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4 January 2022 David Wells thanks our outgoing President Allan https://carlyabbott.com/get-flagyl-online/ Wilson and welcomes our incoming buy flagyl online fast delivery President Debra Padgett New Year is a time of change. For the IBMS, it marks the end of Allan Wilson’s Presidency and the beginning of Debra Padgett’s. I’m sure Allan buy flagyl online fast delivery had no idea what he was letting himself in for when he was voted in by Council. Being IBMS President during a flagyl meant a substantial number of public appearances and interviews with national and international media, and also participation in high-level public speaking events on behalf of the profession.

Throughout it all, he remained resolute and informed, and presented scientific and professional information objectively and with authority. In short, he did us all buy flagyl online fast delivery proud. Allan also stayed true to his desire to champion advanced practice for biomedical scientists – making sure that the IBMS stayed on course to inform the public, healthcare professionals and commissioners of our services what we can deliver through advanced roles. Debra Padgett’s term as President begins alongside the IBMS’ celebration of 100 years of female members.

I’m glad to buy flagyl online fast delivery note that the IBMS embraced the scientific and professional accomplishments of women long before many of their basic rights and dignities were granted by the government. However, despite a 65% female membership, Debra is only our third female President, so we still have some catching up to do. Debra entered the profession as a medical laboratory assistant and worked her way up to roles such as Quality Manager and Clinical Pathology Lead – so she has experience at every level of the profession. She understands how decisions affect each employee buy flagyl online fast delivery and has a special eye for detail and patient care.

On a personal note, I would like to say that Debra is a natural leader – because it is in her nature to inform and guide people. When I first joined IBMS Council, she was the person buy flagyl online fast delivery who approached to talk me through things and then at subsequent meetings continued to show me the ropes. Institutions like ours desperately need leaders like Debra to keep operations running smoothly and efficiently. We can all be proud to call her our President and, as the highest elected representative of our members, I am looking forward to acting on her vision for our professional body.1 January 2022 Debra Padgett discusses her career in biomedical science, her IBMS membership journey and becoming IBMS President [embedded content]We are delighted to announce the beginning of Debra Padgett's IBMS Presidency.

Debra is passionate about promoting and recognising excellence buy flagyl online fast delivery in all of our members. In her eight years as an IBMS Council member, she has advocated, listened, represented and addressed the issues that are most important to our membership at national, regional and local levels.She started her career as a Medical Laboratory Assistant in Microbiology and has successfully worked her way through the career grades to her current role as Clinical Pathology Lead at Northumbria Healthcare NHS Foundation Trust. This means that she understands the many routes to achieve a senior management position within our profession, and how management decisions affect every member of the laboratory. Her post encompasses provision of leadership and management with accountability for the buy flagyl online fast delivery delivery of cost effective, high quality, safe and sustainable services across the Northumbria health economy.

These responsibilities give her a strategic insight to deliver operational priorities both for her own Trust and those of National programmes. We believe that these great qualities will now be hugely beneficial for the profession at large.Debra has been giving back to her profession for a long time and we are proud to now call her IBMS President..

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Start Preamble Notice of flagyl price per pill Amendment and Republished Declaration. The Secretary issues this amendment pursuant to section 319F-3 of the Public Health Service Act to amend his March 10, 2020 Declaration Under the Public Readiness and Emergency Preparedness Act for Medical Countermeasures Against buy antibiotics. The amendments to the Declaration are applicable as of February 4, 2020, except as otherwise specified in Section flagyl price per pill XII.

Start Further Info Robert P. Kadlec, MD, MTM&H, MS, Assistant Secretary for Preparedness and Response, Office of the Secretary, Department of Health and Human Services, 200 Independence Avenue Start Printed Page 79191SW, Washington, DC 20201. Telephone.

202-205-2882. End Further Info End Preamble Start Supplemental Information The Public Readiness and Emergency Preparedness (PREP) Act, 42 U.S.C. 247d-6d et.

Seq., authorizes the Secretary of Health and Human Services (the Secretary) to issue a declaration to provide liability protections to certain individuals and entities (Covered Persons) against any claim of loss caused by, arising out of, relating to, or resulting from, the manufacture, distribution, administration, or use of certain medical countermeasures (Covered Countermeasures), except for claims involving “willful misconduct,” as defined in the PREP Act. Such declarations are subject to amendment as circumstances warrant. The PREP Act was enacted on December 30, 2005, as Public Law 109-148, Division C, Section 2.

It amended the Public Health Service (PHS) Act, adding Section 319F-3, which addresses liability immunity, and Section 319F-4, which creates a compensation program. These sections are codified at 42 U.S.C. 247d-6d and 42 U.S.C.

247d-6e, respectively. Section 319F-3 of the PHS Act has been amended by the flagyl and All-Hazards Preparedness Reauthorization Act (PAHPRA), Public Law 113-5, enacted on March 13, 2013, and the antibiotics Aid, Relief, and Economic Security (CARES) Act, Public Law 116-136, enacted on March 27, 2020, to expand Covered Countermeasures under the PREP Act. On January 31, 2020, the Secretary declared a public health emergency pursuant to section 319 of the PHS Act, 42 U.S.C.

247d, effective January 27, 2020, for the entire United States to aid in the response to the antibiotics Disease 2019 (buy antibiotics) outbreak, which subsequently became a global flagyl. Pursuant to section 319 of the PHS Act, the Secretary renewed that declaration on April 21, 2020, July 23, 2020, and October 2, 2020. On March 10, 2020, the Secretary issued a declaration under the PREP Act for medical countermeasures against buy antibiotics.[] On April 10, the Secretary amended the Declaration to extend liability protections to Covered Countermeasures authorized under the CARES Act.[] On June 4, the Secretary amended the Declaration to clarify that Covered Countermeasures under the Declaration include qualified flagyl and epidemic products that limit the harm that buy antibiotics might otherwise cause.[] On August 19, the Secretary amended the Declaration to add additional categories of Qualified Persons and to amend the category of disease, health condition, or threat for which he recommends the administration or use of Covered Countermeasures.[] The Secretary now further amends the Declaration pursuant to section 319F-3 of the Public Health Service Act.

This Fourth Amendment to the Declaration. (a) Clarifies that the Declaration must be construed in accordance with the Department of Health and Human Services (HHS) Office of the General Counsel (OGC) Advisory Opinions on the Public Readiness and Emergency Preparedness Act and the Declaration (Advisory Opinions).[] The Declaration incorporates the Advisory Opinions for that purpose. (b) Incorporates authorizations that the HHS Office of the Assistant Secretary for Health (OASH) has issued as an Authority Having Jurisdiction.[] (c) Adds an additional category of Qualified Persons under Section V of the Declaration and 42 U.S.C.

247d-6d(i)(8)(B), i.e., healthcare personnel using telehealth to order or administer Covered Countermeasures for patients in a state other than the state where the healthcare personnel are permitted to practice.[] (d) Modifies and clarifies the training requirements for certain licensed pharmacists and pharmacy interns to administer certain routine childhood or buy antibiotics vaccinations. (e) Makes explicit that Section VI covers all qualified flagyl and epidemic products under the PREP Act. (f) Adds a third method of distribution under Section VII of the Declaration and 42 U.S.C.

247d-6d(a)(5) that would provide liability protections for, among other things, additional private-distribution channels. (g) Makes explicit in Section IX that there can be situations where not administering a covered countermeasure to a particular individual can fall within the PREP Act and this Declaration's liability protections. (h) Makes explicit in Section XI that there are substantial federal legal and policy issues, and substantial federal legal and policy interests, in having a unified, whole-of-nation response to the buy antibiotics flagyl among federal, state, local, and private-sector entities.

The world is facing an unprecedented flagyl. To effectively respond, there must be a more consistent pathway for Covered Persons to manufacture, distribute, administer or use Covered Countermeasures across the nation and the world.Start Printed Page 79192 (i) Revises the effective time period of the Declaration in light of the amendments to the Declaration.[] The Secretary republishes the Declaration, as amended, in full. Unless otherwise noted, all statutory citations are to the U.S.

Code. Description of This Amendment Declaration The Declaration has fifteen sections describing PREP Act coverage for medical countermeasures against buy antibiotics. OGC has issued Advisory Opinions interpreting the PREP Act and reflecting the Secretary's interpretation of the Declaration.[] The Secretary now amends the Declaration to clarify that the Declaration must be construed in accordance with the Advisory Opinions.

The Secretary expressly incorporates the Advisory Opinions for that purpose. Section V. Covered Persons Section V of the Declaration describes Covered Persons, including additional qualified persons identified by the Secretary, as required under the PREP Act.

The Secretary amends Section V to specify an additional category of qualified persons. Specifically, healthcare personnel who are permitted to order and administer a Covered Countermeasure through telehealth in a state may do so for patients in another state so long as the healthcare personnel comply with the legal requirements of the state in which the healthcare personnel are permitted to order and administer the Covered Countermeasure by means of telehealth. Telehealth is widely recognized as a valuable tool to promote public health during this flagyl.

According to the Centers for Disease Control and Prevention (CDC), Telehealth services can facilitate public health mitigation strategies during this flagyl by increasing social distancing. These services can be a safer option for [healthcare personnel (HCP)] and patients by reducing potential infectious exposures. They can reduce the strain on healthcare systems by minimizing the surge of patient demand on facilities and reduce the use of [personal protective equipment (PPE)] by healthcare providers.

Maintaining continuity of care to the extent possible can avoid additional negative consequences from delayed preventive, chronic, or routine care. Remote access to healthcare services may increase participation for those who are medically or socially vulnerable or who do not have ready access to providers. Remote access can also help preserve the patient-provider relationship at times when an in-person visit is not practical or feasible.

Telehealth services can be used to. Screen patients who may have symptoms of buy antibiotics and refer as appropriate Provide low-risk urgent care for non-buy antibiotics conditions, identify those persons who may need additional medical consultation or assessment, and refer as appropriate Access primary care providers and specialists, including mental and behavioral health, for chronic health conditions and medication management Provide coaching and support for patients managing chronic health conditions, including weight management and nutrition counseling Participate in physical therapy, occupational therapy, and other modalities as a hybrid approach to in-person care for optimal health Monitor clinical signs of certain chronic medical conditions (e.g., blood pressure, blood glucose, other remote assessments) Engage in case management for patients who have difficulty accessing care (e.g., those who live in very rural settings, older adults, those with limited mobility) Follow up with patients after hospitalization Deliver advance care planning and counseling to patients and caregivers to document preferences if a life-threatening event or medical crisis occurs Provide non-emergent care to residents in long-term care facilities Provide education and training for HCP through peer-to-peer professional medical consultations (inpatient or outpatient) that are not locally available, particularly in rural areas.[] Similarly, CMS has stressed the importance of telehealth during this flagyl. Telehealth, telemedicine, and related terms generally refer to the exchange of medical information from one site to another through electronic communication to improve a patient's health.

Innovative uses of this kind of technology in the provision of healthcare is increasing. And with the emergence of the flagyl causing the disease buy antibiotics, there is an urgency to expand the use of technology to help people who need routine care, and keep vulnerable beneficiaries and beneficiaries with mild symptoms in their homes while maintaining access to the care they need. Limiting community spread of the flagyl, as well as limiting the exposure to other patients and staff members will slow viral spread.[] Accordingly, CMS and other HHS components has substantially expanded the scope of services paid under Medicare when furnished using telehealth technologies during this flagyl.

Other HHS components have also taken steps to expand the use of telehealth during the flagyl.[] Moreover, to expand the use of telehealth during this flagyl, the Office for Civil Rights (OCR) at HHS is exercising enforcement discretion and will not impose penalties for noncompliance with the regulatory requirements under the Health Insurance Portability and Accountability Act (HIPAA) Rules against covered healthcare providers that serve patients through everyday communications technologies during the buy antibiotics nationwide public health emergency.[] This exercise of discretion Start Printed Page 79193applies to widely available communications apps, such as FaceTime or Skype, when used in good faith for any telehealth treatment or diagnostic purpose, regardless of whether the telehealth service is directly related to buy antibiotics.[] Many states have authorized out-of-state healthcare personnel to deliver telehealth services to in-state patients, either generally or in the context of buy antibiotics.[] To help maximize the utility of telehealth, the Secretary declares that the term “qualified person” under 42 U.S.C. 247d-6d(i)(8)(B) includes healthcare personnel using telehealth to order or administer Covered Countermeasures for patients in a state other than the state where the healthcare personnel are permitted to practice. When ordering and administering Covered Countermeasures through telehealth to patients in a state where the healthcare personnel are not already permitted to do so, the healthcare personnel must comply with all requirements for ordering and administering Covered Countermeasures to patients through telehealth in the state where the healthcare personnel are licensed or otherwise permitted to practice.

Any state law that prohibits or effectively prohibits such a qualified person from ordering and administering Covered Countermeasures through telehealth is preempted.[] Nothing in this Declaration shall preempt state laws that permit additional persons to deliver telehealth services. The Secretary also amends Section V to include several examples of Covered Persons who are Qualified Persons, because they are authorized in accordance with the public health and medical emergency response of the Authority Having Jurisdiction to prescribe, administer, deliver, distribute or dispense the Covered Countermeasures. Those examples include certain pharmacists, pharmacy interns, and pharmacy technicians who order or administer certain buy antibiotics tests and certain treatments.[] These examples are not an exclusive or exhaustive list of persons who are qualified persons identified by the Secretary in Section V.

The Secretary also amends Section V to make explicit that the requirement in that section for certain qualified persons to have a current certificate in basic cardiopulmonary resuscitation is satisfied by, among other things, a certification in basic cardiopulmonary resuscitation by an online program that has received accreditation from the American Nurses Credentialing Center, the Accreditation Council for Pharmacy Education (ACPE), or the Accreditation Council for Continuing Medical Education. The Secretary also amends Section V's training requirements for licensed pharmacists to order and administer certain childhood or buy antibiotics treatments. To order and administer treatments, the licensed pharmacist must have completed the immunization training that the licensing State requires in order for pharmacists to administer treatments.

If the State does not specify training requirements for the licensed pharmacist to order and administer treatments, the licensed pharmacist must complete a vaccination training program of at least 20 hours that is approved by the Accreditation Council for Pharmacy Education (ACPE) to order and administer treatments. This training program must include hands-on injection technique, clinical evaluation of indications and contraindications of treatments, and the recognition and treatment of emergency reactions to treatments. Other than the basic cardiopulmonary resuscitation requirement and the practical training program requirement, this Amendment does not change the requirements for a pharmacist, pharmacy intern, or pharmacy technician to be a “qualified person” under 42 U.S.C.

247d-6d(i)(8)(B) who can order or administer childhood or buy antibiotics treatments pursuant to the Declaration. Section VI. Covered Countermeasures The Secretary amends Section VI to make explicit that Section VI covers all qualified flagyl and epidemic products under the PREP Act.Start Printed Page 79194 Section VII.

Limitations on Distribution The Secretary may specify that liability protections are in effect only for Covered Countermeasures obtained through a particular means of distribution. The Declaration previously stated that liability immunity is afforded to Covered Persons only for Recommended Activities related to (a) present or future federal contracts, cooperative agreements, grants, other transactions, interagency agreements, or memoranda of understanding or other federal agreements. Or (b) activities authorized in accordance with the public health and medical response of the Authority Having Jurisdiction to prescribe, administer, deliver, distribute, or dispense the Covered Countermeasures following a declaration of an emergency.

buy antibiotics is an unprecedented global challenge that requires a whole-of-nation response that utilizes federal-, state-, and local- distribution channels as well as private-distribution channels. Given the broad scale of this flagyl, the Secretary amends the Declaration to extend PREP Act coverage to additional private-distribution channels, as set forth below. The amended Section VII adds that PREP Act liability protections also extend to Covered Persons for Recommended Activities that are related to any Covered Countermeasure that is.

(a) Licensed, approved, cleared, or authorized by the Food and Drug Administration (FDA) (or that is permitted to be used under an Investigational New Drug Application or an Investigational Device Exemption) under the Federal Food, Drug, and Cosmetic (FD&C) Act or Public Health Service (PHS) Act to treat, diagnose, cure, prevent, mitigate or limit the harm from buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom. Or (b) a respiratory protective device approved by the National Institute for Occupational Safety and Health (NIOSH) under 42 CFR part 84, or any successor regulations, that the Secretary determines to be a priority for use during a public health emergency declared under section 319 of the PHS Act to prevent, mitigate, or limit the harm from, buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom. To qualify for this third distribution channel (but not necessarily to qualify for the other distribution channels), a Covered Person must manufacture, test, develop, distribute, administer, or use the Covered Countermeasure pursuant to the FDA licensure, approval, clearance, or authorization (or pursuant to an Investigational New Drug Application or Investigational Device Exemption), or the NIOSH approval.

This third distribution channel may extend PREP Act coverage when there is no federal agreement or authorization in accordance with the public health and medical response of the Authority Having Jurisdiction to prescribe, administer, deliver, distribute or dispense the Covered Countermeasures following a declaration of an emergency. For example, a manufacturer, distributor, program planner, or qualified person engages in manufacturing, testing, development, distribution, administration, or use of a buy antibiotics test pursuant to an FDA Emergency Use Authorization for that buy antibiotics test. If the Covered Person satisfies all other requirements of the PREP Act and Declaration, there will be PREP Act coverage even if there is no federal agreement to cover those activities and those activities are not part of the authorized activity of an Authority Having Jurisdiction.

Section IX. Administration of Covered Countermeasures The Secretary amends Section IX to make explicit that there can be situations where not administering a covered countermeasure to a particular individual can fall within the PREP Act and this Declaration's liability protections. Section XI.

Geographic Area The Secretary makes explicit in Section XI that there are substantial federal legal and policy issues, and substantial federal legal and policy interests within the meaning of Grable &. Sons Metal Products, Inc. V.

308 (2005), in having a unified, whole-of-nation response to the buy antibiotics flagyl among federal, state, local, and private-sector entities. The world is facing an unprecedented global flagyl. To effectively respond, there must be a more consistent pathway for Covered Persons to manufacture, distribute, administer or use Covered Countermeasures across the nation and the world.

Thus, there are substantial federal legal and policy issues, and substantial federal legal and policy interests within the meaning of Grable &. Sons Metal Products, Inc. V.

308 (2005), in having a uniform interpretation of the PREP Act. Under the PREP Act, the sole exception to the immunity from suit and liability of covered persons is an exclusive Federal cause of action against a Covered Person for death or serious physical injury proximately caused by willful misconduct by such Covered Person. In all other cases, an injured party's exclusive remedy is an administrative remedy under section 319F-4 of the PHS Act.

Through the PREP Act, Congress delegated to me the authority to strike the appropriate Federal-state balance with respect to particular Covered Countermeasures through PREP Act declarations. Section XII. Effective Time Period The Secretary amends Section XII to provide that liability protections for all Covered Countermeasures administered and used in accordance with the public health and medical response of the Authority Having Jurisdiction, as identified in Section VII(b) of this Declaration, begins with a “Declaration of Emergency,” as defined in Section VII (except that, with respect to qualified persons who order or administer a routine childhood vaccination that ACIP recommends to persons ages three through 18 according to ACIP's standard immunization schedule, PREP Act coverage began on August 24, 2020), and lasts through (a) the final day the Declaration of Emergency is in effect, or (b) October 1, 2024, whichever occurs first.

This change is to conform the text of the Declaration to the Third Amendment.[] The Secretary also amends Section XII to provide that liability protections for all Covered Countermeasures identified in Section VII(c) of this Declaration begins on the date of this amended Declaration and lasts through (a) the final day the Declaration of Emergency is in effect, or (b) October 1, 2024, whichever occurs first. Because the Secretary is adding Section VII(c) to the Declaration in this Amendment, Section XII provides that Section VII(c) is effective as of the date this amended Declaration is published. Additional Amendments The Secretary also makes other, non-substantive amendments.

Declaration, as Amended, for Public Readiness and Emergency Preparedness Act Coverage for Medical Countermeasures Against buy antibiotics To the extent any term previously in the Declaration, including its amendments, is inconsistent with any provision of this Republished Declaration, the terms of this Republished Declaration are controlling. This Declaration must be construed in accordance with the Advisory Opinions Start Printed Page 79195of the Office of the General Counsel (Advisory Opinions). I incorporate those Advisory Opinions as part of this Declaration.[] This Declaration is a “requirement” under the PREP Act.

I. Determination of Public Health Emergency 42 U.S.C. 247d-6d(b)(1) I have determined that the spread of antibiotics or a flagyl mutating therefrom and the resulting disease buy antibiotics constitutes a public health emergency.

I further determine that use of any respiratory protective device approved by NIOSH under 42 CFR part 84, or any successor regulations, is a priority for use during the public health emergency that I declared on January 31, 2020 under section 319 of the PHS Act for the entire United States to aid in the response of the nation's healthcare community to the buy antibiotics outbreak. II. Factors Considered 42 U.S.C.

247d-6d(b)(6) I have considered the desirability of encouraging the design, development, clinical testing, or investigation, manufacture, labeling, distribution, formulation, packaging, marketing, promotion, sale, purchase, donation, dispensing, prescribing, administration, licensing, and use of the Covered Countermeasures. III. Recommended Activities 42 U.S.C.

247d-6d(b)(1) I recommend, under the conditions stated in this Declaration, the manufacture, testing, development, distribution, administration, and use of the Covered Countermeasures. IV. Liability Protections 42 U.S.C.

247d-6d(a), 247d-6d(b)(1) Liability protections as prescribed in the PREP Act and conditions stated in this Declaration are in effect for the Recommended Activities described in Section III. V. Covered Persons 42 U.S.C.

247d-6d(i)(2), (3), (4), (6), (8)(A) and (B) Covered Persons who are afforded liability protections under this Declaration are “manufacturers,” “distributors,” “program planners,” and “qualified persons,” as those terms are defined in the PREP Act. Their officials, agents, and employees. And the United States.

In addition, I have determined that the following additional persons are qualified persons. (a) Any person authorized in accordance with the public health and medical emergency response of the Authority Having Jurisdiction, as described in Section VII below, to prescribe, administer, deliver, distribute or dispense the Covered Countermeasures, and their officials, agents, employees, contractors and volunteers, following a Declaration of Emergency, as that term is defined in Section VII of this Declaration; [] (b) any person authorized to prescribe, administer, or dispense the Covered Countermeasures or who is otherwise authorized to perform an activity under an Emergency Use Authorization in accordance with Section 564 of the FD&C Act. (c) any person authorized to prescribe, administer, or dispense Covered Countermeasures in accordance with Section 564A of the FD&C Act.

(d) a State-licensed pharmacist who orders and administers, and pharmacy interns who administer (if the pharmacy intern acts under the supervision of such pharmacist and the pharmacy intern is licensed or registered by his or her State board of pharmacy), [] (1) treatments that the Advisory Committee on Immunization Practices (ACIP) recommends to persons ages three through 18 according to ACIP's standard immunization schedule or (2) FDA-authorized or FDA-licensed buy antibiotics treatments to persons ages three or older. Such State-licensed pharmacists and the State-licensed or registered interns under their supervision are qualified persons only if the following requirements are met. I.

The treatment must be authorized, approved, or licensed by the FDA. Ii. In the case of a buy antibiotics treatment, the vaccination must be ordered and administered according to ACIP's buy antibiotics treatment recommendation(s).

Iii. In the case of a childhood treatment, the vaccination must be ordered and administered according to ACIP's standard immunization schedule. Iv.

The licensed pharmacist must have completed the immunization training that the licensing State requires in order for pharmacists to order and administer treatments. If the State does not specify training requirements for the licensed pharmacist to order and administer treatments, the licensed pharmacist must complete a vaccination training program of at least 20 hours that is approved by the Accreditation Start Printed Page 79196Council for Pharmacy Education (ACPE) to order and administer treatments. Such a training program must include hands-on injection technique, clinical evaluation of indications and contraindications of treatments, and the recognition and treatment of emergency reactions to treatments.

V. The licensed or registered pharmacy intern must complete a practical training program that is approved by the ACPE. This training program must include hands-on injection technique, clinical evaluation of indications and contraindications of treatments, and the recognition and treatment of emergency reactions to treatments.

Vi. The licensed pharmacist and licensed or registered pharmacy intern must have a current certificate in basic cardiopulmonary resuscitation; [] vii. The licensed pharmacist must complete a minimum of two hours of ACPE-approved, immunization-related continuing pharmacy education during each State licensing period.

Viii. The licensed pharmacist must comply with recordkeeping and reporting requirements of the jurisdiction in which he or she administers treatments, including informing the patient's primary-care provider when available, submitting the required immunization information to the State or local immunization information system (treatment registry), complying with requirements with respect to reporting adverse events, and complying with requirements whereby the person administering a treatment must review the treatment registry or other vaccination records prior to administering a treatment. And ix.

The licensed pharmacist must inform his or her childhood-vaccination patients and the adult caregiver accompanying the child of the importance of a well-child visit with a pediatrician or other licensed primary care provider and refer patients as appropriate. X. The licensed pharmacist and the licensed or registered pharmacy intern must comply with any applicable requirements (or conditions of use) as set forth in the Centers for Disease Control and Prevention (CDC) buy antibiotics vaccination provider agreement and any other federal requirements that apply to the administration of buy antibiotics treatment(s).

(e) Healthcare personnel using telehealth to order or administer Covered Countermeasures for patients in a state other than the state where the healthcare personnel are licensed or otherwise permitted to practice. When ordering and administering Covered Countermeasures by means of telehealth to patients in a state where the healthcare personnel are not already permitted to practice, the healthcare personnel must comply with all requirements for ordering and administering Covered Countermeasures to patients by means of telehealth in the state where the healthcare personnel are permitted to practice. Any state law that prohibits or effectively prohibits such a qualified person from ordering and administering Covered Countermeasures by means of telehealth is preempted.[] Nothing in this Declaration shall preempt state laws that permit additional persons to deliver telehealth services.

Nothing in this Declaration shall be construed to affect the National treatment Injury Compensation Program, including an injured party's ability to obtain compensation under that program. Covered Countermeasures that are subject to the National treatment Injury Compensation Program authorized under 42 U.S.C. 300aa-10 et seq.

Are covered under this Declaration for the purposes of liability immunity and injury compensation only to the extent that injury compensation is not provided under that Program. All other terms and conditions of the Declaration apply to such Covered Countermeasures. VI.

Covered Countermeasures 42 U.S.C. 247d-6b(c)(1)(B), 42 U.S.C. 247d-6d(i)(1) and (7) Covered Countermeasures are.

(a) Any antiviral, any drug, any biologic, any diagnostic, any other device, any respiratory protective device, or any treatment manufactured, used, designed, developed, modified, licensed, or procured. I. To diagnose, mitigate, prevent, treat, or cure buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom.

Or ii. To limit the harm that buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom, might otherwise cause. (b) a product manufactured, used, designed, developed, modified, licensed, or procured to diagnose, mitigate, prevent, treat, or cure a serious or life-threatening disease or condition caused by a product described in paragraph (a) above.

(c) a product or technology intended to enhance the use or effect of a product described in paragraph (a) or (b) above. Or (d) any device used in the administration of any such product, and all components and constituent materials of any such product. To be a Covered Countermeasure under the Declaration, a product must also meet 42 U.S.C.

247d-6d(i)(1)'s definition of “Covered Countermeasure.” VII. Limitations on Distribution 42 U.S.C. 247d-6d(a)(5) and (b)(2)(E) I have determined that liability protections are afforded to Covered Persons only for Recommended Activities involving.

(a) Covered Countermeasures that are related to present or future federal contracts, cooperative agreements, grants, other transactions, interagency agreements, memoranda of understanding, or other federal agreements. (b) Covered Countermeasures that are related to activities authorized in accordance with the public health and medical response of the Authority Having Jurisdiction to prescribe, administer, deliver, distribute or dispense the Covered Countermeasures following a Declaration of Emergency. Or (c) Covered Countermeasures that are.

I. Licensed, approved, cleared, or authorized by the FDA (or that are permitted to be used under an Investigational New Drug Application or an Investigational Device Exemption) under the FD&C Act or PHS Act to treat, diagnose, cure, prevent, mitigate, or limit the harm from buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom. OrStart Printed Page 79197 ii.

A respiratory protective device approved by NIOSH under 42 CFR part 84, or any successor regulations, that the Secretary determines to be a priority for use during a public health emergency declared under section 319 of the PHS Act to prevent, mitigate, or limit the harm from buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom. To qualify for this third distribution channel, a Covered Person must manufacture, test, develop, distribute, administer, or use the Covered Countermeasure pursuant to the FDA licensure, approval, clearance, or authorization (or pursuant to an Investigational New Drug Application or Investigational Device Exemption), or the NIOSH approval. As used in this Declaration, the terms “Authority Having Jurisdiction” and “Declaration of Emergency” have the following meanings.

(a) The Authority Having Jurisdiction means the public agency or its delegate that has legal responsibility and authority for responding to an incident, based on political or geographical (e.g., city, county, tribal, state, or federal boundary lines) or functional (e.g., law enforcement, public health) range or sphere of authority. (b) A Declaration of Emergency means any declaration by any authorized local, regional, state, or federal official of an emergency specific to events that indicate an immediate need to administer and use the Covered Countermeasures, with the exception of a federal declaration in support of an Emergency Use Authorization under Section 564 of the FD&C Act unless such declaration specifies otherwise. I have also determined that, for governmental program planners only, liability protections are afforded only to the extent such program planners obtain Covered Countermeasures through voluntary means, such as (a) donation.

(b) commercial sale. (c) deployment of Covered Countermeasures from federal stockpiles. Or (d) deployment of donated, purchased, or otherwise voluntarily obtained Covered Countermeasures from state, local, or private stockpiles.

VIII. Category of Disease, Health Condition, or Threat 42 U.S.C. 247d-6d(b)(2)(A) The category of disease, health condition, or threat for which I recommend the administration or use of the Covered Countermeasures is not only buy antibiotics caused by antibiotics, or a flagyl mutating therefrom, but also other diseases, health conditions, or threats that may have been caused by buy antibiotics, antibiotics, or a flagyl mutating therefrom, including the decrease in the rate of childhood immunizations, which will lead to an increase in the rate of infectious diseases.

IX. Administration of Covered Countermeasures 42 U.S.C. 247d-6d(a)(2)(B) Administration of the Covered Countermeasure means physical provision of the countermeasures to recipients, or activities and decisions directly relating to public and private delivery, distribution and dispensing of the countermeasures to recipients, management and operation of countermeasure programs, or management and operation of locations for the purpose of distributing and dispensing countermeasures.

Where there are limited Covered Countermeasures, not administering a Covered Countermeasure to one individual in order to administer it to another individual can constitute “relating to. . .

An individual” under 42 U.S.C. 247d-6d. For example, consider a situation where there is only one dose [] of a buy antibiotics treatment, and a person in a vulnerable population and a person in a less vulnerable population both request it from a healthcare professional.

In that situation, the healthcare professional administers the one dose to the person who is more vulnerable to buy antibiotics. In that circumstance, the failure to administer the buy antibiotics treatment to the person in a less-vulnerable population “relat[es] to. .

. The administration to” the person in a vulnerable population. The person in the vulnerable population was able to receive the treatment only because it was not administered to the person in the less-vulnerable population.

Prioritization or purposeful allocation of a Covered Countermeasure, particularly if done in accordance with a public health authority's directive, can fall within the PREP Act and this Declaration's liability protections. X. Population 42 U.S.C.

247d-6d(a)(4), 247d-6d(b)(2)(C) The populations of individuals to whom the liability protections of this Declaration extend include any individual who uses or is administered the Covered Countermeasures in accordance with this Declaration. Liability protections are afforded to manufacturers and distributors without regard to whether the countermeasure is used by or administered to this population. Liability protections are afforded to program planners and qualified persons when the countermeasure is used by or administered to this population, or the program planner or qualified person reasonably could have believed the recipient was in this population.

XI. Geographic Area 42 U.S.C. 247d-6d(a)(4), 247d-6d(b)(2)(D) Liability protections are afforded for the administration or use of a Covered Countermeasure without geographic limitation.

Liability protections are afforded to manufacturers and distributors without regard to whether the Covered Countermeasure is used by or administered in any designated geographic area. Liability protections are afforded to program planners and qualified persons when the countermeasure is used by or administered in any designated geographic area, or the program planner or qualified person reasonably could have believed the recipient was in that geographic area. buy antibiotics is a global challenge that requires a whole-of-nation response.

There are substantial federal legal and policy issues, and substantial federal legal and policy interests within the meaning of Grable &. Sons Metal Products, Inc. V.

308 (2005), in having a unified, whole-of-nation response to the buy antibiotics flagyl among federal, state, local, and private-sector entities. The world is facing an unprecedented flagyl. To effectively respond, there must be a more consistent pathway for Covered Persons to manufacture, distribute, administer or use Covered Countermeasures across the nation and the world.

Thus, there are substantial federal legal and policy issues, and substantial federal legal and policy interests within the meaning of Grable &. Sons Metal Products, Inc. V.

308 (2005), in having a uniform interpretation of the PREP Act. Under the PREP Act, the sole exception to the immunity from suit and liability of covered persons under the PREP Act is an exclusive Federal cause of action against a covered person for death or serious physical injury proximately caused by willful misconduct by such covered person. In all other cases, an injured party's exclusive remedy is an administrative Start Printed Page 79198remedy under section 319F-4 of the PHS Act.

Through the PREP Act, Congress delegated to me the authority to strike the appropriate Federal-state balance with respect to particular Covered Countermeasures through PREP Act declarations.[] XII. Effective Time Period 42 U.S.C. 247d-6d(b)(2)(B) Liability protections for any respiratory protective device approved by NIOSH under 42 CFR part 84, or any successor regulations, through the means of distribution identified in Section VII(a) of this Declaration, begin on March 27, 2020 and extend through October 1, 2024.

Liability protections for all other Covered Countermeasures identified in Section VI of this Declaration, through means of distribution identified in Section VII(a) of this Declaration, begin on February 4, 2020 and extend through October 1, 2024. Liability protections for all Covered Countermeasures administered and used in accordance with the public health and medical response of the Authority Having Jurisdiction, as identified in Section VII(b) of this Declaration, begin with a Declaration of Emergency as that term is defined in Section VII (except that, with respect to qualified persons who order or administer a routine childhood vaccination that ACIP recommends to persons ages three through 18 according to ACIP's standard immunization schedule, liability protections began on August 24, 2020), and last through (a) the final day the Declaration of Emergency is in effect, or (b) October 1, 2024, whichever occurs first. Liability protections for all Covered Countermeasures identified in Section VII(c) of this Declaration begin on the date of this amended Declaration and last through (a) the final day the Declaration of Emergency is in effect, or (b) October 1, 2024, whichever occurs first.

XIII. Additional Time Period of Coverage 42 U.S.C. 247d-6d(b)(3)(B) and (C) I have determined that an additional 12 months of liability protection is reasonable to allow for the manufacturer(s) to arrange for disposition of the Covered Countermeasure, including return of the Covered Countermeasures to the manufacturer, and for Covered Persons to take such other actions as are appropriate to limit the administration or use of the Covered Countermeasures.

Covered Countermeasures obtained for the SNS during the effective period of this Declaration are covered through the date of administration or use pursuant to a distribution or release from the SNS. XIV. Countermeasures Injury Compensation Program 42 U.S.C 247d-6e The PREP Act authorizes the Countermeasures Injury Compensation Program (CICP) to provide benefits to certain individuals or estates of individuals who sustain a covered serious physical injury as the direct result of the administration or use of the Covered Countermeasures, and benefits to certain survivors of individuals who die as a direct result of the administration or use of the Covered Countermeasures.

The causal connection between the countermeasure and the serious physical injury must be supported by compelling, reliable, valid, medical and scientific evidence in order for the individual to be considered for compensation. The CICP is administered by the Health Resources and Services Administration, within the Department of Health and Human Services. Information about the CICP is available at the toll-free number 1-855-266-2427 or http://www.hrsa.gov/​cicp/​.

XV. Amendments 42 U.S.C. 247d-6d(b)(4) Amendments to this Declaration will be published in the Federal Register, as warranted.

Start Authority 42 U.S.C. 247d-6d. End Authority Start Signature Dated.

December 3, 2020. Alex M. Azar II, Secretary of Health and Human Services.

End Signature End Supplemental Information [FR Doc. 2020-26977 Filed 12-8-20. 8:45 am]BILLING CODE 4150-37-PStart Preamble Start Printed Page 77492 Centers for Medicare &.

Medicaid Services (CMS), HHS. Final rule. This final rule addresses any undue regulatory impact and burden of the physician self-referral law.

This final rule is being issued in conjunction with the Centers for Medicare &. Medicaid Services' (CMS) Patients over Paperwork initiative and the Department of Health and Human Services' (the Department or HHS) Regulatory Sprint to Coordinated Care. This final rule establishes exceptions to the physician self-referral law for certain value-based compensation arrangements between or among physicians, providers, and suppliers.

It also establishes a new exception for certain arrangements under which a physician receives limited remuneration for items or services actually provided by the physician. Establishes a new exception for donations of cybersecurity technology and related services. And amends the existing exception for electronic health records (EHR) items and services.

This final rule also provides critically necessary guidance for physicians and health care providers and suppliers whose financial relationships are governed by the physician self-referral statute and regulations. These regulations are effective on January 19, 2021, except for amendment number 3, which further amends section 411.352(i), which is effective January 1, 2022. Start Further Info Lisa O.

Wilson, (410) 786-8852. Matthew Edgar, (410) 786-0698. Catherine Martin, (410) 786-8382.

End Further Info End Preamble Start Supplemental Information I. Background A. Statutory and Regulatory History Section 1877 of the Social Security Act (the Act), also known as the physician self-referral law.

(1) Prohibits a physician from making referrals for certain designated health services payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship, unless an exception applies. And (2) prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third party payor) for those referred services. A financial relationship is an ownership or investment interest in the entity or a compensation arrangement with the entity.

The statute establishes a number of specific exceptions and grants the Secretary of the Department of Health and Human Services (the Secretary) the authority to create regulatory exceptions for financial relationships that do not pose a risk of program or patient abuse. Section 1903(s) of the Act extends aspects of the physician self-referral prohibitions to Medicaid. For additional information about section 1903(s) of the Act, see 66 FR 857 through 858.

This rulemaking follows a history of rulemakings related to the physician self-referral law. The following discussion provides a chronology of our more significant and comprehensive rulemakings. It is not an exhaustive list of all rulemakings related to the physician self-referral law.

After the passage of section 1877 of the Act, we proposed rulemakings in 1992 (related only to referrals for clinical laboratory services) (57 FR 8588) (the 1992 proposed rule) and 1998 (addressing referrals for all designated health services) (63 FR 1659) (the 1998 proposed rule). We finalized the proposals from the 1992 proposed rule in 1995 (60 FR 41914) (the 1995 final rule), and issued final rules following the 1998 proposed rule in three stages. The first final rulemaking (Phase I) was published in the Federal Register on January 4, 2001 as a final rule with comment period (66 FR 856).

The second final rulemaking (Phase II) was published in the Federal Register on March 26, 2004 as an interim final rule with comment period (69 FR 16054). Due to a printing error, a portion of the Phase II preamble was omitted from the March 26, 2004 Federal Register publication. That portion of the preamble, which addressed reporting requirements and sanctions, was published on April 6, 2004 (69 FR 17933).

The third final rulemaking (Phase III) was published in the Federal Register on September 5, 2007 as a final rule (72 FR 51012). In addition to Phase I, Phase II, and Phase III, we issued final regulations on August 19, 2008 in the Fiscal Year (FY) 2009 Inpatient Prospective Payment System final rule with comment period (73 FR 48434) (the FY 2009 IPPS final rule). That rulemaking made various revisions to the physician self-referral regulations, including.

(1) Revisions to the “stand in the shoes” provisions. (2) establishment of provisions regarding the period of disallowance and temporary noncompliance with signature requirements. (3) prohibitions on per unit of service (“per-click”) and percentage-based compensation formulas for determining the rental charges for office space and equipment lease arrangements.

And (4) expansion of the definition of “entity.” After passage of the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148) (Affordable Care Act), we issued final regulations on November 29, 2010 in the Calendar Year (CY) 2011 Physician Fee Schedule (PFS) final rule with comment period that codified a disclosure requirement established by the Affordable Care Act for the in-office ancillary services exception (75 FR 73443).

We also issued final regulations on November 24, 2010 in the CY 2011 Outpatient Prospective Payment System (OPPS) final rule with comment period (75 FR 71800), on November 30, 2011 in the CY 2012 OPPS final rule with comment period (76 FR 74122), and on November 10, 2014 in the CY 2015 OPPS final rule with comment period (79 FR 66987) that established or revised certain regulatory provisions concerning physician-owned hospitals to codify and interpret the Affordable Care Act's revisions to section 1877 of the Act. On November 16, 2015, in the CY 2016 PFS final rule, we issued regulations to reduce burden and facilitate compliance (80 FR 71300 through 71341). In that rulemaking, we established two new exceptions, clarified certain provisions of the physician self-referral regulations, updated regulations to reflect changes in terminology, and revised definitions related to physician-owned hospitals.

On November 15, 2016, we included in the CY 2017 PFS final rule, at § 411.357(a)(5)(ii)(B), (b)(4)(ii)(B), (l)(3)(ii), and (p)(1)(ii)(B), requirements identical to regulations that have been in effect since October 1, 2009 that the rental charges for the lease of office space or equipment are not determined using a formula based on per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee (81 FR 80533 through 80534). On November 23, 2018, in our most recent substantive update, the CY 2019 PFS final rule (83 FR 59715 through 59717), we incorporated into our regulations provisions at sections 1877(h)(1)(D) and (E) of the Act that were added by section 50404 of the Bipartisan Budget Act of 2018 (Pub. L.

Start Printed Page 77493115-123). Specifically, we codified in regulations our longstanding policy that the writing requirement in various compensation arrangement exceptions in § 411.357 may be satisfied by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties. We also amended the special rule for temporary noncompliance with signature requirements at § 411.353(g), removing the limitation on the use of the rule to once every 3 years with respect to the same physician and making other changes to conform the regulatory provision to section 1877(h)(1)(E) of the Act.

B. Health Care Delivery and Payment Reform. Transition to Value-Based Care 1.

The Regulatory Sprint to Coordinated Care The Department identified the broad reach of the physician self-referral law, as well as the Federal anti-kickback statute and beneficiary inducements civil monetary penalty (CMP) law, sections 1128B(b) and 1128A(a)(5) of the Act, respectively, as potentially inhibiting beneficial arrangements that would advance the transition to value-based care and the coordination of care among providers in both the Federal and commercial sectors. Industry stakeholders informed us that, because the consequences of noncompliance with the physician self-referral law (and the anti-kickback statute) are so dire, providers, suppliers, and physicians may be discouraged from entering into innovative arrangements that would improve quality outcomes, produce health system efficiencies, and lower costs (or slow their rate of growth). To address these concerns, and to help accelerate the transformation of the health care system into one that better pays for value and promotes care coordination, HHS launched a Regulatory Sprint to Coordinated Care (the Regulatory Sprint), led by the Deputy Secretary of HHS.

This Regulatory Sprint aims to remove potential regulatory barriers to care coordination and value-based care created by four key Federal health care laws and associated regulations. (1) The physician self-referral law. (2) the anti-kickback statute.

(3) the Health Insurance Portability and Accountability Act of 1996 (Pub. L. 104-191) (HIPAA).

And (4) the rules under 42 CFR part 2 related to opioid and substance use disorder treatment. Through the Regulatory Sprint, HHS aims to encourage and improve— A patient's ability to understand treatment plans and make empowered decisions. Providers' alignment on an end-to-end treatment approach (that is, coordination among providers along the patient's full care journey).

Incentives for providers to coordinate, collaborate, and provide patients with tools to be more involved. And Information-sharing among providers, facilities, and other stakeholders in a manner that facilitates efficient care while preserving and protecting patient access to data. The Department believes that the realization of these goals would meaningfully improve the quality of care received by all American patients.

As part of the Regulatory Sprint, CMS, the HHS Office of Inspector General (OIG), and the HHS Office for Civil Rights (OCR) each issued requests for information to solicit comments that may help to inform the Department's approach to achieving the goals of the Regulatory Sprint (83 FR 29524, 83 FR 43607, and 83 FR 64302, respectively). We discuss our request for information in this section of this final rule. 2.

Policy Considerations and Other Information Relevant to the Development of This Final Rule a. Medicare Payment Was Volume-Based When the Physician Self-Referral Statute Was Enacted When the physician self-referral statute was enacted in 1989, under traditional fee-for-service (FFS) Medicare (that is, Parts A and B), the vast majority of covered services were paid based on volume. Although some services were “bundled” into a single payment, such as inpatient hospital services that were paid on the basis of the diagnosis-related group (DRG) that corresponded to the patient's diagnosis and the services provided (known as the Hospital Inpatient Prospective Payment System, or IPPS), in general, Medicare made a payment each time a provider or supplier furnished a service to a beneficiary.

Thus, the more services a provider or supplier furnished, the more Medicare payments it would receive. Importantly, these bundled payments typically covered services furnished by a single provider or supplier, directly or by contract. Payments were not bundled across multiple providers, with each billing independently.

This volume-based reimbursement system continues to apply under traditional Medicare to both services paid under a prospective payment system (PPS) and services paid under a retrospective FFS system. As described in this final rule, the physician self-referral statute was enacted to address concerns that arose in Medicare's volume-based reimbursement system where the more designated health services that a physician ordered, the more payments Medicare would make to the entity that furnished the designated health services. If the referring physician had an ownership or investment interest in the entity furnishing the designated health services, he or she could increase the entity's revenue by referring patients for more or higher value services, potentially increasing the profit distributions tied to the physician's ownership interest.

Similarly, a physician who had a service or other compensation arrangement with an entity might increase his or her aggregate compensation if he or she made referrals that resulted in more Medicare payments to the entity. The physician self-referral statute was enacted to combat the potential that financial self-interest would affect a physician's medical decision making and ensure that patients have options for quality care. The law's prohibitions were intended to prevent a patient from being referred for services that are not needed or steered to less convenient, lower quality, or more expensive health care providers because the patient's physician may improve his or her financial standing through those referrals.

This statutory structure was designed for and made sense in Medicare's then-largely volume-based reimbursement system. B. The Medicare Shared Savings Program, the Center for Medicare and Medicaid Innovation, and Medicare's Transition to Value-Based Payment Since the enactment of the physician self-referral statute in 1989, significant changes in the delivery of health care services and the payment for such services have occurred, both within the Medicare and Medicaid programs and for non-Federal payors and patients.

For some time, CMS has engaged in efforts to align payment under the Medicare program with the quality of the care provided to our beneficiaries. Laws such as the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L.

108-173) (MMA), the Deficit Reduction Act of 2005 (Pub. L. 109-171) (DRA), and the Medicare Improvements for Patients and Providers Act of 2008 (Pub.

L. 110-275) (MIPPA) guided our early efforts to move toward health care delivery and payment reform. More recently, the Affordable Care Act required significant changes to the Medicare program's Start Printed Page 77494payment systems and provides the Secretary with broad authority to test innovative payment and service delivery models.

Section 3022 of the Affordable Care Act established the Medicare Shared Savings Program (Shared Savings Program). The Congress created the Shared Savings Program to promote accountability for a patient population and coordinate items and services under Medicare Parts A and B and encourage investment in infrastructure and redesigned care processes for high-quality and efficient service delivery. In essence, the Shared Savings Program facilitates coordination among providers to improve the quality of care for Medicare FFS beneficiaries and reduce unnecessary costs.

Physicians, hospitals, and other eligible providers and suppliers may participate in the Shared Savings Program by creating or participating in an accountable care organization (ACO) that agrees to be held accountable for the quality, cost, and experience of care of an assigned Medicare FFS beneficiary population. ACOs that successfully meet quality and savings requirements share a percentage of the achieved savings with Medicare. Since enactment, we have issued numerous regulations to implement and update the Shared Savings Program.

For example, in keeping with the Secretary's vision for achieving value-based transformation by pioneering new payment models, in 2018, we finalized changes to the Shared Savings Program that are intended to put the program on a path toward achieving a more measurable move to value, demonstrate savings to the Medicare program, and promote a competitive and accountable marketplace (83 FR 67816). Specifically, we finalized a significant redesign of the participation options available under the Shared Savings Program to encourage ACOs to transition to two-sided risk models (in which they may share in savings and are accountable for repaying shared losses), increase savings and mitigate losses for the Medicare Trust Funds, and increase program integrity.[] Section 1115A of the Act, as added by section 3021 of the Affordable Care Act, established the Center for Medicare and Medicaid Innovation (the Innovation Center) within CMS. The purpose of the Innovation Center is to test innovative payment and service delivery models to reduce expenditures for the care furnished to patients in the Medicare and Medicaid programs and the Children's Health Insurance Program (CHIP) while preserving or enhancing the quality of that care.

Using its authority in section 1115A of the Act, the Innovation Center has tested numerous health care delivery and payment models in which providers, suppliers, and individual practitioners participate. Most Innovation Center models generally fall into three categories. Accountable care models, episode-based payment models, and primary care transformation models.

The Innovation Center also tests initiatives targeted to the Medicaid and CHIP population and to Medicare-Medicaid (dual eligible) enrollees, and is focused on other initiatives to accelerate the development and testing of new payment and service delivery models, as well as to speed the adoption of best practices.[] The Congress also granted the Secretary broad authority to waive provisions of section 1877 of the Act and certain other Federal fraud and abuse laws when he determines it is necessary to implement the Shared Savings Program (see section 1899(f) of the Act) or test models under the Innovation Center's authority (see section 1115A(d)(1) of the Act).[] c. Commercial Payor and Provider-Driven Activity Although payments made directly from a payor to a physician generally do not implicate the physician self-referral law unless the payor is itself an entity that furnishes designated health services, remuneration between physicians and other health care providers that provide care to a payor's enrolled patients (or subscribers) likely does implicate the physician self-referral law. Commercial payors and health care providers have implemented and continue to develop numerous innovative health care payment and care delivery models that do not include or specifically relate to CMS.

Even though the physicians and health care providers that participate in these initiatives do not necessarily provide designated health services payable by Medicare as part of the initiatives, financial relationships between them may nonetheless implicate the physician self-referral law, which, in turn, may restrict referrals of Medicare patients. D. Request for Information Regarding the Physician Self-Referral Law (CMS-1720-NC) The Secretary identified four priorities for HHS, the first of which is transforming our health care system into one that pays for value.

Dramatically different from the system that existed when the physician self-referral statute was enacted, a value-driven health care system pays for outcomes rather than procedures. We believe that a successful value-based system requires integration and coordination among physicians and other health care providers and suppliers. The Secretary laid out four areas of emphasis for building a system that delivers value.

(1) Maximizing the promise of health information technology (IT). (2) improving transparency in price and quality. (3) pioneering bold new models in Medicare and Medicaid.

And (4) removing government burdens that impede care coordination. (See https://www.hhs.gov/​about/​leadership/​secretary/​priorities/​index.html#value-based-healthcare.) This final rule focuses primarily on the final two areas of emphasis for value-based transformation—pioneering new models in Medicare and Medicaid and removing regulatory barriers that impede care coordination. As the Secretary and the Administrator of CMS (the Administrator) have acknowledged, there are burdens associated with the physician self-referral regulations that may be inhibiting health care professionals and organizations, especially with respect to care coordination.

In 2017, through the annual payment rules, CMS requested comments on improvements that could be made to the health care delivery system to reduce unnecessary burdens for clinicians, other providers, and patients and their families. In response, commenters shared information regarding the barriers to participation in health care delivery and payment reform efforts, both public and private, as well as the burdens of compliance with the physician self-referral statute and regulations. As a result of our review of these comments, and with a goal of reducing regulatory burden and dismantling barriers to value-based care transformation while also protecting the integrity of the Medicare program, on June 25, 2018, we published in the Federal Register a Request for Information Regarding the Physician Self-Referral Law (the CMS RFI) seeking recommendations and input from the Start Printed Page 77495public on how to address any undue impact and burden of the physician self-referral statute and regulations (83 FR 29524).

Comments on the CMS RFI fell within five general themes. First, commenters requested new exceptions to the physician self-referral law to protect a variety of compensation arrangements between and among parties in CMS-sponsored alternative payment models and also those models that are sponsored by other payors, including Federal payors. Commenters also requested protection for care coordination arrangements, including arrangements where entities and physicians share resources to facilitate the care of their common patients.

Generally, commenters recognized the need for appropriate safeguards in exceptions for arrangements among parties that participate in alternative payment models. Second, commenters requested a new exception to permit entities to donate cybersecurity technology and services to physicians. Third, commenters provided helpful feedback on terminology and concepts critical to the physician self-referral law, such as commercial reasonableness, fair market value, and compensation that “takes into account” the volume or value of referrals and is “set in advance.” Fourth, some commenters expressed concerns that new exceptions or easing current restrictions could exacerbate overutilization and other harms.

For example, some commenters indicated that financial gain should never be permitted to influence medical decision making, and some expressed concern that value-based payment systems drive industry consolidation and reduce competition. Finally, a few commenters provided feedback on issues that were not specifically discussed in the CMS RFI, such as requests to eliminate or keep the statutory restrictions for physician-owned hospitals and requests to eliminate, expand, or limit the scope and availability of the in-office ancillary services exception. Commenters on the CMS RFI provided valuable information used to develop the proposals that we are finalizing in this final rule.

E. Notice of Proposed Rulemaking In the October 17, 2019 Federal Register, we published a proposed rule (84 FR 55766) (the proposed rule) in which we proposed a comprehensive package of reforms to modernize and clarify the regulations that interpret the physician self-referral law. These proposed policies were developed in support of the CMS Patients over Paperwork initiative, the Regulatory Sprint, and based on our experience in administering the physician self-referral law, including the CMS Voluntary Self-Referral Disclosure Protocol (SRDP).

The CMS Patients over Paperwork initiative emphasizes a commitment to removing regulatory obstacles to providers spending time with patients. Reducing unnecessary burden generally is a shared goal of the Patients over Paperwork initiative and the Regulatory Sprint. The Regulatory Sprint is focused specifically on identifying regulatory requirements or prohibitions that may act as barriers to coordinated care, assessing whether those regulatory provisions are unnecessary obstacles to coordinated care, and issuing guidance or revising regulations to address such obstacles and, as appropriate, encouraging and incentivizing coordinated care.

To facilitate the transition of our health care system to one that is based on value rather than volume, we proposed new exceptions to the physician self-referral law for value-based arrangements, along with integrally-related definitions for value-based enterprises, activities, arrangements, and purposes, the providers and suppliers that participate in a value-based enterprise, and the target patient population for whom the parties' efforts are undertaken. We also proposed new and revised policies that balance program integrity concerns against the burden of the physician self-referral law's referral and billing prohibitions by. Providing guidance for physicians and health care providers and suppliers whose financial relationships are governed by the physician self-referral statute and regulations.

Reassessing the scope of the statute's reach. And establishing new exceptions for common nonabusive compensation arrangements between physicians and the entities to which they refer Medicare beneficiaries for designated health services. As part of the Regulatory Sprint and also in the October 17, 2019 Federal Register, OIG published a proposed rule under the anti-kickback statute and CMP law to address concerns regarding provisions in those statutes that may act as barriers to coordinated care (84 FR 55694).

Because many of the compensation arrangements between parties that participate in alternative payment models and other novel financial arrangements implicate both the physician self-referral law and the anti-kickback statute, we coordinated closely with OIG in developing certain provisions of our proposals. Our aim was to promote alignment across our agencies, where appropriate, to ease the compliance burden on the regulated industry. In some cases, our proposals were different in application or potentially more restrictive than OIG's comparable proposals, in recognition of the differences in statutory structures, authorities, and penalties.

In other cases, OIG's proposals were more restrictive. In the proposed rule, we stated that, for some arrangements, it may be appropriate for the anti-kickback statute, which is an intent-based criminal law, to serve as “backstop” protection for arrangements that might be protected by an exception to the strict liability physician self-referral law (84 FR 55772). C.

Application and Scope of the Physician Self-Referral Law As we emphasized in the proposed rule, our intent in interpreting and implementing section 1877 of the Act has always been “to interpret the [referral and billing] prohibitions narrowly and the exceptions broadly, to the extent consistent with statutory language and intent,” and we have not vacillated from this position (84 FR 55771. See also, 66 FR 860). Our 1998 proposed rule was informed by our review of the legislative history of section 1877 of the Act, consultation with our law enforcement partners about their experience implementing and enforcing the Federal fraud and abuse laws, and empirical studies of physicians' referral patterns and practices, which concluded that a physician's financial relationship with an entity can affect a physician's medical decision making and lead to overutilization.

At the time of our earliest rulemakings, we did not have as much experience in administering the physician self-referral law or working with our law enforcement partners on investigations and actions involving violations of the physician self-referral law. Thus, despite our stated intention to interpret the law's prohibitions narrowly and the exceptions broadly, we proceeded with great caution when designing exceptions. Over the past decade, we have vastly expanded our knowledge of the aspects of financial relationships that result in Medicare program or patient abuse.

Our administration of the SRDP, which has received over 1,200 submissions since its inception in 2010, has provided us insight into thousands of financial relationships—most of which were compensation arrangements—that ran afoul of the physician self-referral law but posed little risk of Medicare program or patient abuse. We made revisions to our regulations and shared policy clarifications in the CY 2016 and Start Printed Page 774962019 PFS rulemakings to address many issues related to the documentation requirements in the statutory and regulatory exceptions to the physician self-referral law, but had not, until now, addressed other requirements in the regulatory exceptions that stakeholders identified as adding unnecessary complexity without increasing safeguards for program integrity. As described in more detail in section II of this final rule, we are eliminating certain requirements in our regulatory exceptions that may be unnecessary and revising existing exceptions.

We are also establishing new exceptions for nonabusive arrangements for which there is currently no applicable exception to the physician self-referral law's referral and billing prohibitions. D. Purpose of the Final Rule This final rule modernizes and clarifies the regulations that interpret the Medicare physician self-referral law.

Following an extensive review of policies that originated in the context of a health care delivery and payment system that operates based on the volume of services, and to support the innovation necessary for a health care delivery and payment system that pays for value, we are establishing new, permanent exceptions to the physician self-referral law for value-based arrangements and definitions for terminology integral to such a system. This final rule also includes clarifying provisions and guidance intended to reduce unnecessary regulatory burden on physicians and other health care providers and suppliers, while reinforcing the physician self-referral law's goal of protecting against program and patient abuse. Finally, we are establishing new exceptions for nonabusive arrangements for which there is currently no applicable exception to the physician self-referral law's referral and billing prohibitions.

II. Provisions of the Final Rule A. Facilitating the Transition to Value-Based Care and Fostering Care Coordination 1.

Background Transforming our health care system into one that pays for value is one of the Secretary's priorities. As we stated in the proposed rule, there is broad consensus throughout the health care industry regarding the urgent need for a movement away from legacy systems that pay for care on a FFS basis (84 FR 55772). Identifying and addressing regulatory barriers to value-based care transformation is a critical step in this movement.

We are aware of the effect the physician self-referral law may have on parties participating or considering participation in integrated care delivery models, alternative payment models, and arrangements to incent improvements in outcomes and reductions in cost, and we share the optimism of commenters on the CMS RFI and the proposed rule that the changes to the physician self-referral regulations will allow greater innovation and enable HHS to realize its goal of transforming the health care system into one that pays for value. The health care landscape when the physician self-referral law was enacted bears little resemblance to the landscape of today. As many commenters on the CMS RFI and the proposed rule highlighted, the physician self-referral law was enacted at a time when the goals of the various components of the health care system were often in conflict, with each component competing for a bigger share of the health care dollar without regard to the inefficiencies that resulted for the system as a whole—in other words, a volume-based system.

According to these commenters, the current physician self-referral regulations—intended to combat overutilization in a volume-based system—are outmoded because, by their nature, integrated care models protect against overutilization by aligning clinical and economic performance as the benchmarks for value. And, in general, the greater the economic risk that providers assume, the greater the economic disincentive to overutilize services. According to some of these commenters, the current prohibitions are even antithetical to the stated goals of policy makers, both in the Congress and within HHS, for health care delivery and payment reform.

We agree in concept and, as described below in this section II.A. Of this final rule, we are finalizing an interwoven set of definitions and exceptions that depart from the historic exceptions to the physician self-referral law in order to facilitate the transition to a value-based health care delivery and payment system. We intend for the policies finalized in this final rule to facilitate an evolving health care delivery system, and endeavored to design policies that will stand the test of time.

We believe that our final policies achieve the right balance between ensuring program integrity, making compliance with the physician self-referral law readily achievable, and providing the flexibility required by participants in value-based health care delivery and payment systems. As we did with respect to the proposed rule, we coordinated closely with OIG in developing our final exceptions, definitions, and related policies. However, for the reasons described in this final rule, the final definitions and exceptions that pertain to the physician self-referral law differ in some respects from the final definitions and safe harbors that pertain to the anti-kickback statute.

Compensation arrangements may implicate both statutes and, therefore, should be analyzed for compliance with each statute. 2. Definitions and Exceptions In § 411.357(aa), we are finalizing new exceptions to the physician self-referral law for compensation arrangements that satisfy specified requirements based on the characteristics of the arrangement and the level of financial risk undertaken by the parties to the arrangement or the value-based enterprise of which they are participants.

The exceptions apply regardless of whether the arrangement relates to care furnished to Medicare beneficiaries, non-Medicare patients, or a combination of both. Although revisions to the physician self-referral regulations are crucial to facilitating the transition to a value-based health care delivery and payment system, nothing in our final policies is intended to suggest that many value-based arrangements, such as pay-for-performance arrangements or certain risk-sharing arrangements, do not satisfy the requirements of existing exceptions to the physician self-referral law. For purposes of applying the exceptions, we are finalizing new definitions at § 411.351 for the following terms.

Value-based activity. Value-based arrangement. Value-based enterprise.

Value-based purpose. VBE participant. And target patient population.

The definitions are essential to the application of the exceptions, which apply only to compensation arrangements that qualify as value-based arrangements. Thus, the exceptions may be accessed only by those parties that qualify as VBE participants in the same value-based enterprise. The definitions and exceptions together create the set of requirements for protection from the physician self-referral law's referral and billing prohibitions.

Again, where possible and feasible, we have aligned with OIG's final policies to ease the compliance burden on the regulated industry. Specifically, with respect to the value-based terminology as defined in this final rule, we are aligned with the OIG in most respects, and points of difference are explained below. To facilitate readers' review of our final policies, we first discuss the value-Start Printed Page 77497based definitions we are finalizing in this final rule.

A. Definitions The final definitions and exceptions together create the set of requirements for protection from the physician self-referral law's referral and billing prohibitions. The “value-based” definitions are interconnected and, for the best understanding, should be read together.

In the proposed rule (84 FR 55773), we proposed the following terms and definitions for purposes of applying the new exceptions at § 411.357(aa). Value-based activity means any of the following activities, provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise. (1) The provision of an item or service.

(2) the taking of an action. Or (3) the refraining from taking an action. We also proposed that the making of a referral is not a value-based activity.

Value-based arrangement means an arrangement for the provision of at least one value-based activity for a target patient population between or among. (1) The value-based enterprise and one or more of its VBE participants. Or (2) VBE participants in the same value-based enterprise.

Value-based enterprise means two or more VBE participants. (1) Collaborating to achieve at least one value-based purpose. (2) each of which is a party to a value-based arrangement with the other or at least one other VBE participant in the value-based enterprise.

(3) that have an accountable body or person responsible for financial and operational oversight of the value-based enterprise. And (4) that have a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s). Value-based purpose means.

(1) Coordinating and managing the care of a target patient population. (2) improving the quality of care for a target patient population. (3) appropriately reducing the costs to, or growth in expenditures of, payors without reducing the quality of care for a target patient population.

Or (4) transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population. VBE participant means an individual or entity that engages in at least one value-based activity as part of a value-based enterprise. Target patient population means an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that are set out in writing in advance of the commencement of the value-based arrangement and further the value-based enterprise's value-based purpose(s).

We are finalizing the definitions as proposed, with the modifications described below in this section II.A.2.a. Of this final rule. The activities undertaken by the parties to a compensation arrangement are key to the arrangement qualifying as a “value-based arrangement” to which the exceptions at § 411.357(aa) apply.

We refer to these activities as value-based activities. In the proposed rule, we acknowledged that sometimes value-based activities are easily identifiable as the provision of items or services to a patient and, other times, identifying a specific activity responsible for an outcome in a value-based health care system can be difficult (84 FR 55773). We appreciate that remuneration paid in furtherance of the objectives of a value-based health care system does not always involve one-to-one payments for items or services provided by a party to an arrangement.

For example, a shared savings payment distributed by an entity to a downstream physician who joined with other providers and suppliers to achieve the savings represents the physician's agreed upon share of such savings rather than a payment for specific items or services furnished by the physician to the entity (or on the entity's behalf). And, when payments are made to encourage a physician to adhere to a redesigned care protocol, such payments are made, in part, in consideration of the physician refraining from following or altering his or her past patient care practices rather than for direct patient care items or services provided by the physician. Therefore, at final § 411.351, “value-based activity” is defined to mean the provision of an item or service, the taking of an action, or the refraining from taking an action, provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise of which the parties to the arrangement are participants.

In the proposed rule, we stated that the act of referring patients for designated health services is itself not a value-based activity. In addition, as a general matter, referrals are not items or services for which a physician may be compensated under the physician self-referral law, and payments for referrals are antithetical to the purpose of the statute (84 FR 55773). Because of this view, we proposed to expressly state in the definition of “value-based activity” that the making of a referral is not a value-based activity in order to make clear that the exceptions would not protect the direct payment for referrals.

For the reasons discussed in response to comments below, we are not finalizing this part of our proposal. However, as discussed in section II.D.2.c. Of this final rule, we are revising the definition of “referral” at § 411.351 to affirm our policy that, as a general matter, referrals are not items or services for which a physician may be compensated under the physician self-referral law.

Our final definition of “value-based activity” requires that the activities must be reasonably designed to achieve at least one value-based purpose of the value-based enterprise. For example, if the value-based purpose of the enterprise is to coordinate and manage the care of patients who undergo lower extremity joint replacement procedures, a value-based arrangement might require routine post-discharge meetings between a hospital and the physician primarily responsible for the care of the patient following discharge from the hospital. The value-based activity—that is, the physician's participation in the post-discharge meetings—would be reasonably designed to achieve the enterprise's value-based purpose.

In contrast, if the value-based purpose of the enterprise is to reduce the costs to or growth in expenditures of payors while improving or maintaining the quality of care for the target patient population, providing patient care services (the purported value-based activity) without monitoring their utilization would not appear to be reasonably designed to achieve that purpose. The definition of “value-based arrangement” is key to our final policies aimed at facilitating the transition to value-based care and fostering care coordination, as the final exceptions apply only to arrangements that qualify as value-based arrangements. At final § 411.351, “value-based arrangement” is defined to mean an arrangement for the provision of at least one value-based activity for a target patient population to which the only parties are.

(1) A value-based enterprise and one or more of its VBE participants. Or (2) VBE participants in the same value-based enterprise. We have revised the language of our proposed definition by substituting “to which the only parties are” for “between or among” to make clear that all parties to the value-based arrangement must be VBE participants in the same value-based enterprise.

For Start Printed Page 77498instance, a value-based arrangement between an imaging center and a physician would not be a value-based arrangement if the imaging center is not part of the same value-based enterprise as the physician. Effectively, the parties to a value-based arrangement must include an entity (as defined at § 411.351) and a physician. Otherwise, the physician self-referral law's prohibitions would not be implicated.

Also, because the exceptions at final § 411.357(aa) apply only to compensation arrangements (as defined at § 411.354(c)), the value-based arrangement must be a compensation arrangement and not another type of financial relationship to which the physician self-referral law applies. Patient care coordination and management are the foundation of a value-based health care delivery system. Reform of the delivery of health care through better care coordination—including more efficient transitions for patients moving between and across care settings and providers,[] reduction of orders for duplicative items and services, and open sharing of medical records and other important health data across care settings and among a patient's providers (consistent with privacy and security rules)—is integrally connected to reforming health care payment systems to shift from volume-driven to value-driven payment models.

We expect that most value-based arrangements would involve activities that coordinate and manage the care of a target patient population, but did not propose to limit the universe of compensation arrangements that will qualify as value-based arrangements to those arrangements specifically for the coordination and management of patient care. Rather, we sought comment on our approach and whether we should revise the definition of “value-based arrangement” to require care coordination and management in order to qualify as a value-based arrangement. As discussed in more detail later in this section, the final definition of “value-based arrangement” does not require care coordination and management in order to qualify as a value-based arrangement.

Therefore, we are not including a corollary definition of “care coordination and management” in our final regulations. The final exceptions at § 411.357(aa) apply only to value-based arrangements, the only parties to which, as described previously, are a value-based enterprise and one or more of its VBE participants or VBE participants in the same value-based enterprise. At final § 411.351, value-based enterprise is defined to mean two or more VBE participants.

(1) Collaborating to achieve at least one value-based purpose. (2) each of which is a party to a value-based arrangement with the other or at least one other VBE participant in the value-based enterprise. (3) that have an accountable body or person responsible for the financial and operational oversight of the value-based enterprise.

And (4) that have a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s). A “value-based enterprise” includes only organized groups of health care providers, suppliers, and other components of the health care system collaborating to achieve the goals of a value-based health care delivery and payment system. As we stated in the proposed rule, an “enterprise” may be a distinct legal entity—such as an ACO—with a formal governing body, operating agreement or bylaws, and the ability to receive payment on behalf of its affiliated health care providers (84 FR 55774).

An “enterprise” may also consist only of the two parties to a value-based arrangement with the written documentation recording the arrangement serving as the required governing document that describes the enterprise and how the parties intend to achieve its value-based purpose(s). Whatever its size and structure, a value-based enterprise is essentially a network of participants (such as clinicians, providers, and suppliers) that have agreed to collaborate with regard to a target patient population to put the patient at the center of care through care coordination, increase efficiencies in the delivery of care, and improve outcomes for patients. The definition of “value-based enterprise” finalized at § 411.351 is focused on the functions of the enterprise, as it is not our intention to dictate or limit the appropriate legal structures for qualifying as a value-based enterprise.

To qualify as a value-based enterprise, among other things, each participant in the enterprise, whom we refer to as a VBE participant, must be a party to at least one value-based arrangement with at least one other participant in the enterprise. If a value-based enterprise is comprised of only two VBE participants, they must have at least one value-based arrangement with each other in order for the enterprise to qualify as a value-based enterprise. (Provided that a value-based enterprise exists, an arrangement between the enterprise and a physician who is a VBE participant in the value-based enterprise may qualify as a “value-based arrangement” for purposes of the exceptions at § 411.357(aa) if the value-based enterprise is itself an “entity” as defined at § 411.351.) In addition, a value-based enterprise must have an accountable body or person that is responsible for the financial and operational oversight of the enterprise.

This may be the governing board, a committee of the governing board, or a corporate officer of the legal entity that is the value-based enterprise, or this may be the party to a value-based arrangement that is designated as being responsible for the financial and operational oversight of the arrangement between the parties (for example, if the “enterprise” consists of just the two parties). Finally, a value-based enterprise must have a governing document that describes the enterprise and how its VBE participants intend to achieve its value-based purpose(s). Implicit in this requirement is that the value-based enterprise must have at least one value-based purpose.

Also critical to qualifying as a value-based arrangement are the scope and objective of the arrangement. As noted previously, only an arrangement for activities that are reasonably designed to achieve at least one of the value-based enterprise's value-based purposes may qualify as a value-based arrangement to which the exceptions at § 411.357(aa) apply. At final § 411.351, value-based purpose is defined to mean.

(1) Coordinating and managing the care of a target patient population. (2) improving the quality of care for a target patient population. (3) appropriately reducing the costs to or growth in expenditures of payors without reducing the quality of care for a target patient population.

Or (4) transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population. As we stated in the proposed rule, some of these goals are recognizable as part of the successor frameworks to the “triple aim” that are integral to CMS' value-based programs and our larger quality strategy to reform how health care is delivered and reimbursed (84 FR 55774). Our definition of “value-based purpose” identifies four core goals related to a target patient population.

One or more of these goals must anchor the activities underlying every compensation arrangement that qualifies as a value-Start Printed Page 77499based arrangement to which the exceptions at final § 411.357(aa) apply. In the proposed rule, we sought comment on whether it would be desirable or necessary to codify in regulation text what is meant by “coordinating and managing care” and, if so, whether “coordinating and managing care” should be defined to mean the deliberate organization of patient care activities and sharing of information between two or more VBE participants, tailored to improving the health outcomes of the target patient population, in order to achieve safer and more effective care for the target patient population (84 FR 55775). This definition was intended to correspond to a similar definition proposed by OIG.

As described in more detail below, we are not finalizing a definition of “coordinating and managing care” in our regulations. We also sought comment regarding whether additional interpretation of the other proposed value-based purposes is necessary, but did not receive comments on the need for additional interpretation of any other aspect of the definition of “value-based purpose.” We respond to comments on this topic below. We proposed to define VBE participant (that is, a participant in a value-based enterprise) to mean an individual or entity that engages in at least one value-based activity as part of a value-based enterprise.

We noted in the proposed rule that the word “entity,” as used in the definition of “VBE participant,” is not limited to non-natural persons that qualify as “entities” as defined at § 411.351 (84 FR 55775). We proposed to use the word “entity” in the definition of “VBE participant” in order to align with the definition proposed by OIG. We sought comment regarding whether the use of the word “entity” in this definition would cause confusion due to the fact that the universe of non-natural persons (that is, entities) that could qualify as VBE participants is greater than the universe of non-natural persons that qualify as “entities” under § 411.351 and, if so, what alternatives exist for defining “VBE participant” for purposes of the physician self-referral law.

As discussed in more detail below, we are modifying the definition of VBE participant in this final rule to mean a person or entity that engages in at least one value-based activity as part of a value-based enterprise. The phrase “person or entity” is used more frequently throughout our regulations and, even though the word “entity” (as included in the definition of “VBE participant”) is not limited to an “entity” as defined at § 411.351 and its use could result in some confusion for stakeholders, we believe that it is less disruptive to use the already-common phrase “person or entity” to define VBE participant. We may consider whether to replace the word “entity” throughout our regulations in those instances where it is not intended to be limited to the defined term at § 411.351.

However, any revisions to our regulations to achieve this substitution would occur through future notice-and-comment rulemaking. In the proposed rule, we also discussed the experiences of our law enforcement partners, including oversight experience, and the resulting concern about protecting potentially abusive arrangements between certain types of entities that furnish designated health services for purposes of the physician self-referral law (84 FR 55775). Specifically, we discussed concerns about compensation arrangements between physicians and laboratories or suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) that may be intended to improperly influence or capture referrals without contributing to the better coordination of care for patients (84 FR 55776).

We stated that we were considering whether to exclude laboratories and DMEPOS suppliers from the definition of VBE participant or, in the alternative, whether to include in the exceptions at § 411.357(aa), a requirement that the arrangement is not between a physician (or immediate family member of a physician) and a laboratory or DMEPOS supplier. We also stated that, in particular, we were uncertain as to whether laboratories and DMEPOS suppliers have the direct patient contacts that would justify their inclusion as parties working under a protected value-based arrangement to achieve the type of patient-centered care that is a core tenet of care coordination and a value-based health care system. In addition, due to our (and our law enforcement partners') ongoing program integrity concerns with certain other participants in the health care system and to maintain consistency with policies proposed by OIG, we stated that we were also considering whether to exclude the following providers, suppliers, and other persons from the definition of “VBE participant”.

Pharmaceutical manufacturers. Manufacturers and distributors of DMEPOS. Pharmacy benefit managers (PBMs).

Wholesalers. And distributors. At final § 411.351, “VBE participant” is defined to mean a person or entity that engages in at least one value-based activity as part of a value-based enterprise.

The definition of “VBE participant” finalized here does not exclude any specific persons, entities, or organizations from qualifying as a VBE participant. Lastly, we are finalizing the definition of “target patient population” as proposed, without modification. Specifically, the target patient population for which VBE participants undertake value-based activities is defined at final § 411.351 to mean an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that.

(1) Are set out in writing in advance of the commencement of the value-based arrangement. And (2) further the value-based enterprise's value-based purpose(s). We affirm in this final rule that legitimate and verifiable criteria may include medical or health characteristics (for example, patients undergoing knee replacement surgery or patients with newly diagnosed type 2 diabetes), geographic characteristics (for example, all patients in an identified county or set of zip codes), payor status (for example, all patients with a particular health insurance plan or payor), or other defining characteristics.

As we stated in the proposed rule, selecting a target patient population consisting of only lucrative or adherent patients (cherry-picking) and avoiding costly or noncompliant patients (lemon-dropping) would not be permissible under most circumstances, as we would not consider the selection criteria to be legitimate (even if verifiable) (84 FR 55776). We received comments on the proposed definitions of value-based activity, value-based arrangement, value-based enterprise, value-based purpose, VBE participant, and target patient population. Our responses follow.

Comment. Most commenters supported our proposed definition of value-based activity, but many requested further guidance regarding what CMS would consider appropriate value-based activities. Specifically, some commenters asked whether particular items or services, such as transportation services or the provision of non-medical personnel, would qualify as value-based activities.

Commenters did not explain how the arrangements for those particular items or services would implicate the physician self-referral law. That is, whether the items or services are in-kind remuneration provided by an entity to a physician or an immediate family member of a physician under an arrangement between a physician (or Start Printed Page 77500immediate family member of a physician), whether the items or services are provided by one of the parties to a value-based arrangement and paid for by the recipient of the items or services, or whether the services are provided to patients. Response.

We decline to provide a list of items or services, actions, and ways to refrain from taking an action that qualify as value-based activities. We are concerned that even a non-exhaustive list of common value-based activities could unintentionally limit innovation and inhibit robust participation in value-based health care delivery and payment systems. The final definition of “value-based activity” provides the flexibility for parties to design arrangements that further the value-based purpose(s) of value-based enterprises.

The determination regarding whether the provision of an item or service, the taking of an action, or the refraining from taking an action constitutes a value-based activity is a fact-specific analysis and turns on whether the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise. With respect to the examples provided by the commenters, we note that the scope of the physician self-referral law is limited to a financial relationship between a physician (or the immediate family member of a physician) and the entity to which the physician makes referrals for designated health services. We assume that the commenters were referring to the provision of transportation services to a beneficiary, which would not implicate the law unless the beneficiary was a physician or an immediate family member of a physician.

With respect to the commenters' inquiry regarding the provision of non-medical personnel, assuming that the commenters were referring to the provision of non-medical personnel to a physician by an entity, we are uncertain whether the commenter is referring to in-kind remuneration between an entity and a physician in the form of the services of non-medical personnel without expectation of payment or whether the provision of non-medical personnel would be paid for in cash under the terms of an arrangement between an entity and a physician. Therefore, we are unable to provide specific guidance in response to the inquiry. Comment.

A few commenters requested guidance on what it means for a value-based activity to be reasonably designed to achieve at least one value-based purpose. Some of the commenters expressed concern that our solicitation of comments in the proposed rule could be interpreted to signal that success is required in order for the protections of the value-based exceptions to apply, noting that success of a value-based activity in achieving the intended value-based purpose is never guaranteed. One of the commenters urged CMS to confirm that “satisfying the value-based purposes element of various value-based definitions does not necessarily mean actual success in achieving the purposes but means engaging in collaboration and activities `reasonably designed to achieve' one or more of these value-based purposes.” Response.

The determination regarding whether a value-based activity is reasonably designed to achieve at least one value-based purpose is a fact-specific determination. Parties must have a good faith belief that the value-based activity will achieve or lead to the achievement of at least one value-based purpose of the value-based enterprise in which the parties to the arrangement are VBE participants. We recognize that parties may undertake activities that do not ultimately achieve the value-based purpose(s) of the enterprise.

Nothing in our final regulations requires that the value-based purpose(s) must be achieved in order for a value-based arrangement to be protected under an applicable exception at § 411.357(aa). However, if the parties are aware that the provision of the item or service, the taking of the action, or the refraining from taking the action will not further the value-based purpose(s) of the value-based enterprise, it will cease to qualify as a value-based activity and the parties may need to amend or terminate their arrangement. As discussed in section II.A.2.b.(3).

Of this final rule, we are including a requirement in the final exception for value-based arrangements at § 411.357(aa)(3)(vii) that parties must monitor whether they have furnished the value-based activities required under the arrangement and whether and how continuation of the value-based activities is expected to further the value-based purpose(s) of the value-based enterprise. Comment. A few commenters requested guidance on how parties can document or otherwise show that a value-based activity is “reasonably designed” to achieve a value-based purpose.

Response. We do not dictate how parties should analyze the design of their value-based arrangements to ensure that the value-based activities they undertake are reasonably designed to achieve at least one value-based purpose of the value-based enterprise of which they are participants or how they should substantiate their efforts. We note that contemporaneous documentation is a best practice, and we encourage parties to follow this practice.

We also remind parties that the burden of proof to show compliance with the physician self-referral law is set forth at § 411.353 and is applicable to parties utilizing the new exceptions for value-based arrangements at final § 411.357(aa). We emphasize that the new exceptions do not impose an additional or different burden of proof. It is the responsibility of the entity submitting a claim for payment for designated health services furnished pursuant to a referral from a physician with which it has a financial relationship to ensure compliance with the physician self-referral law at the time of submission of the claim.

That is, parties must ensure that their financial relationship satisfies all the requirements of an applicable exception at the time the physician makes a referral for designated health service(s). Comment. Several commenters expressed concern with our statement that the making of a referral is not a value-based activity and requested that CMS revise the definition of value-based activity to include the making of a referral.

These commenters noted that the definition of “referral” at § 411.351 includes the establishment of a plan of care that includes the provision of designated health services. The commenters also asserted that referrals are an integral part of a value-based health care delivery and payment system, especially with respect to care planning, and contended that excluding the making of a referral from the definition of “value-based activity” would significantly limit the utility of the exceptions. Some commenters urged CMS to revise the definition of “value-based activity” to specifically include the making of a referral as a value-based activity.

Response. The commenters raise important points about the scope of the definition of “referral” at § 411.351 and the exclusion of the making of a referral from the definition of “value-based activity.” It was not our intention to exclude the development of a care plan that includes the furnishing of designated health services from the definition of “value-based activity.” Accordingly, we are not finalizing the reference to the making of a referral in the definition of “value-based activity.” We are defining value-based activity to mean any of the following activities, provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise. (1) The provision of an item Start Printed Page 77501or service.

(2) the taking of an action. Or (3) the refraining from taking an action. Care planning activities that meet the definition of “referral” at § 411.351 will qualify as “the taking of an action” for purposes of applying the definition of “value-based activity.” As discussed in section II.D.2.c.

Of this final rule, we are revising the definition of “referral” at § 411.351 to codify in regulation text our policy that a referral is not an item or service for purposes of section 1877 of the Act and the physician self-referral law regulations. Comment. Most commenters supported the proposed definition of “value-based arrangement.” However, a few commenters requested that we expand the definition to specifically include the following alternative payment models (APMs).

Advanced APMs, all-payor/other-payor APMs, and Merit-based Incentive Payment System (MIPS) Alternative Payment Models (APMs) under the Quality Payment Program (QPP). The commenters also requested that we include State-based Medicaid initiatives in the definition of “value-based arrangement.” Response. We decline to adopt the commenters' suggestion and are finalizing the definition as proposed.

The models referenced by the commenters relate to value-based payments from a payor to a physician under a payment arrangement between the payor and the physician. For purposes of the physician self-referral law, a compensation arrangement is an arrangement between a physician (or immediate family member of a physician) and the entity to which the physician makes referrals for designated health services. The definition of “value-based arrangement” relates to a compensation arrangement between a physician and an entity that participate in the same value-based enterprise.

It does not cover compensation arrangements between a payor and a physician. Comment. Most commenters generally supported our proposed definition of “value-based enterprise,” although one commenter had concerns with the requirement that each VBE participant must be a party to a value-based arrangement with at least one other VBE participant in the value-based enterprise.

This commenter interpreted this requirement to preclude the addition of VBE participants to a value-based arrangement after the value-based arrangement has begun. The commenter requested that we permit parties to add VBE participants to a value-based arrangement throughout the duration of the arrangement, either on an ongoing basis or at least annually. Response.

The design and structure of contracts is separate and distinct from the analysis of financial relationships under the physician self-referral law. Although nothing in our regulations prohibits having multiple parties to a contract or adding parties after the effective date of the contract, each of the financial relationships that results from the contract must be analyzed separately under the physician self-referral law. The commenter described adding new physicians to an existing value-based arrangement.

For purposes of determining compliance with the physician self-referral law, an arrangement between an entity and a “new” physician engaging in value-based activities will not be viewed as an “addition” to an existing value-based arrangement but, rather, a separate and distinct compensation arrangement that must be analyzed for compliance with an applicable exception. To illustrate, assume that a hospital and a physician organization enter into a value-based arrangement under which the physician organization agrees that all its physicians will abide by the hospital's care protocols for a period of 2 years. During the course of the value-based arrangement, the physician organization hires a new physician who agrees to abide by the hospital's care protocols as called for by the physician organization's arrangement with the hospital.

Assuming the new physician stands in the shoes of the physician organization under § 411.354(c), the “addition” of the new physician to the physician organization creates a separate new financial relationship between the hospital and the new physician that must satisfy the requirements of an applicable exception to the physician self-referral law. Nothing in the definition of “value-based enterprise” will preclude a new VBE participant from providing value-based activities and participating in a value-based arrangement with another VBE participant or the value-based enterprise itself (if the value-based enterprise is an entity for purposes of the physician self-referral law). Comment.

Many commenters sought additional guidance regarding the type of organized network or group of persons or entities that may qualify as a value-based enterprise. Response. A value-based enterprise may be a distinct legal entity—such as an ACO—with a formal governing body, operating agreement or bylaws, and the ability to receive payment on behalf of its affiliated health care providers and suppliers.

A value-based enterprise may also be an informal affiliation, even consisting of only the two parties to a value-based arrangement. The definition of “value-based enterprise” is intended to include only organized groups of health care providers, suppliers, and other components of the health care system collaborating to achieve the goals of a value-based health care delivery and payment system. Whatever its size and structure, a value-based enterprise is essentially a network of participants (such as clinicians, providers, and suppliers) that have agreed to collaborate with regard to a target patient population to put the patient at the center of care through care coordination, increase efficiencies in the delivery of care, and improve outcomes for patients.

Simply stated, a value-based enterprise is a network of individuals and entities that are collaborating to achieve one or more value-based purposes of the value-based enterprise. We do not believe that it would be beneficial to dictate particular legal or other structural requirements for a value-based enterprise. Rather, the definition of “value-based enterprise” is intended to encompass a wide-range of structures to help facilitate health care providers' transition to a value-based health care delivery and payment system.

Comment. A few commenters requested guidance with respect to the requirement that the value-based enterprise have an accountable body or person responsible for the financial and operational oversight of the value-based enterprise, specifically with respect to the responsibilities, requirements, structure, and composition of the accountable body. One commenter requested confirmation that an ACO could rely on its existing governing body and would not need to establish a separate accountable body or identify a person other than the ACO's governing body to be responsible for the financial and operational oversight of the value-based enterprise.

Several commenters expressed concern that requiring one individual or entity to assume responsibility for the financial and operational oversight of the value-based enterprise could create tension between VBE participants and limit the utility of the exceptions for smaller value-based enterprises. Other commenters asserted that the establishment of the accountable body or person and the development of the governing document would require the expenditure of significant resources, including legal expenses, and questioned whether this burden is necessary. One of these commenters suggested that this requirement is especially burdensome for small or rural practices that may not Start Printed Page 77502have sufficient resources to satisfy the requirement.

Some commenters also requested explicit guidance regarding the governing document that describes the value-based enterprise and how its VBE participants intend to achieve the enterprise's value-based purpose(s). Response. Transparency and accountability are critical to a successful transition to a value-based health care delivery and payment system.

It is essential that CMS and our law enforcement partners are able to identify the person or organization ultimately responsible for the financial and operational oversight of a value-based enterprise. We do not believe that requiring a value-based enterprise to have an accountable body or responsible person and a governing document creates an administrative or financial burden beyond what parties that wish to transition to value-based health care would already incur. We are not persuaded to abandon the requirement that a value-based enterprise must have an accountable body or person that is responsible for the financial and operational oversight of the enterprise.

As discussed in the proposed rule and as noted above, the accountable body or person that is responsible for the financial and operational oversight of the enterprise may be the governing board, a committee of the governing board, or a corporate officer of the legal entity that is the value-based enterprise, or may be the party to a value-based arrangement that is designated as being responsible for the financial and operational oversight of the arrangement between the parties (if the “enterprise” is a network consisting of just the two parties) (84 FR 55774). We expect that a value-based enterprise would establish an accountable body or designate a responsible person commensurate with the scope and objectives of the value-based enterprise and its available resources. We are also maintaining the requirement that the enterprise must have a governing document that describes the value-based enterprise and how its VBE participants intend to achieve its value-based purpose(s).

Parties regularly enter into payor contracts, employment relationships, service arrangements, and other arrangements for items and services related to the provision of patient care services. It is a matter of general contracting practice that these contracts and written agreements specify the rights, responsibilities, and obligations of the parties. We expect that independent health care providers that wish to organize and collaborate to achieve value-based purposes would utilize these same basic practices to reduce their arrangements to writing, including their arrangement to form a value-based enterprise.

We believe that the same is true for the development of a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s). We remind parties that we are not dictating particular legal or other structural requirements for a value-based enterprise. Rather, the final regulations accommodate both formal and informal value-based enterprises.

As a result, the written agreements and contracts that parties enter into in the normal course of their business dealings could serve as the documentation required under the new exception for value-based arrangements. It is simply not possible to establish one set of financial and operational oversight requirements that would be applicable to value-based enterprises of all types and sizes. The financial and operational oversight of a value-based enterprise and the related governing document for a value-based enterprise made up of only a hospital and physician will look very different from that of an ACO that contracts with thousands of providers and suppliers.

Again, we do not dictate the structure or composition of the accountable body. Rather, we simply require that the accountable body or responsible person for the value-based enterprise exercise appropriate financial and operational oversight of the value-based enterprise. Similarly, we do not dictate the format or content of the governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s).

The necessary infrastructure to effectively oversee the financial and operational activities of the value-based enterprise and the governing document will depend on the size and structure of the value-based enterprise. Comment. Several commenters recommended that CMS not limit the types of entities that may qualify as a VBE participant out of concern that any such limitations could slow down or inhibit the movement of the entire health care industry towards value-based health care delivery and significantly limit the utility of the exceptions.

The commenters provided detailed examples of how laboratories and DMEPOS suppliers, in particular, contribute to the value-based health care delivery and payment system by collaborating with other sectors of the health care industry to improve care, lower costs, and ensure that patients are receiving appropriate care. Other commenters expressed concern that the exclusion of laboratories and DMEPOS suppliers from participation in value-based enterprises would impact the ability of health systems that own laboratories or DMEPOS suppliers from participating in value-based health care delivery. Response.

We are not excluding any specific persons, entities, or organizations from the definition of “VBE participant.” We find the commenters' assertions that laboratories and DMEPOS suppliers may play a beneficial role in the delivery of value-based health care persuasive. However, we will continue to monitor the evolution of the value-based health care delivery and payment system to ensure that the inclusion of all types of providers and suppliers as VBE participants does not create a program integrity risk. Comment.

A number of commenters supported the inclusion of coordinating and managing the care of a target patient population as an appropriate value-based purpose, although the majority of these commenters urged CMS to not define “coordinating and managing care” in regulation text, suggesting that the phrase is self-explanatory and defining it could inadvertently limit or interfere with innovation. Commenters that were open to the inclusion of a definition of “coordinating and managing care” stressed the need for any such definition to be drafted broadly. Other commenters suggested that, if we codify a definition of “coordinating and managing care,” it should align with any definition of the same term adopted by OIG.

Response. We agree with the commenters that it is not necessary to define “coordinating and managing care” for purposes of the definition of “value-based purpose.” In addition, we do not believe that it is necessary to define “coordinating and managing care” for purposes of the exceptions finalized at § 411.357(aa), as they are not limited only to value-based arrangements for the coordination or management of care. Comment.

Many commenters requested that we include as a value-based purpose the maintenance of quality of care for the target population without requiring a reduction in costs to payors. Response. We decline to include the maintenance of quality of care as a permissible value-based purpose in the absence of reduction of the costs to or growth in expenditures of payors.

Although we recognize that the maintenance of quality of care may advance the goals of a value-based Start Printed Page 77503enterprise or the specific parties to a value-based arrangement, we do not believe that the maintenance of quality of care in the absence of a reduction in the costs to or growth in expenditures of payors advances the goals of the Regulatory Sprint. Thus, it is not appropriate to include the maintenance of quality of care as a stand-alone value-based purpose that would unlock access to the exceptions at § 411.357(aa). We note that numerous CMS programs and Medicare payment mechanisms already require the maintenance of quality across the care continuum and encourage improvement and maintenance of quality through use of payment incentives and payment reductions.

For example, under the Hospital Inpatient Quality Reporting Program, CMS collects quality data from hospitals paid under the IPPS. Data for selected measures are used for paying a portion of hospitals based on the quality and efficiency of care, including the Hospital-Acquired Condition Reduction Program, Hospital Readmissions Reduction Program, and Hospital Value-Based Purchasing Program, which rewards acute care hospitals with incentive payments based on the quality of care they provide, rather than just the quantity of services they provide. Comment.

The majority of commenters supported the definition of “value-based purpose” and urged CMS to finalize the definition without modifications. A few commenters requested that we revise the definition of “value-based purpose” to include the reduction in costs to or growth in expenditures of health care providers and suppliers. These commenters asserted that limiting the definition of value-based purpose to reducing the costs to or growth in expenditures of only payors fails to recognize the benefits to Medicare that come from the reduction of provider costs, such as reporting lower costs to Medicare on the hospital's cost report, which, in turn, result in lower Medicare expenditures.

These commenters pointed to internal cost savings programs that distribute savings generated from implementing specific cost saving measures to physicians. The commenters expressed concern that hospital-initiated quality and efficiency programs that drive down hospital costs, improve efficiency, and improve quality of care would not be protected by the exceptions because the hospital's program would not directly reduce costs to or growth in expenditures of payors. Response.

We are not persuaded to revise the definition of “value-based purpose” as requested by the commenters. We believe that the four purposes included in the definition are sufficiently inclusive to allow for innovative value-based arrangements while protecting against program or patient abuse. We do not believe that permitting a value-based enterprise to exist solely for the purpose of reducing costs to its VBE participants would adequately protect the Medicare program and its beneficiaries from abuse.

Moreover, allowing parties to share in the reduction of costs without also improving or maintaining quality of care for patients or otherwise benefitting payors does not advance the transition to a value-based health care delivery and payment system. We note that nothing in this final rule precludes the sharing of cost savings and other entity-specific savings programs, provided those programs are part of a value-based arrangement for value-based activities reasonably designed to further at least one value-based purpose of the value-based enterprise of which the parties to the arrangement are VBE participants. The compensation to a physician under such a value-based arrangement could include a share of the savings that result from a hospital's internal cost sharing (or gainsharing) program.

Comment. A few commenters specifically supported the inclusion as a value-based purpose “transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.” These commenters stated that allowing a value-based enterprise to operate for this purpose is necessary to achieve CMS' goal of transitioning to a value-based health care delivery and payment system and strikes the right balance between precision and flexibility. The commenters asserted that value-based enterprises would rely on this purpose to cover the clinical integration and infrastructure activities necessary to develop and implement a value-based enterprise and to meet future operational and capital requirements.

Commenters likened this value-based purpose to the purpose underlying the pre-participation waiver for the Shared Savings Program. The commenters recommended that we make no further refinement to this value-based purpose. Response.

The commenters' understanding of the scope of this value-based purpose is correct. As we discussed in the proposed rule, this value-based purpose is intended to accommodate efforts aimed at transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for the target patient population (84 FR 55775). Generally speaking, we interpret “transitioning” to mean undergoing the process or period of transition from one state or condition to another and, specifically, with respect to this value-based purpose, the process or period of transition from furnishing patient care services in a FFS volume-based system to furnishing patient care services in a value-based health care delivery and payment system.

Thus, this value-based purpose applies during the period of a value-based enterprise's start-up or preparatory activities. In the proposed rule, we interpreted this value-based purpose as a category that includes the integration of VBE participants in team-based coordinated care models, establishing the infrastructure necessary to provide patient-centered coordinated care, and accepting (or preparing to accept) increased levels of financial risk from payors or other VBE participants in value-based arrangements (84 FR 55775). This purpose will also apply to activities undertaken by an unincorporated value-based enterprise that wishes to formalize its legal and operational structure, as well as the preparation by a value-based enterprise to accept financial risk and the preparation of VBE participants to furnish services in a manner focused on the value of those services instead of volume.

We agree that this value-based purpose shares certain aspects of the pre-participation waiver under the Shared Savings Program. In our discussion of the Shared Savings Program pre-participation waiver in our October 29, 2015 Shared Savings Program Final Waivers in Connection with the Shared Savings Program Final Rule (80 FR 66726) (the SSP waivers final rule), we provided examples of start-up arrangements as guideposts for determining whether a particular arrangement may qualify for protection under the pre-participation waiver (80 FR 66733). We believe those examples, to the extent they create a compensation relationship for purposes of the physician self-referral law, may be illustrative for purposes of interpreting the scope of “transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.” In the SSP waivers final rule (80 FR 66733), we stated that the following types of start-up arrangements Start Printed Page 77504may qualify under the Shared Savings Program pre-participation waiver.

Infrastructure creation and provision. Network development and management, including the configuration of a correct ambulatory network and the restructuring of existing providers and suppliers to provide efficient care. Care coordination mechanisms, including care coordination processes across multiple organizations.

Clinical management systems. Quality improvement mechanisms including a mechanism to improve patient experience of care. Creation of governance and management structure.

Care utilization management, including chronic disease management, limiting hospital readmissions, creation of care protocols, and patient education. Creation of incentives for performance-based payment systems and the transition from fee-for-service payment system to one of shared risk of losses. Hiring of new staff, including care coordinators (including nurses, technicians, physicians, and/or non- physician practitioners), umbrella organization management, quality leadership, analytical team, liaison team, IT support, financial management, contracting, and risk management.

IT, including EHR systems, electronic health information exchanges that allow for electronic data exchange across multiple platforms, data reporting systems (including all payor claims data reporting systems), and data analytics (including staff and systems, such as software tools, to perform such analytic functions). Consultant and other professional support, including market analysis for antitrust review, legal services, and financial and accounting services. Organization and staff training costs.

Incentives to attract primary care physicians. Capital investments, including loans, capital contributions, grants, and withholds. Many of these activities similarly facilitate a value-based enterprise's (and its VBE participants') transition from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.

Comment. We received a number of comments regarding the selection criteria that may be used to choose a target patient population and, specifically, what it means for selection criteria to be legitimate and verifiable. Although several commenters supported the standard that selection criteria must be legitimate and verifiable, stating that it struck the right balance between encouraging innovation and protecting against fraud and abuse, other commenters expressed concern with the use of the term “legitimate,” asserting that it is ambiguous and may expose parties to litigation and enforcement risk.

Some commenters requested that we instead prohibit the specific selection criteria that we believe are inappropriate, such as cherry-picking and lemon-dropping, while others requested that we provide a list of selection criteria that would be deemed permissible. A few commenters asked whether specific selection criteria would be acceptable, such as identifying the target patient population by the MS-DRG assigned to the patient, geography, demographic criteria (for example, age or socioeconomic status), or payor (for example, Medicaid or non-Federal payor). Response.

At final § 411.351, “target patient population” means an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that are set out in writing in advance of the commencement of the value-based arrangement and further the value-based enterprise's value-based purpose(s). We do not believe that it is necessary to further define the term “legitimate.” It has been used throughout the physician self-referral regulations for decades. For example, the exception for personal service arrangements includes a requirement at § 411.357(d)(1)(iii) that the aggregate services covered by the arrangement do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement.

The term “legitimate” does not carry a new or different definition for purposes of interpreting the value-based definitions or the exceptions at § 411.357(aa). We refer readers to section II.B.2. Of this final rule for further discussion of the term “legitimate” within our regulations.

With respect to the commenters' requests for lists of impermissible and permissible selection criteria, it is not feasible to provide such an exhaustive list of selection criteria that we consider unacceptable. Similarly, we believe that providing a list of acceptable selection criteria could serve to interfere with or limit a value-based enterprise's or VBE participant's ability to identify and utilize selection criteria. Deeming provisions sometimes have a chilling effect because they are, in practice, interpreted by the regulated industry as mandatory or otherwise prescriptive rules.

We believe the approach we have finalized balances the need for clear guidelines with the need for flexibility. Finally, with respect to the commenters' request for confirmation that specific selection criteria are permissible, we reiterate that the determination whether the selection criteria used to identify a target patient population are legitimate and verifiable is dependent on the facts and circumstances of the parties. If the criteria are selected primarily for their effect on the parties' profits or purely financial concerns, they will not be considered legitimate and, therefore, are impermissible.

None of the selection criteria examples shared by the commenters are per se impermissible. Comment. Some commenters expressed concern with our statement in the proposed rule that choosing a target patient population in a manner driven by profit motive or purely financial concerns would not be legitimate (84 FR 55776).

These commenters suggested that this calls into question proven cost-saving techniques, such as product standardization, aimed at reductions in cost or unnecessary care that impact financial performance. The commenters requested that CMS clarify the distinction between reducing costs and problematic criteria, and asked us to explicitly acknowledge that it is permissible to choose a target patient population that could generate cost reductions from activities like product standardization alone. Response.

It appears to us that these commenters have conflated the acceptable criteria for selecting a target patient population and the requirements for selecting activities to be performed under a value-based arrangement. The target patient population is the group of individuals for whom the parties to a value-based arrangement are undertaking value-based activities. Our statement regarding profit motive or purely financial concerns relates to choosing the patient population for which the parties will undertake value-based activities and not the value-based activities themselves.

We reiterate that the selection of the target patient population may not be driven by profit motive or purely financial concerns. As we stated in the proposed rule, selecting a target patient population consisting of only lucrative or adherent patients (cherry-picking) and avoiding costly or noncompliant patients (lemon-dropping) would not be permissible under most circumstances, as we will not consider the selection criteria to be Start Printed Page 77505legitimate (even if verifiable) (84 FR 55776). Choosing a target patient population solely because it appears likely to reduce the costs to one of the parties to a value-based arrangement would be suspect.

As described earlier in this section and in our response to other comments, a value-based activity must be reasonably designed to achieve at least one value-based purpose of the value-based enterprise. With respect to the commenter's specific inquiry, we note that a value-based activity that requires a physician to utilize a standardized list of products, where appropriate, may be reasonably designed to achieve at least one value-based purpose of the value-based enterprise, depending on the enterprise's value-based purposes. Comment.

A large number of commenters expressed concern with a requirement that the patients in the target patient population have at least one chronic condition to be addressed by the value-based arrangement and urged CMS to not limit the target patient population to chronic patients. The commenters stated that such a requirement would severely constrict the types of value-based arrangements protected under the new exceptions. Response.

Although we sought comment as to whether we should incorporate a requirement that patients in the target patient population have at least one chronic condition in order to align with OIG's proposals, we are not including this provision in the final definition of “target patient population” at § 411.351. As finalized, target patient population means an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that are set out in writing in advance of the commencement of the value-based arrangement and further the value-based enterprise's value-based purpose(s). We are not limiting a target patient population to patients with at least one chronic condition.

Comment. A few commenters requested clarification that the definition of “target patient population” would include patient populations that are retroactively attributed, noting as an example the use of a retrospective claims-based methodology. Response.

A target patient population must be selected based on legitimate and verifiable criteria that are set out in writing in advance of the commencement of the value-based arrangement. The commenter's concerns appear to relate to the requirement that selection criteria for the target patient population must be set out in writing in advance of the commencement of the value-based arrangement. Where a target patient population is ascribed to the value-based enterprise (or the VBE participants that are parties to the specific value-based arrangement) by the payor, the payor establishes the criteria for selecting the target patient population.

However, this does not affect the obligation of the value-based enterprise or its VBE participants to select the target patient population for purposes of the physician self-referral law and qualification to use the exceptions at § 411.357(aa). The definition of “target patient population” at final § 411.351 requires that the target patient population is selected by the value-based enterprise or its VBE participants based on legitimate and verifiable criteria that are set out in writing in advance of the commencement of the value-based arrangement under which value-based activities are undertaken for the target patient population and that further the value-based enterprise's value-based purpose(s). Thus, where a target patient population is ascribed to the value-based enterprise (or the VBE participants that are parties to the specific value-based arrangement) by the payor, the value-based enterprise or its VBE participants must ensure that the requirements of the definition of “target patient population” are satisfied.

In the circumstances described by the commenters, the selection criteria for the target patient population could be described as “the target patient population to be identified by the payor in accordance with criteria established by the payor for retrospective attribution.” The value-based enterprise or the VBE participants that are parties to the specific value-based arrangement under which value-based activities are undertaken for the target patient population must ensure that the payor's methodology for attribution of the target patient population are legitimate and verifiable and that they will further the value-based enterprise's value-based purpose(s). In addition, the selection criteria must be documented in advance of the commencement of the value-based arrangement. It is not sufficient for the value-based enterprise or its VBE participants to merely state that the selection criteria will be determined by another party (in this case, the payor).

The value-based enterprise or its VBE participants may need to collaborate with the payor to ensure that the patient population attributed meets the definition of “target patient population.” Comment. Most commenters supported the proposed definition of “VBE participant.” A few commenters objected to the use of the term “entity” in the definition of “VBE participant,” because the term “entity” is ascribed a specific meaning at § 411.351, but, as used in the definition of “VBE participant,” would not be limited to that meaning. Commenters noted that using the same term in two different ways within the same regulatory scheme creates unnecessary complexity and compliance concerns.

Commenters sought clarity on this issue, and requested that we either revise the definition of “entity” at § 411.351 or use a different term for purposes of the definition of “VBE participant.” Response. Although we understand the commenter's concerns, we are not revising the definition of “VBE participant” to replace the term “entity” with another term, nor are we revising the definition of “entity” at § 411.351. In the physician self-referral regulations, the term “entity” is used to indicate an entity (as defined at § 411.351) furnishing designated health services and also to indicate its general meaning of an organization (such as a business) that has an identity separate from those of its members.

As used in the final definition of “VBE participant,” the term “entity” is not limited to an entity furnishing designated health services. Rather, it has its general meaning. Although we retain the term “entity” in the definition of “VBE participant,” we are replacing the term “individual” (as proposed) with the term “person.” Thus, under our final regulation, VBE participant means a person or entity that engages in at least one value-based activity as part of a value-based enterprise.

We intend for “person or entity” to refer to both natural and non-natural persons. Again, the term “entity” in this context is not limited to an entity that furnishes designated health services. Our review of the physician self-referral regulations indicates that the term “person or entity” is used numerous times throughout the regulations.

For example, as defined at § 411.351, a “referring physician” is a physician who makes a referral or who directs another person or entity to make a referral or who controls referrals made by another person or entity. The regulations regarding indirect compensation arrangements at § 411.354(c)(2) state that one element of an indirect compensation arrangement is that there exists between the referring physician (or a member of his or her immediate family member) and the entity furnishing designated health services an unbroken chain of any number (but not fewer than one) of persons or entities that have financial Start Printed Page 77506relationships between them. The regulations also use this term in the context of the person or entity from whom the referring physician or immediate family member receives aggregate compensation under the arrangement.

The exceptions for the rental of office space and the rental of equipment reference a person or entity in the exclusive use requirements at § 411.357(a)(3) and (b)(2). For consistency with our existing regulations, we are including the term “person or entity” in our final definition of “VBE participant.” b. Exceptions The physician self-referral law (along with other Federal fraud and abuse laws) provides critical protection against a range of troubling patient and program abuses that may result from volume-driven, FFS payment.

These abuses include unnecessary utilization, increased costs to payors and patients, inappropriate steering of patients, corruption of medical decision making, and competition based on buying referrals instead of delivering quality, convenient care. While value-based payment models hold promise for addressing these abuses, they may pose risks of their own, including risks of stinting on care (underutilization), cherry-picking, lemon-dropping, and manipulation or falsification of data used to verify outcomes. Moreover, during the transformation to value-based payment, many new delivery and payment models include both FFS and value-based payment mechanisms in the same model, subjecting providers to mixed incentives, and presenting the possibility of arrangements that pose both traditional FFS risk and emerging value-based payment risks.

When the physician self-referral law was expanded in 1993 to apply to designated health services beyond the clinical laboratory services to which the original 1989 law applied, according to the sponsor of the legislation, the Honorable Fortney “Pete” Stark, the physician self-referral law was intended to address physician referrals that drive up health care costs and result in unnecessary utilization of services. (See Opening Statement of the Honorable Pete Stark, Physician Ownership and Referral Arrangements and H.R. 345, “The Comprehensive Physician Ownership and Referral Act of 1993,” House of Representatives, Committee on Ways and Means, Subcommittee on Health, April 20, 1993, p.

144.) Mr. Stark went on to emphasize the importance of a physician's ability to offer patients neutral advice about whether or not services are necessary, which services are preferable, and who should provide them. He noted that the physician self-referral law would improve consumers' confidence in their physicians and the health care system generally.

In other words, the legislation was proposed (and the law ultimately enacted) to counter the effects of physician decision making driven by financial self-interest—overutilization of health care services, the suppression of patient choice, and the impact on the medical marketplace. As discussed in section I.B.2.a. Of this final rule, in 1989 and 1993, the vast majority of Medicare services were reimbursed based on volume under a retrospective FFS system.

The statutory exceptions to the physician self-referral law's referral and billing prohibitions were developed during this time of FFS, volume-based payment, with conditions which, if met, would allow the physician's ownership or investment interest or compensation arrangement to proceed without triggering the ban on the physician's referrals or the entity's claims submission. We believe that the exceptions in section 1877 of the Act indicate the Congress' stance on what safeguards are necessary to protect against program or patient abuse in a system where Medicare payment is available for each service referred by a physician and furnished by a provider or supplier. To date, the exceptions for compensation arrangements issued under section 1877(b)(4) of the Act, which grants the Secretary authority to establish exceptions for financial relationships that the Secretary determines do not pose a risk of program or patient abuse, have generally followed the blueprint established by the Congress for compensation arrangements that exist in a FFS system.

Value-based health care delivery and payment shifts the paradigm of our analysis under section 1877(b)(4) of the Act. When no longer operating in a volume-based system, or operating in a system that reduces the amount of FFS payment by combining it with some level of value-based payment, our exceptions need fewer “traditional” requirements to ensure the arrangements they protect do not pose a risk of program or patient abuse. This is because a value-based health care delivery and payment system, by design, provides safeguards against harms such as overutilization, care stinting, patient steering, and negative impacts on the medical marketplace.

Using the Secretary's authority under section 1877(b)(4) of the Act, we are adding three exceptions for compensation arrangements that do not pose a risk of program or patient abuse when considered in concert with. (1) The program integrity and other requirements integrated in the definitions used to apply the exceptions only to compensation arrangements that qualify as “value-based arrangements;” and (2) the disincentives to perpetrate the harms the physician self-referral law was intended to deter that are intrinsic in the assumption of substantial downside financial risk and meaningful participation in value-based health care delivery and payment models. In removing regulatory barriers to innovative care coordination and value-based arrangements, we are faced with the challenge of designing protection for emerging health care arrangements, the optimal form, design, and efficacy of which remains unknown or unproven.

This is a fundamental challenge of regulating during a period of innovation and experimentation. Matters are further complicated by the substantial variation in care coordination and value-based arrangements contemplated by the health care industry, variation among patient populations and providers, emerging health technologies and data capabilities, and our desire not to chill beneficial innovations. Thus, a one-size-fits-all approach to protection from the physician self-referral law's prohibitions is not optimal.

The design and structure of our exceptions are intended to further several complementary goals. First, we have endeavored to remove regulatory barriers, real or perceived, to create space and flexibility for industry-led innovation in the delivery of better and more efficient coordinated health care for patients and improved health outcomes. Second, consistent with the Secretary's priorities, the historical trend toward improving health care through better care coordination, and the increasing adoption of value-based models in the health care industry, the final exceptions are intended to create additional incentives for the industry to move away from volume-based health care delivery and payment and toward population health and other non-FFS payment models.

In this regard, our exception structure incorporates additional flexibilities for compensation arrangements between parties that have increased their participation in mature value-based payment models and their assumption of downside financial risk under such models. As discussed in the proposed rule (84 FR 55776) and in more detail in this section II.A.2.b. Of the final rule, our expectation is that meaningful assumption of downside financial risk would not only serve the overall transformation of industry payment systems, but could also curb, at Start Printed Page 77507least to some degree, FFS incentives to order medically unnecessary or overly costly items and services, key patient and program harms addressed by the physician self-referral law (and other Federal fraud and abuse laws).

The current exceptions to the physician self-referral law include requirements that may create significant challenges for parties that wish to develop novel financial arrangements to facilitate their successful participation in health care delivery and payment reform efforts (84 FR 55776 through 55778). Most of the commonly relied upon exceptions to the physician self-referral law include requirements related to compensation that may be difficult to satisfy where the arrangement is designed to foster the behavior shaping necessary for the provision of high-quality patient care that is not reimbursed on a traditional FFS basis. Requirements that compensation be set in advance, fair market value, and not take into account the volume or value of a physician's referrals or the other business generated by the physician may inhibit the innovation necessary to achieve well-coordinated care that results in better health outcomes and reduced expenditures (or reduced growth in expenditures).

For example, depending on their structure, arrangements for the distribution of shared savings or repayment of shared losses, gainsharing arrangements, and pay-for-performance arrangements that provide for payments to refrain from ordering unnecessary care, among others, may be unable to satisfy the requirements of an existing exception to the physician self-referral law. Thus, rather than being a check on bad actors, in the context of value-based care models, the physician self-referral law may actually be having a chilling effect on models and arrangements designed to bend the cost curve and improve quality of care to patients. We have carefully considered the CMS RFI comments, the comments to the proposed rule, and anecdotal information shared by stakeholders regarding the impact of the specific requirements that compensation must be set in advance, fair market value, and not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician, law enforcement and judicial activity related to these requirements, and our own observations from our work (including our work on fraud and abuse waivers for CMS accountable care and other models).

We remain concerned that the inclusion of such requirements in the exceptions for value-based arrangements at § 411.357(aa) would conflict with our goal of addressing regulatory barriers to value-based care transformation. As discussed in more detail below, we are not including these requirements in the final exceptions for value-based arrangements at § 411.357(aa). We note that two of the final exceptions for value-based arrangements are available to protect arrangements even when payments from the payor are made on a FFS basis.

Even so, we are not finalizing a requirement that remuneration is consistent with fair market value and not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician for the entity. Instead, we are finalizing a carefully woven fabric of safeguards, including requirements incorporated through the applicable value-based definitions. The disincentives for overutilization, stinting on patient care, and other harms the physician self-referral law was intended to address that are built into the value-based definitions will operate in tandem with the requirements included in the exceptions and are sufficient to protect against program and patient abuse.

This is especially true where a value-based enterprise assumes full or meaningful downside financial risk. The beneficiary's right to choose a provider of care is expressed and reinforced in almost every aspect of the Medicare program. We believe that a patient's control over who provides his or her care directly contributes to improved health outcomes and patient satisfaction, enhanced quality of care and efficiency in the delivery of care, increased competition among providers, and reduced medical costs, all of which are aims of the Medicare program.

Protection of patient choice is especially critical in the context of referrals made by a physician to an entity with which the physician has a financial relationship, as the physician's financial self-interest may impact, if not infringe on, patients' rights to control who furnishes their care. For this reason, we are making compliance with § 411.354(d)(4)(iv) a requirement of the exceptions that apply to employment arrangements, personal service arrangements, or managed care contracts that purport to restrict or direct physician referrals, including the exceptions at § 411.357(aa) for value-based arrangements. We are finalizing in all three exceptions at § 411.357(aa) a separate requirement to ensure that, regardless of the nature of the value-based arrangement and its value-based purpose(s), the regulation adequately protects a patient's choice of health care provider, the physician's medical judgment, and the ability of health insurers to efficiently provide care to their members.

Specifically, even if the applicable exception at § 411.357(aa) does not require that the arrangement is set out in writing, any requirement to make referrals to a particular provider, practitioner, or supplier must be set out in writing and signed by the parties, and the requirement may not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment.

We believe that well-coordinated and managed patient care is the cornerstone of a value-based health care system. We solicited comments regarding whether it is necessary to include in the exceptions for value-based arrangements, a requirement that the parties to a value-based arrangement engage in value-based activities that include, at a minimum, the coordination and management of the care of the target patient population or that the value-based arrangement is reasonably designed, at a minimum, to coordinate and manage the care of the target patient population (84 FR 55780). We are not including such a requirement in the final exceptions at § 411.357(aa).

In our experience, and as confirmed by commenters, most arrangements that qualify as value-based arrangements, by their nature, have care coordination and management at their heart, eliminating the need for an explicit requirement. Moreover, we remain concerned that requiring every value-based arrangement to include the coordination and management of care of the target patient population could leave beneficial value-based arrangements that do not directly coordinate or manage the care of the target patient population without access to any of the new exceptions at § 411.357(aa) and potentially unable to meet the requirements of any existing exception to the physician self-referral law. Finally, we have endeavored to be as neutral as possible with respect to the types of value-based enterprises and value-based arrangements the final exceptions will cover in order to allow for innovation and experimentation in the health care marketplace and so that compliance with the physician self-referral law is not the driver of innovation or the barrier to innovation.

The final exceptions at § 411.357(aa) are applicable to the compensation Start Printed Page 77508arrangements between parties in a CMS-sponsored model, program, or other initiative (provided that the compensation arrangement at issue qualifies as “value-based arrangement”), and we believe that compensation arrangements between parties in a CMS-sponsored model, program, or other initiative can be structured to satisfy the requirements of at least one of the exceptions at § 411.357(aa). It is our expectation that the suite of value-based exceptions finalized here will eliminate the need for any new waivers of section 1877 of the Act for value-based arrangements. (We note that parties are not required to utilize the value-based exceptions and may elect to use the waivers applicable to the CMS-sponsored models, programs, or initiatives in which they participate.) However, the final exceptions are not limited to CMS-sponsored models (that is, Innovation Center models) or establish separate exceptions with different criteria for arrangements that exist outside of CMS-sponsored models.

At § 411.357(aa)(1), we are finalizing an exception that applies to a value-based arrangement where a value-based enterprise has, during the entire duration of the arrangement, assumed full financial risk from a payor for patient care services for a target patient population. At § 411.357(aa)(2), we are finalizing an exception that applies to a value-based arrangement under which the physician is at meaningful downside financial risk for failure to achieve the value-based purposes of the value-based enterprise during the entire duration of the arrangement. Finally, at § 411.357(aa)(3), we are finalizing an exception that applies to any value-based arrangement, provided that the arrangement satisfies specified requirements.

We received the following general comments on the value-based exceptions and our responses follow. Comment. Several commenters encouraged CMS and OIG to work together to more closely align their final rules.

The commenters expressed concern that notable differences between the two rules, if finalized as proposed, would create a dual regulatory environment, where a value-based arrangement could meet the requirements for protection under one law but not the other, which could hinder the transition to a value-based health care delivery and payment system. These commenters expressed concern with administrative burden and compliance concerns in the event that the OIG and CMS final rules are not aligned. One commenter viewed the exceptions to the physician self-referral law as having little value if the safe harbors to the anti-kickback statute are not revised to mirror the exceptions noting that participants are likely to abide by the more stringent requirements included in the safe harbors.

Response. We share the commenters' concerns about dual regulatory schemes and the challenges for stakeholders in ensuring compliance with both. We have worked closely with OIG to ensure consistency between our respective rules to reduce administrative burden on the regulated industry.

As noted in section II.A.2.a. Of this final rule, the final value-based definitions at § 411.351 are aligned in nearly all respects with OIG's final value-based definitions. However, because of the fundamental differences in the statutory structure, operation, and penalties between the physician self-referral law and the anti-kickback statute, complete alignment between the exceptions to the physician self-referral law and safe harbors to the anti-kickback statute is not feasible.

Reflecting these statutory differences, the regulations that CMS and OIG are finalizing include intentional differences that allow the anti-kickback statute to provide “backstop” protection for Federal health care programs and beneficiaries against abusive arrangements that involve the exchange of remuneration intended to induce or reward referrals under arrangements that could potentially satisfy the requirements of an exception to the physician self-referral law. In this way, the CMS and OIG regulations, operating together, balance the need for parties entering into arrangements that are subject to both laws to develop and implement value-based arrangements that avoid the strict liability referral and billing prohibitions of the physician self-referral law, while ensuring that law enforcement, including OIG, can take action against parties engaging in arrangements that are intentional kickback schemes. Comment.

A few commenters recommended that we finalize one all-inclusive exception to the physician self-referral law for any type of value-based arrangement rather than the three-exception structure proposed. These commenters asserted that replacing the three value-based exceptions with one exception would reduce the complexity of the regulatory scheme and the burden associated with the transition to value-based health care delivery and payment. Response.

We are finalizing our proposed structure with three exceptions to the physician self-referral law that apply based on the level of risk assumed by the value-based enterprise or the physician who is a party to the value-based arrangement and the characteristics of the value-based arrangement. We disagree with the commenters that one exception would be less complex and burdensome, and do not believe that a one-size fits all approach to exceptions to the physician self-referral law to facilitate the transition to a value-based health care delivery and payment system is possible. Comment.

The majority of commenters strongly urged CMS to not include in any of the final value-based exceptions the “traditional” requirements that compensation is set in advance, fair market value, and not determined in any manner that takes into account the volume or value of a physician's referrals or other business generated by the physician for the entity. Some commenters also requested that we not include a requirement that the value-based arrangement is commercially reasonable. The commenters opined that inclusion of these standards in the context of value-based health care delivery and payment is neither appropriate nor necessary, and asserted that inclusion of these standards would create a barrier to the transition to a value-based health care delivery and payment system, leaving the value-based exceptions of limited or no utility.

These commenters noted that nonmonetary remuneration, in particular, that is provided under a value-based arrangement is not necessarily consistent with the fair market value of items or services provided by the recipient (or value-based activities undertaken by the recipient) and asserted that requiring that such compensation is fair market value would impact the ability of parties to share necessary infrastructure, care coordination, and patient engagement tools. The commenters also stated that many value-based arrangements are, by nature, related to the volume or value of referrals, and requiring that compensation is not determined in any manner that takes into account the volume or value of a physician's referrals or other business generated by the physician would limit the utility of the exceptions. Finally, a few commenters asserted that there is no need for a commercial reasonableness standard in light of the definition of “value-based purpose,” which the commenters interpreted to serve the same function and require the same analysis as that of the commercial reasonableness of an arrangement.

These commenters also asserted that value-based arrangements are, by their Start Printed Page 77509nature, commercially reasonable. In contrast, a few commenters urged CMS to include requirements that the value-based arrangement is commercially reasonable, the compensation is not determined in any manner that takes into account the volume or value of a physician's referrals or other business generated by the physician, and the compensation is fair market value in order to protect against program or patient abuse. The commenters did not explain why omitting these requirements creates a risk of program or patient abuse.

Response. As noted above and for the reasons described in the proposed rule, we are not including in the final exceptions at § 411.357(aa) the traditional requirements that compensation is set in advance, consistent with fair market value of the value-based activities provided under the value-based arrangement, and not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician for the entity. However, we are requiring that the compensation arrangement is commercially reasonable.

As we stated in the proposed rule, disincentives for overutilization, stinting on patient care, and other harms the physician self-referral law was intended to address are built into the value-based definitions and will operate in tandem with the requirements included in the exceptions to protect against program and patient abuse (84 FR 55777). It is this framework that allows us to forgo the requirements in the current exceptions to the physician self-referral law that may create significant challenges to innovation in a value-based health care delivery and payment system. We are cognizant that requirements that remuneration be fair market value and not take into account the volume or value of a physician's referrals or the other business generated by a physician may inhibit the innovation necessary to achieve well-coordinated care that results in better health outcomes and reduced expenditures (or reduced growth in expenditures).

We agree with the commenters that these standards, which play an important role in the other exceptions to the physician self-referral law, may be counter to the underlying policy goals of value-based health care delivery and payment. We also agree that compensation arrangements that qualify as value-based arrangements under the new value-based definitions at § 411.351, satisfy all the requirements of an applicable exception at final § 411.357(aa), and are aimed at reducing cost and improving quality are likely commercially reasonable. Even so, we believe that this additional program integrity safeguard is warranted.

As defined at final § 411.351, “commercially reasonable” means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. The requirement at final § 411.357(aa)(3)(vi) will ensure that parties to a value-based arrangement structure the arrangement in a manner intended to further their legitimate business purposes, which must include achievement of the value-based purpose(s) of the value-based enterprise of which they are participants. Comment.

Several commenters urged us to create separate exceptions for CMS-sponsored model arrangements and CMS-sponsored model patient incentives consistent with existing waivers for these programs that would work in conjunction with or mirror the safe harbors at proposed 42 CFR 1001.952(ii). Some commenters expressed concern over parties having to identify and comply with an applicable exception to the physician self-referral law and also comply with the safe harbor under the anti-kickback statute for CMS-sponsored programs. Several other commenters requested assurance that all existing fraud and abuse waivers for CMS-sponsored models, programs, and initiatives will remain in effect as implemented and will not be impacted by the new exceptions for value-based arrangements.

Response. The commenters did not provide any specific examples of existing financial arrangements under a CMS-sponsored model, program, or other initiative between an entity and a physician (or immediate family member) to which none of the exceptions at final § 411.357(aa)(3) would apply. We carefully evaluated our final exceptions against the existing CMS-sponsored models, programs, and other initiatives, and are confident that at least one of the new exceptions at § 411.357(aa) is applicable to the types of compensation arrangements contemplated under each model, program, or initiative.

The design of the final exceptions should result in a smooth transition from participation in a CMS-sponsored model, program, or initiative if the parties wish to continue their compensation arrangements and rely on the new value-based exceptions at § 411.357(aa). Thus, it is not necessary to establish an exception specific to arrangements undertaken pursuant to a CMS-sponsored model, program, or initiative as requested by the commenters. Importantly, the existing model-specific or program-specific fraud and abuse waivers will remain in place and are not affected by the existence of the value-based exceptions.

Also, the Secretary retains authority under section 1115A(d)(1) of the Act to waive certain fraud and abuse laws as necessary solely for purposes of testing payment and service delivery models developed by the Innovation Center, and this authority can be used to address future financial arrangements under Innovation Center models that may not fit within the final value-based exceptions framework. Finally, the final fraud and abuse waivers issued in connection with the Shared Savings Program are permanent waivers that are unaffected by the value-based exceptions finalized in this final rule. Comment.

Some commenters sought clarification regarding the interaction between the value-based exceptions and existing exceptions to the physician self-referral law. A few commenters questioned whether an entity currently relies on the exception for bona fide employment relationships at § 411.357(c) to protect compensation arrangements with employed physicians may continue to utilize the exception at § 411.357(c), or whether its compensation arrangements that qualify as value-based arrangements must satisfy the requirements of one of the new value-based exceptions at § 411.357(aa). The commenters stated a desire to continue to utilize the exception at § 411.357(c) for value-based arrangements with employed physicians rather than the new value-based exceptions.

The commenters also sought guidance regarding whether the value-based exceptions could be utilized concurrently with “traditional exceptions” when an entity has multiple compensation arrangements with the same physician and, if so, how requirements of the exceptions, such as the requirement that compensation is fair market value, would apply if the parties are utilizing multiple exceptions. A few commenters requested that we confirm that compensation for care coordination, quality improvement, and cost containment activities are not prohibited under the exception for bona fide employment relationships or the services exceptions at § 411.355. Response.

Nothing in this final rule mandates the use of the value-based exceptions. As we have stated before, parties may use any applicable exception to the physician self-referral law provided that all the requirements of the exception are satisfied (66 FR 916 and 72 FR 51047). The value-based Start Printed Page 77510exceptions, however, are only available to parties that qualify under the value-based definitions.

Parties may utilize the exception at § 411.357(c) to protect a value-based arrangement, however, the value-based arrangement must satisfy all the requirements of the exception in order to avoid the referral and billing prohibitions of the physician self-referral law. The same is true with respect to the availability of and compliance with any other existing exception that is applicable to the parties' financial relationship or the physician's referrals of designated health services. The exception for bona fide employment relationships includes requirements that the arrangement is commercially reasonable, the compensation paid to the physician is fair market value, and the compensation is not determined in any manner that takes into account the volume or value of the physician's referrals.

None of these requirements are included in the final exceptions at § 411.357(aa). Thus, depending on the terms and conditions of the value-based arrangement, the arrangement may be unable to satisfy all the requirements of the exception for bona fide employment relationships. That determination is, of course, fact-specific.

Comment. Several commenters expressed concern that the requirements of the value-based definitions and exceptions could disadvantage rural providers and small physician practices that desire to participate in value-based arrangements, and that these providers and suppliers face greater challenges when transitioning to a value-based health care delivery and payment system. The commenters stated that these challenges include financial burdens, the complexity of the value-based exceptions and definitions, and inadequate resources to successfully implement value-based arrangements.

Commenters urged CMS to make revisions to the proposed value-based exceptions to accommodate rural providers and small physician practices, specifically suggesting that we either limit the number of requirements under the value-based exceptions that would be applicable to rural providers and small physician practices to help alleviate the burden associated with complying with the exceptions or establish a separate, less onerous exception applicable only to these providers and suppliers. Response. We are not persuaded that an exception for value-based arrangements that is exclusively available to rural providers and small physician practices is necessary, nor are we revising the exceptions to limit the requirements under the value-based exceptions applicable to these providers and suppliers.

We understand the challenges faced by rural providers and small physician practices, including resource limitations, and appreciate the important role of rural providers as a safety net for their communities. The value-based arrangements exception finalized at § 411.357(aa)(3) is applicable to all value-based arrangements, regardless of the size or nature of the parties to the arrangement, the financial risk undertaken by the value-based enterprise, or the financial risk undertaken by the physician who is a party to the value-based arrangement. We expect that this exception may be utilized by rural providers and small physician practices more frequently than the full financial risk and meaningful downside financial risk exceptions.

As discussed elsewhere in this final rule, we are not requiring a financial contribution from the recipient of remuneration under any of our final value-based exceptions. We believe this addresses some of the commenters' concerns. (1) Full Financial Risk (§ 411.357(aa)(1)) We proposed at § 411.357(aa)(1) an exception to the physician self-referral law (the “full financial risk exception”) that applies to value-based arrangements between VBE participants in a value-based enterprise that has assumed “full financial risk” for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time.

That is, the value-based enterprise is financially responsible (or is contractually obligated to be financially responsible within the 6 months following the commencement date of the value-based arrangement) on a prospective basis for the cost of such patient care items and services. For Medicare beneficiaries, we noted that we intend for this requirement to mean that the value-based enterprise, at a minimum, is responsible for all items and services covered under Parts A and B. We are finalizing the exception with one modification.

We are extending the period of time during which the exception will be available prior to the value-based enterprise's financial responsibility for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population. Specifically, we are replacing the requirement that the value-based enterprise is contractually obligated to be financially responsible within the 6 months following the commencement date of the value-based arrangement with a 12-month timeframe. Thus, under this final rule, the value-based enterprise must be financially responsible (or must be contractually obligated to be financially responsible within the 12 months following the commencement date of the value-based arrangement) on a prospective basis for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time.

As described in more detail below, we believe that extending this “pre-risk period” to 12 months is consistent with the timeframe established in the Shared Savings Program pre-participation waiver (80 FR 66742), and, as with the Shared Savings Program pre-participation waiver, we do not believe that establishing a 12-month pre-risk period poses a risk of program or patient abuse. As we stated in the proposed rule, full financial risk may take the form of capitation payments (that is, a predetermined payment per patient per month or other period of time) or global budget payment from a payor that compensates the value-based enterprise for providing all patient care items and services for a target patient population for a predetermined period of time (84 FR 55779). We noted that the full financial risk exception would not prohibit other approaches to full financial risk and sought comment on other approaches to full financial risk that may exist currently or that stakeholders anticipate for the future.

We are not prescribing a specific manner for the assumption of full financial risk in this final rule. A value-based enterprise need not be a separate legal entity with the power to contract on its own (84 FR 55779). Rather, networks of physicians, entities furnishing designated health services, and other components of the health care system collaborating to achieve the goals of a value-based health care system, organized with legal formality or not, may qualify as a value-based enterprise.

A value-based enterprise may assume legal obligations in different ways. For example, all VBE participants in a value-based enterprise could each sign the contract for the value-based enterprise to assume full financial risk from a payor. Or, the VBE participants in a value-based enterprise could have contractual arrangements among themselves that assign risk jointly and severally.

Or, similar to physicians in an independent practice association (IPA), VBE participants could vest the authority to bind all VBE participants in the value-based enterprise with a designated person that Start Printed Page 77511contracts for the assumption of full financial risk on behalf of the value-based enterprise and its VBE participants. As explained in more detail below, we are not requiring that the value-based enterprise is a separate legal entity with contracting powers or requiring a particular structure for the value-based enterprise. The value-based enterprise's financial risk must be prospective.

That is, the contract between the value-based enterprise and the payor may not allow for any additional payment to compensate for costs incurred by the value-based enterprise in providing specific patient care items and services to the target patient population, nor may any VBE participant claim payment from the payor for such items or services. We define “prospective basis” in this final rule at § 411.357(aa)(1)(vii) to mean that the value-based enterprise has assumed financial responsibility for the cost of all patient care items and services covered by the applicable payor prior to providing patient care items and services to patients in the target patient population. As noted in the proposed rule (84 FR 55780) and discussed more fully below, the final definition of “full financial risk” does not prohibit a payor from making payments to a value-based enterprise to offset losses incurred by the enterprise above those prospectively agreed to by the parties.

The payment of shared savings or other incentive payments for achieving quality, performance, or other benchmarks are also not prohibited. The final exception is available to protect value-based arrangements entered into in preparation for the implementation of the value-based enterprise's full financial risk payor contract where such arrangements begin after the value-based enterprise is contractually obligated to assume full financial risk for the cost of patient care items and services for the target patient population but prior to the date the provision of patient care items and services under the contract begin. As stated above, the final exception limits this period to the 12 months prior to the effective date of the full financial risk payor contract.

In other words, the value-based enterprise must be at full financial risk within the 12 months following the commencement of the value-based arrangement. We believe that full financial risk is one of the defining characteristic of a mature value-based payment system. When a value-based enterprise is at full financial risk for the cost of all patient care services, the incentives to order unnecessary services or steer patients to higher-cost sites of service are diminished.

Even when downstream contractors are paid on something other than a full-risk basis, the value-based enterprise itself is incented to monitor for appropriate utilization, referral patterns, and quality performance, which we believe helps to reduce the risk of program or patient abuse. Accordingly, these kinds of payment limitations provide stronger and more effective safeguards against increases in the volume and costs of services than the physician self-referral law ever placed on the FFS system. Nonetheless, as a precaution, we proposed and are finalizing several important safeguards in the full financial risk exception.

The value-based enterprise must be at full financial risk during the entire duration of the value-based arrangement for which the parties to the arrangement seek protection (84 FR 55780). Thus, the final exception will not protect arrangements that begin at some point during a period when the value-based enterprise has assumed full financial risk, but that continue into a timeframe when the safeguards intrinsic to full-financial risk payment, such as the disincentive to overutilize or stint on medically necessary care, no longer exist. However, one or both of the other exceptions finalized at § 411.357(aa)(2) and (3) may be available to protect value-based arrangements that exist during a period when the value-based enterprise is not at full financial risk (or contractually obligated to be at full financial risk within the 12 months following the commencement of the value-based arrangement) for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population.

We also proposed and are finalizing a requirement that the remuneration under the value-based arrangement is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population. As we discussed in the proposed rule, we recognize that payments under certain incentive payment arrangements, such as gainsharing arrangements, may be difficult to tie to specific items or services furnished by a VBE participant (84 FR 55780). We do not interpret the requirement at § 411.357(aa)(1)(ii) as mandating a one-to-one payment for an item or service (or other value-based activity).

Gainsharing payments, shared savings distributions, and similar payments may result from value-based activities undertaken by the recipient of the payment for patients in the target patient population. The requirement that the remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population addresses this issue. We intend for this to be an objective standard.

That is, the remuneration must, in fact, be for or result from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population (84 FR 55780). The final exception, therefore, will not protect payments for referrals or any other actions or business unrelated to the target patient population, such as general marketing or sales arrangements. With respect to in-kind remuneration, it is our position that the remuneration must be necessary and not simply duplicate technology or other infrastructure that the recipient already has.

Finally, although the remuneration must be for or result from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population, parties would not be prohibited from using the remuneration for the benefit of patients who are not part of the target patient population. In the proposed rule, we discussed the fact that integrated into most of the CMS-sponsored models is a requirement that any remuneration between parties to an allowable financial arrangement is not provided as an inducement to reduce or limit medically necessary items or services to any patient in the assigned patient population (84 FR 55780). This is an important safeguard for patient safety and quality of care, regardless of whether Medicare is the ultimate payor for the services.

Therefore, we proposed a requirement at § 411.357(aa)(1)(iii) that remuneration under a value-based arrangement is not provided as an inducement to reduce or limit medically necessary items or services to any patient, whether in the target patient population or not. We are finalizing this requirement at § 411.357(aa)(1)(iii). We note that remuneration that leads to a reduction in medically necessary services would be inherently suspect and could implicate sections 1128A(b)(1) and (2) of the Act.

In addition, we proposed to protect only those value-based arrangements under which remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement (84 FR 55781). Although this requirement is similar to the requirement that remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population, as discussed in the proposed rule, it is Start Printed Page 77512intended to address a different concern. We are finalizing at § 411.357(aa)(1)(iv) the requirement that the remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement.

The final exception does not protect arrangements where one or both parties have made referrals or other business not covered by the value-based arrangement a condition of the remuneration. By way of example, if the value-based enterprise is at full financial risk for the total cost of care for all of a commercial payor's enrollees in a particular county, the exception will not protect a value-based arrangement between an entity and a physician that are VBE participants in the value-based enterprise if the entity requires the physician to refer Medicare patients who are not part of the target patient population for designated health services furnished by the entity. Similarly, the exception will not protect a value-based arrangement related to knee replacement services furnished to Medicare beneficiaries if the arrangement requires that the physician perform all his or her other orthopedic surgeries at the hospital.

We also proposed and are finalizing a requirement at § 411.357(aa)(1)(v) related to directing a physician's referrals to a particular provider, practitioner, or supplier (84 FR 55781). Under final § 411.357(aa)(1)(v), if remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions. (A) The requirement to make referrals to a particular provider, practitioner, or supplier must be set out in writing and signed by the parties.

And (B) the requirement to make referrals to a particular provider, practitioner, or supplier may not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment.

See section II.B.4. Of this final rule for a complete discussion of our interpretation of this requirement. Finally, we proposed to require that records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement be maintained for a period of at least 6 years and made available to the Secretary upon request (84 FR 55781).

We noted in the proposed rule that requirements similar to this are found in our existing regulations in the group practice rules at § 411.352(d)(2) and (i), the exception for physician recruitment at § 411.357(e)(4)(iv), and the exception for assistance to compensate a nonphysician practitioner at § 411.357(x)(2) (84 FR 55781). We are finalizing at § 411.357(aa)(3)(xi) the requirement that records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Secretary upon request. We expect that parties are familiar with these requirements and that the maintenance of such records is part of their routine business practices.

As we discussed in the proposed rule (84 FR 55781), we consider the exception at § 411.357(aa)(1) comparable, in some respects, to the exception at § 411.357(n) for risk-sharing arrangements, which, as we noted in Phase II, is intended to be a broad exception with maximum flexibility, covering all risk-sharing compensation paid to a physician by any type of health plan, insurance company, or health maintenance organization (that is, any “managed care organization” (MCO)) or IPA, provided the arrangement relates to enrollees and meets the conditions set forth in the exception (69 FR 16114). A downstream arrangement that creates an indirect compensation arrangement between an MCO or IPA and a physician is included within the scope of the exception for risk-sharing arrangements. (See section II.A.2.b.(4) of this final rule for a full discussion of the applicability or the exception for risk-sharing arrangements at § 411.357(n).) Although the final exception at § 411.357(aa)(1) is not limited to “risk-sharing compensation” paid to a physician, but, rather, covers any type of remuneration paid under a value-based arrangement that is for or results from value-based activities undertaken by the recipient of the remuneration, for the reasons discussed throughout section II.A.

Of this final rule, we believe that the flexibility provided in the exception for risk-sharing arrangements is also warranted in the full financial risk exception. Finally, like the exception at § 411.357(n) for risk-sharing arrangements, we did not propose, nor are we finalizing, documentation requirements in the full financial risk exception. Nevertheless, it is a good business practice to reduce to writing any arrangement between referral sources as it allows the parties to monitor and confirm that an arrangement is operating as intended.

We received the following comments and our responses follow. Comment. Several commenters urged CMS to expand the definition of “full financial risk” at § 411.357(aa)(1)(vii) to exclude defined sets of patient care items or services for a target patient population, or specific diseases or conditions, similar to episode-based bundled payment models.

By way of example, commenters suggested that full financial risk should be limited to only the items and services required to treat patients with diabetes or during an episode of care for a knee replacement. Commenters perceived the full financial risk exception as having limited utility, asserting that the health care industry is currently not well-positioned to take on full financial risk for all patient care items and services covered by the applicable payor for each patient in the target patient population. Commenters suggested that allowing protection under the full financial risk exception for arrangements where the parties take on full financial risk for only a subset of items or services covered by the applicable payor, such as joint replacement surgery, would increase the utility of the full financial exception and help to facilitate the transition to a value-based health care delivery and payment system.

Response. We are not revising the definition of “full financial risk” to mean a defined set of patient care items or services (similar to episode-based bundled payment models) or anything less than financial responsibility, on a prospective basis, for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population. To do so could undermine the Secretary's policy goals of moving more health care providers and practitioners into two-sided risk payment structures.

The full financial risk exception applies to value-based arrangements between VBE participants in a value-based enterprise that has assumed “full financial risk” on a prospective basis for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. It also applies to a value-based arrangement between the value-based enterprise (if it is an entity as defined at § 411.351) and a physician who is a VBE participant in the value-based enterprise. The value-based enterprise must be financially responsible (or be contractually obligated to be financially responsible within the 12 months following the commencement date of the value-based Start Printed Page 77513arrangement) on a prospective basis for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time.

As noted in the proposed rule and above, we believe that full financial risk is an important defining characteristic of a mature value-based health care delivery and payment system (84 FR 55780). When a value-based enterprise is at full financial risk for the cost of all patient care items and services, the incentives to order unnecessary services or steer patients to high-cost sites of services are diminished. Those same incentives are not necessarily present in episode-based bundled payment models.

Expanding the applicability of the exception at § 411.357(aa)(1) to protect value-based arrangements under episode-based bundled payment models would result in heightened program integrity concerns, and therefore, would not fall within the Secretary's authority under section 1877(b)(4) of the Act upon which we relied to establish this exception. We recognize that providers may not be well-positioned at this time to transition to a full financial risk model. However, it is our hope that, by reducing the burden of the physician self-referral law, we can provide a pathway for participants in the value-based system to evolve and more meaningfully participate in the value-based system.

As discussed in detail in II.A.2.b.(3). Of this final rule, we are finalizing at § 411.357(aa)(3) an exception applicable to value-based arrangements where the value-based enterprise assumes less than full financial risk, including arrangements where neither the value-based enterprise nor the parties to the particular arrangement have assumed any financial risk. That exception may facilitate the entry of providers and suppliers into value-based health care delivery and payment with the goal of moving eventually to two-sided risk models.

Comment. Several commenters stated that the full financial risk exception would be of limited utility if high-cost or specialty items and services, such as organ transplants or pharmacy benefits, are not carved out of the definition of “full financial risk.” The commenters noted that, even in more advanced value-based arrangements, payors exclude high-cost or specialty items or services from the risk arrangement. The commenters urged CMS to permit a value-based enterprise to qualify as being at full financial risk without taking on the responsibility for high cost or specialty items and services.

Similarly, these commenters requested clarification regarding the ability of the value-based enterprise to offset losses while still meeting the definition of full financial risk for purposes of the exception. Other commenters urged CMS to allow a value-based enterprise to enter into payor arrangements with risk mitigation terms to protect against catastrophic losses, such as risk corridors, global risk adjustments, reinsurance, stop loss agreements. Response.

We decline to carve out high-cost or specialty items or services from the definition of “full financial risk.” In addition, we do not believe that revisions are necessary to specifically address mechanisms by which parties to a full financial risk payor arrangement may protect against significant or catastrophic losses. Further, the exclusion of high-cost or specialty items and services could potentially interfere with private payor contracts among health care providers, suppliers, and physicians. Importantly, nothing in the final full financial risk exception or the definition of “full financial risk” prohibits a value-based enterprise from contracting with a payor for stop-loss protection or applying risk corridors to limit exposure to significant losses related to such high-cost items or services or overall expenses.

A payor arrangement may include risk mitigation terms such as risk corridors, global risk adjustments, reinsurance, or stop-loss provisions to protect against significant and catastrophic losses. As noted above, the financial risk assumed by the value-based enterprise must be prospective. Thus, the contract between the value-based enterprise and the payor may not allow for any additional fee for service or other payments to compensate for costs incurred by the value-based enterprise in providing specific patient care items and services to the target patient population, nor may any VBE participant claim payment from the payor for such items or services.

Risk mitigation tools are not new to CMS-sponsored value-based initiatives. In fact, some of the initiatives of the Innovation Center, where Medicare is the payor, anticipate potential burdens on participants related to high cost items and services and the need for protection against significant and catastrophic losses. These Innovation Center initiatives include stop-loss provisions to mitigate the risk of overall costs being higher than expected.

For instance, the Bundled Payment for Care Improvement, Next Gen ACO, and Comprehensive Care for Joint Replacement models all include some form of stop-loss assurance to mitigate financial risk. Finally, there is nothing in this final rule that will prohibit a value-based enterprise and a payor from negotiating and designing a full financial risk payor arrangement that would address the concerns raised by the commenters. We are not imposing a specific limit on the amount of loss coverage a value-based enterprise may have, but we caution that we will expect any stop-loss or other risk adjustment provisions to act as protection for the value-based enterprise against catastrophic losses and not a means by which to shift material financial risk back to the payor.

To be clear, the definition of “full financial risk” would not permit the full offset of a value-based enterprise's losses. Comment. The majority of commenters agreed that the full financial risk exception should extend to compensation arrangements related to activities taken in preparation for the implementation of the value-based enterprises' full financial risk payor contract, but requested that CMS extend the 6-month “pre-risk” period to a 12-month period.

The commenters noted that at least 12 months of preparation are often necessary to develop and operationalize a successful value-based enterprise, even when it will not be assuming full financial risk. Commenters highlighted activities such as the development of care redesign protocols, implementation of IT infrastructure, and deployment of care coordinators as necessary for the successful undertaking of full financial risk by a value-based enterprise and its VBE participants. Response.

We are persuaded to extend the “pre-risk” period under the full financial risk exception to 12 months. Under the regulation finalized in this final rule, the value-based enterprise must be financially responsible (or be contractually obligated to be financially responsible within the 12 months following the commencement date of the value-based arrangement) on a prospective basis for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. Extending this pre-risk period to 12 months should allow parties sufficient time to work together in preparation for taking on full financial risk.

A 12-month period is consistent with the Shared Savings Program pre-participation waiver, and we are not aware of any program integrity concerns with respect to the 12-month start-up period to date. We see no reason why providing for a 12-Start Printed Page 77514month pre-risk period in the full financial risk exception would pose a risk of program or patient abuse. Comment.

Some commenters explained that certain States, such as California, require providers or suppliers that assume full financial risk for health care items and services are required to become licensed as a health plan. The commenters noted that the expense and regulatory burden associated with becoming a licensed health plan would deter most providers or suppliers from taking that step, making the full financial risk exception of no utility to them. The commenters recommended that CMS modify the full financial risk exception to address this State law issue.

Some of the commenters also noted that certain States prohibit a provider or supplier from assuming financial risk for items and services other than those typically provided by that provider or supplier type. For instance, a hospital could not assume financial risk for physician services and vice versa. Response.

We are not prescribing a specific manner for the assumption of full financial risk by a value-based enterprise. The full financial risk exception applies to value-based arrangements between VBE participants in a value-based enterprise that has assumed full financial risk on a prospective basis for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. Nothing in this final rule precludes the various VBE participants in the value-based enterprise from aggregating the risk that each individual VBE participant assumes to reach full financial risk for the value-based enterprise as a whole.

For instance, assume a value-based enterprise has as its VBE participants a hospital, skilled nursing facility, physicians, and a full complement of providers and suppliers that, together, provide all the patient care services covered by an applicable payor. If each of the VBE participants is at full financial risk for the cost of all patient care items or services that it furnishes, the VBE participants could aggregate their risk so that the value-based enterprise is, in total, at full financial risk for the cost of all patient care items or services covered by the applicable payor. Essentially, the hospital could assume full financial risk for hospital services, the skilled nursing facility could assume full financial risk for skilled nursing services, the physicians could assume full financial risk for physician services, etc.

As long as there are no services covered by the applicable payor for which the VBE participants have not assumed full financial risk, the value-based enterprise will be at full financial risk for purposes of § 411.357(aa)(1). We see no reason why allocating the full financial risk among the VBE participants of the value-based enterprise—as opposed to a single organization (the value-based enterprise) assuming the full financial risk—would pose an additional risk of program or patient abuse. Finally, we note that nothing in this final rule preempts any applicable State law, and we remind parties that other exceptions may be available to protect arrangements where State law restrictions make satisfaction of certain requirements of an exception challenging or impossible.

Comment. Many commenters acknowledged the importance of preserving patient choice but stressed that, in a value-based health care delivery and payment system, the ability to guide a patient to a high quality provider is imperative. The commenters requested that we include any patient choice requirements in the regulation text of the value-based exceptions rather than cross-referencing the requirements of the special rules on compensation at § 411.354(d)(4)(iv).

Response. As discussed above, protection of patient choice is especially critical in the context of referrals made by a physician to an entity with which the physician has a financial relationship, as the physician's financial self-interest may impact, if not infringe on, a patient's right to control who furnishes his or her care. We are finalizing in the full financial risk exception a separate requirement to ensure that, regardless of the nature of the value-based arrangement and the value-based enterprise's value-based purpose(s), the regulation adequately protects a patient's choice of health care provider, the physician's medical judgment, and the ability of health insurers to efficiently provide care to their members.

The final exception provides at § 411.357(aa)(1)(v) that, if remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions. (A) The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties. And (B) the requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier.

The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment. We have included this language in all three of the value-based exceptions.

Comment. A few commenters questioned whether the full financial risk exception is even necessary, suggesting that CMS should instead modify the exception at § 411.357(n) for risk-sharing arrangements to accommodate value-based arrangements where the value-based enterprise is at full financial risk. Response.

We decline to modify the exception at § 411.357(n) to accommodate value-based arrangements as requested by the commenters. As discussed more fully in section II.A.2.b.(4) of this final rule, the exception at § 411.357(n) applies to compensation arrangements between an MCO or an IPA and a physician for services provided to enrollees of a health plan, provided that the compensation arrangement qualifies as a risk-sharing arrangement. The compensation arrangement between the MCO or IPA and the physician may be direct or indirect.

The exception does not apply to a compensation arrangement—whether direct or indirect—between a physician and an entity that is anything other than an MCO or IPA. The value-based exceptions finalized in this final rule will apply to any value-based arrangement, direct or indirect, between a physician and any entity that furnishes designated health services to which the physician makes referrals. Thus, the value-based exceptions are broader in applicability than the exception for risk-sharing arrangements.

As discussed in the proposed rule and above, we have designed a carefully woven fabric of definitions and exceptions that protect against program and patient abuse while providing flexibility for experimentation in the design and implementation of value-based care arrangements (84 FR 55777). We believe that this framework is crucial to achieving the Department's goal of moving to a value-based health care delivery and payment system, and that most value-based arrangements between an entity and a physician in a value-based enterprise that has assumed full financial risk should remain within this framework. (2) Value-Based Arrangements With Meaningful Downside Financial Risk to the Physician (§ 411.357(aa)(2)) As we stated in the proposed rule, a few CMS RFI commenters opined that the health care industry is in the early Start Printed Page 77515stages of its transition to value-based health care delivery and payment (84 FR 55781).

After reviewing the comments on the CMS RFI and the proposed rule, we acknowledge that, although CMS, non-Federal payors, and a significant segment of the health care industry have made advancements in value-based health care delivery and payment, many physicians and providers are not yet prepared or willing to be responsible for the total cost of patient care services for a target patient population. However, we are also aware that some physicians are participating in or considering participating in alternative payment models that provide for potential financial gain in exchange for the undertaking of some level of downside financial risk. Financial risk assumed directly by a physician will likely affect his or her practice and referral patterns in a way that curbs the influence of traditional FFS, volume-based payment.

Further, financial risk is tied to the achievement or, or failure to achieve, value-based purposes incents the type of behavior-shaping necessary to transform our health care delivery system into one that improves patient outcomes, eliminates waste and inefficiencies, and reduces the costs to or growth in expenditures of payors. Arrangements under which a physician is at meaningful downside financial risk for failure to achieve predetermined cost, quality, or other performance benchmarks contain inherent protections against program or patient abuse. In recognition of this, we proposed an exception that would protect remuneration paid under a value-based arrangement where the physician is at meaningful downside financial risk for failure to achieve the value-based purpose(s) of the value-based enterprise (the “meaningful downside financial risk exception”) (84 FR 55781).

Under the meaningful downside financial risk exception, although the physician must be at meaningful downside financial risk for the entire term of the value-based arrangement, the remuneration could be paid to or from the physician. We proposed to define “meaningful downside financial risk” to mean that the physician is responsible to pay the entity no less than 25 percent of the value of the remuneration the physician receives under the value-based arrangement. We stated that we believe that this level of financial risk is high enough to curb the influence of traditional FFS, volume-based payment and achieve the type of behavior-shaping necessary to facilitate achievement of the goals set forth in this final rule (84 FR 55782).

We related the definition of “meaningful downside financial risk” to the 25 percent threshold determined by the Secretary for the statutory and regulatory exceptions for physician incentive plans at section 1877(e)(3)(B) of the Act and § 411.357(d)(2), respectively, which reference “substantial financial risk” to a physician (or physician group), and sought comment on whether defining meaningful downside financial risk as 25 percent of the value of the remuneration the physician receives under the value-based arrangement is appropriate. Upon consideration of the public comments, we are revising the definition of “meaningful downside financial risk” to mean that the physician is responsible to repay or forgo no less than 10 percent of the total value of the remuneration the physician receives under the value-based arrangement. Because the exception does not limit the type of remuneration that may be provided, under the final regulation, the risk of repayment or the amount the physician must be at risk to forgo may be no less than 10 percent of the value of the remuneration to account for remuneration that may be provided in-kind, such as infrastructure or care coordination services.

In the proposed rule, we also provided an alternative definition to meaningful downside financial risk that would also include the physician's full financial risk to the entity, recognizing that a physician who assumes full financial risk for all or a defined set of patient care services for the target patient population would certainly be considered at “meaningful downside financial risk” (84 FR 55782). We are not finalizing our proposal for an expanded definition of “meaningful downside financial risk.” As discussed in the proposed rule, because the exception at § 411.357(aa)(2) does not require the type of global risk to the value-based enterprise that is required in the full financial risk exception, additional or different requirements are necessary to protect against program or patient abuse (84 FR 55782). We proposed requiring that the physician must be at meaningful downside financial risk for the entire duration of the value-based arrangement to curtail any gaming that could occur by adding meaningful downside financial risk to a physician during only a short portion of an arrangement.

We are finalizing this requirement at § 411.357(aa)(2)(i). To buttress our oversight ability and that of our law enforcement partners, we proposed a requirement that the nature and extent of the physician's financial risk is set forth in writing. We are finalizing this requirement at § 411.357(aa)(2)(ii).

We note that this is also a good business practice that allows the parties to monitor their value-based arrangements and ensure that they are operating as intended. For similar reasons, but also as a safeguard against manipulating a value-based arrangement to reward referrals, we proposed to require that the methodology used to determine the amount of the remuneration is set in advance of the furnishing of the items or services for which the remuneration is provided. We noted that the special rule on compensation at § 411.354(d)(1) that deems compensation to be set in advance when certain conditions are met would apply, however, that provision is merely a deeming provision and parties are free to confirm satisfaction of the requirement another way.

We are finalizing this requirement at § 411.357(aa)(2)(iii). Integrated into most of the CMS-sponsored models is a requirement that any remuneration between parties to an allowable financial arrangement is not provided as an inducement to reduce or limit medically necessary items or services to any patient in the assigned patient population (84 FR 55782). This is an important safeguard for patient safety and quality of care, regardless of whether Medicare is the ultimate payor for the services, and we proposed including this safeguard in the meaningful downside financial risk exception by requiring that remuneration is not provided as an inducement to reduce or limit medically necessary items or services to any patient, whether in the target patient population or not.

Remuneration that leads to a reduction in medically necessary services would be inherently suspect and could implicate sections 1128A(b)(1) and (2) of the Act. We are finalizing this requirement at § 411.357(aa)(2)(v). For the reasons we explained with respect to the full financial risk exception, we proposed to include in the meaningful downside financial risk exception requirements that the remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population.

Remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement. And that records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Start Printed Page 77516Secretary upon request. We are finalizing our proposals to include these requirements in the meaningful downside financial risk exception at § 411.357(aa)(2)(iv), (vi), and (viii).

We also proposed a requirement at § 411.357(aa)(2)(vii) related to directing a physician's referrals to a particular provider, practitioner, or supplier (84 FR 55781). Under final § 411.357(aa)(2)(vii), if remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions. (1) The requirement to make referrals to a particular provider, practitioner, or supplier must be set out in writing and signed by the parties.

And (2) the requirement to make referrals to a particular provider, practitioner, or supplier may not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment.

See section II.B.4. Of this final rule for a complete discussion of our interpretation of this requirement. We received the following comments on the proposed meaningful downside financial risk exception.

Our responses follow. Comment. Several commenters disagreed with the design of the meaningful downside financial risk exception and the focus of the exception on the physician's level of risk rather than that of the entity.

The commenters viewed the meaningful downside financial risk exception, as proposed, as being of limited utility and not reflective of current real-world financial risk arrangements. Some commenters urged CMS to modify the meaningful downside financial risk exception to protect arrangements where the entity assumes the financial risk noting that entities, such as hospitals, are better positioned to assume risk from payors. These commenters expressed concern as to whether physician behavior has evolved to the point of being able to assume meaningful downside financial risk as required by the exception.

Some commenters requested that we permit an entity to assume meaningful downside financial risk and then allocate the risk down to the physician. Response. We are not making the modifications suggested by the commenters.

These commenters appear to misunderstand the scope of the meaningful downside financial risk exception and the intent behind it. The meaningful downside financial risk exception covers individual compensation arrangements that qualify as value-based arrangements between an entity and a physician that are VBE participants in the same value-based enterprise, regardless of whether the value-based enterprise or the entity has assumed financial risk from a payor. The exception is available to protect value-based arrangements under which the physician has assumed financial risk from the entity that is party to the arrangement, and where such risk is tied to the achievement of the value-based purpose(s) of the value-based enterprise of which the physician and the entity are VBE participants.

The value-based exceptions at § 411.357(aa) are designed to accommodate movement toward two-sided financial risk. Although we recognize that many physicians may not be prepared or willing to assume full (or substantially full) financial risk, the exception at § 411.357(aa)(2) is available to protect those value-based arrangements under which either meaningful downside financial risk is incorporated into the physician's compensation. There is great potential for behavior-shaping when a physician's failure to achieve value-based purposes is tied to his or her remuneration.

This behavior-shaping is critical to transforming our health care delivery system into one that improves patient outcomes, eliminates waste and inefficiencies, and reduces costs to or growth in expenditures of payors. Comment. Most of the commenters that addressed the proposed exception at § 411.357(aa)(2), disliked the 25 percent threshold for qualification as meaningful downside financial risk.

These commenters asserted that a 25 percent threshold is too high and would limit physician participation in value-based health care delivery and payment systems. Some of the commenters suggested that physicians who are new to value-based health care would be reluctant to put 25 percent of their compensation at risk. These commenters requested that we reduce the threshold to 10 percent, referencing a 2018 Deloitte Survey of U.S.

Physicians [] that surveyed 624 primary care and specialty physicians practicing in a variety of health care settings and found that most physicians are willing to tie approximately 10 percent of their compensation to quality and cost measures (the Deloitte Study). Several other commenters suggested a 5 percent threshold, noting that certain CMS payment systems or programs, such as advanced APMs and MIPS APMs, set financial risk percentages for physicians ranging from 5 to 9 percent. A few commenters suggested that we adopt a threshold of 15 percent for consistency with the contribution requirement under the exception for EHR items and services at § 411.357(w).

Some of the commenters suggested a scaled approach under which the exception initially would require a lower level of downside financial risk and increase to a higher level of downside financial risk as the physician acclimates to and participates in the value-based health care delivery and payment system. The commenters suggested that, in the alternative, CMS could set a lower threshold for meaningful downside financial risk in this final rule and increase the threshold in a future rulemaking. A few commenters viewed the 25 percent threshold as appropriate and consistent with the physician incentive plan rules applicable to Medicare and Medicaid managed care plans and federal health maintenance organizations.

Response. We find the commenters' statements and the Deloitte Study compelling, and our final regulation incorporates a lower threshold for meaningful downside financial risk of no less than 10 percent of the total value of the remuneration the physician receives under the value-based arrangement. The Deloitte Study found that physicians are willing to tie a greater percentage of their compensation (10 percent) to cost and quality measures than they have been previously, but physicians still need cost and quality data and analytic tools that may not be readily available to all physicians to find success in a value-based health care delivery and payment system.

We believe that the assumption by a physician of 10 percent downside financial risk is sufficient to curb the influences of traditional FFS payment systems. We reiterate that, the downside financial risk threshold, for purposes of the exception at § 411.357(aa)(2), relates to remuneration from an entity to a physician. Therefore, we do not believe that it is appropriate to link this threshold to the level of risk related to payments for services from a payor, for example, by linking to risk levels under MIPS or the Medicare Access and CHIP Reauthorization Act (MACRA).

Comment. Several commenters urged us to revise the definition of “meaningful downside financial risk” to mirror the risk levels found in OIG's proposed safe harbor for value-based arrangements with substantial downside financial risk. The commenters suggested this would avoid the need for Start Printed Page 77517parties to navigate different regulatory frameworks under the anti-kickback statute and physician self-referral law.

These commenters asserted that the lack of alignment between OIG and CMS could create unnecessary burden on the regulated industry. Response. It appears that the comments are based on a perception of the meaningful downside financial risk exception as a parallel to the OIG substantial downside financial risk safe harbor.

It is not. Under the substantial downside financial risk safe harbor, the required financial risk is at the value-based enterprise level. That is, the value-based enterprise, either directly or through its VBE participants, must assume substantial downside financial risk in order for the safe harbor to be available.

Under the meaningful downside financial risk exception, the focus is on the risk assumed by the individual physician to the value-based arrangement being assessed for satisfaction of the requirements of the exception. It would be incongruous to match the risk requirements in the exception and safe harbor as requested by the commenters. Comment.

Some commenters questioned whether the meaningful downside financial risk exception applies only when a physician is required to repay remuneration already received or whether the exception would also apply to value-based arrangements under which a portion of the physician's compensation is withheld until achievement of the value-based purpose(s) of the value-based enterprise. Other commenters asked whether the meaningful downside financial risk exception is applicable to value-based arrangements under which the physician is eligible to receive or would forgo incentive pay, depending on whether the physician satisfies the goals of the value-based arrangement or the performance or quality standards required under the value-based arrangement. A few commenters expressed concern that a repayment requirement could result in noncompliance where cash flow or other factors impact the ability of the physician to make repayment.

The commenters also asserted that a “repayment-only” policy is inconsistent with the structure of many financial risk arrangements that permit payments to either be withheld, reduced, or repaid for not meeting stated goals or performance and quality standards. Response. We are clarifying the regulation at § 411.357(aa)(2)(ix) to explicitly state that meaningful downside financial risk means that the physician is responsible to repay or forgo no less than 10 percent of the total value of the remuneration the physician receives under the value-based arrangement.

The scope of the meaningful downside financial risk exception is not limited to value-based arrangements under which a physician is required to repay remuneration already received from the entity. The structures of the financial terms of a value-based arrangement described by the commenters are permissible, provided that the arrangement otherwise complies with the value-based definitions and satisfies all the requirements of the meaningful downside financial risk exception. Withholds, repayment requirements, or incentive pay tied to meeting goals or outcome measures are all permissible options for structuring the financial terms of a value-based arrangement between an entity and a physician, provided that the physician's downside financial risk is tied to the achievement of the value-based purpose(s) of the value-based enterprise and not the goals of the parties or the arrangement (unless the parties alone comprise the value-based enterprise).

In addition, the meaningful downside financial risk exception applies only where the physician is at risk for failure to achieve the value-based purpose(s) of the value-based enterprise during the entire duration of the value-based arrangement. To illustrate, if a physician is entitled to a base payment of $50,000 with the ability to earn an additional $25,000 for performing certain value-based activities, meaningful downside financial risk equals at least 10 percent of the total compensation of $75,000, or $7,500. The $25,000 that is at risk for purposes of this example exceeds the 10 percent requirement.

However, unless the receipt of the $25,000 is tied to the achievement of the value-based purpose(s) of the value-based enterprise, the arrangement will not satisfy the requirement at final § 411.357(aa)(2)(i). By way of another example, assume that there exists a value-based arrangement between an entity and a physician that are the only VBE participants in the value-based enterprise (that is, they are a value-based enterprise of two) under which the total remuneration potentially due to the physician is $100,000, but $20,000 is withheld and payable only upon successfully completing the value-based activities called for under the arrangement. Meaningful downside financial risk equals at least 10 percent of the total compensation of the $100,000 total available remuneration, or $10,000.

The $20,000 withhold in this example exceeds the 10 percent requirement. Comment. Some commenters shared their confusion regarding the proposed alternative definition of meaningful downside financial risk under which a physician would be considered to be at meaningful downside financial risk if the physician is financially responsible to the entity on a prospective basis for the cost of all or a defined set of patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time.

The commenters requested that CMS revise or omit the alternative definition. The commenters also questioned the utility of the definition, noting that it is unlikely that an individual physician would assume full financial risk from an entity (or a payor). Response.

We agree with the commenters that it is unlikely that an individual physician would assume full financial risk from the entity with which the physician has the value-based arrangement for the cost of all or a defined set of items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. We are not finalizing this portion of the definition of “meaningful downside financial risk” and have omitted the language from the final regulation. As set forth at final § 411.357(aa)(2)(ix), meaningful downside financial risk means that the physician is responsible to repay or forgo no less than 10 percent of the total value of the remuneration the physician receives under the value-based arrangement.

Comment. A number of commenters requested that CMS adopt the same “pre-risk” period during which the exception is applicable prior to the assumption of financial risk that was included in the proposed full financial risk exception, but did not explain the need for a pre-risk period under the meaningful downside financial risk exception, which applies only to a single arrangement between an entity and a physician. Most of the commenters requested a 12-month “pre-risk” period.

Response. We are not permitting the use of the meaningful downside financial risk exception during the period prior to the physician's assumption of meaningful downside financial risk. We see no need to allow the use of the exception at § 411.357(aa)(2) prior to the physician's assumption of meaningful downside financial risk and believe that it would be a program integrity risk to do so.

The Secretary's authority at section Start Printed Page 775181877(b)(4) of the Act to issue exceptions to the physician self-referral law is limited to only those financial relationships that the Secretary determines do not pose a risk of program or patient abuse. We are concerned that unscrupulous parties could “front load” the remuneration by providing high-value remuneration to the physician in the “pre-risk” period before the physician is required to assume meaningful downside financial risk. This concern is heightened in light of the final definition of “meaningful downside financial risk,” which sets the threshold for downside financial risk at 10 percent of the value of the remuneration rather than the 25 percent threshold proposed.

Further, we note that financial risk in an arrangement between an entity and an individual physician, which is the foundation of the meaningful downside financial risk exception, is not an analog to the financial risk assumed by a value-based enterprise, which is the foundation of the full financial risk exception. As we explained in section II.A.2.b.(1). Of this final rule, VBE participants may need to develop infrastructure and perform certain activities necessary to be successful in a full financial risk payment model before the enterprise's assumption of full financial risk.

The same is not true with respect to a physician who assumes meaningful downside financial risk under an individual value-based arrangement with an entity. Comment. Several commenters asserted that the requirement that the methodology used to determine the amount of the remuneration under the value-based arrangement is set in advance of the undertaking of the value-based activities for which the remuneration is paid fails to provide sufficient flexibility.

The commenters requested that we “soften” the set in advance requirement to accommodate the change of compensation formulas or other requirements established by payors. Response. We decline to revise the requirement as requested by the commenters.

As a safeguard against gaming or manipulating a value-based arrangement to reward referrals, we require in the final meaningful downside financial risk exception that the methodology used to determine the amount of the remuneration is set in advance of the undertaking of the value-based activities for which the remuneration is paid. We interpret this requirement in the same way as the requirement found throughout the exceptions to the physician self-referral law that compensation (or a formula for the compensation) is set in advance before the furnishing of the items or services for which the compensation is to be paid. In the final meaningful downside risk exception, we are requiring only that the methodology used to determine the amount of the remuneration is set in advance of the undertaking of value-based activities for which the remuneration is paid.

Parties need not know the ultimate amount of remuneration under the value-based arrangement. Thus, prior to the commencement of a value-based arrangement, if the parties agree that a physician will be paid $10 for each completed patient assessment (assuming the completion of the patient assessment qualifies as a “value-based activity”), the methodology for determining the amount of the physician's remuneration is set in advance. If the parties later determine to increase the payment to $12 for each completed patient assessment, the revised remuneration would be considered set in advance, provided that the new remuneration terms are effective on a prospective basis only.

We explore our policies regarding compensation that is set in advance with respect to outcome measures in our discussion of the value-based arrangements exception at § 411.357(aa)(3) in section II.A.1.2.b.(3). And more generally in section II.D.5. Of this final rule.

(3) Value-Based Arrangements (§ 411.357(aa)(3)) The transformation to a value-based health care delivery and payment system is heavily dependent on physician engagement. As we noted in the proposed rule, commenters on the CMS RFI stated that, because physician decisions drive the overwhelming majority of all health care spending and patient outcomes, it is not possible to transform health care without a strong, aligned partnership between entities furnishing designated health services and physicians (84 FR 55783). Those commenters noted that this alignment of financial interests is key to the behavior shaping necessary to succeed in a value-based payment system.

They also asserted that permitting physicians and physician groups (especially smaller practices that are not used to risk-sharing or are too small to absorb downside financial risk) to assume only upside risk—or, for that matter, no financial risk—would encourage more physicians to participate in care coordination activities now while they continue to build toward entering into two-sided risk-sharing arrangements. In consideration of these and similar comments, as well as our belief that bold reforms to the physician self-referral regulations are necessary to foster the delivery of coordinated patient care and achieve the Secretary's vision of transitioning to a truly value-based health care delivery and payment system, we proposed an exception at § 411.357(aa)(3) for compensation arrangements that qualify as value-based arrangements, regardless of the level of risk undertaken by the value-based enterprise or any of its VBE participants (the “value-based arrangement exception”) (84 FR 55783). As proposed, the value-based arrangement exception would permit both monetary and nonmonetary remuneration between the parties, although we considered whether to limit the scope of the exception to nonmonetary remuneration only and sought comment regarding the impact such a limitation may have on the transition to a value-based health care delivery and payment system (84 FR 55783).

The final exception is not limited to the provision of only nonmonetary compensation. We also proposed to include in the value-based arrangement exception certain requirements that were included in the proposed meaningful downside financial risk exception, some of which were also included in the proposed full financial risk exception (84 FR 55783). We stated that we would interpret these requirements in the same way as in the proposed full financial risk and meaningful downside financial risk exceptions, and included them in the value-based arrangement exception for the same reasons articulated with respect to those exceptions.

These requirements are. The remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population. Remuneration is not provided as an inducement to reduce or limit medically necessary items or services to a patient in the target patient population.

Remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered by the value-based arrangement. The methodology used to determine the amount of the remuneration is set in advance of the furnishing of the items or services for which the remuneration is provided. And records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Secretary upon request (84 FR 55783).Start Printed Page 77519 Because the exception at proposed § 411.357(aa)(3) would be applicable even to value-based arrangements where neither party, but especially not the physician, has undertaken any downside financial risk, we stated that safeguards beyond those included in the meaningful downside financial risk exception are necessary to protect against program or patient abuse (84 FR 55783).

To address this, we proposed to replace the requirement that remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered by the value-based arrangement with a requirement that remuneration is not conditioned on the volume or value of referrals of any patients, including patients in the target patient population, to the entity or the volume or value of any other business generated, including business covered by the value-based arrangement, by the physician for the entity. We did not propose to include a requirement that the remuneration is not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician for the entity. We sought comments regarding this alternative proposal.

The interplay of the alternative requirement with our longstanding policy that the entity of which the physician is a bona fide employee or independent contractor, or that is a party to a managed care contract with the physician, may direct the physician's referrals to a particular provider, practitioner, or supplier, as long as the compensation arrangement meets specified conditions designed to preserve the physician's judgment as to the patient's best medical interests, avoid interfering in an insurer's operations, and protect patient choice. And whether including such an alternative requirement would impede parties' ability to achieve the value-based purposes on which their value-based arrangement is premised if the entity cannot direct referrals as historically permitted. We are finalizing the proposed safeguards that are also included in the meaningful downside risk exception at § 411.357(aa)(2), but we are not finalizing the alternative proposal regarding the conditioning of remuneration.

Final § 411.357(aa)(3)(ix) requires that the remuneration under the value-based arrangement is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement. However, we are finalizing a requirement regarding patient choice, which is included in the regulations for all three of the value-based exceptions. See section II.B.4.

Of this final rule for a complete discussion of our interpretation of this requirement. In addition, we proposed requirements in the exception at § 411.357(aa)(3) that the value-based arrangement is set forth in writing and signed by the parties, and that the writing includes a description of the value-based activities to be undertaken under the arrangement. How the value-based activities are expected to further the value-based purpose(s) of the value-based enterprise.

The target patient population for the arrangement. The type or nature of the remuneration. The methodology used to determine the amount of the remuneration.

And the performance or quality standards against which the recipient of the remuneration will be measured, if any (84 FR 55783). We believe that the documentation requirements are self-explanatory. We stated that, although we expect that parties would plan to satisfy the writing requirement in advance of the commencement of the value-based arrangement, the special rule at § 411.354(e)(3) (modified, in part, from existing § 411.353(g)(1)(ii)) would apply.

We are finalizing our proposal regarding the writing and signature requirements in the exception at § 411.357(aa)(3). We remind readers that the value-based purpose of the arrangement must relate to the value-based enterprise as a whole (which, as noted previously in section II.A.2.a. Of this final rule, may be the two parties to the value-based arrangement), and that the exception will not protect a “side” arrangement between two VBE participants that is unrelated to the goals and objectives (that is, the value-based purposes) of the value-based enterprise of which they are participants, even if the arrangement itself serves a value-based purpose.

We also proposed to require that the performance or quality standards against which the recipient of the remuneration will be measured, if any, are objective and measurable, and that such standards must be determined prospectively, with any changes to the performance or quality standards set forth in writing and applicable only prospectively (84 FR 55784). Because commenters expressed concern regarding the term “performance or quality standards,” and in an effort to reduce burden on stakeholders by aligning our terminology with OIG, we are modifying this requirement to apply to “outcome measures” rather than “performance or quality standards” and defining “outcome measure” at § 411.357(aa)(3)(xii) to mean a benchmark that quantifies. (A) Improvements in or maintenance of the quality of patient care.

Or (B) reductions in the costs to or reductions in growth in expenditures of payors while maintaining or improving the quality of patient care. Final § 411.357(aa)(3)(ii) requires that the outcome measures against which the recipient of remuneration will be assessed, if any, are objective, measurable, and selected based on clinical evidence or credible medical support. To promote clarity, we discuss our proposals and respond to comments on our proposals regarding the performance or quality standards against which a recipient of remuneration will be assessed in terms of the “outcome measures” against which the recipient of the remuneration will be assessed.

We discuss this modification more fully below. We recognize that outcome measures may not be applicable to all value-based arrangements—for example, an arrangement under which a hospital provides needed infrastructure to a physician in the same value-based enterprise may not require the physician to meet specific outcome measures in order to receive or keep the infrastructure items or services. However, if the value-based arrangement does include outcome measures that relate to the receipt of the remuneration—for example, an arrangement to share the internal cost savings achieved if the physician meaningfully participates in the hospital's quality and outcomes improvement program and reaches or exceeds predetermined benchmarks for his or her personal performance or quality measurement—such outcome measures must be determined in advance of their implementation.

The exception would not protect arrangements where the outcome measures are set retrospectively (84 FR 55784). In the proposed rule, to align with OIG's proposals, we considered whether to require that outcome measures be designed to drive meaningful improvements in physician performance, quality, health outcomes, or efficiencies in care delivery (84 FR 55784). We sought comment regarding whether we should include this as a requirement of the value-based arrangement exception and the burden or cost of including such a requirement.

As discussed more fully below, we are not including a requirement in this final rule that outcome measures must be designed to drive meaningful improvements in physician performance, quality, health outcomes, Start Printed Page 77520or efficiencies in care delivery in this final rule. As we stated in the proposed rule, we expect that, as a prudent business practice, parties would monitor their arrangements to determine whether they are operating as intended and serving their intended purposes—regardless of whether the arrangements are value-based—and have in place mechanisms to address identified deficiencies, as appropriate (84 FR 55784). We explained that there is an implicit ongoing obligation for an entity to monitor each of its financial relationships with a physician for compliance with an applicable exception.

In general, if a physician has a financial relationship with an entity that does not satisfy all the requirements of an applicable exception (after applying any special rules), section 1877(a)(1)(A) of the Act prohibits the physician from making a referral to the entity for the furnishing of designated health services for which payment may otherwise be made under Medicare, section 1877(a)(1)(B) of the Act prohibits the entity from presenting or causing to present a claim under Medicare for the designated health services furnished pursuant to a prohibited referral, and section 1877(g)(1) of the Act prohibits Medicare from making payment for a designated health service that is provided pursuant to a prohibited referral. Thus, parties must ensure the compliance of their financial relationship with an applicable exception at the time the physician makes a referral for designated health service(s). In the proposed rule, we discussed at length the importance of monitoring arrangements that implicate the physician self-referral law (84 FR 55784).

More specifically, we discussed the implicit ongoing compliance monitoring obligation for arrangements that would qualify for protection under the value-based arrangement exception at § 411.357(aa)(3). We provided a detailed example of appropriate monitoring of a value-based arrangement for compliance with the proposed exception at § 411.357(aa)(3), including the consequences of value-based activities that can no longer be considered to be reasonably designed to achieve the value-based purpose(s) of a value-based enterprise (84 FR 55784 through 55785). We considered whether to include program integrity safeguards that.

(1) Require the value-based enterprise or the VBE participant providing the remuneration to monitor to determine whether the value-based activities under the arrangement are furthering the value-based purpose(s) of the value-based enterprise. And (2) if the value-based activities will be unable to achieve the value-based purpose(s) of the arrangement, require the physician to cease referring designated health services to the entity, either immediately upon the determination that the value-based purpose(s) will not be achieved through the value-based activities or within 60 days of such determination (84 FR 55785). We sought comment regarding whether we should include these as requirements of the value-based arrangement exception, how parties could monitor for achievement of value-based purposes, and the burden or cost of including such a requirement.

Specifically, we sought comment regarding whether we should require that monitoring should occur at specified intervals and, if so, what the intervals should be. Recognizing that cost savings, in particular, may take an extended period of time to achieve, we also sought comment regarding whether to impose time limits with respect to a value-based enterprise's or VBE participant's determination that the value-based purpose of the enterprise will not be achieved through the value-based activities required under the arrangement. That is, require that the value-based purpose must be achieved within a certain timeframe, such as 3 years, and, if it is not, the value-based purpose would be deemed not achievable through the value-based activities required under the arrangement.

As explained in our response to comments below, we are including an explicit monitoring requirement at final § 411.357(aa)(3)(vii). Parties seeking to utilize the value-based arrangement exception (or the value-based enterprise in which they participate) must monitor the value-based arrangement no less frequently than annually, or at least once during the term of the arrangement if the arrangement has a duration of less than 1 year, to determine whether the parties have furnished the value-based activities required under the arrangement, and whether and how continuation of the value-based activities is expected to further the value-based purpose(s) of the value-based enterprise. If the monitoring indicates that a value-based activity is not expected to further the value-based purpose(s) of the value-based enterprise, the parties must terminate the ineffective value-based activity.

The parties may do so by terminating the value-based arrangement or by modifying the arrangement to terminate the ineffective value-based activity after completion of the monitoring. If the parties complete the required action within the applicable timeframe, the ineffective value-based activity is deemed to be reasonably designed to achieve at least one value-based purpose of the value-based enterprise during the entire period during which it was undertaken by the parties. In addition, during the same timeframes, either the value-based enterprise or one or more of the parties to the arrangement must monitor progress toward attainment of the outcome measure(s), if any, against which the recipient of the remuneration is assessed.

If the monitoring indicates that an outcome measure is unattainable during the remaining term of the arrangement, the parties must terminate or replace the unattainable outcome measure within 90 consecutive calendar days after completion of the monitoring. If the parties fail to monitor outcome measures within the prescribed timeframes, or fail to terminate or replace an unattainable outcome measure within the prescribed timeframe, the value-based arrangement will no longer satisfy the requirements of the exception at § 411.357(aa)(3). We emphasize that parties may amend their value-based arrangements to address identified deficiencies at any time, provided that the amendments are prospective only, including any amendments to the compensation terms of the arrangement.

We refer readers to section II.E.1. Of this final rule for a discussion of the provisions on amending arrangements newly codified at § 411.354(d)(1). We believe that requiring immediate termination of a value-based arrangement due to an ineffective value-based activity would be counterproductive to the underlying goal of encouraging the transition to a value-based health care delivery and payment system.

We are providing for the noted “grace periods” because we recognize that parties to a value-based arrangement may need time to address an ineffective value-based activity identified through their monitoring. As discussed in the proposed rule, the physician self-referral law would prohibit a physician from making referrals to an entity, and prohibit the entity from submitting claims for designated health services referred by the physician, if the value-based arrangement does not satisfy all the requirements of an applicable exception at the time of the referral. This includes the requirement that the value-based activities undertaken under the arrangement, by definition, are reasonably designed to achieve one or more value-base purposes of the value-Start Printed Page 77521based enterprise (84 FR 55785).

We believe that it is necessary to allow parties an appropriate amount of time to address the findings of their monitoring without fear of violating the physician self-referral law. We also believe that a policy under which parties that act quickly to rectify the ineffectiveness of their value-based activities will not run afoul of the physician self-referral law does not pose a risk of program or patient abuse. As described above, we are finalizing a policy under which a value-based activity will be deemed to be reasonably designed to achieve at least one value-based purpose of the value-based enterprise during the entire period during which it was undertaken by the parties if the parties terminate the arrangement within 30 consecutive calendar days after the completion of the required monitoring or modify their arrangement to terminate the ineffective value-based activity within 90 consecutive calendar days after completion of the monitoring.

Similarly, we are finalizing a policy that provides for 90 consecutive calendar days for parties to terminate or replace an outcome measure that their monitoring indicates is unattainable. To illustrate the monitoring requirement at final § 411.357(aa)(3)(vii) with respect to monitoring of value-based activities, we apply it here in the context of the scenario described in the proposed rule (84 FR 55784 through 55785). Assume a hospital revised its care protocol for screening for a certain type of cancer to incorporate newly issued guidelines from a nationally recognized organization.

The new guidelines, and the revised protocol, no longer support a single screening modality for the disease. Instead, the organization recommends screening by combining two modalities to achieve more accurate results. The revised guidelines and hospital care protocol are intended to improve the quality of care for patients by detecting more cancers and avoiding potential unnecessary overtreatment of false positive results (which can be frequent for single-modality screening for the disease).

The hospital observes that most community physicians continue to refer patients to the hospital for single-modality screening. To align referring physician practices with the hospital's revised care protocol, the hospital offers to pay physicians $10 for each instance that they order dual-modality screening in accordance with the revised care protocol during a 2-year period beginning on January 1, 2021. The hospital expects that it would take approximately 2 years to shape physician behavior to always follow the recommended care protocol (except when not medically appropriate for the particular patient).

Assume that both single-modality and dual-modality screening are designated health services payable by Medicare. In this illustration, the value-based enterprise is the hospital and identified community physicians. (The hospital and the community physicians could also be part of a larger value-based enterprise.) The target patient population is patients in the hospital's service area that receive screening for the particular disease.

The value-based activity is adherence with the hospital's revised care protocol by ordering dual-modality screening instead of single-modality screening. The value-based purpose of the value-based enterprise is to improve the quality of care for patients in the hospital's service area by detecting more cancers and avoiding potential unnecessary overtreatment of false positive results. At its inception, provided that an arrangement between the hospital and a physician satisfies all the requirements of § 411.357(aa)(3), the physician's referrals of designated health services to the hospital and the hospital's submission of claims to Medicare for the designated health services referred by the physician would not violate the physician self-referral law.

However, assume that during the first year of the arrangement, the hospital determines through its monitoring that its data analysis indicates that the use of dual-modality screening not only does not result in earlier detection of cancer, but results in more false positive results, invasive biopsies, and unnecessary treatment than single-modality screening. As a result, the hospital determines that the use of dual-modality screening, despite the nationally-recognized recommendations, will not achieve the goal of improving the quality of care for patients in the hospital's service area by detecting more cancers and avoiding potential unnecessary overtreatment of false positive results. The compliance monitoring, which occurred in the first year of the arrangement, has identified that the continuation of the value-based activity, dual-modality screening, is no longer expected to further the value-based purpose of improving the quality of care for patients in the hospital's service area by detecting more cancers and avoiding potential unnecessary overtreatment of false positive results.

Once the hospital has identified the ineffective value-based activity, the hospital has two options to maintain compliance with the physician self-referral law. Under final § 411.357(aa)(3)(vii)(B), the parties could terminate the arrangement within 30 consecutive calendar days of the date of completion of the monitoring indicating that the value-based activity was ineffective, or the parties could modify the arrangement to terminate the ineffective value-based activity within 90 consecutive calendar days of completion of the monitoring and, if they choose, replace it with a different value-based activity with prospective applicability. If the parties fail to take one of these actions, the physician would be prohibited from making referrals of any designated health services to the hospital from the date the hospital became aware that its value-based arrangement no longer satisfied the requirements of § 411.357(aa)(3) (unless the arrangement satisfies the requirements of another applicable exception to the physician self-referral law, which it likely would not).

In addition, the hospital would be prohibited from submitting claims to Medicare for any improperly referred designated health services. The parties' lack of knowledge does not affect compliance with the physician self-referral law. The hospital's (or value-based enterprise's) failure to monitor as required under our final regulations for progress toward achievement of the value-based purpose of the value-based enterprise would not nullify the parties' noncompliance with the physician self-referral law.

The physician's referrals would be prohibited due to the fact that adherence to the revised care protocol could not, in fact, achieve the value-based purpose of the value-based enterprise and would no longer qualify as a “value-based activity” as that term is defined at final § 411.351. In turn, the arrangement would not qualify as a “value-based arrangement” and the exception at § 411.357(aa)(3) would no longer be available to protect the physician's referrals. In the proposed rule, we also considered whether to require the recipient of any nonmonetary remuneration under a value-based arrangement to contribute at least 15 percent of the donor's cost of the nonmonetary remuneration (84 FR 55785 through 55786).

We stated that requiring financial participation by a recipient of nonmonetary remuneration under a value-based arrangement would help ensure that the nonmonetary remuneration is appropriate and beneficial for the achievement of the value-based purpose(s) of the value-based enterprise, as well as ensuring Start Printed Page 77522that the recipient will actually use the nonmonetary remuneration. However, we also stated our concern that such a requirement could inhibit the adoption of value-based arrangements. As discussed in section II.D.11.d.(1).

Of this final rule, even though many commenters asserted that the 15 percent contribution requirement under the existing exception for EHR items and services is burdensome to some recipients and acts as a barrier to adoption of EHR technology, we are retaining the 15 percent contribution requirement for the existing EHR exception as an important program integrity safeguard where the compensation arrangement between the parties is not a value-based arrangement. We are concerned, however, that requiring a 15 percent contribution from the recipient of nonmonetary compensation under a value-based arrangement could inhibit the goal of transitioning to a value-based health care delivery and payment system. We are not including a contribution requirement in the value-based arrangement exception finalized in this final rule.

We received the following comments and our responses follow. Comment. The vast majority of commenters supported the adoption of a value-based arrangement exception and urged CMS to finalize the exception without modification in order to support the transition to a value-based health care delivery and payment system.

Commenters expressed appreciation for the creation of a value-based exception with no downside risk, asserting that the exception will be beneficial to rural providers, small practices, and others wanting to explore value-based health care delivery and payment, but not yet well-positioned to take on meaningful financial risk. A few commenters suggested that the value-based arrangement exception is complex and burdensome, and could act as a deterrent to participation in value-based health care. A small number of commenters urged us not to finalize the value-based arrangement exception, citing program integrity concerns.

Response. We agree with the commenters that the exception at § 411.357(aa)(3) is necessary to facilitate robust participation in a value-based health care delivery and payment system. We are finalizing the exception with the modifications discussed above and in our response to other comments in this section II.A.2.

Although we appreciate the program integrity concerns raised by some commenters, we are confident that the integrated approach to safeguards against program and patient abuse found in the value-based definitions and exceptions will ensure that even “no risk” value-based arrangements that satisfy all the requirements of the definitions and the requirements of § 411.357(aa)(3) will not pose a risk of program or patient abuse. Comment. The majority of commenters urged CMS not to limit the value-based arrangement exception to nonmonetary remuneration.

The commenters pointed to value-based arrangements commonplace in the industry, such as payment for adherence to care protocols or shared savings models that utilize cash incentives to shape physician behavior, improve quality, and reduce waste. One commenter expressed concern that, by limiting the type of remuneration permissible under the exception, CMS would create a complicated patchwork of protections depending on the type of remuneration at issue. Response.

We are not limiting the value-based arrangement exception to nonmonetary remuneration only. Limiting the exception to nonmonetary remuneration could undermine the Secretary's goal of robust participation in a value-based health care delivery and payment system by artificially restricting the types of arrangements that are appropriate for protection from the prohibitions of the physician self-referral law. Comment.

Commenters nearly universally opposed the inclusion of a contribution requirement for nonmonetary remuneration provided under a value-based arrangement. Commenters asserted that such a contribution requirement would create a barrier to widespread participation in a value-based health care delivery and payment system. Many commenters echoed our concerns in the proposed rule that a contribution requirement for nonmonetary remuneration would unfairly impact small and rural physician practices, providers, and suppliers that cannot afford the contribution (84 FR 55786).

Response. We agree with the commenters that requiring a 15 percent contribution for nonmonetary remuneration provided under a value-based arrangement could create barriers to the transition to a value-based health care delivery and payment system, particularly for small and rural physician practices, providers, and suppliers. The final value-based arrangement exception does not require a contribution for nonmonetary remuneration.

Comment. A few commenters expressed concern regarding the requirement that a value-based arrangement must be set forth in writing and signed by the parties. These commenters viewed these documentation requirements as unnecessary and creating an administrative burden.

A few commenters requested confirmation that the writing requirements of § 411.357(aa)(3) may be satisfied through a collection of contemporaneous documents evidencing the conduct between the parties and that a single, formal contract is not required. These same commenters also requested confirmation that the special rule for signature requirements at § 411.354(e) (formerly at § 411.353(g)) would apply to value-based arrangements. One commenter requested that we eliminate the signature requirement from the value-based arrangement exception to avoid what the commenter called “technical violations.” Response.

We do not consider the documentation requirements under the final value-based arrangement exception burdensome. As discussed above, we view the documentation requirements as self-explanatory and a necessary program integrity safeguard. As we have stated in prior rulemakings, we believe that it is a usual and customary business practice to document and sign arrangements and the requirements of the exceptions to the physician self-referral law do not add burden to these practices.

(See, for example, 83 FR 59993.) Nothing in the final value-based arrangement exception at § 411.357(aa)(3)—or any other exception to the physician self-referral law—requires a single formal contract to satisfy the writing requirement of the exceptions. Comment. Several commenters raised concerns with our discussion in the proposed rule that parties have an implicit obligation to monitor their arrangements for compliance with the physician self-referral law (84 FR 55784).

These commenters asserted that the use of the term “implicit” introduces ambiguity that is not appropriate for a strict liability statute. The commenters requested that any monitoring obligations, including the scope and frequency of the monitoring, be clearly stated in the regulations. A few of the commenters suggested that CMS provide flexibility in monitoring and assessing progress of a value-based arrangement, asserting that the monitoring requirement should be tailored to the resources and sophistication of the parties to the value-based arrangement.

Some commenters stated that monitoring for compliance with the requirements of an Start Printed Page 77523applicable exception at the outset of an arrangement and upon renewal of the arrangement is a common industry practice and suggested that we adopt a similar policy for monitoring value-based arrangements. Response. The commenters' statements regarding parties' obligations to monitor for ongoing compliance with the physician self-referral law are surprising, as are their statements that references to this implicit obligation would introduce ambiguity into their ability to utilize the value-based arrangement exception.

Our expectation of monitoring for ongoing compliance in the context of the physician self-referral law is not a new concept. As we stated in Phase II, section 1877 of the Act is clearly intended to make entities responsible for monitoring their compensation arrangements with physicians (69 FR 16112). As discussed above, the core principle of the physician self-referral law is that, if a physician has a financial relationship with an entity that does not satisfy all the requirements of an applicable exception (after applying any special rules), section 1877(a)(1)(A) of the Act prohibits the physician from making a referral to the entity for the furnishing of designated health services for which payment may otherwise be made under Medicare, section 1877(a)(1)(B) of the Act prohibits the entity from presenting or causing to present a claim under Medicare for the designated health services furnished pursuant to a prohibited referral, and section 1877(g)(1) of the Act prohibits Medicare from making payment for a designated health service that is provided pursuant to a prohibited referral.

Parties must ensure the compliance of their financial relationships with an applicable exception at the time the physician makes a referral for designated health service(s). We agree with the commenters that the government's expectations regarding monitoring of value-based arrangements should be explicitly stated in regulation text, and we are including at final § 411.357(aa)(3)(vii) a monitoring requirement that provides the guidelines requested by the commenters. Under the final regulation, the value-based enterprise or one or more of the parties to a value-based arrangement must monitor the arrangement no less frequently than annually, or at least once during the term of the arrangement if the arrangement has a duration of less than 1 year.

This timeframe coincides with that proposed by OIG in its safe harbors for value-based arrangements and finalized elsewhere in this issue of the Federal Register. To facilitate the assessment of ongoing compliance with the physician self-referral law, we are finalizing our proposal to require that the value-based enterprise or one or more of the parties to the value-based arrangement must monitor whether the parties have furnished the value-based activities required under the arrangement and whether and how continuation of the value-based activities is expected to further the value-based purpose(s) of the value-based enterprise. If the monitoring indicates that a value-based activity is not expected to further the value-based purpose(s) of the value-based enterprise, the parties must terminate the ineffective value-based activity.

In addition, during the same timeframes, either the value-based enterprise or one or more of the parties to the arrangement must monitor progress toward attainment of the outcome measure(s), if any, against which the recipient of the remuneration is assessed. If the monitoring indicates that an outcome measure is unattainable during the remaining term of the arrangement, the parties must terminate or replace the unattainable outcome measure. As discussed in response to the comment below, the final regulation at § 411.357(aa)(3)(vii) sets forth specific timeframes in which the parties must take action following completion of monitoring that identifies an ineffective value-based activity or that an outcome measure is unattainable during the remaining term of the arrangement.

If the parties take action within the timeframe specific to the chosen action (that is, termination or modification of the value-based arrangement), a value-based activity will be deemed to be reasonably designed to achieve at least one value-based purpose of the value-based enterprise for the entire period during which it was undertaken by the parties. Similarly, the arrangement will not fail to satisfy the requirements of the exception at § 411.357(aa)(3) if, within 90 consecutive calendar days after completion of the monitoring, the parties terminate or replace an outcome measure determined to be unattainable. We are not prescribing in this final rule how value-based enterprises, entities, and physicians should monitor their value-based arrangements.

Rather, we expect value-based enterprises, entities, and physicians to design their monitoring and other compliance efforts in a manner that is appropriate for the particular value-based arrangement. Comment. Several commenters urged us not to require termination of a value-based arrangement due to a value-based activity no longer furthering the value-based purpose of the value-based enterprise.

These commenters recommended that we establish a timeframe for “curing” noncompliance or create a transition period that allows the parties to the value-based arrangement to redesign or replace the deficient value-based activity, with a couple commenters suggesting 90 days for that timeframe. A few commenters suggested giving parties the option of terminating the arrangement in its entirety or allowing them to implement a written plan to remediate the noncompliance no later than 60 days from the date they determine that the value-based activities are unable to achieve the value-based purposes. One commenter requested that we adopt a policy that an arrangement would not lose protection under the value-based arrangement exception for a period of 12 months from the date of commencement of the arrangement as long as the value-based activities were reasonably designed to achieve the value-based purpose at its outset.

Some commenters suggested that a policy under which a physician's referrals are considered to violate the physician self-referral law if value-based activities do not immediately succeed in achieving the value-based purpose(s) of the value-based enterprise would create a “fear of failure” that would dissuade parties from attempting to deliver health care in new and innovative value-based ways. These commenters asserted that allowing parties to cure defects in arrangements would remove the “fear of failure” and promote value-based health care delivery. A different commenter requested that we establish a specific timeframe for a value-based arrangement to achieve its value-based purpose without risking violation of the physician self-referral law.

Response. As discussed above, if parties to a value-based arrangement, through monitoring efforts or otherwise, determine that a value-based activity no longer furthers the value-based purpose(s) of the value-based enterprise, the parties may either terminate the arrangement or modify the arrangement to remove the ineffective value-based activity. The commenters mistakenly assumed that termination of a value-based arrangement is required if a value-based activity is no longer reasonably designed to further the value-based purpose(s) of the value-based enterprise.

Our proposal required the cessation of the physician's referrals of designated health services, either immediately or within 60 days of the determination that the value-based activities would be Start Printed Page 77524unable to achieve the value-based purpose(s) of the value-based enterprise. We did not intend to prohibit modification of arrangements that would allow continuation of physician referrals. We recognize that the design and implementation of value-based arrangements require a certain level of fluidity, although we are not persuaded to implement a 12-month “deeming” timeframe under which a value-based arrangement would be deemed to satisfy the requirement that its value-based activities are reasonably designed to further the value-based purpose(s) of the value-based enterprise for a period of 12 months from their implementation.

Such a policy would permit parties with actual knowledge that the value-based activities will be unable to achieve the value-based purpose(s) to make referrals and submit claims for designated health services potentially much longer than we believe is necessary to make appropriate modifications to their arrangement. We agree with the commenters that identified 90 days as the amount of time that parties would need to make adjustments to their value-based arrangements when they are aware that a value-based activity will no longer further the value-based purpose(s) of the value-based enterprise. We note that this timeframe is consistent with other timeframes for remediating temporary noncompliance, documentation deficiencies, and other discrepancies in our regulations.

We do not believe that parties that elect to terminate their value-based arrangement would need as much time. Accordingly, we have established in our final regulation timeframes in which the parties to a value-based arrangement may address any identified deficiencies with their value-based activities without running afoul of the physician self-referral law. Under the final regulations at § 411.357(aa)(3)(vii)(B)(1) and (2), a value-based activity will be deemed to be reasonably designed to achieve at least one value-based purpose of the value-based enterprise for the entire period during which it was undertaken if the parties terminate the arrangement within 30 consecutive calendar days or modify the arrangement within 90 consecutive calendar days after completion of the monitoring.

We believe that parties to a value-based arrangement that identify ineffective value-based activities should be able to decide whether to terminate the entire arrangement and effectuate such a termination within 30 consecutive calendar days of identifying the ineffective value-based activities. In order to protect against program and patient abuse that could arise with an unlimited timeframe in which to terminate specific value-based activities, we are establishing at § 411.357(aa)(3)(vii)(B)(2) a 90-day timeframe for the termination of value-based activities that are not expected to further the value-based purpose(s) of the value-based enterprise. To maintain consistency with other regulations that require remedial action within certain timeframes, the regulation requires that the termination of the arrangement or the ineffective value-based activity must occur within the specified number of consecutive calendar days.

The provisions of final § 411.357(aa)(3)(vii)(B)(1) and (2) should address the concerns raised by the commenters without risking program or patient abuse. Comment. Several commenters inquired about the proposed requirement that performance or quality standards against which the recipient of the remuneration will be measured, if any, are objective and measurable.

The commenters generally supported a requirement that performance or quality standards must be objective and measurable, but requested additional guidance regarding what qualifies as a “performance or quality standards.” The commenters generally opposed our alternative proposal to require that performance or quality standards must be designed to drive meaningful improvements in physician performance, quality, health outcomes, or efficiencies in care delivery. Commenters asserted that this alternative proposal and the use of the language “designed to drive meaningful improvements” created ambiguity that would hinder participation in value-based arrangements. Response.

The final regulations at § 411.357(aa)(3)(i)(F) and (ii) replace the term “performance and quality standards” with the term “outcome measures.” The final exception requires at § 411.357(aa)(3)(ii) that the outcome measures against which the recipient of remuneration under a value-based arrangement will be measured, if any, are objective and measurable, and any changes to the outcome measures must be made prospectively and set forth in writing. We have also added a new paragraph (xii) that defines “outcome measure,” for purposes of the value-based arrangement exception, to mean a benchmark that quantifies. (A) Improvements in or maintenance of the quality of patient care.

Or (B) reductions in the costs to or reductions in growth in expenditures of payors while maintaining or improving the quality of patient care. This definition is intended to align with OIG's final regulations. We are sympathetic to commenters' concerns regarding the difficulty in ascertaining that a measure is designed to drive meaningful improvements in physician performance, quality, health outcomes, or efficiencies in care delivery.

We are not adopting our alternative proposal to require that outcome measures against which recipients of remuneration are measured are designed to drive meaningful improvements in physician performance, quality, health outcomes, or efficiencies in care delivery. Comment. Many commenters appear to have misinterpreted the meaning of the requirement at § 411.357(aa)(3)(ii) that the outcome measures against which the recipient of the remuneration will be measured, if any, are objective and measurable, and any changes to the outcome measures must be made prospectively and set forth in writing.

The commenters interpreted this provision to require the inclusion of outcome measures in all value-based arrangements and questioned whether that is practical. Some of the commenters noted that preventive care and primary care services do not necessarily lend themselves to outcome measures, asserting that benefits of these services may not be immediately measureable. Response.

The requirements at final § 411.357(aa)(3)(i)(F) and (ii) specifically include the language “if any” to indicate that outcome measures are not required in every value-based arrangement. We recognize that outcome measures may not be available for or applicable to certain value-based activities. For instance, the adoption of the same EHR system or the completion of training on the EHR system are potential value-based activities that likely would not have an associated outcome measure.

However, if outcome measures are included as part of the value-based arrangement, those outcome measures must be objective and measurable and determined prospectively. In addition, under final § 411.357(aa)(3)(vii), either the value-based enterprise or one or more of the parties to the arrangement must monitor progress toward attainment of the outcome measure(s) against which the recipient of the remuneration is assessed. If the monitoring indicates that an outcome measure is unattainable during the remaining term of the arrangement, the parties must terminate or replace the unattainable outcome measure within 90 consecutive calendar days after completion of the monitoring.Start Printed Page 77525 Comment.

A few commenters stated that they interpreted the requirement that the outcome measures against which the recipient of the remuneration will be measured, if any, are objective and measurable, and any changes to the outcome measures must be made prospectively and set forth in writing to mean that constant improvement or the achievement of the outcome measures is required. Some of the commenters also interpreted this requirement to mean that parties to a value-based arrangement may not substitute outcome measures or make other adjustments to the outcome measures during the term of the value-based arrangement. These commenters asserted that it is common for parties to value-based arrangements to reevaluate outcome measures and make modifications necessary to continue moving towards achievement of the purposes of the value-based enterprise.

The commenters sought confirmation that parties are permitted to modify their arrangements, including making changes to outcome measures, and make other necessary adjustments over the course of a value-based arrangement without losing the protection of the exception. Response. The commenters may have misinterpreted the requirements of the proposed exception.

We are defining “outcome measure” in this final rule to mean a benchmark that quantifies. (A) Improvements in or maintenance of the quality of patient care. Or (B) reductions in the costs to or reductions in growth in expenditures of payors while maintaining or improving the quality of patient care.

Outcome measures are used to evaluate the provision and effectiveness of value-based activities to ensure that the value-based activities are continuing to further the value-based purposes of the value-based enterprise. Nothing in this final rule prohibits the replacement or substitution of outcome measures against which the recipient of the remuneration is measured under a value-based arrangement, provided that any changes to the outcome measures are made prospectively and set forth in writing. For example, assume that a physician can earn incentive pay under a value-based arrangement for providing certain post-discharge follow-up services to patients in a target patient population following their discharge from the hospital, and that the value-based purpose of the value-based enterprise is to improve the quality of patient care by facilitating a smooth transition from an acute care setting to the appropriate post-acute care setting and lowering readmissions to the hospital.

The physician's remuneration for providing post-discharge follow-up services under the arrangement may be, in whole or in part, dependent on whether the hospital reduces its readmission rate to 65 percent or lower for patients treated by the physician. The “outcome measure” is the readmission rate. If the parties wish to revise this outcome measure—for example, because the hospital realizes that a readmission rate of 65 percent or lower is too easily attainable or is unrealistic given the severity of the medical conditions of the patients in the target patient population and, specifically, the patients treated by the physician—they may make necessary adjustments to the readmission measure, provided any changes to the measure are prospective only and set forth in writing.

It would not be permissible to change the outcome measure to a lower, more attainable readmission percentage and apply that new outcome measure retroactively in order to allow the physician to earn the incentive payment under the value-based arrangement as originally designed. To the extent that commenters were concerned that parties may not amend their value-based arrangements to require more or different value-based activities than those included in the arrangement as originally designed, we emphasize that nothing in final § 411.357(aa)(3) prohibits termination or substitution of value-based activities to be undertaken under a value-based arrangement, provided that all modifications to the value-based arrangement are effective prospectively and comply with any applicable regulations regarding the modification of compensation arrangements. (4) Indirect Compensation Arrangements to Which the Exceptions at § 411.357(aa) Are Applicable (§ 411.354(c)(4)) The prohibitions of section 1877 of the Act apply if a physician (or an immediate family member of a physician) has an ownership or investment interest in an entity or a compensation arrangement with an entity.

For purposes of the physician self-referral law, a compensation arrangement is any arrangement involving direct or indirect remuneration between a physician (or an immediate family member of the physician) and an entity, and remuneration means any payment or other benefit made directly, indirectly, overtly, covertly, in cash, or in kind. (See §§ 411.351 and 411.354(c).) In Phase I, we finalized regulations that define when an indirect compensation arrangement exists between a physician and the entity to which he or she refers designated health services (66 FR 864). For purposes of applying these regulations, in the FY 2009 IPPS final rule, we finalized additional regulations that deem a physician to stand in the shoes of his or her physician organization if the physician has an ownership or investment interest in the physician organization that is not merely a titular interest (73 FR 48693).

These regulations are found at § 411.354(c)(2) and (3). Under our current regulations, if an indirect compensation arrangement exists, the exception for indirect compensation arrangements at § 411.357(p) is available to protect the compensation arrangement. In addition, if the entity with which the physician has the indirect compensation arrangement is a MCO or IPA, the exception at § 411.357(n) is also available to protect the compensation arrangement.

If all the requirements of one of the applicable exceptions are satisfied, the physician would not be barred from referring patients to the entity for designated health services and the entity would not be barred from submitting claims for the referred services. No other exception in § 411.357 is applicable to indirect compensation arrangements. However, the parties may elect to protect individual referrals of and claims for designated health services using an applicable exception in § 411.355 of our regulations.

As we stated in the proposed rule (84 FR 55786), an unbroken chain of financial relationships described in § 411.354(c)(2)(i) may include a value-based arrangement as defined at § 411.351 in this final rule. Thus, an unbroken chain of financial relationships that includes a value-based arrangement could form an “indirect compensation arrangement” for purposes of the physician self-referral law if the circumstances described in § 411.354(c)(2)(ii) and (iii) also exist. Unless the entity furnishing the designated health services is a MCO or IPA, the parties would have to rely on the exception at § 411.357(p), which includes requirements not found in the exceptions for value-based arrangements at § 411.357(aa), in order to ensure the permissibility of all the physician's referrals to the entity (assuming no other financial relationships exist between the parties).

(If the parties elect to utilize a “services” exception at § 411.355, designated health services are protected only on a service-by-service basis, and satisfaction of the requirements of an applicable exception permits only the referral of and claims submission for the Start Printed Page 77526particular designated health service that satisfied the requirements of the exception.) As commenters on the CMS RFI noted and commenters on the proposed rule confirmed, because compensation to the physician under a value-based arrangement could take into account the volume or value of referrals or other business generated by the physician for the entity or may not be fair market value for specific items or services provided by the physician, an indirect compensation arrangement that includes a value-based arrangement in the unbroken chain of financial relationships that forms the indirect compensation arrangement may be unable to satisfy the requirements of § 411.357(p). To avoid a blanket prohibition on indirect compensation arrangements that enhance value-based health care delivery and payment, we are finalizing our proposal to make additional exceptions available to certain indirect compensation arrangements that include a value-based arrangement in the unbroken chain of financial relationships described in § 411.354(c)(2)(i). As described in section II.A.2.b.

Of this final rule, we are finalizing exceptions available only to compensation arrangements that qualify as value-based arrangements. Although the exceptions do not limit their applicability to value-based arrangements directly between a physician and the entity to which he or she refers designated health services, the definition of “value-based arrangement” finalized at § 411.351 establishes that the only potential parties to a value-based arrangement are the value-based enterprise and VBE participants. In order to fully support the transition to a value-based health care delivery and payment system, we believe that it is important to make the exceptions at § 411.357(aa) applicable to certain indirect compensation arrangements that include a value-based arrangement in the unbroken chain of financial relationships described in § 411.354(c)(2)(i).

Following review of the comments on our proposed alternative approaches for addressing indirect compensation arrangements in which one link in the unbroken chain of financial relationships between an entity and a physician is a value-based arrangement, with technical revisions to the proposed regulation text, we are finalizing our primary proposal to make the exceptions at § 411.357(aa) applicable to certain indirect compensation arrangements that include a value-based arrangement in the unbroken chain of financial relationships described in § 411.354(c)(2)(i). Specifically, under the regulation finalized at § 411.354(c)(4)(iii), the exceptions at § 411.357(aa) are available to protect the physician's referrals to the entity when an indirect compensation arrangement (as defined at § 411.354(c)(4)(2)) includes a value-based arrangement (as defined at § 411.351) to which the physician (or the physician organization in whose shoes the physician stands) is a direct party. To be clear, the link closest to the physician may not be an ownership interest.

It must be a compensation arrangement that meets the definition of value-based arrangement finalized at § 411.351. Under this final rule, parties would first determine if an indirect compensation arrangement exists and, if it does, determine whether the compensation arrangement to which the physician (or the physician organization in whose shoes the physician stands) is a direct party qualifies as a value-based arrangement. If so, the exceptions at § 411.357(aa) for value-based arrangements would be applicable.

To illustrate, assume an unbroken chain of financial relationships between a hospital and a physician that runs. Hospital—(owned by)—parent organization—(owns)—physician practice—(employs)—physician. Thus, the links in the unbroken chain are ownership or investment interest—ownership or investment interest—compensation arrangement.

For purposes of determining whether an indirect compensation arrangement exists between the physician and the hospital, under § 411.354(c)(2)(ii), we would analyze the compensation arrangement between the physician practice and the physician. Assume also that the compensation paid to the physician under her employment arrangement varies with the volume or value of her referrals to the hospital because she is paid a bonus for each referral for designated health services furnished by the hospital, provided that she adheres to redesigned care protocols intended to further one or more value-based purposes (as defined at § 411.351 in this final rule). Finally, assume that the hospital has actual knowledge that the physician receives aggregate compensation that varies with the volume or value of her referrals to the hospital.

The unbroken chain of financial relationships establishes an indirect compensation arrangement. Therefore, in order for the physician to refer patients to the hospital for designated health services and for the hospital to submit claims to Medicare for the referred designated health services, the indirect compensation arrangement must satisfy the requirements of an applicable exception. Under the final regulation at § 411.354(c)(4)(iii), if the compensation arrangement in this example between the physician practice and the physician qualifies as a value-based arrangement (as defined at § 411.351 in this final rule), the exceptions at § 411.357(aa) would be available to protect the value-based arrangement (that is, the indirect compensation arrangement) between the hospital and the physician.

(The parties could also utilize an applicable exception in § 411.355 to protect individual referrals for designated health services or the exception at § 411.357(p) to protect the indirect compensation arrangement between the hospital and the physician, but it is unlikely that all the requirements of § 411.357(p) would be satisfied in this hypothetical fact pattern.) In the proposed rule, we described an alternative proposal under which we would define “indirect value-based arrangement” and specify in regulation that the exceptions at § 411.357(aa) would be available to protect an indirect value-based arrangement (84 FR 55787). Under our alternative proposal, an indirect value-based arrangement would exist if. (1) Between the physician and the entity there exists an unbroken chain of any number (but not fewer than one) of persons (including but not limited to natural persons, corporations, and municipal organizations) that have financial relationships (as defined at § 411.354(a)) between them (that is, each person in the unbroken chain is linked to the preceding person by either an ownership or investment interest or a compensation arrangement).

(2) the financial relationship between the physician and the person with which he or she is directly linked is a value-based arrangement. And (3) the entity has actual knowledge of the value-based arrangement in subparagraph (2). We proposed that, if an unbroken chain of financial relationships between a physician and an entity qualifies as an “indirect value-based arrangement,” the exceptions at § 411.357(aa) would be applicable and the requirements of at least one of the applicable exceptions must be satisfied in order for the physician to refer patients to the hospital for designated health services and for the hospital to submit claims to Medicare for the referred designated health services.

Following review of the comments on our alternative approach for addressing indirect compensation arrangements in which one link in the Start Printed Page 77527unbroken chain of financial relationships between an entity and a physician is a value-based arrangement, we are not finalizing the alternative proposal. We also stated in the proposed rule that we were considering whether to exclude an unbroken chain of financial relationships between an entity and a physician from the definition of “indirect value-based arrangement” if the link closest to the physician (that is, the value-based arrangement to which the physician is a party) is a compensation arrangement between the physician and a pharmaceutical manufacturer. Manufacturer, distributor, or supplier of DMEPOS.

Laboratory. Pharmacy benefit manager. Wholesaler.

Or distributor. In the alternative, we stated that we were considering whether to exclude an unbroken chain of financial relationships between an entity and a physician from the definition of “indirect value-based arrangement” if one of these persons or organizations is a party to any financial relationship in the chain of financial relationships. Finally, we stated that we were considering whether to include health technology companies in any such exclusion in order to align our policies with policies proposed by OIG (84 FR 55786 through 55787).

We sought comment on these approaches and their effectiveness in enhancing program integrity. We are not finalizing any of the proposed restrictions on the identity of the parties to the financial relationships in the unbroken chain of financial relationships between an entity and a physician. We received the following comments and our responses follow.

Comment. The majority of the commenters that commented on this proposal preferred our primary approach for addressing indirect compensation arrangements in which one of the financial relationships between a physician (or the immediate family member of the physician) and the entity to which the physician refers patients for designated health services is a value-based arrangement. Commenters noted that an indirect compensation arrangement that involves a value-based arrangement may not satisfy the requirements of the exception at § 411.357(p) because the compensation paid to the physician may take into account the volume or value of the physician's referrals or the other business generated by the physician for the entity, or the compensation may not meet the fair market value requirement of the exception.

Response. We are finalizing regulations at § 411.354(c)(4)(iii) to provide that the exceptions at § 411.357(aa) are applicable when an unbroken chain described in § 411.354(c)(2)(i) includes a value-based arrangement (as defined in § 411.351) to which the physician (or the physician organization in whose shoes the physician stands) is a direct party. In order to determine whether the physician's referrals to the entity with which the physician has the indirect compensation arrangement do not violate the physician self-referral law, parties would determine whether the value-based arrangement to which the physician (or the physician organization in whose shoes the physician stands) is a direct party satisfies all the requirements of one of the exceptions finalized at § 411.357(aa) (or another applicable exception).

If the value-based arrangement to which the physician is a direct party is with an entity (as defined at § 411.351) other than the entity with which the physician has the indirect compensation arrangement, that direct compensation arrangement must also satisfy the requirements of an applicable exception in order for the physician to make referrals to that entity. Comment. A few commenters expressed concern regarding our statement in the proposed rule that, besides the exception at § 411.357(p), no other exception in § 411.357 is applicable to indirect compensation arrangements (84 FR 55786).

The commenters requested that we confirm that the exception at § 411.357(n) for risk-sharing arrangements is applicable to indirect compensation arrangements, including an indirect compensation arrangement that involves a value-based arrangement. One of the commenters noted that the exception for risk-sharing arrangements expressly references compensation conveyed “directly or indirectly” to a physician. This commenter and others asserted that the exception for risk-sharing arrangements should remain available to entities, such as hospitals, that have indirect compensation arrangements with physicians resulting from risk-sharing arrangements.

Response. Some of the commenters misunderstand the application of the exception for risk-sharing arrangements. The exception at § 411.357(n) applies to compensation arrangements between a MCO or an IPA and a physician for services provided to enrollees of a health plan, provided that the compensation arrangement qualifies as a risk-sharing arrangement.

In Phase I, we established the exception at § 411.357(n) for remuneration provided pursuant to a risk-sharing arrangement between a physician and a health plan. There, we stated that physicians generally are compensated for services to managed care enrollees in one of three ways, the first two of which do not vary based on the volume or value of referrals. (1) A salary, in the case of a physician who is an employee.

(2) a “fee-for-service” contractual arrangement under which the physician assumes no risk. Or (3) a risk-sharing arrangement, under which the physician assumes risk for the costs of services, either through a capitation arrangement, or through a withhold, bonus, or risk-corridor approach. We noted that the first two types of compensation arrangements are eligible for the statutory exceptions for bona fide employment relationships and personal service arrangements,[] while the third is potentially eligible for the exception for risk-sharing arrangements at § 411.357(n).

The exception at § 411.357(n) does not apply to a compensation arrangement—whether direct or indirect—between a physician and an entity that is anything other than a MCO or IPA. The risk-sharing arrangement between the MCO or IPA and the physician may be direct or indirect. An indirect risk-sharing arrangement would run MCO or IPA—subcontractor—physician.

For example, MCO—(compensation arrangement)—hospital—(compensation arrangement)—physician. In this example, if the MCO is an “entity” (as defined at § 411.351), the unbroken chain of financial relationships may constitute an indirect compensation arrangement under § 411.354(c)(2). If so, the exception at § 411.357(n) would be available to protect the physician's referrals to the MCO, provided that all the requirements of the exception are satisfied.

The exception for indirect compensation arrangements at § 411.357(p) would also apply. If the MCO or IPA is not itself furnishing designated health services (as described in § 411.351), it would not be an “entity” and, in the example above, would not have a direct or indirect compensation arrangement with the physician. (Note that, in Phase I, we clarified and significantly narrowed the situations in which a MCO will be considered an entity furnishing designated health services by refocusing the definition on the party submitting a claim to Medicare rather than the party “providing for” or “arranging for” the furnishing of designated health services Start Printed Page 77528for which a claim is submitted to Medicare.) To be clear, the exception for risk-sharing arrangements at § 411.357(n) is not applicable to all risk-sharing arrangements between entities and physicians that provide services to enrollees of the same health plan.

Contrary to commenters' stated understanding of the application of § 411.357(n), the exception for risk-sharing arrangements does not apply to indirect compensation arrangements between hospitals and physicians, even if both are contractors (or subcontractors) of the same MCO or IPA. In Phase II, a commenter requested confirmation that the exception at § 411.357(n) is meant to cover all risk-sharing compensation paid to physicians by an entity downstream of any type of health plan, insurance company, or health maintenance organization. We confirmed the commenter's understanding of the applicability of the exception (69 FR 16114), and stated that all downstream entities are included.

We purposefully declined to define the term “managed care organization” so as to create a broad exception with maximum flexibility. Although we did not in Phase II (or any subsequent rulemaking) modify the text of § 411.357(n) to extend the applicability of the exception to compensation pursuant to a risk-sharing arrangement (directly or indirectly) between a physician and any entity other than a MCO or IPA, we recognize why the commenters on the proposed rule could be under the impression that our response in the Phase II preamble was intended to do so. For this reason, we are finalizing revisions to the exception at § 411.357(n) to clarify the scope and application of the exception.

The revisions are effective as of the date set forth in this final rule and apply prospectively only. Comment. A few commenters requested that we include a reference to § 411.357(n) in the regulation text identifying which exceptions are applicable to indirect compensation arrangements that involve value-based arrangements.

Response. To clarify the applicability of the exception for risk-sharing arrangements, we are finalizing regulations at § 411.354(c)(4)(ii) and (iii)(B) that expressly state that the exception at § 411.357(n) is applicable in the case of an indirect compensation arrangement in which the entity furnishing designated health services described in § 411.354(c)(2)(i) is a MCO or IPA. If the entity with which the physician has an indirect compensation arrangement is not a MCO or IPA, the exception for risk-sharing arrangements is not applicable to the indirect compensation arrangement.

(5) Price Transparency Price transparency is a critical component of a health care system that pays for value and aligns with our desire to reinforce and support patient freedom of choice. We believe that transparency in pricing can empower consumers of health care services to make more informed decisions about their care and lower the rate of growth in health care costs. Health care consumers today lack meaningful and timely access to pricing information that could, if available, help them choose a lower-cost setting or a higher-value provider.

Patients are often unaware of site-of-care cost differentials until it is too late (see Aparna Higgins &. German Veselovskiy, Does the Cite of Care Change the Cost of Care, Health Affairs (June 2, 2016), https://www.healthaffairs.org/​do/​10.1377/​hblog20160602.055132/​full/​). Multiple surveys and studies have revealed that patients want their health care providers to engage in cost discussions, and one recent national survey found that a majority of physicians want to have cost of care discussions with their patients (see Caroline E.

Sloan, MD &. Peter A. Ubel, MD, The 7 Habits of Highly Effective Cost-of-Care Conversations, Annals of Internal Medicine (May 7, 2019), https://annals.org/​aim/​issue/​937992, and Let's Talk About Money, The University of Utah (2018), https://uofuhealth.utah.edu/​value/​lets-talk-about-money.php).

The point of referral presents an ideal opportunity to have such cost-of-care discussions. In the CMS RFI, we solicited comment on the role of transparency in the context of the physician self-referral law. In particular, we solicited comment on whether, if provided by the referring physician to a beneficiary, transparency about a physician's financial relationships, price transparency, or the availability of other data necessary for informed consumer purchasing (such as data about quality of services provided) would reduce or eliminate the harms to the Medicare program and its beneficiaries that the physician self-referral law is intended to address.

Many commenters replied that making a physician's financial relationships and cost of care information available could be useful. One commenter suggested that providing clear and transparent information was vital in the health care industry where patients are often vulnerable, confused, and unsure of their options. This commenter further opined that informed patients are empowered to take charge of their health care and better assist their providers in fulfilling their health care needs.

Several commenters shared similar support for transparency efforts. Another commenter stated that transparency of a physician's financial relationships along with price and quality of care information would be valuable to patients in choosing providers and care pathways. This commenter maintained that these actions would also engage patients in protecting against possible unintended consequences of value-based arrangements.

Other commenters raised concerns that information on price transparency and a physician's financial relationships with other health care providers, in combination with already-required disclosures under HIPAA, informed consent information and forms, insurance payment authorization forms, and other paperwork that patients receive or must complete would serve only to inundate patients with paperwork that they will find confusing or simply not read. These commenters contended that, although transparency is an appealing concept, requiring additional disclosures would result in more burden than benefit. The June 24, 2019 Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First [] recognizes the importance of price transparency.

The Executive Order directs Federal agencies to take historic steps toward getting patients the information they need and when they need it to make well-informed decisions about their health care. CMS has already acted on the Executive Order in two ways. First, by finalizing price transparency requirements in the CY 2020 OPPS final rule (84 FR 65524) to improve the availability of meaningful pricing information to the public by requiring hospitals to make public a machine-readable file that contains a hospital's gross charges and payer-specific negotiated charges, plus discounted cash prices, the de-identified minimum negotiated charge, and the de-identified maximum negotiated charge for all items and services provided by the hospital beginning January 1, 2021.

Second, through the Transparency in Coverage final rule (85 FR 72158), HHS, along with the Departments of Labor and Treasury, finalized requirements for Start Printed Page 77529health insurance issuers and plans in the individual and group markets to make health care prices and expected out-of-pocket costs for enrollees available to the general public to help facilitate more informed health care purchasing decisions with the goal of driving down health care costs. We continue to believe that all consumers need price and quality information in advance to make an informed decision when they choose a good or service, including at the point of a referral for such goods or services. As we stated in the proposed rule, by making meaningful price and quality information more broadly available, we can protect patients and increase competition, innovation, and value in the health care system (84 FR 55788).

We remain committed to ensuring that physician self-referral law policies do not infringe on patient choice and the ability of physicians and patients to make health care decisions that are in the patient's best interest. We continue to believe that it is important for patients to have timely access to information about all aspects of their care, including information about the factors that may affect the cost of services for which they are referred. As stated in the proposed rule, a patient who is made aware, for example, that costs may differ based on the site of service where the referred services are furnished, may become a more conscious consumer of health care services (84 FR 55788).

Access to such information may also spark important conversations between patients and their physicians, promoting patient choice and the ability of physicians and patients to make health care decisions that are in the patient's best interest. In conjunction with their physicians' determination of the need for recommended health care services and the urgency of that need, information on the factors that may affect the cost of such services could ensure that patients have the information they need to shop and seek out high-quality care at the lowest possible cost. It remains CMS' goal to establish policies that facilitate consumers' ability to participate actively and meaningfully in decisions relating to their care.

At the same time, we continue to be cognizant that including requirements regarding price transparency in the exceptions to the physician self-referral law raises certain challenges for the regulated industry. In the proposed rule, we sought comments on how to pursue our price transparency objectives in the context of the physician self-referral law, both in the context of a value-based health care system and otherwise, and how to overcome the technical, operational, legal, cultural, and other challenges to including price transparency requirements in the physician self-referral regulations (84 FR 55788). Specifically, we requested comments regarding the availability of pricing information and out-of-pocket costs to patients (including information specific to a particular patient's insurance, such as the satisfaction of the patient's applicable deductible, copayment, and coinsurance obligations).

The appropriate timing for the dissemination of information (that is, whether the information should be provided at the time of the referral, the time the service is scheduled, or some other time). And the burden associated with compliance with a requirement in an exception to the physician self-referral law to provide information about the factors that may affect the cost of services for which a patient is referred. Finally, we sought comment regarding whether the inclusion of a price transparency requirement in a value-based exception would provide additional protections against program or patient abuse through the active participation of patients in selecting their health care providers and suppliers.

In furtherance of our goal of price transparency for all patients, we solicited comments regarding whether to consider a requirement related to price transparency in every exception for value-based arrangements at § 411.357(aa) (84 FR 55789). While we did not propose regulatory changes, we considered whether to require that a physician provide a notice or have a policy regarding the provision of a public notice that alerts patients that their out-of-pocket costs for items and services for which they are referred by the physician may vary based on the site where the services are furnished and based on the type of insurance that they have. Because of limits on currently available pricing data, we continue to believe that such a requirement could be an important first step in breaking down barriers to cost-of-care discussions that play a beneficial role in a value-based health care system.

We further explained the public notice provided or reflected in the policy could be made in any form or manner that is accessible to patients. For example, a notice on the physician's website, a poster on the wall in the physician's office, or a notice in a patient portal used by the physician's patients would all be acceptable. We stated our expectation that any notice would be written in plain language that would be understood by the general public.

We refer readers to the Plain Writing Act of 2010 (Pub. L. 111-274, enacted on October 13, 2010) for further information.

We sought comment on whether, if we finalize such a requirement, it would be helpful for CMS to provide a sample notice and, if we provide a sample notice, whether we should deem such a notice to satisfy the requirement described. We stated that we would not require public notice in advance of referrals for emergency hospital services to avoid delays in urgently needed care. We solicited comment on other options for price transparency requirements in the value-based exceptions to the physician self-referral law, as well as whether we should consider for a future rulemaking the inclusion of price transparency requirements in exceptions to the physician self-referral law included in our existing regulations.

We received several comments from both consumers of health care and entities that provide health care services. Nearly all the commenters were united in their support that patients should have access to clear, accurate, and actionable cost-sharing information and recognized the important role price transparency has in patient care. However, many supportive commenters also asserted that requiring price transparency disclosures as a requirement of an exception to the physician self-referral law is not an appropriate mechanism for promoting price transparency objectives given the strict liability nature of the law.

We continue to believe that health care markets work more efficiently and provide consumers with higher-value health care if we promote policies that encourage choice and competition. We thank the commenters for their thoughtful responses, which will help inform future agency policy making on this important objective. We are not finalizing any price transparency provisions in this rulemaking.

B. Fundamental Terminology and Requirements 1. Background As described in the proposed rule and in greater detail in this section of the final rule, many of the statutory and regulatory exceptions to the physician self-referral law include one, two, or all the following requirements.

The compensation arrangement itself is commercially reasonable. The amount of the compensation is fair market value. And the compensation paid under the arrangement is not determined in a manner that takes into account the volume or value of referrals (or, in some Start Printed Page 77530cases, other business generated between the parties).

These requirements are presented in various ways within the statutory and regulatory exceptions, but it is clear that they are separate and distinct requirements, each of which must be satisfied when included in an exception. As we stated in the proposed rule, the regulated industry and its complementary parts, such as the health care valuation community, have sought additional guidance from CMS regarding whether compliance with one of the requirements is dependent on compliance with one or both of the others (84 FR 55789). In addition, these and other stakeholders have requested clarification on our policy with respect to when an arrangement is considered commercially reasonable, under what circumstances compensation is considered to take into account the volume or value of referrals or other business generated between the parties, and how to determine the fair market value of compensation.

According to stakeholders and commenters on the proposed rule, False Claims Act (31 U.S.C. 3729 through 3733) case law has exacerbated the challenge of complying with these three fundamental requirements. Endeavoring to establish bright-line, objective regulations for each of these fundamental requirements, we proposed a new definition of “commercially reasonable” at § 411.351, proposed to establish special rules that identify the universe of circumstances under which compensation would be considered to take into account the volume or value of a physician's referrals or the other business generated by a physician for the entity paying the compensation, and proposed to revise the definitions of “fair market value” and “general market value” in our regulations at § 411.351.

Our overall intention with these policies is to reduce the burden of compliance with the physician self-referral law, provide clarification where possible, and achieve the goals of the Regulatory Sprint. As we stated in the proposed rule, we believe that clear, bright-line rules would enhance both stakeholder compliance efforts and our enforcement capability. We believe that the policies finalized here will provide the clarity that will benefit the regulated industry, CMS, and our law enforcement partners (84 FR 55789).

In developing our proposals for guidance on the fundamental terminology and requirements, we considered three basic questions— Does the arrangement make sense as a means to accomplish the parties' goals?. How did the parties calculate the remuneration?. Did the calculation result in compensation that is fair market value for the asset, item, service, or rental property?.

These questions relate, respectively, to the definition of commercial reasonableness, the volume or value standard and the other business generated standard, and the definition of fair market value. In this section of the final rule, we provide detailed descriptions of our final definitions and special rules. Importantly, our final policies relate only to the application of section 1877 of the Act and our physician self-referral regulations.

Although other laws and regulations, including the anti-kickback statute and CMP law, may utilize the same or similar terminology, the policies finalized in this final rule do not affect or in any way bind OIG's (or any other governmental agency's) interpretation or ability to interpret such terms for purposes of laws or regulations other than the physician self-referral law. In addition, our interpretation of these key terms does not relate to and in no way binds the Internal Revenue Service with respect to its rulings and interpretation of the Internal Revenue Code or State agencies with respect to any State law or regulation that may utilize the same or similar terminology. We note further that, to the extent terminology is the same as or similar to terminology used in the Quality Payment Program within the PFS, our final policies do not affect or apply to the Quality Payment Program.

We received the following general comment on our discussion of the three key requirements in the exceptions to the physician self-referral law, and our response follows. We respond to comments specific to each of the key requirements in sections II.B.2. Through II.B.4.

Of this final rule. Comment. Several commenters requested that CMS' articulation of the “big three” requirements should be preserved in the final rule.

Specifically, commenters described as “cornerstones” of exceptions to the physician self-referral law the requirements that. (1) The compensation arrangement is commercially reasonable. (2) the compensation is not determined in any manner that takes into account the volume or value of a physician's referrals (the volume or value standard) or the other business generated by a physician for the entity (the other business generated standard).

And (3) the amount of compensation is fair market value for the items or services furnished under the arrangement. Commenters strongly agreed with our statements that these requirements are separate and distinct and should be disentangled from each other. Response.

We agree with the commenters that it is important to reiterate that the statutory and regulatory requirements regarding compensation arrangements that are commercially reasonable, compensation that is not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by a physician, and compensation that is fair market value for items or services actually furnished are separate and distinct requirements, each of which must be satisfied when included in an exception to the physician self-referral law. 2. Commercially Reasonable (§ 411.351) In the proposed rule, we proposed to include at § 411.351 a definition for the term “commercially reasonable.” As described previously, many of the statutory and regulatory exceptions to the physician self-referral law include a requirement that the compensation arrangement is commercially reasonable.

For example, the exception at section 1877(e)(2) of the Act for bona fide employment relationships requires that the remuneration provided to the physician is pursuant to an arrangement that would be commercially reasonable (even if no referrals were made to the employer). The exception at section 1877(e)(3)(A) of the Act for personal service arrangements uses slightly different language to describe this general concept, and requires that the aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement. The exception at § 411.357(y) for timeshare arrangements, which the Secretary established in regulation using his authority at section 1877(b)(4) of the Act, requires that the arrangement would be commercially reasonable even if no referrals were made between the parties.

Despite the prevalence of this requirement (in one form or another), as we stated in the proposed rule (84 FR 55790), we addressed the concept of commercial reasonableness only once—in our 1998 proposed rule—where we stated that we are interpreting “commercially reasonable” to mean that an arrangement appears to be a sensible, prudent business agreement, from the perspective of the particular parties involved, even in the absence of any potential referrals (63 FR 1700). Until now, the physician self-referral regulations themselves lacked a codified Start Printed Page 77531definition for the term commercially reasonable. As discussed previously in this section II.B.2., the key question to ask when determining whether an arrangement is commercially reasonable is simply whether the arrangement makes sense as a means to accomplish the parties' goals.

The determination of commercial reasonableness is not one of valuation. We continue to believe that this determination should be made from the perspective of the particular parties involved in the arrangement. In addition, the determination that an arrangement is commercially reasonable does not turn on whether the arrangement is profitable.

Compensation arrangements that do not result in profit for one or more of the parties may nonetheless be commercially reasonable. In the proposed rule, we described numerous examples of compensation arrangements that commenters on the CMS RFI asserted would be commercially reasonable, despite the fact that the party paying the remuneration does not recognize an equivalent or greater financial benefit from the items or services purchased in the transaction, or that the party receiving the remuneration incurs costs in furnishing the items or services that are greater than the amount of the remuneration received. We acknowledge that, even knowing in advance that an arrangement may result in losses to one or more parties, it may be reasonable, if not necessary, to nevertheless enter into the arrangement.

Examples of reasons why parties would enter into such transactions include community need, timely access to health care services, fulfillment of licensure or regulatory obligations, including those under the Emergency Medical Treatment and Labor Act (EMTALA), the provision of charity care, and the improvement of quality and health outcomes. To provide the certainty requested by stakeholders, we proposed to codify in regulation the definition of “commercially reasonable” at § 411.351. We proposed two alternative definitions for the term.

First, we proposed to define “commercially reasonable” to mean that the particular arrangement furthers a legitimate business purpose of the parties and is on similar terms and conditions as like arrangements. In the alternative, we proposed to define “commercially reasonable” to mean that the arrangement makes commercial sense and is entered into by a reasonable entity of similar type and size and a reasonable physician of similar scope and specialty. We sought comment on each of these definitions as well as input from stakeholders regarding other possible definitions that would provide clear guidance to enable parties to structure their arrangements in a manner that ensures compliance with the requirement that their particular arrangement is commercially reasonable.

We also proposed to clarify in regulation text that an arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties (84 FR 55790). After considering the comments on the definition of “commercially reasonable,” we are finalizing in our regulation at § 411.351 that commercially reasonable means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. The final regulation also states that an arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.

Finally, many of the exceptions to the physician self-referral law require that an arrangement is commercially reasonable “even if no referrals were made between the parties” or “even if no referrals were made to the employer.” The exceptions use varying phrasing to describe this requirement and we do not repeat each iteration here. Although we did not include this language in the final definition of “commercially reasonable,” it remains an important constraint when determining whether an arrangement satisfies the requirements of an applicable exception. As described elsewhere in this final rule, we have revised the exception for fair market value compensation to include this important constraint in the requirement at § 411.357(l)(4) that a compensation arrangement is commercially reasonable.

In addition, we included this requirement in the new exception for limited remuneration to a physician that we are finalizing at § 411.357(z). We received the following comments and our responses follow. Comment.

Most commenters supported our proposal to define the term “commercially reasonable” in regulation, stating a preference for one of the two alternative definitions that we proposed. A few commenters offered alternative definitions of “commercially reasonable,” such as an arrangement that is “appropriately designed to meet the parties' legitimate business goals from the perspective of the parties to the arrangement” and an arrangement that is “entered into for a legitimate business interest and is reasonably structured to achieve the legitimate business interest.” A small number of commenters urged us not to finalize the proposed definition so that parties could rely on CMS' statements in the 1998 proposed rule, noting that it has been workable for industry stakeholders for many years. Several commenters requested that, if we finalize the first alternative proposed definition, we strike the limitation that the arrangement is on similar terms and conditions as like arrangements.

These commenters asserted that parties to an arrangement would not have access to data to identify “like arrangements” or be aware of their terms and conditions. In addition, parties may enter into a novel compensation arrangement that bears minimal, if any, resemblance to existing arrangements against which it could be compared for “similar terms.” The commenters also highlighted the burden associated with obtaining third party opinions in order to satisfy this requirement. Other commenters preferred the second alternative definition because of its focus on the comparison to other similarly situated providers, suppliers, and physicians, although one of these commenters noted that the requirement that an arrangement makes “commercial sense” could exclude arrangements for noncommercial purposes, such as meeting community needs.

A few other commenters suggested combining the two proposed definitions in order to emphasize that the determination of commercial reasonableness should be from the perspective of, and further a legitimate business need of, the particular parties to the arrangement, and also that the arrangement should be compared to arrangements with similarly situated parties. One of these commenters also suggested that the definition of “commercially reasonable” should reflect the importance of evaluating the market conditions relevant to the arrangement. A few other commenters offered that CMS should finalize a policy under which an arrangement would be commercially reasonable if it meets either of the proposed alternative definitions.

Another commenter urged CMS to ensure that the definition of “commercially reasonable” does not shelter abusive arrangements. Response. We agree that a definition requiring a compensation arrangement to be on similar terms as like arrangements in order to be commercially reasonable does not provide for the clarity that we and stakeholders seek and, in fact, could increase the burden on parties that must seek the expertise of outside Start Printed Page 77532organizations to ensure compliance with the requirement that their arrangement is commercially reasonable.

We are finalizing a modified definition of “commercially reasonable” to address commenters' concerns. In line with the suggestion of some commenters, the final definition of “commercially reasonable” incorporates aspects of each of the proposed alternative definitions. Under the definition finalized at § 411.351, commercially reasonable means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty.

We believe that the definition of “commercially reasonable” at final § 411.351 is consistent with the guidance we provided in the 1998 proposed rule, appropriately considers the characteristics of the parties to the actual arrangement being assessed for its commercial reasonableness, and will adequately ensure that parties cannot protect abusive arrangements under the guise of “commercial reasonableness.” Comment. One commenter asked us to confirm that the test of commercial reasonableness relates primarily to the non-financial elements of an arrangement. Response.

We understand the commenter to be inquiring whether the existence of the compensation arrangement must be commercially reasonable as opposed to whether the precise compensation terms of the arrangement must be commercially reasonable. That is, we understand the commenter to be seeking confirmation that the concept of commercial reasonableness does not relate to the amount of or formula for compensation paid under an arrangement, but rather whether the entire arrangement is commercially reasonable. As we stated in the proposed rule and previously in this final rule, when determining the commercial reasonableness of an arrangement, the question to ask is whether the arrangement makes sense as a means to accomplish the parties' goals.

The test is not whether the compensation terms alone make sense as a means to accomplish the parties' goals. However, the compensation terms of an arrangement are an integral part of the arrangement and impact its ability to accomplish the parties' goals (84 FR 55790). Comment.

One commenter urged us to adopt a policy under which an arrangement would be presumed to be commercially reasonable if, contemporaneously with the commencement of the arrangement, the governing body of the entity (or its designee) documents in writing that the arrangement furthers the legitimate business purpose of the parties. Another commenter urged us to adopt an irrebuttable presumption that, if the purpose of an arrangement is documented and achieved, the commercial reasonableness of the arrangement cannot be contradicted by extrinsic evidence. The commenter asserted that, in the absence of such a presumption, entities are left susceptible to the potential for False Claims Act litigation predicated on an unsupported inference of ill intent on behalf of the contracting parties.

Response. We do not believe that merely documenting in writing that an arrangement furthers a legitimate business purpose of the parties is sufficient to ensure that the arrangement is commercially reasonable, even if the identified purpose is achieved. Moreover, our final definition of “commercially reasonable” requires more than furtherance of a legitimate business purpose of the parties.

The arrangement must also be sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. If the only requirement to demonstrate that an arrangement is commercially reasonable is contemporaneous written documentation stating that it is commercially reasonable, unscrupulous parties could satisfy the requirement simply by including sufficient template language in their documentation, even if, in reality, the arrangement could not further the legitimate business purposes of the parties (assuming they have a legitimate business need for the arrangement) or is not sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. Further, the fact that an arrangement ultimately achieved a legitimate business purpose of the parties does not necessarily mean that it was a commercially reasonable arrangement.

Where a financial relationship exists between a physician (or an immediate family member of a physician) and an entity to which the physician makes referrals for designated health services, compliance with the physician self-referral law requires substantive compliance, not merely documentary (or “paper”) compliance, with the requirements of an applicable exception. An irrebuttable presumption of commercial reasonableness that ensures that parties are shielded from allegations of violation of the False Claims Act if their documentation includes specific language or their arrangement ultimately achieved its intended purpose would pose a risk of program or patient abuse. Comment.

A few commenters requested that we include in regulation text a non-exhaustive list of legitimate business purposes for purposes of applying the definition of “commercially reasonable.” One commenter specifically referenced our discussion in the proposed rule of examples of compensation arrangements that CMS RFI commenters believed would be commercially reasonable even if they did not result in profit for one or more of the parties. Response. As we stated in the proposed rule, we find compelling the comments of commenters on the CMS RFI regarding the types of arrangements they believed would be commercially reasonable even if they did not result in profit for one or more of the parties (84 FR 55790).

However, these types of arrangements do not depict the entire universe of arrangements that could be commercially reasonable. We decline to provide examples in regulation text of arrangements that may be commercially reasonable, because the determination of whether a compensation arrangement is commercially reasonable is dependent on the facts and circumstances of the parties. Even a non-exhaustive list of the types of arrangements that are potentially commercially reasonable could inadvertently limit or otherwise proscribe the types of arrangements that parties undertake.

Moreover, it is not possible to know definitively that, in every instance, a particular type of arrangement would be commercially reasonable. An arrangement that is commercially reasonable for one set of parties may not be commercially reasonable for another. Comment.

One commenter that asked us to provide examples of arrangements that would be considered commercially reasonable asserted that examples are necessary so that parties may avoid unintentional noncompliance with the commercial reasonableness requirement, particularly in the context of value-based arrangements for which the commercial reasonableness of the arrangement is required. Another commenter stated its assumption that CMS “expects that value-based payments must still be tested for commercial reasonableness” and asked us to confirm its belief. The commenter specifically requested us to confirm that, for any new exceptions for value-based arrangements, the determination of commercial reasonableness may be based on more than just cost savings to the value-based enterprise.

The commenter asserted that, in Start Printed Page 77533arrangements where cost savings are negligible, enhanced access to care, increased care coordination, and improved quality of care may support a determination of the value-based arrangement's commercial reasonableness. Response. As we explained in section II.A.2.

Of this final rule, the new exceptions for value-based arrangements finalized at § 411.357(aa) do not include a requirement that the value-based arrangement is commercially reasonable. Of course, parties may utilize any applicable exception to demonstrate compliance with the physician self-referral law. If the exception upon which parties to a value-based arrangement rely includes a requirement that the arrangement is commercially reasonable, the arrangement must further a legitimate business purpose of the parties.

In addition, it must be sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. However, as we stated in the proposed rule, the determination of whether the arrangement is commercially reasonable is not one of valuation (84 FR 55790), and an arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties. Comment.

A few commenters expressed concern that the term “legitimate business purpose” does not provide enough certainty for stakeholders. Another commenter asked how the requirement that an arrangement must further a legitimate business purpose of the parties in order to be commercially reasonable is different from a query into the subjective intent of the parties (that is, whether a purpose of the arrangement is to induce or reward referrals). Response.

The term “legitimate business purpose” appears in both the statutory and regulatory exceptions to the physician self-referral law. The commenter did not clearly explain how the use of this term in the definition of “commercially reasonable” is any less clear or appropriate than its use in the special rule at § 411.354(d)(4)(v) or the exceptions for the rental of office space at § 411.357(a)(3), the rental of equipment at § 411.357(b)(2), personal service arrangements at § 411.357(d)(1)(iii), and fair market value compensation at § 411.357(l)(4) (prior to its revision in this final rule). Given that the language finalized in our definition of “commercially reasonable” is identical to that used in longstanding statutory and regulatory exceptions and our special rule at § 411.354(d)(4)(v), we see no reason why stakeholders would be suddenly unable to ascertain the meaning of the term.

We see great benefit in using consistent terminology throughout our regulations where we intend an identical policy or standard. With respect to the second commenter's question, we believe that the requirement represents an objective standard. This requirement in the definition of “commercially reasonable” is similar to the requirements in the exceptions referenced, all of which represent objective standards.

Although identifying the business purpose of an arrangement may entail an inquiry into the parties' intent for the arrangement, the requirement in the definition of “commercially reasonable” that the arrangement furthers a legitimate business purpose of the parties would be considered only after the determination that there actually exists a legitimate business purpose for the arrangement. As we stated in the proposed rule, conduct that violates a criminal law, such as inducing or rewarding referrals in violation of the anti-kickback statute, would not be a legitimate business purpose for an arrangement (84 FR 55791). Thus, the arrangement would not be commercially reasonable, and the question of whether the arrangement furthers a legitimate business purpose would not be reached.

Comment. One commenter agreed that an arrangement does not further the legitimate business purposes of the parties if, for example, a hospital engages more medical directors than it needs to furnish required medical direction, but asked for additional guidance on our interpretation of the term “legitimate business purpose.” Another commenter expressed concern that unscrupulous parties could identify the goal of attracting a physician's business as a “legitimate business purpose” of its compensation arrangement with the physician. This commenter also suggested that an arrangement that is unprofitable should have discrete and well-documented factors establishing that it furthers a legitimate business purpose of the parties (such as a regulatory or licensure requirement or a patient access issue) in order to qualify as commercially reasonable.

Response. As we noted in the proposed rule, arrangements that, on their face, appear to further a legitimate business purpose of the parties may not be commercially reasonable if they merely duplicate other facially legitimate arrangements (84 FR 55790). For example, a hospital may enter into an arrangement for the personal services of a physician to oversee its oncology department.

If the hospital needs only one medical director for the oncology department, but later enters into a second arrangement with another physician for oversight of the department, the second arrangement merely duplicates the already-obtained medical directorship services and may not be commercially reasonable. Although the evaluation of compliance with the physician self-referral law always requires a review of the facts and circumstances of the financial relationship between the parties, the commercial reasonableness of multiple arrangements for the same services is questionable. In the proposed rule, we discussed numerous examples of compensation arrangements described by CMS RFI commenters as commercially reasonable, in their opinions, despite the fact that the party paying the remuneration does not recognize an equivalent or greater financial benefit from the items or services purchased in the transaction, or that the party receiving the remuneration incurs costs in furnishing the items or services that are greater than the amount of the remuneration received (84 FR 55790).

The underlying purposes of the compensation arrangements described by the CMS RFI commenters included addressing community need, timely access to health care services, fulfillment of licensure or regulatory obligations (including those under the Emergency Medical Treatment and Labor Act (EMTALA)), the provision of charity care, and the improvement of quality and health outcomes. We believe that all of these purposes could qualify as “legitimate business purposes” of the parties to an arrangement, depending on the facts and circumstances of the parties. We share the second commenter's concern that unscrupulous parties could claim that a compensation arrangement is commercially reasonable by claiming that attracting a physician's business is a “legitimate business purpose” for their arrangement.

In the proposed rule, we explained that we were not proposing to include the phrase “even if no referrals were made” in the definition of “commercially reasonable” because this qualifying phrase (or similar language) appears in the regulation text of many exceptions that require an arrangement to be commercially reasonable (84 FR 55791). Thus, it would be redundant to include the language in the definition of “commercially reasonable” itself. We were clear that we were not proposing to remove this qualifying language from the exceptions in which it appears.

We believe that this qualifying language provides critical protection against Start Printed Page 77534program or patient abuse, as an arrangement must be commercially reasonable even if no referrals were made by the physician. As described in greater detail in sections II.D.10. And II.E.1.

Of this final rule, we are adding this language where it had not previously been included in the exception for fair market value compensation at § 411.357(l) and in the new exception for limited remuneration to a physician finalized at § 411.357(z). An arrangement whose purpose is to attract a physician's business, even if the parties claim this purpose, would not be commercially reasonable in the absence of the physician's referrals and, thus, would not satisfy this important requirement of the exceptions generally applicable to compensation arrangements that call for items or services to be provided by a physician. Finally, in the proposed rule, we also discussed our review of Internal Revenue Service (IRS) Revenue Ruling 97-21 and its conclusion that a hospital may not engage in substantial unlawful activities and maintain its tax-exempt status because the conduct of an unlawful activity is inconsistent with charitable purposes (84 FR 55790).

In this final rule, we are similarly taking the position that an activity that is in violation of a criminal law would not be a legitimate business purpose of the parties and, therefore, would not be commercially reasonable for purposes of the physician self-referral law. We note that the absence of a criminal violation would not, in and of itself, establish that an arrangement is commercially reasonable. Comment.

Several commenters addressed our preamble discussion regarding the requirement in our regulations that a compensation arrangement must be commercially reasonable even if no referrals were made between the parties. One commenter suggested that, if CMS intends that an arrangement should be commercially reasonable even in the absence of referrals, that phrase should be added to the exceptions or, if referrals may be considered, CMS should so state. These commenters requested that we expressly confirm that the term “referral” in these references in our exceptions has the meaning set forth in § 411.351 of our regulations.

Another commenter asserted that the “even if no referrals were made” requirement is an integral part of commercial reasonableness in applying the physician self-referral law. This commenter suggested that we add this limiting phrase to § 411.357(l)(4). Response.

We agree with the commenters regarding the inclusion of the language “even if no referrals were made between the parties” and, for the reasons explained in our response to the previous comment, have added this language to the exception for fair market value compensation at § 411.357(l) and the new exception for limited remuneration to a physician at § 411.357(z). Unless the context indicates otherwise, the term “referral” has the meaning set forth in § 411.351 throughout the physician self-referral regulations, including in this limiting phrase. Comment.

Most commenters that addressed the definition of “commercially reasonable” expressed appreciation for the clarification in the proposed rule of our position that compensation arrangements that do not result in profit for one or more of the parties may nonetheless be commercially reasonable (84 FR 55790), and supported the inclusion of this policy statement at proposed § 411.351. Commenters echoed the potential reasons set forth in the proposed rule why an arrangement may not be profitable, but yet still commercially reasonable, and added that, despite the parties' prediction of profitability at the onset of an arrangement, an arrangement may simply not “pan out.” Many of these commenters requested that we extend our policy regarding the effect that the profitability of a compensation arrangement has on the arrangement's ability to satisfy the requirement that it is commercially reasonable to state that commercial reasonableness is unrelated, wholly unrelated, or irrelevant to the profitability of the arrangement to one or more of the parties. One commenter suggested that we state in regulation text that profitability is not a requirement for an arrangement to be commercially reasonable.

Another commenter expressed concern that the use of the word “may” does not provide a bright-line rule for stakeholders. One commenter noted that the concept of commercial reasonableness has been used as an enforcement tool for business decisions that might not have turned out to be good business decisions, but were made in good faith, or that are strategic in nature without making absolute “commercial sense.” In contrast, a few commenters asserted that there are circumstances under which it would not be commercially reasonable for parties to enter into an arrangement that they know would result in substantial losses to one or more of the parties. One commenter, while agreeing that the issue of commercial reasonableness is not solely determined by physician practice profitability, stated that physician practice losses may indicate arrangements that should be further scrutinized as possible fraud and abuse risks.

Response. We decline to adopt the commenters' suggestions regarding the extension of our policy. Although we believe that compensation arrangements that do not result in profit for one or more of the parties may nonetheless be commercially reasonable, we are not convinced that the profitability of an arrangement is completely irrelevant or always unrelated to a determination of its commercial reasonableness, for instance, in a case where the parties enter into an arrangement aware of its certain unprofitability and there exists no identifiable need or justification—other than to capture the physician's referrals—for the arrangement.

We agree with the commenters that it is appropriate and helpful to include in regulation text our policy regarding the impact of an arrangement's profitability on its ability to satisfy the requirement that it is commercially reasonable. We are not adopting the alternative characterization of our policy as “profitability is not a requirement for an arrangement to be commercially reasonable” because we do not believe that this language is as clear or precise as the language we proposed. We are finalizing in regulation text at § 411.351 our policy that “an arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.” Comment.

One commenter asked for confirmation that any definition of “commercially reasonable” finalized by CMS will not apply to regulations enforced by the IRS, OIG or pursuant to state law. Response. The commenter is correct.

The introductory language to § 411.351 where the definition of “commercially reasonable” appears in our regulation text states that the definitions in [Title 42, part 411, Subpart J] apply only for purposes of section 1877 of the Act and [Subpart J]. Comment. One commenter asked how CMS interprets the requirements at § 411.357(a)(3) and (b)(2) in the exceptions for the rental of office space and equipment, respectively, that the leased office space or equipment does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement.

The commenter noted that this requirement and a requirement that the compensation arrangement is commercially reasonable are included in each of these statutory (and regulatory) exceptions. The commenter expressed confusion about our Start Printed Page 77535description in the proposed rule of the requirement in the statutory exception for personal service arrangements that the aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement as another form of the requirement that an arrangement is commercially reasonable (84 FR 55790). Response.

We believe that the requirement that the leased office space or equipment does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement is intended to prevent sham lease arrangements under which a lessee pays remuneration to the lessor under the guise of rental charges where the rental charges are for office space or equipment for which the lessee has no genuine or reasonable use. The statutory and regulatory exceptions for the rental of office space and the rental of equipment also include a requirement that the lease arrangement would be commercially reasonable even if no referrals were made between the lessee and the lessor. The new definition of “commercially reasonable” at final § 411.351 applies for purposes of interpreting this requirement.

Thus, the particular lease arrangement must further a legitimate business purpose of the parties to the arrangement and must be sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. The statutory exception at section 1877(e)(3)(A) of the Act for personal service arrangements includes a requirement that the aggregate services contracted for under the personal service arrangement do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement. We included this requirement in the regulatory exception for personal service arrangements at § 411.357(d)(1)(iii).

Unlike the exceptions for the rental of office space and the rental of equipment, the exception for personal service arrangements does not include—either in the statute or our regulations—a separate requirement that the arrangement is commercially reasonable. The commenter raises a valid point regarding our statement in the proposed rule that, with respect to the exception for personal services, the “does not exceed what is reasonable and necessary” requirement is a different form of the requirement that the arrangement is commercially reasonable. Upon further review of the similarities and differences in the requirements in the statutory and regulatory exceptions for the rental of office space, the rental of equipment, and personal service arrangements, we are retracting our statement from the proposed rule that the requirement at section 1877(e)(3)(A) of the Act (incorporated at § 411.357(d)(1)(iii)) equates to a requirement that the personal service arrangement is commercially reasonable.

As we stated in this section II.B.2., with respect to lease arrangements for office space and equipment, we interpret the “does not exceed what is reasonable and necessary” requirement as a protection against sham lease arrangements under which a lessee pays remuneration to the lessor under the guise of rental charges where the rental charges are for office space or equipment for which the lessee has no genuine or reasonable use. We similarly interpret this requirement in the context of the exception for personal service arrangements as a protection against sham arrangements for the services of a physician for which the entity has no genuine or reasonable use. In the proposed rule, we stated that arrangements that, on their face, appear to further a legitimate business purpose of the parties may not be commercially reasonable if they merely duplicate other facially legitimate arrangements (84 FR 55790).

We provided the example of a hospital that enters into multiple arrangements for medical director services for a single department even though the hospital needs only one medical director for the department. We stated that the commercial reasonableness of multiple arrangements for the same services is questionable. Multiple arrangements for the same personal services may also result in the failure of the duplicate arrangements to satisfy the “reasonable and necessary” requirement in the exception for personal services at section 1877(e)(3)(A) of the Act and § 411.357(d)(1)(iii).

In the proposed rule, we also discussed our view that an activity that is in violation of criminal law would not be a legitimate business purpose of the parties and, therefore, would not be commercially reasonable for purposes of the physician self-referral law (84 FR 55791). Activity that is in violation of criminal law would also fail to satisfy the requirement in the exception for personal service arrangements that the services to be furnished under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates any Federal or State law. Thus, although the exception for personal service arrangements does not include a requirement that the arrangement is commercially reasonable, the other requirements in the exception guard against program or patient abuse in an important and essentially equivalent way.

We note that the exception for personal service arrangements at § 411.357(d)(1) includes a requirement that the arrangement covers all the services to be furnished by the physician (or an immediate family member of the physician) to the entity. The exception permits the use of a master list of contracts that is maintained and updated centrally and available for review by the Secretary upon request. In addition, a personal service arrangement must have a duration of at least 1 year in order to qualify for protection under the exception at § 411.357(d)(1).

We are aware that, because personal service arrangements may not satisfy these requirements, parties often rely on the exception at § 411.357(l) for fair market value compensation to protect their arrangements for the personal services of physicians and their immediate family members. We remind readers that the exception for fair market value compensation includes a requirement that the arrangement is commercially reasonable, and as explained in section II.D.10. Of this final rule, we are revising the regulation text of that exception to require that the arrangement is commercially reasonable even if no referrals were made between the parties.

3. The Volume or Value Standard and the Other Business Generated Standard (§ 411.354(d)(5) and (6)) Many of the exceptions at section 1877(e) of the Act (“Exceptions Relating to Other Compensation Arrangements”) and in our regulations include a requirement that the compensation paid under the arrangement is not determined in any manner that takes into account the volume or value of referrals by the physician who is a party to the arrangement, and some exceptions also include a requirement that the compensation is not determined in any manner that takes into account other business generated between the parties. We refer to these as the “volume or value standard” and the “other business generated standard,” respectively.

Throughout the regulatory history of the physician self-referral law, we have shared our interpretation of these standards and responded to comments as they arose. Despite our attempt at establishing clear guidance regarding the application of the volume or value standard and the other business generated standard, commenters to several requests for information, Start Printed Page 77536including the CMS RFI, identified their lack of a clear understanding as to whether compensation will be considered to take into account the volume or value of referrals or other business generated by the physician as one of the greatest risks they face when structuring arrangements between entities furnishing designated health services and the physicians who refer to them. They stated that, not only do they face the risk of penalties under the physician self-referral law, but, because a violation of the physician self-referral law may be the predicate for liability under the False Claims Act, entities are susceptible to both government and whistleblower actions that can result in significant penalties through litigation or settlement.

In the proposed rule, we proposed regulations intended to provide objective tests for determining whether compensation takes into account the volume or value of referrals or the volume or value of other business generated by the physician. We also provided a brief history of the guidance to date on the volume or value standard and the other business generated standard. We believe it is useful to repeat that history in this final rule.

In the 1998 proposed rule, we discussed the volume or value standard as it pertains to the criteria that a physician practice must meet to qualify as a “group practice” (63 FR 1690). We also stated that we would apply this interpretation of the volume or value standard throughout our regulations (63 FR 1699 through 1700). In the discussion of group practices, we stated that we believe that the volume or value standard precludes a group practice from paying physician members for each referral they personally make or based on the volume or value of the referred services (63 FR 1690).

We went on to state that the most straightforward way for a physician practice to demonstrate that it is meeting the requirements for group practices would be for the practice to avoid a link between physician compensation and the volume or value of any referrals, regardless of whether the referrals involve Medicare or Medicaid patients (63 FR 1690). However, because our definition of “referral” at § 411.351 includes only referrals for designated health services, we also noted that a physician practice could compensate its members on the basis of non-Medicare and non-Medicaid referrals, but would be required to separately account for revenues and distributions related to referrals for designated health services for Medicare and Medicaid patients (63 FR 1690). (See section II.C.

Of this final rule for a discussion of the historical inclusion of Medicaid referrals in our regulations and our revisions to the group practice rules.) Outside of the group practice context, these principles apply generally to compensation from an entity to a physician. We also addressed the other business generated standard in the 1998 proposed rule, stating that we believe that the Congress may not have wished to except arrangements that include additional compensation for other business dealings and that, if a party's compensation contains payment for other business generated between the parties, we would expect the parties to separately determine if this extra payment falls within one of the exceptions (63 FR 1700). In Phase I, we finalized our policy regarding the volume or value standard and the other business generated standard, responding to comments on the proposals included in the 1998 proposed rule.

Most importantly, we revised the scope of the volume or value standard to permit time-based or unit of service-based compensation formulas (66 FR 876). We also stated that the phrase “does not take into account other business generated between the parties” means that the fixed, fair market value payment cannot take into account, or vary with, referrals of designated health services payable by Medicare or Medicaid or any other business generated by the referring physician, including other Federal and private pay business (66 FR 877), noting that the phrase “generated between the parties” means business generated by the referring physician for purposes of the physician self-referral law (66 FR 876). We stated that section 1877 of the Act establishes a straightforward test that compensation should be at fair market value for the work or service performed or the equipment or [office] space leased—not inflated to compensate for the physician's ability to generate other revenue (66 FR 877).

Finally, in response to a comment about whether the compensation paid to a physician for the purchase of his or her practice could include the value of the physician's referrals of designated health services to the practice, we stated that compensation may include the value of designated health services made by the physician to his or her practice if the designated health services referred by the selling physician satisfied the requirements of an applicable exception, such as the in-office ancillary services exception, and the purchase arrangement is not contingent on future referrals (66 FR 877). This policy would apply also to the value of the physician's referrals of designated health services to his or her practice if the compensation arrangement between the physician and the practice satisfied the requirements of an applicable exception. Also in Phase I, we established special rules on compensation at § 411.354(d)(2) and (3) that deem unit-based compensation not to take into account the volume or value of referrals or other business generated between the parties if certain conditions are met (66 FR 876 through 877).

These rules state that unit-based compensation will be deemed not to take into account the volume or value of referrals if the compensation is fair market value for items or services actually provided and does not vary during the course of the compensation arrangement in any manner that takes into account referrals of designated health services. Unit-based compensation will be deemed not to take into account the volume or value of other business generated between the parties to a compensation arrangement if the compensation is fair market value for items or services actually provided and does not vary during the term of the compensation arrangement in any manner that takes into account referrals or other business generated by the referring physician, including private pay health care business. We note that the special rules use the phrase “takes into account referrals” (or other business generated) rather than “takes into account the volume or value of referrals” (or other business generated).

Both special rules apply to time-based or per-unit of service-based (“per-click”) compensation formulas. However, as we later noted in Phase II, the special rules on unit-based compensation are intended to be safe harbors, and there may be some situations not described in § 411.354(d)(2) or (3) where an arrangement does not take into account the volume or value of referrals or other business generated between the parties (69 FR 16070). In Phase II, we clarified that personally performed services are not considered other business generated by the referring physician (69 FR 16068).

We also stated that fixed compensation (that is, one lump-sum payment or several individual payments aggregated together) can take into account or otherwise reflect the volume or value of referrals (for example, if the payment exceeds the fair market value for the items or services provided) (69 FR 16059). We noted that a determination whether the compensation does, in fact, take into account or otherwise reflect the volume or value of referrals will Start Printed Page 77537require a case-by-case examination based on the facts and circumstances. (We note that the language “otherwise reflects” was determined to be superfluous and removed from our regulation text in Phase III (72 FR 51027).) Until now, we had not codified regulations defining the volume or value standard or the other business generated standard, although the special rule at § 411.354(d)(4) sets forth the circumstances under which a physician's compensation under a bona fide employment relationship, personal service arrangement, or managed care contract may be conditioned on the physician's referrals to a particular provider, practitioner, or supplier without running afoul of the volume or value standard.

For the reasons explained in more detail below and in our responses to comments, in this final rule, we are finalizing special rules at § 411.354(d)(5) and (6) that supersede our previous guidance, including guidance with which they may be (or appear to be) inconsistent. Our final policies relate to the volume or value and other business generated standards as they apply to the definition of remuneration at section 1877(h)(1)(C) of the Act and § 411.351 of our regulations, the exception for academic medical centers at § 411.355(e)(1)(ii), and various exceptions for compensation arrangements in section 1877(e) of the Act and § 411.357 of our regulations, including the new exception established in this final rule for limited remuneration to a physician at § 411.357(z). In addition, the regulation at final § 411.354(d)(5)(i) applies for purposes of section 1877(h)(4) of the Act and the group practice regulations at § 411.352(g) and (i).

The final policies do not apply for purposes of applying the exceptions at § 411.357(m), (s), (u), (v), and (w), or for purposes of applying the new exception finalized in this final rule at § 411.357(bb) for cybersecurity items and services. We are including regulation text at § 411.354(d)(5)(iv) and (6)(iv) regarding the application of the volume or value standard and the other business generated standard for purposes of applying these exceptions. Given the revisions to our regulations at § 411.354(c)(2) and (d)(1), which eliminate language regarding compensation that is determined in any manner that takes into account the volume or value of referrals or other business generated by a physician, the final special rules at § 411.354(d)(5) and (6) do not apply for purposes of determining the existence of an indirect compensation arrangement under § 411.354(c)(2) or applying the special rule on compensation that is deemed to be set in advance at § 411.354(d)(1).

For the reasons discussed below in response to comments, the final special rules at § 411.354(d)(5) and (6) do not apply for purposes of applying the special rules for unit-based compensation at § 411.354(d)(2) and (3). We are including regulation text at § 411.354(d)(5)(iv) and (6)(iv) regarding the application of the volume or value standard and the other business generated standard for purposes of applying the special rules for unit-based compensation. As we stated in the proposed rule, we believe there is great value in having an objective test for determining whether the compensation is determined in any manner that takes into account the volume or value of referrals or takes into account other business generated between the parties (84 FR 55793).

Our final rules establish such a test. We are finalizing an approach that, rather than deeming compensation under certain circumstances not to have been determined in a manner that takes into account the volume or value of referrals or takes into account other business generated between the parties, defines exactly when compensation will be considered to take into account the volume or value of referrals or take into account other business generated between the parties. Under our final regulations, which we believe create the bright-line rule sought by commenters and other stakeholders, outside of the circumstances at § 411.354(d)(5) and (6), compensation will not be considered to take into account the volume or value of referrals or take into account other business generated between the parties, respectively.

In other words, only when the mathematical formula used to calculate the amount of the compensation includes referrals or other business generated as a variable, and the amount of the compensation correlates with the number or value of the physician's referrals to or the physician's generation of other business for the entity, is the compensation considered to take into account the volume or value of referrals or take into account the volume or value of other business generated. We believe that our final regulations are consistent with the position we articulated in Phase I where we stated that, in general, we believe that a compensation structure does not directly take into account the volume or value of referrals if there is no direct correlation between the total amount of a physician's compensation and the volume or value of the physician's referrals of designated health services (66 FR 908). In the proposed rule, we explained that, even with nonsubstantive changes to standardize (where possible) the language used to describe the volume or value standard and the other business generated standard in our regulations, due to the varying language used throughout the statutory and regulatory schemes, we find it impossible to establish a single definition for the volume or value and other business generated standards (84 FR 55793).

Therefore, instead of a definition at § 411.351, we proposed special rules for compensation arrangements that would apply regardless of the exact language used to describe the standards in the statute and our regulations. We also explained that, because section 1877 of the Act defines a compensation arrangement as any arrangement involving any remuneration between a physician (or an immediate family member of such physician) and an entity, we believe that it is necessary that the tests address circumstances where the compensation is from the entity to the physician, as well as where the compensation is from the physician to the entity. Therefore, we proposed two separate special rules for the volume or value standard and two separate special rules for the other business generated standard.

Under our proposals, compensation from an entity to a physician (or immediate family member of the physician) would take into account the volume or value of referrals only if the formula used to calculate the physician's (or immediate family member's) compensation includes the physician's referrals to the entity as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the number or value of the physician's referrals to the entity. For example, if the physician (or immediate family member) receives additional compensation as the number or value of the physician's referrals to the entity increase, the physician's (or immediate family member's) compensation would positively correlate with the number or value of the physician's referrals. In the proposed rule, we stated that, unless the special rule at § 411.354(d)(2) for unit-based compensation applies and its conditions are met, the physician's (or immediate family member's) compensation would take into account the volume or value of referrals (84 FR 55793).

For the reasons explained in our response to comments below, we are retracting this statement. Under the Start Printed Page 77538policies set forth in this final rule, as described in our response to comments below, the special rules at § 411.354(d)(2) and (3) are not applicable to compensation that takes into account the volume or value of referrals under final § 411.354(d)(5)(i) or (6)(i) or to compensation that takes into account other business generated by a physician under final § 411.354(d)(5)(ii) or (6)(ii). We have revised the regulation text at § 411.354(d)(2) and (3) accordingly.

If compensation takes into account the volume or value of referrals or the volume or value of other business generated under final § 411.354(d)(5) or (6), that determination is final. The special rules at § 411.354(d)(2) and (3) may not be applied to then deem the compensation not to take into account the volume or value of referrals or other business generated. To illustrate our proposed policy, in the proposed rule, we provided an example under which a physician organization does not qualify as a group practice under § 411.352 of the physician self-referral regulations.

Under the example, the physician organization pays its physicians a percentage of collections attributed to the physician, including personally performed services and services furnished by the physician organization (the physician's “pool”). If a physician's pool includes amounts collected for designated health services furnished by the physician organization that he ordered but did not personally perform, the physician's compensation takes into account the volume or value of his referrals to the physician organization. Assuming the physician is paid 50 percent of the amount in his pool, the mathematical formula that illustrates the physician's compensation would be.

Compensation = (.50 × collections from personally performed services) + (.50 × collections from referred designated health services) + (.50 × collections from non-designated health services referrals). The policy proposed with respect to when compensation from an entity to a physician (or immediate family member of the physician) takes into account other business generated would operate in the same manner (84 FR 55793). Analogously, we proposed that compensation from a physician (or immediate family member of the physician) to an entity takes into account the volume or value of referrals only if the formula used to calculate the compensation paid by the physician includes the physician's referrals to the entity as a variable, resulting in an increase or decrease in the compensation that negatively correlates with the number or value of the physician's referrals to the entity.

For example, if a physician (or immediate family member) pays less compensation as the number or value of the physician's referrals to the entity increases, the compensation from the physician to the entity would negatively correlate with the number or value of the physician's referrals. In the proposed rule, we stated that, unless the special rule at § 411.354(d)(2) for unit-based compensation applies and its requirements are met (which seems unlikely), the compensation would take into account the volume or value of referrals (84 FR 55793). We are retracting this statement.

Under the policies set forth in this final rule, as described above and in our response to comments below, the special rules at § 411.354(d)(2) and (3) are not applicable to compensation that takes into account the volume or value of referrals under final § 411.354(d)(5)(i) or (6)(i) or to compensation that takes into account the volume or value of other business generated by the physician under final § 411.354(d)(5)(ii) or (6)(ii). If compensation takes into account the volume or value of referrals or the volume or value of other business generated under final § 411.354(d)(5) or (6), that determination is final. The special rules at § 411.354(d)(2) and (3) may not be applied to then deem the compensation not to take into account the volume or value of referrals or other business generated.

To illustrate our proposed policy, in the proposed rule, we provided an example under which a physician leases medical office space from a hospital. Our example assumed that the rental charges are $5,000 per month and the arrangement provides that the monthly rental charges will be reduced by $5 for each diagnostic test ordered by the physician and furnished in one of the hospital's outpatient departments. Under our proposal, the compensation (that is, the rental charges) would take into account the volume or value of the physician's referrals to the hospital.

The mathematical formula that illustrates the rental charges paid by the physician to the hospital would be. Compensation = $5,000−($5 × the number of designated health services referrals). The proposed policy with respect to when compensation from a physician (or immediate family member of the physician) to an entity takes into account other business generated would operate in the same manner (84 FR 55793 through 55794).

We are finalizing our proposals with modifications to the structure of the regulations. The final regulations are designated at § 411.354(d)(5)(i), (ii), and (iii) (with respect to compensation from an entity to a physician (or immediate family member of a physician)) and § 411.354(d)(6)(i), (ii), and (iii) (with respect to compensation from a physician (or immediate family member of a physician) to an entity). As set forth at final § 411.354(d)(5)(iv) and (6)(iv), these special rules do not apply for purposes of applying the exceptions at § 411.357(m), (s), (u), (v), and (w), or for purposes of applying the new exception established in this final rule at § 411.357(bb) for cybersecurity items and services.

Although our final regulations are “special rules” on compensation, we interpret them in the same manner as definitions. That is, the special rules are intended to define the universe of circumstances under which compensation is considered to take into account the volume or value of referrals or other business generated by the physician. If the methodology used to determine the physician's compensation or the payment from the physician does not fall squarely within the defined circumstances, the compensation is not considered to take into account the volume or value of the physician's referrals or other business generated by the physician, as appropriate, for purposes of the physician self-referral law.

We also proposed additional policies at proposed § 411.354(d)(5)(i)(B) and (ii)(B), and at proposed § 411.354(d)(6)(i)(B) and (ii)(B), outlining narrowly-defined circumstances under which fixed-rate compensation (for example, a fixed annual salary or an unvarying per-unit rate of compensation) would be considered to be determined in a manner that takes into account the volume or value of referrals or other business generated by a physician for the entity paying the compensation. For the reasons described in response to comments below and in section II.B.4. Of this final rule, we are not finalizing the proposed regulations.

However, to address the concerns prompting the policy described in the proposed rule with respect to referrals of designated health services, we are revising § 411.354(d)(4), which sets forth requirements that must be met if a physician's compensation is conditioned on the physician's referrals to a particular provider, practitioner, or supplier. That is, if, under the bona fide employment relationship, personal service arrangement, or managed care contract the physician's referrals are directed to a particular provider, practitioner, or supplier. The final Start Printed Page 77539policy is designated at § 411.354(d)(4)(vi) and states that, regardless of whether the physician's compensation takes into account the volume or value of referrals by the physician, neither the existence of the compensation arrangement nor the amount of the compensation may be contingent on the volume or value of the physician's referrals to the particular provider, practitioner, or supplier.

See section II.B.4. Of this final rule for further discussion of § 411.354(d)(4)(vi). In the proposed rule, we stated that we believe that the modifier “directly or indirectly” is implicit in the requirements that compensation is not determined in any manner that takes into account the volume or value of referrals or the volume or value of other business generated (84 FR 55794).

We are finalizing our proposal to remove the modifier from the regulations where it appears in connection with the standards and the related requirements. We also highlighted that, where the statute or regulations specifically allow parties to determine compensation in a manner that only indirectly takes into account the volume or value of referrals (for example, in the exception for EHR items and services at § 411.357(w)(6) and the rules for a group practice's distribution of profit shares and payment of productivity bonuses at section 1877(h)(4)(B) of the Act and § 411.352(i)), our regulations include guidance regarding direct versus indirect manners of determining compensation. We solicited comment on the need for additional guidance or regulation text that includes deeming provisions related to the volume or value standard in these exceptions.

Based on the comments we received, we are not revising our regulations to provide further guidance on the deeming provisions (except as provided in section II.D.11. Of this final rule with respect to the deeming provision in the exception at § 411.357(w) for EHR items and services). Finally, in the proposed rule, we discussed related guidance in our Phase II regulation (69 FR 16088 through 16089).

In Phase II, a commenter presented a scenario under which a hospital employs a physician at an outpatient clinic and pays the physician for each patient seen at the clinic. The physician reassigns his or her right to payment to the hospital, and the hospital bills for the Part B physician service (with a site-of-service reduction). And the hospital also bills for the hospital outpatient services, which may include some procedures furnished as “incident to” services in a hospital setting.

The Phase II commenter's concern was that the payment to the physician is inevitably linked to a facility fee, which is a designated health service (that is, a hospital service). Accordingly, the commenter wondered whether the payment to the physician would be considered an improper productivity bonus based on a referral of designated health services (that is, the facility fee). In response, we stated that the fact that corresponding hospital services are billed would not invalidate an employed physician's personally performed work, for which the physician may be paid a productivity bonus (subject to the fair market value requirement).

We acknowledged stakeholder concerns that, following the July 2, 2015 opinion of the United States Court of Appeals for the Fourth Circuit in United States ex rel. Drakeford v. Tuomey Healthcare System, Inc.

(792 F.3d 364) (Tuomey), CMS may no longer endorse this policy. We stated that we believe that the objective tests for determining whether compensation takes into account the volume or value of referrals or the volume or value of other business generated may address these concerns. However, for clarity, we reaffirmed the position we took in the Phase II regulation.

We stated that, with respect to employed physicians, a productivity bonus will not take into account the volume or value of the physician's referrals solely because corresponding hospital services (that is, designated health services) are billed each time the employed physician personally performs a service. We also clarified that our guidance extends to compensation arrangements that do not rely on the exception for bona fide employment relationships at § 411.357(c), and under which a physician is paid using a unit-based compensation formula for his or her personally performed services, provided that the compensation meets the conditions in the special rule at § 411.354(d)(2). That is, under a personal service arrangement, an entity may compensate a physician for his or her personally performed services using a unit-based compensation formula—even when the entity bills for designated health services that correspond to such personally performed services—and the compensation will not take into account the volume or value of the physician's referrals if the compensation meets the conditions in the special rule at § 411.354(d)(2) (see 69 FR 16067).

This is true whether the compensation arrangement is analyzed under an exception applicable to compensation arrangements directly between an entity and a physician or is an indirect compensation arrangement analyzed under the exception at § 411.357(p). Our position has not changed since the publication of Phase II, and we reaffirm here our statements in the proposed rule. An association between personally performed physician services and designated health services furnished by an entity does not convert compensation tied solely to the physician's personal productivity into compensation that takes into account the volume or value of a physician's referrals to the entity or the volume or value of other business generated by the physician for the entity.

Although commenters requested that we codify these policies in regulation text, we decline to do so, as we do not believe that it is necessary given the policies set forth in the final regulations at § 411.354(d)(5) and (6). However, as described below in our response to comments, we are revising the regulations at § 411.354(c)(2) regarding the existence (that is, definition) of an indirect compensation arrangement. We believe the revisions to § 411.354(c)(2) may alleviate the commenters' concerns.

We received the following comments and our responses follow. Comment. Most commenters supported the proposed special rules on the volume or value standard and the other business generated standard.

Some commenters requested modification of the standards, as described in other comments below. The commenters in support of our proposed special rules generally appreciated the clarification of terms that they asserted have been a source of confusion among providers, physicians, qui tam relators, and courts. The commenters stated that the objective tests established in the proposed special rules are easily understood, which, in turn, will greatly ease the burden on providers and suppliers attempting to ensure compliance with the volume or value and other business generated standards, as well as make a clear path for law enforcement and the regulated industry.

Commenters urged CMS to finalize objective standards for this critical terminology. In contrast, one commenter asserted that the proposed special rules do not adequately explain what is meant by “includes the physician's referrals to the entity as a variable” and would create significantly more confusion than the current standard. This commenter asserted that this lack of clarity could allow for abusive compensation arrangements and hamper enforcement efforts.Start Printed Page 77540 Response.

We are finalizing most of our proposals to establish objective tests for whether compensation takes into account the volume or value of a physician's referrals to an entity or the volume or value of other business generated by a physician for an entity. We agree with the commenters that our final policies will establish a clear path for parties to design compensation arrangements that comply with the volume or value standard and other business generated standard found in many of the exceptions to the physician self-referral law. In turn, the objective standards should assist in law enforcement efforts by making it clear whether compensation paid to or from a physician takes into account the volume or value of a physician's referrals to an entity or the volume or value of other business generated by a physician for an entity.

As discussed more fully in our response to other comments, we are also clarifying in regulation text that, if compensation takes into account the volume or value of a physician's referrals to an entity or the volume or value of other business generated by a physician for an entity under final § 411.354(d)(5) or (6), no special rule, including those at § 411.354(d)(2) and (3), may be applied to reverse that determination. We disagree with the commenter that asserted that the proposed special rules would create significantly more confusion related to the volume or value standard and the other business generated standard, and note that nearly all other commenters that addressed these specific proposals asserted that the proposed special rules would provide clarity for parties seeking to ensure that compensation is not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by a physician. With respect to the meaning of “includes the physician's referrals to the entity as a variable” as included in the regulation text at final § 411.354(d)(5)(i) and (6)(i), we refer readers to the examples provided in the proposed rule and restated above that illustrate the mathematical formulas for determining compensation that takes into account the volume or value of a physician's referrals.

The term “variable” has the meaning it does with respect to general mathematical principles—a symbol for a number we do not yet know. Thus, if an entity pays a physician one-fifth of a bonus pool that includes all collections from a set of services furnished by an entity, including those from designated health services referred by a physician to the entity, the formula used to calculate the physician's compensation is. (.20 × the value of the physician's referrals of designated health services) + (.20 × the value of the other business generated by the physician for the entity) + (.20 × the value of services furnished by the entity that were not referred or generated by the physician).

The value of the physician's referrals to the entity is a variable in this formula, as is the value of the other business generated by the physician. Comment. A small number of commenters did not support our proposals for special rules that identify the universe of compensation formulas that take into account the volume or value of a physician's referrals or the other business generated by the physician for an entity.

One of the commenters asserted that the standards were too narrow to protect the Medicare program from abuse, noting that, under our proposals, a hospital could make payment to a physician in anticipation of future referrals without a mathematical formula explicitly delineating it. Other commenters opposed CMS finalizing any of its proposals, while not specifically opposing the proposed special rules for the volume or value and other business generated standards. Response.

Although we agree with the commenters regarding the importance of program integrity, we believe that the certainty afforded by the objective standards we are finalizing is critical to reduce the burden associated with compliance with the physician self-referral law's volume or value and other business generated standards. We believe that the policies finalized at § 411.354(d)(5) and (6), coupled with the new condition at § 411.354(d)(4)(vi) prohibiting an entity from making the existence of a compensation arrangement or the amount of the compensation contingent on the volume or value of the physician's referrals to the particular provider, practitioner, or supplier (as well as the other requirements of our exceptions) mitigates the potential for program or patient abuse asserted by the commenters. We remind parties that arrangements that involve remuneration from an entity to a physician (or vice versa) implicate the anti-kickback statute.

An arrangement under which a hospital makes a payment to a physician in anticipation of future referrals would be suspect under the anti-kickback statute. Moreover, our revised definition of “referral” at § 411.351 clarifies that referrals are not items or services to be protected under the exceptions to the physician self-referral law, regardless of whether or not it is possible to ascribe a fair market value to them. Comment.

A large number of commenters requested that CMS specifically address personal productivity compensation by finalizing in regulation text the interpretations we described in the proposed rule (84 FR 55795). Some commenters requested that CMS confirm that personal productivity compensation is permissible in all settings. Others requested that we revise the exceptions for personal service arrangements, fair market value compensation, and indirect compensation arrangements to expressly permit compensation formulas based on a physician's personal productivity.

All of the commenters noted that productivity pay for personally performed services is among the most prevalent compensation methodologies used by hospitals and other entities to compensate surgeons and other proceduralists, as well as physicians who do not attend to patients in a hospital setting. Commenters stated that, despite our affirmative statements in the proposed rule that, under a personal service arrangement, an entity may compensate a physician for his or her personally performed services using a unit-based compensation formula even when the entity bills for designated health services that correspond to such personally performed services, and the compensation will not take into account the volume or value of the physician's referrals if the compensation meets the conditions of the special rule at § 411.354(d)(2) (84 FR 55795), they remain concerned that an entity may still have to defend its compensation practices in the event of a False Claims Act allegation because satisfaction of all the requirements of an applicable exception to the physician self-referral law is an affirmative defense. Response.

We decline to revise the text of the regulations as requested by the commenters. We reaffirm our statements in the proposed rule, including those with respect to productivity-based compensation under a bona fide employment relationship. We also confirm that our policy applies to indirect compensation arrangements.

To be clear, under a bona fide employment relationship, personal service arrangement, or indirect compensation arrangement, a physician may be compensated for his or her personally performed services using a unit-based compensation formula—even when the entity with which the physician has a direct or indirect compensation arrangement bills for designated health services that Start Printed Page 77541correspond to such personally performed services—and the compensation will not take into account the volume or value of the physician's referrals if the unit-based compensation meets the conditions of the special rule at § 411.354(d)(2). Similarly, under a personal service arrangement or indirect compensation arrangement, a physician may be compensated for his or her personally performed services using a unit-based compensation formula—even when the entity with which the physician has a direct or indirect compensation arrangement bills for other business that correspond to such personally performed services—and the compensation will not take into account other business generated by the physician if the unit-based compensation meets the conditions of the special rule at § 411.354(d)(3). We note that the policies described in the proposed rule (84 FR 55795) and in this response regarding the application of the special rules for unit-based compensation have been superseded by the policies finalized in this final rule.

However, these policies would be applied when analyzing compensation arrangements for compliance with the physician self-referral law during periods prior to the effective date of this final rule. They have never applied and will continue not to apply for purposes of analyzing ownership or investment interests for compliance with the physician self-referral law, as none of our exceptions in § 411.356 include a requirement identical or analogous to the volume or value standard or other business generated standard. To reiterate, neither the special rules at § 411.354(d)(2) and (3) nor any guidance regarding our interpretation of the volume or value standard or other business generated standard are relevant for purposes of applying the exceptions at § 411.356(c)(1) and (3), both of which incorporate the requirements of § 411.362, including the requirement at § 411.362(b)(3)(ii)(B) that a hospital must not condition any physician ownership or investment interests either directly or indirectly on the physician owner or investor making or influencing referrals to the hospital or otherwise generating business for the hospital.

Comment. A significant number of commenters requested that we clarify that the positions CMS took in prior litigation, including Tuomey, and the discussion in the proposed rule regarding productivity-based compensation were based on its then-current policy, not on the policies finalized here. Commenters asserted that this is necessary to avoid confusing the special rules on the volume or value standard and other business generated standard that we are finalizing in this final rule—under which productivity compensation would not trigger the volume or value standard of the exceptions for bona fide employment relationships, personal service arrangements, or fair market value compensation—with Tuomey's “correlation theory.” The commenters also asserted that, under the policies finalized here, there would no longer be a need for the productivity bonus “safe harbor” at § 411.357(c)(4).

Response. Productivity compensation based solely on a physician's personally performed services does not take into account the volume or value of the physician's referrals or other business generated by a physician under the policies finalized in this final rule. Such compensation would satisfy the volume or value standard and the other business generated standard, where it appears, in the exceptions for bona fide employment relationships, personal service arrangements, and fair market value compensation, all of which apply to direct compensation arrangements between entities and physicians.

Although the productivity bonus “safe harbor” at § 411.357(c)(4) would not be necessary to protect productivity compensation based solely on a physician's personally performed services under this final rule, the provision is included in section 1877(e)(2) of the Act and, therefore, we are not removing it from our regulations. Prior to this final rule, productivity compensation based solely on a physician's personally performed services would not take into account the volume or value of a physician's referrals if the conditions of the special rule at § 411.354(d)(2) were met. Thus, even prior to this final rule, the productivity bonus “safe harbor” at § 411.357(c)(4) would not have been necessary to ensure that a physician's referrals to his or her employer did not violate the physician self-referral law due to the fact that the physician received productivity compensation from the employer based solely on the physician's personally performed services.

As we stated in the proposed rule and repeated above, the special rules at § 411.354(d)(5) and (6), as finalized, supersede our previous guidance, including guidance with which they may be (or appear to be) inconsistent (84 FR 55792). The policies finalized here are prospective only and represent CMS policy regarding the volume or value standard and the other business generated standard going forward from the effective date of this final rule. Comment.

Two commenters asked us to confirm whether a “tiered” compensation model would take into account the volume or value of a physician's referrals. The commenters both presented the following example. For the first 50 procedures that a physician performs at a hospital, the physician is paid $X per procedure.

For the next 25 procedures that the physician performs at the hospital, the physician is paid $X + $20. The commenters did not specify whether the physician made the referrals for the corresponding designated health services furnished by the hospital. Response.

The commenters did not provide sufficient facts to enable us to respond to their request. Parties may use the process set forth in our regulations at §§ 411.370 through 411.389 to request an advisory opinion on whether a specific referral or referrals relating to designated health services (other than clinical laboratory services) is prohibited under section 1877 of the Act. Comment.

One commenter expressed support for the approach of identifying the universe of circumstances in which compensation will be considered to take into account the volume or value of referrals or other business generated, rather than the current approach that identifies limited circumstances in which compensation is deemed to not take into account the volume or value of a physician's referrals or other business generated by the physician for an entity. The commenter asserted that the regulatory certainty provided under our approach will allow hospitals to encourage physicians to improve quality, reduce cost, and provide leadership by permitting quality and outcomes-based bonuses payable to physicians, bonuses to physician leaders based on system success, and unit-based compensation based on personally performed services that sometimes, but not always, result in referrals of designated health services. Another commenter asked whether incentive compensation paid only in the event of the hospital's achievement of overall financial performance goals would take into account the volume or value of a particular physician's compensation.

The commenter gave the example of a physician receiving a 15 percent bonus if the system has a 2 percent margin, and a 20 percent bonus if the system has a 4 percent margin. Response. We agree that identifying for stakeholders the universe of circumstances in which we believe compensation is determined in a Start Printed Page 77542manner that takes into account the volume or value of a physician's referrals or other business generated by the physician is preferable to our former policy, which articulated a general rule that compensation may not be determined in any manner that takes into account the volume or value of referrals (or other business generated by a physician) and provided a single “safe harbor” for assurance that the specific compensation does not violate the general rule.

We caution that outcomes-based bonuses, as described by the commenter, could fall within the circumstances of the special rules at final § 411.354(d)(5) and (6), depending on how they are structured and whether referrals to the entity or other business generated by the physician for the entity are variables anywhere in the mathematical formula for determining the compensation. Although bonus compensation based on “system success” may not include referrals to or other business generated for the entity as a variable in many instances, the determination of whether the formula to determine the compensation includes such variables must be made on a case-by-case basis. As we explain above and in our response to other comments, unit-based compensation based solely on personally performed services would not include the physician's referrals to or the other business generated by the physician for the entity as a variable and, regardless of whether an entity furnishes designated health services in conjunction with the physician's personally performed services, would not take into account the volume or value of the physician's referrals or other business generated by the physician.

Comment. Many commenters noted that our proposed interpretations of the volume or value and other business generated standards do not readily translate in the context of nonmonetary compensation such as the donation of EHR items and services or medical staff incidental benefits. These commenters requested that we not apply the special rules at § 411.354(d)(5) and (6) to the exceptions where the remuneration to or from a physician generally is not calculated as a mathematical formula.

Response. We agree with the commenters in part. The final special rules at § 411.354(d)(5) and (6) do not apply for purposes of applying the exceptions for medical staff incidental benefits at § 411.357(m), professional courtesy at § 411.357(s), community-wide health information systems at § 411.357(u), electronic prescribing items and services at § 411.357(v), electronic health records items and services at § 411.357(w), and cybersecurity technology and related services at new § 411.357(bb).

These exceptions have “volume or value” requirements that are somewhat unique and the special rules are not a perfect fit. We have included language at final § 411.354(d)(5)(iv) and (6)(iv) to indicate the inapplicability of the special rules for purposes of applying these particular exceptions to the physician self-referral law. However, the requirement in the exception for nonmonetary compensation at § 411.357(k)(1)(i), which requires that the nonmonetary compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician, is similar to those in the exceptions where cash remuneration may be provided and the special rules at final § 411.354(d)(5) and (6) can be easily applied.

Comment. A few commenters requested that CMS confirm that the proposed special rules at § 411.354(d)(5) and (6) would apply to the determination of whether an indirect compensation arrangement exists. Another commenter requested confirmation that the special rules set forth at final § 411.354(d)(5) and (6) would apply to the determination of whether a physician who is a member of the group practice directly or indirectly receives compensation based on the volume or value of his or her referrals (§ 411.352(g)) and the requirements under the special rules for profit shares and productivity bonuses at § 411.352(i).

Response. Except as specified in § 411.354(d)(5)(iv) and (6)(iv), the proposed special rules interpreting the volume or value standard at § 411.354(d)(5)(i) and (6)(i) apply in all instances where our regulations require an analysis of whether compensation is determined in any manner that takes into account the volume or value of a physician's referrals. Likewise, except as specified in § 411.354(d)(5)(iv) and (6)(iv), the proposed special rules interpreting the other business generated standard at § 411.354(d)(5)(ii) and (6)(ii) apply in all instances where our regulations require an analysis of whether compensation is determined in any manner that takes into account the volume or value of other business generated by a physician.

Given the revisions to the regulations at § 411.354(c)(2) finalized in this final rule, and because the special rules at final § 411.354(d)(5) and (6) have only prospective application, the special rules at § 411.354(d)(5) and (6) do not apply to the determination of whether an indirect compensation arrangement exists under § 411.354(c)(2). For the reasons explained in the response to a comment below, the special rules at final § 411.354(d)(5) and (6) do not apply for purposes of applying the special rules on unit-based compensation at § 411.354(d)(2) and (3). As described in section II.C.1.

Of this final rule, the terms “based on” and “related to” exist in the regulation text at § 411.352(g) and (i). We interpret these terms to equate to “takes into account” when referring to the volume or value of referrals. Thus, the special rule at final § 411.354(d)(5)(i) applies for purposes of interpreting and applying the group practice regulations at § 411.352(g) and (i), which apply only to compensation from the group practice to the physician and the physician's referrals (but do not apply to the other business generated by the physician for the group practice).

Comment. Citing concerns related to recent False Claims Act litigation, many commenters asked CMS to refrain from using the term “correlation” in the final regulations. Commenters suggested that we use the term “causal relationship” in lieu of “correlation” in the special rules.

The commenters were concerned that the term “correlation” could create an inference that compensation could violate the volume or value or other business generated standards without a causal relationship between referrals or other business generated and the compensation to or from the physician. Response. We have provided definitions for “positive correlation” and “negative correlation” to indicate specifically what mathematical formulas will be problematic under the final rules.

We believe that our regulations, as finalized, are clear and express the agency's interpretation of the volume or value standard and the other business generated standard. Comment. A few commenters requested that CMS require that the physician's referrals are a written or otherwise expressly articulated variable in the formula for calculating the compensation paid to a physician.

The commenters asserted that, under the proposed special rule, it is not clear how the formula would be assessed, and recommended language would signify that, for purposes of applying § 411.357(d)(5), the test is not one of subjective intent. The commenters made the same request, for the same reasons, with respect to the other business generated standard. Another commenter suggested that we require that the compensation formula has a “direct and explicit” variable that results in an increase or decrease in the physician's Start Printed Page 77543compensation that “directly, explicitly and” positively (or negatively) correlates with the number of value of the physician's referrals to (or other business generated for) the entity in order to take into account the volume or value of referrals (or other business generated).

Response. We decline to adopt the commenter's suggestions. We believe that the special rules finalized at § 411.354(d)(5) and (6) sufficiently articulate objective tests for assessing whether compensation takes into account the volume or value of a physician's referrals or the other business generated by a physician for an entity.

We disagree that the final special rules lack clarity or imply that the volume or value standard and other business generated standard are subjective tests. Compensation paid to a physician takes into account the volume or value of referrals if the formula used to calculate the physician's (or immediate family member's) compensation includes the physician's referrals to the entity as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the number or value of the physician's referrals to the entity, regardless of whether the formula is written in a particular place or manner. The same applies to compensation that takes into account other business generated by the physician for the entity making the payment to the physician.

Comment. A large number of commenters requested that we not finalize our proposal to consider fixed-rate compensation for which there is a predetermined, direct correlation to the physician's prior referrals to the entity or the other business previously generated by the physician for the entity to take into account the volume or value of referrals or other business generated by the physician. Noting that fixed rate compensation (for example, $200,000 per year) qualifies as unit-based compensation, some commenters asserted that, even if we were to finalize this proposal, once the special rules for unit-based compensation at § 411.354(d)(2) and (3) are applied, fixed-rate compensation that fails the proposed test(s) would nonetheless be deemed not to take into account the volume or value of referrals or other business generated under the existing regulations at § 411.354(d)(2) and (3).

Other commenters stated that the proposal regarding fixed-rate compensation would not establish the objective rule we sought and would continue the uncertainty that the industry currently faces. Response. We agree with the commenters that the special rules for unit-based compensation at § 411.354(d)(2) and (3) essentially nullify the proposed special rule regarding fixed-rate compensation that takes into account the volume or value of a physician's referrals or other business generated by the physician for an entity.

We are not finalizing our proposals for additional special rules outlining the circumstances under which we would consider fixed-rate compensation to be determined in a manner that takes into account the volume or value of referrals or other business generated by a physician for the entity paying the compensation. In the proposed rule, we stated that merely hoping for or even anticipating future referrals or other business is not enough to show that compensation is determined in a manner that takes into account the volume or value of referrals or other business generated by the physician for the entity. However, we also stated that we are concerned with an “if X, then Y” correlation between compensation in the current term and prior referrals or previous other business generated by a physician (84 FR 55794).

Our proposed policy focused on fixed-rate compensation under a current arrangement where there is a predetermined, direct correlation between the volume or value of a physician's prior referrals or the other business previously generated for the entity and the rate of compensation paid to or by the physician (or immediate family member of the physician). We provided examples of objectionable tiered compensation structures that condition a physician's compensation on the volume or value of his or her referrals to an entity. The conditioning of the existence of a compensation arrangement would also fall within such a structure.

For example, “if the value of the physician's referrals does not equal $1,000,000 in the prior period, the physician's employment arrangement will be terminated and his compensation from the entity will equal $0.” We believe that there is a risk of program or patient abuse when a physician will receive no future compensation if he or she fails to refer as required. The same is true if the amount of the physician's compensation conditioned on the volume or value of a physician's referrals to an entity (or another provider, practitioner, or supplier). Therefore, in lieu of the proposed policies treating “if X, then Y” compensation methodologies as potential concerns under the volume or value standard and other business generated standard, we are revising the special rule at § 411.354(d)(4) to address our concerns when a physician's compensation under a bona fide employment relationship, personal service arrangement, or managed care contract is conditioned on the physician's referrals to a particular provider, practitioner, or supplier (including the entity providing the compensation to the physician)—in other words, when the physician's referrals are directed to a particular provider, practitioner, or supplier.

Under the policy at final § 411.354(d)(4)(vi), regardless of whether the physician's compensation takes into account the volume or value of referrals by the physician as set forth at paragraph (d)(5) of this section, neither the existence of the compensation arrangement nor the amount of the compensation is contingent on the volume or value of the physician's referrals to the particular provider, practitioner, or supplier. We discuss this revision in more detail in section II.B.4. Of this final rule.

Comment. A few commenters requested clarification of the examples in the proposed rule regarding fixed-rate tiered compensation set using a predetermined, “if X, then Y” methodology. One commenter suggested that our statement in the proposed rule that the tiered compensation methodology in the example provided (84 FR 55794) is at odds with our confirmation that a productivity bonus will not take into account the volume or value of referrals solely because corresponding hospital services (that is, designated health services) are billed each time the employed physician personally performs a service.

Response. The example of tiered compensation referenced by the commenter related to our proposal regarding fixed-rate compensation. We are not finalizing our proposal to consider fixed-rate compensation to take into account the volume or value of referrals or other business generated by a physician.

Therefore, it is unnecessary to further address the examples as requested by the commenters in the context of the volume or value standard. We note that the regulation at final § 411.354(d)(4)(vi) regarding making the existence of a compensation arrangement or the amount of a physician's compensation contingent on the volume or value of a physician's referrals to a particular provider, practitioner, or supplier may apply to the commenter's examples. See section II.B.4.

Of this final rule for a further discussion of final § 411.354(d)(4)(vi).Start Printed Page 77544 Comment. A few commenters asserted that the existing special rules at § 411.354(d)(2) and (3) regarding per-unit compensation create confusion when considered in light of the new special rules interpreting the volume or value standard and other business generated standard. Some of the commenters suggested that CMS should remove the regulations at § 411.354(d)(2) and (3), because they would no longer be necessary if we finalize our proposals at § 411.354(d)(5) and (6).

The commenters suggested revisions to § 411.354(d)(2) and (3) in the event CMS does not finalize the proposals for special rules at interpreting the volume or value standard and other business generated standard § 411.354(d)(5) and (6). One commenter described a hypothetical arrangement under which a hospital contracts with a surgeon for professional services, the surgeon performs surgeries at the hospital, and the hospital pays the surgeon a fixed amount per personally-performed relative value unit (RVU) that is consistent with the fair market value of the physician's services. Assuming that the compensation would be viewed as not taking into account the volume or value of the physician's referrals to the hospital or other business generated by the physician for the hospital, the commenter asked whether this is the case based on the application of the special rules at final § 411.354(d)(5) and (6) or whether it is because the unit-based compensation satisfies the requirements of the special rules for per-unit compensation at § 411.354(d)(2) and (3).

The commenter then questioned whether the special rules for unit-based compensation at § 411.354(d)(2) and (3) would continue to be necessary if we finalize our proposals. Response. We agree with the commenters that, under the policies finalized here, there is effectively no longer a need for the “unit-based deeming provision” at § 411.354(d)(2).

The same is true for the deeming provision at § 411.354(d)(3). Unit-based compensation that does not include a physician's referrals to the entity as a variable in the formula used to calculate the physician's (or immediate family member's) compensation would not take into account the volume or value of the physician's referrals and, therefore, there would be no need to apply the special rule at § 411.354(d)(2). Similarly, unit-based compensation that does not include other business generated by a physician for the entity as a variable in the formula used to calculate the physician's (or immediate family member's) compensation would not take into account the volume or value of other business generated and, therefore, there would be no need to apply the special rule at § 411.354(d)(3).

If the formula used to calculate a physician's (or immediate family member's) compensation does include the physician's referrals to the entity or other business generated by the physician for the entity as a variable (for example, a payment of $50 to the immediate family member of a physician for each patient who receives items or services furnished by the DMEPOS supplier making the payment, including items or service referred by the physician), the compensation would take into account the volume or value of the physician's referrals or other business generated and, under the revisions to § 411.354(d)(2) and (3) finalized here, the special rules for unit-based compensation would not apply. On and after the effective date of this final rule, the special rules at § 411.354(d)(2) and (3) will be either unnecessary or inapplicable to deem unit-based compensation not to take into account the volume or value of a physician's referrals or other business generated by a physician. However, it is important to preserve the regulations at § 411.354(d)(2) and (3) to assist parties, CMS, and law enforcement in applying the historical policies in effect at the time of the existence of the compensation arrangement being analyzed for compliance with the physician self-referral law.

Therefore, we are not removing the regulations at § 411.354(d)(2) and (3) from the physician self-referral regulations, although we are adding language to both § 411.354(d)(2) and (3) to make clear that the regulations may not be applied to deem unit-based compensation not to take into account the volume or value of referrals or other business generated by a physician if the compensation formula used to calculate the physician's (or immediate family member's) compensation is determined to take into account the volume or value of referrals or other business generated under final § 411.354(d)(5) or (6). Because the special rules at final § 411.354(d)(5) and (6) have prospective application only, we are confirming in regulation text at § 411.354(d)(5)(iv) and (6)(iv) that they do not apply for purposes of applying the special rules on unit-based compensation at § 411.354(d)(2) and (3), which, as we explained, remain in our regulations only for historical purposes to assist parties, CMS, and law enforcement in applying the historical policies in effect at the time of the existence of the compensation arrangement being analyzed for compliance with the physician self-referral law. Comment.

Several commenters expressed strong support for the proposal to remove the term “varies with” from the regulations at § 411.354(c)(2)(ii) and (iii) identifying when an indirect compensation arrangement exists, stating that this would be consistent with CMS' expressed intent for the volume or value standard and other business generated standard to have the same meaning wherever they occur in our regulations. Using the same example from the immediately previous comment, one commenter asked whether, under the regulation at proposed § 411.354(c)(2), the compensation arrangement would constitute an indirect compensation arrangement if the compensation was paid to the physician by an affiliate of the hospital with which the hospital has a financial relationship, forming an unbroken chain of financial relationships between the hospital and the physician. Other commenters questioned whether any unbroken chain of financial relationships would create an indirect compensation arrangement if CMS finalizes its proposals to remove the term “varies with” from the regulations at § 411.352(c)(2) and establish the special rules interpreting the volume or value standard and other business generated standard at § 411.354(d)(5) and (6).

Response. As we stated in the proposed rule, we proposed nonsubstantive changes to standardize where possible the language used to describe the volume or value standard and the other business generated standard in our regulations (84 FR 55793). Our proposal to remove the term “varies with” from the regulation at § 411.354(c)(2) originated with our attempt at standardizing this language.

Upon consideration of the comments and after developing our responses, we are not finalizing our proposal to remove the term “varies with” from § 411.354(c)(2). If finalized as proposed, the regulatory scheme outlining the conditions under which an indirect compensation arrangement exists would have eliminated most unbroken chains of financial relationships between entities that furnish designated health services and the physicians who refer to them from the scrutiny of the physician self-referral law without affording CMS the opportunity to confirm that the compensation paid to the physician does not pose a risk of the harm section 1877 of the Act is intended to avoid, namely, that the compensation could improperly influence the physician's Start Printed Page 77545medical decision making. We continue to believe in the importance of ensuring that compensation paid to a physician by someone (or some organization) that has a financial relationship with an entity does not improperly influence the physician's medical decision making, resulting in the overutilization of designated health services, patient steering, or other program or patient abuse.

However, we believe that the regulatory scheme that casts a wide net to include the vast majority of unbroken chains of financial relationships between an entity and a physician and then weeds out most of those unbroken chains through a showing of compliance with the requirements of the special rules at § 411.354(d)(2) and (3) and the exception at § 411.357(p) is unnecessarily burdensome. The identification of truly problematic physician compensation may be achieved at an earlier stage of analysis. Therefore, we are revising § 411.354(c)(2) to more precisely identify compensation arrangements that may pose a risk of program or patient abuse.

As we stated in Phase I, the existence of a financial relationship between an entity and a physician (or the immediate family member of a physician) is the factual predicate triggering the application of section 1877 of the Act (66 FR 864). (For a similar discussion in Phase II, see 69 FR 16057.). Because section 1877 of the Act expressly contemplates that a financial relationship and, specifically, a compensation arrangement, may be directly or indirectly between an entity and a physician (or an immediate family member of a physician), in Phase I, we established a three-part test for determining when an indirect compensation arrangement exists (66 FR 865 through 866).

Once all three parts of the test are met, there exists an indirect compensation arrangement that must satisfy the requirements of an applicable exception in order to avoid the referral and billing prohibitions of the physician self-referral law. Also in Phase I, we finalized the exception at § 411.357(p) for indirect compensation arrangements that would apply to unbroken chains of financial relationships that result in indirect compensation arrangements. In Phase I, we explained that some of the statutory and regulatory exceptions operate to exclude certain categories of services from the reach of section 1877 of the Act when certain requirements are satisfied.

In effect, services described in those exceptions are not designated health services for purposes of the physician self-referral law (66 FR 867). The service-based exceptions are found in § 411.355 of our regulations. Thus, even if there is an indirect compensation arrangement between an entity and a physician, the service-based exceptions may apply to and protect referrals of the particular services described in the exception.

However, referrals for designated health services that do not satisfy the requirements of an applicable service-based exception would be prohibited unless the indirect compensation arrangement satisfies all the requirements of the exception for indirect compensation arrangements at § 411.357(p) (66 FR 867) or, if the entity is a MCO or IPA, the exception at § 411.357(n) for risk-sharing arrangements. (We refer readers to section II.A.2.b.(4). Of this final rule for a discussion of the applicability of the exception at § 411.357(n) to indirect compensation arrangements.) In Phase I, we also finalized special rules related to unit-based compensation at § 411.354(d)(2) and (3) to be applied when analyzing compliance with the requirements of the exceptions in § 411.357, including the exception for indirect compensation arrangements at § 411.357(p) (66 FR 876 through 878).

Following the publication of Phase I, we received comments regarding the interplay of the definition of “indirect compensation arrangement,” the exception at § 411.357(p) for indirect compensation arrangements, and the special rules that deem unit-based compensation not to take into account the volume or value of referrals or other business generated at § 411.354(d)(2) and (3), respectively, when certain conditions are met. The commenters questioned whether an indirect compensation arrangement exists at all if a referring physician receives time-based or unit-of-service based compensation that is fair market value and does not vary over the term of the arrangement—that is, compensation that, by definition, does not take into account the volume or value of referrals or other business generated under § 411.354(d)(2) and (3). Commenters noted that, similarly, the exception for indirect compensation arrangements at § 411.357(p), like § 411.354(d)(2) and (3), does not look to aggregate compensation and incorporates a fair market value test.

Given this, the commenters pointed out that the ultimate result would be the same whether time-based and unit-of-service based compensation arrangements are initially excluded from the definition of “indirect compensation arrangement” at § 411.354(c)(2) or included in the definition and then excepted under § 411.357(p) after applying the special rules at § 411.354(d)(2) and (3). In response, we stated that, although we agree that the ultimate result may be the same—time, unit-of-service, or other “per click” based arrangements are generally permitted if they are at fair market value without reference to referrals—we believe that [the Phase I regulatory] construct more closely corresponds to the statutory treatment of direct compensation arrangements (69 FR 16059). We elected to retain the regulatory structure finalized in Phase I, noting a two-fold intent.

We stated that we intended to include in the definition of “indirect compensation arrangement” any compensation arrangements (including time-based or unit-of-service based compensation arrangements) where the aggregate compensation received by the referring physician varies with, or otherwise takes into account, the volume or value of referrals or other business generated between the parties, regardless of whether the individual unit of compensation qualifies under § 411.354(d)(2) and (3) (69 FR 16059). We continued that we intended to exclude under the exception at § 411.357(p) that subset of indirect compensation arrangements where the compensation is fair market value and does not reflect the volume or value of referrals or other business generated (and the other requirements of the exception are satisfied). We stated that per-unit compensation will meet this test if it complies with the conditions of § 411.354(d)(2) and (3).

In developing our response to the commenters to the proposed rule, we revisited the regulatory construct for determining which unbroken chains of financial relationships between entities and physicians (or immediate family members of a physician) establish indirect compensation arrangements and how to determine if they pose a risk of program or patient abuse. One of the driving goals of this final rulemaking, which is a shared goal of the Patients over Paperwork initiative and the Regulatory Sprint, is to reduce unnecessary burden on providers and suppliers. As we discussed in section I.D.

Of this final rule, our final policies are intended to balance genuine program integrity concerns against the considerable burden of the physician self-referral law's referral and billing prohibitions. We see no need to continue to treat compensation arrangements that may qualify as “indirect compensation arrangements” in the exact same way that the statute treats direct compensation arrangements Start Printed Page 77546when that construct creates unnecessary burden on the regulated industry. We believe that it is possible to simplify the analysis of whether an unbroken chain of financial relationships between an entity and a physician (or immediate family member of a physician) poses a risk of program or patient abuse without raising program integrity concerns, and we are finalizing revisions to the regulations at § 411.354(c)(2) that we believe achieve the same result as the Phase I regulatory construct in protecting against program or patient abuse but reduce unnecessary burden on the regulated industry.

We are revising our regulations at § 411.354(c)(2)(ii) to effectively incorporate and apply the conditions of the special rules on unit-based compensation at the definitional level when determining whether an indirect compensation arrangement exists that must satisfy the requirements of an applicable exception in order to avoid the prohibitions of the physician self-referral law. Unless all the elements of final § 411.354(c)(2)(i), (ii) and (iii) exist, the unbroken chain of financial relationships between an entity furnishing designated health services and a physician (or immediate family member of a physician) will not be considered an indirect compensation arrangement. Nor will the unbroken chain of financial relationships be considered a direct compensation arrangement under § 411.354(c)(1).

Therefore, the referral and billing prohibitions of the physician self-referral law will not apply. Under the regulations finalized in this final rule, an unbroken chain of financial relationships between an entity and a physician will be considered an indirect compensation arrangement if the physician (or immediate family member of the physician) receives aggregate compensation from the person or entity in the chain with which the physician (or immediate family member) has a direct financial relationship that varies with the volume or value of referrals or other business generated by the physician for the entity furnishing the designated health services, and any of the following are true. (1) The individual unit of compensation received by the physician (or immediate family member) is not fair market value for items or services actually provided.

(2) the individual unit of compensation received by the physician (or immediate family member) is calculated using a formula that includes the physician's referrals to the entity furnishing designated health services as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the number or value of the physician's referrals to the entity. Or (3) the individual unit of compensation received by the physician (or immediate family member) is calculated using a formula that includes other business generated by the physician for the entity furnishing designated health services as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the physician's generation of other business for the entity. In addition, the entity must have actual knowledge of, or act in reckless disregard or deliberate ignorance of, the fact that the referring physician (or immediate family member) receives aggregate compensation that varies with the volume or value of referrals or other business generated by the referring physician for the entity.

We acknowledge that our final policies will reduce the number of unbroken chains of financial relationships that fall within the ambit of the physician self-referral law as indirect compensation arrangements (although they may still implicate the anti-kickback statute, depending on the facts and circumstances). We also acknowledge that, by analyzing unit-based compensation at the definitional stage at final § 411.354(c)(2)(ii), many unbroken chains of financial relationships will no longer be required to satisfy the writing requirement at § 411.357(p)(2), potentially limiting our and law enforcement's visibility into the compensation received by physicians who make referrals for designated health services to the entities at the other end of the unbroken chain of financial relationships between them. However, as we have stated many times in previous rulemakings and in this final rule, we believe that it is a common practice (if not the best practice), and required by other Federal and State statutes and regulations, for parties to reduce their arrangements to writing, including the compensation and other terms of their arrangements.

Also, we remind readers that compliance with the physician self-referral law is a prerequisite for submitting a claim to Medicare for a designated health service referred by a physician who has (or whose immediate family member has) a financial relationship with the entity submitting the claim. Included in the burden of proof to show that a claim for designated health services is permissible is the burden to show either that the physician self-referral law does not apply because the parties do not have a financial relationship within the meaning of the physician self-referral law or, if the law does apply because the parties have a financial relationship within the meaning of the physician self-referral law, that all the requirements of an applicable exception are satisfied. An entity's mistaken belief that no indirect compensation arrangement exists does not eliminate the need to satisfy the requirements of an applicable exception to the physician self-referral law.

Comment. One commenter requested that we deem certain compensation formulas that do include the physician's referrals to an entity or other business generated by a physician for the entity as a variable to nonetheless not take into account the volume or value of referrals or other business generated if the compensation arrangement is consistent with value-based care goals but does not qualify for or satisfy the requirements of the new exceptions at § 411.357(aa). Response.

We decline to permit any arrangement under which compensation is determined using a formula that includes a physician's referrals to or other business generated for the entity as a variable and creates the positive or negative correlation with the compensation paid to or from the physician, as applicable. If a compensation arrangement does not qualify for or does not satisfy all the requirements of an exception at new § 411.357(aa), the compensation paid under the arrangement may not take into account the volume or value of the physician's referrals or other business generated by the physician for the entity. Although the new exceptions at § 411.357(aa) do not include a requirement that the compensation does not take into account the volume or value of a physician's referrals or other business generated by the physician, they include substitute safeguards against program or patient abuse through their limited application and included requirements.

Permitting an arrangement to circumvent those safeguards and the volume or value and other business generated standards of the traditional exceptions would pose a risk of program or patient abuse. Comment. One commenter requested clarification of the term “other business generated.” The commenter stated that industry guidance suggests that other business generated means services that are not designated health services.

The commenter proposed that the definition of “other business generated” should include only services paid by government payors, and should not Start Printed Page 77547extend to services paid by private or commercial payors. Response. Our interpretation of the term “other business generated” is longstanding and settled.

In Phase I, we stated that, based on our review of the legislative history, we believe that the Congress intended the “other business generated” language to be a limitation on the compensation or payment formula parallel to the statutory and regulatory prohibition on taking into account referrals of designated health services. We further stated that, in the provisions in which the phrase appears, affected payments cannot be based or adjusted in any way on referrals of designated health services or on any other business referred by the physician, including other Federal and private pay business (66 FR 877). We see no reason to revisit this interpretation as suggested by the commenter.

Comment. A few commenters objected to our proposals to establish special rules on the volume or value standard and the other business generated standard based on what appear to be fair market value concerns. The commenters provided the example of a hospital that determines the amount of fixed-rate compensation at a higher level than a physician practice might pay the physician because the hospital knows that it can direct the physician's referrals to the hospital and its affiliates to “make up the difference” in billings for those services.

Response. We assume the commenters are referring to compensation that is based on the physician's personally performed services and not referrals of designated health services or other business generated by the physician for the entity paying the compensation, for instance, a salary of $300,000 per year. Although the formula for calculating fixed-rate compensation for a physician's personally performed services would not include the physician's referrals to the entity or other business generated by the physician for the entity as variables—in our example, the physician's compensation would be $300,000 × the number of years of the arrangement's duration—the compensation arrangement must satisfy all the requirements of an applicable exception in order not to trigger the referral and billing prohibitions of the physician self-referral law.

Compensation that is inflated to recognize the ability of the hospital to receive payment under the IPPS and OPPS for designated health services that it requires the physician to refer to the hospital or a specific provider, practitioner, or supplier within the hospital's health system may not be fair market value for the physician's personally performed services under our existing definition of “fair market value” and the revised definition of “fair market value” finalized in this final rule. See section II.B.5. Of this final rule for a detailed discussion of our final policies with respect to the definition of “fair market value.” Also, as described above and in more detail in section II.B.4.

Of this final rule, if any compensation paid to the referring physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement must satisfy the conditions of § 411.354(d)(4). 4. Patient Choice and Directed Referrals (§ 411.354(d)(4)) Historically, when the conditions of the special rule at § 411.354(d)(4) are met, compensation from a bona fide employer, under a managed care contract, or under a personal service arrangement is deemed not to take into account the volume or value of referrals, even if the physician's compensation is predicated, either expressly or otherwise, on the physician making referrals to a particular provider, practitioner, or supplier.

This special rule was established in Phase I after many commenters objected to our statement in the 1998 proposed rule that fixed payments to a physician could be considered to take into account the volume or value of referrals if a condition or requirement for receiving the payment was that the physician refer designated health services to a given entity, such as an employer or an affiliated entity (63 FR 1700). In Phase I, we acknowledged that the proposed interpretation could have had far-reaching effects, especially for managed care arrangements and group practices (66 FR 878). We determined that we would not consider a physician's compensation to take into account the volume or value of his or her referrals, as long as the directed referral requirement does not apply if a patient expresses a preference for a different provider, practitioner, or supplier.

The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment (66 FR 878). In addition, the referral requirement must be set out in writing and signed by the parties, and the compensation to the physician must be.

(1) Set in advance for the term of the compensation arrangement. And (2) consistent with fair market value for the services performed. Finally, the compensation arrangement must otherwise comply with an applicable exception in § 411.355 or § 411.357.

We continue to believe in the importance of preserving patient choice, protecting the physician's professional medical judgment, and avoiding interference in the operations of a managed care organization. In the proposed rule, we expressed concern that, given our proposed interpretation of the volume or value standard, § 411.354(d)(4) may apply in fewer instances, if at all, to serve these important goals. To reiterate how critical these protections are, we proposed to include in the exceptions applicable to the types of contracts or arrangements to which the special rule has historically applied an affirmative requirement that the compensation arrangement meet the conditions of the special rule at § 411.354(d)(4).

To that end, we proposed to include in the exceptions at § 411.355(e) for academic medical centers, § 411.357(c) for bona fide employment relationships, § 411.357(d)(1) for personal service arrangements, § 411.357(d)(2) for physician incentive plans, § 411.357(h) for group practice arrangements with a hospital, § 411.357(l) for fair market value compensation, and § 411.357(p) for indirect compensation arrangements, a requirement that, in addition to satisfying the other requirements of the exception, the relevant arrangement must comply with the conditions of the revised special rule at § 411.354(d)(4). In making this proposal, we relied on the authority granted to the Secretary under sections 1877(b)(4), (e)(2)(D), (e)(3)(A)(vii), (e)(3)(B)(i)(II), and (e)(7)(vii) of the Act. We solicited comment as to whether, given the nature of academic medical centers, the conditions of revised § 411.354(d)(4) are necessary.

We are finalizing our proposal to include an affirmative requirement that the compensation arrangement meet the conditions of the special rule at § 411.354(d)(4) in all of the exceptions identified in the proposed rule. As explained in section II.E.1. Of this final rule, we are also finalizing this requirement in the new exception for limited remuneration to a physician at § 411.357(z).

Although the requirement is not included in the new exceptions for value-based arrangements at final § 411.357(aa), as discussed in section II.A.2. Of this final rule, we have incorporated into these exceptions specific requirements related to remuneration paid to a physician that is conditioned on the physician's referrals to a particular provider, practitioner, or supplier. In the 1998 proposed rule, highlighting stakeholder inquiries Start Printed Page 77548regarding whether an arrangement fails to meet the volume or value standard only in situations in which a physician's payments from an entity fluctuate in a manner that reflects referrals, we expressed our view that an arrangement can also fail to meet this standard in some cases when a physician's payments from an entity are stable, but predicated, either expressly or otherwise, on the physician making referrals to a particular provider.

We gave the example of a hospital that includes as a condition of a physician's employment the requirement that the physician refer only within the hospital's own network of ancillary service providers, such as to the hospital's own home health agency. We stated that, in these situations, a physician's compensation reflects the volume or value of his or her referrals in the sense that the physician will receive no future compensation if he or she fails to refer as required. We continue to believe that conditioning a physician's future compensation on his or her referrals could improperly influence the physician's medical decision making, potentially impacting patient choice or the utilization of services.

However, upon further examination of the policy goals behind our statements in the 1998 proposed rule (63 FR 1700), the special rule finalized in Phase I (66 FR 878), and the comments on the proposed rule, we no longer believe that compensation predicated, either expressly or otherwise, on the physician making referrals of designated health services to a particular provider, practitioner, or supplier should be evaluated for compliance with the volume or value standard. As described in the proposed rule (84 FR 55789) and in section II.B.3. Of this final rule, after reviewing the statute and our regulations in a fresh light, we now believe that the volume or value standard is most appropriately interpreted as relating to how compensation is calculated.

That is, what formula is used to determine the amount of the physician's compensation. We are finalizing special rules at § 411.354(d)(5)(i) and (6)(i) that set forth mathematical formulas that identify compensation that takes into account the volume or value of a physician's referrals. However, a review of the mathematical formula that determines the amount of the physician's compensation would not be sufficient to identify a referral requirement that could lead to program or patient abuse.

Rather, payment conditioned on the physician's referrals of designated health services to a given entity, such as an employer or an affiliated entity, should be evaluated for compliance with the special rule at § 411.354(d)(4), which is mandatory under the policies finalized in this final rule. As we explained in the proposed rule (84 FR 55794) and our response to comments in section II.B.3. Of this final rule, there is a risk of program or patient abuse when a physician will receive no future compensation if he or she fails to refer as required.

The same is true if the amount of the physician's compensation is tied to the physician's referral to a particular provider, practitioner, or supplier. To address this risk, we are revising § 411.354(d)(4) to include a condition at § 411.354(d)(4)(vi) that neither the existence of the compensation arrangement nor the amount of the compensation is contingent on the number or value of the physician's referrals to the particular provider, practitioner, or supplier. This condition must be met regardless of whether the physician's compensation takes into account the volume or value of his or her referrals to the entity with which the physician has the compensation arrangement.

As applied, under final § 411.354(d)(4)(vi), where an entity requires a physician to refer patients for designated health services to a particular provider, practitioner, or supplier and the applicable exception requires compliance with § 411.354(d)(4), in addition to meeting the other conditions of § 411.354(d)(4), neither the existence of the compensation arrangement nor the amount of the compensation may be contingent on the number or value of the physician's referrals to the particular provider, practitioner, or supplier. The requirement to make referrals to a particular provider, practitioner, or supplier may require that the physician refer an established percentage or ratio of the physician's referrals to a particular provider, practitioner, or supplier. In the proposed rule, we described this type of contingency as a direct “if X, then Y” correlation (84 FR 55794).

The proposed special rule built upon the concerns described above, which we originally described in the 1998 proposed rule as relating to a nexus between fixed-rate compensation and the volume or value of a physician's compensation. We believe that the condition at final § 411.354(d)(4)(vi) provides a clearer standard for stakeholders and better addresses our concerns than the proposed special rule that would have considered fixed-rate compensation to take into account the volume or value of referrals if there is a predetermined, direct correlation between the physician's prior referrals to the entity and the prospective rate of compensation to be paid over the entire duration of the arrangement for which the compensation is determined. We provide the following example to illustrate the application of our final regulation at § 411.354(d)(4)(vi).

Assume that a hospital directly employs a cardiologist to treat patients in the hospital's outpatient cardiology department. The physician is paid a predetermined, unvarying annual salary. Under the employment arrangement, the hospital requires the physician to refer patients to the hospital or other providers and suppliers wholly owned by the hospital, unless the patient expresses a preference for a different provider, practitioner, or supplier.

The patient's insurer determines the provider, practitioner or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment. When negotiating an extension of the employment arrangement and revised compensation terms, the hospital reviews the past performance of the physician, including the physician's referrals for diagnostic testing.

At final § 411.357(c)(5), the exception for bona fide employment relationships requires compliance with the conditions of the special rule for directed referrals at § 411.354(d)(4). (The exceptions for personal service arrangements and fair market value compensation have identical requirements at § 411.357(d)(1)(viii) and (l)(7), respectively.) Under § 411.354(d)(4)(vi), the amount of the physician's compensation may not be contingent on the number or value of the physician's referrals under the directed referral requirement. Thus, if, for example, the hospital increases the physician's compensation in the renewal term only if the physician made a targeted number of referrals for diagnostic testing to the hospital or the designated wholly-owned providers and suppliers in the current term, the compensation would not meet the condition at § 411.354(d)(4)(vi).

Similarly, if, for example, the hospital refuses to renew the employment arrangement (or terminates it in the current term) unless the value of the physician's diagnostic testing referrals generates sufficient profit to the hospital (or its wholly-owned providers and suppliers), the existence of the compensation arrangement would be contingent on the value of the physician's referrals in violation of § 411.354(d)(4)(vi).Start Printed Page 77549 We also proposed to revise § 411.354(d)(4) to eliminate certain language regarding. (1) Whether the “set in advance” and “fair market value” conditions of the special rule apply to the compensation arrangement (as stated in the regulation) or to the compensation itself. And (2) when compensation is considered fair market value.

The proposed revisions were intended to clarify that the physician's compensation must be set in advance. Any changes to the compensation (or the formula for determining the compensation) must also be set in advance (that is, made prospectively). (See section II.D.5.

Of this final rule for a detailed discussion of the “set in advance” deeming provision at § 411.354(d)(1).) We proposed to clarify that the physician's compensation must be consistent with the fair market value of the services performed. In addition, we proposed to eliminate the parenthetical language in existing § 411.354(d)(4) as it conflates the concept of fair market value and the volume or value standard. As noted in response to the comment in section II.B.1.

Of this final rule, these are separate standards, and compliance with one is not contingent on compliance with the other. We also proposed nonsubstantive revisions for clarity. We noted that, although revised § 411.354(d)(4) sets forth protections that apply to both the compensation arrangement that includes a directed referral requirement and also specifically to the compensation itself, for continuity in the application of the regulation, we would leave the regulation in § 411.354(d), which sets forth special rules on compensation, rather than include it in § 411.354(e), which sets forth special rules for compensation arrangements.

We are finalizing the proposed restructuring of and nonsubstantive revisions to § 411.354(d)(4). We received the following comments and our responses follow. Comment.

Many commenters recognized that directed referral requirements would be permitted without limitation if we finalized our proposed interpretation of the volume or value standard at § 411.354(d)(5). Commenters agreed that compliance with the conditions of the special rule at § 411.354(d)(4) provides important protections for patients and the independence of a physician's medical decision making. Several commenters supported our proposal to continue this protection by including in the exceptions at § 411.355(e) for academic medical centers, § 411.357(c) for bona fide employment relationships, § 411.357(d)(1) for personal service arrangements, § 411.357(d)(2) for physician incentive plans, § 411.357(h) for group practice arrangements with a hospital, § 411.357(l) for fair market value compensation, and § 411.357(p) for indirect compensation arrangements an affirmative requirement for compliance with § 411.354(d)(4) when a physician's compensation is conditioned on his or her referrals to a particular provider, practitioner, or supplier.

Response. We agree with the commenters that patient choice, independent medical decision making, and avoiding interference with managed care contracts should be protected. We are finalizing our proposals and, as discussed in section II.E.1.

Of this final rule, are including the requirement in the new exception for limited remuneration to a physician at § 411.357(z). As the previous commenter described, directed referral requirements can take the form of conditioning the existence of the arrangement itself on the physician's referrals to a particular provider, practitioner, or supplier, or they may condition the amount of the physician's compensation on his or her referrals to a particular provider, practitioner, or supplier. Because both types of conditioning represent threats to patient choice and the independence of a physician's medical decision making, in order to reflect both of these conditioning requirements, we are revising the language of § 411.354(d)(4), with which the compensation arrangement must comply under the exceptions at §§ 411.355(e) and 411.357(c), (d)(1), (d)(2), (h), (l), (p), and (z).

In each of the exceptions noted, if the physician referrals are directed to a particular provider, practitioner, or supplier, the arrangement must satisfy the conditions of § 411.354(d)(4). Comment. A few commenters stated that they did not oppose the policy stated in the proposed rule (84 FR 55796) that § 411.354(d)(4) applies to both the situation where the compensation arrangement is contingent on the physician's required referrals and the situation where the compensation amount is contingent on the physician's required referrals, but requested guidance on the precise function of the special rule at § 411.354(d)(4) in light of our proposed interpretation of the volume or value standard.

One of these commenters focused on the contractual terms between the parties to the compensation arrangement, and asked whether the volume or value standard would be violated if the breach of a directed referral requirement resulted only in termination of the arrangement, rather than an impact on the amount of the physician's compensation from the entity. This commenter provided a second example of a directed referral requirement that it stated would affect the amount of a physician's compensation. Under that example, a physician is paid different stipulated percentages of a bonus pool depending on the percentage of the physician's referrals that are “in network” (that is, to a particular provider, practitioner, or supplier).

The commenter requested clarification of the applicability of the special rule at § 411.354(d)(4) and whether provisions such as those described would violate the volume or value standard as proposed. A different commenter described a compensation arrangement under which a physician is paid an amount that does not result from a mathematical model tied to individual referrals of designated health services, but rather a “model” under which the entity knows it will generate revenue by requiring physician referrals to a particular provider, practitioner, or supplier. The commenter stated that, under the scenario presented, the entity is not rewarding (paying) the physician for referrals but would terminate the physician's employment if he or she does not actively participate in the mandated referrals.

The commenter asked whether CMS views this type of compensation model as taking into account the volume or value of the physician's referrals. Response. In light of this specific comment and other similar comments, we revisited the history of § 411.354(d)(4) and our previously-stated concerns regarding directed referral requirements that ultimately led to the establishment of the special rule.

As we stated in Phase I, we understand that directed referral requirements are a common and integral part of employment relationships, personal service arrangements, and managed care contracts (66 FR 878). Even so, we continue to believe that payments tied to referral requirements can be abused, and appropriate safeguards should be in place to protect against the risk of program or patient abuse when an entity directs a physician where to make referrals of designated health services. After review of the regulatory history of our interpretation of the volume or value standard and the establishment of the special rule at § 411.354(d)(4), we now believe that the best approach to addressing the risks of directed referral requirements is to affirmatively require compliance with the conditions of Start Printed Page 77550§ 411.354(d)(4) whenever an entity conditions the compensation of a physician with whom it has an employment relationship, personal service arrangement, or managed care contract on the physician's referrals for designated health services to a particular provider, practitioner, or supplier.

Compensation conditioned, either expressly or otherwise, on the physician making referrals of designated health services to a particular provider, practitioner, or supplier should not be evaluated for compliance with the volume or value standard. Because we are finalizing requirements in certain exceptions for affirmative compliance with the conditions of § 411.354(d)(4), and directed referral requirements will no longer be considered in the context of compliance with the volume or value standards, we are applying the condition at final § 411.354(d)(4)(vi), rather than the final regulation at § 411.354(d)(5)(i), in our response to the commenters. The condition at § 411.354(d)(vi) applies to a directed referral requirement which, if not achieved, would result in the termination of a physician's compensation arrangement, even if it would not impact the amount of the physician's compensation from the entity.

The condition at § 411.354(d)(4)(vi) prohibits making the existence of a compensation arrangement contingent on the number or value of the physician's referrals to a particular provider, practitioner, or supplier. If the compensation arrangement would be terminated if the physician failed to refer a sufficient number of patients for designated health services, or if the value of the physician's referrals of designated health services failed to achieve the target established under the directed referral requirement, the directed referral requirement would be impermissible and the compensation arrangement would not satisfy the applicable exception's requirement of compliance with § 411.354(d)(4). We emphasize that § 411.354(d)(4)(vi) does not prohibit directed referral requirements based on an established percentage—rather than the number or value—of a physician's referrals.

Therefore, if the directed referral requirement in the commenter's example provided for termination of the compensation arrangement if the physician failed to refer 90 percent, for example, of his or her patients to a particular provider, practitioner, or supplier, it would not run afoul of the special rule at § 411.354(d)(4) or jeopardize compliance with the requirement of the applicable exception. With respect to the commenter's second example that ties the amount of the physician's compensation to achievement of a directed referral requirement, the condition at § 411.354(d)(4)(vi) would apply in the same manner. A directed referral requirement under which a physician is paid different stipulated percentages of a bonus pool depending on the percentage of the physician's referrals that are “in network” (that is, to a particular provider, practitioner, or supplier) would not be categorically prohibited under § 411.354(d)(4)(vi).

However, we caution that the composition of the bonus pool must be analyzed to ensure that the formula for the compensation ultimately paid to the physician does not include referrals of designated health services or other business generated by the physician as a variable. Also, if the directed referral requirement was tied to the number or value of the physician's referrals, it would run afoul of the special rule at § 411.354(d)(4) and and the compensation arrangement would not satisfy the applicable exception's requirement of compliance with § 411.354(d)(4). Comment.

One commenter expressed support for the affirmative requirement for compliance with the conditions of § 411.354(d)(4) where a physician is directed to refer patients to a particular provider, practitioner, or supplier under the physician's compensation arrangement with the entity directing the referrals. The commenter recommended that we finalize our proposal to make the compliance requirement mandatory, and that we apply the rule where the referral requirement is not only express, but where it occurs as the practical result of processes that steer a physician's referrals for designated health service to a provider, practitioner, or supplier selected by the entity. Response.

The affirmative obligation finalized in the exceptions at §§ 411.355(e) and 411.357(c), (d)(1), (d)(2), (h), (l), (p), and (z) is not limited to express or written requirements to refer patients to particular provider, practitioner, or supplier selected by the entity paying the compensation. Rather, the condition at § 411.354(d)(4)(vi), as finalized, prohibits making the existence of the compensation arrangement or any compensation paid to the referring physician contingent on the physician's referrals to a particular provider, practitioner, or supplier. Comment.

One commenter expressed general agreement with the proposals to include compliance with the conditions of § 411.354(d)(4) as an affirmative requirement in exceptions applicable to compensation for physician services in those instances where the physician's compensation is conditioned on the physician's referrals to a particular provider, practitioner, or supplier. The commenter also supported leaving the regulation in § 411.354(d)(4), rather than include it with other special rules related to compensation arrangements at § 411.354(e). Response.

We are finalizing our proposals with the modifications explained in the responses to other comments. We agree with the commenter that the regulation should remain at § 411.354(d)(4). We believe this will avoid disruption with stakeholder compliance efforts and our enforcement efforts.

Comment. One commenter urged CMS not to adopt an affirmative requirement to comply with the conditions of § 411.354(d)(4) when a physician's compensation is conditioned on the physician's referrals to a particular provider, practitioner, or supplier. Despite its stated support for patient preference in referrals, the commenter asserted that the requirement would place additional burden on physicians and other providers.

Response. Where such referral requirements have existed, they have historically implicated the volume or value standard under our historic interpretation of that standard. Thus, parties would have had to comply with the conditions of § 411.354(d)(4) in order to be assured not to run afoul of the volume or value standard, or offer some other proof of compliance with the volume or value standard.

This is not a new requirement. Comment. A few commenters discussed what they termed “employee workplace requirements” that require an employed physician to treat the employer's patients in a specified workplace, typically the location of a medical practice or clinic and the address of an affiliated hospital.

The commenters questioned whether such requirements were of concern to CMS. The commenters requested that CMS provide guidance on employee workplace requirements, suggesting that several approaches might be appropriate. The commenters offered that CMS could take the position that employee workplace requirements are not directed referral requirements that trigger the need for compliance with the volume or value standard because the employed physician is merely restricted by his or her employment from working Start Printed Page 77551elsewhere and is not expressly required to refer patients to the employer.

In the alternative, the commenters offered that CMS could take the position that such workplace requirements are directed referral requirements because the employer is effectively requiring the physician to refer his or her patients to the employer and, for example, an affiliated hospital for designated health services. If so, the commenters requested that CMS confirm that § 411.354(d)(4) requires only that the employer permits the physician to refer the patient to another physician who can provide the services (such as a surgery or other procedure) at a different location based on patient preference, payor requirements, or the best medical interest of the patient. The commenters requested specific confirmation that § 411.354(d)(4) does not require the employer to permit the employed physician to personally treat the patient in a location other than that specified in the physician's employment contract.

Response. Under the policies finalized in this final rule, a directed referral requirement will not trigger analysis for compliance with the volume or value standard at final § 411.354(d)(5). However, a compensation arrangement will have to satisfy the conditions of § 411.354(d)(4) if any of the physician's compensation is conditioned on the physician's referrals to a particular provider, practitioner, or supplier and the parties intend to rely on the exception at § 411.355(e) or § 411.357(c), (d)(1), (d)(2), (h), (l), (p), or (z).

The commenter is correct that the requirement to comply with § 411.354(d)(4) is not intended to interfere with employer's rights or operations or infringe on the employer-employee relationship. The condition at § 411.354(d)(4)(iv)(B) requires only that the requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier.

Or the referral is not in the patient's best medical interests in the physician's judgment. Requiring that the employed physician refer the patient to another physician for treatment is permissible, provided that the referral is appropriate. We wish to make clear that the permissibility of the referral to another physician for purposes of the physician self-referral law has no bearing on whether the employed physician complies with any State law and common law requirements, such as laws regarding patient abandonment.

Comment. Many commenters noted that the term “referrals” is used throughout our physician self-referral regulations. Commenters stated that, although the term is defined at § 411.351, they were uncertain whether the term “referrals” has the meaning ascribed to it at § 411.351 in all instances in which it appears in the regulations.

Several commenters asked if the term “referrals” in § 411.354(d)(4) is intended to encompass more than the defined term “referrals” at § 411.351. One commenter stated that, if the meaning of “referrals,” as used at § 411.354(d)(4), is not limited to the definition at § 411.351, the proposed inclusion of a requirement for compliance with the conditions of § 411.354(d)(4) as an element of the exceptions for bona fide employment relationships, personal service arrangements, and others has the effect of introducing an all-payor volume or value standard into these exceptions. The commenters requested that CMS expressly clarify in commentary that, unless otherwise noted, when “referrals” appears in the physician self-referral regulations, it has the meaning set forth at § 411.351.

Response. The introductory language to § 411.351 states clearly that, unless the context indicates otherwise, the term “referral” has the meaning set forth in § 411.351. The term “referral,” as used at § 411.354(d)(4) and the new requirement in certain exceptions that, if remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4) have the meaning set forth in the definition of “referral” at § 411.351.

In Phase I, we discussed the scope of the term “referral” with reference to a requirement that a physician refer designated health services to a given entity (66 FR 878). As we stated above in section II.B.2. Of this final rule, unless the context indicates otherwise, the term “referral” has the meaning set forth in § 411.351 throughout the physician self-referral regulations, including in the special rules on compensation at § 411.354(d).

5. Fair Market Value (§ 411.351) The term “fair market value,” as it is defined at section 1877(h)(3) of the Act, consists of three basic components. Fair market value is defined generally as “the value in arms length [sic] transactions, consistent with the general market value.” The statutory definition includes additional qualifications for leases generally, providing that fair market value with respect to rentals or leases also means “the value of rental property for general commercial purposes (not taking into account its intended use).” Finally, with respect to the lease of office space, in particular, the statutory definition further stipulates that fair market value also means that the value of the rental property is “not adjusted to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee.” Most of the statutory exceptions at section 1877(e) of the Act relating to compensation arrangements include requirements pertaining to fair market value compensation, including the exceptions for the rental of office space, the rental of equipment, bona fide employment relationships, personal service arrangements, isolated transactions, and payments by a physician.

Many of the regulatory exceptions created using the Secretary's authority under section 1877(b)(4) of the Act also include requirements pertaining to fair market value compensation, including the exceptions for academic medical centers, fair market value compensation, indirect compensation arrangements, EHR items and services, and assistance to compensate a nonphysician practitioner. The term “fair market value” is defined in our regulations in § 411.351. In the 1992 proposed rule (57 FR 8602) and the 1995 final rule (60 FR 41978), we incorporated the statutory definition of “fair market value” into our regulations without modification.

In the 1998 proposed rule (63 FR 1686), we proposed to include in our definition of “fair market value” a definition of “general market value,” to explain what it means for a value to be “consistent with the general market value.” In an attempt to ensure consistency across our regulations, we proposed to adopt the definition of “general market value” from part 413 of our regulations, which pertains to reasonable cost reimbursement for end stage renal disease services. In the context of determining the cost incurred by a present owner in acquiring an asset, § 413.134(b)(2) defined “fair market value” as “the price that the asset would bring by bona fide bargaining between well-informed buyers and sellers at the date of acquisition. Usually the fair market price is the price that bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition.” We modified the Start Printed Page 77552definition drawn from § 413.134(b)(2) to include analogous provisions for determining the fair market value of any items or services, including personal services, employment relationships, and rental arrangements.

As proposed in the 1998 proposed rule, “general market value” would mean. The price that an asset would bring, as the result of bona fide bargaining between well-informed buyers and sellers, or the compensation that would be included in a service agreement, as the result of bona fide bargaining between well-informed parties to the agreement, on the date of acquisition of the asset or at the time of the service agreement. Usually the fair market price is the price at which bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition, or the compensation that has been included in bona fide service agreements with comparable terms at the time of the agreement.

The proposed definition of “fair market value” in the 1998 proposed rule did not substantively modify the provisions of the fair market value definition pertaining to leases in general and office space leases in particular. In Phase I, we finalized the definition of “fair market value” from the 1998 proposed rule with one modification (66 FR 944 through 945). The definition of “fair market” value finalized in Phase I clarified that a rental payment “does not take into account intended use if it takes into account costs incurred by the lessor in developing or upgrading the property or maintaining the property or its improvements.” In Phase I we also responded to commenters that requested guidance on how to determine fair market value in a variety of circumstances.

We stated that we would accept any commercially reasonable method for determining fair market value. However, we noted that, in most exceptions, the fair market value requirement is further modified by language that precludes taking into account the volume or value of referrals, and, in some cases, other business generated by the referring physician. We concluded that, in determining whether compensation is fair market value, requirements pertaining to the volume or value of referrals and other business generated may preclude reliance on comparables that involve entities and physicians in a position to refer or generate business (66 FR 944).

Elsewhere in Phase I, we suggested a similar underlying connection between the fair market value requirement and requirements pertaining to the volume or value of a physician's referrals and other business generated (66 FR 877). In a discussion of our then-interpretation of the fair market value standard in light of our Phase I interpretation of the requirement that compensation not take into account other business generated, we stated that— [T]he additional limiting phrase `not taking into account * * * other business generated between the parties' means simply that the fixed, fair market value payment cannot take into account, or vary with, referrals of Medicare or Medicaid [designated health services] or any other business generated by the referring physician, including other Federal and private pay business. Simply stated, section 1877 of the Act establishes a straightforward test that compensation arrangements should be at fair market value for the work or service performed or the equipment or space leased—not inflated to compensate for the physician's ability to generate other revenues.

Despite our intimation in Phase I that the concepts of fair market value and the volume and value of referrals or other business generated were fundamentally interrelated, the definition of fair market value finalized in Phase I did not include any reference to the volume or value of a physician's referrals. In Phase II, we made two significant modifications to the definition of “fair market value.” First, we proposed certain “safe harbors” for determining fair market value for hourly payments made to physicians for physician services (69 FR 16092 and 16107). (These safe harbors were not finalized.) Second, and more importantly, we incorporated into the definition of “fair market value” a reference to the volume or value standard found in many exceptions to the physician self-referral law.

The Phase II definition of “fair market value” provided, in relevant part, that fair market value is usually the price at which bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition, or the compensation that has been included in bona fide service agreements with comparable terms at the time of the agreement, where the price or compensation has not been determined in any manner that takes into account the volume or value of anticipated or actual referrals. We explained our view that the determination of fair market value under the physician self-referral law differs in significant respects from standard valuation techniques and methodologies. In particular, we noted that the methodology must exclude valuations where the parties to the transactions are at arm's length but in a position to refer to one another (69 FR 16107).

We made no substantive changes to the definition of “fair market value” in Phase III or in any of our subsequent rulemaking. As a preliminary matter and as described previously in section II.B.1. Of this final rule, a careful reading of the statute shows that the fair market value requirement is separate and distinct from the volume or value standard and the other business generated standard.

(See section II.B.3. Of this final rule for a detailed discussion of the volume or value standard and the other business generated standard.) The volume or value and other business generated standards do not merely serve as “limiting phrases” to modify the fair market value requirement. In order to satisfy the requirements of the exceptions in which these concepts appear, compensation must both.

(1) Be fair market value for items or services provided. And (2) not take into account the volume or value of referrals (or the volume or value of other business generated by the physician, where such standard appears). We believe that the appropriate reading of the statute is that the requirement that compensation does not take into account the volume or value of referrals—which is plainly set out as an independent requirement of the relevant exceptions—is not also part of the definition of “fair market value.” We note that the statutory definition of “fair market value” at section 1877(h)(3) of the Act includes no reference to the volume or value of referrals (or other business generated between the parties or by the physician).

For these reasons and as described further below, we are finalizing our proposal to eliminate the connection to the volume or value standard in the definitions of “fair market value” and “general market value.” Our proposals to revise the definition of “fair market value” at § 411.351 were premised on our goal to give meaning to the statutory language at section 1877(h)(3) of the Act. As described previously in this section II.B.5., the statute states a general definition of “fair market value” and then modifies that definition for application to leases of equipment and office space. One of the modifications applies to leases of both equipment and office space.

The other applies only to the lease of office space. To illustrate this more clearly in our regulations, we proposed to modify the definition of “fair market value” to provide for a definition of general application, a definition applicable to the rental of equipment, and a definition Start Printed Page 77553applicable to the rental of office space. (We proposed to use the terms “rental” of equipment and “rental” of office space as those are the titles of the statutory exceptions at section 1877(e)(1)(A) and (B) of the Act and our regulatory exceptions at § 411.357(a) and (b).) We are finalizing our proposals to restructure the regulation in this way.

We believe that this approach provides parties with ready access to the definition of “fair market value,” with the attendant modifiers, that is applicable to the specific type of compensation arrangement at issue. Under the final regulation at § 411.351, generally, fair market value means the value in an arm's-length transaction, consistent with the general market value of the subject transaction. With respect to the rental of equipment, fair market value means the value in an arm's-length transaction of rental property for general commercial purposes (not taking into account its intended use), consistent with the general market value of the subject transaction.

And with respect to the rental of office space, fair market value means the value in an arm's length transaction of rental property for general commercial purposes (not taking into account its intended use), without adjustment to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee, and consistent with the general market value of the subject transaction. We are not finalizing the proposed references to “like parties and under like circumstances.” We note that the structure of the final regulation merely reorganizes for clarity, but does not significantly differ from, the statutory language at section 1877(h)(3) of the Act. We also proposed changes to the definition of “general market value,” which, until now, was included within the definition of fair market value at § 411.351.

As we explained in the proposed rule, the definition of “fair market value” finalized in Phase II states the following, some of which relates to fair market value and some of which relates to the included term, “general market value” (84 FR 55797). Numerical references are added here for ease but did not appear in the regulation at § 411.351. (1) Fair market value means the value in arm's-length transactions, consistent with the general market value.

(2) General market value means the price that an asset would bring as the result of bona fide bargaining between well-informed buyers and sellers who are not otherwise in a position to generate business for the other party, or the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party, on the date of acquisition of the asset or at the time of the service agreement. (3) Usually, the fair market price is the price at which bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition, or the compensation that has been included in bona fide service agreements with comparable terms at the time of the agreement, where the price or compensation has not been determined in any manner that takes into account the volume or value of anticipated or actual referrals. (4) With respect to rentals and leases described in § 411.357(a), (b), and (l) (as to equipment leases only), “fair market value” means the value of rental property for general commercial purposes (not taking into account its intended use).

(5) In the case of a lease of space, this value may not be adjusted to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor when the lessor is a potential source of patient referrals to the lessee. (6) For purposes of this definition, a rental payment does not take into account intended use if it takes into account costs incurred by the lessor in developing or upgrading the property or maintaining the property or its improvements. Items one, four, and five essentially restate the language at section 1877(h)(3) of the Act, albeit with the intervening language in items two and three, and item six was added in Phase I in response to a comment for the purpose of interpreting the modifier “(not taking into account its intended use)” in item four and at section 1877(h)(3) of the Act.

We stated in the 1998 proposed rule that items two and three were our attempt to give meaning to the statutory requirement that the fair market value of compensation must be “consistent with the general market value.” In doing so, we relied on a regulation that relates to the circumstances under which an appropriate allowance for depreciation on buildings and equipment used in furnishing patient care can be an allowable cost. We stated in the proposed rule that we no longer see the benefit of connecting the definition of “general market value” to principles of reasonable cost reimbursement for end stage renal disease services in order to explain what it means for a value to be consistent with general market value, as required by the statute. Moreover, the definition at § 413.134(b)(2) upon which we relied states that fair market value (not general market value) is defined as the price that the asset would bring by bona fide bargaining between well-informed buyers and sellers at the date of acquisition.

The regulation goes on to state that, usually the fair market price is the price that bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition. This definition more closely ties to the widely accepted IRS definition of “fair market value,” [] not general market value. Therefore, we considered whether current § 411.351 includes an appropriate definition for “general market value.” We stated in the proposed rule that we see no indication in the legislative history or the statutory language itself that the Congress intended that the definition of “general market value” for purposes of the physician self-referral law should deviate from general concepts and principles in the valuation community.

We discussed in detail the basis for our proposals to revise the definition of “general market value” in accordance with our belief that the Congress used the term “general market value” to ensure that the fair market value of the remuneration is generally consistent with the valuation that would result using accepted valuation principles (84 FR 55798). However, after reviewing the comments, to which our detailed responses are provided below, we believe that our proposals, if finalized, could have had an unintended limiting effect on the regulated community, as well as the valuation community. Our use of the term “market value” in our preamble discussion, although not carried into the proposed definition of “general market value,” may have been inaccurate.

Therefore, we are retracting our statements equating “general market value,” as that term appears in the statute and our regulations, with “market value,” the term we identified as uniformly used in the valuation industry (84 FR 55798).Start Printed Page 77554 We continue to believe that the general market value of a transaction is based solely on consideration of the economics of the subject transaction and should not include any consideration of other business the parties may have with one another. Thus, for example, when parties to a potential medical director arrangement determine the value of the physician's administrative services, they must not consider that the physician could also refer patients to the entity when not acting as its medical director. After reviewing the comments on our proposed definition of “general market value” and the existing regulation at § 411.351, we determined that the best way to state this policy is to remove the language regarding the volume or value standard (item three above) and restructure the definition to emphasize our policy that the valuation of the remuneration terms of a transaction should not include any consideration of other business the actual parties to the transaction may have with one another.

Also, for clarity and as supported by commenters, we are finalizing definitions of “general market value” specific to each of the types of transactions contemplated in the exceptions to the physician self-referral law—asset acquisition, compensation for services, and rental of equipment or office space. Under our final regulation at § 411.351, “general market value” means, with respect to the purchase of an asset, the price that an asset would bring on the date of acquisition of the asset as the result of bona fide bargaining between a well-informed buyer and seller that are not otherwise in a position to generate business for each other. With respect to compensation for services, “general market value” means the compensation that would be paid at the time the parties enter into the service arrangement as the result of bona fide bargaining between well-informed parties that are not otherwise in a position to generate business for each other.

And, with respect to the rental of equipment or the rental of office space, “general market value” means the price that rental property would bring at the time the parties enter into the rental arrangement as the result of bona fide bargaining between a well-informed lessor and lessee that are not otherwise in a position to generate business for each other. In the proposed rule, we stated that it is our view that the concept of fair market value relates to the value of an asset or service to hypothetical parties in a hypothetical transaction (that is, typical transactions for like assets or services, with like buyers and sellers, and under like circumstances), while general market value relates to the value of an asset or service to the actual parties to a transaction that is set to occur within a specified timeframe. We provided examples of compensation arrangements under which compensation outside the parameters of salary survey data could be appropriate (84 FR 55798 through 55799).

Although we are not finalizing the proposed analytical framework related to “hypothetical” versus “actual” transactions, we continue to believe that the fair market value of a transaction—and particularly, compensation for physician services—may not always align with published valuation data compilations, such as salary surveys. In other words, the rate of compensation set forth in a salary survey may not always be identical to the worth of a particular physician's services. For this reason, we are affirming the examples provided in the proposed rule and restate them here, with modifications to eliminate terminology not included in our final analytical framework and regulations.

As we stated in the proposed rule, extenuating circumstances may dictate that parties to an arm's length transaction veer from values identified in salary surveys and other valuation data compilations that are not specific to the actual parties to the subject transaction (84 FR 55799). By way of example, assume a hospital is engaged in negotiations to employ an orthopedic surgeon. Independent salary surveys indicate that compensation of $450,000 per year would be appropriate for an orthopedic surgeon in the geographic location of the hospital.

However, the orthopedic surgeon with whom the hospital is negotiating is one of the top orthopedic surgeons in the entire country and is highly sought after by professional athletes with knee injuries due to his specialized techniques and success rate. Thus, although the employee compensation of a hypothetical orthopedic surgeon may be $450,000 per year, this particular physician commands a significantly higher salary. In this example, compensation substantially above $450,000 per year may be fair market value.

On the other hand, hypothetical data may result in hospitals and other entities paying more than they believe appropriate for physician services. Assume a hospital is engaged in negotiations to employ a family physician. Independent salary surveys indicate that compensation of $250,000 per year would be appropriate for a family physician nationally.

No local salary surveys are available. However, the cost of living in the geographic location of the hospital is very low despite its proximity to good schools and desirable recreation opportunities, and, due to declining reimbursement rates and a somewhat poor payor mix, the hospital's economic position is tenuous. Although the physician may request the $250,000 that the salary survey indicates would be appropriate for a hypothetical (unidentified) physician to earn, and the hospital may believe that it is compelled to pay the physician this amount, the fair market value of the physician's compensation may be less than $250,000 per year (84 FR 55799).

We also proposed to remove from the regulation text at § 411.351 the statement that, for purposes of the definition of “fair market value,” a rental payment does not take into account intended use if it takes into account costs incurred by the lessor in developing or upgrading the property or maintaining the property or its improvements (84 FR 55798). This language was added to the regulation text as a result of our response in Phase I to a commenter to the 1998 proposed rule, where we stated that a rental payment does not violate the requirement that the fair market value of rental property is the value of the property for general commercial purposes, not taking into account its intended use, merely because it reflects any costs that were incurred by the lessor in developing or upgrading the property, or maintaining the property or its improvements, regardless of why the improvements were added (66 FR 945). That is, the rental payment may reflect the value of any similar commercial property with improvements or amenities of a similar value, regardless of why the property was improved.

This regulation text appears to have caused confusion among stakeholders. Although it remains our policy, to avoid further confusion and provide certainty in the final definitions of “fair market value” and “general market value,” we are finalizing our proposal to remove this language from the definition of “fair market value” at § 411.351. Lastly, we noted in the proposed rule that many CMS RFI commenters requested that we simply return to the statutory language defining fair market value (84 FR 55798).

Some commenters on the proposed rule made similar requests. We continue to disagree that this would be the best approach. We believe that it is important to provide guidance with respect to the requirement that compensation is fair market value in order not to stymy our Start Printed Page 77555enforcement efforts (or those of our law enforcement partners).

This guidance is also crucial to support the compliance efforts of the regulated industry. We received the following comments and our responses follow. Comment.

Some commenters supported our proposal to remove the language regarding bargaining between well-informed buyers and sellers who are not otherwise in a position to generate business for the other party, suggesting that this language essentially links the volume or value standard with the definition of “fair market value.” The commenters noted that CMS clearly stated in the proposed rule that the volume or value standard and other business generated standard are distinct and separate requirements of many exceptions to the physician self-referral law (84 FR 55797). These commenters also referenced court opinions in which they believe the standards were blended or conflated by the court, causing confusion, additional litigation, and what they termed a “torrent of unnecessary effort to reexamine arrangements long-believed to comply with the law.” The commenters contended that parties should not have to search for market data that isolates transactions with physicians who are not in a position to refer to the entities with which they have compensation arrangements. In contrast, one commenter strongly opposed our proposal to remove the language regarding well-informed buyers and sellers that are not otherwise in a position to generate business for each other from the definition of “general market value.” A few other commenters asserted that, by defining general market value as the value determined by the parties to the subject transaction, the standard would simply be a subjective test of how parties to the transaction value the services, which could include additional payment for referrals or the generation of business.

These commenters asserted that delinking the definition of “general market value” from the ability to generate business could result in the parties comparing the subject transaction to other transactions under which compensation is inflated by the value of referrals. One commenter suggested that we include in regulation text our preamble statement that [general] market value is based solely on consideration of the economics of the subject transaction and should not include any consideration of other business the parties may have with one another (84 FR 55798). The commenter asserted that this would address the legitimate concern about valuations for purposes of the physician self-referral law being distorted by considerations of referrals.

The commenter suggested that we include this statement at the end of the proposed definition of “general market value” for clarity. Response. Although we disagree with the characterization of our proposal to define general market value merely as the value determined by the parties to the subject transaction, we find the program integrity concerns highlighted by the latter commenters compelling.

It was not our intention to define “general market value” in a way that permits the inappropriate consideration of the value of a physician's referrals or the other business that a physician could generate for an entity in a determination of the fair market value of compensation. In Phase I, based on our then-interpretation that the “volume or value restriction” in the exceptions to the physician self-referral law established a limitation on the fair market value of compensation rather than represent a separate and distinct requirement of the exceptions, we stated that, depending on the circumstances, the “volume or value” restriction will preclude reliance on comparables that involve entities and physicians in a position to refer or generate business for each other (66 FR 944). In Phase II, we stated that, if parties are using comparables to establish fair market value, they should take reasonable steps to ensure that the comparables are not distorted (69 FR 16107).

Although we have renounced the interpretation of the volume or value and other business generated standards as merely limiting or modifying the fair market value requirement (84 FR 55797), we continue to believe that precluding reliance on comparables that involve entities and physicians in a position to refer or generate business for each other in the determination of fair market value and general market value is an important program integrity safeguard. We are finalizing a definition of “general market value” that retains this language from the current regulation defining general market value. We believe this will be less disruptive to the regulated industry and valuation professionals that have developed compliance protocols and valuation standards that have incorporated this requirement for the past two decades, while still achieving our goal of disentangling the volume or value and other business generated standards from the requirement that compensation is fair market value.

We are not including in the definition of “general market value” a statement that general market value is based solely on consideration of the economics of the subject transaction and should not include any consideration of other business the parties may have with one another. Although we continue to believe that the determination of general market value should be based solely on consideration of the economics of the subject transaction and should not include any consideration of other business the parties may have with one another, we do not believe that it is necessary to include this statement because the final definition of “general market value” retains the essentially equivalent requirement for bona fide bargaining between well-informed parties that are not otherwise in a position to generate business for each other. Compensation to or from a physician should not be inflated or reduced simply because the entity paying or receiving the compensation values the referrals or other business that the physician may generate more than a different potential buyer of the items or services.

This means that a hospital may not value a physician's services at a higher rate than a private equity investor or another physician practice simply because the hospital could bill for designated health services referred by the physician under the OPPS, whereas a physician practice owned by the private equity investor or other physicians would have to bill under the PFS, which may have lower payment rates. Put another way, the value of a physician's services should be the same regardless of the identity of the purchaser of those services. We recognize that reliance on similar transactions in the marketplace could simplify the process of determining fair market value for purposes of the physician self-referral law, but adopting such a standard would allow parties to consider the additional (or investment) value to certain types of entities, skewing the buyer-neutral fair market value.

Comment. One commenter asserted that the definition of “fair market value” should include a statement that organizations compensating individuals at an ongoing loss may create risk that the compensation is not representative of fair market value. The commenter explained its concern in an example involving a hospital compensating a physician at an amount greater than the collections for the physician's services, asserting that the hospital is able to do so because it controls referrals within its network and increased facility revenues offset the physician practice losses.

In the commenter's view, this creates a situation in which hospitals are taking Start Printed Page 77556into account the value of referrals when setting physician compensation. The commenter noted that, from a fair market value and [general] market value perspective, two hypothetical parties (that cannot consider the fact that one party can generate business for the other) would never enter into a situation in which the physician's compensation and benefits exceeded direct revenue. A different commenter asserted that a payment to a physician above what the entity collects for the physician's services is inherently not fair market value.

Response. We agree that, in some circumstances, an entity's compensation of a physician at an ongoing loss may present program integrity concerns, but see no need to include the language requested by the commenter in regulation. As we stated earlier, we are retaining the language “not in a position to generate business” in the definition of “general market value.” We believe this addresses the commenter's concern, at least in part, as it requires that the nature or identity of the purchaser of the items or services (in the commenter's example, the hospital) is irrelevant to a determination of “general market value” and, thus, “fair market value.” In the commenter's example, the value of the physician's services is the value to any willing buyer, and the fact that the hospital could make up losses for the physician's compensation through designated health services reimbursed at facility rates under OPPS rather than PFS, may not be considered.

Also, we disagree that parties would never enter into such an arrangement. As we stated above in section II.B.2 (with respect to the definition of “commercially reasonable”), there are many valid reasons and legitimate business purposes for entering into an arrangement that will not result in profit for one or more of the parties to the arrangement. Comment.

A few commenters raised the point that, with respect to our statements in the proposed rule connecting the statutory term “general market value” to the valuation principle of “market value” (84 FR 55798), “general market value” does not equate to the “market value” of a transaction, as that term is used in the valuation industry. One of these commenters suggested that what CMS described as “market value” actually corresponds to “investment value” as defined by the four commercial valuation disciplines. Business valuation, compensation valuation, machinery and equipment valuation, and real estate valuation.

Commenters expressed concern that this focus would narrow the universe of appropriate valuation methodologies for purposes of the physician self-referral law solely to the “market value” approach. One commenter asserted that stakeholders should not be restricted to exclusive use of the market approach to value a physician's personal services or promote exclusive use by valuators of physician compensation survey data. Other commenters requested that hospitals should be permitted to use existing written offers to a physician from other similarly situated providers to support a valuation.

One of these commenters requested guidance on how fair market value should be determined and documented for timeshare arrangements, citing the “cost plus” guidance from Phase I regarding equipment leases as potentially appropriate (66 FR 876 through 877). Another of the commenters asked for additional guidance on recruiting and paying physicians in rural areas, including the use of supply, demand, access, and community need to support the fair market value of a physician's compensation. Another commenter requested that CMS provide additional guidance or examples on what data, facts, and circumstances should be applied to evaluate fair market value.

The commenter requested specific guidance on the relevance of payor mix, market supply and demand data, cost of living, physician skills, and experience. A different commenter noted costs of care, costs for medical liability insurance, costs of equipment and staffing, certificate of need laws, and provider and related taxes on health care services and centers as relevant factors when determining the fair market value of compensation. Response.

As discussed above, we are retracting our statements in the proposed rule equating “general market value” with the valuation principle of “market value” (84 FR 55798). We did not intend to limit the valuation of assets, compensation, or rental property to the market approach or prescribe any other particular method for determining the fair market value and general market value of compensation. As we have stated consistently in prior rulemakings, to establish the fair market value (and general market value) of a transaction that involves compensation paid for assets or services, we intend to accept any method that is commercially reasonable and provides us with evidence that the compensation is comparable to what is ordinarily paid for an item or service in the location at issue, by parties in arm's-length transactions that are not in a position to refer to one another (66 FR 944).

We emphasize that our use of the language “commercially reasonable” in Phase I (and again in Phase III (72 FR 51015 through 51016)) was also not intended to limit the valuation of assets, compensation, or rental property to a specific valuation approach or prescribe any other particular method for determining the fair market value and general market value of compensation. Rather, as stated in Phase II and reiterated in Phase III, we will consider a range of methods of determining fair market value and that the appropriate method will depend on the nature of the transaction, its location, and other factors (69 FR 16107 and 72 FR 51015 through 51016). We decline to affirm the specific valuation suggestions of the commenters because the amount or type of documentation that will be sufficient to confirm fair market value (and general market value) will vary depending on the circumstances in any given case (66 FR 944), but refer readers to the Phase I rulemaking for an extensive discussion on potentially acceptable valuation methods (66 FR 944 through 945).

Comment. Several commenters expressed appreciation for the examples in the proposed rule regarding when an arrangement may involve compensation above or below what national market data (salary surveys) suggests would be appropriate. The commenters stated that the ability to factor in unique circumstances, such as whether a physician is particularly remarkable in his or her field, will allow entities to design compensation packages that more fully account for the broader circumstances of an arrangement.

One commenter emphasized that the analysis of fair market value is always predicated on an analysis of the actual terms of a transaction and the actual facts and circumstances, while another commenter agreed specifically that extenuating circumstances may dictate that parties to an arm's-length transaction veer from values identified in salary surveys and other hypothetical valuation data that is not specific to the actual parties. The commenter urged CMS to include this language (or similar language) in regulation text to provide further assurances to stakeholders of CMS' policy. Another commenter requested that we acknowledge that there are other factors that may justify higher levels of compensation rates for physician services in markets that may have relatively low cost of living standards due to market supply and demand.

A different commenter discussed the difficulty of establishing fair market value in rural areas and Start Printed Page 77557other challenging markets. This commenter noted that, in some instances, a hospital might need to compensate a physician above what is indicated in some published salary schedules in order to convince the physician to relocate to the market area and fill a dire patient need. The commenter was concerned that the example in the proposed rule regarding lower cost of living in certain markets could be read to prohibit compensation above what is found in salary schedules.

Some commenters requested additional examples of circumstances that could justify deviating from salary survey data. A few other commenters objected to the examples and disagreed that extenuating circumstances could require a downward deviation from salary surveys. Response.

It appears from the comments that stakeholders may have been under the impression that it is CMS policy that reliance on salary surveys will result, in all cases, in a determination of fair market value for a physician's professional services. It is not CMS policy that salary surveys necessarily provide an accurate determination of fair market value in all cases. However, we decline to include in regulation text, as requested by one of the commenters, a statement that extenuating circumstances may dictate that parties to an arm's-length transaction should veer from values identified in salary surveys and other hypothetical valuation data that is not specific to the actual parties to the transaction when determining the fair market value of the compensation under their transaction.

We believe such a statement is unnecessary in light of our policy discussion in the proposed rule and this final rule and our concern that it could reduce the clarity in the definitions of “fair market value” and “general market value” that we and stakeholders seek. Consulting salary schedules or other hypothetical data is an appropriate starting point in the determination of fair market value, and in many cases, it may be all that is required. However, we agree with the commenter that asserted that a hospital may find it necessary to pay a physician above what is in the salary schedule, especially where there is a compelling need for the physician's services.

For example, in an area that has two interventional cardiologists but no cardiothoracic surgeon who could perform surgery in the event of an emergency during a catheterization, a hospital may need to pay above the amount indicated at a particular percentile in a salary schedule to attract and employ a cardiothoracic surgeon. We also agree with the commenter that emphasized the need for an analysis of the actual terms of a transaction and the actual facts and circumstances of the parties. In our view, each compensation arrangement is different and must be evaluated based on its unique factors.

That is not to say that common arrangements, where the services required are identical regardless of the identity of the physician providing them, do not lend themselves well to the use of salary surveys for determining compensation that is fair market value. Our examples in the proposed rule were intended to show that a variety of factors could affect whether the amount shown in a salary schedule is too high or too low to be fair market value for the services of the subject transaction. In some instances, it is exactly right.

Parties do not necessarily fail to satisfy the fair market value requirement simply because the compensation exceeds a particular percentile in a salary schedule. Nor are parties required to pay a physician what is shown in a salary schedule if the specific circumstances do not warrant that level of compensation. With respect to the commenters that took issue with the statements in the proposed rule that the fair market value of a particular physician's services may be below what is indicated in a salary schedule, we believe that salary schedules should not be used by a physician to demand compensation that is above what well-informed parties that are not in a position to generate business for each other would agree is the fair market value of the physician's services.

We wish to be perfectly clear that nothing in our commentary was intended to imply that an independent valuation is required for all compensation arrangements. Comment. Two commenters, in identical statements, expressed concern with the proposed definition of “general market value.” The commenters contended that, despite the statutory language that fair market value means the value in an arm's-length transaction, consistent with the general market value, there is no reason to believe that the reference to “general market value” modifies “fair market value” such that fair market value means anything other than what it means to the business valuation profession, and suggested that CMS leave the determination of fair market value to the business valuation profession.

These commenters shared a definition of “fair market value” found in the International Glossary of Business Valuation Terms, with slight modification to recognize the valuation of services and resources as well as property and goods. Specifically, the price, expressed in terms of cash equivalents, at which property, services, and resources would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm's-length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts. The commenters asserted that this definition would not require valuators to limit themselves to the market approach or depart from time-honored valuation principles of their profession, including consideration of more than just physician compensation survey data.

Ultimately, the commenters requested that CMS not adopt a new definition of “fair market value” (with or without a definition of “general market value”) to take advantage of the consensus reached within the valuation profession. Response. We decline to retain the current definition of “fair market value” (with or without a definition of “general market value”) as requested by the commenters.

First, the term “general market value” is included in the statutory definition of “fair market value” and we cannot ignore it for purposes of the statutory exceptions or remove it from our regulations. Second, we expect that our retraction of certain statements from the proposed rule and the clarification of previous commentary on valuation methods will assuage the commenters' concerns. As described above, we are finalizing only slight modifications to the existing definitions of “fair market value” and “general market value” to clearly indicate the statute's specific requirements for determining the fair market value of rental property and to disentangle the volume or value and other business generated standards of the exceptions to the physician self-referral law from the definition of “general market value.” Comment.

Most commenters supported the reorganization of the definitions, noting that the proposed structure provides better clarity. Some commenters urged CMS to adopt the definitions of “fair market value” and “general market value” as proposed. The commenters expressed appreciation for the restructuring of the existing definition of “fair market value” to extract the separate term “general market value” and the link to the volume or value standard.

One of the commenters stated that the proposed definition of “fair market value” better aligns with the definition set forth in the statute.Start Printed Page 77558 Response. We agree that the final structure of the definitions of “fair market value” and “general market value” is clearer than our existing regulations. As we discussed above and in response to earlier comments, we are finalizing slight modifications to the proposed definitions.

We are finalizing our proposal to remove the link to the volume or value standard in the definition of “general market value” as requested by the commenters. We believe that structuring the definition of “fair market value” to provide for a definition of general application, a definition applicable to the rental of equipment, and a definition applicable to the rental of office space facilitate parties' compliance with the fair market value requirement in the exceptions to the physician self-referral law that apply to the specific type of compensation arrangement between them. Similarly, we believe that definitions of “general market value” specific to each of the types of transactions contemplated in the exceptions to the physician self-referral law—asset acquisition, compensation for services, and rental of equipment or office space—will facilitate stakeholders' understanding of the requirements for fair market value compensation that is consistent with the general market value and ease overall compliance efforts.

Comment. A large number of commenters requested that we establish rebuttable presumptions that compensation is fair market value or “safe harbors” that would deem compensation to be fair market value if certain conditions are met. The commenters variously suggested that the following should be deemed to be fair market value.

Compensation set within a range of percentiles identified in independent salary surveys (with a wider band of permissible compensation for physicians who practice in medically underserved areas, health professional shortage areas, or rural areas), compensation set within the parameters of an independent third-party valuation, and compensation set in accordance with a valuation process that meets certain conditions patterned after those set forth in IRS regulations at 26 CFR 53.4958-6 (related to excess benefit transactions). Some of the commenters asserted that a “safe harbor” based on a range of values in salary surveys would be consistent with what they stated was established CMS policy that compensation set at or below the 75th percentile in a salary schedule is appropriate and compensation set above the 75th percentile is suspect, if not presumed inappropriate. Response.

For the reasons explained in Phase I (66 FR 944 through 945), Phase II (69 FR 16092), and Phase III (72 FR 51015), we decline to establish the rebuttable presumptions and “safe harbors” requested by the commenters. We are uncertain why the commenters believe that it is CMS policy that compensation set at or below the 75th percentile in a salary schedule is always appropriate, and that compensation set above the 75th percentile is suspect, if not presumed inappropriate. The commenters are incorrect that this is CMS policy.

C. Group Practices (§ 411.352) In the proposed rule, we proposed certain revisions to the group practice rules at § 411.352 that relate to corresponding proposals regarding the definitions and special rules for “commercially reasonable” compensation arrangements, “fair market value” compensation, and the volume or value standard applicable throughout the physician self-referral law and regulations (84 FR 55799 through 55802). We also proposed a revision to the rules regarding the distribution of overall profits intended to support our policies related to the transition from a volume-based to a value-based health care system (84 FR 55800 through 55801).

We discuss these proposals and our final regulations in section II.C.2. Of this final rule. 1.

Interpretation of the “Volume or Value Standard” for Purposes of the Group Practice Regulations (§ 411.352(g)) As we discussed in the proposed rule, in conjunction with our proposals related to the volume or value standards, we reviewed the physician self-referral regulations to ensure that the standards related to the volume or value of a physician's referrals (the volume or value standard) and the other business generated by the physician (the other business generated standard) are expressed using standardized terminology (84 FR 55799). We identified several occurrences of inconsistent expression of the standards. Although section 1877 of the Act uses more than one phrase to describe the volume or value and other business generated standards, which may be one reason for variations in the regulation text, we believe that the references are all to the same underlying prohibition on compensation that fluctuates with the volume or value of a physician's referrals or the other business generated by a physician for the entity providing the remuneration.

Therefore, as discussed in section II.B.3. Of this final rule, we proposed and are finalizing conforming changes throughout our regulations to delineate these standards as a prohibition on compensation that takes into account the volume or value of a physician's referrals or other business generated by the physician for the entity providing the remuneration. However, because the language in § 411.352(g) and (i) mirrors the statutory language at section 1877(h)(4)(iv) of the Act, we did not propose changes to the “volume or value” regulation text in either of those paragraphs.

The terms “based on” and “related to” remain in the regulation text at § 411.352(g) and (i). We are affirming here that we interpret the requirements of § 411.352(g) and (i) to incorporate the volume or value standard as it relates to a physician's referrals. That is, compensation to a physician who is a member of a group practice may not be determined in any manner that takes into account the volume or value of the physician's referrals (except as provided in § 411.352(i)), and profit shares and productivity bonuses paid to a physician in the group may not be determined in any manner that takes into account the volume or value of the physician's referrals (except that a productivity bonus may directly take into account the volume or value of the physician's referrals if the referrals are for services “incident to” the physician's personally performed services).

Prior to the revisions we are finalizing in this final rule, the regulation at § 411.352(g) stated that “[n]o physician who is a member of the group practice directly or indirectly receives compensation based on the volume or value of his or her referrals, except as provided in § 411.352(i)” (emphasis added). We interpret this to mean that, in order to satisfy this requirement for qualification as a “group practice,” no physician who is a member of the group practice receives compensation that directly or indirectly takes into account the volume or value of his or her referrals (unless permitted under § 411.352(i)). Our interpretation is consistent with the interpretation of “related to” set forth in Phase I, where we used the terms “based on,” “related to,” and “takes into account” interchangeably when describing the final group practice regulations (66 FR 908 through 910).

Prior to the revisions we are finalizing in this final rule, the regulation at § 411.352(i) stated that a physician in a group practice may be paid a share of overall profits of the group practice, provided that the share is not Start Printed Page 77559determined in any manner that is directly related to the volume or value of referrals by the physician. We have long interpreted “is directly related to” the volume or value of referrals to mean “takes into account” the volume or value of referrals. In Phase I, we discussed this provision and stated that the Congress expressly limited profit shares for group practice members to methodologies that do not directly take into account the member's designated health services referrals, and that, under the statutory scheme, revenues generated by designated health services may be distributed to group practice members and physicians in the group in accordance with methods that indirectly take into account referrals (emphasis added) (66 FR 862 and 908).

Despite the varying language of the regulations, as detailed in the proposed rule (84 FR 55800), we consider the regulations at § 411.352(g) and (i) to prohibit compensation to physicians in a group practice that is determined in any manner that takes into account the volume or value of the physician's referrals to the group practice. The new special rule at § 411.354(d)(5) establishes the universe of compensation that we consider to be determined in a manner that takes into account the volume or value of a physician's referrals to the entity paying the compensation. As described in section II.B.3.

Of this final rule, this special rule applies in all instances where our regulations include the volume or value standard, except as specified in § 411.354(d)(5)(iv). Therefore, with respect to both § 411.352(g) and (i), when determining whether the physician's compensation, share of overall profits, or productivity bonus is based on, is directly or indirectly related to, or takes into account the volume or value of the physician's referrals to the group practice, the special rule at final § 411.354(d)(5) applies. We received the following general comment and our response follows.

Comment. Some commenters argued that we should not finalize our proposals because group practices need the utmost flexibility to participate and succeed in value-based health care delivery and payment systems. Response.

Nothing in our final regulations prohibits a group practice (or any physician practice) that furnishes designated health services and the physicians who are owners, employees, or independent contractors of the practice from qualifying as a value-based enterprise. The new exceptions at § 411.357(aa)(3) may be available to such an enterprise, assuming it meets all the requirements of the definitions and exceptions. Those exceptions do not include fair market value or volume or value requirements.

The regulations at § 411.352 apply to group practices that operate in a FFS payment environment. We do not agree that our final regulations at § 411.352 will prohibit a group practice from participating and succeeding in a value-based health care delivery and payment system. 2.

Special Rules for Profit Shares and Productivity Bonuses (§ 411.352(i)) a. Distribution of Profits Related to Participation in a Value-Based Enterprise We proposed a new § 411.352(i)(3) to address downstream compensation that derives from payments made to a group practice, rather than payments made directly to a physician in the group, that relate to the physician's participation in a value-based arrangement. Certain downstream distribution arrangements are currently protected under waivers in the Shared Savings Program and certain Innovation Center models.

However, outside of the Shared Savings Program or an Innovation Center model, profit shares or productivity bonuses paid to a physician in a group practice that are determined in any manner that directly takes into account the volume or value of his or her referrals to the group practice are strictly prohibited by the physician self-referral statute and regulations. The special rules for the profit shares and productivity bonuses paid to physicians in a group practice prohibit calculation methodologies that directly take into account the volume or value of the recipient physician's referrals to the group practice. Thus, by way of example, in a 100-physician group practice where only two of the physicians participate with a hospital as a value-based enterprise in a commercial payor-sponsored alternative payment model, the profits from the designated health services ordered by the physicians and furnished by the group practice to beneficiaries assigned to the model may not be allocated directly to the two physicians.

We explained in the proposed rule that commenters on the CMS RFI interpreted this to mean that the special rules at § 411.352(i) would restrict the group practice to allocating alternative payment model-derived income that includes revenues from designated health services among all physicians in the group (or a component of at least five physicians in the group) in order to ensure that such income is allocated in a manner that only indirectly takes into account the volume or value of the two physicians' referrals. The commenters suggested that this restriction discourages physician participation in alternative payment or other value-based care models because physicians cannot be suitably rewarded for their accomplishments in advancing the goals of the model, which is at odds with the Secretary's vision for achieving value-based transformation by pioneering bold new payment models. We also described the assertion of another commenter on the CMS RFI that, because physician decisions drive the overwhelming majority of all health care spending and patient outcomes, it is not possible to transform health care without the participation of physicians in value-based health care delivery and payment models with other health care providers.

We stated that we share the commenters' concerns regarding physician participation in value-based health care delivery and payment models and are also concerned that our regulations could undermine the success of the Regulatory Sprint or the larger transition to a value-based health care system. Therefore, we proposed changes to § 411.352(i) with respect to the payment of profit shares to eliminate this potential barrier to robust physician participation in value-based care delivery (84 FR 55800). We are finalizing our proposal with modifications to the regulation text as proposed.

As explained in our responses to comments below, the policy will be codified at revised § 411.352(i)(3) and effective on January 1, 2022. For the reasons described elsewhere in this final rule, in the exceptions for value-based arrangements at new § 411.357(aa), we did not propose to prohibit remuneration that takes into account the volume or value of a physician's referrals. The revisions finalized at § 411.352(i)(3) are an extension of this policy.

Specifically, we are finalizing a provision related to the distribution of profits from designated health services that are directly attributable to a physician's participation in a value-based enterprise. Under our final policy at § 411.352(i)(3), such profits may be distributed to the participating physician and will not be considered to directly relate to (or take into account) the volume or value of the physician's referrals. In other words, a group practice may distribute directly to a physician in the group the profits from designated health services furnished by the group that are derived from the Start Printed Page 77560physician's participation in a value-based enterprise, including profits from designated health services referred by the physician, and such remuneration will be deemed not to be based on (or take into account) the volume or value of the physician's referrals.

The regulation finalized at § 411.352(i)(3) would permit the 100-physician group practice in the previous example to distribute the profits from designated health services derived from the two physicians' participation in value-based enterprise directly to those physicians. Physician #1 could receive a profit distribution that considers his or her referrals to the group that are directly attributable to his or her participation in the value-based enterprise (and its corresponding participation in the model), and Physician #2 could receive a profit distribution that considers his or her referrals to the group that are directly attributable to his or her participation in the value-based enterprise (and its corresponding participation in the model). Neither distribution would jeopardize the group's ability to qualify as a “group practice” under § 411.352.

In the proposed rule, we sought comment regarding whether we should permit the distribution of “revenue” from designated health services, as opposed to “profits” from designated health services in order to effectuate the goals described elsewhere in the proposed rule (84 FR 55801) and this final rule. As explained in our responses to comments below, we are finalizing our proposal to apply the rule at final § 411.352(i)(3) to “profits” from designated health services, which will be effective on January 1, 2022. We received the following comments and our responses follow.

Comment. Commenters widely supported our proposal to address the distribution of profits from designated health services that are derived from the participation in a value-based enterprise by a physician in a group practice. Commenters urged us to finalize our proposal to permit the distribution of profits from designated health services that are directly attributable to a physician's participation in a value-based enterprise without having to aggregate the profits with the overall profits of the group practice or a component of five physicians within the group practice.

Commenters asserted that this flexibility will encourage physicians to incorporate value-based elements into their practices, as well as physician participation in value-based enterprises on an individual basis and in circumstances where the entire group practice's participation may not be warranted or desirable. Response. We agree with the commenters regarding the potential impact of the permitted distributions.

Namely, that individual physicians in a group practice may be encouraged to participate in a value-based enterprise with providers and suppliers outside of the physician's own group practice even when the group practice does not participate as a whole in the value-based enterprise. We believe that the protection afforded by the safeguards in the new definitions and exceptions related to value-based care delivery and payment will ensure that distribution of profits to an individual physician (or subset of physicians) within a group practice should not increase the risk of inappropriate utilization of designated health services or program or patient abuse. Comment.

One commenter noted that proposed § 411.352(i)(3) was not structured in the same way as the “special rules” for distribution of overall profits and payment of productivity bonuses. The commenter expressed concern that the proposed regulation text would not create the deeming provision we intended. The commenter requested that we revise the regulation to expressly state that, where a group practice's profits from designated health services are directly attributable to a physician's participation in a value-based enterprise and those profits are distributed to the physician, the compensation to the physician is deemed not to take into account the volume or value of the physician's referrals under § 411.352(g).

The commenter asserted that making these revisions would eliminate any inference that § 411.352(i)(3) is not an exception to § 411.352(g). Response. The commenter is correct about the structure of the three provisions in § 411.352(i) that describe methodologies for the distribution of profits from designated health services and the payment of productivity bonuses.

We agree that standard language and further clarification of the provision at § 411.352(i)(3) is warranted to ensure the provision operates as a deeming provision as we intend. We have revised the final regulation accordingly. Specifically, final § 411.352(i)(3) provides that notwithstanding paragraph (g) of § 411.352, profits from designated health services that are directly attributable to a physician's participation in a value-based enterprise, as defined at § 411.351, may be distributed to the participating physician.

Comment. With respect to our proposal to permit the distribution of profits from designated health services that are directly attributable to a physician's participation in a value-based enterprise, we sought comment regarding whether we should permit the distribution of “revenue” from designated health services, as opposed to “profits” from designated health services in order to effectuate the goals described elsewhere in the proposed rule and this final rule. One commenter stated that the furnishing of certain designated health services does not always result in profit for the group practice and suggested that permitting the distribution of revenue from designated health services would provide needed flexibility to encourage physicians to participate in value-based care delivery.

Another commenter suggested that we permit the distribution of revenue from designated health services to simplify the regulation because revenues are easier to calculate than profits. Response. We have no reason to doubt the commenter's assertion that a group practice does not realize a profit on every designated health service that it furnishes.

Thus, it is possible that a group practice could have no profits to distribute to a physician in the group who makes a referral of designated health services for a patient in the target patient population while undertaking value-based activities as a VBE participant in a value-based enterprise. Although it may be true that it is easier to calculate revenues than to calculate profits, in general, we believe that a group practice's distribution of revenues to a referring physician rather than profits, which are calculated by deducting the expenses incurred in furnishing the designated health service, could serve as an inducement to make additional and potentially inappropriate referrals to the group practice. This is consistent with our statement in the 1998 proposed rule that rewarding a physician each time he or she self-refers for a designated health service can constitute an incentive to overutilize services (63 FR 1691).

We are unclear how the sharing of a group practice's revenues with a physician would encourage the physician's participation in value-based care delivery or how the physician's participation in his or her individual capacity in a value-based enterprise would mitigate our concerns regarding the inducement to refer any of the physician's patients outside the target patient population for designated health services furnished by the group practice. We are not adopting the Start Printed Page 77561commenters' recommendation to permit the distribution of revenues from designated health services that are directly attributable to a physician's participation in a value-based enterprise. B.

Clarifying Revisions (1) Restructuring of the Regulation at § 411.352(i) We proposed to restructure and renumber § 411.352(i) as well as clarify several provisions of the regulation. As we stated in the proposed rule, we believe that the revisions will enable groups to determine with more certainty whether compensation paid to a physician in the group as profit shares or productivity bonuses takes into account the volume or value of referrals and, if it does, whether there is a direct or indirect connection to the volume or value of the physician's referrals (84 FR 55801). Except as noted above with respect to the uniformity of the structure of the provisions in § 411.352(i), we received no comments on the general restructuring of the regulations, and are finalizing our proposal to restructure and renumber the regulations at § 411.352(i) without modification to the proposed numbering and headers of the regulation.

Our purpose in restructuring the regulation is to more closely adhere to the structure of section 1877(h)(4)(B) of the Act and to express in affirmative language which profit shares and productivity bonuses are permissible. That is, permitting the payment of a profit share or productivity bonus that does not directly take into account the volume or value of referrals is the affirmative and more simple way of saying, as our current regulations do, that the profit share or productivity bonus is permissible but only if it does not directly take into account the volume or value of referrals. In addition, the special rules for profit shares and productivity bonuses, as finalized, follow the format of our special rules on compensation at § 411.354(d) and our special rules for compensation arrangements at § 411.354(e).

As stated in the proposed rule, our addition of introductory language at § 411.352(i) and revised language at § 411.352(i)(1) and 411.352(i)(2) do not constitute a substantive change to the noted provisions (84 FR 55801). (2) Overall Profits We proposed revisions to clarify our interpretation of the overall profits of a group that can be distributed to physicians in the group. Until now, the term “overall profits” was defined to mean two different things.

(1) The group's entire profits derived from designated health services. And (2) the profits derived from designated health services of any component of the group practice that consists of at least five physicians. As stated in the proposed rule, stakeholders informed us that they were confused about the definition.

For example, stakeholders informally inquired whether the profits of a group practice that has only two, three, or four physicians may be distributed at all. We proposed to revise the definition of “overall profits” to mean the profits derived from all the designated health services of any component of the group that consists of at least five physicians, which may include all physicians in the group. To further clarify this definition, we proposed regulation text at revised § 411.352(i)(1)(ii) stating that, if there are fewer than five physicians in the group, “overall profits” means the profits derived from all the designated health services of the group.

We stated that we believe that this more precisely states the policy articulated in Phase I (66 FR 909 through 910). For the reasons explained in our responses to comments, we are finalizing the definition of “overall profits” at § 411.352(i)(1)(ii) as proposed. We highlight that the final regulation at § 411.352(i)(1)(ii) includes the words “all the” before “designated health services.” As we stated in the proposed rule, stakeholders' informal inquiries regarding the permissible methods of distributing profits from designated health services indicated that the regulation text may not have precisely evidenced our intent (84 FR 55801).

Such inquiries included whether it is permissible to distribute profit shares of only some types of designated health services provided by a group practice without distributing the profits from the other types of designated health services provided by the group practice, and whether a group practice may share profits from one type of designated health service with a subset of physicians in a group practice and the profits from another type of designated health service with a different (possibly overlapping) subset of physicians in the group practice. As discussed, we are finalizing at § 411.352(i)(1)(ii) that overall profits means “the profits derived from all the designated health services.” Thus, the profits from all the designated health services of any component of the group that consists of at least five physicians (which may include all physicians in the group) must be aggregated before distribution. Under this final rule, a physician practice that wishes to qualify as a group practice may not distribute profits from designated health services on a service-by-service basis.

To illustrate, suppose a physician practice provides both clinical laboratory services and diagnostic imaging services—both designated health services—to its patients in a centralized building (as defined at § 411.351) or a location that qualifies as a “same building” under § 411.351 and meets the requirements at § 411.355(b)(2)(i). If the practice wishes to qualify as a group practice, it may not distribute the profits from clinical laboratory services to one subset of its physicians and distribute the profits from diagnostic imaging to a different subset of its physicians. We are cognizant that, under the requirement at § 411.352(e), to qualify as a “group practice,” the overhead expenses of, and income from, a practice must be distributed according to methods that are determined before the receipt of payment for the services giving rise to the overhead expense or producing the income.

Essentially, a group practice's compensation methodology must be established prospectively. Based on the comments, it is our understanding that group practice physician compensation methodologies are often established prior to the beginning of a calendar year. We are concerned that the regulations we are finalizing in this final rule may require group practices that relied on their interpretation of § 411.352(i) (as it existed prior to this final rule) to adjust their compensation methodologies and, if so, they may not have sufficient time prior to the end of the current calendar year to make necessary adjustments to their compensation methodologies.

As explained in our responses to comments below, we are delaying the effective date of revised § 411.352(i)(1) until January 1, 2022. Through December 31, 2021, the definition of “overall profits” will be as set forth at existing § 411.352(i)(2). We also proposed to remove the reference to Medicaid from the definition of “overall profits.” We believe that the inclusion of this reference unnecessarily complicates the regulation.

In the proposed rule, we noted that it is possible that the reference to designated health services payable by Medicaid is related to the definition of “referral” in the 1998 proposed rule (63 FR 1692). There, with respect to the definition of group practice, we stated that, because of our interpretation of what constitutes a “referral,” an entity wishing to be considered a group practice in order to use the in-office ancillary services exception may not compensate its members based on the volume or value Start Printed Page 77562of referrals for designated health services for Medicare or Medicaid patients but could do so in the case of other patients (63 FR 1690). However, when the 1998 proposed policies were finalized, the definition of “referral” omitted all references to Medicaid.

Nonetheless, the reference to Medicaid in final § 411.352(i)(2), which was also proposed in the 1998 proposed rule (as a definition in § 411.351), was not congruently omitted when finalized. We explained further in the proposed rule that, under the definition of “designated health services” at § 411.351, “designated health services payable by. .

. Medicaid” would not include any services. This is because the definition of “designated health services” includes only those services payable in whole or in part by Medicare.

Although the qualifying language in this definition potentially allows for a different definition “as otherwise noted in this subpart,” the regulations at existing § 411.352(i)(2) do not expressly articulate an alternative definition for “designated health services.” Rather, they simply state that the overall profits of a group include profits derived from designated health services payable by Medicare or Medicaid. For consistency with the definitions and regulations we proposed (and are finalizing here), we proposed to eliminate the references to Medicaid in the definition of “overall profits.” We are finalizing our proposal. However, as explained in our responses to comments below, we are delaying the effective date of these updates until January 1, 2022 to coincide with the effective date of the other revisions to the definition of “overall profits.” Our group practice regulations also articulate the general rule that overall profits should be divided in a reasonable and verifiable manner that is not directly related to the volume or value of the physician's referrals of designated health services.

In this final rule, we are finalizing our proposal to move the prefatory language of this requirement from existing § 411.352(i)(2) to revised § 411.352(i)(1)(iii) without substantive change. We are also finalizing our proposal to replace the varying language in the methods deemed not to relate directly to the volume or value of referrals (the deeming provisions). One of the current deeming provisions references “the group's profits” and another references “revenues” where both should reference “overall profits.” We are finalizing the revision to use the term “overall profits” in both of these deeming provisions in order to articulate more clearly that the deeming provisions relate to methods for distributing a share of overall profits, not “profits” or “revenues.” To avoid complications associated with the restructuring of § 411.352(i), as explained in our responses to comments below, we are delaying the effective date of these updates until January 1, 2022 to coincide with the effective date of the revised definition of “overall profits.” We also proposed to revise the language related to one of the deemed permissible methods for distributing shares of overall profits by replacing “are not [designated health services] payable by any Federal health care program or private [payor]” with “and would not be considered designated health services if they were payable by Medicare.” This change is reflected in revised § 411.352(i)(1)(iii)(B).

Current regulations provide that a share of overall profits will be deemed not to directly take into account the volume or value of referrals if revenues derived from designated health services are distributed based on the distribution of the group practice's revenues attributed to services that are not designated health services payable by “any Federal health care program or private payer.” As we explained in the proposed rule, the definition of “designated health services” includes only those specified services that are payable by Medicare (84 FR 55802). Thus, we believe a better way to reflect our policy that overall profits may be distributed based on the distribution of the group practice's revenues from services other than those in the categories of services that are “designated health services” is to deem the payment of a share of overall profits not to directly take into account the volume or value of a physician's referrals if overall profits are distributed based on the distribution of the group's revenues attributed to services that are not designated health services and would not be considered designated health services if they were payable by Medicare. We proposed to revise the regulation in this manner and renumber current § 411.352(i)(2)(ii) to § 411.352(i)(1)(iii)(B).

We are finalizing this proposal. As noted, to avoid complications associated with the restructuring of § 411.352(i), as explained in our responses to comments below, we are delaying the effective date of these updates until January 1, 2022 to coincide with the effective date of the revised definition of “overall profits.” Lastly, we did not propose to revise the third deeming provision to replace the term “revenues” with “overall profits.” The third deeming provision states that a share of overall profits will be deemed not to relate directly to the volume or value of referrals if revenues derived from designated health services constitute less than 5 percent of the group practice's total revenues, and the allocated portion of those revenues to each physician in the group practice constitutes 5 percent or less of his or her total compensation from the group. We did, however, propose nonsubstantive updates to the language used in this deeming provision and we are finalizing those nonsubstantive changes.

Final § 411.352(i)(1)(iii)(C) deems as a permissible methodology for distributing overall profits a methodology under which revenues derived from designated health services constitute less than 5 percent of the group's total revenues, and the portion of those revenues distributed to each physician in the group constitutes 5 percent or less of his or her total compensation from the group. Again, to avoid complications associated with the restructuring of § 411.352(i), as explained in our responses to comments below, we are delaying the effective date of these updates until January 1, 2022 to coincide with the effective date of the revised definition of “overall profits.” We received the following comments and our responses follow. Comment.

One commenter characterized our policy clarifications as an attempt to micromanage the organization, governance, and operation of group practices. The commenter opposed any revisions to the group practice regulations (except for the addition of new § 411.352(i)(3), which the commenter found beneficial for group practices). The commenter asserted that we should not finalize the revisions to § 411.352(i)(1) because the statute is not prescriptive with respect to what methodologies are permissible for distributing overall profits to physicians.

Another commenter asserted that we gave no rationale to support our interpretation of the statutory term “overall profits” as meaning profits from all the designated health services of a group practice or a component of at least five physicians in the group practice (which may include all physicians in the group practice). Response. The commenter is correct that section 1877(h)(4)(B) of the Act does not prescribe the methodology that a group practice may use to pay shares of its overall profits, provided that the share is not determined in any manner that is directly related to the volume or value of referrals by the physician to whom the share is paid.

The commenter appears to confuse our proposal to clarify our interpretation of the term “overall profits” as used in section 1877(h)(4)(B) of the Act with a proposal Start Printed Page 77563to limit payment methodologies, although our final regulations may indeed result in some group practices modifying their physician compensation with respect to payment of shares of overall profits from designated health services. We have long interpreted the term “overall profits” as the profits from the group practice's overall pooled revenues from designated health services (63 FR 1691). In the 1998 proposed rule, we stated that we regard “overall profits of the group” to mean all of the profits a group can distribute in any form to physicians in the group, even if the group is located in two different states or has many different locations within one state, and that we would not interpret “overall profits” as the profits that belong only to a particular specialty or subspecialty group (63 FR 1691).

When finalizing our proposals related to the payment of shares of overall profits in Phase I, we stated that the Congress recognized that, in the case of group practices, revenues derived from designated health services must be distributed to the group practice physicians in some fashion, even though the physicians generate the revenue (66 FR 876). However, because the Congress wished to minimize the economic incentives to generate unnecessary referrals for designated health services, section 1877(h)(4)(B) of the Act permits a physician in the group practice to receive a share of the overall profits of the group practice, provided that the share is not determined in any manner that is directly related to the volume or value of referrals by the physician. We described our proposals in the 1998 proposed rule as requiring that profits must be aggregated at the group level and not at a component level (66 FR 908).

In Phase I, we defined “share of overall profits” to mean a share of the entire profits of the entire group (or any component of the group that consists of at least five physicians) derived from designated health services (66 FR 908) (emphasis added). We stated that overall profit shares must be derived from aggregations of the entire practice or a component of the practice consisting of at least five physicians (66 FR 907). The regulation text defining “overall profits” finalized in Phase I stated that overall profits means the group's entire profits derived from “DHS” payable by Medicare or Medicaid or the profits derived from “DHS” payable by Medicare or Medicaid of any component of the group practice that consists of at least five physicians.

The regulation text does not accord precisely with our preamble guidance that states that overall profits means the entire profits of the entire group. It has not been revised until now. We note that, in § 411.351, the regulation text provides a definition for “designated health services (DHS).” The definition states that DHS means any of the following services (other than those provided as emergency physician services furnished outside of the U.S.), as they are defined in § 411.351, and lists the various individual categories of services that are considered designated health services.

Stakeholders may have evaluated this portion of the definition of “designated health services” within the context of the definition of “overall profits” and interpreted “overall profits” to mean the group's entire profits from any one of the individual categories of designated health services identified in the definition at § 411.351. This was not our intention when using the acronym “DHS” in the definition of “overall profits” in the regulation text at § 411.352(i). We are finalizing our proposal to clarify our longstanding interpretation of the term “overall profits” as used in section 1877(h)(4)(B) of the Act at final § 411.352(i)(1)(ii).

However, because the regulation text at § 411.352(i) has not fully and exactly depicted the policy set forth in our Phase I preamble guidance, we are making the revisions prospective. In addition, for the reasons set forth in the response to comments below, we are delaying the effective date of the revisions to § 411.352(i) until January 1, 2022. Comment.

Some commenters opposed our proposal to define “overall profits” to mean the profits derived from all the designated health services of any component of the group that consists of at least five physicians, which may include all physicians in the group, asserting that group practices should be able to distribute profits of some types of designated health services, but not others. Other commenters asked for clarification regarding whether a group practice could retain its profits (from designated health services or otherwise), or whether our revisions would require a group practice to distribute all of its profits to physicians in the group in order to qualify as a group practice. Response.

Nothing in final § 411.352(i)(1)(ii) (or any other physician self-referral regulation) requires the distribution of a group practice's profits from designated health services. However, if a group practice wishes to pay shares of overall profits to any of its physicians, it must first aggregate. (1) The entire profits from the entire group.

Or (2) the entire profits from any component of the group that consists of at least five physicians. Once aggregated, the group practice may choose to retain some of the profits or distribute all of the profits through shares of overall profits paid to its physicians. A group practice need not treat all components of at least five physicians the same with respect to the distribution of shares of overall profits from designated health services.

That is, the group practice may choose to distribute all of the overall profits from designated health services of one of its components of five physicians to the physicians in that component, and choose to retain some or all of the overall profits from designated health services of another of its components of five physicians. Moreover, we are aware that group practices may utilize eligibility standards to determine whether a physician is eligible for a profit share, such as length of time with the group practice, whether the physician is an owner, employee, or independent contractor of the group practice, or the amount of time that the physician practices (for example, full-time or part-time). Nothing in our regulations prohibits the use of eligibility standards, provided that they do not result in the payment of a profit share that is determined in a manner that is directly related to the volume or value of a physician's referrals.

In sum, a group practice may determine for itself how much of the aggregate overall profits it chooses to share with its physicians and which physicians are entitled to a share of the group practice's overall profits. However, all payments of shares of overall profits must comply with the requirements of § 411.352(g) and (i). Comment.

A number of commenters opposed our proposal to define “overall profits” from designated health services to mean the profits from all the designated health services of the group practice (or a component of the group that consists of at least five physicians), asserting that group practices should be permitted to distribute the profits from designated health services on a service-by-service basis, which some of the commenters referred to as “split pooling.” These commenters variously stated that service-by-service profit shares would allow physicians to receive profits shares more closely related to the services they referred, their specialty, the services they provide, or the expenses they have personally incurred. One of the commenters explained that, for large or multispecialty group practices, in particular, different practice locations or specialties commonly use ancillary Start Printed Page 77564designated health services to varying degrees in connection with the delivery of care in their location or specialty, and another stated that the proposed “limits” may inadvertently penalize the “practices” within a group that are more profitable due to efficiency and reward those that are less efficient. Another of the commenters asserted that a service-by-service allocation methodology aligns compensation with the physicians who are furnishing professional services in conjunction with designated health services and incurring the related expenses.

The commenter complained that not allowing what it referred to as “pooling by designated health service,” physicians who have no treatment involvement in the designated health services are nonetheless rewarded financially. A different commenter gave the example of a subset of physicians within a group practice that agree to assume all of the costs of expensive diagnostic testing equipment when there is a dispute within the group as to whether to purchase the equipment. The commenter asserted that service-by-service distribution of profits is appropriate so that the physicians who bear the cost of the equipment also receive the profits arising from the use of the equipment.

One commenter stated that distributing profits from designated health services on a service-by-service basis is not an issue, but offered no reason why this is the case. In contrast, several commenters commended CMS for proposing the clarifying language at § 411.352(i)(1)(ii) and supported finalizing the regulatory revisions. Response.

Section 1877(h)(4)(B) of the Act permits a group practice to pay a physician in the group practice a share of overall profits of the group. In Phase I, we shared our interpretation that the term “overall profits” means the entire profits of the entire group (or any component of the group that consists of at least five physicians) derived from designated health services (66 FR 908) (emphasis added). The proposed revisions at § 411.352(i)(1)(ii), which we are finalizing in this final rule, incorporate this long-held interpretation.

Commenters provided no justification for their preferred interpretation of the statutory term “overall profits”—which makes no reference to designated health services as the services that generated the profits—as meaning the profits from any one type of designated health service. We remind readers that, in order to qualify as a group practice, a physician practice must meet all the requirements set forth in § 411.352. These include that the practice is a unified business with centralized decision making by a body representative of the practice that maintains effective control over the practice's assets and liabilities (including, but not limited to, budgets, compensation, and salaries) and consolidated billing, accounting, and financial reporting.

In addition, revenues from patient care services must be treated as receipts of the practice. Certain of the justifications for the commenters' assertions that we should permit a group practice to share the profits from designated health services on a service-by-service basis call into question whether a physician practice that operates as described in the comments could satisfy the unified business test at § 411.352(f) or, potentially, whether the revenues from patient care services are treated as receipts of the practice, as required at § 411.352(d)(1). As we stated in Phase I, the Congress intended to confer group practice status on bona fide group practices and not on loose confederations of physicians who come together substantially in order to capture the profits from referrals of designated health services protected under the exception for in-office ancillary services (66 FR 875).

For that reason, we established the unified business test at § 411.352(f). To meet the unified business test, a group practice must be organized and operated on a bona fide basis as a single integrated business enterprise with legal and organizational integration (66 FR 906). We designed the group practice rules at § 411.352 to preclude group practice status for loose confederations of physicians that are group practices in name, but not operation.

In Phase I, in response to a comment on our 1998 proposed rule, we stated that we generally agree that a group practice should consist of a single medical business whose equity holders operate as a single business by sharing such things as contracts, liability, facilities, equipment, support personnel, management, and a pension plan, and that this aspect of a group practice is addressed by the unified business test at § 411.352(f) (66 FR 898). The essential elements of a unified business are. (1) Centralized decision making by a body representative of the practice that maintains effective control over the group's assets and liabilities (including budgets, compensation, and salaries).

And (2) consolidated billing, accounting, and financial reporting. As we stated in Phase I, group practices may distribute the revenues from services that are not designated health services in any manner they wish. The unified business test permits group practices to use cost- and location-based accounting with respect to services that are not designated health services, and, in some cases, with respect to services that are designated health services if the compensation method is not directly related to the volume or value of the physician's referrals and other conditions are satisfied (66 FR 895).

However, if a physician practice's payment methods do not indicate a unified business (or indicate a business that is unified solely with respect to the provision of designated health services), the physician practice may not qualify as a group practice under section 1877(h)(4) of the Act and § 411.352 (66 FR 907). With respect to the specific comments regarding the need for the payment of profit shares on a service-by-service basis, we assume the reference to “practices” within a group practice pertains to specialties or locations of the group practice. We remind parties that, if a “practice” within a group practice is comprised of five or more physicians, the group practice may aggregate the profits from all the designated health services of the component and pay shares of the overall profits to the physicians in the component, provided that the group practice satisfies all the requirements of § 411.352, including § 411.352(g) and (i).

If a “practice” within a group practice is not comprised of at least five physicians, the group practice would have to include additional physicians in the component and aggregate the profits from all the designated health services of the component. Comment. One commenter stated that disparate state certificate of need and self-referral laws result in a patchwork of permitted and prohibited designated health services within different segments or practice locations of the same group practice.

The commenter suggested that requiring group practices that operate in multiple states to aggregate all their profits from designated health services will be challenging, but did not elaborate on what those challenges are. Response. Group practices may use the “component of five” rule to aggregate and distribute profit shares.

We think that most large group practices, including those that operate in more than one state, will be able to use the component of five rule to establish workable profit distribution methodologies to address issues related to the distribution of profits from designated health services for which all physicians in the group do not make Start Printed Page 77565referrals and discrepancies in the types of designated health services furnished among practice locations due to state certificate of need and self-referral laws. Comment. Some of the commenters that objected to the proposed revisions to the group practice rules regarding the distribution of shares of overall profits noted that our proposals, if finalized, would require changes to the internal compensation practices in many medical groups.

Some of these commenters requested that, if we finalize the proposed changes to the regulation text, we provide a sufficient timeframe of at least one year for all group practices to revise their compensation methodologies. Another commenter was generally supportive of the revisions to § 411.352(i), but expressed concern about the time and effort involved in revising compensation arrangements for group practices that have separated profits by service type until now. Response.

We agree with the commenters that parties may need time to revise compensation methodologies and arrangements for group practice physicians. For that reason, we are delaying the effective date of final § 411.352(i)(1) until January 1, 2022. We believe this will provide group practices sufficient time to evaluate their current compensation methodologies for compliance with final § 411.352(i)(1) and make necessary revisions.

Through December 31, 2021, the definition of “overall profits” will be as set forth at existing § 411.352(i)(2). We note that the delayed effective date applies to all revisions at final § 411.352(i)(1), including the removal of the reference to “Medicaid.” Also, to avoid complications associated with the restructuring of § 411.352(i), we are also delaying the effective date of final § 411.352(i)(2) and (4) to coincide with the effective date of the revised definition of “overall profits.” Comment. One commenter was concerned that new § 411.352(i)(3) would negatively impact physicians who are employees or independent contractors of a group practice, noting that only group practice owners are able to share in the group's profits.

Response. The commenter is mistaken. Nothing in section 1877 of the Act or our physician self-referral regulations limits the payment of a share of overall profits to owners of a group practice.

Under section 1877(h)(4)(B) of the Act and our regulations, any physician in the group may be paid a share of overall profits of the group practice. Comment. One commenter requested confirmation that a group practice may designate more than one component of at least five physicians for the allocation of overall profits from designated health services as long as the profits from all the designated health services referred by the physicians in a component are aggregated and the profits shared with the physicians in that component.

The commenter also sought confirmation that the various components could be established by grouping together physicians of the same specialty or by any other pooling mechanism, as long as each component consists of at least five physicians. Response. A group practice may designate more than one component of at least five physicians for the allocation of overall profits from designated health services as long as the profits from all the designated health services referred by the physicians in a component are aggregated and the profits shared with the physicians in that component.

Provided that the share of overall profits received by a physician is not determined in any manner that is directly related to the volume or value of the physician's referrals, a group may establish components of at least five physicians by including physicians with similar practice patterns, who practice in the same location, with similar years of experience, with similar tenure with the group practice, or who meet other criteria determined by the group practice. We continue to believe, as we stated in Phase I, that a threshold of at least five physicians is likely to be broad enough to attenuate the ties between compensation and referrals of designated health services (66 FR 909). Comment.

Some commenters asked whether a group practice must use a single methodology for distributing the shares of overall profits attributable to each of its designated components of five physicians. In other words, if a group practice has three designated “pools” of at least five physicians (components A, B, and C), must the group practice use the same methodology for distributing the profits for components A, B, and C?. The commenters referenced the example in the proposed rule where we stated that a group practice may not distribute the profits from clinical laboratory services to one subset of its physicians or using a particular methodology and distribute the profits from diagnostic imaging to a different subset of physicians (or the same subset of its physicians but using a different methodology) (84 FR 55801).

Response. The example provided in the proposed rule was intended to illustrate the application of the policy that does not permit service-by-service distribution of profits from designated health services (which one of the commenters referred to as “split pooling”). However, as noted by the commenters, the statement could appear to prohibit the use of different distribution methodologies for different components of five physicians in a group practice.

To the extent that parties understood this to be our policy and an indication of how we would interpret the regulations, we are clarifying that a group practice may utilize different distribution methodologies to distribute shares of the overall profits from all the designated health services of each of its components of at least five physicians, provided that the distribution to any physician is not directly related to the volume or value of the physician's referrals. To illustrate, assume a group practice comprised of 15 physicians furnishes clinical laboratory services, diagnostic imaging services, and radiation oncology services. Assume further that the group practice has divided its physicians into three components of five physicians (component A, component B, and component C) for purposes of distributing the overall profits from the designated services of the group practice.

Under the final regulations, for each component, the group practice must aggregate the profits from all the designated health services furnished by the group and referred by any of the five physicians in the component. The group practice may distribute the overall profits from all the designated health services of component A using one methodology (for example, a per-capita distribution methodology), distribute the overall profits from all the designated health services of component B using a different methodology (for example, a personal productivity methodology in compliance with § 411.352(i)(1)(iii)(B)), and distribute the overall profits from all the designated health services of component C using a third methodology that does not directly relate to the volume or value of the component physicians' referrals (or the methodology used for component A or B). However, a group practice must utilize the same methodology for distributing overall profits for every physician in the component.

That is, using the illustration above, the group practice must use the per-capita distribution methodology for each physician in component A, the personal productivity methodology for each physician in component B, and the same methodology (whichever it utilizes) for each physician in component C. As described in our responses to other comments in this Start Printed Page 77566section II.C.2.b., the group practice could not use different methodologies to distribute the profits of the different types of designated health services within a component. Comment.

Most commenters that commented on our proposals to revise the group practice regulations supported the removal of the reference to Medicaid from the definition of “overall profits” and the clarifying discussion in the proposed rule. Response. As stated above, we are finalizing our proposal to revise § 411.352(i).

However, we are delaying the effective date of these updates until January 1, 2022 to coincide with the effective date of the other revisions to the definition of “overall profits.” (3) Productivity Bonuses For consistency with the regulations related to the payment of a share of overall profits, we proposed to revise the introductory language in the deeming provisions for productivity bonuses at renumbered § 411.352(i)(2)(ii) to state that a productivity bonus must be calculated in a reasonable and verifiable manner. We also proposed to renumber the regulation that lists the deeming provisions related to the payment of productivity bonuses from § 411.352(i)(3) to § 411.352(i)(2) and proposed minor changes to the deeming provisions themselves. In addition, we proposed to update the language of existing § 411.352(i)(1) (relocated to § 411.352(i)(2)(i)) to remove “or both” as unnecessary because the word “or” is interpreted to mean the conjunctive “and” as well as the disjunctive “or.” We stated that groups may continue to pay a productivity bonus based on services that the physician has personally performed, or services “incident to” such personally performed services, or both, provided that the bonus does not directly take into account the volume or value of the physician's referrals (except that the bonus may directly take into account the volume or value of referrals by the physician if the referrals are for services “incident to” the physician's personally performed services).

To correct a misstatement about the nature of § 414.22 of this chapter included in existing § 411.352(i)(3)(i), we proposed to revise the deeming provision related to the physician's total patient encounters or relative value units to state that a productivity bonus will be deemed not to relate directly to the volume or value of a physician's referrals if it is based on the physician's total patient encounters or the relative value units personally performed by the physician. We sought comment in the proposed rule regarding whether this provision should limit the methodology to physician work relative value units as defined at § 414.22(a) or whether any personally-performed relative value units should be an acceptable basis for calculating a productivity bonus that is deemed not to relate directly to (that is, directly take into account) the volume or value of referrals. The regulation that deems a productivity bonus not to directly take into account the volume or value of a physician's referrals under certain circumstances includes a provision similar to that at final § 411.352(i)(1)(iii)(B).

Therefore, we proposed corresponding revisions at § 411.352(i)(2)(ii)(B) (to be renumbered from current § 411.352(i)(3)(ii)) that would deem the payment of a productivity bonus not to directly relate to (or, as explained in this section II.C.2.b(1), take into account) the volume or value of a physician's referrals if the services on which the productivity bonus is based are not revenues derived from designated health services and would not be considered designated health services if they were payable by Medicare. Finally, we proposed to replace the term “allocated” with “distributed” at (redesignated) § 411.352(i)(1)(iii)(C) as the latter term reflects the actual payment of the profit share (84 FR 55802). We are finalizing all of our proposals related to the payment of productivity bonuses by a group practice.

However, to avoid complications associated with the restructuring of § 411.352(i), as explained in our responses to comments below, we are delaying the effective date of these updates at final § 411.352(i)(2) until January 1, 2022 to coincide with the effective date of the revised definition of “overall profits.” We received the following comments and our responses follow. Comment. One commenter requested that we permit a physician to receive a productivity bonus based on services that the physician or the physician's “care team” has personally performed, provided that the productivity bonus is not determined in any manner that is directly related to the volume or value of the physician's referrals of designated health services.

Response. Whether or not a productivity bonus paid to a physician in a group practice would violate the prohibition on compensation that takes into account the volume or value of the physician's referrals at § 411.352(g) depends on the basis for the productivity bonus. To the extent that a productivity bonus (or the portion of a productivity bonus) paid by a group practice to a physician in the group is solely based on services personally performed by the physician (which are not referrals, even if they are designated health services), the productivity bonus (or the portion of the productivity bonus) would not violate § 411.352(g).

To the extent that a productivity bonus (or the portion of a productivity bonus) paid by a group practice to a physician in the group is solely based on services performed by a member of the physician's care team that are not designated health services, the productivity bonus (or the portion of the productivity bonus) would not violate § 411.352(g). To the extent that a productivity bonus (or the portion of a productivity bonus) paid by a group practice to a physician in the group is solely based on designated health services ordered by the physician and furnished by members of the physician's care team “incident to” the physician's services and billed to Medicare as such, the productivity bonus (or the portion of the productivity bonus) would not violate § 411.352(g). To the extent that a productivity bonus (or the portion of a productivity bonus) paid by a group practice to a physician in the group is solely based on designated health services ordered by the physician and furnished by members of the physician's care team, but not furnished “incident to” the physician's services, the productivity bonus (or the portion of the productivity bonus) may only indirectly relate to the volume or value of the physician's referrals for the designated health services furnished by the members of the physician's care team.

Comment. Most commenters that commented on our solicitation regarding whether the deeming provision related to the relative value units personally performed by a physician did not support a limitation of this deeming methodology to only the physician's relative value units as defined at § 414.22. Commenters urged us to finalize our proposal to include as a deemed permissible productivity bonus methodology one that is based on the physician's total patient encounters.

One commenter urged us not to make any revision to this regulation, stating that it works as currently structured and revising it would create additional regulatory burden. Response. We are finalizing § 411.352(i)(2)(ii)(A) as proposed.

Under our longstanding regulations, as well as those proposed, a physician in the group practice may be paid a productivity bonus based on services that he or she has personally performed or services “incident to” such Start Printed Page 77567personally performed services (or both). The productivity bonus may not be determined in any manner that is directly related to the volume or value of referrals by the physician, except that the productivity bonus may directly relate to the volume or value of referrals by the physician if the referrals are for services “incident to” the physician's personally performed services. The regulation at § 414.22(a) relates to the establishment of physician work RVUs.

The regulation at § 414.22(b) relates to the computation of practice expense RVUs. The regulation at § 414.22(c) relates to the computation of malpractice expense RVUs. We believe the reference to § 414.22 generally to describe a “physician's RVUs” is misplaced in our current regulations.

Our clarification is intended only to marry the general requirement for productivity bonuses based on services that are personally performed by a physician with the deeming provision that allows productivity bonuses based on total patient encounters or RVUs. It is not intended to, nor do we believe it will, limit the payment of productivity bonuses currently permissible under our regulations. Therefore, we see no reason why the revisions finalized at § 411.352(i)(2)(ii)(A) would create additional regulatory burden for group practices.

D. Recalibrating the Scope and Application of the Regulations As we stated previously and in our Phase I rulemaking, our intent in implementing section 1877 of the Act was “to interpret the [referral and billing] prohibitions narrowly and the exceptions broadly, to the extent consistent with statutory language and intent” (66 FR 860). One purpose of this final rule is to reexamine our current regulations to assess whether we have held true to that intention.

In doing so, we have considered our own experience in administering the SRDP, stakeholder interactions, comments to the CMS RFI and to our proposed rule, and our experience working with our law enforcement partners. In the proposed rule, we proposed revisions to, including deletions of, certain requirements in our regulatory exceptions. In this section II.D.

Of the final rule, we explain which of our proposals to recalibrate the scope and application of the physician self-referral regulations that we are finalizing and any modifications resulting from our consideration of the comments on the proposed rule. 1. Decoupling the Physician Self-Referral Law From the Federal Anti-Kickback Statute and Federal and State Laws or Regulations Governing Billing or Claims Submission Section 1877 of the Act established numerous exceptions to the statute's referral and billing prohibitions and granted the Secretary authority to establish regulatory exceptions for other financial relationships that do not pose a risk of program or patient abuse.

The majority of the exceptions issued using the Secretary's authority under section 1877(b)(4) of the Act (which we often refer to as the “regulatory exceptions”) require that the arrangement does not violate the anti-kickback statute. Most of these exceptions also require that the arrangement does not violate any Federal or State law or regulation governing billing or claims submission. In Phase I, we stated that the requirements pertaining to the anti-kickback statute and billing or claims submission are necessary in regulatory exceptions to ensure that the excepted financial relationships do not pose a risk of program or patient abuse (66 FR 863).

Even though we acknowledged that the physician self-referral law and the anti-kickback statute are different statutes, we were concerned that, if the regulatory exceptions did not require compliance with the anti-kickback statute, unscrupulous physicians and entities could potentially protect intentional unlawful and abusive conduct by complying with the minimal requirements of a regulatory exception. In Phase II, we stated our interpretation that the statutory “no risk” standard is not limited to risks as determined under the physician self-referral law (69 FR 16108). We added that many arrangements that might otherwise warrant an exception under section 1877 of the Act—a strict liability statute—pose some degree of risk under the anti-kickback statute.

These arrangements cannot, therefore, be said to pose no risk. Similarly, we stated that some arrangements that may be permissible under the physician self-referral law could pose a risk of violating certain laws pertaining to billing or claims submission. Therefore, we concluded that the regulatory exceptions created using the Secretary's authority under section 1877(b)(4) of the Act must require that the excepted financial relationship not violate the anti-kickback statute or any Federal or State law or regulation governing billing or claims submission.

A substantial number of CMS RFI commenters expressed opposition to the continued coupling of the physician self-referral law with the anti-kickback statute and other billing and claims submission laws, explaining the significant burden associated with the inclusion of these requirements in regulatory exceptions to the physician self-referral law. CMS RFI commenters noted that the physician self-referral law is a strict liability statute and compliance with each element of an exception is mandatory if the entity wishes to submit a claim for designated health services referred by a physician with which it has a financial relationship, while the anti-kickback statute is an intent-based criminal statute and compliance with a safe harbor is not required. These commenters asserted that the inclusion of a requirement for compliance with the anti-kickback statute is misplaced in an exception to the physician self-referral law because it introduces an intent-based requirement into a strict liability statute.

The commenters further noted that this requirement can make it unreasonably difficult for entities to meet their burden of proof under § 411.353(c)(2) that a referral and claim for designated health services does not violate the physician self-referral law. CMS RFI commenters also noted that the requirement for compliance with the anti-kickback statute and the requirement pertaining to Federal or State laws or regulations governing billing or claims submission are not necessary, because parties remain subject to these laws or regulations, regardless of whether their financial relationships otherwise comply with the physician self-referral law. As discussed below, commenters on the proposed rule have many of these same concerns.

As we stated in the proposed rule, based on our experience working with our law enforcement partners in reviewing conduct that implicates the physician self-referral law and other Federal fraud and abuse laws, when a compensation arrangement violates the intent-based criminal anti-kickback statute, it will likely also fail to meet one or more of the key requirements of an exception to the physician self-referral law (84 FR 55803). That is, the compensation in such cases likely is not fair market value or is determined in a manner that takes into account the volume or value of the physician's referrals or other business generated for the entity. As noted in the proposed rule, since the Phase I regulation was issued, we are unaware of any instances of noncompliance with the physician self-referral law that turned solely on an underlying violation of the anti-kickback statute (or any other Federal or Start Printed Page 77568State law governing billing or claims submission).

We also emphasized in the proposed rule and reiterate here that, although we were considering removing the requirement that the arrangement does not violate the anti-kickback statute from some or all of the regulatory exceptions, we believe that the Secretary has the authority under the statute to impose a requirement that the financial relationship not violate the anti-kickback statute or any other requirement if the Secretary determines it necessary and appropriate to ensure that an excepted financial relationship does not pose a risk of program or patient abuse. We also stated that we intend to monitor excepted financial relationships, and that we may propose in a future rulemaking to reinstate the requirements for deletion in some or all of the exceptions issued pursuant to the Secretary's statutory authority if we determine such requirements are necessary or appropriate to protect against program or patient abuse (84 FR 55802 through 55803). Based on our experience working with our law enforcement partners since our regulations were finalized, as well as comments received in response to the CMS RFI, we stated in the proposed rule that we no longer believe that it is necessary or appropriate to include requirements pertaining to compliance with the anti-kickback statute and Federal and State laws or regulations governing billing or claims submission as requirements of the exceptions to the physician self-referral law.

We noted further that the Congress did not require compliance with the anti-kickback statute or any other law in existence at the time of enactment of the statute or its subsequent revision in order to avoid the law's referral and billing prohibitions. Therefore, we proposed to remove from the exceptions in 42 CFR part 411, subpart J the requirement that the arrangement does not violate the anti-kickback statute or any Federal or State law or regulation governing billing or claims submission wherever such requirements appear. Specifically, we proposed to remove the following sections from our regulations.

§ 411.353(f)(1)(iii). § 411.355(b)(4)(v), (e)(1)(iv), (f)(3), (f)(4), (g)(2), (g)(3), (h)(2), (h)(3), (i)(2), (i)(3), (j)(1)(iv). § 411.357(e)(4)(vii), (j)(3), (k)(1)(iii), (l)(5), (m)(7), (p)(3), (r)(2)(x), (s)(5), (t)(3)(iv), (u)(3), (w)(12), (x)(1)(viii), and (y)(8).

We also proposed to delete the following clause from § 411.357(e)(6)(i) and (n). €œ, provided that the arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission.” Finally, we proposed to remove the definition of “does not violate the anti-kickback statute” in § 411.351. We noted that the exceptions for referral services at § 411.357(q) and obstetrical malpractice subsidies at § 411.357(r)(1) provide that arrangements satisfy the requirements of the exception if the arrangements comply with the requirements of certain specified safe harbors to the anti-kickback statute, and stated that our proposal did not apply to or affect these provisions.

After reviewing comments on our proposed rule, we no longer believe that it is appropriate to remove the requirement that the arrangement does not violate the anti-kickback statute from the exception for fair market value compensation at § 411.357(l), and we are not finalizing our proposal to remove that requirement at § 411.357(l)(5). We are finalizing our proposal to remove the requirement that the arrangement does not violate the anti-kickback statute from all other regulatory exceptions, and to remove requirements pertaining to Federal or State laws or regulations governing billing or claims submissions from all the regulatory exceptions, including § 411.357(l)(5). In the proposed rule, we noted that the Congress did not require compliance with the anti-kickback statute or any other law in existence at the time of enactment of the statute or its subsequent revision in order to avoid the physician self-referral law's referral and billing prohibitions (84 FR 55803).

However, the regulatory exception for fair market value compensation at § 411.357(l) applies to many arrangements that also could be protected by a statutory exception. In particular, as explained in section II.D.10 of this final rule, we are finalizing our proposal to permit arrangements for the lease of office space to be excepted under § 411.357(l). The statutory exception for the rental of office space at section 1877(e)(1) of the Act and § 411.357(a) of our regulations requires, among other things, that the space rented or leased does not exceed that which is reasonable or necessary for the legitimate purposes of the lease and is used exclusively by the lessee when being used by the lessee.

There are similar requirements in the statutory exception for the rental of equipment at § 411.357(b)(2). The regulatory exception for fair market value compensation, on the other hand, does not include such requirements. To the extent that the exception for fair market value compensation does not contain substitute requirements or safeguards, there is a possibility that certain potentially abusive arrangements that would not be permitted under a statutory exception could be protected by this regulatory exception.

We believe that requiring that the arrangement does not violate the anti-kickback statute in the exception for fair market value compensation at § 411.357(l) serves as a substitute safeguard, in lieu of certain safeguards that are included in the statutory exceptions but omitted from § 411.357(l). The exclusive use requirement in the statutory exceptions for the rental of office space and equipment, for example, prevents sham or “paper” leases, where a lessor receives payment from a lessee for space that the lessor continues to use (63 FR 1714 and 69 FR 16086). We believe that sham or paper lease arrangements would likely violate the anti-kickback statute.

Therefore, the requirement at § 411.357(l)(5) that the arrangement not violate the anti-kickback statute provides a substitute safeguard for the statutory exclusive use requirement and serves to prevent program or patient abuse. Without the requirement that the arrangement not violate the anti-kickback statute, sham lease arrangements or other abusive arrangements could potentially be excepted under § 411.357(l), and the exception for fair market value compensation would not satisfy the requirement at section 1877(b)(4) of the Act that financial relationships protected by the exception do not pose a risk of program or patient abuse. On the other hand, we are no longer convinced that the requirement at § 411.357(l)(5) that an arrangement must not violate Federal or State laws or regulations governing billing or claims submission is needed as a substitute safeguard to prevent program or patient abuse, and we are therefore finalizing the proposal to remove that requirement from § 411.357(l)(5).

In sum, the exception for fair market value compensation offers greater flexibility than certain overlapping statutory exceptions insofar as it omits some statutory requirements, but the greater flexibility could, in certain instances, increase the risk of program or patient abuse. Therefore, the requirement that the arrangement does not violate the anti-kickback statute should not be deleted from § 411.357(l)(5). We emphasized in the proposed rule and reiterate here that our final rule in no way affects parties' liability under the anti-kickback statute.

Indeed, the Congress clarified when enacting section 1877 of the Act that “any Start Printed Page 77569prohibition, exemption, or exception authorized under this provision in no way alters (or reflects on) the scope and application of the anti-kickback provisions in section 1128B of the Social Security Act” (H. Report 101-386, 856 (1989)). Most importantly, the fact that a financial relationship satisfies the requirements of an applicable exception to the physician self-referral law does not entail that the financial relationship does not violate the anti-kickback statute.

(See 66 FR 879.) Similarly, compliance with the anti-kickback statute does not entail compliance with the physician self-referral law. To the extent that a financial relationship is governed by other laws or regulations, our action does not affect the parties' compliance obligations under those other laws or regulations. Specifically, claims submitted to the Medicare program must comply with all laws, regulations, and other requirements governing billing and claims submission.

After reviewing the comments on the proposed rule, we are finalizing our proposal to remove the requirement that an arrangement not violate the anti-kickback statute from all the regulatory exceptions except the exception for fair market value compensation at § 411.357(l). Because this requirement will remain in § 411.357(l), we are not finalizing our proposal to delete the definition of “does not violate the anti-kickback statute” at § 411.351. We are finalizing without modification our proposal to remove from all the applicable regulatory exceptions the requirement that an arrangement not violate any Federal or State law or regulation governing billing and claims submissions.

We received the following comments and our responses follow. Comment. Nearly all the commenters that addressed the proposal favored removing provisions requiring that the arrangement does not violate the anti-kickback statute or Federal and State laws or regulations governing billing and claims submissions from the regulatory exceptions.

The commenters stated that the requirements are unnecessary because parties must comply with these laws independently of the physician self-referral law. One of these commenters stated that removing the requirement that an arrangement that satisfies an exception to the physician self-referral law must also fit within a safe harbor under the anti-kickback is a welcome streamlining of the regulations. Some commenters stressed that the incorporation of the intent-based Federal anti-kickback statute into the strict-liability framework of the physician self-referral law causes confusion and compliance risk without affording any additional protection of the Medicare program.

Commenters in favor of removing the requirement that the arrangement does not violate the anti-kickback statute also requested that CMS delete the definition of “does not violate the anti-kickback statute” in § 411.351. One of these commenters maintained that the definition is circular, because it includes the phrase “does not violate the anti-kickback provision in section 1128B(b) of the Act.” Lastly, one commenter generally opposed removing the requirement that the arrangement does not violate the anti-kickback statute from the regulatory exceptions, stating that finalizing the proposal would lead to program or patient abuse. Response.

We agree with the majority of the commenters that the requirement that an arrangement not violate any Federal or State law or regulation governing billing or claims submission should be removed from all the regulatory exceptions. Parties have an independent obligation to follow such laws, and we no longer believe that the Secretary must require compliance with such laws and regulations to ensure that financial relationships excepted under a regulatory exception do not pose a risk of program or patient abuse. With respect to the anti-kickback statute, we continue to believe that, as a general matter, the requirement that the arrangement does not violate the anti-kickback statute in most regulatory exceptions would not further protect against program or patient abuse because the parties to the compensation arrangement are already required to comply with all Federal laws, including the anti-kickback statute.

We understand the concerns raised by commenters that inclusion of the intent-based anti-kickback statute in the strict liability framework of the physician self-referral law may increase the burden of compliance with the physician self-referral law, and we are finalizing our proposal to remove this requirement from all regulatory exceptions except the exception at § 411.357(l) for fair market value compensation. As previously noted in this final rule, the requirement that the arrangement does not violate the anti-kickback statute in § 411.357(l)(5) is an important substitute requirement for certain statutory requirements that would otherwise apply to arrangements to which the regulatory exception at § 411.357(l) is applicable, such as the exclusive use requirement for leases of office space and equipment. Given the current requirements in the exception for fair market value compensation, we are not convinced that it is appropriate to protect leases of office space and certain other arrangements under § 411.357(l) without the requirement that the arrangement does not violate the anti-kickback statute.

Thus, we are not finalizing our proposal to remove this requirement from § 411.357(l)(5). Because we are not finalizing our proposal to remove the requirement that the arrangement does not violate the anti-kickback statute from the exception for fair market value compensation, we are not deleting the definition of “does not violate the anti-kickback statute” at § 411.351. We note that the requirement that the arrangement does not violate the anti-kickback statute at § 411.357(l)(5) does not and never has required that an arrangement fit into a safe harbor under the anti-kickback statute.

Rather the requirement remains that the arrangement does not violate the anti-kickback statute. As the term is defined at § 411.351, an arrangement “does not violate the anti-kickback statute” if it meets a safe harbor under the anti-kickback statute, has been specifically approved by OIG in a favorable advisory opinion issued to a party to the particular arrangement with respect to the particular arrangement (and not a similar arrangement), or does not violate the anti-kickback provisions in section 1128B(b) of the Act. We did not propose and are not finalizing any specific substantive modifications of this definition.

Lastly, we are taking this opportunity to reiterate that the Secretary retains the authority to impose, in future rulemaking, requirements pertaining to the anti-kickback statute and Federal or State laws or regulations governing billing or claims submissions in some or all of the regulatory exceptions issued under section 1877(b)(4) of the Act, if the Secretary determines that such requirements are necessary to prevent program or patient abuse. We intend to monitor excepted financial relationships, and we may propose in a future rulemaking to include the requirements in some or all of the exceptions issued pursuant to the Secretary's authority if we determine such requirements are necessary or appropriate to protect against program or patient abuse. 2.

Definitions (§ 411.351) a. Designated Health Services Section 1877(1)(A) of the Act provides that, unless the requirements of an applicable exception are satisfied, if a physician (or an immediate family member of a physician) has a financial Start Printed Page 77570relationship with an entity, the physician may not make a referral to the entity for the furnishing of a designated health service for which payment may otherwise be made under Title XVIII of the Act (that is, Medicare). The referral prohibition is codified in our regulations at § 411.353(a).

In the 1998 proposed rule, we interpreted the phrase “designated health service for which payment otherwise may be made” broadly to mean “any designated health service that ordinarily `may be' covered under Medicare (that is, that could be a covered service under Medicare in the community in which the service has been provided) for a Medicare-eligible individual, regardless of whether Medicare would actually pay for this particular service, at the time, for that particular individual (for example, the individual may not have met his or her deductible)” (63 FR 1694). Our definition of the term “designated health services” in the 1998 proposed rule was consistent with this broad interpretation of the referral prohibition. Section 1877(h)(6) of the Act defines “designated health services” by listing various categories of services that qualify as designated health services (for example, clinical laboratory services).

In the 1998 proposed rule, we stated that a designated health service remains such “even if it is billed as something else or is subsumed within another service category by being bundled with other services for billing purposes” (63 FR 1673). By way of example, we stated that clinical laboratory services that are provided by a skilled nursing facility (SNF) and reimbursed as part of the SNF composite rate would remain designated health services for purposes of section 1877 of the Act, even though SNF services are not listed as designated health services at section 1877(h)(6) of the Act and Medicare would not separately pay for the clinical laboratory service furnished by the SNF. The now-deleted exception at § 411.355(d), which was first finalized in the 1995 final rule, served as a counterbalance to the broad interpretation of designated health services that was proposed in the 1998 proposed rule.

As finalized in the 1995 final rule, § 411.355(d) provided that the referral prohibition in § 411.353 did not apply to services furnished in an ambulatory surgical center (ASC) or end-stage renal disease (ESRD) facility, or by a hospice, if payment for those services was included in the ASC rate, the ESRD composite rate, or as part of the per diem hospice charge (60 FR 41980). We explained that the application of a composite rate payment “constitutes a barrier to either Medicare program or patient abuse because the Medicare program will pay only a set amount to the facilities irrespective of the number and frequency of laboratory tests that are ordered” (60 FR 41940). In the 1998 proposed rule, we proposed an amendment to § 411.355(d) that would have excepted services furnished under other payment rates that that the Secretary determines provide no financial incentive for under- or overutilization or any other risk of program or patient abuse (63 FR 1666).

However, in Phase I, instead of expanding the exception at § 411.355(d) to include services furnished under other payment rates, we narrowed the definition of “designated health services” to exclude certain services that are paid as part of a composite rate, and solicited comments on whether the exception at § 411.355(d) was still necessary in light of the narrowed definition of “designated health services” (66 FR 923 through 924). We ultimately determined in Phase II that § 411.355(d) was no longer necessary, given the change to the definition of “designated health services” finalized in Phase I, and we removed the exception from our regulations (69 FR 16111). As finalized in Phase I, the definition of “designated health services” includes only designated health services payable, in whole or in part, by Medicare, and does not include services that would otherwise constitute designated health services, but that are reimbursed by Medicare as part of a composite rate, except to the extent that the services are specifically identified in § 411.351 and are themselves payable through a composite rate.

SNF services paid by Medicare under the Part A composite rate (that is, the Skilled Nursing Facility Prospective Payment System (SNF PPS)), for example, are not designated health services, even if the bundle of services includes services that would otherwise be designated health services, such as clinical laboratory services.[] In contrast, although home health and inpatient and outpatient hospital services are paid under a composite rate, they remain designated health services under the definition finalized in Phase I because section 1877(h)(6) of the Act explicitly lists these services as designated health services. We explained in Phase I that our ultimate definition of “designated health services” was based on issues of statutory construction (66 FR 923). In particular, commenters on the 1998 proposed rule asserted that the definition of designated health services would have expanded the list of services that are considered to be designated health services beyond the services explicitly listed at section 1877(h)(1) of the Act.

For example, clinical laboratory services furnished by a SNF and reimbursed under the SNF PPS would have been considered designated health services under the definition, even though SNF services are not included in the statutory list of designated health services. The commenters maintained that, where the Congress intended the physician self-referral law to cover specific services, including services that are paid under a composite rate such as home health services, it did so by explicitly listing the services at section 1877(h)(6) of the Act. We agreed and finalized the definition of “designated health services” to include only those services paid under a composite rate that are explicitly listed at section 1877(h)(1) of the Act.

That is, home health services and inpatient and outpatient hospital services. As we stated in the proposed rule, in light of our experience with the SRDP and our review of the comments to the CMS RFI, we reviewed the regulatory history of our definition of “designated health services” at § 411.351 to identify whether further clarification regarding what constitutes a designated health service is necessary (84 FR 55805). We proposed to revise the definition of “designated health services” to clarify that a service provided by a hospital to an inpatient does not constitute a designated health service payable, in whole or in part, by Medicare, if the furnishing of the service does not affect the amount of Medicare's payment to the hospital under the Acute Care Hospital Inpatient Prospective Payment System (IPPS).

To illustrate, suppose that, after an inpatient has been admitted to a hospital under an established Medicare Severity Diagnosis Related Group (MS-DRG), the patient's attending physician requests a consultation with a specialist who was not responsible for the patient's admission, and the specialist orders an X-ray. By the time the specialist orders the X-ray, the rate of Medicare payment under the IPPS has already been established by the MS-DRG (diagnostic Start Printed Page 77571imaging is bundled into the payment for the inpatient admission), and, unless the X-ray results in an outlier payment, the hospital will not receive any additional payment for the service over and above the payment rate established by the MS-DRG. Moreover, insofar as the provision of the X-ray does not affect the rate of payment, the physician has no financial incentive to over-prescribe the service.

As illustrated here, we do not believe that the X-ray is a designated health service that is payable, in whole or part, by Medicare, and our definition of “designated health services” at § 411.351 would exclude this service from the definition of designated health services, even though it falls within a category of services that, when billed separately, would be “designated health services.” Thus, assuming the specialist had a financial relationship with the hospital that failed to satisfy the requirements of an applicable exception to the physician self-referral law at the time the X-ray was ordered, the inpatient hospital services would not be tainted by the unexcepted financial relationship, and the hospital would not be prohibited from billing Medicare for the admission. On the other hand, if the physician who ordered the inpatient hospital admission had a financial relationship with the hospital that failed to satisfy the requirements of an applicable exception, § 411.353(b) would prohibit the hospital for billing for the inpatient hospital services. In the proposed rule, we stated that we are aware that not all hospitals are paid under the IPPS (84 FR 55805).

We solicited comments as to whether our proposal regarding certain hospital services that are not “designated health services payable, in whole or in part, by Medicare” should be extended to analogous services provided by hospitals that are not paid under the IPPS, and, if so, how we should effectuate this change in our regulation text. We also stated that, although hospital outpatient services are also paid under a composite rate, we believe that there is typically only one ordering physician for outpatient services, and it would be rare for a physician other than the ordering physician to refer an outpatient for additional hospital outpatient services that are compensated within the same ambulatory payment classification (APC) under the Hospital Outpatient Prospective Payment System (OPPS). For this reason, we did not propose to apply the modified definition of “designated health services” at § 411.351 to outpatient hospital services paid under the OPPS.

In this final rule, we are extending the proposed policy to apply to hospital services furnished to inpatients that are paid under additional prospective payment systems. Specifically, we are revising the definition of “designated health services” to state that, for services furnished to inpatients by a hospital, a service is not a designated health service payable, in whole or in part, by Medicare if the furnishing of the service does not increase the amount of Medicare's payment to the hospital under any of the following prospective payment systems (PPS). (i) Acute Care Hospital Inpatient (IPPS).

(ii) Inpatient Rehabilitation Facility (IRF PPS). (iii) Inpatient Psychiatric Facility (IPF PPS). Or (iv) Long-Term Care Hospital (LTCH PPS).

For the reasons explained in our response to comments below, we are not extending the proposed policy to apply to hospital services furnished to outpatients. We are also making nonsubstantive revisions to the definition of “designated health services” for consistency regarding the terms “paid” and “payable” and making a minor grammatical change. We received the following comments and our responses follow.

Comment. The vast majority of commenters that commented on this proposal supported our proposal to exclude from the definition of “designated health service payable, in whole or in part, by Medicare” those services furnished by a hospital to an inpatient that do not affect the amount of Medicare's payment to the hospital under the IPPS. Commenters indicated that the revision would bring clarity to hospitals when assessing compliance with the physician self-referral law and calculating potential overpayments for violations of the law.

Some commenters highlighted the onerous compliance burdens associated with quantifying a potential overpayment when the financial relationship that does not satisfy the requirements of an applicable exception is with a physician other than the physician who referred the patient for the inpatient admission. Nearly all of the commenters that supported our proposal requested that we expand the policy to other composite rate payment systems under which hospitals are paid. Some commenters suggested limiting the expansion to payments for services to inpatients under the IRF PPS, IPF PPS, and LTCH PPS.

Other commenters suggested that we expand the policy to any composite rate payment system under which a hospital is paid for either inpatient or outpatient services, including OPPS. The commenters suggesting expansion to OPPS stated (in identical language) that they are aware of circumstances where physicians other than the ordering physician refer outpatients for additional outpatient services that would not be compensated separately under the OPPS. However, none of these commenters provided a specific example or identified a specific APC.

Response. We believe that expanding our policy to other payment systems applicable to the furnishing of services to inpatients would not pose a risk of program or patient abuse. The IRF PPS, IPF PPS, and LTCH PPS operate similarly to IPPS.

No additional payment is available where additional hospital services are ordered after a patient's admission by a physician who was not responsible for the patient's admission, except in limited circumstances. We are not persuaded to expand the policy to the OPPS. As we stated in the proposed rule, we believe that there is typically only one ordering physician for outpatient services, and it would be rare that a physician other than the ordering physician would refer an outpatient for additional outpatient services that would not be paid separately under the OPPS (84 FR 55805).

The commenters that asserted the existence of circumstances where physicians other than the ordering physician refer outpatients for additional outpatient services that would not be paid separately under the OPPS provided no evidence or examples of such circumstances for us to confirm. Finally, we believe that extending the rule to designated health services paid under the OPPS would be burdensome and challenging for stakeholders, CMS, and our law enforcement partners to implement and enforce. We decline to extend the policy to the OPPS.

Comment. One commenter questioned whether a service would be considered a designated health service if the hospital's furnishing of the service to an inpatient decreased the IPPS payment to the hospital. Another commenter requested clarification of the meaning of “affects” the amount of Medicare payment.

A few commenters requested additional examples of hospital services that would or would not “affect” an IPPS payment under the revised definition of “designated health services,” if finalized. Response. Although we do not believe it is likely that the ordering of additional services for an inpatient would decrease the amount of Medicare's payment for the admission, we are replacing the word “affect” with “increase” to express our policy with more precision.

As noted, under the definition of “designated health Start Printed Page 77572services” finalized at § 411.351, for services furnished to inpatients by a hospital, a service is not a designated health service payable, in whole or in part, by Medicare if the furnishing of the service does not increase the amount of Medicare's payment to the hospital under any of the following prospective payment systems (PPS). (i) Acute Care Hospital Inpatient (IPPS). (ii) Inpatient Rehabilitation Facility (IRF PPS).

(iii) Inpatient Psychiatric Facility (IPF PPS). Or (iv) Long-Term Care Hospital (LTCH PPS). Comment.

One commenter in opposition to our proposal described a summary of the proposed rule prepared by an independent law firm that identified what the law firm assumed the rationale behind our proposal to be. Physicians have no financial incentive to overprescribe services that do not affect the rate of payment. The commenter disagreed with that rationale as support for our proposal, and described a complicated situation that could present a risk of abuse based on hospital referrals to service lines within the hospital in which certain physicians, but not the referring physicians addressed in our proposal, could profit.

The commenter expressed concern that the revised definition of “designated health services” would likely eliminate inpatient hospitalization from the reach of the physician self-referral law. The commenter also asserted that there exists no opposition to the current definition of “designated health services” and urged CMS not to finalize the proposal. Response.

All inpatient and outpatient hospital services will remain designated health services except for services furnished to an inpatient after he or she becomes an inpatient and only where those additional services do not increase the amount of Medicare's payment to the hospital for the inpatient admission. For the reasons stated in the proposed rule and in this final rule, we are finalizing our proposal with the modification described above. Comment.

A few commenters expressed uncertainty with respect to a hospital's ability to know whether services furnished to an inpatient pursuant to a prohibited referral from a physician other than the physician who made the referral for the inpatient admission result in outlier payments under the IPPS such that the “caveat” in the exclusion from the definition would apply. The commenters also stated that they lacked clarity regarding when a hospital could know that an outlier payment is triggered by a particular inpatient admission. The commenters asserted that this makes the revised definition of “designated health services” unworkable.

Response. We see no reason why a hospital would be unable to identify referrals made by physicians with whom the hospital has financial relationships that do not satisfy the requirements of an applicable exception. As we have stated repeatedly throughout our rulemaking history, the physician self-referral law's billing prohibition requires that the entity submitting a claim to Medicare for payment for designated health services has the burden of ensuring that the services were not furnished as a result of a prohibited referral.

It is incumbent upon hospitals to implement effective compliance programs to identify financial relationships with physicians that do not satisfy the requirements of an applicable exception to the physician self-referral law and take action not to submit prohibited claims for payment. If a hospital did not identify the financial relationship with a referring physician until after a claim was submitted and paid, the hospital would need to identify admissions for which payments in excess of the expected MS-DRG payment (or other PPS payment) were received and identify any prohibited referrals for services furnished to the inpatients for whom the excess payments relate. We believe that our rules and regulations regarding outlier payments are clear and we are unaware of any reason that a hospital would be unable to utilize its medical record and billing systems to identify inpatient admissions that resulted in payments in addition to the expected MS-DRG payment (or other PPS payment) for the inpatient admission.

B. Physician In the 1992 proposed rule, we stated that, for purposes of the physician self-referral law, physicians are certain professionals who are “legally authorized to practice by the State in which they perform their professional functions or actions and when they are acting within the scope of their licenses.” (57 FR 8593). We included in the definition a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of optometry, and a chiropractor who meets certain qualifications.

In Phase I, we finalized our definition of “physician” at § 411.351, defining the term as “a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor, as defined at section 1861(r) of the Act.” (66 FR 955). Since Phase I, our definition of “physician” at § 411.351 has consistently referred to the definition of “physician” at section 1861(r) of the Act. However, although the definition of “physician” at § 411.351 cross-references section 1861(r) of the Act, the two definitions are not entirely harmonious.

In particular, the definition of “physician” at § 411.351 does not include all the limitations imposed by the definition of “physician” at section 1861(r) of the Act. In order to correct this discrepancy and provide uniformity between Title XVIII of the Act and our regulations with regard to the definition of a “physician,” in the proposed rule, we proposed to amend the definition of “physician” at § 411.351 (84 FR 55805 through 55806). Under the proposed definition, the types of practitioners who qualify as “physicians” for purposes of the physician self-referral law would be defined by cross-reference to section 1861(r) of the Act.

Therefore, the definition of “physician” at § 411.351 would incorporate the statutory limitations imposed on the definition of “physician” by section 1861(r) of the Act. As proposed, the definition at § 411.351 would continue to provide that a physician is considered the same as his or her professional corporation for purposes of the physician self-referral law. After reviewing the comments, we are finalizing the definition of “physician” as proposed.

We received the following comment and our response follows. Comment. Several commenters generally supported the regulatory change to cross-reference the definition of “physician” at § 411.351 to the definition in section 1861 of the Act.

A few commenters maintained that the definition of “physician” should be limited to doctors who have a Doctor of Medicine, Doctor of Osteopathic Medicine, or a recognized equivalent physician degree. One commenter questioned the practical effect of incorporating into our definition of physician at § 411.351 the statutory limitations imposed in the definition of “physician” under section 1861(r) of the Act. Specifically, the commenter asked whether the policy excludes podiatrists, optometrists, and chiropractors from the definition of “physician” for purposes of the physician self-referral law, because, according to the commenter, the statutory limitations related to those three types of practitioners restrict when they are considered physicians under section 1861(r) of the Act to very limited circumstances, none of which reference the physician self-referral law.

Response. We are finalizing the definition of “physician” as proposed. Start Printed Page 77573The revised definition will align the regulatory definition of “physician” at § 411.351 with the statutory definition of “physician” in section 1861(r) of the Act to ensure that there are no inconsistencies between our regulations and the statutory definition.

Because the physician self-referral statute is in Title XVIII of the Act, in the absence of a definition of “physician” in section 1877 of the Act, definitions of general applicability, such as the definition of “physician” at section 1861(r) of the Act, are applicable to the physician self-referral law. Under section 1861(r) of the Act, a “physician” includes a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, and a chiropractor, but provides for limitations on when such doctors are considered “physicians” for purposes of Title XVIII of the Act. We do not believe that the definition of “physician” in our regulations should be either more limited or more expansive than the statutory definition.

Thus, to the extent that the statutory definition of “physician” includes doctors other than doctors of medicine and osteopathy, those practitioners fall within the ambit of the physician self-referral law. However, we do not believe that the referral prohibition at § 411.353(a) should apply to any doctor during the period he or she is not considered to be a physician for purposes of Title XVIII of the Act. In those instances when a doctor of medicine or osteopathy, doctor of dental surgery or dental medicine, doctor of podiatric medicine, doctor of optometry, or chiropractor is considered a physician under section 1861(r) of the Act, the doctor or chiropractor will be considered a physician for purposes of the physician self-referral law.

C. Referral In Phase II, we stated that the exception for fair market value compensation is not available to protect recruitment arrangements (69 FR 16096). We noted that a hospital is not permitted to pay a physician for the benefit of receiving the physician's referrals, and that such payments are antithetical to the premise of the statute.

In the proposed rule, we reaffirmed that a physician's referrals are not items or services for which payment may be made under the physician self-referral law, and that neither the existing exceptions to the physician self-referral law nor the exceptions proposed in the proposed rule would protect such payments. We proposed to revise the definition of “referral” at § 411.351 to explicitly state our longstanding policy that a referral is not an item or service for purposes of section 1877 of the Act and the physician self-referral regulations (84 FR 55806). After reviewing the comments, we are finalizing our modification of the definition of “referral” as proposed.

We received the following comment and our response follows. Comment. Numerous commenters supported the proposed revision of the definition of “referral.” We also received comments on our proposed definition of “referral” that pertained to the volume or value standard and the payment of productivity bonuses.

Response. We are finalizing the definition as proposed. Comments pertaining to the volume or value standard and the payment of productivity bonuses are addressed in section II.B.3.

Of this final rule. D. Remuneration A compensation arrangement between a physician (or an immediate family member of such physician) and an entity (as defined at § 411.351) implicates the referral and billing prohibitions of the physician self-referral law.

Section 1877(h)(1)(A) of the Act defines the term “compensation arrangement” as any arrangement involving any “remuneration” between a physician (or an immediate family member of such physician) and an entity. However, section 1877(h)(1)(C) of the Act identifies certain types of remuneration which, if provided, would not create a compensation arrangement subject to the referral and billing prohibitions of the physician self-referral law. Under section 1877(h)(1)(C)(ii) of the Act, the provision of the following does not create a compensation arrangement between the parties.

Items, devices, or supplies that are used solely to collect, transport, process, or store specimens for the entity providing the items, devices, or supplies, or to order or communicate the results of tests or procedures for such entity. Furthermore, under our definition of “remuneration” at § 411.351, the provision of such items, devices, or supplies is not considered to be remuneration. In the 1998 proposed rule we explained our interpretation of the phrase “used solely” at section 1877(h)(1)(C)(ii) of the Act (66 FR 1693 through 1694).

We observed that some pathology laboratories had been furnishing physicians with materials ranging from basic collection and storage items to more specialized or sophisticated items, devices, or equipment. We clarified that, in order for these items and devices to meet the statutory requirement, they must be used solely to collect, transport, process, or store specimens for the entity that provided the items and devices, or to order or communicate the results of tests or procedures for such entity. We provided examples of items that could meet the “used solely” test, including cups used for urine collection or vials used to hold and transport blood to the entity that supplied the items or devices.

We emphasized that an item or device would not meet the “used solely” requirement if it is used for any purpose besides the purposes listed in the statute. In particular, we noted that certain surgical tools that can be used to collect or store samples, but are also routinely used as part of a surgical or medical procedure, would not satisfy the “used solely” requirement. As finalized in Phase I, the definition of “remuneration” included a parenthetical stipulating that the provision of surgical items, devices, and supplies would not qualify for the carve-out to the definition of “remuneration” for items, devices, or supplies that are used solely for the purposes listed at section 1877(h)(1)(C)(ii) of the Act (66 FR 947).

We explained that we did not believe that the Congress intended section 1877(h)(1)(C)(ii) of the Act to allow entities to supply physicians with surgical items for free or below fair market value prices, noting that such items may have independent economic value to physicians apart from the six statutorily permitted uses. We stated our belief that the Congress intended to include at section 1877(h)(1)(C)(ii) of the Act single-use items, devices, and supplies of low value that are primarily provided by laboratories to ensure proper collection of specimens. In this context, we explained that reusable items may have value to physicians unrelated to the collection of specimens, and therefore could not meet the “used solely” requirement.

Lastly, we stated that the provision of an excessive number of collection supplies creates an inference that the supplies are not provided “solely” to collect, transport, process, or store specimens for the entity that furnished them. We made no changes to the definition of “remuneration” in Phase II or Phase III. In the CY 2016 PFS final rule, we clarified that the provision of an item, device, or supply that is used for one or more of the six purposes listed in the statute, and no other purpose, does not constitute remuneration (80 FR 71321).

In two advisory opinions issued in 2013 we applied the definition of “remuneration” at § 411.351 to two proposed arrangements to provide Start Printed Page 77574certain devices to physicians free of charge. In CMS-AO-2013-01, we concluded that, based on the specific facts certified by the requestor of the opinion, the provision of liquid-based Pap smear specimen collection kits did not constitute remuneration, because the collection kits are not surgical devices, and because the devices are used solely in the collection of specimens. Among other things, our “used solely” analysis highlighted the following facts, as certified by the requestor.

(1) The Pap smear collection kits contain only disposable items that cannot be reused after a specimen is collected. And (2) the entity furnishing the Pap smear collection kits has a system in place to ensure that physicians receive only the quantity of devices necessary for their practice needs, and to address potential instances of separation of the devices into their component parts for use other than to collect specimens. In contrast, in CMS-AO-2013-02, we concluded that, based on the specific facts certified by the requestor of the opinion, the furnishing of certain disposable biopsy brushes for use in obtaining a biopsy of visible exocervical lesions constituted remuneration under the definition at § 411.351.

We noted that, as certified by the requestor, the biopsy brush is a disposable, single-use, cervical biopsy device that is used to collect a specimen to be sent to a laboratory. After reviewing FDA rules and regulations and American Medical Association guidelines, and consulting with CMS medical officers, we concluded that the device is a “surgical item, device, or supply” for purposes of the physician self-referral law and, therefore, that the provision of the device constitutes remuneration under § 411.351. After further consideration of our interpretation of section 1877(h)(1)(C)(ii) of the Act and the analysis set forth in the 2013 advisory opinions, in the proposed rule, we proposed certain modifications to the definition of “remuneration” at § 411.351 (84 FR 55806 through 55807).

Specifically, we proposed to remove the parenthetical in the current definition of “remuneration,” which stipulates that the carve-out to the definition of “remuneration” does not apply to surgical items, devices, or supplies. We stated that we are no longer convinced that the mere fact that an item, device, or supply is routinely used as part of a surgical procedure means that the item, device, or supply is not used solely for one of the six purposes listed at section 1877(h)(1)(C)(ii) of the Act. Rather, the relevant inquiry for purposes of the physician self-referral law is whether the item, device, or supply is used solely for one or more of the statutory purposes, regardless of whether the device is also classified as a surgical device.

To be clear, we continue to believe that the Congress intended the carve-out at section 1877(h)(1)(C)(ii) of the Act to cover single-use items, devices, or supplies of low value [] that are primarily provided by laboratories to ensure proper collection of specimens, but we are no longer convinced that the mere fact that an item, supply, or device is classified as a “surgical device” means that it does not fall within the carve-out. In the proposed rule, we also clarified the “used solely” requirement at § 411.351. Although the furnished item, device, or supply may not be used for any purpose other than one or more of the six purposes listed in the statute, we recognize that, in many instances, the item, device, or supply could theoretically be used for numerous purposes.

For example, a specimen lockbox could potentially be used for several purposes. It could be used to store unused specimen collection supplies or as a doorstop. However, if, during the course of the arrangement, the specimen box provided to the physician is not used for any of these purposes and is, in fact, used only for one or more of the six purposes outlined in the statute and our regulations, the furnishing of the specimen box would not be considered remuneration between parties.

In other words, the mere fact that an item, device, or supply could be used for a purpose other than one or more of the permitted purposes does not automatically mean that the furnishing of the item, device, or supply at no cost constitutes remuneration. We proposed to add the phrase “in fact” to the “used solely” requirement to clarify that an item, device, or supply can have several uses, including uses that are not among the six purposes listed in the statute. However, the furnishing of such items, supplies, or devices would not be considered remuneration if the item, device, or supply in question is, in fact, only used for one or more of the six purposes outlined in the statute.

We again refer readers to the guidance provided in the 1998 proposed rule and in Phase I on steps that a party can take to ensure that the furnished items, supplies, or devices are used appropriately (63 FR 1693 through 1694 and 66 FR 947 through 948, respectively). Although we proposed certain modifications to the definition of “remuneration,” we did not propose to exclude from the definition of “remuneration” those items, devices, or supplies whose main function is to prevent contamination or , even if the item, device, or supply could potentially be used for one or more of the six statutory purposes at section 1877(h)(1)(C)(ii) of the Act. In Phase I, we made clear that, although sterile gloves are essential to the proper collection of specimens, we believe they are not items, devices, or supplies that are used solely to collect, transport, process, or store specimens (66 FR 948).

Sterile gloves are essential to the specimen collection process, but their primary purpose is to prevent or contamination. In addition, sterile gloves are fungible, general purpose items, and we continue to believe it would be impractical for parties to monitor the use of the gloves to ensure that they are used solely for one or more of the purposes listed at section 1877(h)(1)(C)(ii) of the Act. Likewise, although there may be certain specialized equipment (including surgical tools) that may be used for one or more of the purposes described in the statute, in order not to be considered remuneration, the item, device, or supply must not have a primary function of preventing or contamination, or some other purpose besides one of the six purposes listed in the statute.

After reviewing the comments, we are finalizing our revision of the definition of “remuneration” as proposed. We received the following comments and our responses follow. Comment.

Numerous commenters supported our proposed revision of the definition of “remuneration,” including our proposal to remove the phrase “not including surgical supplies, devices, or supplies” and our proposal to clarify that items, devices, and supplies are not remuneration if they are, “in fact,” used exclusively for one or more of the permitted purposes. Several of the commenters that supported our proposed revision of the definition of “remuneration” also supported our statement that those items, devices, or supplies whose main function is to prevent contamination or are not carved out of the definition of “remuneration.” One commenter suggested that the proposed changes to the definition will reduce physician hesitancy regarding the acceptance of such items, devices, and supplies and will reduce administrative burden.Start Printed Page 77575 Response. We agree that the revisions to the definition of “remuneration” will provide additional clarification and reduce administrative burden, and are revising the definition of “remuneration” as proposed.

Comment. One commenter objected to the proposal to strike the parenthetical pertaining to surgical items, devices, or supplies from the definition of “remuneration” and urged CMS not to finalize the proposal. The commenter maintained that CMS did not explain the rationale for the policy change in the proposed rule, and that CMS did not provide any examples of surgical items, devices, or supplies that would not be considered remuneration.

According to the commenter, it is relatively straightforward for a laboratory to determine if an item, device, or supply is classified as “surgical,” and thus is not excluded from the definition of remuneration. The commenter asserted that it would be more difficult, if not impossible, for a laboratory to determine whether a physician in fact uses a surgical item, device, or supply for one of the permitted purposes under the statute. The commenter noted that CMS acknowledged in the proposed rule the difficulty of monitoring the use of sterile gloves.

The commenter concluded that, given the difficulty of monitoring actual use, the proposal, if finalized, would create a “slippery slope” that would permit unscrupulous actors to provide items, devices, or supplies that are routinely used as part of a surgical procedure as opposed to one of the permitted purposes under the statute. A different commenter raised similar objections to the proposal. This commenter acknowledged that the proposal to no longer categorically include surgical items, devices, or supplies in the definition of “remuneration” provides some additional flexibility under our regulations, but urged CMS to ensure that the items, devices, or supplies not considered to be remuneration continue to be single-use items, devices, or supplies with little, if any, independent value to the physicians who receive them.

The commenter expressed concern that, under the proposal, valuable items, devices, or supplies, such as bone marrow kits, would no longer be considered remuneration, thus increasing the risk of program or patient abuse. The commenter also expressed concern that it would increase the burden on parties to monitor the use of items, devices, or services, to ensure that physicians are in fact using the items, devices, or services for one or more of the permitted purposes under the statute. Response.

The purpose of the revision to the definition of “remuneration” is to increase flexibility under our regulations and to clarify the “used solely” requirement. As noted in the proposed rule, we no longer believe that the mere fact that an item, device, or supply is classified as “surgical” means that the item, device, or supply is not used solely for one or more of the permitted purposes. Although the categorical inclusion of surgical items, devices, or supplies in the definition of “remuneration” may provide a bright line test for determining which items may be furnished to physicians at reduced or no cost, it also may include certain items, device, or supplies in the definition of “remuneration” that the Congress meant to exclude in section 1877(h)(1)(C)(ii) of the Act.

Nothing in the regulation compels an entity to provide any item, device, or supply to a physician below fair market value or for free. Entities concerned about monitoring for “sole use” may elect not to give away surgical (or any other) item, device, or supply. Moreover, items, devices, and supplies that do not constitute remuneration for purposes of the physician self-referral law may nonetheless implicate the anti-kickback statute.

Similarly, our clarification of the “used solely” requirement was not intended to loosen the requirement or to create a slippery slope that will lead to abusive arrangements. Prior to the proposed rule, we received inquiries from stakeholders questioning whether the mere fact that an item, device, or supply could be used for a purpose other than one or more of the permitted purposes means that the provision of such an item, device, or supply constitutes “remuneration” under our regulations. We are adding the phrase “in fact” to the definition to clarify that this is not the case and to provide certainty to parties regarding items, devices, or supplies with potential ancillary functions outside of one or more of the permitted purposes.

At the same time, as indicated in our discussion of the provision of sterile gloves, we continue to believe that, for an item, device, or supply (including surgical tools) to satisfy the “used solely” requirement, the primary purpose of the item, device, or supply must be one or more of the uses permitted under the statute. Sterile gloves and other multi-use items, devices, or supplies whose primary purpose is not one of the permitted purposes are not excluded from the definition of “remuneration,” even if a particular physician in fact only uses the item, device, or supply for one of the permitted purposes. We do not disagree that it may be difficult for an entity to monitor how a physician “in fact” uses a multi-use item, device, or supply whose primary purpose is not one or more of the permitted purposes to ensure that the physician in fact uses the item, device, or supply exclusively for one or more of the permitted purposes.

However, because the provision of multi-use items, devices, or supplies whose primary purpose is not one or more of the permitted purposes will not be carved out of the definition of remuneration. We continue to believe that the Congress intended the carve-out at section 1877(h)(1)(C)(ii) of the Act to cover single-use items, devices, or supplies of low value that are primarily provided by laboratories to ensure proper collection of specimens. We note that, in the OBRA 1993 Conference Report, H.R.

103-213 pp. 818 through 819, the Congress characterized section 1877(h)(1)(C)(ii) of the Act as an “exception” for “certain minor remuneration.” Although we are not finalizing a monetary limit for the carve-out, we continue to believe that the items carved out of the definition of “remuneration” must be low value. We also reaffirm that the items, devices, or supplies provided to a physician must have little or no independent value to the physician.

In this context, it is important to note that both the statute and our regulations provide that the items, devices, or supplies provided must serve a purpose for the entity providing the items, devices, or supplies. For example, collecting specimens for the entity. We believe that the phrase “for the entity” underscores that the items, devices, or supplies must have little, if any, independent value for the physician.

Lastly, we emphasize that, even if the provision of an item, device, or supply is carved out of the definition of “remuneration” under the physician self-referral law, the provision of such items, devices, and supplies implicates the anti-kickback statute. E. Transaction (and Isolated Financial Transaction) Section 1877(e)(6) of the Act provides that an isolated financial transaction, such as a one-time sale of property or practice, is not a compensation arrangement for purposes of the physician self-referral law if.

(1) The amount of remuneration under the transaction is consistent with the fair market value of the transaction and is not determined in a manner that takes into account (directly or indirectly) the Start Printed Page 77576volume or value of referrals by the referring physician. (2) the remuneration is pursuant to an arrangement that would be commercially reasonable even if no referrals were made to the entity. And (3) the transaction meets any other requirements that the Secretary imposes by regulation as needed to protect against program or patient abuse.

As enacted by OBRA 1989, the statutory exception identified a one-time sale of property as an example of an isolated financial transaction. In OBRA 1993, the Congress further clarified the statutory exception by providing an additional example of an isolated transaction, namely, a one-time sale of a practice. (See House Conference Report at H.R.

813-815 (1993).) In the 1992 proposed rule, we proposed an exception (ultimately codified at § 411.357(f)) to mirror the statutory exception at section 1877(e)(6) of the Act for certain isolated financial transactions (both titled and together referred to as the exception for isolated transactions) (57 FR 8591). In our proposal, we included a requirement—in addition to the statutory requirements—that there be no other transactions (that is, financial relationships) between the parties for 1 year before and 1 year after the financial transaction to ensure that financial transactions excepted under section 1877(e)(6) of the Act and § 411.357(f) are truly isolated in nature (57 FR 8599). In the 1995 final rule, we finalized an exception for isolated financial transactions at § 411.357(f), and we modified the proposed 1-year requirement in response to commenters that asserted that the requirement would create substantial and unnecessary problems (60 FR 41960).

We stated that a transaction would be considered an isolated transaction for purposes of § 411.357(f) if there were no other transactions between the parties for 6 months after the transaction, except those transactions that are specifically excepted by another provision in §§ 411.355 through 411.357. We further stated that individual payments between parties generally characterize a compensation arrangement. However, debt, as described in the definition of “ownership or investment interest” at section 1877(a)(2) of the Act, can constitute an ownership interest that continues to exist until the debt is paid off (60 FR 41960).

The 1995 final rule also established definitions of “transaction” and “isolated transaction” at § 411.351. We defined a “transaction” as an instance or process of two or more persons doing business and an “isolated transaction” as a transaction involving a single payment between two or more persons. The regulation at § 411.351 specified that a transaction involving long-term or installment payments is not considered an isolated transaction.

In the 1998 proposed rule, we proposed to revise the definition of “transaction” at § 411.351 to clarify that a transaction can involve persons or entities, but did not propose any substantive changes to the exception at § 411.357(f) (63 FR 1669). This definition was finalized in Phase II, with modification to permit installment payments (and post-closing adjustments) under certain circumstances (69 FR 16098). In Phase II, we also responded to commenters that objected to the prohibition on other transactions within 6 months of the excepted transaction.

We declined to modify the 6-month prohibition on other transactions, and we explained that the concept of an isolated transaction is incompatible with the parties routinely engaging in multiple transactions in a year or during a short period of time. In Phase III, we made no changes to the exception at § 411.357(f), but updated the term “isolated transaction” at § 411.351 to refer to an “isolated financial transaction,” as that specific term is used in the statutory and regulatory exceptions (72 FR 51084). Through our administration of the SRDP, work with our law enforcement partners, and interactions with stakeholders, it has come to our attention that some parties may believe that CMS' policy is that the exceptions in section 1877(e)(6) of the Act and § 411.357(f) for isolated transactions are available to protect service arrangements where a party makes a single payment for multiple services provided over an extended period of time.

To illustrate, assume that a hospital makes a single payment to a physician for working multiple call coverage shifts over the course of a month (or several months) and seeks to utilize the exception at § 411.357(f) to avoid qualification of the payment as a financial relationship subject to the physician self-referral law's referral and billing prohibitions. That is, the parties wish to consider the single payment for multiple services an “isolated financial transaction.” We have observed that parties turn to the exception for isolated transactions to protect single payments for multiple services when they discover, typically after the services have been provided, that they failed to set forth the service arrangement in writing, and thus cannot rely on the exceptions for personal service arrangements or fair market value compensation. In fact, it is our policy that the exception for isolated transactions is not available to except payments for multiple services provided over an extended period of time, even if there is only a single payment for all the services.

We see no reason to unduly stretch the meaning and applicability of the exception for isolated transactions beyond what was intended by the Congress. As described elsewhere in this final rule, our final regulations should facilitate compliance with the physician self-referral law in general and the writing and signature requirements in particular, including a 90-day period to reduce arrangements to a signed writing and an exception for limited remuneration to a physician. We believe that these final provisions will afford parties with sufficient flexibility to ensure that personal service and other compensation arrangements comply with the physician self-referral law.

To illustrate the kind of transactions that section 1877(e)(6) of the Act is meant to exempt, the Congress provided as examples a one-time sale of property and a one-time sale of a practice. In our view, a one-time sale of property or a practice is a unique, singular transaction. It is not possible for one party to repeatedly offer and sell the same property or medical practice to another party.

In contrast, in service arrangements where multiple services are provided over an extended duration of time, the same services are provided on a repeated basis, even if there is only one payment for the multiple services provided. Also, in a one-time sale of property or a practice, the consideration for the transaction (that is, the transfer of ownership of the property or practice) is exchanged at the time payment is made in a single transaction (although § 411.357(f) permits installment payments under certain circumstances). In contrast, if a physician provides multiple services to an entity over an extended period of time, remuneration in the form of an in-kind benefit has passed repeatedly from the physician to the entity receiving the service prior to the payment date.

We remind parties that the provision of remuneration in the form of services commences a compensation arrangement at the time the services are provided, and the compensation arrangement must satisfy the requirements of an applicable exception at that time if the physician makes referrals for designated health services and the entity wishes to bill Medicare for such services. Thus, the exception for isolated transactions is not available Start Printed Page 77577to retroactively cure noncompliance with the physician self-referral law. Our position is buttressed by the fact that the Congress created an exception for personal service arrangements at section 1877(e)(3) of the Act and required, among other things, that the arrangement is set out in writing and signed by the parties, that the term of the arrangement is at least 1 year, and that the compensation is set in advance.

We do not believe that the Congress would impose such requirements for service arrangements under this exception, and then permit parties to avoid these requirements as long as the parties made one retrospective payment for multiple services provided over an extended period of time relying on the exception for isolated transactions. After reviewing the comments, we are finalizing the proposed independent definition of “isolated financial transaction” at § 411.351, which clarifies that an “isolated financial transaction” does not include a single payment for multiple services provided over an extended period, with the following modifications. First, the final definition of “isolated financial transaction” specifies that an isolated transaction is a one-time transaction.

Second, subparagraph (2) of the definition of “isolated financial transaction” at § 411.351 and the introductory chapeau language in § 411.357(f) provides as an additional example of an isolated financial transaction a single instance of forgiveness of an amount owed in settlement of a bona fide dispute. Third, we are clarifying at § 411.357(f)(4) that an isolated financial transaction that is an instance of forgiveness of an amount owed in settlement of a bona fide dispute is not part of the compensation arrangement giving rise to the bona fide dispute. Fourth, although we did not propose further changes to the definition of “transaction” at § 411.351, we are modifying the definition in response to comments to remove the phrase “or process,” because the term “process” has led some stakeholders to conclude that the exception is available to protect a single payment for multiple services provided over an extended period of time.

Lastly, we are finalizing corresponding revisions to the exception for isolated transactions at § 411.357(f) to reference isolated financial transactions in order to align the exception text with the statutory provisions at section 1877(e)(6) of the Act. Even though the exception at § 411.357(f) applies to isolated financial transactions, we did not propose and we are not finalizing a change in the title of the exception from “isolated transactions” to “isolated financial transactions,” as the title of the statutory exception is “isolated transactions.” We received the following comments and our responses follow. Comment.

Many commenters expressed concern that, given the proposed definition of “isolated financial transaction,” the exception at § 411.357(f) would not apply to the settlement of a bona fide legal dispute, especially a dispute arising from an ongoing service arrangement, may not be excepted under § 411.357(f). Commenters noted that parties to a service arrangement may have a legitimate dispute concerning the amount of compensation due under a service arrangement, for example, where the terms of a contract documenting the arrangement are ambiguous. In these circumstances, a physician may have reasonable belief that he or she is owed more money under the contract, while the entity may believe in good faith that the physician is entitled to less than what the physician claims.

Under such circumstances, the parties may wish to settle the matter to avoid litigation. The commenters expressed concern that the settlement could be construed as a single payment for multiple services previously provided by the physician and, therefore, the exception at § 411.357(f) would be unavailable to protect the compensation arrangement arising from the settlement payment (or reduction in debt). Several commenters maintained that resolution of a bona fide dispute is altogether different from making a single payment for multiple services provided over an extended period of time.

The commenters requested that CMS expressly include a settlement of a bona fide legal dispute, along with a one-time sale of a property or practice, in the definition of “isolated financial transaction,” and strike language stating that an isolated financial transaction does not include a single payment for multiple services. Response. Our policy has always been that the exception for isolated transactions at § 411.357(f) is applicable to a compensation arrangement arising from the settlement of a bona fide dispute, even if the dispute originates from a service arrangement where multiple services have been provided over an extended period of time.

To clarify our longstanding policy, we are modifying the definition of “isolated financial transaction” at § 411.351 to include in subparagraph (2) a single instance of forgiveness of an amount owed in settlement of a bona fide dispute, and we are including similar language in the introductory chapeau language at § 411.357(f). However, the exception is not applicable to the compensation arrangement that the parties dispute. We agree with the commenters that stated that settlement of a bona fide dispute arising from an arrangement is fundamentally different from making a payment, including a single payment, for items or services provided under the arrangement.

Although the settlement of a bona fide dispute may include a one-time payment made by a party (or installment payments as permitted under the exception), the cornerstone of a settlement of a bona fide dispute, as opposed to a payment for items or services, is that one or more of the parties forgoes a good faith claim to be paid more under the arrangement than the party actually receives. Therefore, we are describing the settlement of a bona fide dispute in the definition of “isolated financial transaction” and in the exception at § 411.357(f) as an instance of forgiveness of an amount owed. We are further clarifying at § 411.357(f)(4) that an isolated financial transaction that is an instance of forgiveness of an amount owed in settlement of a bona fide dispute is not part of the compensation arrangement giving rise to the bona fide dispute.

Thus, a settlement of a bona fide legal dispute under § 411.357(f) is a separate compensation arrangement from any compensation arrangement between the parties giving rise to the bona fide dispute, and settlement of a bona fide dispute under § 411.357(f) does not retroactively bring the compensation arrangement that gave rise to the dispute into compliance with the physician self-referral law. For the reasons explained above, we decline to omit from subparagraph (2) the phrase “but does not include a single payment for multiple or repeated services (such as payment for services previously provided but not yet compensated).” Parties may rely on the exception at § 411.357(f) to protect an isolated financial transaction that settles a bona fide dispute arising from an arrangement for multiple, repeated, or ongoing services, but the exception is not available to protect a single payment for multiple or repeated services. A single payment for multiple or repeated services is not an isolated financial transaction, but rather an ongoing, extended compensation arrangement that must satisfy the requirements of another applicable exception.

Comment. Several commenters maintained that our proposal to exclude a single payment for multiple services from the definition of “isolated financial transaction” is inconsistent with the Start Printed Page 77578statutory exception for isolated transactions at section 1877(e)(6) of the Act. According to the commenters' interpretation of section 1877(e)(6) of the Act, the statutory examples of isolated financial transactions, namely a one-time sale of property or a one-time sale of a practice, are illustrative only, and non-exhaustive.

The commenters asserted that the exception may also be used for payments for services, noting that section 1877(e)(6) of the Act incorporates by reference certain requirements of the exception at section 1877(e)(2) of the Act for bona fide employment relationships, including the requirement that the remuneration is “consistent with the fair market value of the services” (emphasis added). Another commenter asserted that it is reasonable to see a single payment for items or services already furnished as an isolated transaction. The commenter provided as an example a hospital's single payment to a physician for fulfilling an unanticipated need for call coverage over a weekend or holiday, where the physician performs no others services for the hospital for the previous or subsequent 6-month periods.

Response. We agree with the commenters that the examples of isolated transactions in section 1877(e)(6) of the Act are illustrative only, not exhaustive. Among other things, as noted above, we believe that a single transaction resolving a bona fide dispute is an example of an isolated transaction that may be protected under the exception, if all the requirements of the exception are met.

What the statutory examples illustrate, however, are one-time transactions, where there is not only a single payment (or installment payments as permitted under the exception) but also a single exchange of value, typically occurring on a specific date, involving consideration that is usually not the subject of repeated or frequent exchange over an extended period of time. In a sale of property or a practice, for example, there is typically a closing date when value is exchanged, and the parties ordinarily do not repeatedly transact to buy and sell the same property or practice over an extended period. The Congress' inclusion of the term “one-time” underscores that the exception is not available for transactions that are repeated over an extended period of time.

In contrast to a one-time sale of property or a practice, if a physician repeatedly provides services to an entity over the course of months or years, then the physician has repeatedly provided remuneration to the entity in the form of an in-kind benefit during that timeframe. Even if the entity only makes one payment for the services, this is not a one-time transaction as contemplated by the statute, but rather an ongoing service arrangement. Because we interpret the exception for isolated transactions as protecting one-time transactions, as indicated at section 1877(e)(6) of the Act, we are modifying the definition of “isolated financial transaction” to include the term “one-time.” Under our interpretation of the statutory scheme, ongoing service arrangements, where a physician provides multiple services to an entity over an extended period of time, must satisfy all the requirements of another applicable exception, such as the exception for personal service arrangements at § 411.357(d)(1) or the exception for fair market value compensation at § 411.357(l).

We do not believe that the Congress would have required ongoing service arrangements to meet all the requirements of section 1877(e)(3) of the Act, including writing, signature, 1-year term, and set in advance requirements, and then permit parties to sidestep these requirements by making a single, retrospective payment for multiple services relying on the exception for isolated transactions. We agree with the commenters that not all service arrangements are per se excluded from protection under the exception for isolated transactions. In the proposed rule, we noted that the same services can be provided by one party and purchased by another on a repeated basis, whereas a party cannot repeatedly offer and sell the same property or medical practice to another party (84 FR 55808).

We believe that the commenters may have inferred from this statement that our policy categorically excludes services from the isolated transaction exception. This is not our policy. As noted above, the exception for isolated transactions protects one-time transactions.

With respect to an arrangement for services, the exception is available to protect a single payment (or installment payments, as permitted by the exception) for a one-time service arrangement, as opposed to an arrangement where multiple or repeated services are provided over an extended period of time. Whether a one-time service arrangement constitutes an isolated financial transaction depends on the facts and circumstances of the arrangement, including whether the service (or bundle of integrally related services) is provided in its entirety during a discrete time-period of short duration, such as a 24-hour or weekend shift. We note that, under § 411.357(f)(3), if parties utilize the exception for isolated transactions for a one-time service arrangement that qualifies as an isolated financial transaction, the parties would not be barred from entering into an ongoing arrangement for the same or similar services during the 6 months after the isolated financial transaction, provided that the subsequent service arrangement satisfied all the requirements of a different exception applicable to the subsequent service arrangement.

The parties would, however, be barred from using the exception for isolated transactions for 6 months after the one-time service arrangement, regardless of the subject matter or consideration of the transaction. Comment. Some commenters maintained that, under the plain language of the exception for isolated transactions and our previous guidance, the exception may be relied on to protect a single payment for multiple services.

The commenters noted that “transaction” is currently defined to mean an “instance or process” of two or more persons or entities doing business, and stated that a “process” suggests an ongoing relationship such as an arrangement for repeated or multiple services provided over an extended period of time. The commenters further noted that the terms “isolated financial transaction” and “transaction” are defined together in the current regulations, and that “isolated financial transaction” is defined as a transaction involving a single payment. Another commenter objected to CMS' statement that the proposal is a clarification of longstanding policy and stated that there is nothing in the plain language of the exception to put parties on notice that the exception cannot be used to protect a single payment for multiple services.

Response. We first introduced the concept of a “process” of two or more persons doing business in the 1995 final rule (60 FR 41979). There is very little commentary in the 1995 final rule or subsequent rulemaking on the term “process” in the definition of “transaction,” though we did note in Phase II, when declining to adopt a policy allowing a certain number of transactions per year, that the concept of an isolated transaction is incompatible with parties routinely engaging in multiple transactions each year or more than one transaction during a short period of time (69 FR 16098).

Moreover, in the FY 2009 IPPS final rule, we explained that all the requirements of an exception must be met at the time that a physician makes a referral, and that parties may not turn back the clock to retroactively “cure” noncompliant Start Printed Page 77579arrangements (73 FR 48703). Under the statute and our regulations, a compensation arrangement is formed when remuneration, including in-kind remuneration such as the provision of a service, is exchanged between a physician and an entity. Thus, once a physician begins providing services to an entity under an arrangement, a compensation arrangement is formed, and the compensation arrangement must satisfy all the requirements of an exception at that time if the physician makes referrals to the entity.

The statute and our previous policy statements in Phase II and the FY 2009 IPPS final rule are the basis for the policy articulated in the proposed rule and this final rule, namely that parties may not rely on the exception for isolated transactions to protect or retroactively “cure” a service arrangement involving the provision of multiple or repeated services over an extended period of time. We recognize, however, that stakeholders may have been under the impression, given the use of the word “process” in the definition of “transaction,” that the exception for isolated transactions was available to protect service arrangements involving multiple or repeated services provided over an extended period of time. We also acknowledge that, under the current regulations, the definition of “isolated financial transaction” is subsumed under the definition of “transaction,” and, although the definition of “isolated financial transaction” requires a single payment (or installment payments, if certain requirements are met), it does not explicitly state that a single payment cannot be made for repeated or multiple services.

To clarify our policy, we are deleting the term “process” from the definition of “transaction” in § 411.351 and we are explicitly stating in subparagraph (2) of the definition of “isolated financial transaction” at § 411.351 that an isolated financial transaction does not include a single payment for multiple or repeated services. We stress that these revisions are effective as of the date set forth in this final rule and apply prospectively only. Comment.

Many commenters maintained that our policy reduces flexibility and increases the burden of compliance with the physician self-referral law. The commenters noted that the exception for isolated transactions includes core safeguards of the physician self-referral law, such as requirements pertaining to fair market value, the volume or value of a physician's referrals and other business generated by the physician, and commercial reasonableness, and asserted that a single payment for multiple services that meets these requirements and the other requirements of § 411.357(f) does not pose a risk of program or patient abuse. One commenter stated that parties often seek to rely on the isolated transaction exception to make a single payment for items or service previously furnished, where the arrangement has not been documented before payment is made, and the documentation deficiencies are not discovered until after the items or services have been furnished (which may be for a period of more than 90 days).

Several commenters asserted that the proposal, if finalized, would have an especially acute impact on hospitals located in states that prohibit the corporate practice of medicine. According to the commenters, hospitals in states without such restrictions may rely on the exception for bona fide employment relationships for instances in which fair market value compensation has been paid to a physician for services provided, but the arrangement is not set out in writing and the compensation was not set in advance. The commenters noted that, in states where the employment of physicians is prohibited, the exception for bona fide employment relationships is not available, and the only available exception to protect the arrangement may be the exception for isolated transactions.

A few commenters, using identical language, provided an example of an arrangement that the commenters claimed should be covered by the exception for isolated transactions. In the example, an arrangement with an anesthesiology group is expiring, and despite good faith efforts to agree to the terms of a renewal arrangement, the parties disagree over the amount of compensation to be paid under the renewal. The commenters explained that the compensation formula in such a case may be very complex and take significant time to negotiate.

In the commenters' example, the anesthesiology group agrees to keep providing services to patients after the previous arrangement expires while the parties continue to negotiate the terms of the renewal. The commenters contended that there is no harm to the Medicare program if, after the parties agree on compensation for the renewal, the entity relies on the exception for isolated transactions to compensate the physicians for services already furnished in the renewal term. The commenters suggested that no other exception would be available in this context, because the compensation for the renewal term was not set in advance of the services already provided, and the compensation would likely exceed the $3,500 limit under the proposed exception for limited remuneration to a physician.

Response. Our policy that the exception for isolated transactions is not available to protect a single payment for multiple or repeated services is grounded in our interpretation of the statute and the mandate under sections 1877(b)(4) and 1877(e)(6)(B) of the Act to protect only those financial relationships that do not pose a risk of program or patient abuse. We are not convinced that an ongoing service arrangement is an isolated financial transaction like a one-time sale of a property or a practice.

Moreover, we do not believe that the Congress would have required an ongoing service arrangement to satisfy all the requirements of the exception for personal service arrangements at section 1877(e)(3) of the Act, including set in advance, writing, and 1-year term requirements, and allowed the same arrangement to be excepted under the exception for isolated transactions, which does not include these requirements. The commenters' example of the anesthesiology practice illustrates our concern with the use of the exception for isolated transactions to protect an ongoing service arrangement. As explained in section II.D.5 of this final rule, the “set in advance” requirement is an important safeguard to prevent parties from adjusting, including retrospectively adjusting, the compensation under an arrangement in a manner that takes into account the volume or value of a physician's referrals.

In the commenters' example, the parties would be permitted to rely on the exception for isolated transactions to compensate the physicians retroactively, thus sidestepping the “set in advance” requirement of other exceptions and opening the door to adjustments of compensation during the negotiation period that take into account the volume or value of the physicians' referrals or other business generated by the physicians. The special rule for writing and signature requirements at final § 411.354(e)(4) and the exception for limited remuneration to a physician at final § 411.357(z) provide significant flexibility under our regulations while providing sufficient safeguards, including an annual monetary limit of $5,000 (as adjusted for inflation) under § 411.357(z), a 90-day period for obtaining required writings under Start Printed Page 77580§ 411.354(e)(4), and the requirement under § 411.354(e)(4) that the arrangement satisfy all the requirements of an applicable exception (other than the writing and signature requirement), including the “set in advance” requirement, for the first 90 days of the arrangement and thereafter. In contrast, the exception for isolated transactions does not limit the amount of compensation permissible under the arrangement, does not require the compensation arrangement to ever be in writing, and does not require compensation to be set in advance.

Given the limited requirements of the exception for isolated financial transactions, we believe that excepting ongoing service arrangements under § 411.357(f), which could last for years and be worth hundreds of thousands of dollars or more, would pose a risk of program or patient abuse. We note that, depending on the facts and circumstances, the parties in the commenters' example of an anesthesiology services arrangement could rely on the indefinite holdover provision at § 411.357(d)(1)(vii) to continue the arrangement on the same terms and conditions of the original arrangement while the parties negotiate the compensation terms for the renewal arrangement. Once the parties finalize the negotiations, compensation under the arrangement could be amended under new § 411.354(d)(1)(ii) (as discussed in section II.D.5.

Of this final rule) or the parties could enter into a new arrangement that satisfies the requirements of § 411.357(d)(1) or another applicable exception to the physician self-referral law. In either case, to meet the “set in advance” requirement, the newly negotiated compensation terms may only be applied prospectively. Comment.

A few commenters requested that, if CMS finalizes its proposed definition of “isolated financial transaction,” it should also finalize a new exception for isolated payments. The exception suggested by the commenters would permit an isolated, one-time payment for services already furnished, if. (1) The payment is consistent with fair market value and not determined in any manner that takes into account the volume or value of a physician's referrals or other business generated.

And (2) the remuneration is provided under an arrangement that would be commercially reasonable even if the physician made no referrals to the entity. Similar to the current exception at § 411.357(f) for isolated transactions, there could be no additional exchanges of remuneration between the parties for 6 months after the isolated payment, except for financial relationships that satisfy all the requirements of another exception in § 411.355 through § 411.357. The commenters contended that their proposal incorporates the three central requirements of other compensation exceptions—fair market value compensation, commercial reasonableness of the arrangement, and compensation that is not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician—but would not require a writing or compensation set in advance.

Response. The exception suggested by the commenters does not differ substantively from the exception for isolated financial transactions at § 411.357(f). For the reasons explained in response to the immediately previous comment, adopting the commenters' suggestions would pose a risk of program or patient abuse and, therefore, we cannot issue the suggested exception under the authority at section 1877(b)(4) of the Act.

3. Denial of Payment for Services Furnished Under a Prohibited Referral—Period of Disallowance (§ 411.353(c)(1)) In the CY 2008 PFS proposed rule, we solicited comments on how to determine the period of time during which a physician may not make referrals for designated health services to an entity and the entity may not bill Medicare for the referred designated health services when a financial relationship between the parties failed to satisfy the requirements of any applicable exception (72 FR 38183). We referred to this timeframe as the “period of disallowance.” We stated that, as a general matter, the period of disallowance under the physician self-referral law should begin on the date when a financial relationship fails to satisfy the requirements of any applicable exception and end on the date that the financial relationship ends or is brought back into compliance (that is, satisfies all the requirements of an applicable exception).

We noted, however, that it is not always clear when a financial relationship has ended. By way of example, we stated that, if a physician paid less than fair market value for the rental of office space, the below market rental payments may have been in exchange for future or anticipated referrals, so it is not clear if the financial relationship ended on the date that the lease expires. We sought comments on whether we should employ a case-by-case method for determining when a financial relationship ends or if we should, to the extent practicable, create a provision that would deem certain kinds of financial relationships to last a prescribed period of time for purposes of determining the period of disallowance.

Assuming we were to prescribe a determinate amount of time for the period of disallowance in certain circumstances, we sought comments on whether the period of disallowance could be terminated if parties returned or repaid the value of any problematic compensation under an arrangement. In the FY 2009 IPPS proposed rule, we proposed regulations at § 411.353(c)(1) pertaining to the period of disallowance (73 FR 23690 through 23692). Under that proposal, the period of disallowance would begin when the financial relationship failed to satisfy the requirements of any applicable exception.

Where the noncompliance is unrelated to the payment of compensation, the period of disallowance would be deemed to end no later than the date that the financial relationship satisfies all the requirements of an applicable exception. Correspondingly, where the noncompliance is related to the payment of excess or insufficient compensation, we proposed that the period of disallowance would be deemed to end no later than the date on which the excess compensation was repaid or the additional required compensation was paid, and the arrangement satisfied all the requirements of an applicable exception. We emphasized that the proposal only prescribed an outside limit on the period of disallowance.

We acknowledged that, in certain cases, a financial relationship may end before the excess compensation has been returned or the insufficient compensation paid in full, and that the period of disallowance in such cases would end when the financial relationship ended. However, we did not issue any regulations or guidance on determining when a financial relationship has ended in such cases, and we stated that the period of disallowance would have to be determined in such instances on a case-by-case basis. Lastly, we recognized that noncompliance may also arise for other reasons related to compensation, such as payments that take into account the volume or value of a physician's referrals, but we did not propose any regulations regarding how to determine the period of disallowance in such cases.

In the FY 2009 IPPS final rule, we finalized § 411.353(c)(1) as proposed, without substantive modifications (73 FR 48700 through 48705). We Start Printed Page 77581emphasized again that the regulation only prescribed an outside date for the period of disallowance, and that parties could determine that the period of disallowance ended earlier than the outside date prescribed by the regulation on the theory that the financial relationship ended prior to this date. We made it clear in response to commenters that the period of disallowance established at § 411.353(c)(1) was not intended to extend the period of disallowance beyond the end of a financial relationship.

Rather, the regulation was merely intended to give parties clear guidance on steps that could be taken to ensure that the period of disallowance had ended. In addition, we explained the application of the provisions regarding excess and insufficient compensation at § 411.353(c)(1)(ii) and (iii). In the proposed rule, noting our experience administering the SRDP and stakeholder feedback that we have received over the years, we proposed to delete in their entirety the provisions setting forth the period of disallowance at § 411.353(c)(1) because we believe that, although the rules were initially intended merely to establish an outside, bright-line limit for the period of disallowance, in application, they appear to be overly prescriptive and impractical (84 FR 55809).

We are finalizing this proposal. We emphasize that our action in this final rule does not permit parties to a financial relationship to make referrals for designated health services or to bill Medicare for the services when their financial relationship does not satisfy all the requirements of an applicable exception. It is a fundamental principle of the physician self-referral law that a physician may not make a referral for designated health services to an entity with which he or she (or an immediate family member) has a financial relationship, and the entity may not bill Medicare for the services, if the financial relationship between the parties does not satisfy all the requirements of an applicable exception.

Nothing in this final rule affects the billing and referral prohibitions at § 411.353(a) and (b). We stress that the analysis to determine when a financial relationship has ended is dependent in each case on the unique facts and circumstances of the financial relationship, including the operation of the financial relationship as negotiated between the parties, and it is not possible for us to provide definitive rules that would be valid in all cases. We also emphasize that removing the period of disallowance regulations is in no way meant to undermine parties who relied on § 411.353(c)(1)(ii) or (iii) in the past to establish that the period of disallowance has ended.

The general principle stated in the CY 2008 PFS proposed rule that the period of disallowance under the physician self-referral law should begin on the date when a financial relationship fails to satisfy all the requirements of any applicable exception and end on the date that the financial relationship ends or satisfies all the requirements of an applicable exception remains true. And, we continue to believe that one way to establish that the period of disallowance has ended in such circumstances is to recover any excess compensation and bring the financial relationship back into compliance with the requirements of an applicable exception. However, we are aware that the payment of excess or insufficient compensation may complicate the question of when a financial relationship has ended or been brought back into compliance with the requirements of an applicable exception for purposes of the physician self-referral law, and believe that removing the period of disallowance regulations is the best way to ensure that what was intended as an elective “safe harbor” is not mistaken for a compulsory action required to ensure that the period of disallowance has ended.

As we stated in the proposed rule, since the publication of the FY 2009 IPPS final rule, stakeholders have questioned whether our preamble guidance was intended to state that administrative or other operational failures during the course of an arrangement, such as the erroneous payment of excess compensation or the erroneous failure to pay the full amount of compensation due during the timeframes established under the terms of an arrangement, would necessarily result in noncompliance with the physician self-referral law (84 FR 55809). Through submissions to the SRDP and other interactions with stakeholders, we are aware of questions regarding whether administrative errors, such as invoicing for the wrong amount of rental charges (that is, an amount other than the amount specified in the written lease arrangement) or the payment of compensation above what is called for under a personal service arrangement due to a typographical error entered into an accounting system, create the type of “excess compensation” or “insufficient compensation” described in our preamble guidance and the period of disallowance rules. As we stated in the proposed rule and affirm here, this was never our intent (84 FR 55809 through 55810).

However, the failure to remedy such operational inconsistencies (that is, payment discrepancies) could result in a distinct basis for noncompliance with the physician self-referral law. In the proposed rule, endeavoring to clarify statements in the FY 2009 IPPS final rule regarding whether parties can “turn back the clock” or retroactively “cure” noncompliance, we stated that parties that detect and correct administrative or operational errors or payment discrepancies during the course of the arrangement are not necessarily “turning back the clock” to address past noncompliance (84 FR 55811). Rather, it is a normal business practice, and a key element of an effective compliance program, to actively monitor ongoing financial relationships, and to correct problems that such monitoring uncovers.

An entity that detects a problem in an ongoing financial relationship and corrects the problem while the financial relationship is still ongoing is addressing a current problem and is not “turning back the clock” to fix past noncompliance. On the other hand, once a financial relationship has ended, parties cannot retroactively “cure” the previous noncompliance by recovering or repaying problematic compensation. Of course, to the extent that the financial relationship has ended, the period of disallowance has ended as well.

We believe this policy encourages active, regular review of arrangements for compliance with the physician self-referral law. We provided an example to illustrate our policy regarding payment discrepancies in the operation of a compensation arrangement (84 FR 55810 through 55811), and believe that it is useful to repeat the example from the proposed rule here. We have modified some of the language of the example for clarity.

Assume there is a 1-year arrangement between an entity and a physician beginning January 1 for the personal services of the physician. The arrangement is memorialized at the outset in a writing signed by the parties. The amount of compensation provided for in the writing does not exceed fair market value.

And the arrangement otherwise fully complies with all the requirements of an applicable exception. Assume further that the entity provides compensation to the physician in months 1 through 6 in an amount other than what is stipulated in the writing, and the parties discover the payment discrepancy early in month 7. For purposes of this illustration, assume that a hospital pays a physician $150 per hour for medical director services Start Printed Page 77582when the writing evidencing the arrangement between the parties identifies $140 per hour as the physician's rate of pay.

If the $150 per hour payment is due to an administrative or other operational error—that is, the payment discrepancy was unintended—the parties may, while the arrangement is ongoing during the term initially anticipated (in this example, during the year of the arrangement), correct the error by collecting the overage (or making up the underpayment, if that is the case). We expect entities and the physicians who refer designated health services to them to operate effective compliance programs that identify administrative or operational errors and rectify them promptly. We provided this example in the proposed rule and include it in this final rule to assure parties that unintended payment discrepancies that are corrected in a timely manner do not cause a compensation arrangement to fail to satisfy the requirements of an exception to the physician self-referral law during the timeframe of the erroneous operation of the arrangement.

We did not state in the proposed rule, nor is it our view, that every error or mistake will cause a compensation arrangement to fail to satisfy the requirements of an exception or that every error or mistake must be corrected in order to maintain compliance with the physician self-referral law. However, if parties identify an error that would cause the compensation arrangement to fail to satisfy the requirements of an exception to the physician self-referral law, they cannot simply “unring the bell” by correcting it at some date after the termination of the arrangement. We discuss below the comments that we received regarding our statements in the proposed rule and this example.

In the proposed rule, we continued our analysis of the example provided, stating that, if the operational error—that is, payments of $150 per hour instead of the agreed upon $140 per hour—was not timely discovered and rectified, we would analyze the actual compensation arrangement between the parties as we would any financial relationship under the physician self-referral law. For purposes of explaining our policies in this final rule, assume also that the payments to the physician did not revert back to the intended $140 per hour for months 7 through 12, and the hospital did not recover any of the $10 per hour paid in excess of the intended $140 per hour. Therefore, the physician was, in fact, paid $150 per hour under the parties' arrangement for the provision of medical director services.

In the proposed rule, we noted that the actual arrangement between parties does not always coincide with the terms described in the written documentation. To properly ascertain potential noncompliance, it is important to determine whether the actual amount of compensation paid under the arrangement—that is, the amount the physician actually received, as opposed to the amount stipulated in the written agreement—exceeded fair market value for the services actually provided. Assuming that the actual amount paid ($150 per hour) did not exceed fair market value and was not determined in any manner that took into account the volume or value of the physician's referrals or other business generated for the hospital, then the potential noncompliance would relate primarily to the failure to properly document the actual arrangement (medical director services compensated at $150 per hour) in writing, provided that the arrangement satisfied the remaining requirements of an applicable exception.

We emphasize again in this final rule that various provisions in our regulations, including those finalized in this final rule, may offer parties a means of limiting the scope of potential noncompliance when the actions of the parties differ from their documented arrangement such that they create a separate compensation arrangement that must be analyzed for compliance with the physician self-referral law. To illustrate, assume the actual arrangement between the parties is for the provision of medical director services compensated at $150 per hour and all the requirements of an applicable exception are satisfied except for the requirements that the compensation is set in advance, in writing, and signed by the parties. The new exception finalized at § 411.357(z) for limited remuneration to a physician may be available to protect the first $5,000 paid to the physician (if the exception has not yet been utilized during the current calendar year).

In addition, the parties could rely on the special rule for writing and signature requirements finalized at § 411.354(e)(3), coupled with the clarification of the writing requirement at § 411.354(e)(2), to establish that the actual amount of compensation provided under the arrangement was set forth in writing within 90 consecutive calendar days of the commencement of the arrangement via a collection of documents, including documents evidencing the course of conduct between the parties. The 90-day clock would begin when the parties could no longer use (or were no longer using) the exception at § 411.357(z). Thus, while the parties are relying on the exception at § 411.357(z) and for up to 90 consecutive calendar days after, they would likely be developing the documentation necessary to evidence their arrangement for medical director services under which the physician is paid $150 per hour.

Depending on the facts and circumstances, the parties may be able to establish that the arrangement complied with the physician self-referral law for its entire duration. Finally, as we stated in the proposed rule, in certain instances, the failure to collect money that is legally owed under an arrangement may potentially give rise to a secondary (separate) financial relationship between the parties (84 FR 55810). In such circumstances, because forgiveness of an obligation or debt may constitute remuneration for purposes of the physician self-referral law, the parties may conclude that the only means to avoid noncompliance with the physician self-referral law is to recoup the amount owed under the arrangement.

Turning back to the previous example, and assuming that the hospital corrected the error beginning in month 7 but did not collect the excess compensation from the physician, the relevant inquiry is whether the uncorrected payment errors during months 1 through 6—that is, the additional $10 per hour paid to the physician—gave rise to a secondary financial relationship (for example, an interest free loan or the complete forgiveness of debt) that must satisfy the requirements of an applicable exception. We received the following comments and our responses follow. Comment.

Commenters generally supported the removal of the “period of disallowance” provisions from § 411.353(c). One commenter stated that these provisions were cumbersome to apply and raised questions for parties deciding whether the period of disallowance ended. The commenter further stated that removal of the provisions will help parties to establish the end of the period of disallowance on a case-by-case basis without concern of having to defend why an arrangement is believed to have ended prior to the deeming provision in the regulations.

One commenter agreed with our proposal, asserting that removing the period of disallowance regulations in their entirety would offer providers more flexibility to determine when a financial relationship has ended. In contrast, two commenters requested that we replace the period of disallowance regulation to provide for a date certain by which a compensation arrangement Start Printed Page 77583would be deemed to end. Specifically, the commenters (in identical phrasing) suggested that the arrangement and, thus, the period of disallowance, should be deemed to end on the date that is 90 days after the physician (or immediate family member) last receives remuneration from the entity under the arrangement.

Response. As we stated in the proposed rule, although the period of disallowance provisions were initially intended to establish an outside, bright-line limit for the period of disallowance, the rules, in application, were overly prescriptive and impractical (84 FR 55809). We are finalizing our proposal to delete the provisions from § 411.353(c) of our regulations.

We are not persuaded to establish a rule under which the period of disallowance would end 90 days after the physician (or immediate family member) last receives remuneration from the entity under the specific arrangement. Such a rule would be inappropriate in the case of remuneration to a physician that was substantially in excess of fair market value or that was determined in a manner that took into account the volume or value of the physician's referrals to the entity. In addition, the rule suggested by the commenters could extend the period of disallowance in many cases, for instance, in a case where a lease arrangement has ended and the noncompliance was related to the parties' failure to properly document it as required by our regulations.

We believe that the determination of when the period of disallowance ends is best made on a case-by-case basis taking into consideration the facts and circumstances of the specific compensation arrangement between the parties. Comment. Two commenters (in essentially identical comments) claimed that parties often have no way of knowing when certain types of compensation arrangements end.

The commenters highlighted as particularly problematic one-time payments that are above or below fair market value and the provision of nonmonetary compensation in excess of the annual limit established in regulation. The commenter suggested that we adopt a rebuttable presumption that a compensation arrangement resulting from a one-time payment in excess or below fair market value or the payment of nonmonetary compensation above the annual limit in § 411.357(k)(1) ends the earlier of 6 months after the payment and the date the value causing the one-time payment or excess nonmonetary compensation is corrected (paid or repaid) by the physician (or the physician organization in whose shoes the physician stands under § 411.354(c)). Response.

One-time payments that are above or below fair market value may be an indication of a reward (that is, payment) for a physician's referrals. Referrals are not items or services (see section II.D.2.c. Of this final rule).

Therefore, there is no exception available to protect the payment for referrals. A compensation arrangement that involves a one-time payment that is above or below fair market value does not lend itself to a one-size-fits-all approach. We decline to adopt the commenter's suggestion with respect to one-time payments that are above or below fair market value.

With respect to the provision of nonmonetary compensation in excess of the annual limit established in regulation, we offer the following observations. In Phase II, when explaining that the exception for temporary noncompliance does not apply to arrangements that previously complied with the exception for nonmonetary compensation at § 411.357(k), we noted that, in the case of nonmonetary compensation, it is possible to be compliant in the next year, since the exception permits nonmonetary compensation up to $300 annually (69 FR 16057). In Phase III, we clarified that the aggregate limit in § 411.357(k)(1) is to be calculated on a calendar year basis (72 FR 51058).

Thus, on January 1 of the next calendar year, the parties would no longer be over the limit for the current calendar year. Put another way, the period of disallowance for nonmonetary compensation overages that are not repaid in accordance with § 411.357(k)(1) in most cases will end on December 31st of the year in which the excess nonmonetary compensation is provided. However, in rare instances, the period of disallowance may continue if the nonmonetary compensation is so valuable that it cannot fairly be considered the type of token of appreciation anticipated by the exception (72 FR 51059).

For example, if a hospital gifts a physician an expensive new car on December 30th of a calendar year, the compensation arrangement that results from the transfer of the remuneration would not appropriately be considered to end the next day. Rather, the remuneration should be viewed as a likely exchange for the physician's future referrals. Under our final regulation at § 411.351, it is clear that referrals are not items or services for which an entity may provide remuneration.

In essence, with respect to the provision of nonmonetary compensation that is not a fair market value exchange for items or services and the amount of which is over the annual limit at § 411.357(k)(1), there is a rebuttable presumption that the period of disallowance ends no later than December 31st of the year in which the excess nonmonetary compensation is provided. There is no need to adopt the commenter's suggestion with respect to the period of disallowance for the payment of excess nonmonetary compensation. Comment.

A large number of commenters expressed appreciation for our proposed rule guidance on remedying payment discrepancies that occur during the course of a compensation arrangement. Most of these commenters agreed that, if a party identifies an administrative or operational error or a payment discrepancy during the course of an arrangement, the parties do not fall out of compliance with the requirements of an applicable exception if the payment discrepancy is remedied prior to the end of the arrangement. Response.

As described more fully above and in our responses to other comments, an effective compliance program should enable parties to identify administrative and operational errors that result in payment discrepancies under a compensation arrangement. When payment discrepancies are identified and rectified in a timely manner, we do not believe that the discrepancies cause a compensation arrangement to be out of compliance with the requirements of the applicable exception during the time that they existed. We are codifying in regulation at new § 411.353(h) a special rule for reconciling compensation to confirm our policy view.

Comment. One commenter noted that, ideally, the impact of an effective compliance program will be the identification of payment discrepancies within the term of an arrangement, providing the parties an opportunity to cure the error. According to this commenter, however, even an effective compliance program may not identify all errors within the term of an arrangement.

The commenter requested that CMS provide a grace period for correcting unintentional errors that would begin upon termination or expiration of an arrangement, expressing concern, along with other commenters, with a policy that does not allow for the correction of errors that are discovered after the termination or expiration of an arrangement. Some of these commenters asserted that it is unfair that errors discovered after several years of an ongoing multi-year arrangement could be corrected to “right Start Printed Page 77584the ship,” while errors discovered even 1 week after the expiration of a 1-year arrangement could not. One commenter suggested that, provided that the parties to an arrangement correct any payment discrepancies within 1 year of the termination or expiration of an arrangement, we should consider the arrangement to have satisfied the requirements of the applicable exception for its entire duration.

Other commenters asserted that “retroactive curing” of an arrangement (or “turning back the clock”) should be permitted at any time. Response. In Phase II, when we finalized the exception for temporary noncompliance at § 411.353(f), we stated that it was applicable in those instances where an arrangement has fully satisfied the requirements of another exception for at least 180 consecutive calendar days, but has fallen out of compliance with that exception for reasons beyond the control of the entity.

We also stated that parties must take steps to rectify their noncompliance or otherwise comply with the statute as expeditiously as possible under the circumstances (69 FR 16057). In regulation, we provided that the period of time in which an entity must rectify the noncompliance must not exceed 90 consecutive calendar days. By the end of the 90-day exception period, parties must either comply with another exception or have terminated their otherwise prohibited financial relationship.

We continue to believe in the importance of promptly rectifying noncompliance in those instances where the noncompliance occurs for reasons beyond the control of the entity. Our belief that parties should promptly reconcile known payment discrepancies that occur through their own administrative or operational errors in order to maintain compliance with the requirements of an exception is a logical extension of this policy. In Phase II, we also stated that the exception for temporary noncompliance is not intended to allow an entity to submit otherwise prohibited claims or bills when it purposefully takes or omits to take actions or engages in conduct that causes its financial relationship to be noncompliant with the requirements of an exception (69 FR 16057).

It is our view that the knowing failure to comply with the terms of an arrangement negotiated by the parties is a purposeful or affirmative action or omission of the parties. It does not qualify as a reason beyond the control of the entity, and we are not persuaded by the commenters that we should allow a period of time for reconciliation of known payment discrepancies that exceeds the period for resolving temporary noncompliance occurring for reasons beyond the control of the entity. Specifically, permitting parties to reconcile payment discrepancies for a period of 1 year following the expiration or termination of their compensation arrangement or for an unlimited period of time would present a risk of program or patient abuse.

Allowing a lengthy or unlimited period of time to correct payment discrepancies, especially in the case of significant payment discrepancies, would serve as a disincentive for parties to monitor arrangements for compliance with the physician self-referral law through an effective compliance program. Therefore, we decline to adopt the commenters' suggestions regarding the length of the reconciliation period. However, we are persuaded that a limited “grace period” to reconcile payment discrepancies following the expiration or termination of a compensation arrangement would not pose a risk of program or patient abuse.

We believe that allowing the same period of time to reconcile payment discrepancies as the period to rectify noncompliance due to reasons beyond the control of the entity—but no longer—would not pose a risk of program or patient abuse. Therefore, we are finalizing at § 411.353(h) a special rule that permits an entity to submit claims or bills for designated health services and permits payment to be made to the entity for such designated health services if all payment discrepancies under the parties' arrangement (or the arrangement between the entity and the immediate family member of the physician) are reconciled within 90 consecutive calendar days of expiration or termination of the compensation arrangement, and following the reconciliation, the entire amount of remuneration for items or services has been paid as required under the terms and conditions of the arrangement. To maintain consistency with other regulations that require remedial action within certain timeframes, the regulation specifies that the reconciliation must occur within the specified number of consecutive calendar days.

Under the special rule for reconciling compensation at final § 411.353(h), if the parties to a compensation arrangement reconcile all payment discrepancies in the arrangement within this timeframe, the entity may submit a claim or bill and payment may be made to the entity for designated health services referred by the physician, assuming their arrangement satisfied all the requirements of an applicable exception during the entire duration of the arrangement, after considering the reconciliation. Comment. One commenter asserted that a result of our policy that payment discrepancies reconciled during the course of an arrangement will prevent the arrangement from being considered out of compliance with the requirements of an exception to the physician self-referral law is that parties will continue arrangements they would otherwise wish to terminate in order to keep the arrangement “live” or ongoing so that identified payment discrepancies may be reconciled.

Response. The flexibility provided under the final special rule for reconciling compensation at § 411.353(h) should provide parties sufficient time to reconcile identified payment discrepancies without requiring the continuation of arrangements the parties no longer wish to have. Comment.

A few commenters asserted that it is unfair that parties could discover an error in the first few months of a long-term arrangement but not have to correct it until the end of the arrangement, yet parties that discover an error after the termination or expiration of an arrangement would be unable to take even immediate action to cure it in order to maintain compliance with the physician self-referral law. Response. We believe the new special rule at § 411.353(h) addresses the latter part of the commenter's concern.

However, the commenter's assumption that parties could discover an error in the first few months of a long-term arrangement and suffer no consequences under the physician self-referral law if they wait until the end of the arrangement to reconcile the discrepancies is incorrect. Although the new special rule for reconciling compensation at § 411.353(h) allows an entity to avoid violating the billing prohibition of the physician self-referral law if the parties reconcile all payment discrepancies under their arrangement within 90 consecutive calendar days following the expiration or termination of the arrangement, parties that fail to reconcile known payment discrepancies risk establishing a second financial relationship (for example, through the forgiveness of debt or the provision of an interest-free loan) that must satisfy the requirements of an applicable exception in order to avoid the prohibitions of the physician self-referral law. If the payment discrepancy or the failure to reconcile it (that is, recover excess compensation or collect Start Printed Page 77585compensation owed) is significant enough to give rise to a separate financial relationship, that financial relationship must satisfy the requirements of an applicable exception once it exists.

The commencement date of the second financial relationship depends on the facts and circumstances, such as the amount of excess compensation or unpaid compensation and how long the known overpayment or underpayment of the compensation has continued. For example, a large amount of excess compensation that is not recovered may give rise to a financial relationship in a shorter amount of time than a very small amount of unrecovered excess compensation or unpaid compensation. Thus, even if the entity is deemed not to have violated the physician self-referral law's billing prohibition once the original compensation arrangement is ultimately reconciled, the entity would be prohibited from submitting a claim or bill for a designated health service referred by the physician beginning at the point where the second financial relationship exists.

Comment. One commenter suggested that we allow parties an established amount of time after the end of a financial relationship to cure noncompliance with one or more requirements of an applicable exception. The commenter did not expressly limit its suggestions to payment discrepancies due to clerical errors or other unintentional deviation from the terms of a compensation arrangement.

The commenter asserted that this approach would acknowledge the realities of the rhythms of compliance programs and recognize that it can take some time to identify, quantify, and cure defects in a financial relationship with a referring physician. The commenter claimed that this approach would not absolve an entity of its responsibility to structure its financial relationships with physicians to comply with the requirements of an applicable exception or to monitor its administration of those relationships. Response.

We are not adopting the commenter's suggestion to allow the correction of any aspect of a compensation arrangement that fails to satisfy the requirement of the exception upon which the parties rely. As we understand the commenter's suggested approach, parties would be able to retroactively restructure compensation arrangements that failed to satisfy the requirements of an applicable exception for any reason. This approach would allow parties to retroactively restructure compensation terms to comply with fair market value requirements or apply a different formula for the compensation so that it does not run afoul of the volume or value standard.

To the extent the commenter was suggesting this approach only with respect to the types of errors we discussed in the proposed rule, we believe our final policy addresses the commenter's concerns. Comment. One commenter requested clarification whether a hospital that has paid a physician excess compensation due to a technical error could “cure” the error by offsetting the amount to be recouped against future compensation over multiple years to alleviate hardship and navigate complex state employment laws related to wage recoupment and penalties charged to employees.

Response. The special rule for reconciling compensation at final § 411.353(h) requires that the reconciliation of payment discrepancies occurs no later than 90 consecutive calendar days following the expiration or termination of a compensation arrangement. The commenter's inquiry relates to an ongoing compensation arrangement between the hospital and the physician.

In such circumstances, the payment discrepancy could be recovered through an offset against future compensation. However, if the parties wish to ensure that their compensation arrangement is deemed to satisfy the requirements of an applicable exception throughout its entire duration, if their compensation arrangement expires or terminates before the entire amount of the payment discrepancy is recouped, the remaining amounts must be recouped within 90 consecutive calendar days following the expiration or termination of a compensation arrangement. Comment.

One commenter expressed concern with what it interpreted as a mandate for a party to recover any excess payments it has made in order to achieve compliance with the physician self-referral law. The commenter discussed the difficulty entities face when trying to recover excess payments or collect unmade payments from physicians and physician practices. The commenter explained that disputes over whether excess payments have been made or are owed are common and contribute to the difficulty entities face recovering excess payments or underpayments in order to achieve compliance.

The commenter suggested that requiring the party to which money is owed to make a “reasonable effort” to be made whole would be sufficient, with the determination of “reasonable effort” dependent on the facts and circumstances of the arrangement, such as the amount of money at issue. The commenter asserted that, if a large amount of money is at issue, a reasonable effort might very well require a hospital, for example, to sue a physician or physician practice, but a lawsuit might not be reasonable for a dispute over a small amount of money or where the costs of the action would dwarf the amount owed. The commenter also asserted that a compromise of the amount owed may be justified if the physician or physician practice has equitable or legal defenses.

Response. As we explained in the proposed rule, the now-removed period of disallowance rules were never intended as anything more than deeming provisions so that parties could know the absolute latest date that the period of disallowance would end when the reason for the failure of their compensation arrangement to satisfy the requirements of an exception is the payment of excess compensation or the failure to pay all amounts due under the arrangement (84 FR 55809). The now-removed period of disallowance provisions never stated that a party must recover any excess payments it has made or recover any underpayment owed to it in order to achieve compliance with the physician self-referral law, nor do we adopt such a policy here.

However, we reiterate the following points. First, the new special rule for reconciling compensation arrangements permits the submission of a claim or bill and the payment of the claim or bill for a designated health service even if a compensation arrangement does not operate as intended with respect to its compensation terms, provided that. (1) No later than 90 consecutive calendar days following the expiration or termination of a compensation arrangement, the entity and the physician (or immediate family member of a physician) that are parties to the compensation arrangement reconcile all discrepancies in payments under the arrangement such that, following the reconciliation, all remuneration for items or services has been paid as required under the terms and conditions of the arrangement.

And (2) except for the discrepancies in payments described in paragraph (h)(1), the compensation arrangement fully complies with an applicable exception. This regulation assures an entity that its claims were not prohibited under section 1877(a)(1) of the Act or our regulations at § 411.353(b). However, it is a deeming provision only and does not require the entity to reconcile payment discrepancies.

Second, if payment discrepancies are not reconciled within 90 consecutive calendar days following the expiration Start Printed Page 77586or termination of a compensation arrangement, the parties may not “unring the bell” on any noncompliance resulting from the payment discrepancies. In the event that the compensation arrangement failed to satisfy the requirements of an applicable exception due to discrepancies in payment as required under the terms and conditions of the arrangement, the period of noncompliance would begin at the time the payment discrepancies caused the arrangement to fail to satisfy the requirements of the exception. As described in response to other comments below, not all payment discrepancies necessarily result in noncompliance with the physician self-referral law.

Third, although recoupment of amounts due to payment discrepancies is not required to show that the period of disallowance has ended, referrals are prohibited and claims may not be submitted during the period that a financial relationship fails to satisfy the requirements of an applicable exception. If a physician was regularly paid more for services called for under an arrangement (due to an overpayment) or regularly paid less for items or services actually received (due to failure to pay all amounts owed), and the discrepancies were not reconciled during the course of the arrangement (or, under the policies finalized in this final rule, within 90 consecutive calendar days of the termination or expiration of the arrangement), from the point of the variance on, the arrangement would not satisfy the requirements of an applicable exception. Parties are free to demonstrate that a financial relationship has ended as they see fit.

As always, in the absence of a financial relationship, the physician self-referral law is not implicated. Fourth, we do not believe that “reasonable efforts” to recover excess payments or collect amounts due are equivalent to the reconciliation of payment discrepancies. A policy requiring that the parties make “reasonable efforts” would present compliance and enforcement challenges, and would not provide for the certainty that reduces burden on stakeholders.

Moreover, we do not believe that the mere undertaking of “reasonable efforts” to recover excess payments or collect amounts due is sufficient to warrant a deeming provision allowing the submission of claims or bills for designated health services and the payment for such services where parties make “reasonable efforts” to recover excess payments or collect amounts due under their compensation arrangement. Finally, as discussed in section II.D.2.e. Of this final rule, parties to a legitimate dispute regarding a compensation arrangement may utilize the exception for isolated transactions at § 411.357(f) to protect the compensation arrangement that arises from the forgiveness of an obligation related to the settlement.

However, the settlement of a dispute over payment discrepancies that confers remuneration on the party that is relieved of some or all of its obligation to refund excess payments or pay amounts due under the original arrangement does not retroactively return the original arrangement to compliance with the requirements of an exception. Comment. A few commenters questioned our analysis that the actual activities and remuneration between parties constitutes the arrangement that must be analyzed for compliance with the physician self-referral law.

These commenters argued that the “arrangement” is what the parties intended (as referenced in a written agreement or otherwise). The commenters also stated a belief that this position is unsupported by the statute. Another commenter asserted that, once the parties have memorialized in writing an arrangement that would satisfy the requirements of an applicable exception, if the arrangement satisfied all the requirements of an applicable exception at its inception, the referral and billing prohibitions of the physician self-referral law will not and cannot attach during the course of the arrangement.

Response. As we stated in Phase II and continue to believe, section 1877 of the Act is clearly intended to make entities responsible for monitoring their compensation arrangements with physicians (69 FR 16112). Unless a compensation arrangement between a physician (or immediate family member of a physician) and an entity satisfies the requirements of an applicable exception, section 1877 of the Act and § 411.353(a) and (b) of our regulations prohibit a physician from making a referral for designated health services and prohibit an entity from submitting a claim to Medicare or bill any individual, third party payor, or other entity for the designated health services furnished pursuant to a prohibited referral.

As set forth in section 1877(h)(1) of the Act, the term “compensation arrangement” means any arrangement involving remuneration between a physician (or an immediate family member of such physician) and an entity. The regulation at § 411.354(c) specifies that the arrangement involving remuneration may be direct or indirect, but otherwise essentially incorporates the statutory definition. Neither of these definitions limits a compensation arrangement to that described in written documentation.

Although many of the exceptions to the physician self-referral law require that the arrangement between the parties is documented in writing in order to avoid the law's prohibitions, the actions of the parties, regardless of what they have documented an arrangement to be, constitute the compensation arrangement between them. The commenters assert that, once a compensation arrangement is documented in writing and satisfies the remaining requirements of an applicable exception, the referral and billing prohibitions of the physician self-referral law will not and cannot attach from that point forward and during the course of the arrangement, even if the parties deviate from the terms and conditions—including the payment terms and conditions—of the documented arrangement. If this were the case, parties would only need to document an arrangement that, on its face, would satisfy the requirements of an applicable exception.

As noted, the physician self-referral law requires that, where a compensation arrangement exists between a physician (or an immediate family member of the physician) and the entity to which the physician makes referrals for designated health services, unless the compensation arrangement satisfies all the requirements of an applicable exception, the physician is prohibited from making referrals and the entity from submitting claims for designated health services. The physician self-referral law does not permit the physician to make referrals and the entity to submit claims for designated health services merely because an arrangement they documented would comply with the requirements of an applicable exception. The actions of the parties, regardless of what they have documented an arrangement to be, constitute the compensation arrangement between them.

The commenter's assertion that the actual arrangement that exists between parties need not satisfy the requirements of an exception and the law's prohibitions would not apply as long as they have documentation of some arrangement they state they intended, if true, would reduce the statute to a paper tiger. To be clear, for purposes of determining compliance with the physician self-referral law, the Start Printed Page 77587arrangement under which the parties operate is analyzed to determine whether it satisfies all the requirements of an applicable exception. As discussed in the responses to other commenters, a slight deviation from the terms set forth in the written documentation of an arrangement may not result in a different actual arrangement between the parties.

Comment. Some commenters expressed concern with a policy under which—they assumed—even a single mistake, for instance if a check for single rental payment during an arrangement was written for the wrong amount, would turn the original arrangement into a different actual arrangement. One of these commenters stated its disagreement that a mere mistaken payment of remuneration creates a financial relationship within the meaning of the physician self-referral law, but conceded that, if an entity discovers that it has overpaid a physician or has been underpaid by a physician and fails to make reasonable efforts to recover the excess compensation or recover the shortfall, a new financial relationship in the form of a gift (that is, the forgiveness of debt) may arise, for which there would be no applicable exception under the physician self-referral law.

Response. We did not state in the proposed rule, nor is it our view, that every error or mistake will cause a compensation arrangement to fail to satisfy the requirements of an exception or that every error or mistake must be corrected in order to maintain compliance with the physician self-referral law. However, if parties identify an error that would cause the compensation arrangement to fail to satisfy the requirements of an exception to the physician self-referral law, they cannot simply “unring the bell” by correcting it at some date after the expiration or termination of the arrangement.

Given the individual commenter's concession that the failure to make reasonable efforts to recover excess compensation or a shortfall in payment may establish a new financial relationship in the form of a gift (that is, forgiveness of debt) for which there would be no applicable exception under the physician self-referral law, we assume that commenter's assertion that a mere mistaken payment of remuneration under a compensation arrangement does not create a second, separate financial relationship within the meaning of the physician self-referral law refers to the situation in which the parties never identify the mistaken payment (or underpayment) and are, therefore, unaware of the need to reconcile any payment discrepancies. We agree that not all transfers of remuneration create compensation arrangements. (See 66 FR 921 and 69 FR 16113.) In addition, theft generally does not create a compensation arrangement between the thief and the victim.

For example, the theft of items, the use of office space that is not included in a lease, and the use of equipment during periods outside those included in a lease would not create a compensation arrangement between the party whose assets have been coopted and the party that took them or used them without permission or payment. Further, a slight deviation from the operation of the arrangement as anticipated and documented (where written documentation is required under the applicable exception) that results in the payment of too much or too little compensation under an arrangement—for example, in the case of a single rental payment over the course of an entire lease arrangement that was paid in the wrong amount—may not require reconciliation by the party receiving the overpayment or failing to make the full payment due, especially if the parties are not aware of the discrepancy. However, where a party is aware of the mistakes (or payment discrepancies) in the operation of its arrangements, as the commenter stated, the failure to correct the mistake may indeed establish a second financial relationship between the parties, depending on the facts and circumstances.

4. Ownership or Investment Interests (§ 411.354(b)) a. Titular Ownership or Investment Interest (§ 411.354(b)(3)(vi)) In the FY 2009 IPPS final rule, we introduced the concept of titular ownership or investment interests in the context of our rulemaking pertaining to the “stand in the shoes” provisions at § 411.354(c) (73 FR 48693 through 48699).

Under the provisions finalized in the FY 2009 IPPS final rule, for purposes of determining whether a compensation arrangement between an entity and a physician organization is deemed to be a compensation arrangement between the entity and the physician owners, employees, and contractors of the organization, a physician whose ownership or investment interest in the physician organization is merely titular in nature is not required to stand in the shoes of the physician organization (73 FR 48694). We explained that an ownership or investment interest is considered to be “titular” if the physician is not able or entitled to receive any of the financial benefits of ownership or investment, including, but not limited to, the distribution of profits, dividends, proceeds of sale, or similar returns on investment (73 FR 48694). The concept of titular ownership or investment interests set forth in the FY 2009 IPPS final rule applied only to the stand in the shoes provisions at § 411.354(c) which pertain to compensation arrangements.

Because we were responding to a comment on the 1998 proposed rule (and the Phase I comments thereafter) regarding the application of the exceptions for compensation arrangements, we did not propose to extend the concept of titular ownership or investment interests to the provisions at § 411.354(b) pertaining to ownership or investment interests. Separately, we had previously concluded in a 2005 advisory opinion (CMS-AO-2005-08-01) that, for purposes of section 1877(a) of the Act, physician-shareholders of a group practice who did not receive any of the purchase and ownership rights or financial risks and benefits typically associated with stock ownership would not be considered to have an ownership or investment interest in the group practice. In the proposed rule, we proposed to extend the concept of titular ownership or investment interests to our rules governing ownership or investment interests at § 411.354(b).

We explained that, under proposed § 411.354(b)(3)(vi), ownership and investment interests would not include titular ownership or investment interests. Consistent with the FY 2009 IPPS final rule, a “titular ownership or investment interest” would be an interest that excludes the ability or right to receive the financial benefits of ownership or investment, including, but not limited to, the distribution of profits, dividends, proceeds of sale, or similar returns on investment. As noted in the FY 2009 IPPS final rule, whether an ownership or investment interest is titular is determined by whether the physician has any right to the financial benefits through ownership or investment (73 FR 48694).

We are finalizing § 411.354(b)(3)(vi) as proposed. The new regulation at § 411.354(b)(3)(vi) should afford providers and suppliers with greater flexibility and certainty under our regulations, especially in states where the corporate practice of medicine is prohibited. For the reasons similar to those stated in our advisory opinion CMS-AO-2005-08-01, namely that a physician with a titular ownership in an entity does not have a Start Printed Page 77588right to the distribution of profits or the proceeds of sale and, therefore, does not have a financial incentive to make referrals to the entity in which the titular ownership or investment interest exists, our interpretation and revised definition of “ownership or investment interest” does not pose a risk of program or patient abuse.

We are finalizing § 411.354(b)(3)(vi) as proposed, without modification. We received the following comment and our response follows. Comment.

Nearly all the commenters that addressed the proposal to revise § 411.354(b)(3) supported excluding titular ownership from qualifying as an ownership or investment interest under § 411.354(b). One commenter emphasized that the proposal, if finalized, would afford physicians with greater flexibility, especially in States where the corporate practice of medicine is prohibited. Response.

We have long recognized that an interest in an entity that excludes the ability or right to receive the financial benefits of ownership should not be considered to constitute an ownership or investment interest for purposes of the physician self-referral law. (See CMS advisory opinion CMS-AO-2005-08-01.) Our proposal at § 411.354(b)(3)(vi) codifies this policy. The policy we are explicitly articulating in regulatory text at § 411.354(b)(3)(vi) will provide stakeholders greater certainty under our regulations.

We caution that any compensation arrangement between a physician and an entity in which the physician or an immediate family member of the physician holds only a titular ownership or investment interest must nonetheless satisfy all the requirements of an applicable exception in § 411.355 or § 411.357. B. Employee Stock Ownership Program (§ 411.354(b)(3)(vii)) We stated in the 1998 proposed rule that an interest in an entity arising through a retirement fund constitutes an ownership or investment interest in the entity for purposes of section 1877 of the Act (63 FR 1708).

Our interpretation was based on the premise that a retirement interest in an entity creates a financial incentive to make referrals to the entity. In Phase I, we reconsidered the issue and withdrew the statement regarding retirement interests that we made in the 1998 proposed rule (66 FR 870). As finalized in Phase I, § 411.354(b)(3)(i) excluded an interest in a retirement plan from the definition of “ownership or investment interest.” We stated that retirement contributions, including contributions from an employer, would instead be considered to be part of an employee's overall compensation.

We made no changes to § 411.354(b)(3)(i) in Phase II. However, after publishing Phase II, we received a comment stating that, contrary to our intent, some physicians were using their retirement plans to purchase or invest in other entities (that is, entities other than the entity that sponsored the retirement plan) to which the physicians were making referrals for designated health services. We made no changes to § 411.354(b)(3)(i) in Phase III, but proposed in the CY 2008 PFS proposed rule to address the potential abuse described by the commenter on Phase II (72 FR 38183).

After reviewing the comments received in response to that proposal, in the FY 2009 IPPS final rule, we finalized changes to § 411.354(b)(3)(i) that restricted the retirement interest carve-out to an interest in an entity that arises from a retirement plan offered by the entity to the physician (or an immediate family member) through the physician's (or immediate family member's) employment with that entity (73 FR 48737 through 48738). Under the current regulation at § 411.354(b)(3)(i), if, through his or her employment by Entity A, a physician has an interest in a retirement plan offered by Entity A, any interest the physician may have in Entity A by virtue of his or her interest in the retirement plan would not constitute an ownership or investment interest for purposes of section 1877 of the Act. On the other hand, if the retirement plan sponsored by Entity A purchased or invested in Entity B, the physician would have an interest in Entity B that would not be excluded from the definition of “ownership or investment interest” for purposes of the physician self-referral law.

For the physician to make referrals for designated health services to Entity B, the ownership or investment interest in Entity B would have to satisfy the requirements of an applicable exception. We explained in the FY 2009 IPPS final rule that it would pose a risk of program or patient abuse to permit a physician to own another entity that furnishes designated health services (other than the entity which employs the physician) through his or her retirement plan, because the physician could then use the retirement interest carve-out to skirt the prohibitions of the physician self-referral law (73 FR 48737 through 48738). Since we published the 2009 IPPS final rule, stakeholders have informed us that, in certain cases, employers seeking to offer retirement plans to physician employees may find it necessary or practical, for reasons of Federal law, State law, or taxation, to structure a retirement plan using a holding company.

By way of example, assume a home health agency desires to sponsor a retirement plan for its employees and elects to establish such plan using a holding company whose primary asset will be the home health agency. To effectuate the retirement plan, the home health agency's assets are transferred to or purchased by the holding company, which then employs the physicians and other staff of the home health agency. The holding company sponsors the retirement plan for its employees, offering the employees (including physician employees) an interest in the holding company.

Under our current regulation at § 411.354(b)(3)(i), the physician's interest in the holding company would not be considered an ownership or investment interest, because the physician is employed by the holding company, the holding company sponsors the retirement plan, and the physician's ownership interest in the holding company arises through the retirement plan sponsored by the holding company. However, because the physician has an interest in the retirement plan that owns the holding company, and the holding company owns the home health agency, the physician has an indirect ownership or investment interest in the home health agency that would not be excluded under § 411.354(b)(3)(i) and may not satisfy the requirements of an applicable exception at § 411.356. It is our understanding that a retirement plan structure involving ownership of a holding company and indirect ownership of a legally separate entity (as defined at § 411.351) may be particularly advantageous or necessary in certain circumstances for the establishment of an employee stock ownership plan (ESOP).

An ESOP is an individually designed stock bonus plan, which is qualified under Internal Revenue Code (IRC) section 401(a), or a stock bonus and a money purchase plan, both of which are qualified under IRC section 401(a), and which are designed to invest primarily in qualifying employer securities. It is our understanding that ESOPs must be structured to comply with certain safeguards under the Employee Retirement Income Security Act of 1974 (ERISA) (Pub. L.

93-406), including certain nondiscrimination rules and vesting rules that, among other things, do not allow an employee to receive the value of his or her employer stocks held Start Printed Page 77589through the retirement plan until at least 1 year after separation from the employer. Given the statutory and regulatory safeguards that exist for ESOPs, we believe that an interest in an entity arising through participation in an ESOP merits the same protection from the physician self-referral law's prohibitions as an interest in an entity that arises from a retirement plan offered by that entity to the physician through the physician's employment with the entity. We do not believe that excluding from the definition of “ownership or investment interest” an interest in an entity that arises through participation in an ESOP qualified under IRC section 401(a) poses a risk of program or patient abuse, and we are finalizing our proposal at § 411.354(b)(3)(vii) to remove such interests from the definition of “ownership or investment interest” for purposes of section 1877 of the Act.

To provide regulatory flexibility in structuring retirement plans, § 411.354(b)(3)(vii) is not restricted to an interest in an entity that both employs the physician and sponsors the retirement plan. To illustrate our policy, assume that a holding company is owned by its employees, including physician employees, through an ESOP, and that the holding company owns a separate legal entity that furnishes designated health services (an “entity” for purposes of section 1877 of the Act). Under § 411.354(b)(3)(vii), for purposes of the physician self-referral law, the physician's interest in the ESOP will not constitute an ownership or investment interest in the holding company or the legally separate entity the holding company owns.

As with the current retirement interest exclusion at § 411.354(b)(3)(i), employer contributions to the ESOP on behalf of an employed physician will be considered part of the physician's overall compensation and will have to meet the requirements of an applicable exception for compensation arrangements at § 411.357 or the physician's individual referrals must satisfy the requirements of an applicable exception in § 411.355. In the proposed rule, we sought comments on whether the safeguards that are imposed by ERISA are sufficient for purposes of the physician self-referral law to ensure that an ownership or investment interest in an ESOP does not pose a risk of program or patient abuse and, if not, what additional safeguards we should include to ensure that such interests do not pose a risk of program or patient abuse. To prevent the kind of abuses identified by the commenter on Phase II, we sought comment as to whether it is necessary to restrict the number or scope of entities owned by an ESOP that would not be considered an ownership or investment interest of its physician employees.

It is our understanding that an ESOP is designed to invest primarily in “qualifying employer securities,” but the ESOP may also invest in other securities. We sought comment on whether the exclusion from the definition of “ownership or investment interest” should apply only to an interest in an entity arising from an interest in “qualifying employer securities” that are offered to a physician as part of an ESOP. Finally, we sought comment on whether the revision to § 411.354(b)(3)(vii) is necessary.

That is, whether existing § 411.354(b)(3)(i) affords entities furnishing designated health services sufficient regulatory flexibility to structure nonabusive retirement plans, including ESOPs or other plans that involve holding companies (84 FR 55812). We are finalizing § 411.354(b)(3)(vii) as proposed, without modification. We received the following comment and our response follows.

Comment. Nearly all the commenters that addressed the proposal at § 411.354(b)(3)(vii) favored excluding an interest in an entity that arises by virtue of a physician's participation in an ESOP from the regulation regarding what constitutes an ownership or investment interests under § 411.354(b). Commenters stated that no additional safeguards or requirements are necessary.

Two commenters pointed to specific safeguards related to ESOPs that are imposed by ERISA, which they asserted are sufficient to protect against program or patient abuse. One of the commenters highlighted that ERISA requires a fiduciary to act with care, skill, prudence, and diligence under the circumstances of a prudent person acting in a similar capacity, and ESOPs are required to have an independent appraiser to establish value for all securities which are not readily tradable on a market. The other commenter emphasized that ESOPs are also regulated by the U.S.

Department of Treasury. This commenter highlighted anti-abuse rules for ESOPs in section 409(p) of the Internal Revenue Code, which mandate broad-based employee ownership and establish strict repercussions for violations. According to this commenter, since their enactment, these rules have been highly effective in ensuring that ESOPs serve their intended purpose and are not subject to abuse.

Response. We are convinced by the commenters that the legal and regulatory protections applicable to ESOPs are sufficient to prevent program or patient abuse, and we are finalizing § 411.354(b)(3)(vii) without any additional requirements. We remind parties that employer contributions to the ESOP are considered part of an employee's overall compensation arrangement with his or her employer (see 66 FR 870).

Thus, when determining whether a compensation arrangement satisfies all the requirements of an applicable exception, including the requirements pertaining to fair market value and the volume or value of the physician's referrals, employer contributions to the ESOP must be considered as part of the employee's compensation under the arrangement. 5. Special Rules on Compensation Arrangements (§ 411.354(e)) In the CY 2008 PFS proposed rule, we proposed an alternative method for satisfying certain requirements of some of the exceptions in §§ 411.355 through 411.357 (72 FR 38184 through 38186).

We explained that, although we do not have the authority to waive violations of the physician self-referral law, we do have the authority under section 1877(b)(4) of the Act to implement an alternative method for satisfying the requirements of an exception. The proposed method would have required, among other things, that an entity self-disclose the facts and circumstances of the arrangement at issue and that CMS make a determination that the arrangement satisfied all but the “procedural or `form' requirements” of an exception (72 FR 38185). We cited the signature requirement of the exception for personal service arrangements at § 411.357(d)(1) as an example of a procedural or “form” requirement, and explained that the alternative method would not be available for violations of requirements such as compensation that is fair market value, set in advance, and not determined in any manner that takes into account the volume or value of a physician's referrals.

In the FY 2009 IPPS final rule, we did not finalize the alternative method proposed in the CY 2008 PFS proposed rule. Instead, relying on our authority under section 1877(b)(4) of the Act, we finalized a rule for temporary noncompliance with signature requirements at § 411.353(g) (73 FR 48705 through 48709). As finalized in the FY 2009 IPPS final rule, § 411.353(g) applied only to the signature requirement of an applicable exception Start Printed Page 77590in § 411.357.

We declined to extend the special rule for temporary noncompliance to any other procedural or “form” requirement of an exception (73 FR 48706) or to noncompliance arising from “minor payment errors” (73 FR 48703). The special rule at § 411.353(g) permitted an entity to submit a bill and receive payment for a designated health service if the compensation arrangement between the referring physician and the entity fully complied with the requirements of an applicable exception at § 411.357, except with respect to the signature requirement, and the parties obtained the required signatures within 90 consecutive calendar days if the failure to obtain the signatures was inadvertent, or within 30 consecutive calendar days if the failure to obtain the signatures was not inadvertent (73 FR 48706). Entities were allowed to use the special rule at § 411.353(g) only once every 3 years with respect to the same physician.

We stated that we would evaluate our experience with the special rule at § 411.353(g) and that we may propose modifications, either more or less restrictive, at a later date (73 FR 48707). Subsequently, in the CY 2016 PFS final rule, we removed the distinction between failures to obtain missing signatures that were inadvertent and not inadvertent, thereby allowing all parties up to 90 consecutive calendar days to obtain the missing signatures (80 FR 71333). As discussed in further detail in this section of the final rule, following a revision to section 1877 of the Act, in the CY 2019 PFS final rule, we removed the provision limiting the use of the special rule at § 411.353(g) to once every 3 years with respect to the same physician (83 FR 59715 through 59717).

In the CY 2016 PFS final rule, we clarified that the writing requirement of various exceptions in § 411.357 can be satisfied with a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties (80 FR 71314 through 71317).[] In response to our proposals regarding satisfaction of the writing requirement, one commenter requested that CMS permit a 60- or 90-day grace period for satisfying the writing requirement of an applicable exception, stating that such a grace period is needed for last minute arrangements between physicians and entities to which they refer patients for designated health services (80 FR 71316 through 71317). In response, we noted that the special rule at § 411.353(g) applied only to temporary noncompliance with the signature requirement of an applicable exception, and we declined to extend the special rule to the writing requirement of various exceptions at § 411.357. We stated that a “grace period” for satisfying the writing requirement could pose a risk of program or patient abuse.

For example, if the rate of compensation is not documented before a physician provides services to an entity, the entity could adjust the rate of compensation during the grace period in a manner that takes into account the volume or value of the physician's referrals (80 FR 71317). We added that an entity could not satisfy the set in advance requirement at the outset of an arrangement if the only documents stating the compensation term of an arrangement were generated after the arrangement began. Finally, we reminded parties that, even if an arrangement is not sufficiently documented at the outset, depending on the facts and circumstances, contemporaneous documents created during the course of an arrangement may allow parties to satisfy the writing requirement and the set in advance requirement for referrals made after the contemporaneous documents were created (80 FR 71317).

Section 50404 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123, enacted February 9, 2018) (BiBA) added provisions to section 1877(h)(1) of the Act pertaining to the writing and signature requirements in certain exceptions applicable to compensation arrangements.

As amended, section 1877(h)(1)(D) of the Act provides that the writing requirement in various exceptions applicable to compensation arrangements “shall be satisfied by such means as determined by the Secretary,” including by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties. Section 1877(h)(1)(E) of the Act created a statutory special rule for temporary noncompliance with signature requirements, providing that the signature requirement of an applicable exception shall be satisfied if the arrangement otherwise complies with all the requirements of the exception and the parties obtain the required signatures no later than 90 consecutive calendar days immediately following the date on which the compensation arrangement became noncompliant. In the CY 2019 PFS final rule, we finalized at § 411.354(e) a special rule on compensation arrangements, which codified in our regulations the clarification of the writing requirement found at section 1877(h)(1)(D) of the Act (83 FR 59715 through 59717).

In addition, we removed the 3-year limitation on the special rule on temporary noncompliance with signature requirements at § 411.353(g)(2) in order to align the regulatory provision at § 411.353(g) with section 1877(h)(1)(E) of the Act. We proposed, in the alternative, to delete § 411.353(g) in its entirety and to codify section 1877(h)(1)(E) of the Act in the newly created special rules on compensation arrangements at § 411.354(e). However, we declined to finalize the alternative proposal in the CY 2019 PFS final rule, because we believed it would be less disruptive to stakeholder compliance efforts to amend already-existing § 411.353(g).

As stated in our proposed rule, we have reconsidered our policy on temporary noncompliance with the signature and writing requirements of various compensation arrangement exceptions (84 FR 55813 through 55814). In our administration of the SRDP, we have reviewed numerous compensation arrangements that fully satisfied all the requirements of an applicable exception, including requirements pertaining to fair market value compensation and the volume or value of referrals, except for the writing or signature requirements. In many cases, there are short periods of noncompliance with the physician self-referral law at the outset of a compensation arrangement, because the parties begin performance under the arrangement before reducing the key terms and conditions of the arrangement to writing.

As long as the compensation arrangement otherwise meets all the requirements of an applicable exception, and the parties memorialize the arrangement in writing and sign the written documentation within 90 consecutive calendar days, we do not believe that the arrangement poses a risk of program or patient abuse. Therefore, it is appropriate to provide entities and physicians flexibility under our rules to satisfy the writing or signature requirement of an applicable exception within 90 consecutive calendar days of the inception of a compensation arrangement. Relying on our authority at section 1877(h)(1)(D) of the Act, which grants the Secretary the authority to determine the means by which the writing requirement of a compensation arrangement exception may be satisfied, and section 1877(h)(1)(E) of the Act, Start Printed Page 77591which establishes a statutory rule for temporary noncompliance with signature requirements, we proposed to create a special rule for noncompliance with the writing or signature requirement of an applicable exception for compensation arrangements.

Specifically, we proposed to delete § 411.353(g) in its entirety, codify the statutory rule for noncompliance with signature requirements at section 1877(h)(1)(E) of the Act in a special rule on compensation arrangements at § 411.354(e)(3), and incorporate a special rule for noncompliance with the writing requirement into the new special rule at § 411.354(e)(3). In this final rule, the special rule on writing and signature requirements is designated as § 411.354(e)(4) and a new rule on electronic signatures is included in our regulations at § 411.354(e)(3). Under the special rule for writing and signature requirements at § 411.354(e)(4), the writing requirement or the signature requirement is deemed to be satisfied if.

(1) The compensation arrangement satisfies all the requirements of an applicable exception other than the writing or signature requirement(s). And (2) the parties obtain the required writing or signature(s) within 90 consecutive calendar days immediately after the date on which the arrangement failed to satisfy the requirement(s) of the applicable exception. A party may rely on § 411.354(e)(4) if an arrangement is neither in writing nor signed at the outset, provided both the required writing and signature(s) are obtained within 90 consecutive calendar days and the arrangement otherwise satisfied all the requirements of an applicable exception.

We remind readers that, as we explained in the CY 2016 PFS final rule and subsequently codified at § 411.354(e)(2), a single formal written contract is not necessary to satisfy the writing requirement in the exceptions to the physician self-referral law (80 FR 71314 through 71317). Depending on the facts and circumstances, the writing requirement may be satisfied by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties. Thus, parties to an arrangement would have 90 consecutive calendar days to compile the collection of documents if the parties determine to show compliance with the writing requirement in this manner.

We note that, because parties must compile the documents that evidence their arrangement within 90 consecutive calendar days of the commencement of the arrangement, if an arrangement expires or is terminated before the compilation is complete or the end of the “grace period,” whichever comes first, the parties may not rely on the special rule at § 411.354(e)(4) to establish compliance with the physician self-referral law for their arrangement. However, depending on the facts and circumstances, the new exception for limited remuneration to a physician at § 411.357(z), which does not include a writing or signature requirement, might be available to protect a short-term arrangement. We stressed in the proposed rule and reiterate here that our proposal to permit parties up to 90 consecutive calendar days to satisfy the writing requirement of an applicable exception does not amend, nor does it affect, the requirement under various exceptions in § 411.357 that compensation must be set in advance.

The amount of or formula for calculating the compensation must be set in advance and the arrangement must satisfy all other requirements of an applicable exception, other than the writing or signature requirements, in order for parties to an arrangement to establish compliance with the physician self-referral law by relying on § 411.354(e)(4). Section 1877(h)(1)(D) of the Act provides the Secretary with the authority to determine the means by which the writing requirement may be satisfied, but it does not provide the Secretary similar authority with respect to the set in advance requirement. Moreover, we believe that the set in advance requirement is necessary to prevent parties from retroactively adjusting the amount of compensation paid under an arrangement in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician over the course of the arrangement, including the first 90 days of the arrangement.

In the proposed rule, we did not propose to amend the special rule on compensation that is considered to be set in advance at § 411.354(d)(1), though we did clarify that § 411.354(d)(1) is a deeming provision, not a requirement (84 FR 55782). As explained in more detail below, in response to comments, we are finalizing certain modifications to the special rule at § 411.354(d)(1), including codifying requirements at § 411.354(d)(1)(ii) for modifying the compensation (or formula for determining the compensation) during the course of an arrangement. The new regulation related to modifying compensation terms during the course of an arrangement requires that the modified compensation (or formula for determining compensation) is set out in writing before the furnishing of items or services for which the modified compensation is to be paid, and it specifically provides that parties do not have 90 days under § 411.354(e)(4) to reduce the modified compensation terms to writing.

We emphasize that the requirements in new § 411.354(d)(1)(ii), including the writing requirement, apply only when the parties modify the compensation (or formula for determining compensation) during the course of an arrangement. In this final rule, the current special rule at § 411.354(d)(1) is redesignated as § 411.354(d)(1)(i). To underscore that this rule is merely an optional “deeming provision” and not a requirement, we are replacing the phrase “is considered `set in advance' ” with “is deemed to be `set in advance'.” We are also deleting the phrase “and may not be changed or modified during the course of the arrangement in any manner that takes into account the volume or value of referrals or other business generated by the referring physician,” because the requirements for modifying the compensation are codified in this final rule at § 411.354(d)(1)(ii).

Under § 411.354(d)(1)(i), compensation is deemed to be set in advance if the compensation is “set out in writing before the furnishing of items or services” and the other requirements of § 411.354(d)(1)(i) are met. In the proposed rule, we stated that, because the special rule on the set in advance requirement at § 411.354(d)(1) is an optional deeming provision and not a requirement, in order to satisfy the set in advance requirement included in various exceptions in § 411.357, it is not necessary that the parties reduce the compensation to writing before the furnishing of items or services. Given the writing requirement in the new rule at § 411.354(d)(1)(ii) on modifying compensation during the course of an arrangement, we are qualifying this statement in this final rule.

As finalized in this rule, compensation may be set in advance even if it is not set out in writing before the furnishing of items or services as long as the compensation is not modified at any time during the period the parties seek to show the compensation was set in advance. For example, assume that the parties to an arrangement agree on the rate of compensation before the furnishing of items or services, but do not reduce the compensation rate to writing at that point in time. Assume further that the first payment under the arrangement is documented and that, under § 411.354(e)(4), during the 90-day period after the items or services are Start Printed Page 77592initially furnished, the parties compile sufficient documentation of the arrangement to satisfy the writing requirement of an applicable exception.

Finally, assume that the written documentation compiled during the 90-day period provides for a rate of compensation that is consistent with the documented amount of the first payment, that is, the rate of compensation was not modified during the 90-day period. Under these specific circumstances, we would consider the compensation to be set in advance. More broadly speaking, records of a consistent rate of payment over the course of an arrangement, from the first payment to the last, typically support the inference that the rate of compensation was set in advance.

On the other hand, under § 411.354(d)(1)(ii), if the parties modify the compensation (or formula for determining the compensation) during the 90-day period (or thereafter), the modified compensation (or formula for determining the compensation) must be set out in writing before the furnishing of items or services for which the modified compensation is to be paid. To the extent that our preamble discussion in the CY 2016 PFS final rule suggested that the rate of compensation must always be set out in writing before the furnishing of items or services in order to meet the set in advance requirement of an applicable exception, we are retracting that statement (80 FR 71317). We noted in the proposed rule and reiterate here that there are many ways in which the amount of or a formula for calculating the compensation under an arrangement may be documented before the furnishing of items or services (84 FR 55815).

It is not necessary that the document stating the amount of or a formula for calculating the compensation, taken by itself, satisfies the writing requirement of the applicable exception. The document stating the amount of or a formula for calculating the compensation may be one document among many which, taken together, constitute a collection of documents sufficient to satisfy the writing requirement of the applicable exception as interpreted at § 411.354(e)(2). For example, depending on the facts and circumstances, informal communications via email or text, internal notes to file, similar payments between the parties from prior arrangements, generally applicable fee schedules, or other documents recording similar payments to or from other similarly situated physicians for similar items or services, may be sufficient to establish that the amount of or a formula for calculating the compensation was set in advance before the furnishing of items or services.

Even if the amount of or a formula for calculating the compensation is not set in advance, depending on the facts and circumstances, the parties may be able to rely on the new exception for limited remuneration to a physician at § 411.357(z). Under § 411.357(z), if an entity initially pays a physician for services utilizing the exception for limited remuneration to a physician and the parties subsequently decide to continue the arrangement utilizing an exception that requires the compensation to be set in advance, such as the exception for personal service arrangements at § 411.357(d)(1), depending on the facts and circumstances, the parties may be able to use documentation of the initial payments made while utilizing § 411.357(z) to establish that the amount of or a formula for calculating the compensation was set in advance before the furnishing of services under the subsequent personal service arrangement. In the proposed rule, we clarified our longstanding policy that an electronic signature that is legally valid under Federal or State law is sufficient to satisfy the signature requirement of various exceptions in our regulations and sought comments on whether we should codify this policy in our regulations.

We also noted that the collection of writings that parties may rely on under § 411.354(e)(2) to satisfy the writing requirement of our exceptions may include documents and records that are stored electronically (84 FR 55815). In response to commenters, we are codifying a new special rule for electronic signatures at § 411.354(e)(3). The special rule on writing and signature requirements, which was proposed at § 411.354(e)(3), will be designated as § 411.354(e)(4).

While we are not codifying our policy on electronic documents, we are reaffirming in this final rule our policy that the documents that may be used to satisfy the writing requirement under § 411.354(e)(2) include electronically stored documents. After reviewing the comments, we are finalizing the special rule for writing and signature requirements without modification at § 411.354(e)(4). In addition, to clarify the set in advance requirement in various exceptions and to prevent program or patient abuse, we are finalizing requirements for modifying compensation (or the formula used to calculate compensation) during the course of an arrangement at § 411.354(d)(1)(ii).

For modified compensation under an arrangement to be set in advance, it must satisfy these requirements. We are also finalizing a special rule for electronic signatures at § 411.354(e)(3), codifying our longstanding policy that an electronic signature that is valid under Federal or State law is sufficient to satisfy the signature requirement of various physician self-referral law exceptions. We received the following comments and our responses follow.

Comment. We received nearly unanimous support for our proposal to allow parties up to 90 consecutive calendar days to satisfy the writing and signature requirements of various physician self-referral law exceptions. Commenters stated that the proposal, if finalized, would reduce administrative burden associated with the documentation requirements of the exceptions to the physician self-referral law, provide flexibility in situations where an arrangement begins before key terms and conditions are reduced to writing, and allow entities to avoid so-called technical noncompliance that may lead to disclosures of nonabusive arrangements to the SRDP.

Response. We agree with the commenters that the policy as finalized affords greater flexibility and will reduce the administrative burden associated with the writing and signature requirements. We believe that, with the clarification of the set in advance requirement detailed below, the special rule on writing and signature requirements at § 411.354(e)(4) will not pose a risk of program or patient abuse, and we are finalizing it as proposed.

Comment. Several commenters supported our proposal to allow parties additional time to obtain required writings and signatures, but encouraged us to adopt a 120- or 180-day period instead of the proposed 90-day period for obtaining required writings and signatures. According to some commenters, if, as required under the proposed special rule, a compensation arrangement complies with all the requirements of an applicable exception except for the writing and signature requirements, a 180-day grace period for compliance with the writing and signature requirements poses a low risk of program or patient abuse.

One commenter stated that a grace period of 120 days is necessary for a large health care system to obtain required writings and signatures, given the large number of contracts the system must review and the time it takes for staff to review the contracts. Another commenter stated that small practices may need up to 120 days to comply with the writing and signature requirements.Start Printed Page 77593 Response. We decline to extend the special rule to allow parties up to 120 or 180 days to comply with the writing and signature requirements.

With respect to the signature requirement, section 1877(h)(1)(E) of the Act currently provides for a period of 90 consecutive calendar days for parties to obtain missing signatures, and we are not persuaded that we could extend the period to 120 or 180 days under section 1877(b)(4) of the Act without posing a risk of program or patient abuse. Regarding the writing requirement, we believe that the requirement is important for ensuring transparency in potentially lucrative compensation arrangements, and we believe that extending the grace period to 120 or 180 days could pose a risk of program or patient abuse. We believe that allowing a period of 90 consecutive calendar days to satisfy the writing and signature requirements sufficiently addresses legitimate concerns regarding the administrative burden of the writing and signature requirements and inadvertent “technical” noncompliance, especially in light of the clarification of the writing requirement at § 411.354(e)(2) and the new exception for limited remuneration to a physician at § 411.357(z), which may be used to protect an arrangement at its inception while parties collect required documentation and signatures to satisfy the writing and signature requirements of other exceptions on a going-forward basis.

Commenter. One commenter objected on both legal and policy grounds (the policy objections are discussed in the next comment and response) to the proposal to allow parties up to 90 consecutive calendar days to document arrangements in writing, especially for personal service arrangements excepted under § 411.357(d). The commenter stated that CMS lacks the legal authority to permit parties up to 90 consecutive calendar days to document an arrangement in writing.

The commenter maintained that the codification of the 90-day signature rule in the BiBA expressly provides that, except for the signature requirement, an arrangement must comply with all the other requirements of an exception, including the writing requirement. The commenter concluded that the Congress did not intend that the 90-day signature rule to be expanded to include the writing requirement. Response.

Our proposal to allow parties up to 90 consecutive calendar days to document arrangements in writing does not waive the writing requirement in various statutory and regulatory exceptions, including the exception for personal service arrangements at § 411.357(d). Rather, our proposal was made pursuant to section 1877(h)(1)(D) of the Act, which expressly grants the Secretary the authority to determine the means by which the writing requirement in various exceptions is satisfied. In this context, the special rule we are finalizing at § 411.354(e)(4) functions as a deeming provision.

As long as parties obtain the required writings and signatures within 90 consecutive calendar days (and the other requirements of an applicable exception are met), the arrangement is deemed to have met the writing and signature requirement, including for the first 90 days of the arrangement. Thus, with respect to the statutory special rule for signature requirements at section 1877(h)(1)(E) of the Act, if the parties obtain the required writing within 90 consecutive calendar days and the arrangement satisfies all the other requirements of an applicable exception, then the arrangement “otherwise complies with all criteria of the applicable exception” for the initial 90-day period, including the writing requirement. While it is true that the Congress did not explicitly extend the 90-day period for signature requirements in section 1877(h)(1)(E) of the Act to the writing requirement in various exceptions, we do not believe that section 1877(h)(1)(E) of the Act limits the grant of authority in section 1877(h)(1)(D) of the Act to determine the means by which the writing requirement may be satisfied.

We note that, in addition to the authority granted to the Secretary under section 1877(h)(1)(D) of the Act, the Secretary has authority under section 1877(b)(4) of the Act to issue regulations excepting financial relationships that do not pose a risk of program or patient abuse. In the FY 2009 IPPS final rule, we explained that, although the Secretary cannot grant immunity for violations or waive requirements of the physician self-referral law, the Secretary is authorized under section 1877(b)(4) of the Act to propose alternative methods for compliance with the physician self-referral law, including amendments to our regulations that keep within the exceptions certain financial relationships that would otherwise be out of compliance with the physician self-referral law (73 FR 48707 through 48709). Relying on this authority, in the FY 2009 IPPS final rule, we finalized the special rule for temporary noncompliance with signature requirements at § 411.353(g) (73 FR 48702 through 48703), which the Congress in the BiBA codified in the substantively identical special rule for signature requirements at section 1877(h)(1)(E) of the Act.

As with the special rule for temporary noncompliance with signature requirements finalized in the FY 2009 IPPS final rule, the Secretary has the authority under section 1877(b)(4) of the Act to propose alternative methods for compliance with the writing requirement of various physician self-referral law exceptions, if the financial relationships ultimately protected under the exceptions do not pose a risk of program or patient abuse. Based on our administration of the SRDP and our experience working with our law enforcement partners, we conclude that an arrangement that satisfies all the requirements of an applicable exception for the duration of the arrangement, including the set in advance requirement as detailed below, but is not initially set out in writing or signed (or both) for a period of no longer than 90 consecutive calendar days, does not pose a risk of program or patient abuse. Therefore, the Secretary also has authority under section 1877(b)(4) of the Act to issue the new special rule for writing and signature requirements at § 411.357(e)(4).

Comment. In addition to the objection discussed above, one commenter objected strongly to the proposed policy to permit parties up to 90 consecutive calendar days to document personal service arrangements. According to the commenter, the proposal, if finalized, would allow parties to routinely, intentionally, and repeatedly enter into oral agreements worth thousands of dollars, without sufficient transparency to determine if the arrangements comply with all the other requirements of an exception.

Specifically, the commenter expressed concern that parties would use the “grace period” to adjust compensation upward or downward based on a physician's referrals, and these adjustments would be virtually impossible to detect, because the original arrangement would not be documented. The commenter doubted whether parties that do not timely document arrangements at their inception would assiduously comply with all the other requirements of an exception. Response.

We believe that the set in advance requirement, as clarified and codified in this final rule, addresses the commenter's concern that parties will adjust the compensation under an arrangement upward or downward during the first 90 days of the arrangement in a manner that takes into account the volume or value of referrals Start Printed Page 77594or other business generated by the physician, and that these adjustments will be virtually impossible to detect. In the proposed rule, we emphasized that, other than the writing and signature requirements, the special rule on writing and signature requirements requires an arrangement to satisfy all the requirements of an applicable exception, including the set in advance requirement, for the entire term of the arrangement, including the first 90 days (84 FR 55814). Under the current special rule for compensation that is considered set in advance at § 411.354(d)(1) (that is, the special rule in effect prior to the effective date of this final rule), the formula for determining compensation cannot be changed or modified during the course of an arrangement in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.

Thus, to the extent that compensation is adjusted upwards or downwards during the first 90 days of an arrangement in a manner that takes into account the volume or value of referrals or other business generated, as described by the commenter, the compensation would not be considered to be set in advance under current § 411.354(d)(1). However, as we explained in the proposed rule, the special rule at current § 411.354(d)(1) is merely a deeming provision, not a requirement (84 FR 55814). We share the commenter's concern regarding inappropriate and potentially undetectable changes in compensation during the first 90 days of an arrangement and thereafter.

Although modifications of the compensation terms of an arrangement are permissible under the physician self-referral law (see 73 FR 48697), such modifications may pose a risk of program or patient abuse, because the modifications could be made—either retroactively or prospectively—in a manner that takes into account the volume or value of a physician's referrals or other business generated by the physician. We believe that, in order to prevent program or patient abuse, including abuse of the 90-day “grace period” for documenting an arrangement in writing under final § 411.354(e)(4), it is necessary to codify in our regulations certain requirements, including a writing requirement, for modified compensation to meet the set in advance requirement of various exceptions. Unlike the deeming provision in current § 411.354(d)(1), which will be redesignated as § 411.354(d)(1)(i), compliance with the new set in advance rule at § 411.354(d)(1)(ii) will be required for any modification of the compensation terms of an arrangement.

The set in advance requirements at § 411.354(d)(1)(ii) are based on preamble guidance in the FY 2009 IPPS final rule on the requirements for amending compensation arrangements (73 FR 48696 through 48697). Under final § 411.354(d)(1)(ii), compensation (or a formula for determining the compensation) that is modified at any time during the course of a compensation arrangement, including the first 90 days of the arrangement, satisfies the set in advance requirement of various exceptions only if all of the following conditions are met. (1) All requirements of an applicable exception in §§ 411.355 through 411.357 are met on the effective date of the modified compensation (or the formula for determining the modified compensation).

(2) the modified compensation (or the formula for determining the modified compensation) is determined before the furnishing of the items, services, office space, or equipment for which the modified compensation is to be paid. And (3) before the furnishing of the items, services, office space, or equipment for which the modified compensation is to be paid, the formula for the modified compensation is set forth in writing in sufficient detail so that it can be objectively verified. Importantly, parties will not have 90 days under § 411.354(d)(1)(ii) to reduce the modified compensation (or the formula for determining the modified compensation) to writing.

Rather, the modified compensation (or the formula for determining the modified compensation) must be set forth in writing in sufficient detail so that it can be objectively verified before the furnishing of items, services, office space, or equipment for which the modified compensation is to be paid. Given our program integrity concerns, as well as the concerns identified by the commenter with modifications to the compensation terms of an arrangement, we believe that the transparency afforded by a writing requirement is necessary for modifying compensation, including modifying compensation during the first 90 days of an arrangement. Under § 411.354(d)(1)(ii)(A), the amended arrangement, including the modified rate of compensation, must satisfy the requirements of an applicable exception anew.

For example, suppose that an arrangement for call coverage at the rate of $500 per 24-hour shift of coverage satisfies all the requirements of the exception for personal service arrangements at § 411.357(d)(1) on day 1. If, on day 70, the parties agree to modify the compensation to $600 per 24-hour shift, the arrangement as amended must satisfy all the requirements of the exception for personal service arrangements. Thus, the compensation under the amended arrangement (that is, $600 per 24-hour shift) may not exceed fair market value for the call coverage and may not be determined in any manner that takes into account the volume or value of referrals or other business generated by the physician, and the other requirements of the exception for personal service arrangements must also be satisfied.

In addition, as required by § 411.354(d)(1)(ii)(B), the amended compensation rate may not be retroactive (that is, the physician may not be paid at the rate of $600 per 24-hour shift for services provided from day 1 to day 69). Lastly, under § 411.354(d)(1)(ii)(C), the modified compensation (or formula for determining the compensation) must be set forth sufficiently in writing before the furnishing of the services for which the modified compensation is to be paid. Thus, if the physician provides the first shift of call coverage at the rate of $600 per 24-hour shift on day 75, the modified rate of compensation must be set forth in writing in sufficient detail so that it can be objectively verified before the services are furnished on day 75.

Under § 411.354(e)(4), the parties will still have through day 90 to reduce the entire arrangement to writing and to obtain required signatures, but in order for the modified compensation (or formula for determining the compensation) to satisfy the set in advance requirement, it must be in writing before the furnishing of services on day 75. If the parties again modify the compensation terms of the arrangement effective, for example, on day 180, all the conditions for modifying the compensation under § 411.354(d)(1)(ii) must be met again, and the modified compensation must be sufficiently set forth in writing before the furnishing of services on day 180. (There is no signature requirement under § 411.354(d)(1)(ii), so the writing that documents the modified compensation need not be signed by the parties.) As noted in Phase III, in certain instances, modifications to an arrangement may be material to the compensation terms of the arrangement, without directly modifying the amount of compensation under an arrangement (72 FR 51044).

Returning to the example above, assume the parties modified the arrangement on day 70 to reduce the Start Printed Page 77595call coverage shift from 24 to 12 hours, but retained the compensation amount of $500 per shift. For purposes of the physician self-referral law, the modification is material to the compensation terms of the arrangement because it raises questions as to whether the compensation under the amended arrangement ($500 per 12-hour shift) satisfies requirements pertaining to fair market value and the volume or value of referrals or other business generated. It is our view that such an amendment is a modification of the formula for determining compensation ($500 per 12-hour shift versus $500 per 24-hour shift), and this modification must meet all conditions of § 411.354(d)(1)(ii) in order to avoid the physician self-referral law's referral and billing prohibitions.

On the other hand, modifications that do not affect the compensation terms of the arrangement need not meet the conditions of § 411.354(d)(1)(ii). For example, if the parties amend the schedule for the provision of call coverage from Tuesdays to Thursdays but there are no other changes to their arrangement, § 411.354(d)(1)(ii) would not be triggered. Lastly, reflecting our current policy, § 411.354(d)(1)(ii) does not require that the modified compensation remain in place for at least 1 year from the date of amendment and there is no prohibition on the number of times the parties may modify the compensation, provided that the conditions of § 411.354(d)(1)(ii) are met each time the compensation is modified.

We caution against a practice of frequently or repeatedly modifying the compensation terms over the course of an arrangement and remind readers that, under § 411.354(d)(1)(ii), each time the compensation is modified, the parties must establish anew that the arrangement—as modified—satisfies all the requirements of an applicable exception. Given our clarification and codification at § 411.354(d)(1)(ii) of the conditions that modified compensation must meet in order to be set in advance, we believe that our interpretation of writing and signature requirements as set forth at § 411.354(e)(4) does not pose a risk of program or patient abuse. To reiterate, with the exception of the writing and signature requirements, a compensation arrangement must satisfy all the requirements of an applicable exception, including the set in advance requirement, during the initial 90 days of the arrangement (and thereafter).

Any modification of the compensation terms of an arrangement during the initial 90 days (or thereafter) must meet all the conditions of § 411.354(d)(1)(ii) in order for the compensation to be set in advance. If parties modify the compensation terms of an arrangement during the first 90 days (or thereafter), the modified compensation arrangement will have to satisfy all the requirements of an applicable exception, including applicable requirements pertaining to fair market value and the volume or value of referrals or other business generated by the referring physician. In addition, under § 411.354(d)(1)(ii)(C), the modified compensation (or formula for determining the compensation) must be sufficiently set forth in writing before the furnishing of items, services, office space, or equipment for which the modified compensation is to be paid, even if the modification occurs during the first 90 days of the arrangement.

Thus, notwithstanding the 90-day period for obtaining required writings and signatures under § 411.354(e)(4), parties will not be permitted to modify the compensation terms of an arrangement during the first 90 days without documenting the modification in writing, and modifications to the compensation (or formula for determining the compensation) may not be determined in any manner that takes into account the volume or value of referrals or other business generated by the physician. Lastly, the commenter doubted that parties that fail to document their arrangements during the first 90 days of the arrangement work diligently to ensure compliance with other requirements of applicable exceptions. Our experience administering the SRDP suggests otherwise.

We have reviewed a large number of arrangements that satisfied all the requirements of an applicable exception except the writing and signature requirements. We have learned that parties neglect to document arrangements in writing and sign the writings for a variety of reasons, such as administrative oversight or personnel changes. At the same time, we continue to believe that the writing requirement functions as an important safeguard to provide transparency and prevent program or patient abuse, and we reiterate that the best practice is to document compensation arrangements in writing from the outset.

We believe that § 411.354(e)(4) provides sufficient flexibility for nonabusive arrangements that fully satisfy all the requirements of an exception other than the writing or signature requirement, while incenting parties to act diligently to sign and document arrangements within 90 consecutive calendar days of the commencement of their arrangement. We also stress that arrangements that fail to satisfy all the requirements of an applicable exception other than the writing and signature requirement during the first 90 days (and thereafter) would not be protected under § 411.354(e)(4). Comment.

Several commenters appreciated CMS' statement that the set in advance requirement does not require parties to set out the compensation in writing in advance of the furnishing of items or services, and that the special rule on the set in advance requirement at § 411.354(d)(1) is a deeming provision, not a requirement. One commenter noted that the clarification would greatly benefit hospitals that inadvertently fail to document their compensation terms prior to starting performance. Another commenter found helpful our preamble guidance regarding the set in advance requirement and the use of practice patterns, including consistent payments patterns, to establish that the rate of compensation was set in advance.

The commenter stated that a grace period of more than 90 days may be necessary in some circumstances to establish an identifiable pattern of payments. Response. As explained above, under § 411.354(e)(4), other than the writing and signature requirements, a compensation arrangement must satisfy all the requirements of an applicable exception, including the set in advance requirement, for the entire duration of the arrangement, including the first 90 days of the arrangement.

Thus, the compensation (or formula for calculating the compensation) must be determined before the furnishing of items or services for which compensation is to be paid. A party submitting a claim for payment for a designated health service retains the burden of proof under § 411.353(c)(2) to establish that all the requirements of an applicable exception, including the set in advance requirement, if applicable, are met. The surest and most straightforward way for a party to establish that the compensation under an arrangement is set in advance is to satisfy the deeming provision at § 411.354(d)(1)(i).

Under § 411.354(d)(1)(i), parties that document the compensation in writing prior to the furnishing of items, services, office space, or equipment in sufficient detail so that it can be verified are deemed to satisfy the set in advance requirement. However, we are reiterating in this final rule that the compensation (or the formula determining the compensation) does not need to be documented in writing and it does not need to be deemed to be set in advance under § 411.354(d)(1)(i) in order to satisfy the Start Printed Page 77596set in advance requirement during the first 90 days of the arrangement. In order for an arrangement to meet the writing requirement of an applicable exception on an ongoing basis, the compensation (or formula for calculating compensation) must be documented in writing by the time the 90-day period under § 411.354(e)(4) expires.

As we explained in the CY 2016 PFS, to determine compliance with the writing requirement, the relevant inquiry is whether the available contemporaneous documents (that is, documents that are contemporaneous with the arrangement) would permit a reasonable person to verify compliance with the applicable exception at the time that a referral is made (80 FR 71315). A reasonable person could not verify whether the compensation under an arrangement complies with an applicable fair market value requirement, for example, if the person could not determine from the documentation what the compensation was under the arrangement. Thus, by day 91, the compensation terms of the arrangement must be documented in writing in order to satisfy the writing requirement of an applicable exception.

As explained above, we decline to extend the “grace period” for collecting required writings beyond the 90-day period. We believe that 90 consecutive calendar days provides sufficient time to document an arrangement to show compliance with the requirements of an applicable exception, including the set in advance requirement. Comment.

One commenter requested additional guidance from CMS on the interim systems and documents that may be relied upon to satisfy the requirement that rental rates are set in advance during the 90-day grace period. Specifically, the commenter asked whether a scheduling platform that tracks leasing arrangements and allocates leased square footage, scheduling actual space utilization and rent, would be sufficient to satisfy the set in advance requirement. Response.

The determination as to what constitutes sufficient documentation to establish that compensation under the arrangement is set in advance depends on the facts and circumstances in each case. Therefore, we cannot opine on whether the scheduling platform described by the commenter would be sufficient to establish that the set in advance requirement was met. We discussed in the proposed rule (and repeated above) the various documents that, depending on the facts and circumstances, may be used to establish that compensation is set in advance.

We are clarifying the types of documents that, individually or taken together and depending on the facts and circumstances, may establish that compensation is set in advance. These documents include informal communications via email or text, internal notes to file, similar payments between the same parties for similar items or services under prior arrangements, generally applicable fee schedules, or, where no formal generally applicable fee schedule exists, other documents showing a pattern of payments to or from other similarly situated physicians for the same or similar items or services. This list is illustrative only and is not exhaustive.

To avoid being overly prescriptive, we are not providing more determinant rules for establishing that compensation is set in advance. Comment. Several commenters stated that, even if the proposed special rule is finalized, there would be continuing uncertainty regarding how parties can establish that compensation is set in advance if there is no signed writing and no steady, consistent stream of payments.

Commenters noted that informal writings between the parties may not be detailed enough to satisfy the set in advance requirement and that, in certain instances, the compensation may only have been determined through in-person conversations, with no paper trail. The commenters also noted that fee schedules and comparisons to other arrangements may not be useful for compensation arrangements where the payment methodology is more complicated or customized to the specific financial relationship. Given these difficulties, the commenters requested that compensation be deemed to comply with all the requirements of an applicable exception, except the writing and signature requirements, if the parties certify in the signed writing documenting the arrangement that the arrangement met all the elements of the exception as of the commencement date of the arrangement.

The commenters noted that this requirement would provide an additional safeguard, because a false certification could expose a person to potential liability under the False Claims Act, because it would be useful evidence of scienter. A second group of commenters suggested that, to provide additional flexibility, CMS should create another special rule on the set in advance requirement at § 411.354(d). Under the commenters' proposal, compensation would be considered set in advance if.

(1) The parties agree in advance that compensation under the arrangement will be fair market value and not determined in any manner that takes into account the volume or value of the physician's referrals prior to the commencement of the arrangement. (2) the parties work with reasonable diligence to establish the specific compensation amount or methodology. (3) the parties, in fact, establish the specific compensation amount or methodology within 90 days of the commencement of the arrangement.

And (4) the resulting compensation is fair market value and commercially reasonable without taking into account the volume or value of referrals or other business generated by the physician. The commenters asserted that, as long as the compensation is ultimately fair market value and the arrangement is commercially reasonable, then there is no risk of program or patient abuse. The commenters further asserted that their proposal would be helpful for practices located in States that prohibit the corporate practice of medicine, because providers in those States cannot rely on the exception for bona fide employment relationships, which does not include a set in advance requirement.

One commenter stressed that the special rule is especially needed if CMS finalizes its proposed definition of “isolated financial transaction,” as parties may have relied on this exception in the past to compensate physicians for services furnished prior to the parties setting the compensation under the arrangement. Response. We decline to adopt the deeming provision suggested by the first commenters and the new special rule recommended by the second commenters.

The set in advance requirement is a statutory requirement and, in our view, both proposals are inconsistent with the statutory requirement that the compensation is set in advance. In addition, as explained above, the set in advance requirement is an important safeguard to prevent program or patient abuse, including abuse of the 90-day grace period under § 411.354(e)(4). We believe that both proposals would be subject to the kinds of abuses described by the commenter above, namely undocumented and potentially undetectable adjustments of the compensation during the first 90 days of the arrangement that take into account the volume or value of referrals or other business generated by the physician.

Even with a requirement that compensation is, in fact, fair market value, we believe that the proposals could be subject to abuse. Typically, fair market value is a range of values, and parties could use the 90-day period to adjust compensation upwards or downwards within this range. Therefore, we do not believe that we Start Printed Page 77597have the authority under section 1877(b)(4) of the Act to waive the set in advance requirement for 90 days.

In addition, although the Secretary has authority under section 1877(h)(1)(D) of the Act to determine how the writing requirement of various exceptions may be satisfied, we do not believe that this authority does not extend to the set in advance requirement. With respect to the first commenters' proposal, parties documenting an arrangement after it has begun, as is permitted under § 411.354(e)(4), may choose to include memoranda or other notes describing earlier agreements, including verbal agreements or agreements made by informal communications that set the compensation (or formula for determining the compensation) in advance. The memoranda would not be sufficient for the compensation to be deemed to be set in advance under § 411.354(d)(1)(i), but, depending on the facts and circumstances, the memoranda could be used as evidence to help establish that the compensation was set in advance.

We emphasize that there is no requirement under the physician self-referral law that parties create or retain such memoranda. As illustrated by our earlier discussion in this section II.D.5., there are a variety of ways to establish that compensation is set in advance, and, other than the deeming provision in § 411.354(d)(1)(i), we are not prescribing or recommending any particular approach. With respect to the second commenters' proposed special rule, we note that the new rule for modifying compensation at § 411.354(d)(1)(ii) provides stakeholders certainty regarding the requirements that must be met in order for modified compensation to satisfy the set in advance requirement.

Parties to an arrangement are permitted to enter into an arrangement that satisfies all the requirements of an applicable exception, including the set in advance requirement, and later modify the compensation terms of the arrangement, provided that the modified compensation is not retroactive and all the other conditions of § 411.354(d)(1)(ii) are met. This policy, coupled with the new exception for limited remuneration to a physician at § 411.357(z), which does not require compensation to be set in advance, should provide sufficient flexibility for all providers, including providers located in States that prohibit the corporate practice of medicine. Comment.

Some commenters stated that, if finalized, the proposed 90-day grace period and the clarification of the set in advance requirement, coupled with the newly proposed exception for limited remuneration to a physician, which does not require the compensation to be set in advance, would accommodate situations where a physician's services are needed on an urgent basis, and the compensation arrangement commences before the parties can set the compensation in advance or document the compensation. Response. We agree with the commenters that, depending on the facts and circumstances, parties that do not have an opportunity to set compensation in advance may utilize the exception for limited remuneration to a physician at § 411.357(z) to protect an arrangement at its outset.

If the parties decide to continue the arrangement on an ongoing basis, the parties may utilize another applicable exception without an annual limit, such as the exception for fair market value compensation at § 411.357(l). Depending on the facts and circumstances, records of payments made while utilizing the exception at § 411.357(z) may establish that the compensation under the ongoing arrangement satisfied the set in advance requirement of § 411.357(l). Parties that utilize the exception at § 411.357(l) (or another exception that requires the arrangement to be in writing and signed by the parties) for the ongoing arrangement have 90 consecutive calendar days to satisfy the writing and signature requirements under § 411.354(e)(4) once the parties begin to utilize that exception (or another applicable exception that requires the arrangement to be in writing and signed by the parties).

Comment. Several commenters urged us to finalize regulatory text, clearly stating CMS' policy that electronic signatures that are legally valid under Federal or State law are sufficient to satisfy the signature requirement of various exceptions. Some commenters also specifically asked that the regulatory text clarify that assent transmitted by email may satisfy the signature requirement.

Other commenters recognized that CMS has declined in the past to specify what qualifies as a signature for purposes of the physician self-referral law, because CMS does not wish to be overly prescriptive. Nevertheless, the commenters requested that we explicitly confirm that a signature includes a sender's typed or printed name on an email or letterhead stationary that is one of the contemporaneous writings documenting an arrangement under § 411.354(e)(2). Response.

Our longstanding policy is that an electronic signature that is valid under applicable Federal or State law is sufficient to satisfy the signature requirement in various physician self-referral law exceptions. To provide greater clarity and certainty to stakeholders, we are codifying this policy at § 411.354(e)(3). We believe that what constitutes a valid signature that is sufficient to satisfy the signature requirement of various exceptions to the physician self-referral law depends on the facts and circumstances.

We decline to provide a general rule regarding whether a sender's typed or printed name on an email or letterhead stationary would satisfy the requirement that an arrangement is signed by the parties. However, we note that, if an individual's typed or printed name on an email sent by that individual constitutes an electronic signature for purposes of applicable Federal or State law, then it qualifies as a “signature” for purposes of the physician self-referral law. Similarly, if the individual whose name is printed on the letterhead of the document being relied upon to satisfy the signature requirement of an applicable exception is also the sender of the document and the document would be considered signed by the individual under applicable Federal or State law, then it qualifies as a “signature” for purposes of the physician self-referral law.

While a hand-written “wet” signature is the paradigmatic example of a signature, there is no requirement under the physician self-referral law that parties sign a document by hand, nor is there a requirement that electronic signatures be scanned copies of hand-written signatures. Any electronic signature that is valid under applicable Federal or State law is sufficient to satisfy the signature requirement under the physician self-referral law. 6.

Exceptions for Rental of Office Space and Rental of Equipment (§ 411.357(a) and (b)) Section 1877(e)(1) of the Act establishes an exception to the physician self-referral law's referral and billing prohibitions for certain arrangements involving the rental of office space or equipment. Among other things, sections 1877(e)(1)(A)(ii) and (e)(1)(B)(ii) of the Act require the office space or equipment to be used exclusively by the lessee when being used by the lessee. The exclusive use requirements are incorporated into our regulations at § 411.357(a)(3) and (b)(2).

In the 1998 proposed rule, we stated our belief that the exclusive use requirement in the statute was meant to Start Printed Page 77598prevent “paper leases,” where payment passes from a lessee to a lessor, even though the lessee is not actually using the office space or equipment (63 FR 1714). In Phase II, we further explained our interpretation of the exclusive use requirement (69 FR 16086). We stated that, after reviewing the statutory scheme, we believe that the purpose of the exclusive use requirement is to ensure that the rented office space or equipment cannot be shared with the lessor when it is being used or rented by the lessee (or any subsequent sublessee).

In other words, a lessee (or sublessee) cannot “rent” office space or equipment that the lessor will be using concurrently with, or in lieu of, the lessee (or sublessee). We added that we were concerned that unscrupulous physicians or physician groups might attempt to skirt the exclusive use requirement by establishing holding companies to act as lessors. To foreclose this possibility, we modified the exclusive use requirements at § 411.357(a)(3) and (b)(2), to stipulate that the rented office space or equipment may not be “shared with or used by the lessor or any person or entity related to the lessor” when the lessee is using the office space or equipment.

Disclosures to the SRDP have included several arrangements where multiple lessees use the same rented office space or equipment either contemporaneously or in close succession to one another, while the lessor is excluded from using the premises or equipment. At least one entity disclosed that it had invited a physician who was not the lessor into its office space to treat a mutual patient for the patient's convenience. The disclosing parties assumed that the arrangements violated the physician self-referral law, because, based on their understanding of the exceptions at § 411.357(a) and (b), the arrangements did not satisfy the exclusive use requirement of the applicable exception.

As noted in the 1998 proposed rule and in Phase II, the purpose of the exclusive use rule is to prevent sham leases where a lessor “rents” space or equipment to a lessee, but continues to use the space or equipment during the period ostensibly reserved for the lessee. We do not interpret sections 1877(e)(1)(A)(ii) and (B)(ii) of the Act to prevent multiple lessees from using the rented space or equipment at the same time, so long as the lessor is excluded, nor do we interpret sections 1877(e)(1)(A)(ii) and (B)(ii) of the Act to prohibit a lessee from inviting a party other than the lessor (or any person or entity related to the lessor) to use the office space or equipment rented by the lessee. Moreover, we do not believe it would pose a risk of program or patient abuse for multiple lessees (and their invitees) to use the space or equipment to the exclusion of the lessor, provided that the arrangements satisfy all the requirements of the applicable exception for the rental of office space or equipment, and any financial relationships between the lessees (or their invitees) that implicate the physician self-referral law likewise satisfy the requirements of an applicable exception.

Therefore, relying on the Secretary's authority under section 1877(b)(4) of the Act, we proposed to clarify our longstanding policy that the lessor (or any person or entity related to the lessor) is the only party that must be excluded from using the space or equipment under § 411.357(a)(3) and 411.357(b)(2). Specifically, we proposed to add the following clarification to the regulation text. For purposes of this exception, exclusive use means that the lessee (and any other lessees of the same office space or equipment) uses the office space or equipment to the exclusion of the lessor (or any person or entity related to the lessor).

The lessor (or any person or entity related to the lessor) may not be an invitee of the lessee to use the office space or the equipment. After reviewing the comments, we are finalizing the proposal without modification. We received the following comments and our responses follows.

Comment. Several commenters supported our clarification of the exclusive use requirement in § 411.357(a)(3) and (b)(2) as proposed. Commenters explained that as physician practices evolve to meet the rising costs of health care, the uncertainty regarding “exclusive use” is challenging when multiple physicians use the same space or equipment, a practice which the commenter stated is common.

For example, a physician may invite a guest physician into the premises in order to coordinate and jointly treat a mutual patient. Commenters stated it would not pose a risk of program or patient abuse to allow multiple parties to use space or equipment concurrently. Response.

We agree with the commenters that the clarification of the exclusive use requirement in the exception for the rental of office space at § 411.357(a)(3) and the exception for the rental of equipment at § 411.357(b)(2) offers flexibility and certainty to providers, and that it does not pose a risk of program or patient abuse to permit multiple lessees (and their invitees) to use space or equipment concurrently, provided that all the other requirements of the exception are satisfied and that the lessor (or any person or entity related to the lessor) is excluded. We remind readers that the exceptions for the rental of office space and equipment both require, among other things, that the rental charges are consistent with fair market value, that the space or equipment that is rented or leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement, and that the lease arrangement would be commercially reasonable even if no referrals were made between the lessee and lessor. If a lessor collects rental payments from multiple lessees for concurrent use of office space or equipment, these requirements and all the other requirements of § 411.357(a) or (b) must still be satisfied.

Comment. Multiple commenters requested that CMS update the new proposed language to permit lessors to use their own space or equipment along with lessees, especially when the lease provides access to space or equipment on a part-time basis. One commenter further explained that lessors should have the opportunity to utilize or lease such space to other lessees when it is not utilized as long as the leasing arrangements are properly administered and that any allocations of space, costs, or flow of funds can be audited, monitored and otherwise objectively verified to ensure accountability.

Another commenter stated that, if a hospital leases space to a physician practice, the practice should be permitted to sublease back an exam room to the hospital for use by a hospital-employed physician or technician, in order to coordinate care. The commenter stated that if CMS is concerned about the risk of abuse, CMS could provide that space subleased back to the lessor must be at the same rate that the lessor leases the space to the tenant. Response.

Both the statute and our regulations require that leased office space or equipment is used exclusively by the lessee when it is being used by the lessee. We believe that the commenters' proposal would render this requirement meaningless. In addition, the exclusive use requirement is an important safeguard to prevent sham or “paper” leases, where a lessor collects rent from a lessee while continuing to use the leased office space or equipment during periods of time that are ostensibly reserved for the lessee.

We also note that, under § 411.357(a)(3) and § 411.357(b)(2), rented office space or equipment may not exceed that which Start Printed Page 77599is reasonable and necessary for the legitimate business purposes of the lease arrangement. We question if a lease arrangement satisfies this requirement if the lease includes space or equipment that is consistently not used by the lessee. For example, assume a physician owns a medical office building, a hospital leases the entire building from the physician, the hospital (sublessor) subleases an office suite to the physician (sublessee), and the remainder or a significant portion of the medical office building remains unused and unoccupied.

On these facts, the amount of spaced leased by the hospital (that is, the entire medical office building) likely exceeds that which is reasonable and necessary for the legitimate business purposes of the lease arrangement. We note that, as amended in this final rule, the exception for fair market value compensation at § 411.357(l) may be used for office space and equipment lease arrangements. The exception for fair market value does not include an exclusive use requirement.

Rather, the exception includes as a substitute the requirement that the arrangement not violate the anti-kickback statute. Depending on the facts and circumstances, the arrangements described by the commenters may be permitted under the exception for fair market value compensation at § 411.357(l). We note, however, that the arrangements would have to satisfy the commercial reasonableness requirement at § 411.357(l)(4) and the remaining requirements of the exception for fair market value compensation.

7. Exception for Physician Recruitment (§ 411.357(e)) Section 1877(e)(5) of the Act established an exception for remuneration provided by a hospital to a physician to induce the physician to relocate to the geographic area served by the hospital in order to be a member of the hospital's medical staff. The exception at section 1877(e)(5) of the Act authorizes the Secretary to impose additional requirements on recruitment arrangements as needed to protect against program or patient abuse.

The 1995 final rule incorporated the provisions of section 1877(e)(5) of the Act into our regulations at § 411.357(e). As finalized in the 1995 final rule, § 411.357(e) requires the recruitment arrangement to be in writing and signed by both parties, that is, the recruited physician and the hospital. In Phase II, we substantially modified § 411.357(e).

Relying on our authority under section 1877(b)(4) of the Act, we expanded the exception at § 411.357(e)(4) to address remuneration from a hospital (or a federally qualified health center (FQHC), which was added as a permissible recruiting entity under Phase II) to a physician who joins a physician practice. There, we established requirements for recruitment arrangements under which remuneration is provided by a hospital or FQHC indirectly to a physician through payments made to his or her physician practice as well as directly to the physician who joins a physician practice (69 FR 16094 through 16095). When payment is made to a physician indirectly through a physician practice that the recruited physician joins, the practice is permitted to retain actual costs incurred by the practice in recruiting the physician under § 411.357(e)(4)(ii), and, in the case of an income guarantee made by the hospital or FQHC to the recruited physician, the practice may also retain the actual additional incremental costs attributable to the recruited physician under § 411.357(e)(4)(iii).

Under the Phase II regulation, if a recruited physician joined a physician practice, § 411.357(e)(4)(i) required the party to whom the payments are directly made (that is, the physician practice that the recruited physician joins) to sign the written recruitment agreement (69 FR 16139). In Phase III, we responded to a commenter that requested clarification with respect to who must sign the writing documenting the physician recruitment arrangement (72 FR 51051). The commenter's concern was that § 411.357(e)(4)(i) could be interpreted to require that the recruiting entity (in the commenter's example, a hospital), the physician practice, and the recruited physician all had to sign one document.

The commenter asserted that this would be unnecessary and would add to the transaction costs of the recruitment. The commenter suggested that we require a written agreement between the hospital and either the recruited physician or the physician practice to which the payments would be made or, in the alternative, that we should permit the hospital and the physician practice receiving the payments to sign a written recruitment agreement and require the recruited physician to sign a one-page acknowledgment agreeing to be bound by the terms and conditions set forth in that agreement. We responded that the exception for physician recruitment requires a writing that is signed by all parties, including the recruiting hospital (or FQHC or rural health clinic, which was added as a permissible recruiting entity under Phase III), the recruited physician, and the physician practice that the physician will be joining, if any, and explained that nothing in the regulations precluded execution of the agreement in counterparts.

We have reconsidered our position regarding the signature requirement at § 411.357(e)(4)(i). In the SRDP, we have seen arrangements in which a physician practice that hired a physician who was recruited by a hospital (or FQHC or rural health clinic) did not receive any financial benefit as a result of the hospital and physician's recruitment arrangement. Examples of such arrangements include arrangements under which.

(1) The recruited physician joined a physician practice but the hospital paid the recruitment remuneration to the recruited physician directly. (2) remuneration was transferred from the hospital to the physician practice, but the practice passed all of the remuneration from the hospital to the recruited physician (that is, the practice served merely as an intermediary for the hospital's payments to the recruited physician and did not retain any actual costs for recruitment, actual additional incremental costs attributable to the recruited physician, or any other remuneration). And (3) the recruited physician joined the physician practice after the period of the income guarantee but before the physician's “community service” repayment obligation was completed.

In each of the arrangements disclosed to the SRDP, the arrangement was determined by the disclosing party not to satisfy the requirements of the exception at § 411.357(e) solely because the physician practice that the recruited physician joined had not signed the writing evidencing the arrangement. We do not believe, however, that, under the circumstances described by parties disclosing to the SRDP, there exists a compensation arrangement between the physician practice and the hospital (or FQHC or rural health clinic) of the type against which the statute is intended to protect. That is, the type of financial self-interest that impacts a physician's medical decision making.

Because the physician practice is not receiving a financial benefit from the recruitment arrangement, we do not believe it is necessary for the physician practice to also sign the writing documenting the recruitment arrangement between the recruited physician and the hospital (or FQHC or rural health clinic) in order to protect against program or patient abuse. We also believe that eliminating the signature requirement for a physician practice that receives no financial benefit under the recruitment Start Printed Page 77600arrangement would reduce undue burden without posing a risk of program and patient abuse. For these reasons, we proposed to modify the signature requirement at § 411.357(e)(4)(i).

We proposed to require the physician practice to sign the writing documenting the recruitment arrangement, if the remuneration is provided indirectly to the physician through payments made to the physician practice and the physician practice does not pass directly through to the physician all of the remuneration from the hospital. After reviewing the comments, we are finalizing the proposal without modification. We received the following comment and our response follows.

Comment. Several commenters supported our proposal to modify the signature requirement at § 411.357(e)(4)(i) to require a physician practice to sign the writing documenting a recruitment arrangement between a physician and a hospital only if remuneration is provided to the physician indirectly through payments made to the physician practice and the physician practice does not pass directly through to the physician all the remuneration from the hospital. One commenter stated that eliminating the signature requirement for a physician practice would reduce burden without posing a risk of program and patient abuse.

Response. We agree with the commenters that the proposal will reduce the burden of compliance with the physician self-referral law without posing a risk of program or patient abuse. Therefore, we are finalizing the modification of the exception as proposed.

We note in this context that a “physician practice” under § 411.357(e)(4) includes a sole practice consisting of only one physician. (See, for example, the definition of “entity” at § 411.351). Under the definition of “physician” at § 411.351, a physician and the professional corporation of which he or she is a sole owner are the same for purposes of the physician self-referral law.

Thus, if a recruited physician joins an existing sole physician practice, and the recruited physician receives remuneration indirectly through payments made to the sole physician practice and the sole physician practice does not pass directly through to the recruited physician all the remuneration from the hospital, then the physician in the sole physician practice or someone authorized to sign on behalf of the physician's professional corporation must sign the writing documenting the arrangement. 8. Exception for Remuneration Unrelated to the Provision of Designated Health Services (§ 411.357(g)) Under section 1877(e)(4) of the Act, remuneration provided by a hospital to a physician does not create a compensation arrangement for purposes of the physician self-referral law, if the remuneration does not relate to the provision of designated health services.

The statutory exception is codified in our regulations at § 411.357(g). Because our prior rulemaking regarding § 411.357(g) was based in part on an interpretation of legislative history, we reviewed the legislative history of section 1877(e)(4) of the Act and certain provisions that preceded it in the proposed rule. As originally enacted by OBRA 1989, the referral and billing prohibitions of the physician self-referral law applied only to clinical laboratory services.

OBRA 1989 created three general exceptions for both ownership and compensation arrangements at sections 1877(b)(1) through (3) of the Act, and granted the Secretary the authority at section 1877(b)(4) of the Act to create additional exceptions. Section 42017(e) of OBRA 1990 (Pub. L.

101-508) redesignated section 1877(b)(4) as 1877(b)(5) of the Act, and added an exception at section 1877(b)(4) of the Act for financial relationships with hospitals that are unrelated to the provision of clinical laboratory services. (To avoid confusion between the exception added by OBRA 1990 at section 1877(b)(4) of the Act and section 1877(b)(4) of the Act as it currently exists, the exception for financial relationships unrelated to the provision of clinical laboratory services enacted by OBRA 1990 is referred to herein as the “OBRA 1990 exception.”) The OBRA 1990 exception applied to both ownership or investment interests and compensation arrangements, and excepted financial relationships between physicians (or immediate family members of physicians) and hospitals that did not relate to the provision of clinical laboratory services. OBRA 1993 eliminated the OBRA 1990 exception, but the Social Security Act Amendments of 1994 (Pub.

L. 103-432) (SSA 1994) reinstated the exception through January 1, 1995. In place of the OBRA 1990 exception, OBRA 1993 added a new exception at section 1877(e)(4) of the Act.

Under section 1877(e)(4) of the Act, remuneration provided by a hospital to a physician that does not relate to the provision of designated health services is not considered a compensation arrangement for purposes of the referral and billing prohibitions. Although there are certain similarities between section 1877(e)(4) of the Act and the OBRA 1990 exception, the exception at section 1877(e)(4) of the Act is narrower than the OBRA 1990 exception in several important respects. (1) The OBRA 1990 exception excepts both ownership interests and compensation arrangements between hospitals and physicians, whereas section 1877(e)(4) of the Act applies only to compensation arrangements under which remuneration passes from the hospital to the physician.

(2) the OBRA 1990 exception protects a broad range of financial relationships that are unrelated to the provision of clinical laboratory services, whereas section 1877(e)(4) of the Act has a narrower application, applying only to remuneration unrelated to the provision of designated health services. And (3) the OBRA 1990 exception applies to financial relationships between entities and physicians or their immediate family members, whereas section 1877(e)(4) of the Act applies only to compensation arrangements with physicians. In the 1998 proposed rule, we proposed to revise our regulation at § 411.357(g) to reflect our interpretation of section 1877(e)(4) of the Act (63 FR 1702).

(The prior regulation at § 411.357(g) was based on former sections 1877(b)(4) and (e)(4) of the Act as they were effective on January 1, 1992 (63 FR 1669).) We stated that, for remuneration from a hospital to a physician to be excepted under § 411.357(g), the remuneration must be “completely unrelated” to the furnishing of designated health services. We clarified that the remuneration could not in any direct or indirect way involve designated health services, and further that the exception would not apply in any situation involving remuneration that might have a nexus with the provision of, or referrals for, a designated health service (63 FR 1702). We further stated that the remuneration could in no way reflect the volume or value of a physician's referrals, and that payments to physicians that were “inordinately high” or above fair market value would be presumed to be related to the furnishing of designated health services.

We provided the following examples of remuneration that might be completely unrelated to the furnishing of designated health services and excepted under § 411.357(g). (1) Fair market value rental payments made by a teaching hospital to a physician to rent his or her house in order to use the house as a residence for a visiting Start Printed Page 77601faculty member. And (2) compensation for teaching, general utilization review, or administrative services.

In Phase II, we finalized the exception at § 411.357(g) with modifications (69 FR 16093 through 16094). As finalized, in addition to requiring that the remuneration does not in any way take into account the volume or value of the physician's referrals, § 411.357(g) requires that the remuneration is wholly unrelated (that is, neither directly nor indirectly related) to the furnishing of designated health services. The regulation stipulates that remuneration relates to the furnishing of designated health services if it.

(1) Is an item, service, or cost that could be allocated in whole or in part to Medicare or Medicaid under cost reporting principles. (2) is furnished, directly or indirectly, explicitly or implicitly, in a selective, targeted, preferential, or conditioned manner to medical staff or other persons in a position to make or influence referrals. Or (3) otherwise takes into account the volume or value of referrals or other business generated by the referring physician.

We stated that we incorporated cost reporting principles in the regulation in order to provide the industry with bright-line rules to determine whether remuneration is related to the furnishing of designated health services (69 FR 16093). At the same time, we retracted the statement from the 1998 proposed rule that general utilization review or administrative services might not be related to the furnishing of designated health services. We justified our narrow interpretation of section 1877(e)(4) of the Act on the legislative history of the exception, noting that, initially, under the original statute, the exception was necessary to insulate a hospital's relationships with physicians that were unrelated to the provision of clinical laboratory services, a very small element of a hospital's practice.

We continued that, since 1995, however, all hospital services are designated health services and a narrower interpretation of the exception is required to prevent abuse (69 FR 16093). We have made no changes to § 411.357(g) since Phase II. Commenters on Phase II stated that the Congress intended hospitals to be able to provide any amount of remuneration to physicians, provided that the remuneration did not directly relate to designated health services.

In Phase III, based on our interpretation of the legislative history at that time, we reaffirmed our narrow interpretation of section 1877(e)(4) of the Act (72 FR 51056). Based on our review of the statutory history of the OBRA 1990 exception and section 1877(e)(4) of the Act, and comments we received on our CMS RFI, we proposed certain modifications to the exception at § 411.357(g) to broaden the application of the exception. In the proposed rule, we stated that we continued to agree with the statement in Phase II that the exception at section 1877(e)(4) of the Act is significantly narrower than the OBRA 1990 exception.

There are many financial relationships between hospitals and physicians that would be permissible under the OBRA 1990 exception because they do not relate, directly or indirectly, to the provision of clinical laboratory services. On the other hand, insofar as the exception at section 1877(e)(4) of the Act requires the remuneration to be unrelated to the provision of designated health services, and OBRA 1993 defines this term to include inpatient and outpatient services, the scope of protected compensation arrangements under section 1877(e)(4) of the Act is much narrower than that of the OBRA 1990 exception. Generally speaking, most financial relationships between hospitals and physicians relate to the furnishing of designated health services, in particular, inpatient or outpatient hospital services.

That being said, we also considered in the proposed rule that OBRA 1993 did not merely strike the term “clinical laboratory services” in the OBRA 1990 exception and substituted the term “designated health services.” Rather, OBRA 1993 eliminated the OBRA 1990 exception and created a new (albeit somewhat similar) exception at section 1877(e)(4) of the Act. In light of this statutory history, in the proposed rule we stated that the most accurate interpretation of section 1877(e)(4) of the Act is not as a carryover of the 1990 OBRA exception into the significantly revised statutory regime established by OBRA 1993, but rather as a new exception that was intentionally created by the Congress in OBRA 1993, the very same legislation in which the Congress expanded the referral and billing prohibition of the physician self-referral law to inpatient and outpatient hospital services. We stated in the proposed rule that, in creating a new exception for remuneration unrelated to the provision of designated health services and expanding the definition of “designated health services” to include inpatient and outpatient hospital services, we believe that the Congress intended the exception to apply to a narrow—but not empty—subset of compensation arrangements between hospitals and physicians.

In the proposed rule, we reconsidered what remuneration, if any, is permissible under the exception if the exception does not apply to any item, cost, or service that could be allocated to Medicare or Medicaid under cost reporting principles, or to remuneration that is offered in any preferential or selective manner whatsoever based on comments received to the CMS RFI. We stated that we agreed with the commenters that the current exception is too restrictive and that the current § 411.357(g) has an extremely limited application (84 FR 55818). To give appropriate meaning to the statutory exception at section 1877(e)(4) of the Act, we proposed to delete the current provisions at § 411.357(g)(1) and (2) in their entirety and to remove the phrase “directly or indirectly” from the regulation text.

In place of existing § 411.357(g)(1) and (2), we proposed language that incorporates the concept of patient care services as the touchstone for determining when remuneration for an item or service is related to the provision of designated health services. In particular, we proposed regulation text to clarify that remuneration from a hospital to a physician does not relate to the provision of designated health services if the remuneration is for items or services that are not related to patient care services. We noted that section 1877(e)(4) of the Act specifically excepts remuneration unrelated to the provision of designated health services.

For purposes of applying the exception at section § 411.357(g), we interpreted section 1877(e)(4) of the Act to except remuneration unrelated to the act or process of providing designated health services, a concept which is not as all-encompassing as remuneration that is unrelated in any manner whatsoever to designated health services. We stated our belief that patient care services provided by a physician, when the physician is acting in his or her capacity as a medical professional, are integrally related to the act or process of providing designated health services, regardless of whether such services are provided to patients of the hospital. Thus, payment for such services relates to the provision of designated health services.

Likewise, we proposed that items that are used in the act or process of furnishing patient care services are integrally related to the provision of designated health services, and payments for such items relate to the provision of designated health services. On the other hand, we also stated our belief that remuneration from a hospital to a physician for services that are not patient care services or Start Printed Page 77602items that are not used in the act or process of providing designated health services does not relate to the provision of designated health services and would, therefore, not be prohibited under section 1877(e)(4) of the Act or our regulations at proposed § 411.357(g) (provided that the remuneration is not determined in any manner that takes into account the volume or value of the physician's referrals). In the proposed rule, we stated our belief that the concept of patient care services would provide a determinant and practicable principle for applying § 411.357(g) to compensation arrangements between hospitals and physicians.

We also noted that the proposed regulation at § 411.357(g) retained the requirement that the remuneration is not determined in any manner that takes into account the volume or value of the physician's referrals. Remuneration that is determined in any manner that takes into account the volume or value of a physician's referrals clearly relates to the provision of designated health services, regardless of the nature of the item or service for which the physician receives remuneration. Thus, the proposed provisions at § 411.357(g)(2) and (g)(3), which were intended to clarify when remuneration does not relate to the provision of designated health services, would not have applied to remuneration that is determined in any manner that takes into account the volume or value of a physician's referrals (84 FR 55816 through 55817).

In the proposed rule, we stated that remuneration from a hospital to a physician that pertains to the physician's patient care services is the paradigm of remuneration that relates to the provision of designated health services. Most obviously, when a physician provides patient care services to hospital patients, the physician's patient care services are directly correlated with the provision of designated health services. Thus, remuneration from the hospital to the physician for such services is clearly related to designated health services.

However, we noted in the proposed rule that there does not have to be a direct one-to-one correlation between a physician's services and the provision of designated health services in order for payments for the service to be related to the provision of designated health services. For example, payment for emergency department call coverage relates to the furnishing of designated health services, even if the physician is not as a matter of fact called to the hospital to provide patient care services, because the hospital is paying the physician to be available to provide patient care services at the hospital. Similarly, medical director services typically include, among other things, establishing clinical pathways and overseeing the provision of designated health services in a hospital.

Under our proposal, payments for such services would relate to the furnishing of designated health services for purposes of applying the exception at proposed § 411.357(g). We also stated that utilization review services are closely related to patient care services, and for this reason, we considered remuneration for such services to be related to the furnishing of designated health services (84 FR 55818). In contrast to the services described above, in the proposed rule we stated that the administrative services of a physician pertaining solely to the business operations of a hospital are not related to patient care services.

Thus, under our proposal, if a physician were a member of a governing board along with persons who were not licensed medical professionals, and the physician received stipends or meals that were available to the other board members, we would not have considered the remuneration provided to the physician to relate to the provision of designated health services, provided that the physician's compensation for the administrative services was not determined in a manner that takes into account the volume or value of his or her referrals. In this instance, we stated that the dispositive factor in determining that a physician's services are not related to the provision of designated health services is that the services are also provided by persons who are not licensed medical professionals, and the physician is compensated on the same terms and conditions as the non-medical professionals. Because the services could be provided by persons who are not licensed medical professionals, we concluded that the services were not patient care services.

To provide clarity for stakeholders, we proposed a general principle at § 411.357(g)(3) for determining when remuneration for a particular service, when provided by a physician, is related to the provision of designated health services. We stated that, if a service can be provided legally by a person who is not a licensed medical professional and the service is of the type that is typically provided by such persons, then payment for such a service is unrelated to the provision of designated health services and may be protected under proposed § 411.357(g), provided that it is not determined in a manner that takes into account the volume or value of the physician's referrals. We noted in this context that “licensed medical professional” would include, but would not be limited to, a licensed physician.

That is, if a service could be provided legally by both a physician and a medical professional who is not a physician, such as a registered nurse, but the service could not be provided by a person who is not a licensed medical professional, it would still be considered a patient care service under § 411.357(g)(3) as proposed. Thus, we proposed that remuneration provided by a hospital to a physician for the service would not be excepted under § 411.357(g), notwithstanding the fact that the service does not have to be performed by a physician (84 FR 55818 through 55819). In the proposed rule, we stated that with respect to remuneration from a hospital for items provided by a physician, typical examples of remuneration that is related to the provision of designated health services include the rental of medical equipment and purchasing of medical devices from physicians.

Because these items are used in the provision of patient care services, and patient care services may be designated health services or be directly correlated with the provision of designated health services, we concluded that remuneration for such items clearly relates to the provision of designated health services. We also stated that rental of office space where patient care services are provided, including patient care services that are not necessarily designated health services, is remuneration related to the provision of designated health services. In contrast, we stated that, if a physician who joins another practice sells the furniture from his or her medical office to a hospital, and the hospital places the furniture in the hospital's facilities, as long as the payment is not determined in a manner that takes into account the physician's referrals, the remuneration would not be considered to be related to the provision of designated health services under our proposal.

Also, we stated our continued belief that, as first stated in the 1998 proposed rule, § 411.357(g) is available to except rental payments made by a teaching hospital to a physician to rent his or her house in order to use the house as a residence for a visiting faculty member. To provide stakeholders with greater clarity, we proposed to stipulate in regulation that remuneration provided in exchange for any item, supply, device, equipment, or office space that Start Printed Page 77603is used in the diagnosis or treatment of patients, or any technology that is used to communicate with patients regarding patient care services, is presumed to be related to the provision of designated health services for purposes of § 411.357(g) (84 FR 55819). In the proposed rule, we stated our belief that § 411.357(g)(2) and (3) would provide clarity regarding when payments for items and services relate to the provision of designated health services, and also give the meaning to the statutory exception.

We stated that the requirement pertaining to the volume or value of a physician's referrals at § 411.357(g)(1) would ensure that payments to a physician for items or services that are ostensibly not related to patient care services are not in fact disguised payments for the physician's referrals. We sought comments on our proposals, as well as other possible ways for distinguishing between remuneration that is related to the provision of designated health services and remuneration that is unrelated to the provision of designated health services. Specifically, we sought comment as to whether we should limit what we consider to be “remuneration related to the provision of designated health services” to remuneration paid explicitly for a physician's provision of designated health services to a hospital's patients (84 FR 55819).

We received the following comment and our response follows. Comment. Commenters on the proposal generally supported our efforts to restore utility to the statutory exception, but a few commenters expressed valid concerns that the expansion of the exception, especially without substantial guidance and examples of its application, would risk program or patient abuse.

One commenter noted that “patient care services” is a defined term under our regulations, and it is not clear whether the term “patient care services” as used in § 411.357(g) was intended to have the same meaning as “patient care services” as defined at § 411.351. Many commenters, citing uncertainty in applying the proposed exception, requested codification of specific remuneration that would be deemed not to relate to the provision of designated health services. Response.

Given the concerns raised by commenters, we are not finalizing our proposed revision to § 411.357(g) at this time. We are continuing to evaluate the best way to restore utility to the statutory exception, and we may finalize revisions to the exception for remuneration unrelated to the provision of designated health services in future rulemaking. 9.

Exception for Payments by a Physician (§ 411.357(i)) Section 1877(e)(8) of the Act excepts payments made by a physician to a laboratory in exchange for the provision of clinical laboratory services, or to an entity as compensation for other items or services if the items or services are furnished at a price that is consistent with fair market value. The 1995 final rule (60 FR 41929) incorporated the provisions of section 1877(e)(8) of the Act into our regulations at § 411.357(i). In the 1998 proposed rule, we proposed to interpret “other items and services” to mean any kind of item or service that a physician might purchase (that is, not limited to “services” for purposes of the Medicare program in § 400.202 of this Chapter), but not including clinical laboratory services or those items or services that are specifically excepted by another provision in §§ 411.355 through 411.357 (63 FR 1703).

We stated that we did not believe that the Congress meant the exception for payments by a physician to protect financial relationships that were covered by more specific exceptions with specific requirements, such as the exceptions for rental arrangements at section 1877(e)(1) of the Act. In Phase II, we responded to commenters that disagreed with our position that the exception for payments by a physician is not available for arrangements involving any items or services excepted by another exception (69 FR 16099). We reiterated the statutory interpretation from the 1998 proposed rule, explaining that the determination that items and services addressed by another exception should not be covered in this exception is consistent with the overall statutory scheme and purpose and is necessary to prevent the exception for payments by a physician from negating the statute (69 FR 16099.

See also 72 FR 51057). As a result, we made no changes to the regulation at § 411.357(i) in Phase II. Thus, as finalized in Phase II, the exception for payments by a physician at § 411.357(i) stated that the exception could not be used for items or services that are specifically excepted by another exception in §§ 411.355 through 411.357, with a parenthetical clarifying that this included the exception for fair market value compensation at § 411.357(l).

However, at that time, the exception for fair market value compensation applied only to the provision of items or services by physicians to entities. The exception did not apply to items or services provided by entities to physicians. Following the publication of Phase II, commenters complained that neither § 411.357(i) nor § 411.357(l) were available to protect many arrangements wherein physicians purchased items and services from entities, because.

(1) The exception for payments by a physician was limited to the purchase of items and services not specifically excepted by another exception in §§ 411.355 through 411.357 (including § 411.357(l)). And (2) the exception for fair market value compensation did not apply to items or services provided by an entity to a physician (72 FR 51057). In response to the commenters, we expanded § 411.357(l) in Phase III to include both items and services furnished by physicians to entities and items and services furnished by entities to physicians (72 FR 51094 through 51095).

However, Phase III did not modify the exception for payments by a physician,[] including the parenthetical indicating that § 411.357(i) could not be used for items or services specifically excepted under § 411.357(l). We acknowledged that the expansion of the exception for fair market value compensation to items or services furnished by entities to physicians would require parties in some instances to rely on § 411.357(l) instead of § 411.357(i). We concluded, however, that upon further consideration, we believe that the required application of the fair market value compensation exception, which contains conditions not found in the less transparent exception for payments by a physician to a hospital, further reduces the risk of program abuse (72 FR 51057).

We also emphasized in Phase III that the exception for payments by a physician could not be used to protect office space leases (72 FR 51044 through 51045). We explained that we did not believe that the lease of office space is an “item or service” and that parties seeking to protect arrangements for the rental of office space must rely on § 411.357(a) (72 FR 51059). In 2015, when we finalized the exception at § 411.357(y) for timeshare arrangements, we reaffirmed our position that the exception for payments by a physician Start Printed Page 77604is not available for arrangements involving the rental of office space (80 FR 71325 through 71327).

Commenters on the CMS RFI stated that our interpretation of the exception for payments by a physician, especially our determination that the exception is not available if any other exception would apply to an arrangement, unreasonably narrowed the scope of the statutory exception. Commenters also noted that compliance with other exceptions is generally more burdensome than compliance with the statutory exception for payments by a physician, and urged us to conform the language of the exception at § 411.357(i) to the statutory language at section 1877(e)(8) of the Act. As noted in the proposed rule, we found the CMS RFI comments regarding the narrowing of the statutory exception persuasive and, as a result, we reconsidered our position regarding the availability of the exception for payments by a physician for certain compensation arrangements (84 FR 55820).

To explain our proposal and the policies we are setting forth in this final rule regarding the availability of the exception at § 411.357(i), it is important to distinguish between the statutory exceptions found at section 1877(e) of the Act (codified at § 411.357(a) through § 411.357(i) of our regulations) and the regulatory exceptions (codified at § 411.357(j) et seq.) issued using the Secretary's authority under section 1877(b)(4) of the Act.[] We continue to believe that the exception for payments by a physician at section 1877(e)(8) of the Act was not meant to apply to compensation arrangements that are specifically excepted by other statutory exceptions in section 1877 of the Act. Given the placement of the exception for payments by a physician as the final statutory exception at section 1877(e) of the Act, we believe that this exception functions as a catch-all to protect certain legitimate arrangements that are not covered by the exceptions at sections 1877(e)(1) through (7) of the Act. As a matter of statutory construction, the catch-all exception at section 1877(e)(8) of the Act does not supersede the previous exceptions.

With respect to arrangements for the rental of office space or the rental of equipment, in particular, we note that the statutory exceptions for such arrangements at section 1877(e)(1) of the Act include requirements that are specific to rental arrangements, as well as general requirements that the arrangements are commercially reasonable, that rental charges are fair market value, and that compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties. We do not believe that the Congress would have imposed these particularized requirements at section 1877(e)(1) of the Act, but also allowed parties to sidestep them by relying on the exception for payments by a physician to protect rental arrangements. Although we maintain our policy with respect to the statutory exceptions, we no longer believe that the regulatory exceptions should limit the scope of the exception for payments by a physician.

Thus, we proposed to remove from § 411.357(i)(2) the reference to the regulatory exceptions, including the parenthetical referencing the exception for fair market value compensation. We also proposed that the exception at § 411.357(i) would not be available to protect compensation arrangements specifically addressed by one of the statutory exceptions, codified in our regulations at § 411.357(a) through (h). Under the proposal, parties would generally be able to rely on the exception at § 411.357(i) to protect fair market value payments by a physician to an entity for items or services furnished by the entity, even if a regulatory exception at § 411.357(j) et seq.

May be applicable. However, for the reasons noted previously in this section II.D.9., § 411.357(i) would not be applicable to arrangements for the rental of office space or equipment.[] That is, we believe that, as a matter of statutory construction, the exception for payments by a physician is not available to protect any type of arrangement that is specifically addressed by another statutory exception at section 1877(e) of the Act, including arrangements for the rental of office space or the rental of equipment. We are retracting our prior statements that office space is neither an “item” nor a “service.” We made these statements, in significant part, to emphasize that we do not believe that the exception for payments by a physician should be available to protect the type of arrangement for which the Congress established a specific exception in statute.

In this final rule, we have more clearly explained this position and no longer believe it is necessary to preclude office space from the categories of “items” and “services.” (We note that we have not made prior similar statements regarding equipment.) As such, and because the exception at § 411.357(i) is unavailable to protect an arrangement for the rental of office space or equipment, parties seeking to protect an arrangement for the rental of office space or equipment must structure the arrangement to satisfy the requirements of § 411.357(a), § 411.357(b), § 411.357(l) (for direct compensation arrangements), or § 411.357(p) (for indirect compensation arrangements). Although we are retracting our statement that office space is not an “item or service,” parties may not rely on the exception for personal service arrangements at § 411.357(d)(1) to protect arrangements for the rental of office space. We noted that § 411.357(i) may be available to protect payments by a physician for the lease or use of space that is not office space, such as storage space or residential real estate.

We also proposed to remove from § 411.357(i)(2) the reference to exceptions in §§ 411.355 and 411.356. As noted previously, we interpret the exception at section 1877(e)(8) of the Act for payments by a physician to function in the statutory scheme as a catch-all, to apply to compensation arrangements for the furnishing of other items or services by entities that are not specifically addressed at sections 1877(e)(1) through (7) of the Act. Therefore, we no longer believe that the exception should be limited by the exceptions at sections 1877(b) and (c) of the Act or the regulatory exceptions codified in §§ 411.355 and 411.356.

Lastly, “items or services” furnished by the entity under the exception for payments by a physician may not include cash or cash equivalents. That is, the physician may not make in-kind “payments” to the entity in exchange for cash from the entity. We believe that cash provided by an entity to a physician poses a risk of program or patient abuse, and that the Congress would have included additional safeguards at section 1877(e)(8) of the Start Printed Page 77605Act if the exception were designed to cover such arrangements.

At the same time, we note that, if a physician pays an entity $10 in cash for a gift card worth $10, we do not believe that this would constitute a financial relationship for purposes of the physician self-referral law. Likewise, in cases where a physician or an entity acts as a pure pass-through, taking money from one party and passing the exact same amount of money to another party, we do not believe that the pass-through arrangement is a financial relationship for purposes of the physician self-referral law. After reviewing the comments, we are finalizing our proposal at § 411.357(i) without modification.

We received the following comments and our responses follow. Comment. Most commenters that addressed this issue supported our proposed interpretation of the statutory payments by a physician exception and the proposed regulatory changes to implement the interpretation.

One commenter asserted that our previous interpretation of the statute inappropriately narrowed the utility of the exception. Other commenters emphasized that finalizing our proposal would increase flexibility and reduce the cost and burden of compliance with the physician self-referral law. Commenters generally agreed that the exception should be available to protect an arrangement even if the arrangement is addressed by a regulatory exception, but not if another statutory exception, such as the exception for the rental of office space, is applicable to the arrangement.

One commenter agreed that the exception for payments by a physician functions in the statutory scheme as a “catch-all” exception that applies only to arrangements that are not otherwise addressed in a statutory exception. Response. We agree with the commenters and are finalizing our revisions to § 411.357(i) as proposed.

Comment. Several commenters supported our retraction of our previous policy that office space is neither an item nor a service. The commenters recognized that, under the regulatory scheme of the physician self-referral law, retraction of the policy is key to making the exception for fair market value compensation at § 411.357(l) applicable to arrangements for the rental of office space.

Response. In this final rule, we are reiterating the retraction of our previous policy that office space is neither an item nor a service. Given our interpretation of the exception for payments by a physician within the statutory scheme of exceptions applicable only to compensation arrangements, we no longer believe that it is necessary to distinguish office space from items or services in order to ensure that the exception at § 411.357(i) may not be used for rental of office space arrangements.

As recognized by the commenters and explained in section II.D.10 of this final rule, parties may now use the exception for fair market value compensation at § 411.357(l) to except arrangements for the rental of office space. At the same time, we are taking this opportunity to clarify that office space is not a service, and therefore the exception for personal service arrangements at § 411.357(d)(1) is not available to protect arrangements for the rental of office space or timeshare arrangements. 10.

Exception for Fair Market Value Compensation (§ 411.357(l)) In the 1998 proposed rule, we proposed an exception at § 411.357(l) for fair market value compensation (63 FR 1699). We noted that the statutory exceptions at section 1877(e) of the Act apply to specific categories of financial relationships and do not address many common and legitimate compensation arrangements between physicians and the entities to which they refer designated health services. The exception for fair market value compensation was proposed as an open-ended exception to protect certain compensation arrangements that may not be specifically addressed in the statutory exceptions.

Among other things, we stated that the exception might be used to protect arrangements for the sublease of office space (63 FR 1714). We suggested that parties could use the exception for fair market value compensation if they had any doubts about whether they met the requirements of another exception in § 411.357. In Phase I, we finalized § 411.357(l), stating that parties could use the exception, even if another exception potentially applied to an arrangement (66 FR 919).

We explained our belief that the safeguards incorporated into the exception for fair market value compensation were sufficient to cover various compensation arrangements, including arrangements covered by other exceptions. In Phase II, we responded to commenters that requested that the exception at § 411.357(l) be made available to protect arrangements for the rental of office space, including arrangements where space is rented by entities to physicians (69 FR 16111). We declined to extend § 411.357(l) to arrangements for the rental of office space, and emphasized that § 411.357(l) applied only to payments from an entity to a physician for items and services furnished by the physician.

We modified our policy in Phase III and extended the application of the exception at § 411.357(l) to payments from a physician to an entity for items or services provided by the entity, but continued to decline to make § 411.357(l) applicable to an arrangement for the rental of office space (72 FR 51059 through 51060). We explained our policy at that time that the rental of office space is not an “item or service.” We added that, because arrangements for the rental of office space had been subject to abuse, we believe that it could pose a risk of program or patient abuse to permit parties to protect such arrangements relying on § 411.357(l). In the CY 2016 PFS final rule, we reaffirmed our position that the exception for fair market value compensation does not apply to arrangements for the rental of office space (80 FR 71327).

We have reconsidered our policy regarding the application of § 411.357(l). Through our administration of the SRDP, we have seen legitimate, nonabusive arrangements for the rental of office space that could not satisfy the requirements of § 411.357(a) because the term of the arrangement was less than 1 year, and could not satisfy the requirements of § 411.357(y) because the arrangement conveyed a possessory leasehold interest in the office space. To provide flexibility to stakeholders to protect such nonabusive arrangements, we proposed and are now finalizing modifications to § 411.357(l) to permit parties to rely on the exception for fair market value compensation to protect arrangements for the rental or lease of office space.

As discussed in many of our previous rulemakings and most recently in the CY 2017 PFS proposed rule (81 FR 46448 through 46453) and final rule (81 FR 80524 through 80534), we are concerned about potential abuse that may arise when rental charges for the lease of office space or equipment are determined using a formula based on. (1) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space (a “percentage-based compensation formula”). Or (2) per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee (a “per-click compensation formula”).

We continue to believe that arrangements based on percentage compensation or per-unit of service Start Printed Page 77606compensation formulas present a risk of program or patient abuse because they may incentivize overutilization and patient steering. To address this risk, in the FY 2009 IPPS final rule, we included in the exceptions for the rental of equipment, fair market value compensation, and indirect compensation arrangements restrictions on percentage-based compensation and per-click compensation formulas when determining the rental charges for the lease of equipment. Because the exception at § 411.357(l), to date, has not been applicable to arrangements for the rental of office space, it does not include a prohibition on percentage-based compensation and per-click compensation formulas when determining the rental charges for the lease of office space.

(The exceptions for the rental of office space and indirect compensation arrangements currently include the prohibitions as they relate to the determination of rental charges for the lease of office space.) We remain concerned about the potential abuse related to percentage-based compensation and per-click compensation formulas for determining the rental charges of both office space and equipment. Therefore, we proposed to incorporate into the exception at § 411.357(l) prohibitions on percentage-based compensation and per-unit of service compensation formulas with respect to the determination of rental charges for the lease of office space, similar to the restrictions found in § 411.357(a)(5)(ii) and § 411.357(p)(1)(ii). Unlike the exception for the rental of office space at § 411.357(a), the exception for fair market value compensation does not require a 1-year term.

Therefore, short-term arrangements for the rental of office space of less than 1 year will be permissible under the exception. However, as with other compensation arrangements permitted under § 411.357(l), the parties will be permitted to enter into only one arrangement for the rental of the same office space during the course of a year. The parties will be able to renew the arrangement on the same terms and conditions any number of times, provided that the terms of the arrangement and the compensation for the same office space do not change.

Parties are not required to renew their arrangement in writing. Renewals effectuated through course of conduct or by verbal agreement are permitted under the exception for fair market value compensation. However, parties retain the burden of proof under § 411.353(c)(2) to establish that the terms of the arrangement and the compensation for the same items, office space, or services did not change during the renewal arrangement.

Although we believe that, in most cases, parties seeking to lease office space prefer leases with longer terms—for instance, to justify expenses spent on property improvements—as described by commenters, some parties, especially parties in rural areas, would prefer or find necessary the flexibility of a short-term rental of office space. Given the requirements of the exception for fair market value compensation, including the requirement that parties enter into only one arrangement for the leased office space over the course of a year and the requirement that the arrangement does not violate the anti-kickback statute, which, as explained below and in section II.D.1. Of this final rule, is not being removed from § 411.357(l)(5) in the final rule, we do not believe that short-term arrangements for the rental of office space that satisfy all the requirements of § 411.357(l) pose a risk of program or patient abuse.

We remind readers that, as explained in section II.D.9. Of this final rule, the exception for payments by a physician at § 411.357(i) is not available to protect any leases of office space, including short-term leases. In the proposed rule, we proposed to remove the requirement at § 411.357(l)(5) that the arrangement does not violate the anti-kickback statute or any Federal or State law or regulation governing billing or claims submissions.

As explained in section II.D.1. Of this final rule, with respect to the exception for fair market value compensation, we are finalizing this proposal with respect to Federal or State laws or regulations governing billing or claims submissions, but we are not finalizing the proposal with respect to the requirement that the arrangement does not violate the anti-kickback statute. We believe that the requirement that the arrangement does not violate the anti-kickback statute in § 411.357(l)(5) functions as an important safeguard that substitutes for certain requirements included in certain statutory exceptions but omitted from § 411.357(l), including the exclusive use requirement in the exceptions for the rental of office space and equipment.

We did not propose to remove § 411.357(l)(6), which requires that any services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates a Federal or State law. However, we solicited comments on whether this requirement is necessary to protect against program or patient abuse or should be removed from the exception, and whether substitute safeguards such as those included in many of the statutory or regulatory exceptions to the physician self-referral law would be appropriate. As explained below, in this final rule we are not removing or modifying § 411.357(l)(6).

In this final rule, we are taking the opportunity to reorganize the exception at § 411.357(l) to distinguish the writing requirement of the exception for fair market value compensation from other requirements. As the exception is currently organized, § 411.357(l)(1) requires the arrangement to be in writing and requires the writing to specify the items or services covered by the arrangement. § 411.357(l)(2) requires the timeframe of the arrangement to be in writing, and also contains substantive requirements pertaining to timeframe of the arrangement and rules governing the frequency with which parties can enter into an arrangement for the same items or services.

§ 411.357(l)(3) requires the compensation of the arrangement to be in writing, and also contains substantive requirements pertaining to the compensation under the arrangement. We are placing the writing requirement from these various provisions in § 411.357(l)(1). Specifically, § 411.357(l)(1) will require the arrangement to be in writing and signed by the parties.

While § 411.357(l)(i) through § 411.357(l)(iii) will list the information that must be specified in writing, as follows. The items, services, office space, or equipment covered by the arrangement (§ 411.357(l)(1)(i)). The compensation that will be provided under the arrangement (§ 411.357(l)(1)(ii)).

And timeframe of the arrangement (§ 411.357(l)(1)(iii)). These organizational modifications are intended to clarify the exception and do not affect or modify the requirements of the exception in any way. In addition to the organizational changes explained above, after reviewing the comments, we are finalizing our proposal to permit arrangements for the lease of office space under § 411.357(l) with certain modifications to clarify the exception and to protect against program or patient abuse.

First, we are clarifying in the introductory chapeau language that the exception may be used for the lease of office space and not only for the use of office space. Second, we are no longer requiring at § 411.357(l)(5) that the arrangement not violate any Federal or State law or regulation governing billing or claims submission, but we are not Start Printed Page 77607finalizing our proposal to remove the requirement for compliance with the anti-kickback statute. Third, we are adding the phrase “even if no referrals were made between the parties” to the commercially reasonable requirement in § 411.357(l)(4).

Fourth, as explained in section II.E.1. Of this final rule, we are modifying the requirement at § 411.357(l)(2) to permit parties to rely on § 411.357(l) and § 411.357(z) to protect an arrangement for the same items, services, office space, or equipment during the course of a year. Lastly, as explained in section II.B.4, we are requiring at § 411.357(l)(7) that any arrangement that includes a directed referral requirement must satisfy all the conditions of § 411.354(d)(4).

We received the following comments and our responses follow. Comment. Commenters generally supported our proposal to allow parties to rely on the exception for fair market value compensation at § 411.357(l) to protect arrangements for the rental of office space.

Commenters recognized the flexibility afforded by the proposal, especially for office space leases with a term of less than one year. One commenter noted that the proposal would be helpful for rural providers, where short-term rentals may be necessary to address community needs, such as the need to relocate a physician due to facility demands or renovations. Another commenter stated that the exception could be helpful for situations where a laboratory leases space from a physician for a temporary patient service center for specimen collections while a permanent space is renovated or constructed.

Response. We agree with the commenters that the proposal, once finalized, will afford greater flexibility for short-term leases of office space. Under the current regulations, an arrangement for the lease of office, which involves the transfer of dominion and control of the leased premises to the lessee, must have a term of at least 1 year.

On the other hand, arrangements for the use of space, where dominion and control over the space are not transferred to the party making use of the space, are permitted for durations of less than 1 year under the exception for timeshare arrangements at § 411.357(y). (See 80 FR 71325 through 71326). However, the exception at § 411.357(y) includes several requirements not found in the exception for the rental of office space at § 411.357(a), such as a requirement at § 411.357(y)(2) that the arrangement is between a physician and a hospital or a physician organization and the requirement at § 411.357(y)(3)(i) that the premises covered by the arrangement is used predominantly for evaluation and management services to patients.

Given the latter restrictions, an arrangement such as that identified by the commenter, under which a laboratory compensates a physician for space used on a short-term basis for specimen collections, would not be permissible under either § 411.357(a) or § 411.357(y). As modified in this final rule, the exception for fair market value compensation at § 411.357(l) may be used to except such an arrangement, provided that all the requirements of the exception are satisfied. To clarify that the exception at § 411.357(l) may be used for leases of office space, where dominion and control are transferred to the lessee, we are modifying the chapeau language of the exception to include the phrase “lease of office space.” Comment.

Commenters generally opposed inclusion of a requirement for compliance with the anti-kickback statute in regulatory exceptions, including the exception for fair market value compensation at § 411.357(l). One commenter that addressed our request for comments on § 411.357(l)(6), which prohibits services furnished under an arrangement from involving the counseling or promotion of a business arrangement or other activity that violates a Federal or State law, specifically objected to including a requirement for compliance with the anti-kickback statute in the exception for fair market value compensation. Response.

As explained in section II.D.1 of this final rule, we are not removing the requirement for compliance with the anti-kickback statute from the exception for fair market value compensation at § 411.357(l)(5). We believe that the requirement that the arrangement does not violate the anti-kickback statute in § 411.357(l)(5) functions as an important substitute safeguard for requirements that are included in certain statutory exceptions but omitted from § 411.357(l), including the exclusive use requirement in the exceptions for the rental of office space and equipment. For similar reasons, we are also not removing the requirement at § 411.357(l)(6), which requires that the services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates a Federal or State law.

This requirement applies to service arrangements and is carried over from the statutory exception for personal service arrangements, codified in our regulations at § 411.357(d)(1)(vi). We are concerned that, if we remove the requirement at § 411.357(l)(6), we would need to include additional safeguards to substitute for the statutory requirements in order to ensure that excepted service arrangements under § 411.357(l) do not pose a risk of program or patient abuse. Comment.

One commenter supported removing the phrase “and furthers the legitimate business purpose of the parties” from § 411.357(l)(4), but requested either that the term “commercially reasonable” be defined to include a requirement that the arrangement must be commercially reasonable even if no referrals were made between the parties or that § 411.357(l)(4) be modified to require an arrangement to be commercially reasonable “even if no referrals were made between the parties.” Response. As we discussed in section II.B.2, we are not including the “even if no referrals were made” requirement in the definition of “commercially reasonable” at final § 411.351. Most exceptions that include a commercial reasonableness requirement, including exceptions that apply to arrangements that could also be excepted by § 411.357(l), stipulate that the arrangement must be commercially reasonable “even if no referrals” were made between the parties.

We are adopting the second approach advocated by the commenter and are revising the requirement at § 411.357(l)(4) to clarify that the arrangement must be commercially reasonable “even if no referrals were made between the parties.” Without this modification, some stakeholders may believe that the standard articulated at § 411.357(l) is a different and less demanding standard than the requirement in other exceptions. Comment. One commenter supported our proposal at § 411.357(l)(3) to prohibit the use of percentage-based or per-unit-of service based compensation formulas for determining the compensation for the rental of office space under the exception for fair market value compensation.

Response. We are finalizing this proposal. We believe that it is a necessary safeguard for the reasons stated in the CY 2017 PFS proposed rule (81 FR 46448 through 46453) and final rule (81 FR 80524 through 80534).

Comment. One commenter requested that CMS permit indefinite holdovers for arrangements under the exception for fair market value compensation, similar to the indefinite holdover provisions in the exceptions for rental of office space, rental of equipment, and personal service arrangements. The commenter noted that an arrangement may be for any period of time under Start Printed Page 77608§ 411.357(l), and the exception permits the arrangement to be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change.

The commenter interpreted the renewal provision under § 411.357(l) to require written documentation that the renewed arrangement was on the same terms and conditions, while there is no such requirement under the indefinite holdover provisions. Response. We believe that the commenter misunderstood the renewal provision in § 411.357(l)(2).

Under § 411.357(l)(2), parties are permitted to renew an arrangement any number of times if the terms of the arrangement and the compensation for the same items, services, office space, or equipment do not change. Likewise, the indefinite holdover provisions at § 411.357(a)(7), § 411.357(b)(6), and § 411.357(d)(1)(vii) require the holdover arrangement to continue on the same terms and conditions. Neither the indefinite holdover provisions in the latter exceptions nor the renewal provision in § 411.357(l)(2) require the holdover arrangement or renewal arrangement to be documented in a formal writing.

To be sure, parties renewing an arrangement under § 411.357(l)(2) retain the burden of proof under § 411.353(c)(2) to establish that the renewal arrangement is on the same terms and conditions as the previous arrangement, but parties to a holdover arrangement under one of the indefinite holdover provisions have a similar burden. In sum, with respect to documentation and writing requirements, there is no substantive difference between the indefinite holdover provisions and the renewal provision in § 411.357(l)(2). Therefore, we are not including an indefinite holdover provision in § 411.357(l).

11. Electronic Health Records Items and Services (§ 411.357(w)) Relying on our authority at section 1877(b)(4) of the Act, on August 8, 2006, we published a final rule (the 2006 EHR final rule) that, among other things, established an exception at § 411.357(w) for certain arrangements involving the donation of interoperable electronic health records software or information technology and training services (the EHR exception) (71 FR 45140). The EHR exception was initially set to expire on December 31, 2013.

On December 27, 2013, we published a final rule (the 2013 EHR final rule) modifying the EHR exception by, among other things, extending the expiration date of the exception to December 31, 2021, excluding laboratory companies from the types of entities that may donate electronic health records items and services under the exception, and updating the provision under which electronic health records software is deemed interoperable (78 FR 78751). Although we did not specifically request comments on the EHR exception in the CMS RFI, we received several comments related to the exception. In addition, in its August 27, 2018 request for information described in section I.B.1.

Of this final rule, OIG requested comments on the safe harbor at 42 CFR 1001.952(y), which is substantively similar to the EHR exception at § 411.357(w) (see 83 FR 43607). After reviewing comments related to the EHR exception and safe harbor submitted in response to the CMS RFI and the OIG's request for information, as well as recent statutory and regulatory developments arising from the 21st Century Cures Act (Pub. L.

114-255, enacted on December 13, 2016) (Cures Act), in the proposed rule, we proposed to update provisions in the EHR exception pertaining to interoperability (§ 411.357(w)(2)) and data lock-in (§ 411.357(w)(3)), clarify that donations of certain cybersecurity software and services are permitted under the EHR exception, remove the sunset provision at § 411.357(w)(13), and modify the definitions of “electronic health record” and “interoperable” at § 411.351 to ensure consistency with the Cures Act (84 FR 55822). We also proposed to modify the requirement at § 411.357(w)(4) that a physician contributes at least 15 percent of the cost of the donated electronic health records items and services and permit certain donations of replacement electronic health records items and services (84 FR 55822). As discussed more fully below, in this final rule we are finalizing certain of our proposals to revise the EHR exception.

Despite the fundamental differences in the statutory structure, operation, and penalties of the respective underlying statutes, we have worked closely with OIG to ensure consistency between our revised EHR exception and the policies finalized by OIG related to its safe harbor and discussed elsewhere in this issue of the Federal Register. A. Requirements Regarding Interoperability Currently, the requirements at § 411.357(w)(2) and (3) require donated software to be interoperable and prohibit the donor (or a person on the donor's behalf) from taking action to limit the interoperability of the donated items or services.

In the proposed rule (84 FR 55822), we proposed changes that would impact § 411.357(w)(2) and (3) based on the Cures Act and the Office of the National Coordinator for Health Information Technology (ONC), HHS Notice of Proposed Rulemaking, “21st Century Cures Act. Interoperability, Information Blocking, and the ONC Health IT Certification Program” (ONC NPRM), which proposed to implement key provisions in Title IV of the Cures Act.[] Among other things, the ONC NPRM proposed Conditions and Maintenance of Certification requirements for health IT developers under the ONC Health IT Certification Program (certification program) and proposed to define reasonable and necessary activities that do not constitute information blocking for purposes of section 3022(a)(1) of the Public Health Service Act (PHSA). We discuss our specific proposals and our final policies and regulations pertaining to § 411.357(w)(2) and (3) below in subsections (1) and (2), respectively.

(1) The “Deeming Provision” (§ 411.357(w)(2)) The existing regulation at § 411.357(w)(2) requires that software donated under the EHR exception is interoperable. The deeming provision at § 411.357(w)(2) provides certainty to parties that donated software satisfies the interoperability requirement at § 411.357(w)(2). Specifically, § 411.357(w)(2) currently provides that software is deemed to be interoperable if it has been certified under ONC's certification program to electronic health record certification criteria identified in the then-applicable version of 45 CFR part 170.

In the 2013 EHR final rule, we modified the deeming provision to reflect developments in the ONC certification program and to track ONC's anticipated regulatory cycle. By relying on ONC's certification program and related updates of criteria and standards, we stated that the deeming provision would meet our objective of ensuring that software is certified to the current required standard of interoperability when it is donated (78 FR 78753). In the proposed rule, we proposed to retain this general construct for the updated EHR exception, but proposed two clarifications to the deeming provision at § 411.357(w)(2) (84 FR 55823).

Our current regulation at § 411.357(w)(2) specifies that the software is deemed to be interoperable if, on the date it is provided to the physician, it has been certified by a Start Printed Page 77609certifying body to an edition of the electronic health record certification criteria identified in the then-applicable version of 45 CFR part 170. We proposed to modify this language to replace the phrase “has been certified” with the phrase “is certified” (84 FR 55823). The proposed modification was intended to clarify that the certification must be current as of the date of the donation, as opposed to the software having been certified at some point in the past (and potentially no longer maintaining certification on the date of the donation).

We also proposed to remove the reference to “an edition” of certification criteria to align with changes to ONC's certification program (84 FR 55823). As we describe in more detail below, we proposed and are finalizing an updated definition of “interoperable” (84 FR 55824 through 55825). Although the revised definition would not require a change to the text of § 411.357(w)(2), the revision would impact the deeming provision, and we solicited comments regarding this update to the definition of “interoperable” (84 FR 55823).

We emphasized in the proposed rule and reaffirm here that an arrangement for the donation of software that met the definition of interoperable and that satisfied the requirements of § 411.357(w) at the time the donation was made will not cease to be protected by the exception, even though we are finalizing certain changes to these provisions (84 FR 55823). After reviewing comments on our proposal, we are finalizing our clarifying revisions to the deeming provision at § 411.357(w)(2) as proposed, with one modification to the regulation text. We are removing the phrase “electronic health record” preceding “certification criteria” because the phrase “electronic health records certification criteria” has been removed from 45 CFR part 170 as of June 30, 2020.

We received the following comments and our responses follow. Comment. Commenters generally agreed with our proposal to clarify that software would be deemed to be interoperable under § 411.357(w)(2) if, on the date it is donated, it “is” certified by a certifying body authorized by ONC, rather than “has been certified.” Some commenters had questions about our removal of the phrase “an edition” before “the electronic health record certification criteria” and inquired whether we should specify that the criteria are the “latest” or “current” certification criteria.

One commenter recommended that we modify the deeming provision to state that the certification must be current as of the date that the donor has entered into a binding agreement with the recipient or the electronic health records vendor. This commenter stated that a reasonable time limit, such as 1 year, could be applied in order to prevent potential fraud or abuse. Response.

We are finalizing our proposal to modify § 411.357(w)(2) to specify that the donated software “is” certified on the date that it is donated, as opposed to “has been certified” on that date, and to delete the phrase “an edition.” We agree that the certification criteria should be the latest or current criteria. That is, current as of the date of donation. However, we believe that our proposal, which provides that the software must be certified to the “then-applicable” version of 45 CFR part 170, already includes this requirement, and we are finalizing the regulation text as proposed.

As noted above, we are removing the phrase “electronic health record” before “certification criteria” in § 411.357(w)(2), because the phrase “electronic health records certification criteria” has been removed from 45 CFR part 170 as of June 30, 2020. We note that the latter change does not alter the scope of the remuneration to which the EHR exception applies. The exception continues to apply only to donations of items or services that are necessary and used predominantly to create, maintain, transmit, receive, or protect electronic health records.

We also decline to adopt the commenter's suggestion that the certification must be current on the date that the donor has entered into a binding agreement with the recipient. To help ensure that donations of health information technology will further the policy goal of fully interoperable health information systems (71 FR 45149), we believe that parties that enjoy the benefit of donated software being deemed to be interoperable must ensure that it is certified to the current certification criteria on the date it is donated. However, depending on the facts and circumstances, donations that do not satisfy the requirements of the deeming provision may still satisfy the requirement at § 411.357(w)(2) that the donated software is interoperable.

Comment. One commenter opposed the concept of an “optional” deeming provision, asserting that it is critical to require that software be certified by a certifying body authorized by ONC to further support the goal of value-based arrangements. In contrast, another commenter was concerned that the EHR exception applies only to donations of software that has been certified by ONC.

Response. Although we agree that the interoperability of software is a critical requirement of the EHR exception, we disagree with the first commenter that certification by a certifying body authorized by ONC should be the only way of meeting this requirement. This certification provides donors and recipients with assurance that the electronic health records software donated under their arrangement is interoperable for purposes of the EHR exception, but such certification is not required under the exception.

We emphasize that the exception does not require that donated software is certified as interoperable by a certifying body authorized by ONC. Rather, the exception requires that donated software is interoperable. We believe that requiring only that donated software is interoperable—allowing parties to demonstrate that donated software is interoperable even if it is not certified as interoperable by a certifying body authorized by ONC—coupled with the optional method for assuring that software is interoperable through satisfaction of the deeming provision at § 411.357(w)(2), affords parties sufficient flexibility under the exception for donations of electronic health records items or services.

Comment. One commenter suggested that the proposed change to the deeming provision creates compliance uncertainty in the context of an ongoing software donation. In particular, the commenter was concerned that the proposed wording change would mean that, if at any time after the initial software donation the electronic health records software loses its certification, the continued provision of the software, including maintenance, would implicate the fraud and abuse laws.

Other commenters supported the proposal to require that software is certified at the time it is provided to a recipient, with one commenter noting that any updates to donated systems should also need to be certified to the most recent standards. Another commenter requested that we provide for a 5-year grace period under the interoperability deeming provision so that physicians not participating in the Quality Payment Program could continue to use donated electronic health records software certified to the 2015 edition. Response.

As we explained in response to the comment immediately above, the deeming provision is optional. Certification of donated electronic health records software by a certifying body authorized by ONC is not required to satisfy the requirement at § 411.357(w)(2) that the software is interoperable, as defined at § 411.351. The exception merely requires that the Start Printed Page 77610software is interoperable at the time it is provided to the recipient.

Regardless of whether the physician recipient participates in the Quality Payment Program, electronic health records software is not required to satisfy the deeming provision at § 411.357(w)(2) in order to be “interoperable” as defined at § 411.351. With respect to ongoing donations of maintenance, updates, or other items or services in connection with previously donated electronic health records software, we note the following. If the electronic health records software loses its certification, then new donations of that electronic health records software, including updates and patches of that software, will not be deemed to be interoperable under the deeming provision in § 411.357(w)(2).

However, if the electronic health records software is still interoperable (as defined at § 411.351), then the EHR exception will remain available to protect ongoing donations of such electronic health records software, including updates and patches, provided that all other requirements of the exception are satisfied. If, on the other hand, software that loses its certification is no longer interoperable (as defined at § 411.351), then new donations of such electronic health records software, including updates and patches of the software, would not be protected under the EHR exception. (2) Information Blocking and Data Lock-in (§ 411.357(w)(3)) The current requirement at § 411.357(w)(3) prohibits the donor (or any person on the donor's behalf) from taking any action to limit or restrict the use, compatibility, or interoperability of the donated items or services with other electronic prescribing or electronic health records systems (including, but not limited to, health IT applications, products, or services).

Beginning with the 2006 EHR final rule and reaffirmed in the 2013 EHR final rule, § 411.357(w)(3) has been designed to. (1) Prevent the misuse of the exception that results in data and referral lock-in. And (2) encourage the free exchange of data (in accordance with protections for privacy) (78 FR 78762).

Since the publication of the 2006 EHR final rule and 2013 EHR final rule, significant legislative, regulatory, policy, and other Federal government action further defined the data lock-in problem (now commonly referred to as “information blocking”) and established penalties for certain types of individuals and entities that engage in information blocking. Most notably, the Cures Act added section 3022 of the PHSA, known as “the information blocking provision,” which defines conduct that constitutes information blocking by health care providers, health IT developers of certified health IT, health information exchanges, and health information networks. Section 3022(a)(1) of the PHSA defines “information blocking” in broad terms, while section 3022(a)(3) of the PHSA authorizes and charges the Secretary to identify reasonable and necessary activities that do not constitute information blocking for purposes of section 3022(a)(1) of the PHSA.

The ONC NPRM included proposals to implement the statutory definition of “information blocking,” define certain terms related to the statutory definition of “information blocking,” and establish exceptions to the definition of “information blocking.” ONC published its final rule on May 1, 2020 (85 FR 25642). In the proposed rule, we proposed modifications to § 411.357(w)(3) to recognize these significant updates since the 2013 EHR final rule (84 FR 55823). Specifically, we proposed at § 411.357(w)(3) to prohibit the donor (or any person on the donor's behalf) from engaging in a practice constituting information blocking, as defined in section 3022 of the PHSA, in connection with the donated items or services.

We stated that, should ONC finalize its proposals to implement section 3022 of the PHSA at 45 CFR part 171, we would incorporate such regulations into the requirement at § 411.357(w)(3) for purposes of the physician self-referral law, if we finalized the proposals described in the proposed rule (84 FR 55823). We noted in the proposed rule that the current requirements of the EHR exception, while not using the term “information blocking,” already include concepts similar to those found in the Cures Act's prohibition on information blocking (84 FR 55823). For example, in prior rulemaking, we stated our concern about donors (or those on the donor's behalf) taking steps to limit the interoperability of donated software to lock in or steer referrals (see, for example, 71 FR 45156 and 78 FR 78762 through 78763).

We stated in the proposed rule that the proposed modifications of § 411.357(w)(3) were not intended to change the underlying purpose of this requirement, but instead further our longstanding goal of preventing abusive arrangements that lead to information blocking and referral lock-in through modern understandings of those concepts established in the Cures Act (84 FR 55823).[] We solicited comments on aligning the requirement at § 411.357(w)(3) with the PHSA information blocking provision and the information blocking definition in 45 CFR part 171. After reviewing comments on our proposal, we are not finalizing the proposed modification of § 411.357(w)(3). Rather, based on the comments and for the reasons explained below, we are removing § 411.357(w)(3) from our regulations.

We received the following comments and our responses follow. Comment. We received a number of comments about incorporating the “information blocking” prohibitions from the Cures Act or the ONC NPRM into the EHR exception at § 411.357(w)(3).

Several commenters supported aligning the EHR exception with the concepts of interoperability and information blocking from the Cures Act and the ONC NPRM, including our proposal to expressly prohibit information blocking at § 411.357(w)(3). One commenter agreed with CMS' assessment that the incorporation of the concept of information blocking into the regulation does not change the underlying purpose of the existing interoperability requirements. Another commenter that supported the prohibition on information blocking asserted that large health systems can control referrals and increase market share by limiting access to patients' records to specific providers on the same health information network, thereby shutting out independent providers and negatively impacting patient care.

Other commenters did not disagree that information blocking should be prohibited, but raised a number of questions and concerns regarding how such a provision would work in the EHR exception. For example, a number of commenters expressed concern about relying on the ONC NPRM, which was not yet final at the time our proposed rule was published. Some commenters were particularly concerned about the array of exceptions to the definition of “information blocking” and incorporation of the definition of “electronic health information” as proposed in the ONC NPRM.

Some commenters asked that we clarify which party is responsible to ensure that information blocking does not occur, asserting that a donor cannot Start Printed Page 77611control what happens to software after it is donated. Several commenters recommended removing or revising the requirement in the EHR exception that a donor (or any person on a donor's behalf) does not engage in a practice constituting information blocking, explaining that a vendor may engage in information blocking without the donor's knowledge. Another commenter expressed concern that, if a determination of information blocking against either a donor or recipient occurs at some time after the donation, the recipient may be vulnerable to unexpected costs or loss of access to its health information technology if the arrangement suddenly ends.

Another commenter asserted that the incorporation of ONC's proposals into the exception at § 411.357(w)(3) would introduce an intent-based requirement into the strict-liability framework of the physician self-referral law. A few commenters suggested that, rather than including a prohibition on information blocking (as that term is defined in the Cures Act or in 45 CFR part 171) as a requirement of the EHR exception, CMS should assume that information blocking will not be tolerated and will be enforced through other authorities. One commenter explained that, when the EHR exception was first issued in 2006, interoperability was in its infancy, and there was no separate regulatory guidance on interoperability and information blocking, whereas now these concepts are separately addressed and regulated by ONC.

Given these changes, the commenters maintained that incorporation of information blocking provisions into the EHR exception is duplicative and unnecessary. Response. Based on the comments and after assessing the final rule published by ONC, “21st Century Cures Act.

Interoperability, Information Blocking, and the ONC Health IT Certification Program” (ONC final rule),[] we are removing the requirement at § 411.357(w)(3) in its entirety. This requirement, when originally implemented in the 2006 EHR final rule, was intended to “help ensure that donations of health information technology will further the policy goal of fully interoperable health information systems and will not be misused to steer business to the donor.” (71 FR 45156). The 2013 EHR final rule also explained that the Department was considering other policies to improve interoperability and noted that those policy efforts are “better suited than this exception to consider and respond to evolving functionality related to the interoperability of electronic health record technology” (78 FR 78763).

At that time, the Department had few other authorities to directly address information blocking. However, there are now other enforcement authorities designed to address information blocking. For example, the Cures Act gave ONC and OIG more direct authority to address information blocking.

Additionally, CMS has separate authority to address providers that information block, and OCR has authorities related to patient access. The Cures Act and the ONC final rule recognize that certain practices likely to interfere with, prevent, or materially discourage access, exchange, or use of electronic health information may nonetheless be reasonable and necessary. That is why the Cures Act directed the Secretary to identify exceptions to the definition of information blocking.

The ONC final rule implements eight exceptions that apply to practices likely to interfere with the access, exchange, or use of electronic health information provided that the practice meets the conditions of an exception. However, § 411.357(w)(3), as implemented by the 2006 EHR final rule, required that a party not take “any action to limit or restrict the use, compatibility, or interoperability” of the donated electronic health records items or services. The requirement did not account for actions that may be reasonable and necessary, such as implementing privacy and security measures.

Recognizing the developments since 2013, we agree with the commenter that newer and separate authorities are better suited than a requirement of an exception to the physician self-referral law to deter information blocking and hold individuals and entities that engage in information blocking appropriately accountable. We also agree with commenters that a recipient is unlikely to have the capabilities to determine if a donor (or someone on the donor's behalf) engaged in information blocking, which includes a level of intent set by statute, or met an exception to information blocking as set forth in the ONC final rule. Given these potential issues with the proposed modifications to § 411.357(w)(3) and limitations of the original requirement at § 411.357(w)(3) discussed above, we no longer believe that the requirement is an effective way to achieve the policy goals that served as its original basis.

Removing the requirement at § 411.357(w)(3) should sufficiently address the concerns of the commenters that had questions about the scope of information blocking practices, how CMS would determine the party responsible, and how the information blocking knowledge standards in the Cures Act and ONC final rule would be assessed in context of this exception and the strict-liability framework of the physician self-referral law. We emphasize that we are maintaining the interoperability requirement at § 411.357(w)(2). We believe that this requirement and the optional deeming provision at § 411.357(w)(2) will ensure that donations of items and services under § 411.357(w) that satisfy all the requirements of the EHR exception further the Department's policy goal of an interoperable health system and prevent donations of items and services intended to lock in referrals by limiting the flow of electronic health information.

Comment. One commenter requested that we include in the EHR exception a requirement that donors must also provide access to electronic health records to pharmacists. The commenter stated that some health information technology systems block pharmacists' visibility into relevant clinical information from other health care providers.

Response. The EHR exception does not limit the scope of permissible donors to those donors that grant access to electronic health records to a specified set of providers or suppliers. However, for a donation to be permissible under the EHR exception, among other things, the software must be interoperable and should not inappropriately interfere with, prevent, or materially discourage legally permissible access, exchange, or use of relevant clinical information.

We encourage parties to report concerns regarding potential information blocking to https://healthit.gov/​report-info-blocking. B. Cybersecurity We proposed to amend the EHR exception to clarify that the exception is applicable (and always has been applicable) to certain cybersecurity software and services,[] and to more broadly protect the donation of software and services related to cybersecurity (84 FR 55823).

Currently, the exception at § 411.357(w) protects electronic health records software or information technology and training services necessary and used predominantly to create, maintain, transmit, or receive Start Printed Page 77612electronic health records. We proposed to modify this language to expressly include software that “protects” electronic health records, and to expressly include software and services related to cybersecurity. In the 2006 EHR final rule, we emphasized that software and information technology and training services donated under § 411.357(w) must create, maintain, transmit, or receive electronic health records, and those functions must predominate (71 FR 54151).

We stated that the core functionality of the items and services must be the creation, maintenance, transmission, or receipt of individual patients' electronic health records, but, recognizing that electronic health records software is commonly integrated with other features, we also stated that arrangements in which the software package included other functionality related to the care and treatment of individual patients would be protected (71 FR 45151). Under our proposal, the same criteria would apply to cybersecurity software and services, provided that the predominant use of the software or services is cybersecurity associated with the electronic health records. In section II.E.2.

Of this final rule, we discuss the new exception at § 411.357(bb), which applies specifically to arrangements involving the donation of cybersecurity technology and related services (the cybersecurity exception), and the definition of “cybersecurity” at § 411.351 that will apply to both the EHR exception and the cybersecurity exception at § 411.357(bb). As finalized, the cybersecurity exception at § 411.357(bb) is broader and includes fewer requirements than the EHR exception as applied to cybersecurity software and services that are necessary and used predominantly to protect electronic health records. Among other things, the cybersecurity exception at final § 411.357(bb) does not require recipients to contribute to the cost of the donated cybersecurity technology or services, while the EHR exception retains the cost contribution requirement at § 411.357(w)(4) for donations of electronic health records items or services.

In the proposed rule, we solicited comments on whether it is necessary to modify the EHR exception to expressly include cybersecurity, given our proposed addition of a standalone exception for cybersecurity technology and related services at § 411.357(bb), and we stated that a party seeking to protect an arrangement involving the donation of cybersecurity software and services only needs to comply with the requirements of one applicable exception (84 FR 55824). After reviewing the comments on our proposed rule, we are finalizing our proposal to expand the EHR exception to expressly include cybersecurity software and services so that it is clear that an entity donating electronic health records software and providing training and other related services may also utilize the EHR exception to protect donations of related cybersecurity software and services to protect the electronic health records, provided that all the requirements of the EHR exception are satisfied. In the final exception, we removed the word “certain” before “cybersecurity software and services” in the introductory chapeau language to avoid ambiguity regarding the scope of the EHR exception.

We received the following comments and our responses follow. Comment. A number of commenters supported stating in regulation text that the EHR exception applies to donations of cybersecurity software and services that protect electronic health records.

These commenters stated that the proposal, if finalized, would clarify the regulations, and one of the commenters also noted that the revision would reduce administrative overhead by avoiding real or perceived disparities between donations of electronic health records items and services and cybersecurity donations. One commenter supported our proposal to include certain cybersecurity donations under the EHR exception, as well as in proposed § 411.357(bb). The commenter appreciated our statement that cybersecurity donations only need to satisfy one of the exceptions, and noted that having two exceptions available allows a donor to tailor its donation strategy.

Response. We are finalizing our proposal to expressly permit donations of cybersecurity software and services that protect electronic health records under the EHR exception. We agree with the commenter that having two exceptions available to protect donations of cybersecurity software and services increases flexibility under our regulations.

Comment. A few commenters expressed concern that the proposal related to cybersecurity software and services with respect to the EHR exception and the separately proposed cybersecurity exception at § 411.357(bb) overlap significantly and could lead to confusion if both are finalized. The commenters stated that, if CMS finalizes a separate cybersecurity exception at § 411.357(bb), the proposed cybersecurity-related clarifications to the EHR exception would not be necessary.

One of the commenters questioned how the cost contribution requirement under the EHR exception at § 411.357(w)(4) would apply to donations of cybersecurity software under § 411.357(w), given that there is no cost contribution requirement in the cybersecurity exception at proposed § 411.357(bb), and also asked whether the electronic health records or cybersecurity function must predominate in software that includes both electronic health records and cybersecurity functions. A different commenter requested that, if we finalize protection for certain cybersecurity software and services under the EHR exception, we also clarify that the predominant purpose of the software or service must be cybersecurity associated with electronic health records. Another commenter suggested that creating separate exceptions for electronic health records items and services and cybersecurity technology and related services is taking a piecemeal approach to tools that must work together for care coordination.

Response. We recognize that there is a certain amount of overlap between the cybersecurity exception established in this final rule at § 411.357(bb) and the EHR exception, as amended by this final rule, although we do not agree that this overlap will result in the type of confusion suggested by the commenter. The revision to the introductory language of § 411.357(w) merely confirms in regulation text that the EHR exception has always been applicable to (and remains applicable to) arrangements that include the donation of cybersecurity software and services that have a predominant purpose of protecting electronic health records.

In application, if a party is donating electronic health records items and services under the EHR exception, and the donation includes cybersecurity software or services that are necessary and used predominantly to protect electronic health records, the parties may structure their entire arrangement to satisfy the requirements of the EHR exception, instead of structuring the arrangement to satisfy two different exceptions. We believe that having this option available will reduce administrative burden for some parties. Other parties may wish to structure such donations as two separate arrangements that each satisfy the requirements of the respective exception at § 411.357(w) and § 411.357(bb).

As noted in the proposed rule and reiterated above, parties seeking to Start Printed Page 77613protect an arrangement involving the donation of cybersecurity software and services only need to satisfy the requirements of one applicable exception (84 FR 55824). Regarding the requirement in the EHR exception that a physician recipient must contribute 15 percent of the donor's cost of the donated items and services, under this final rule, the EHR exception retains the 15 percent cost contribution requirement at § 411.357(w)(4), but there is no cost contribution requirement under the standalone cybersecurity exception at § 411.357(bb). Thus, if parties rely on the exception at § 411.357(w) to protect an arrangement for a donation that includes both electronic health records items and services and related cybersecurity software or services, the physician recipient must contribute 15 percent of the donor's cost for the cybersecurity software or services under § 411.357(w)(4).

If parties structure such a donation to satisfy the requirements of § 411.357(w) and § 411.357(bb) respectively, then the physician does not have to pay the 15 percent cost contribution for the cybersecurity software and services if the arrangement related to the cybersecurity software and services satisfies all the requirements of § 411.357(bb). We reiterate here that, with respect to cybersecurity technology and related services, the scope of the EHR exception is more limited than the standalone cybersecurity exception at § 411.357(bb). Arrangements for the donation of standalone cybersecurity hardware or items or services that are not used predominantly to protect electronic health records (but are used predominantly to implement, maintain, or reestablish cybersecurity) are not excepted under the EHR exception, but may be protected under the cybersecurity exception if all the requirements of § 411.357(bb) are satisfied.

Comment. Some commenters requested that CMS broaden the application of the EHR exception to additional cybersecurity technology and services, for example, to cybersecurity hardware, such as network appliances. One commenter requested that we make the EHR exception applicable to donations of cybersecurity hardware, software, infrastructure and services, without exception and without a requirement that the recipient contribute 15 percent of the donor's cost for the items or services.

Another commenter suggested that, if the expanded exception does not protect hardware, CMS should permit donors to place cybersecurity hardware at the recipient's location as long as the donor retains title to or a leasehold interest in the equipment. Response. By including the word “protect” in the introductory chapeau language of § 411.357(w), we are clarifying that the scope of the EHR exception applies to cybersecurity software or other information technology and training services that are necessary and used predominantly to protect electronic health records.

We decline to expand the EHR exception to apply to additional services or hardware, including hardware that is donated or loaned to a recipient. There is a separate, standalone exception at final § 411.357(bb) that applies to broader cybersecurity donations, including donations of cybersecurity hardware, and that exception does not include a contribution requirement. C.

The Sunset Provision The EHR exception originally was scheduled to expire on December 31, 2013. In the 2006 EHR final rule, we stated that the need for an exception for donations of electronic health records items and services should diminish substantially over time as the use of electronic health records technology becomes a standard and expected part of medical practice. In our 2013 proposal to revise the EHR exception (78 FR 21308), we recognized that, although the adoption of electronic health records had risen dramatically, its use was not yet universal nationwide.

Because continued adoption of electronic health records remained an important goal of the Department, we solicited comments regarding an extension of the EHR exception (78 FR 21311 through 21312). In response to those comments, in the 2013 EHR final rule, we extended the sunset date of the exception to December 31, 2021, a date that corresponds to the end of the electronic health records Medicaid incentives (78 FR 78755 through 78757). We stated our continued belief that, as progress on the goal of nationwide electronic health records adoption is achieved, the need for an exception for donations should continue to diminish over time.

Nonetheless, commenters on the CMS RFI and on OIG's request for information requested that we make the EHR exception and safe harbor permanent. Although widespread (though not universal) adoption of electronic health records largely has been achieved at this time, we no longer believe that the need for an exception for arrangements involving the donation of electronic health records items and services will diminish over time or completely disappear. The continued availability of the EHR exception provides certainty with respect to the contribution costs related to donations of electronic health records items and services for recipients, facilitates adoption by physicians who are new entrants into medical practice or have postponed adoption based on financial concerns regarding the ongoing costs of maintaining and supporting an electronic health records system, and helps preserve the gains already made in the adoption of interoperable electronic health records technology (84 FR 55824).

Therefore, in the proposed rule, we proposed to eliminate the sunset provision at § 411.357(w)(13) (84 FR 55824). In the alternative, we considered an extension of the sunset date. We sought comment on whether we should extend the sunset date instead of making the exception permanent, and if so, the duration of any such extension.

Based on the comments we received on the proposed rule, we are finalizing our proposal to make the EHR exception permanent by removing the sunset provision at § 411.357(w)(13). We received the following comment and our response follows. Comment.

We received almost unanimous support to remove the sunset date in the EHR exception. Commenters asserted that the elimination of the sunset date would provide certainty regarding the availability of an exception to the physician self-referral law for ongoing donations of electronic health records items and services. Commenters also agreed with our statement in the proposed rule that the exception will remain necessary after 2021, given new entrants, aging electronic health records technology at existing practices, and emerging and improved technology.

In contrast, one commenter suggested that, after 2021, the exception should only be available to rural providers and to physicians entering into solo practice in a health professional shortage area or medically underserved area. According to the commenter, making the current exception permanent could incentivize entities to reward high referring physicians with new electronic health records systems or updates. Response.

We are finalizing our proposal to make the EHR exception permanent by removing the sunset date. We note that, as finalized, the exception continues to require at § 411.357(w)(6) that neither the eligibility of a physician to receive items or services nor the amount or nature of the items or services may be determined in any manner that directly takes into account Start Printed Page 77614the volume or value of the physician's referrals or other business generated between the parties. Given this requirement, as well as the other requirements of the exception, we do not believe that making the EHR exception permanent poses a risk of program or patient abuse.

D. Definitions In the proposed rule, we proposed to modify the definitions of “electronic health record” and “interoperable” (84 FR 55824 through 55825). We adopted definitions for these terms in the 2006 EHR final rule based on contemporaneous terminology, the emerging standards for electronic health records, and other resources cited by commenters at that time.

Our proposed modifications to these definitions were largely based on terms and provisions in the Cures Act that update or supersede terminology we used in the 2006 EHR final rule (84 FR 55824 through 55825). We discuss our specific proposals and our final policies and regulations pertaining to definitions of “electronic health record” and “interoperable” below in subsections (1) and (2), respectively. (1) “Electronic Health Record” The term “electronic health record” is defined at § 411.351 as a repository of consumer health status information in computer processable form used for clinical diagnosis and treatment for a broad array of clinical conditions.

We proposed to revise this definition so that “electronic health record” would mean a repository that includes electronic health information that. (1) Is transmitted by or maintained in electronic media. And (2) relates to the past, present, or future health or condition of an individual or the provision of health care to an individual (84 FR 55824).

We proposed the modifications to reflect the term “electronic health information” that is used throughout the Cures Act and that is central to the definition of interoperability at section 3000(9) of the PHSA and the information blocking provisions at section 3022 of the PHSA. We based our proposed modifications, in part, on ONC's proposed definition of “electronic health information” in the ONC NPRM (84 FR 7513), which reflects more modern terminology used to describe the type of information that is part of an electronic health record. We solicited comments on this updated definition (84 FR 55824).

After reviewing the comments on our proposed definition of “electronic health record,” we are not finalizing our proposal to modify the definition. Rather, we are retaining the current definition of “electronic health record” at § 411.351. We received the following comments and our responses follow.

Comment. Several commenters expressed general support for our proposed revision to the definition of “electronic health record,” particularly to the extent that the definition would align with the definition included in the Cures Act. Some commenters supported our proposal to incorporate the term “electronic health information,” which ONC proposed to define in the ONC NPRM.

According to one commenter, the broad definition of “electronic health information” in the ONC NPRM would ensure that data related to medical imaging, such as electronic orders and referrals for radiology services, would be subject to the information blocking provisions. The commenter suggested that, if ONC does not finalize a broad definition of “electronic health information,” CMS should retain the term “consumer health status information” in the definition of “electronic health record.” Another commenter maintained that, to further the agency's price transparency goals, CMS should explicitly define “electronic health record” to include electronic health information that relates to the past, present, or future payment for the provision of health care to an individual. In contrast, several other commenters objected to the inclusion of the term “electronic health information” in the definition of “electronic health record.” Noting that, at the time we issued our proposed rule, ONC had not finalized its definition of “electronic health information,” these commenters maintained that the definition proposed by ONC is overly broad.

For example, one commenter asserted that, under the proposed definition, a patient's computer or mobile telephone could be considered an electronic health record if the patient obtained a copy of his or her health record through electronic transmittal. Some commenters specifically stated that the proposed definition of “electronic health record” was too broad because, as proposed, it would have included financial information pertaining to payment for the provision of health care to an individual. Several commenters also made suggestions to limit the scope of “electronic health information.” Response.

As stated in the proposed rule and reiterated above, our proposal to modify the definition of “electronic health information” was meant to update terminology that we adopted in the 2006 EHR final rule (84 FR 55824). We did not intend for our proposed modifications to the definition of “electronic health record” to make a substantive change to the scope of the exception at § 411.357(w). We agree with commenters that our proposed changes might have inadvertently introduced undesirable complexity.

To remain true to our intent, we are not finalizing any of the proposed changes to the definition of “electronic health record,” and we are retaining the existing definition in our regulations. We also note that ONC published its final definition of “electronic health information” in the Federal Register on May 1, 2020, well after the comment period for our proposed rule closed on December 31, 2019, and the final definition of “electronic health information” (85 FR 25955) differs from the definition that ONC proposed (84 FR 7601). Among other things, as ONC explained in its final rule, the definition of “electronic health information” in ONC's final rule does not expressly include or exclude price information (85 FR 25804).

Given that ONC's final definition differs from the definition in the ONC NPRM, which we cited in our proposed rule, and that ONC's final rule was published after the comment period for our proposed rule closed, we are concerned that the public may have not had sufficient information to comment on our proposal to incorporate the concept of “electronic health information” in the definition of “electronic health record.” Finally, although CMS remains committed to the price transparency initiative, at this time, we do not believe that modifying the definition of “electronic health record” with the resulting impact on the scope and requirements of the EHR exception is the best means to achieve this goal. (2) “Interoperable” The term “interoperable” is currently defined at § 411.351 to mean able to communicate and exchange data accurately, effectively, securely, and consistently with different information technology systems, software applications, and networks, in various settings. And exchange data such that the clinical or operational purposes and meaning of the data are preserved and unaltered.

This definition of “interoperable” was based on 44 U.S.C. 3601(6) (pertaining to the management and promotion of electronic Government services) and several comments we received in response to our 2005 rulemaking proposing exceptions for certain electronic prescribing and electronic health records arrangements (70 FR 59182) that Start Printed Page 77615referenced emerging industry definitions and standards related to interoperability (71 FR 45155 through 45156). In the proposed rule, we proposed to update the definition of “interoperable” to align with the statutory definition of “interoperability” added by the Cures Act to section 3000(9) of the PHSA (84 FR 55824 through 55825).

Consistent with section 3000(9) of the PHSA, we proposed to define “interoperable” to mean. (i) Able to securely exchange data with and use data from other health information technology without special effort on the part of the user. (ii) allows for complete access, exchange, and use of all electronically accessible health information for authorized use under applicable State or Federal law.

And (iii) does not constitute information blocking as defined in section 3022 of the PHSA (84 FR 55824 through 55825). We stated that, should ONC finalize its proposals to implement section 3022 of the PHSA at 45 CFR part 171, and if we finalize our proposed definition of “interoperable,” we would incorporate the final ONC regulations into the definition of “interoperable” at § 411.351 by referencing 45 CFR part 171 instead of section 3022 of the PHSA (84 FR 55825). We also noted in the proposed rule that the statutory definition of “interoperability” includes concepts similar to the existing definition of “interoperable” at § 411.351 (for example, the ability to securely exchange data across different systems or technology) (84 FR 55825).

Two new concepts in the statutory definition were included in our proposed modification of the definition. (1) Interoperable means the ability to exchange electronic health information without special effort on the part of the user. And (2) interoperable expressly does not mean information blocking (Section 3000(9) of the PHSA.

(42 U.S.C. 300jj(9)). We stated that, as a practical matter, we believe that these two concepts are not substantively different from the existing definition and only reflect an updated understanding of interoperability and related terminology, and solicited comments on a definition that would align the definition of “interoperable” at § 411.351 (for purposes of the physician self-referral law) with the statutory definition “interoperability” at 3000(9) of the PHSA (84 FR 55825).

As an alternative proposal, we considered revising our regulations to eliminate the term “interoperable” and instead define the term “interoperability” by reference to section 3000(9) of the PHSA and 45 CFR part 170 (if finalized) (84 FR 55825). In conjunction, we would revise the EHR exception to incorporate the term “interoperability” and remove the term “interoperable.” We sought comment regarding whether using terminology identical to the PHSA and ONC regulations would facilitate compliance with the requirements of the EHR exception and reduce any regulatory burden resulting from the differences in the agencies' varying terminology related to the singular concept of interoperability (84 FR 55825). We are not finalizing this alternative proposal.

After reviewing the comments on our proposals, we are revising the definition of “interoperable,” but omitting the provision related to information blocking and deleting the phrase “without special effort on the part of the user” from proposed subparagraph (1). Specifically, at revised § 411.351, “interoperable” means. (1) Able to securely exchange data with and use data from other health information technology.

And (2) allows for complete access, exchange, and use of all electronically accessible health information for authorized use under applicable State or Federal law. We received the following comments and our response follows. Comment.

We received general support for our effort to align the definition of “interoperable” with the statutory definition of “interoperability” in the Cures Act. However, citing uncertainty regarding the proposals in the ONC NPRM, one commenter requested that CMS not define “interoperable” with reference to ONC's proposed definition. The commenter also requested that CMS not replace the definition of “interoperable” with a definition of “interoperability” that cites ONC's proposed definition at 45 CFR 170.102.

One commenter supported including a provision pertaining to information blocking in the definition, while several other commenters raised questions about the incorporation of information blocking in the definition of “interoperable.” For example, these commenters asked when the test for interoperability occurs and whether a prior donation of electronic health records items or services would cease to satisfy the requirements of the EHR exception if there was a finding of information blocking sometime after the donation. One commenter asked for further clarification of the phrase “without special effort on the part of the user.” Response. As we explain above in the discussion of our proposal to include the concept of “information blocking” in the exception at § 411.357(w)(3), we believe that newer and separate authorities are better suited than the EHR exception to deter information blocking and hold individuals and entities that engage in information blocking appropriately accountable.

We are concerned that, if we include the phrase “does not constitute information blocking” in the definition of “interoperable” at § 411.351, then § 411.357(w)(2), which requires that the donated software is interoperable, could be interpreted to prohibit parties from engaging in practices that constitute “information blocking” but that might not be prohibited under ONC rules. Therefore, we are not including the phrase “does not constitute information blocking” in the definition of “interoperable” at § 411.351. With respect to the phrase “without special effort on the part of the user,” we note that, the phrase is used in the definition of “interoperability” at section 4003(a)(2) of the Cures Act and the partial phrase “without special effort” is used in the conditions of certification at section 4002(a) of the Cures Act.

As explained above, although software certified by ONC is deemed to be interoperable for purposes of the physician self-referral law, certification is not required for compliance with § 411.357(w)(2). To avoid any implication that we are incorporating a certification requirement into the definition of “interoperable” at § 411.351, we are removing the phrase “without special effort on the part of the user” from the definition. E.

Additional Proposals and Considerations (1) 15 Percent Recipient Contribution (§ 411.357(w)(4)) In the 2006 EHR final rule, we agreed with a number of commenters that suggested that cost sharing is an appropriate method to address some of the program integrity risks inherent in unlimited donations of electronic health records items and services (71 FR 45160 through 45161). Accordingly, we incorporated a requirement at § 411.357(w)(4) that, before the receipt of the items or services, the physician pays 15 percent of the donor's cost of the items or services. We stated our belief that the 15 percent cost sharing requirement is high enough to encourage prudent and robust electronic health records arrangements without imposing a prohibitive financial burden on recipients.

Moreover, we stated that this approach requires recipients to contribute toward the benefits they may experience from the adoption of interoperable electronic health records software (for example, a decrease in Start Printed Page 77616practice expenses or access to incentive payments related to the adoption of electronic health records technology). We received a number of comments in response to the CMS RFI, and OIG received similar comments in response to its request for information, asserting that the 15 percent contribution requirement of the EHR exception has been burdensome to some recipients and acts as a barrier to adoption of electronic health records. Some commenters on the requests for information asserted that this burden may be particularly acute for small and rural practices that cannot afford the contribution.

Other suggested that applying the 15 percent contribution requirement to upgrades and updates to electronic health records software is restrictive and cumbersome and similarly acts as a barrier. In the proposed rule, we considered and solicited comments on two alternatives to the existing requirement at § 411.357(w)(4) as outlined below, but did not propose specific regulation text along with the proposals (85 FR 55825). First, we considered eliminating the contribution requirement or reducing the percentage that small or rural physician organizations would be required to contribute.

In conjunction with this proposal, we solicited comments on how we should define “small or rural physician organization.” We also solicited comments on whether “rural physician organization” should be defined as a physician organization located in a rural area, as that term is defined at § 411.351, or defined in line with the definition of “rural provider” at § 411.356(c)(1). We also solicited comments on other subsets of potential physician recipients for which the 15 percent contribution is a particular burden. As an alternative, we proposed to reduce or eliminate the 15 percent contribution requirement in the EHR exception for all physician recipients.

We solicited comments regarding the impact this might have on the use and adoption of electronic health records technology, as well as any attendant program integrity concerns. We solicited comments requesting specific examples of any prohibitive costs associated with the 15 percent contribution requirement, both for the initial donation of electronic health records items and services, and subsequent upgrades and updates to previously donated electronic health records items and services. Finally, in the proposed rule, we also considered modifying or eliminating the contribution requirement for updates to previously donated electronic health records software or services, regardless of whether we determined to retain the 15 percent contribution requirement or reduce that contribution requirement for some or all physician recipients (85 FR 55825).

We solicited comments on this approach as well as what such a modification should entail. For example, we considered requiring a contribution for the initial donation only, as well as any new electronic health records software modules, but not requiring a contribution for any update of the software already donated. We solicited comments on these alternatives, or another similar alternative that would still involve some contribution but could reduce the uncertainty and administrative burden associated with assessing a contribution for each update of the software already donated.

After reviewing the comments, we are retaining the 15 percent cost contribution requirement for all physician recipients. However, in response to comments, we are revising § 411.357(w)(4) as it pertains to the timing of payments. Under revised § 411.357(w)(4)(i), a physician must pay the required cost contribution amount before receiving an initial donation of electronic health records items and services or a donation of replacement items and services.

However, with respect to items or services donated after the initial donation or the replacement donation, final § 411.357(w)(4)(ii) requires that the cost contribution amount must be paid at reasonable intervals. Specifically, as finalized, § 411.357(w)(4)(i) and (ii) require that. (i) Before receipt of the initial donation of items and services or the donation of replacement items and services, the physician pays 15 percent of the donor's cost for the items and services.

And (ii) except as provided in subparagraph (i), with respect to items or services received from the donor after the initial donation of items and services or the donation of replacement items and services, the physician pays 15 percent of the donor's cost for the items and services at reasonable intervals. We are not modifying § 411.357(w)(4)(iii), which requires that the donor (or any party related to the donor) does not finance the physician's payment or loan funds to be used by the physician to pay for the items and services. We received the following comments and our responses follow.

Comment. A large number of commenters recommended that we remove the 15 percent contribution requirement for all donations and for all recipients or, in the alternative, reduce the contribution requirement to 5 percent of the donor's cost for the items and services. Commenters provided a number of reasons in support of their request to remove the contribution requirement.

One commenter noted that the contribution requirement may pose a barrier to physicians who have not yet adopted electronic health records software, and added that, even if the contribution requirement is eliminated, physicians would still be required to bear other costs related to electronic health records implementation, such as hardware, staff time, and other resources. A few commenters stated that the contribution requirement may be an unreasonable constraint on how health systems and hospitals finance the needed infrastructure to implement new value-based payment models and promote coordination of care. One of these commenters asserted that a common electronic health records system across a network of hospitals and physicians fosters a higher degree of integrated care, better and more timely access to services through coordinated systems, alignment of quality standards across all participating providers, and a more structured approach to optimizing utilization, thus contributing to higher quality and more affordable care.

However, according to the commenter, small and independent practices typically cannot afford the electronic health records systems used by a larger health care system, even at a discount, which leads to a network of disjointed care and service offerings. Other commenters cited the added burden involved in setting the contribution amount in writing and the necessary, ongoing monitoring to ensure compliance. One of these commenters also highlighted that eliminating the requirement would align the EHR exception with the proposed cybersecurity exception at § 411.357(bb), which does not include a contribution requirement.

Several commenters that supported eliminating the contribution requirement as a requirement of the EHR exception suggested that CMS should still allow the donor to require a contribution. One of the commenters suggested that any contribution requirement should be left up to market forces and negotiation between the parties, and another suggested that the contribution amount should be at the discretion of the donor, as long as the donor consistently and fairly applies its policy to all recipients. In contrast, some commenters raised concerns about eliminating the contribution requirement.

One of these commenters maintained that physician adoption and use of an electronic health Start Printed Page 77617records system is improved when physicians have a certain level of buy-in and share in the financial cost. Similarly, other commenters suggested that 15 percent represents a fair contribution amount, the contribution requirement serves as a reasonable safeguard to reduce wasteful spending, and it is important for recipients to have a stake in the purchased technology. Response.

After careful consideration, we continue to believe that the contribution requirement is an important safeguard to protect against program or patient abuse. When recipients of valuable remuneration have some responsibility to contribute to the cost of the items or services, they are more likely to make economically prudent decisions and accept only items and services that they need. As described below, we are revising the requirement at § 411.357(w)(4) to increase flexibility in connection with administering the contribution requirement.

We note that, depending on the facts and circumstances, donations of electronic health records items and services may be permissible under the new exceptions for arrangements that facilitate value-based health care delivery and payment at § 411.357(aa). There is no requirement in the exceptions at final § 411.357(aa)(1), (2), or (3) that recipients of the electronic health records items or services contribute to the donor's cost for the items or services. Comment.

Many commenters suggested that, if CMS determines not to eliminate the 15 percent contribution requirement for all physician recipients, it should eliminate the requirement for at least a subset of recipients, such as small, rural, or tribal physician practices. Free and charitable clinics. Physicians with demonstrable financial need.

Or physician practices located in underserved areas, including urban practices serving low-income Medicaid populations. Several commenters stated that the contribution requirement presents a significant financial barrier for these physician practices that could negatively impact patient care, and one commenter maintained that the contribution requirement “prices out” physicians in small, rural, or underserved practices, while another stated that the 15 percent contribution requirement is “too steep” for many small practices. Another commenter believed that the contribution requirement could be lowered for small and rural physician organizations, provided that the donor is still permitted to decide the cost sharing amount required.

Some commenters that favored eliminating the contribution requirement for a subset of physician practices, such as small or rural practices and practices in underserved areas, provided a variety of definitions for small, rural, and underserved practices, including definitions based on the Quality Payment Program. The anti-kickback statute safe harbor for local transportation. The North American Industry Classification System for small businesses.

And the Secretary's designation of medically underserved areas and primary health care geographic health professional shortage areas. Some commenters expressed concern that different contribution requirements for different sets of physician practices may be difficult to administer and increase burden and, therefore, supported removing the contribution requirement for all physicians. Response.

As we explained in response to the immediately previous comment, we are retaining the 15 percent contribution requirement for all recipients seeking to protect donations of electronic health records items and services under the EHR exception. We agree with the commenters that identified the challenges of defining subgroups of entities to exempt from this requirement. Even if we were to adopt definitions for the categories of physician recipients who would be exempted from the contribution requirement—whether by adopting definitions existing in other regulations or definitions suggested by commenters—we are cognizant that qualification under a designation can change over time (for example, a physician practice may qualify as a “small practice” at some points in time but not at others, depending on staffing changes), resulting in significant compliance challenges when such a change occurs.

In addition, the program integrity risks associated with donations of electronic health records items and services apply regardless of the geography or size of the donation recipient. Again, we note that, to the extent that the donation of electronic health records items and services is made under a value-based arrangement (as defined at § 411.351), no recipient contribution is required, provided that the arrangement satisfies all the requirements of an applicable exception at final § 411.357(aa). Comment.

A number of commenters asked that, if CMS retains a contribution requirement on the initial donation of electronic health records items and services, the contribution requirement be eliminated for updates to the original donation. Commenters noted that updates may ensure that an electronic health records donation continues to function as needed and to meet current Federal standards for data exchange. One commenter stated that it is not uncommon for a donor's electronic health records system to be linked to a recipient's system, and the two systems must be in sync if they share an “instance” of electronic health records software.

According to the commenter, updates to the donor's system must also be passed on to the recipient's electronic health records system, even if the recipient does not need, want, or use the updates. The commenter contended that, with respect to such updates, the 15 percent cost contribution requirement functions as a tax that damages the financial stability of small practices. Another commenter recommended that CMS consider retaining a contribution requirement only for the provision of replacement software while eliminating it for the initial donation and any updates to that initially donated system.

Response. As explained in response to comments above, we are retaining the contribution requirement for all electronic health records donations, including updates. We recognize that updates are crucial for the continuing functionality of an electronic health records system.

However, we do not believe that it is appropriate to retain a contribution requirement for certain donations and eliminate it for others. We are concerned about gaming under such a regulatory scheme. For example, the parties could structure the “initial” donation to consist of a functionality with a low cost, and consequently, a small required contribution, with the most valuable functionality provided later as an “update” with no required contribution.

For this reason, we believe that a cost contribution requirement is appropriate for all donations, including updates. However, as explained in our response to comments below, for updates to previously donated electronic health records items or services, we are no longer requiring that the contribution be made before the receipt of items and services. Comment.

Some commenters addressed other aspects of the contribution requirement at § 411.357(w)(4). For example, one commenter expressed concern about the requirement that the physician recipient must pay the required contribution before the items or services are received. This commenter noted that recipients may unintentionally fail to satisfy this requirement due to inadvertent late payments and requested that CMS add Start Printed Page 77618a remedy period for mistakes to be corrected.

Another commenter recommended eliminating the requirement that the physician make the required contribution payment prior to the receipt of services and recommended instead that CMS require that the parties have in place a commercially reasonable collections process. Response. We are aware that assessing a contribution for each update could create compliance challenges and increase administrative burden.

We recognize that updates may need to take place quickly to remedy security or other problems in an electronic health records system, and we understand the commenter's concern about inadvertent late payments under such circumstances. We do not believe that it would pose a risk of program or patient abuse to permit a physician to pay required contribution amounts after receipt of an update, provided that payments are made at reasonable intervals. In contrast, with respect to an initial donation of items or services, or a donation that will replace existing items or services, we believe that parties can effectively plan the donation, with all expenses known in advance.

Thus, there does not exist the same administrative burden or potential for inadvertent late payments that may exist with the timing of payments for periodic updates. In light of this, we are modifying the requirement at § 411.357(w)(4) to permit payments of the cost contribution for items and services received after the initial donation or replacement donation at reasonable intervals, rather than in advance of the receipt of the items and services. Of course, parties remain free to require advance payments under their electronic health records donation arrangement.

The regulation continues to require that the physician recipient pays the cost contribution amount for the initial donation of items or services or the donation of replacement items or services before the items or services are received. We note that the EHR exception does not require a specific billing method, but the contribution amounts must actually be paid by the physician and be paid at reasonable intervals. A donor could choose to bill a recipient separately for each update or could bill the recipient monthly or quarterly to combine the contribution payments for all updates during a select period of time.

Given the modifications to § 411.357(w)(4) that we are finalizing here, we do not believe that it is necessary to add a remedy period for mistakes to be corrected, as suggested by the commenter. Comment. One commenter recommended that we not require a 15 percent contribution for cybersecurity donations under the EHR exception.

The commenter noted that some organizations will only permit practices to use their electronic health records systems if the practice has certain cybersecurity protections, and thus the commenter suggested that the party requiring the cybersecurity protection should pay any costs associated with it. Response. We are not finalizing separate requirements for different types of donations within this exception.

If a party seeks to protect a donation of cybersecurity software or services under the EHR exception, then a contribution toward the cost of the items and services is required. However, as explained in our response to comments above, a physician need not pay the 15 percent cost contribution for cybersecurity technology and services donated in conjunction with electronic health records items and services if the donation of the cybersecurity technology or services satisfies all the requirements of final § 411.357(bb). Comment.

One commenter stated that donations of items and services under the EHR exception are typically made to a physician practice, as opposed to an individual physician. However, the cost contribution requirement at § 411.357(w)(4) requires the physician to pay 15 percent of the donor's cost. The commenter stated that, given this language, it is unclear whether individual physicians or the physician practice must pay the cost contribution.

The commenter requested that CMS clarify that donations may be made to a physician organization as the sole contracting party and as the sole contributor to the donor's cost. Response. Because the physician self-referral law is implicated when a financial relationship exists between a physician (or an immediate family member of a physician) and an entity, the exception for electronic health records items or services at § 411.357(w) is structured to apply to remuneration from an entity to a physician.

The commenter correctly notes that the cost contribution requirement at § 411.357(w)(4) requires the physician to pay 15 percent of the donor's cost. The required contribution amount may be paid by the physician or on behalf of the physician by his or her physician organization. With respect to donations to physicians in a physician organization consisting of more than one physician, we note the following.

We acknowledge, as the commenter stated, that donations of items and services under the EHR exception are often made to a physician organization, as opposed to an individual physician. When an arrangement for the donation of electronic health records items and services is between the donor entity and a physician organization, under our regulation at § 411.354(c)(1), each physician who stands in the shoes of the physician organization is deemed to have the same compensation arrangement as the physician organization. Thus, the donation of the electronic health records items and services to the physician organization is deemed to establish a direct compensation arrangement between each physician who stands in the shoes of the physician organization and the entity donating the electronic health records items and services.

Each of those “deemed direct” compensation arrangements must satisfy the requirements of an applicable exception in order to avoid the physician self-referral law's referral and billing prohibitions. However, unlike many other forms of nonmonetary compensation, the cost of electronic health records items and services is oftentimes capable of being allocated on a per-user basis. Thus, when a donor entity divides the cost of electronic health records items and services among physician recipients in an appropriate manner (for example, per capita or by estimated usage based on their portions of the physician organization's patient universe or visits), the donation of electronic health records items and services to the physicians in a physician organization is properly viewed as a direct compensation arrangement between the donor entity and each recipient physician, rather than “deemed direct” compensation arrangements that result from applying the “stand in the shoes” provisions at § 411.354(c)(1).

In such circumstances, each physician recipient would be required to contribute 15 percent of the cost of the electronic health records items and services specifically allocated to him or her, rather than the cost of the entire suite of electronic health records items and services provided to the physician organization as a whole. The required contribution amount may be paid by each individual physician or on behalf of the physicians by the physician organization. To illustrate, assume that a donor entity wishes to provide licenses for the physicians in a physician organization to access and utilize electronic health records items and services, and the cost Start Printed Page 77619of the license is $100,000 per year for 25 licenses.

The donor entity may divide the cost of the 25 licenses among the potential licensees, and allocate $4,000 to each physician recipient. Thus, if the donor entity provided 10 licenses to a physician organization, it could allocate $4,000 per physician recipient, establishing a direct compensation arrangement with each physician recipient. In these circumstances, each physician recipient must pay 15 percent (or $600) of the cost of the license before receipt of the license in order to satisfy the requirement at § 411.357(w)(4).

In contrast, assume that a donor entity provides information technology and training services that are not readily or appropriately divisible by any particular number of licensees or users. If the cost of the items and services provided to a physician organization cannot readily and appropriately be divided among the individual physician recipients of the items and services, under the regulation at § 411.354(c)(1), the entirety of the items and services are deemed to be provided to each physician who stands in the shoes of the physician organization. (2) Equivalent Items and Services (§ 411.357(w)(8)) In the 2013 EHR final rule, we highlighted a commenter's assertion that the prohibition on donating equivalent items or services currently included in the exception at § 411.357(w)(8) locks physician practices into a vendor, even if they are dissatisfied with the donated items or services, because the recipient must choose between paying the full amount for a new electronic health records system and continuing to pay 15 percent of the cost of the substandard system (78 FR 78766).

That commenter asserted that the cost differential between these two options is high enough to effectively locks physician practices into electronic health records technology vendors. In the 2013 EHR final rule, we responded that we continued to believe that items and services are not necessary if the recipient already possesses the equivalent items or services. We noted that providing equivalent items and services confers independent value on the physician recipient and stated our expectation that physicians would not select or continue to use a substandard system if it posed a threat to patient safety.

We appreciate that advancements in electronic health records technology are continuous and rapid. According to commenters on the CMS RFI and OIG's request for information, in some situations replacement electronic health records items or services are appropriate but prohibitively expensive. In the proposed rule, we proposed to permit donations of replacement electronic health records items or services under the EHR exception (84 FR 55826).

We specifically sought comment as to the types of situations in which the donation of replacement items and services would be appropriate. We further solicited comment as to how we might safeguard against donors inappropriately offering, or physician recipients inappropriately soliciting, unnecessary items and services instead of upgrading their existing technology for appropriate reasons. Based on our review of the comments, we are finalizing our proposal to permit donations of replacement items and services by removing the requirement at § 411.357(w)(8) that the donor does not have actual knowledge of, or and does not act in reckless disregard or deliberate ignorance of, the fact that the physician possesses or has obtained items or services equivalent to those provided by the donor, which we have historically interpreted as a prohibition on the donation of replacement technology.

We received the following comment and our response follows. Comment. Commenters broadly supported removing the requirement at § 411.357(w)(8) that effectively prohibits a donor from donating replacement items and services under the EHR exception.

Commenters provided a number of reasons for their support of the elimination of this requirement, highlighting that, because they cannot afford the full cost to replace their electronic health records systems, some physician practices may work with an electronic health records system that no longer meets their needs, is outdated, or is otherwise substandard. Similar to the commenter on the 2013 EHR proposed rule, a few commenters maintained that the prohibition on replacement items and services locks a physician recipient into a particular vendor, even if the physician is not satisfied with its current electronic health records system, because the cost for a new system is significantly higher than continued payment of a 15 percent contribution for updates to the physician's current electronic health records software. One commenter stated that one of its clinically integrated networks operates with more than two dozen electronic health records systems.

The commenter explained that, although it has developed a system to aggregate all patient information, the diverse electronic health records systems made the solution less than optimal. The commenter explained that, if the restriction on donations of replacement items and services were lifted, it could achieve greater efficiency and care coordination by migrating the network to one unified electronic health records system. A different commenter recommended that CMS eliminate the requirement at § 411.357(w)(8) but require a documented rationale for the need of replacement items and services, while another commenter suggested that donations of replacement items and services should be permitted only if the recipient contributes 15 percent of the cost of the replacement software and services and demonstrates in writing, accompanied by documentation from an objective third party, that the recipient's current electronic health records system is substandard such that it poses a threat to patient safety.

Similarly, one commenter suggested that donations of replacement software should only be permitted if the software that the physician is currently using no longer meets certification criteria. Response. We are removing the requirement at § 411.357(w)(8) from the EHR exception.

We recognize that there may be valid business or clinical reasons for a physician recipient to replace an entire electronic health records system rather than update existing items and services, even if the existing software meets current certification criteria and does not pose a threat to patient safety. Under the revised EHR exception, replacement items and services are treated the same as a new donation and arrangements for the donation of replacement electronic health records items and services would need to satisfy all the requirements of the exception to avoid the referral and billing prohibitions of the physician self-referral law. For example, under § 411.357(w)(4)(i), a recipient of replacement items and services would be required to pay at least 15 percent of the donor's cost for the items and services before receiving them.

We believe that treating a donation of replacement items and services the same as a new donation strikes an appropriate balance between making necessary replacements financially feasible for recipients and maintaining safeguards to protect against program or patient abuse, such as recipients inappropriately soliciting or accepting unnecessary electronic health records items and services.Start Printed Page 77620 12. Exception for Assistance to Compensate a Nonphysician Practitioner (§ 411.357(x)) Section 1877(e)(5) of the Act sets forth an exception for remuneration provided by a hospital to a physician to induce the physician to relocate to the geographic area served by the hospital to be a member of the hospital's medical staff, subject to certain requirements. This exception is codified in our regulations at § 411.357(e).

In Phase III, we declined one commenter's request to expand § 411.357(e) to cover the recruitment of nonphysician practitioners (NPPs) into a hospital's service area, including into an existing physician practice, stating that the exception for physician recruitment at § 411.357(e) applies only to payments made directly (or, in some circumstances, passed through) to a recruited physician (72 FR 51049). Recruitment payments made by a hospital directly to an NPP would not implicate the physician self-referral law, unless the NPP serves as a conduit for physician referrals or is an immediate family member of a referring physician. We further stated that payments made by a hospital to subsidize a physician practice's costs of recruiting and employing NPPs would create a compensation arrangement between the hospital and the physician practice for which no exception would apply, and that these kinds of subsidy arrangements pose a substantial risk of fraud and abuse.

Following the publication of Phase III, we reconsidered our position. There have been significant changes in our health care delivery and payment systems, as well as projected shortages in the primary care workforce. To address this changed landscape, in the CY 2016 PFS final rule, we finalized a limited exception at § 411.357(x) for hospitals, FQHCs, and rural health clinics (RHCs) to provide remuneration to a physician to assist with the employment of (or other compensation arrangement with) an NPP (80 FR 71301 through 71311).

The exception at § 411.357(x) applies to remuneration provided by a hospital to a physician to compensate an NPP to provide patient care services. As we noted in the proposed rule, we have received several inquiries regarding the meaning of the term “patient care services” as it relates to an NPP. The inquiries generally concentrate on the requirement at § 411.357(x)(1)(v)(B) that the NPP has not, within 1 year of the commencement of his or her compensation arrangement with the physician, been employed or otherwise engaged to provide patient care services by a physician or a physician organization that has a medical practice site located in the geographic area served by the hospital.

Often, prior to becoming an NPP, an individual may have been a registered nurse (or some other health care professional) and may have provided services to patients that are similar to the services provided by an NPP. For purposes of the exception at § 411.357(x), the question presented by stakeholders is whether the services provided by the individual before the individual became an NPP constitute “patient care services.” As we explained in the proposed rule, the definition of “patient care services” found at § 411.351 relates to tasks performed by a physician only (84 FR 55826). To clarify the meaning of “patient care services” for purposes of the exception for assistance to compensate an NPP, we proposed to revise § 411.357(x) to change the references to “patient care services” to “NPP patient care services” and include a definition of the term “NPP patient care services” in the exception at § 411.357(x)(4)(i).

We proposed to define “NPP patient care services” to mean direct patient care services furnished by an NPP that address the medical needs of specific patients or any task performed by an NPP that promotes the care of patients of the physician or physician organization with which the NPP has a compensation arrangement. Under the definition of “NPP patient care services,” services provided by an individual who is not an NPP (as the term is defined at § 411.357(x)(3)) at the time the services are provided, are not NPP patient care services for purposes of § 411.357(x). Thus, if an individual worked in the geographic area served by the hospital providing the assistance (for example, as a registered nurse) for some period immediately prior to the commencement of his or her compensation arrangement with the physician or physician organization in whose shoes the physician stands, but had not worked as an NPP in that area during that period, the exception at § 411.357(x) would be available to protect remuneration from the hospital to the physician to compensate the NPP to provide NPP patient care services, provided that all the requirements of the exception are satisfied.

In this example, the registered nursing services would not be considered NPP patient care services when determining whether the arrangement satisfies the 1-year restriction at § 411.357(x)(1)(v) (84 FR 55826). We also proposed conforming changes to the term “referral” as defined at § 411.357(x)(4) for purposes of the exception. Specifically, we proposed to revise § 411.357(x) to change references to “referral” when describing the actions of an NPP to “NPP referral” and revise § 411.357(x)(4) accordingly.

We stated, and affirm here, that it is unnecessary to have a general definition of “referral” at § 411.351 that is applicable throughout our regulations and a different definition of the same term (“referral”) that applies only for purposes of the exception at § 411.357(x). We did not propose substantive changes to the definition itself. However, we proposed to move the definition to § 411.357(x)(4)(ii) in order to accommodate the inclusion of the related definition of “NPP patient care services” within section § 411.357(x)(4) (84 FR 55826).

We also proposed a related change to § 411.357(x)(1)(v)(A). As drafted, § 411.357(x)(1)(v)(A) requires the NPP to not have practiced in the geographical area served by the hospital within 1 year of the commencement of the compensation arrangement with the physician. According to stakeholders that requested guidance on the scope of the exception, the word “practiced” may be interpreted to include the provision of NPP patient care services (as we proposed to define the term here) and other services, for example, services provided by a health care professional who is not an NPP at the time the services are furnished.

To resolve any potential stakeholder confusion, we proposed to replace the term “practiced” with “furnished NPP patient care services.” Under the proposal, a hospital would not run afoul of § 411.357(x)(1)(v)(A) if the hospital provided remuneration to a physician to compensate an NPP, and the individual receiving compensation from the physician furnished services in the hospital's geographic service area within 1 year of the commencement of his or her compensation arrangement with the physician, provided that the services furnished by the individual during the 1-year period were not NPP patient care services, as we proposed to define the term at § 411.357(x)(4)(i) (84 FR 55826 through 55827). In addition to the inquiries related to the meaning of the terms “patient care services” and “practice,” we noted our awareness of stakeholder uncertainty regarding the timing of arrangements that may be permissible under § 411.357(x). Specifically, stakeholders have inquired whether an NPP must begin his or her compensation arrangement with the physician (or physician organization in whose shoes the physician stands) on or after the Start Printed Page 77621commencement of the compensation arrangement between the hospital, FQHC, or RHC and the physician, noting that the exception includes no explicit prohibition on an entity providing assistance to a physician to reimburse the physician for the compensation, signing bonus, or benefits paid to an NPP already employed or contracted by the physician prior to the date of the commencement of the physician's compensation arrangement with the hospital, FQHC, or RHC.

As we stated when finalizing the exception at § 411.357(x), our underlying goal is to increase access to needed care (80 FR 71309). Permitting a hospital, FQHC, or RHC to simply reimburse a physician for overhead costs of current employees or contractors already serving patients in the geographic area served by the hospital, FQHC, or RHC does not support this goal. Nonetheless, as stakeholders pointed out, there is no express requirement regarding the timing of the compensation arrangement between the NPP and the physician (or physician organization in whose shoes the physician stands) in § 411.357(x).

To ensure that compensation arrangements protected under the exception do not pose a risk of program or patient abuse, we proposed to amend § 411.357(x)(1)(i) to expressly require that the compensation arrangement between the hospital, FQHC, or RHC and the physician commences before the physician (or the physician organization in whose shoes the physician stands under § 411.354(c)) enters into the compensation arrangement with the NPP (84 FR 55827). Put another way, the compensation arrangement between the NPP and the physician (or physician organization in whose shoes the physician stands) must commence on or after the commencement of the compensation arrangement between the hospital, FQHC, or RHC and the physician. We received a number of comments in support of our clarifying proposals.

Although we received a few comments addressing issues outside the scope of our proposals, we did not receive any comments objecting to our proposals or suggesting alternatives for clarifying the requirements of the exception for assistance to compensate a nonphysician practitioner. We are finalizing the proposed revisions to § 411.357(x) without modification. We received the following comments and our responses follow.

Comment. Most commenters that commented on our proposal supported the proposed modifications to clarify the terminology used in the exception and that the exception cannot be used to reimburse physicians for compensation, signing bonus, and benefits expenses related to NPPs who were employed or contracted before the commencement of the compensation arrangement between the hospital and the physician. Response.

As discussed above, we are finalizing our clarifying revisions in the exception for assistance to compensate a nonphysician practitioner at § 411.357(x). We believe that the revisions finalized here will provide the clarity sought by stakeholders prior to the proposed rule. Comment.

Two commenters requested that CMS revise the exception at § 411.357(x) to remove any limits on the practice specialties of nonphysician practitioners for whom physicians may receive assistance. One of the commenters asserted that surgery, neurology, urology, and many other specialty services are areas of acute need for many communities. The commenter also recommended that we not limit the medical specialties of physicians who may receive assistance under the exception to physicians who provide “primary care services or mental health services.” The other commenter asserted that, although most nurse practitioners provide primary care or behavioral health services, nurse practitioners practice in nearly all practice specialties, and these medical practices are also in need of nurse practitioners, particularly in rural and underserved communities.

This commenter suggested that CMS align the exception for assistance to compensate a nonphysician practitioner with the exception for physician recruitment, noting that the former exception is limited to nonphysician practitioners who, for the most part, provide primary care or behavioral health services, while no similar restriction applies to physician recruitment. Response. The exception for assistance to compensate a nonphysician practitioner was proposed in the CY 2016 PFS proposed rule (80 FR 41686) and finalized in the CY 2016 PFS final rule (80 FR 70866).

In the CY 2016 PFS proposed rule, we stated that our goal in proposing (and ultimately finalizing) the exception was to promote the expansion of access to primary care services, but sought comment regarding whether there was a compelling need to expand the scope of the exception to nonphysician practitioners who provide services that are not considered primary care services (80 FR 41911). In response, commenters requested that we broaden the scope of the exception. Commenters that suggested an expansion to mental health services provided convincing evidence of the compelling need for access to mental health care services throughout the country (80 FR 71306).

However, commenters that requested the expansion of the exception to any other specialty services provided no documentation or other evidence of the compelling need for such an expansion (80 FR 71306 through 71307). We did not propose to expand the scope of the exception for assistance to compensate a nonphysician practitioner in the proposed rule, and make no attempt to finalize such a regulatory modification in this final rule. However, we note that the commenters that made the requests for expansion of the scope of the exception, like those that commented on the CY 2016 PFS proposed rule, failed to provide any documentation or other evidence of the compelling need for such an expansion at this time.

With respect to the commenter that suggested the exception for assistance to compensate a nonphysician practitioner at § 411.357(x) should be aligned with the exception for physician recruitment at § 411.357(e), we note that the exception for physician recruitment is statutory and covers only remuneration from a hospital to a physician to induce the physician to relocate his or her medical practice to the geographic area served by the hospital to become a member of the hospital's medical staff. In contrast, the underlying purpose of the exception to assist a physician to compensate a nonphysician practitioner is to promote expansion of access to primary care and mental health care services. There is no reason for the two exceptions to have identical requirements and scope.

13. Updating and Eliminating Out-of-Date References a. Medicare+Choice (§ 411.355(c)(5)) Section 1877(b)(3) of the Act and § 411.355(c) of the physician self-referral regulations set forth exceptions for designated health services furnished by various organizations to enrollees of certain prepaid health plans.

When the Medicare+Choice program was established in the Balanced Budget Act of 1997 (Pub. L. 105-33) (BBA), the Congress failed to update section 1877(b)(3) of the Act to except the designated health services furnished under Medicare+Choice coordinated care plans.

Based on our belief that this was an oversight, in the June 26, 1998 interim final rule with comment period (Medicare Program. Establishment of the Medicare+Choice Program (63 FR 34968)), we revised § 411.355(c) to Start Printed Page 77622accommodate the creation of the Medicare+Choice program and, relying on the Secretary's authority to create new exceptions under section 1877(b)(4) of the Act, we included Medicare+Choice coordinated care plans in § 411.355(c)(5) of our regulations (63 FR 35003 through 35004). (We declined to include Medicare+Choice medical savings account plans and Medicare+Choice private FFS plans due to the risk of patient abuse related to financial liability for premiums and cost sharing, which were not limited by the BBA.) We included Medicare+Choice coordinated care plans at § 411.355(c)(5), in part, to avoid contradiction with the BBA's establishment of provider-sponsored organization (PSO) plans as coordinated care plans.

PSOs are defined in the BBA as entities that must be organized and operated by a provider (which may be a physician) or a group of affiliated health care providers (which may include physicians). The BBA requires that the providers have at least a majority financial interest in the entity and share a substantial financial risk for the provision of items and services. If such ownership was not excepted, the physician owners of PSOs would not be permitted to refer enrollees for designated health services furnished by the coordinated care plan (or its contractors and subcontractors).

Subsequently, in 1999, the Congress amended section 1877(b)(3) of the Act to create a similar statutory exception for Medicare+Choice at section 1877(b)(3)(E) of the Act (Pub. L. 106-113).

Section 201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173, enacted on December 8, 2003) (MMA) renamed the Medicare+Choice program as the Medicare Advantage program and provided that any statutory reference to “Medicare+Choice” was deemed to be a reference to the Medicare Advantage program.

In reviewing our regulations for out-of-date references, including references to Medicare+Choice, as part of this rulemaking, it came to our attention that the language of § 411.355(c)(5) may be inconsistent with other program regulations. Current § 411.355(c)(5) excepts designated health services furnished by an organization (or its subcontractors) to enrollees of a coordinated care plan (within the meaning of section 1851(a)(2)(A) of the Act) offered by an organization in accordance with a contract with CMS under section 1857 of the Act and Part 422 of Title 42, Chapter IV of the Code of Federal Regulations. For consistency with the MMA directive and to ensure the accuracy of our regulations, we proposed to revise § 411.355(c)(5) to more accurately reference Medicare Advantage plans.

Under this proposal, § 411.355(c)(5) would reference designated health services furnished by an organization (or its contractors or subcontractors) to enrollees of a coordinated care plan (within the meaning of section 1851(a)(2)(A) of the Act) offered by a Medicare Advantage organization in accordance with a contract with CMS under section 1857 of the Act and part 422 of this chapter. This proposal does not represent a change in our policy. The Medicare Advantage program varies from the Medicare+Choice program in ways other than its name and has matured in the years since passage of the MMA.

More than 20 years have passed since we determined to protect designated health services furnished to enrollees of coordinated care plans and exclude medical savings account plans and private FFS plans from the scope of § 411.355(c)(5). In light of this, we sought comments regarding whether § 411.355(c)(5) is broad enough to protect designated health services furnished to enrollees in the full range of Medicare Advantage plans that exist today and that do not pose a risk of program or patient abuse. Specifically, we were interested in commenters' views on which, if any, other Medicare Advantage plans we should include within the scope of § 411.355(c)(5).

We received the following comment and our response follows. Comment. Multiple commenters supported the proposed updates and elimination of references to “Medicare+Choice.” We did not receive any comments opposing these changes.

Response. We are finalizing the changes as proposed. B.

Website We proposed to modernize the regulatory text by changing “Web site” to “website” throughout the physician self-referral regulations to conform to the spelling of the term in the Government Publishing Office's Style Manual and other current style guides. After reviewing the comments, we are finalizing our proposal to change “Web site” to “website” wherever the term appears in our regulations. We received the following comment and our response follows.

Comment. Multiple commenters supported the proposed updates and elimination of references to “Web site.” We did not receive any comments opposing these changes. Response.

We are finalizing the changes as proposed. E. Providing Flexibility for Nonabusive Business Practices 1.

Limited Remuneration to a Physician (§ 411.357(z)) In the 1998 proposed rule, we proposed an exception for de minimis compensation in the form of noncash items or services (63 FR 1699). In Phase I, using the Secretary's authority at section 1877(b)(4) of the Act, we finalized the proposal at § 411.357(k) and changed the name of the exception to nonmonetary compensation, noting that, although free or discounted items and services such as free samples of certain drugs, chemicals from a laboratory, or free coffee mugs or note pads from a hospital fall within the definition of “compensation arrangement,” we believe that such compensation is unlikely to cause overutilization, if held within reasonable limits (66 FR 920). The exception for nonmonetary compensation at § 411.357(k) permits an entity to provide compensation to a physician in the form of items or services (other than cash or cash equivalents) up to an aggregate amount of $300 per calendar year, adjusted annually for inflation and currently $423 per calendar year, provided that the compensation is not solicited by the physician and is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.

The exception does not require that the physician provide anything to the entity in return for the nonmonetary compensation, nor does it require that the arrangement is set forth in writing and signed by the parties. We also recognized in Phase I that many of the incidental benefits that hospitals provide to medical staff members do not qualify for the exception at § 411.357(c) for bona fide employment relationships because most members of a hospital's medical staff are not hospital employees, nor would they qualify for the exception at § 411.357(l) for fair market value compensation because, to the extent that the medical staff membership is the only relationship between the hospital and the physician, there is no written agreement between the parties to which these incidental benefits could be added. We acknowledged that many medical staff incidental benefits are customary industry practices that are intended to benefit the hospital and its Start Printed Page 77623patients.

For example, free computer and internet access benefits the hospital and its patients by facilitating the maintenance of up-to-date, accurate medical records and the availability of cutting edge medical information (66 FR 921). To address this, using the Secretary's authority under section 1877(b)(4) of the Act, we finalized a second exception for noncash items or services provided to a physician. The exception at § 411.357(m) for medical staff incidental benefits permits a hospital to provide noncash items or services to members of its medical staff when the item or service is used on the hospital's campus and certain conditions are met, including that the compensation is reasonably related to the provision of (or designed to facilitate) the delivery of medical services at the hospital and the item or service is provided only during periods when the physician is making rounds or engaged in other services or activities that benefit the hospital or its patients (66 FR 921).

In addition, the compensation may not be offered in a manner that takes into account the volume or value of referrals or other business generated between the parties. Under the exception, permissible noncash compensation is limited on a per-instance basis, and the current limit is $36 per instance. Like the exception at § 411.357(k) for nonmonetary compensation, the exception at § 411.357(m) for medical staff incidental benefits does not impose any documentation or signature requirements.

Through our administration of the SRDP, we have been made aware of numerous nonabusive arrangements under which a limited amount of remuneration was paid by an entity to a physician in exchange for the physician's provision of items and services to the entity. In some instances, the arrangements were ongoing service arrangements under which services were provided sporadically or for a low rate of compensation. In others, services were provided during a short period of time and the arrangement did not continue past the service period.

For example, one submission to the SRDP disclosed an arrangement with a physician for short-term medical director services while the hospital was finalizing the engagement of its new medical director following the unexpected resignation of its previous medical director. Despite the hospital's need for the services and compensation that was fair market value and not determined in any manner that took into account the volume or value of the referrals or other business generated by the physician, the arrangement could not satisfy all the requirements of any applicable exception because the compensation was not set in advance of the provision of the services and was not reduced to writing and signed by the parties. Under arrangements such as this, insofar as the hospital paid the physician in cash, the exception at § 411.357(k) for nonmonetary compensation would not apply to the arrangement.

Similarly, the exception at § 411.357(l) for fair market value compensation would not protect the arrangement if it was not documented in contemporaneous signed writings and the amount of or formula for calculating the compensation was not set in advance of the provision of the items or services, even if the compensation did not exceed fair market value for actual items or services provided and was not determined in a manner that takes into account the volume or value of referrals or other business generated by the physician. In the proposed rule, we stated that, based on our review of numerous arrangements in the SRDP, we believe that the provision of limited remuneration to a physician would not pose a risk of program or patient abuse, even in the absence of documentation regarding the arrangement and where the amount of or a formula for calculating the remuneration is not set in advance of the provision of items or services, if. (1) The arrangement is for items or services actually provided by the physician.

(2) the amount of the remuneration to the physician is limited. (3) the arrangement is commercially reasonable (4) the remuneration is not determined in any manner that takes into account the volume or value of referrals or other business generated by the physician. And (5) the remuneration does not exceed the fair market value for the items or services.

We stated that, under these circumstances, remuneration that is held within reasonable limits is unlikely to cause overutilization or similar harms to the Medicare program. Therefore, relying on the Secretary's authority under section 1877(b)(4) of the Act, we proposed an exception for limited remuneration from an entity to a physician for items or services actually provided by the physician (84 FR 55828 through 55829). We proposed that the exception for limited remuneration to a physician would apply only when the remuneration does not exceed an aggregate of $3,500 per calendar year, which would be adjusted for inflation in the same manner as the annual limit on nonmonetary compensation and the per-instance limit on medical staff incidental benefits.

That is, adjusted to the nearest whole dollar by the increase in the Consumer Price Index—Urban All Items (CPI-U) for the 12-month period ending the preceding September 30. We stated our belief that an annual aggregate remuneration limit of $3,500 would be sufficient to cover the typical range of commercially reasonable arrangements for the provision of items and services that a physician might provide to an entity on an infrequent or short-term basis. We also proposed that the exception would not be applicable to payments from an entity to a physician's immediate family member or to payments for items or services provided by the physician's immediate family member.

We sought public comment on whether the $3,500 annual aggregate remuneration limit is appropriate, too high, or too low to accommodate nonabusive compensation arrangements for the provision of items or services by a physician. We also sought comments regarding whether it is necessary to limit the applicability of the exception to services that are personally performed by the physician and items provided by the physician in order to further safeguard against program or patient abuse. In keeping with our proposal to decouple exceptions issued under our authority at section 1877(b)(4) of the Act from the anti-kickback statute, we did not propose to include a requirement under § 411.357(z) that the arrangement must not violate the anti-kickback statute or other Federal or State law or regulation governing billing or claims submission.

However, we solicited comment regarding whether such a safeguard is necessary here in light of the absence of requirements for set in advance compensation and written documentation of the arrangement. We also proposed that the remuneration may not be determined in any manner that takes into account the volume or value of referrals or other business generated by the physician or exceed fair market value for the items or services provided by the physician, and the compensation arrangement must be commercially reasonable. Finally, we proposed limits on the percentage-based and per-unit compensation formulas for the lease of office space, the lease of equipment, and the use of premises, equipment, personnel, items, supplies, or services (84 FR 55829).

After reviewing the comments, we are finalizing the exception for limited remuneration to a physician at § 411.357(z) with several modifications. Start Printed Page 77624First, we are setting the annual aggregate remuneration limit to the physician at $5,000 instead of at $3,500, adjusted annually for inflation and indexed to the CPI-U. Second, the exception permits the physician to provide items or services through employees whom the physician has hired for the purpose of performing the services.

Through a wholly-owned entity. Or through locum tenens physicians (as defined at § 411.351, except that the regular physician need not be a member of a group practice). Third, we are requiring that the arrangement is commercially reasonable even if no referrals were made between the parties.

Fourth, to address our concerns regarding the preservation of patient choice, we are requiring compliance with the special rule at § 411.354(d)(4) if remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier. Lastly, we are modifying the per-click and percentage-based compensation provisions at § 411.357(z)(1)(v), to clarify that these provisions only apply to timeshare arrangements for the use of premises or equipment. Given the relatively low annual aggregate remuneration limit of the exception and the other safeguards of the exception, we believe that the exception for limited remuneration to a physician, as finalized, does not pose a risk of program or patient abuse.

However, when the remuneration a physician receives from an entity for items or services exceeds the annual aggregate remuneration limit of $5,000, as adjusted annually for inflation, the additional safeguards of other applicable exceptions are necessary to protect against program or patient abuse. For example, for long-term arrangements for items or services provided on a more routine or frequent basis, where the aggregate annual compensation exceeds the annual aggregate remuneration limit of the exception at new § 411.357(z), the requirement that compensation is set in advance before the provision of the items or services is necessary to ensure that various payments made over the term of the arrangement are not determined retrospectively to reward past referrals or encourage increased referrals from the physician. We note that the annual aggregate remuneration limit for the exception at § 411.357(z) is higher than the annual limit for the exception for nonmonetary compensation at § 411.357(k) because the exception for limited remuneration to a physician would protect a fair market value exchange of remuneration for items or services actually provided by a physician, while the exception for nonmonetary compensation does not require a physician to provide actual items or services in exchange for the nonmonetary compensation.

The final exception at § 411.357(z) for limited remuneration to a physician applies to the provision of both items and services by a physician. In the proposed rule, we retracted our prior statements that office space is neither an “item” nor a “service.” Thus, the exception for limited remuneration to a physician is available to protect compensation arrangements involving the lease of office space or equipment from a physician. For the reasons articulated in section II.D.10.

Of this final rule and the CY 2017 PFS proposed rule (81 FR 46448 through 46453) and final rule (81 FR 80524 through 80534), the exception at § 411.357(z) incorporates prohibitions on percentage-based and per-unit of service compensation to the extent the remuneration is for the use or lease of office space or equipment, similar to the provisions at existing § 411.357(p)(1)(ii) for indirect compensation arrangements and § 411.357(y)(6)(ii) for timeshare arrangements. We explained in the proposed rule and reaffirm here our policy that, in determining whether payments to a physician under the exception for limited remuneration to a physician exceed the annual aggregate remuneration limit in § 411.357(z), we will not count compensation to a physician for items or services provided outside of the arrangement, if the items or services provided are protected under an exception in § 411.355 or the arrangement for the other items or services fully complies with the requirements of another exception in § 411.357. To illustrate, assume an entity has an established call coverage arrangement with a physician that fully satisfies the requirements of § 411.357(d)(1) or § 411.357(l).

Assume further that the entity later engages the physician to provide supervision services on a sporadic basis during the same year but fails to document the arrangement in a writing signed by the parties. In determining whether the supervision arrangement satisfies the requirements of the exception for limited remuneration to a physician, we will not count the compensation provided under the call coverage arrangement towards the annual aggregate remuneration limit in § 411.357(z). However, if an entity has multiple undocumented, unsigned arrangements under which it provides compensation to a physician for items or services provided by the physician, we consider the parties to have a single compensation arrangement for various items and services, and the aggregate of all the compensation provided under the arrangement may not exceed the annual aggregate remuneration limit of § 411.357(z) during the calendar year in order for the exception to protect the remuneration to the physician.

To illustrate, assume the entity in the previous example also engages the physician to provide occasional EKG interpretations during the course of the year, and that the aggregate annual compensation for the supervision services and the EKG interpretation services taken together exceeded the annual aggregate remuneration limit.[] Assuming neither arrangement satisfies the requirements of any other applicable exception, the exception for limited remuneration to a physician will not protect either arrangement (which, as noted, we treat as a single arrangement for multiple services) after the annual aggregate remuneration limit is exceeded during the calendar year. As we explained in the proposed rule, the exception for limited remuneration to a physician may be used in conjunction with other exceptions to protect an arrangement during the course of a calendar year in certain circumstances (84 FR 55830). To illustrate, assume that an entity engages a physician to provide call coverage services, and that the arrangement is not documented or the rate of compensation has not been set in advance at the time the services are first provided.

Further, assume that, after the services are provided and payment is made, the parties agree to continue the arrangement on a going forward basis and agree to a rate of compensation. Assume also that the parties have no other arrangements between them. Depending on the facts and circumstances, the parties may rely on the exception at § 411.357(z) to protect payments to the physician up to the $5,000 annual aggregate remuneration limit, provided that all the requirements of the exception are satisfied.

For the ongoing compensation arrangement, the parties could rely on another applicable exception, such as § 411.357(d)(1), to protect the arrangement once the compensation is set in advance and the other requirements of that exception are satisfied. (We remind readers that, under § 411.354(e)(4), the parties would Start Printed Page 77625have up to 90 consecutive calendar days to document and sign the arrangement.) In the proposed rule, we noted that § 411.357(d)(1)(ii) requires that the personal service arrangement covers all the services provided by the physician (or an immediate family member of the physician) to the entity (or incorporate other arrangements by reference or cross-reference a master list of contracts) and § 411.357(l)(2) requires that parties enter into only one arrangement for the same services in a year. As we stated in the proposed rule, for purposes of § 411.357(d)(1)(ii), we will not require an arrangement for items or services that satisfies all the requirements of the final exception for limited remuneration to a physician to be covered by a personal service arrangement protected under § 411.357(d)(1) or listed in a master list of contracts (84 FR 55830).

Likewise, with respect to the restriction in the exception for fair market value compensation at § 411.357(l)(2), we will not consider an arrangement for items or services that is protected under the exception at § 411.357(z) to violate the prohibition on entering into an arrangement for the same items and services during a calendar year. The vast majority of commenters supported our proposal, stating that the exception would increase flexibility under our regulations and reduce the burden of compliance without posing a risk of program or patient abuse. After reviewing the comments, we are finalizing the proposed exception for limited remuneration to a physician at § 411.357(z) with certain modifications, as noted above.

We are also making certain modifications to the exception for personal service arrangements at § 411.357(d)(1) and the exception for fair market value compensation at § 411.357(l) to ensure that § 411.357(z) may be used in conjunction with these exceptions. We received the following comments and our response follows. Comment.

We received numerous comments regarding who may provide items and services and to whom the payments for items and services under the new exception at § 411.357(z) may be made. Many commenters requested that we not limit the exception at § 411.357(z) to items or services that are personally provided by physicians. One commenter suggested that the exception should be available for payments to a physician for items or services provided by someone at the direction of and under the control of the physician through a contract or employment arrangement.

In contrast, one commenter expressed concern that the exception, as proposed, is subject to abuse and urged CMS to limit the applicability of the exception to items or services that are personally provided by the physician. One commenter suggested that the exception should apply to payments to a group practice for the services of a midlevel practitioner employed by the group or to a physician's immediate family members for items or services provided by the immediate family members. Response.

In the 1998 proposed rule, we interpreted the exception for personal service arrangements at § 411.357(d)(1) to permit physicians to provide services through employees (63 FR 1701). In Phase II, we added that a physician may provide services under § 411.357(d)(1)(ii) through a wholly owned entity or a locum tenens physician, but we declined to permit physicians to provide services under the exception through independent contractors (69 FR 16090 through 16093). We explained that, if physicians were permitted to provide services through independent contractors, a physician could enter into a broad range of service arrangements and take a fee as a middleperson without performing any actual service.

In contrast, when a physician provides services through an employee or a wholly owned entity, the relationship evidences a bona fide business operated by the physician to provide the services. We find this reasoning to be convincing and applicable to the exception for limited remuneration to a physician, and therefore we are clarifying at § 411.357(z)(2) that a physician may provide items or services through an employee, a wholly owned entity, or a locum tenens physician, but not through an independent contractor. With respect to items, office space, or equipment provided by a physician through a physician's employee, wholly-owned entity, or locum tenens physician, we stress that the items, office space, or equipment provided must be the items, office space, or equipment of the physician.

For purposes of determining whether payments comply with the annual aggregate remuneration limit, any payments for items, office space, equipment, or services provided through a physician's employee, wholly owned entity, or locum tenens physician would be counted towards the annual aggregate remuneration limit applicable to the physician. In other words, there are not separate limits for a physician and his or her employees. For example, if an entity pays a physician $1,000 for personally performed services, $400 for services provided through the physician's employee, and $150 for items provided through the physician's employee, assuming no other previous payments for the calendar year, the sum of $1,550 is counted towards the annual aggregate remuneration limit applicable to the physician.

(See below for a discussion of payments to a group practice or physician organization, and the application of the physician “stand in the shoes” rules at § 411.354(c) under the exception for limited remuneration to a physician.) Given our clarification that payments to a physician for items or services provided through a physician's employee, wholly owned entity, or locum tenens physician count towards the physician's annual aggregate remuneration limit and the other requirements of the exception, including the low annual compensation limit and requirements pertaining to fair market value, the volume or value of referrals and other business generated, and commercial reasonableness, we do not believe that our final policy poses a risk of program or patient abuse. We are not convinced that the exception at § 411.357(z) should be applicable to payments to a physician's immediate family member for items or services provided by the family member. As explained above, the limited remuneration to a physician exception is designed in part to allow entities to compensate physicians for short-term or infrequent arrangements, many of which commence under exigent circumstances, with little time to reduce the arrangement to writing or set the compensation in advance.

We do not believe that such situations typically arise with respect to physicians' immediate family members. In addition, if each immediate family member had a separate annual aggregate remuneration limit under the exception, the sum total of remuneration to a physician and his or her immediate family members could be substantial, depending on the number of immediate family members. We believe that such a policy may pose a risk of program or patient abuse.

We note that an entity is permitted under the exception to compensate a physician for services provided through the physician's immediate family member if the family member is an employee of the physician acting at the direction of the physician, provided that all the requirements of the exception are met. However, as noted above, any payments to the physician for such services would be counted towards the physician's annual aggregate remuneration limit. Comment.

A significant number of commenters supported the proposed exception, but requested that the limit be higher than $3,500 per calendar year, Start Printed Page 77626as adjusted for inflation. Many commenters asserted that the proposed limit of $3,500 could be easily exceeded in a day or a weekend, for example, if a hospital has a sudden and immediate need to secure emergency on-call coverage in an area with high labor costs or a shortage of physicians. Other commenters suggested that a higher annual aggregate remuneration limit would better reflect what they consider the typical range of commercially reasonable arrangements that physicians might enter into with entities on a short-term or infrequent basis.

Most commenters requested an annual aggregate remuneration limit of either $5,000, $7,000, or $10,000. A few commenters requested limits over $10,000, such as $35,000 per calendar year or 10 percent of the physician's total cash compensation from an entity (or its affiliates) over the most recent fiscal year. One commenter stated that, as an alternative to raising the annual aggregate remuneration limit, CMS could cap the amount of remuneration per episode of service during a defined period of time, such as 2 or 3 months.

In contrast, one commenter urged us to not raise the annual aggregate remuneration limit above $3,500. Response. In establishing the appropriate annual aggregate remuneration limit in the final exception for limited remuneration to a physician at § 411.357(z), we relied on our experience administering the SRDP and working with law enforcement, as well as comments we received on our proposed rule.

In light of the comments we received, we are convinced that the proposed limit of $3,500 per calendar year, as adjusted for inflation, is not high enough to accommodate the broad range of nonabusive infrequent or temporary arrangements that an entity and a physician might enter into over the course of a year. Given the other requirements of the finalized exception, an annual aggregate remuneration limit of $5,000 for items or services actually provided by a physician to an entity does not pose a risk of program or patient abuse. We believe that an annual amount of remuneration greater than $5,000 per calendar year, as adjusted for inflation, may be high enough in certain instances to improperly incent physicians and affect medical decision-making.

Without transparency safeguards that require an arrangement to be set forth in writing and signed by the parties and the safeguard of requiring that compensation is set in advance of the provision of items or services under the arrangement, we do not believe that an annual aggregate remuneration limit greater than $5,000 is appropriate. We believe that the per-episode methodology suggested by the commenter would increase burden, be difficult to administer and enforce, and could easily result in failure to comply with the requirements of the exception if parties do not meticulously track payments to the physician. For these reasons, we are finalizing a limit of $5,000 per calendar year, as adjusted for inflation.

Comment. One commenter requested clarification whether the annual aggregate remuneration limit on remuneration applies to an individual physician or a physician practice comprised of more than one physician. Another commenter suggested that the annual aggregate remuneration limit, when applied to physicians in physician organizations, should apply to physicians individually, as opposed to the entire physician organization.

Response. Because the physician self-referral law is implicated when a financial relationship exists between physicians and entities that furnish designated health services, the exception for limited remuneration to a physician at § 411.357(z) is structured to apply to remuneration from an entity to a physician. We did not propose, nor are we finalizing, an exception that permits a specific amount of remuneration from an entity to a physician organization under the conditions outlined in the new exception at § 411.357(z).

Under our regulations at § 411.354(c), remuneration from an entity to a physician organization would be deemed to be a direct compensation arrangement between the entity and each physician who stands in the shoes of the physician organization. A “deemed” direct compensation arrangement must satisfy the requirements of an applicable exception if the physician makes referrals to the entity and the entity bills the Medicare program for designated health services furnished as a result of the physician's referrals. The exception for limited remuneration to a physician is available to protect a direct compensation arrangement between an entity providing remuneration to an individual physician, as well as a “deemed” direct compensation arrangement between an entity and a physician who stands in the shoes of the physician organization to which the entity provides the remuneration.

If an entity that makes payment to a physician organization relies on new § 411.357(z), under § 411.354(c)(1), the payment will create a “deemed” direct compensation arrangement with each physician who stands in the shoes of the organization. That is, each physician who stands in the shoes of the physician organization will be deemed to have the same compensation arrangement with the entity making the payment to the physician organization. Compensation received by the physician organization under such circumstances is counted towards the annual aggregate remuneration limit of each physician who stands in the shoes of the physician organization.

For example, if an entity pays a physician organization $1,000 under § 411.357(z) for lease of the physician organization's equipment, and the physician organization consists of two owners (Drs. A and B) who stand in the shoes of the organization, then $1,000 is counted towards the annual aggregate remuneration limit of both Drs. A and B.

The $1,000 payment would not count toward the annual aggregate remuneration limit of other physicians in the physician organization who are not required to stand in the shoes of the physician organization and are not treated as permissibly standing in the shoes of the physician organization. Remuneration from an entity to a physician under a direct compensation arrangement between the entity and the individual physician (as opposed to a “deemed direct” compensation arrangement under the stand in the shoes rules) is counted only towards the individual physician's annual aggregate remuneration limit under § 411.357(z). Returning to the example earlier in this response, if, in a direct compensation arrangement under § 411.354(c)(1)(i), the entity paid Dr.

A $500 for her services relying on § 411.357(z), assuming no other payments during the calendar year relying on § 411.357(z), the amount counted towards Dr. A's annual aggregate remuneration limit for payments received from the entity under § 411.357(z) would be $1,500. That is, $500 for the services provided under the direct compensation arrangement and $1,000 for the equipment rental arising from the “deemed” direct compensation arrangement with the physician organization.

Importantly, the $500 paid under the direct compensation arrangement between the entity and Dr. A would not be counted towards the annual aggregate remuneration limit of Dr. B or any other physician in the physician organization.

Under certain circumstances, a payment from an entity to a physician organization may be considered to be a payment directly to the physician who provided the items or services to the entity, with the physician organization only passing the remuneration through Start Printed Page 77627from the entity to the physician. What constitutes a direct compensation arrangement with an individual physician under § 411.354(c)(1)(i), as opposed to an arrangement with a physician organization that creates a “deemed direct” compensation arrangement with a physician standing in the shoes of the organization under § 411.354(c)(ii) or (iii), depends on the facts and circumstances of each arrangement. Important factors include, but are not limited to, whether the physician (or the physician's employee, wholly owned entity, or locum tenens physician) provides the services under the arrangement, as opposed to the services being provided by another physician in the physician organization (or the physician organization's employee, wholly owned entity, or locum tenens physician).

Whether any items, office space, or equipment provided by the physician under the arrangement are owned or leased by the individual physician (as opposed to being owned or leased by the physician organization). And whether payment is made directly to the individual physician or, if payment is made to the physician organization, whether the physician organization acts as a pure go-between or middleman, transferring all of the compensation received from the entity under the arrangement to the physician who provided the items or services. (See section II.D.9.

Of this final rule for a discussion of our policy on pure “pass-through” payments.) Payments made to and retained by a physician organization for services provided through an employee of the physician organization are permitted under § 411.357(z), but the payment amount would be counted toward the annual aggregate remuneration limit of each physician who stands in the shoes of the organization. Comment. A number of commenters requested clarification whether, if compensation exceeds the proposed annual aggregate remuneration limit in a given calendar year (as adjusted for inflation), the entity can rely on the exception up to the point immediately prior to when the remuneration exceeded the limit.

The commenters also requested clarification on how the exception would apply when remuneration straddles a calendar year. Specifically, the commenter asked if the remuneration limit resets at the beginning of each calendar year, or whether CMS would apply the exception for a different period, such as a 12-month period beginning with the commencement of the compensation arrangement. Response.

An entity may rely on the exception at § 411.357(z) up to the point in a calendar year immediately prior to when the annual aggregate remuneration limit is exceeded. After that point, if the arrangement does not fit into another applicable exception, the physician is not permitted to make referrals to the entity for designated health services, and the entity may not bill Medicare for such improperly referred services. For example, if the aggregate payments from an entity to a physician exceed the annual aggregate remuneration limit on April 1 of a given year, the exception is available to protect referrals from January 1 to March 31, but not for referrals from April 1 to December 31.

We stress, however, that structuring arrangements to satisfy the requirements of an applicable exception that does not impose a cap on the amount of remuneration paid to the physician under the arrangement (other than the requirement that compensation is fair market value for the items and services provided by the physician) is a best practice and the best way to avoid exceeding the annual aggregate remuneration limit imposed at § 411.357(z)(1). The annual aggregate remuneration limit on remuneration under § 411.357(z) resets each calendar year. As explained in section II.D.2.e.

Of this rule, the provision of remuneration in the form of items or services commences a compensation arrangement at the time the items or services are provided, and the compensation arrangement must satisfy the requirements of an applicable exception at that time if the physician makes referrals for designated health services and the entity wishes to bill Medicare for such services. Thus, for arrangements that straddle a calendar year, remuneration should be allocated to the annual aggregate remuneration limit of a calendar year based on the date that the items or services are provided. To illustrate, assume that an entity engages a physician to present at an educational program series held periodically throughout an academic year spanning September 2020 through May 2021.

Assume also that, on December 15, 2020, the entity pays the physician $2,000 for services provided during the fall semester and, on May 15, 2021, the entity pays the physician $4,000 for services provided during the spring semester. The $2,000 paid under the arrangement for the fall semester is counted toward the annual aggregate remuneration limit for 2020 and the $4,000 paid for the spring semester is counted toward the annual aggregate remuneration limit for 2021. It is possible that the services for which the physician is paid will more directly straddle the change from one calendar year to the next.

For example, assume a physician is engaged to provide a single weekend of emergency call coverage and is paid $2,000 for coverage provided on December 31, 2021 and January 1, 2022, and the physician is paid for the services on January 31, 2022. Assuming no unusual circumstances that would require the payment to be weighted for one day over another, $1,000 would be counted towards the physician's 2021 annual aggregate remuneration limit and $1,000 would be counted towards the physician's 2022 annual aggregate remuneration limit. Comment.

One commenter requested that CMS clarify whether the exception for limited remuneration to a physician can apply to multiple types of services or arrangements. Response. During any given calendar year, the exception at § 411.357(z) may be applied to the provision of different types of items or services, including office space and equipment.

The annual aggregate remuneration limit on remuneration from an entity to a physician is determined by adding compensation for all of the various items and services provided by the physician. For example, if, in a calendar year, a physician is paid $500 for one service, $350 for a separate service, $150 for certain items, and $400 for a short-term lease of equipment, the amount allocated to the annual aggregate remuneration limit under § 411.357(z) for that year is $1,400. As explained above, if the parties had additional arrangements in the same calendar year that fully satisfied all the requirements of an applicable exception other than § 411.357(z), the remuneration under those arrangements would not be counted towards the physician's annual limit under § 411.357(z).

Comment. One commenter expressed concern that the exception for limited remuneration to a physician may allow for business arrangements that the commenter deemed “questionable” and asserted are subject to abuse. This commenter urged CMS to include additional safeguards in the exception, including a requirement that the arrangement does not violate the anti-kickback statute or other Federal or State law or regulation governing billing or claims submission.

Other commenters objected to including any additional requirements pertaining to the anti-kickback statute or Federal or State laws or regulations governing Start Printed Page 77628billing or claims submissions. These commenters stressed that parties already have an independent obligation to not violate these other laws and expressed concern that the introduction of the intent-based anti-kickback statute into the strict liability framework of the physician self-referral law would increase the burden of compliance without affording any additional safeguards to protect against program or patient abuse. Response.

As explained in sections II.D.1. And II.D.10. Of this final rule, we generally believe that certain regulatory exceptions need not include requirements pertaining to the anti-kickback statute or other Federal or State laws or regulations governing billing or claims submissions in order to ensure that financial relationships to which the exceptions apply do not pose a risk of program or patient abuse.

Even so, we believe that a requirement for compliance with the anti-kickback statute is appropriate in certain instances, particularly where both a regulatory and statutory exception could apply to an arrangement and the regulatory exception does not contain all of the requirements or safeguards that are included in the statutory exception. For example, as explained in section II.D.10, the requirement in the regulatory exception for fair market value compensation at § 411.357(l) that the arrangement does not violate the anti-kickback statute acts as a substitute safeguard for certain requirements that are included in the statutory exception for the rental of office space but omitted in the regulatory exception, such as the exclusive use requirement at section 1877(e)(1)(A)(ii) of the Act and § 411.357(a)(3) of our regulations. With respect to the final exception for limited remuneration to a physician at § 411.357(z), the regulatory exception omits certain requirements that are found in many statutory exceptions that are potentially applicable to arrangements excepted under § 411.357(z), such as the set in advance, writing, and signature requirements.

However, the low annual cap on aggregate remuneration under the exception provides a strong and sufficient substitute safeguard for the omitted requirements. Therefore, we are not requiring under § 411.357(z) that the arrangement not violate the anti-kickback statute or other Federal or State law or regulation governing billing or claims submissions. Nonetheless, we agree with the commenter that certain additional safeguards are necessary to prevent program or patient abuse, especially in light of our final policy to raise the annual aggregate remuneration limit under the exception from $3,500 to $5,000.

As proposed, the exception for limited remuneration to a physician required the compensation arrangement to be commercially reasonable. As explained elsewhere in this final rule, we believe that the requirement that an arrangement is commercially reasonable is uniformly interpreted wherever it appears. Most exceptions that include a commercial reasonableness requirement, including exceptions that apply to arrangements that could also be excepted by § 411.357(z), stipulate that the arrangement must be commercially reasonable “even if no referrals were made” between the parties.

We are modifying the requirement at § 411.357(z)(1)(iii) to clarify that the arrangement must be commercially reasonable “even if no referrals were made between the parties.” We are concerned that, without this modification, some stakeholders may believe that the commercial reasonableness standard in § 411.357(z) is a different and less demanding standard than the commercial reasonableness requirement in other exceptions. Because we do not have the same transparency into arrangements protected under the finalized exception at § 411.357(z) and, as explained elsewhere in this final rule, because we prioritize the protection of patient choice, we are also requiring at § 411.357(z)(1)(vi) that, if remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement must satisfy all the conditions of § 411.354(d)(4). As revised in this final rule, § 411.354(d)(4) provides that, if a physician's compensation under a bona fide employment relationship, personal service arrangement, or managed care contract is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, then certain conditions must be met, including that the compensation is set in advance for the duration of the arrangement.

The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties. And neither the existence of the compensation arrangement nor the amount of the compensation is contingent on the volume or value of the physician's referrals to the particular provider, practitioner, or supplier. As explained in section II.B.4.

Of this final rule, the conditions in § 411.354(d)(4) play an important role in preserving patient choice, protecting the physician's professional medical judgment, and avoiding interference in the operations of a managed care organization. Furthermore, prior to our interpretation of the volume or value standard in this final rule, a service arrangement that included a directed referral requirement would have had to comply § 411.354(d)(4) in order to be deemed not to take into account the volume or value of a physician's referrals to the entity. Given our final rules interpreting the volume or value standard and other business generated standard, to ensure that arrangements excepted under § 411.357(z) protect patient choice and the physician's professional medical judgement and avoid interfering in the operation of a managed care organization, we are requiring compliance with § 411.354(d)(4) for arrangements that condition a physician's compensation on referrals to a particular provider, practitioner, or supplier.

We stress that, under § 411.357(z)(1)(vi), the conditions of § 411.354(d)(4), including the set in advance and writing requirement, must be satisfied only if the arrangement to be excepted under § 411.357(z) conditions a physician's compensation on referrals to a particular provider, practitioner, or supplier. To be excepted under § 411.357(z), an arrangement need not satisfy the conditions of § 411.354(d)(4) if compensation under the arrangement to be excepted is not conditioned in this manner, even if the parties have other, separate arrangements that condition a physician's compensation on referrals to a particular provider, practitioner, or supplier. Likewise, if the parties begin an arrangement relying on § 411.357(z) and the arrangement at its outset does not condition compensation on referrals to a particular provider, practitioner, or supplier, then the arrangement need not comply with § 411.354(d)(4) at its outset.

However, if the entity later requires the physician to refer to a particular provider, practitioner, or supplier, the parties must set the compensation and document the referral requirement in writing in advance of the applicability of the requirement. Although we are not including a requirement for compliance with the anti-kickback statute in § 411.357(z), we reiterate here that, to the extent that remuneration implicates the anti-kickback statute, nothing in our proposals or this final rule affects the parties' obligation to comply with the anti-kickback statute, and compliance with the exception for limited remuneration to a physician does not necessarily result in compliance with Start Printed Page 77629the anti-kickback statute. As we stated in Phase I, section 1877 of the Act is limited in its application and does not address every abuse in the health care industry.

The fact that particular referrals and claims are not prohibited by section 1877 of the Act does not mean that the arrangement is not abusive (66 FR 879). Comment. One commenter requested that we limit the applicability of the exception for limited remuneration to a physician to service arrangements and not permit use of the exception for the rental of office space or equipment or for timeshare arrangements.

The commenter stated that such arrangements carry a heightened risk and, therefore, should be documented in writing so that they can be audited, monitored, and objectively verified. Response. Although we appreciate the importance of ensuring that an exception issued by the Secretary under his authority at section 1877(b)(4) of the Act does not undermine the integrity of the Medicare program, we believe that the safeguards incorporated in final § 411.357(z), including the annual aggregate remuneration limit capping the total remuneration permissible under the exception at a relatively low level and the requirement that the remuneration is for items or services actually provided by the physician, are sufficient to protect against program or patient abuse even with respect to arrangements for the rental of office space or equipment and timeshare arrangements.

Therefore, the final exception for limited remuneration to a physician at § 411.357(z) is not limited to arrangements for items and services that are not office space or equipment. The prohibitions on percentage-based compensation and per-unit of service (“per-click”) fees for the rental or use, as modified in this final rule, of office space and equipment serve to protect against certain abusive arrangements. Comment.

Some commenters requested that CMS not finalize the proposed prohibition on certain percentage-based and per-unit of service compensation formulas for the use of premises, equipment, personnel, items, supplies, or services under a timeshare arrangement. The commenter assumed that the proposed requirement is apparently intended to address timeshare arrangements and other arrangements similar to traditional lease of office space and equipment, but asserted that the requirement, as drafted, is so broad that its scope is unclear. Response.

The commenter is correct that the requirement prohibiting a compensation formula under a timeshare arrangement that is based on percentage of revenue or per-unit of service fees that are not time-based relates to the use of premises (including office space), and equipment protected under final § 411.357(z). Under timeshare arrangements, where dominion and control are not transferred for the use of premises, equipment, personnel, items, supplies, or services, we believe that prohibitions on percentage-based compensation and per-unit of service fees are required to ensure that excepted timeshare arrangements do not pose a risk of program or patient abuse. (See 80 FR 71331 through 71332.) Therefore, we are not convinced that § 411.357(z)(1)(v) should be removed.

However, we agree that the requirement, as proposed, could have an unintended impact on arrangements other than timeshare arrangements, and we are revising the requirement to address our specific concern. Under final § 411.357(z)(1)(v), compensation for the use of premises (including office space) or equipment may not be determined using a formula based on. (1) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services provided while using the premises (including office space) or equipment.

Or (2) per-unit of service fees that are not time-based, to the extent that such fees reflect services provided to patients referred by the party granting permission to use the premises (including office space) or equipment. Comment. Several commenters supported our policy that the exception for limited remuneration to a physician be used in conjunction with other exceptions during the course of a calendar year, noting that the exception, if finalized, would provide relief for parties that begin an arrangement for items or services before the arrangement squarely fits in another exception.

One commenter requested that we finalize certain modifications to the exceptions for personal service arrangements at § 411.357(d) and fair market value compensation at § 411.357(l) to ensure consistency with our policy regarding the application of § 411.357(z). Specifically, the commenter requested that we revise § 411.357(d)(1)(ii) to explicitly provide that an arrangement that satisfies all the requirements of § 411.357(z) need not be covered by a personal service arrangement protected under § 411.357(d)(1) or be listed on a master list of contracts. Similarly, the commenter requested that we revise § 411.357(l)(2) to explicitly provide that, if an arrangement for items or services fully satisfied the requirements of § 411.357(z), the parties could also rely on § 411.357(l) to except an arrangement for the same items and services during a calendar year.

Response. As explained in the proposed rule and in this final rule, the exception at § 411.357(z) may be used during the course of a calendar year in conjunction with other exceptions to the physician self-referral law. The commenters are correct that the exception for limited remuneration to a physician may be used in succession with another applicable exception to protect an ongoing arrangement.

For example, if parties do not initially document an arrangement or set the compensation in advance, the arrangement may be excepted under § 411.357(z) if all its requirements are satisfied, including that the remuneration does not exceed the annual aggregate remuneration limit established at final § 411.357(z)(1). If the parties continue the arrangement, they may rely on another applicable exception to protect the arrangement on a going forward basis, provided that all the requirements of the other applicable exception are met, including any writing, signature, and set in advance requirements. All the requirements of the other applicable exception, including the set in advance requirement, would have to be met beginning on the date that the parties rely on the other exception, except that the parties would have up to 90 consecutive calendar days to document and sign the arrangement under § 411.354(e)(4).

Remuneration provided to a physician for items or services provided prior to the date that the arrangement satisfies all the requirements of an applicable exception other than § 411.357(z) would be counted towards the annual aggregate remuneration limit in § 411.357(z)(1). The provision at § 411.357(d)(1)(ii) requires that the personal service arrangement covers all the services provided by the physician (or an immediate family member) to the entity, and states that this requirement is met if all the separate arrangements between the entity and the physician (or immediate family member) incorporate each other by reference or if they cross list a master list of contracts. We share the commenter's concern that this requirement could undermine the applicability and utility of the exception for personal service arrangements if the parties to an arrangement concurrently rely on the new exception at § 411.357(z) to protect a separate arrangement for the provision of personal services.

Therefore, we are modifying § 411.357(d)(1)(ii) to state Start Printed Page 77630that a personal service arrangement excepted under § 411.357(d)(1) does not have to cover personal services that are provided by a physician under an arrangement that satisfies all the requirement of § 411.357(z). Without this modification, there may be confusion as to whether the exception for limited remuneration to a physician may be used for one service arrangement while the parties concurrently use § 411.357(d)(1) for a separate personal service arrangement. Insofar as personal services provided under an arrangement that satisfies all the requirements at § 411.357(z) are excluded from the “covers all services” requirement in § 411.357(d)(1)(ii), it is not necessary to incorporate a personal service arrangement excepted under § 411.357(z) by reference or list it on a master list of contracts.

The exception for fair market value compensation provides at § 411.357(l)(2) that the parties may enter into only one arrangement for the same items or services during the course of a year. We share the commenter's concern that this requirement could undermine the utility of the exception for fair market value compensation if parties first rely on the new exception at § 411.357(z) to protect an arrangement for the same items or services during a single year. (We note that a “year” for purposes of the exception at § 411.357(l) is not defined as a “calendar year” and refers, instead, to any 365-day period.) We are modifying this provision to state that, other than an arrangement that satisfies all the requirements of § 411.357(z), the parties may not enter into more than one arrangement for the same items and services during the course of a year.

With this modification, parties may use the exception for limited remuneration to a physician to protect an arrangement for the provision of items and services, and, during the course of a year, also rely on § 411.357(l) to protect an arrangement for the same items and services. Comment. One commenter asked for clarification as to whether the proposed exception for limited remuneration to a physician could be relied on by an entity to provide continuing medical education (CME) to physicians for free or at a reduced cost.

The commenter characterized our proposal as “increasing the limit from $300 to $3,500 per year.” Response. We believe that the commenter is confusing the new exception for limited remuneration to a physician at § 411.357(z) with the exception for nonmonetary compensation at § 411.357(k), which has an annual limit of $300, adjusted annually for inflation. There are significant differences between these exceptions.

Among other things, the exception for limited remuneration to a physician protects compensation that does not exceed fair market value for items or services actually provided by the physician. Unlike the exception for nonmonetary compensation at § 411.357(k), the new exception at § 411.357(z) does not permit entities to provide remuneration to a physician, including valuable in-kind remuneration such as free or reduced cost CME, without a fair market value exchange for items or services actually provided by the physician. The exception for nonmonetary compensation permits an entity to gift (or otherwise provide) a physician a limited amount of noncash remuneration during the course of a calendar year, not to exceed $300, as indexed to inflation and currently $423 per year, in the aggregate.

No exchange of items or services from the physician is required. An entity may provide CME to a physician under the exception at § 411.357(k), provided that the value of the CME does not exceed the annual limit on nonmonetary compensation when aggregated with any other nonmonetary compensation provided to the physician during the same calendar year. 2.

Cybersecurity Technology and Related Services (§ 411.357(bb)) Relying on our authority under section 1877(b)(4) of the Act, in the proposed rule, we proposed an exception at § 411.357(bb) (the cybersecurity exception) applicable to arrangements involving the donation of cybersecurity technology and related services (84 FR 55830). We believe that establishing such an exception will help improve the cybersecurity posture of the health care industry by removing a perceived barrier to donations of technology and services that address the growing threat of cyberattacks that infiltrate data systems and corrupt or prevent access to health records and other information essential to the delivery of health care. The OIG is establishing a similar safe harbor to the anti-kickback statute elsewhere in this issue of the Federal Register.

Despite the differences in the respective underlying statutes, we attempted to ensure as much consistency as possible between the exception to the physician self-referral law and the safe harbor to the anti-kickback statute. In recent years, both CMS and OIG have received numerous comments and suggestions urging the creation of an exception and a safe harbor, respectively, applicable to donations of cybersecurity technology and related services.[] The digitization of health care delivery and rules designed to increase interoperability and data sharing in the delivery of health care create abundant targets for cyberattacks. For instance, a large health system with over 400 locations was recently the victim of a system-wide cyberattack that took medication, medical record, and other patient care systems offline.[] The health care industry and the technology used in health care delivery have been described as an interconnected ecosystem where the weakest link in the system can compromise the entire system.[] Given the prevalence of electronic health record storage, as well as the processing and transit of health records and other critical protected health information (PHI) between and within the components of the health care ecosystem, the risks associated with cyberattacks that originate with “weak links” are borne by every component of the system.

Although we did not specifically request comments on cybersecurity, numerous commenters on the CMS RFI requested that we establish an exception to protect the donation of cybersecurity technology and related services. In response to its request for information specifically related to cybersecurity, OIG received overwhelming support for a safe harbor to protect the donation of cybersecurity technology and related services. Many commenters on both requests for information highlighted the increasing prevalence of cyberattacks and other threats.

These commenters noted that cyberattacks pose a fundamental risk to the health care ecosystem and that data breaches result in high costs to the health care industry and may endanger patients. Moreover, disclosures of PHI through a data breach can result in identity fraud, among other things. The Health Care Industry Cybersecurity (HCIC) Task Force, created by the Cybersecurity Information Sharing Act of 2015 Start Printed Page 77631(CISA),[] was established in March 2016 and is comprised of government and private sector experts.

The HCIC Task Force produced its HCIC Task Force Report in June 2017.[] The HCIC Task Force recommended, among other things, that the Congress “evaluate an amendment to [the physician self-referral law and the anti-kickback statute] specifically for cybersecurity software that would allow health care organizations the ability to assist physicians in the acquisition of this technology, through either donation or subsidy,” and noted that the regulatory exception to the physician self-referral law for EHR items and services and the safe harbor to the anti-kickback statute for EHR items and services could serve as a template for a new statutory exception.[] Based on responses to OIG's request for information and our proposed rule, we understand that the cost of cybersecurity technology and related services has increased dramatically, to the point where many providers and suppliers are unable to invest in and, therefore, have not invested in, adequate cybersecurity measures. As previously noted, the risks associated with a cyberattack on a single provider or supplier in an interconnected system are ultimately borne by every component in the system. Therefore, an entity wishing to protect itself by preventing, detecting, and responding to cyberattacks has a vested interest in ensuring that the physicians with whom the entity exchanges data are also able to prevent, detect, and respond to cyberattacks, particularly where the connections allow the physicians to establish bidirectional interfaces with the entity, which inherently present higher risk than connections that permit physicians “read-only” access to the entity's data systems.

We believe that a primary reason that an entity would provide cybersecurity technology and related services to a physician is to protect itself from cyberattacks. However, we recognize that donated cybersecurity technology and services may have value for a physician recipient insomuch as the recipient would be able to use his or her resources for needs other than cybersecurity expenses. Even so, it is our position that allowing entities to donate cybersecurity technology and related services to physicians will lead to strengthening of the entire health care ecosystem.

We believe that, with appropriate safeguards, arrangements for the donation of cybersecurity technology and related services will not pose a risk of program or patient abuse, provided that they satisfy all the requirements of the exception at final § 411.357(bb). In addition, we believe that the exception established in this final rule will promote increased security for interconnected and interoperable health care IT systems without protecting potentially abusive arrangements. In the proposed rule, we proposed that the exception at § 411.357(bb) would be applicable to nonmonetary remuneration in the form of certain types of cybersecurity technology and related services (84 FR 55831).

In an effort to foster beneficial cybersecurity donation arrangements without permitting arrangements that pose a risk of program or patient abuse, we proposed the following requirements for cybersecurity donations made under § 411.357(bb). The technology and services are necessary and used predominantly to implement, maintain, or reestablish cybersecurity. Neither the eligibility of a physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties.

Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor. And the arrangement is documented in writing. After reviewing comments on our proposed rule, we are finalizing the exception for cybersecurity donations and related services at § 411.357(bb) with certain modifications related to the types of nonmonetary remuneration permitted under the exception, as well as nonsubstantive modifications to the text of the regulation.

We received the following general comments and our responses follow. Comment. The majority of commenters generally supported the proposed exception for cybersecurity technology and related services.

Commenters noted that cybersecurity is necessary to enable secure and effective exchange of health information and thus is crucial for care coordination and improved health outcomes. One commenter explained that patient safety is the most critical concern when cyberattacks occur, especially when the cyberattacks impact the patient's electronic health records and medical devices. The commenter added that cyberattacks can result in disclosure of sensitive patient information and can alter the treatment a patient is prescribed, among other negative consequences.

One commenter highlighted the trend in health care towards greater interconnectivity, even as costs for cybersecurity rise, and concluded that cybersecurity donations make sense from affordability, efficiency, and social responsibility standpoints. Another commenter stated its belief that health care providers are insufficiently prepared to meet cybersecurity challenges that arise in an increasingly digitized health care delivery system. The commenter stated that the proposed cybersecurity exception would help address these challenges and be part of a national strategy to improve the safety, resilience, and security of the health care industry.

Response. We believe that the exception as finalized at § 411.357(bb) will remove real and perceived barriers to beneficial cybersecurity technology donations, addressing an urgent need to improve cybersecurity hygiene in the health care industry and protect patients and the health care ecosystem overall. With respect to care coordination, we note that, depending on the facts and circumstances, an arrangement for the donation of cybersecurity technology and services may qualify as a value-based arrangement (as defined at final § 411.351) to which the new exceptions at § 411.357(aa)(1), (2), and (3) for arrangements that facilitate value-based health care delivery and payments may be applicable.

Comment. A few commenters generally objected to the proposed cybersecurity exception. One commenter expressed concern that the requirements of the proposed exception are inadequate because, according to the commenter, they are difficult to monitor and less stringent than the requirements of the EHR exception.

Another commenter asked CMS to reconsider the exception and whether cybersecurity technology and arrangements involving the donation of such technology are understood sufficiently at this time to warrant an exception. Some commenters expressed concern that the exception could be used to support anti-competitive behavior. One of the commenters maintained that, while health IT donations by large health care entities appear to advance interoperability, the actual result is that physician recipients lose their autonomy as independent providers, the lack of competition increases the costs of health care, and smaller providers are Start Printed Page 77632closed by the larger health system when they do not create a profit.

Instead of finalizing the proposal, the commenter urged CMS to fund a program that would allow small or rural providers to gain access to cybersecurity technology. Another commenter expressed concern that the proposed cybersecurity exception could inadvertently bolster information blocking, as some providers cite cybersecurity as a reason for not sharing data or providing data access to physicians. Response.

We do not understand the basis for the commeners' assertions that the provision of cybersecurity items and services to protect information by preventing, detecting, and responding to cyberattacks would limit physician autonomy or lead to inappropriate information blocking. Although we are concerned, in general, about anti-competitive behavior, we believe that an exception for arrangements involving the donation of cybersecurity technology and related services is a necessary and critical tool to assist the health care industry in addressing the prevalent and increasing cybersecurity threats facing the industry, which, among other things, can negatively impact the quality of care delivered to beneficiaries.[] The cybersecurity exception incorporates many of the core requirements of the EHR exception, including the requirements that. (1) The remuneration is necessary and used predominantly for the purposes outlined in the exception.

(2) neither the eligibility of the physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties. (3) neither the physician recipient nor the physician's practice makes the receipt of the technology or services or the amount or nature of the technology or services a condition of doing business with the donor entity. And (4) the arrangement is documented in writing.

In addition, as explained above, we believe that many donors will make cybersecurity donations as a self-protective measure. Given these safeguards, we do not believe that the cybersecurity exception, as finalized, permits financial relationships that pose a risk of program or patient abuse. A.

Covered Technology and Services In the proposed rule, we proposed to limit the applicability of the cybersecurity exception to nonmonetary remuneration consisting of technology or services that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity (84 FR 55832).[] We explained that our goal is to ensure that donations are made for the purposes of addressing legitimate cybersecurity needs of donors and recipients. Therefore, the core function of the donated technology or service must be to protect information by preventing, detecting, and responding to cyberattacks (84 FR 55832). As proposed, the exception at § 411.357(bb) would apply to the provision of a wide range of technology and services that are predominantly used for the purpose of, and are necessary for, ensuring that donors and recipients have cybersecurity.

We are taking a neutral position with respect to the types of technology to which the final cybersecurity exception is applicable, including the types and versions of software that an entity may provide to a physician recipient when all the requirements of the exception are satisfied. We did not propose to distinguish, and the cybersecurity exception as finalized here does not distinguish, between cloud-based software and software that must be installed locally (84 FR 55832). The types of technology to which the cybersecurity exception is applicable include, but are not limited to, software that provides malware prevention, software security measures to protect endpoints that allow for network access control, business continuity software, data protection and encryption, and email traffic filtering (84 FR 55832).

As we stated in the proposed rule, these examples are indicative of the types of technology that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity (84 FR 55832). In addition, as explained in section II.E.2.b. Below, the cybersecurity exception as finalized also applies to hardware that is necessary and used predominantly to implement, maintain, or reestablish cybersecurity.

We solicited comments on the scope of the technology to which the cybersecurity exception should be applicable, as well as whether we should expressly include (or exclude) other technology or categories of technology in the exception. We also proposed that the cybersecurity exception would apply to a broad range of services (84 FR 55832). We stated that such services could include— Services associated with developing, installing, and updating cybersecurity software.

Cybersecurity training services, such as training recipients on how to use the cybersecurity technology, how to prevent, detect, and respond to cyber threats, and how to troubleshoot problems with the cybersecurity technology (for example, “help desk” services specific to cybersecurity). Cybersecurity services for business continuity and data recovery services to ensure the recipient's operations can continue during and after a cybersecurity attack. €œCybersecurity as a service” models that rely on a third-party service provider to manage, monitor, or operate cybersecurity of a recipient.

Services associated with performing a cybersecurity risk assessment or analysis, vulnerability analysis, or penetration test. Or Services associated with sharing information about known cyber threats, and assisting recipients responding to threats or attacks on their systems. We stated further that these types of services are indicative of the types of services that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity, and solicited comments on the scope of the services to which the cybersecurity exception should be applicable, as well as whether we should expressly include (or exclude) other services or categories of services (84 FR 55832).

We noted in the proposed rule and reiterate here that, in all cases, the technology and services provided by an entity must be nonmonetary. With respect to both technology and services, we emphasize that, although donated technology or services may have multiple uses, the cybersecurity exception only applies to technology and services that are necessary and used predominantly to implement, maintain, and reestablish cybersecurity. The exception does not apply to technology or services that are otherwise used predominantly in the normal course of the recipient's business (for example, general help desk services related to use of a practice's IT).

We solicited comment on whether this limitation would prohibit the donation of cybersecurity technology and related services that are vital to improving the Start Printed Page 77633cybersecurity posture of the health care industry. With respect to the requirement that the technology or services are necessary to implement, maintain, or reestablish cybersecurity, we considered, and sought comment on, whether to deem certain arrangements to satisfy this requirement (84 FR 55832). We explained in the proposed rule that such a deeming provision, if adopted, would not affect the requirement that the technology or services are used predominantly to implement, maintain, or reestablish cybersecurity.

We emphasized that parties would have to show on a case-by-case basis that the “used predominantly” requirement is met (84 FR 55832). In the proposed rule, we stated that, if we adopted a deeming provision for the purpose of applying the “necessary” requirement at proposed § 411.357(bb)(1)(i), we would deem donors and recipients to satisfy the requirement if the parties demonstrated that the donation furthers a recipient's compliance with a written cybersecurity program that reasonably conforms to a widely-recognized cybersecurity framework or set of standards (84 FR 55832). Examples of such frameworks and sets of standards include those developed or endorsed by the National Institute for Standards and Technology (NIST), another American National Standards Institute-accredited standards body, or an international voluntary standards body such as the International Organization for Standardization.

As explained below in response to comments below, we are not adopting this proposed deeming provision. We are finalizing our proposal to limit the applicability of the cybersecurity exception to technology and services that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity. However, in the final cybersecurity exception as established here, we state the scope of the exception in the chapeau of the exception at § 411.357(bb)(1) instead of including a requirement in the exception that the technology and services are necessary and used predominantly to implement, maintain, or reestablish cybersecurity.

(The remaining requirements of the exception are redesignated to account for this organizational change. For example, proposed § 411.357(bb)(1)(ii) is finalized at § 411.357(bb)(1)(i), and so forth). We are also removing the phrase “certain types of” before “cybersecurity technology and services” from the chapeau to avoid ambiguity regarding the scope of the exception.

Most exceptions to the physician self-referral law are structured such that the chapeau delineates the scope of remuneration that may be provided under the exception, provided that the requirements enumerated under the chapeau language are satisfied. The chapeau of an exception contains specific pre-conditions that must be satisfied in order for the exception to be available to except a particular arrangement. The “necessary and used predominantly” condition in the cybersecurity exception serves this function.

The remuneration that may be provided under the cybersecurity exception is limited to nonmonetary compensation, consisting of technology and services, that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity. In addition, the structural reorganization of the final cybersecurity exception creates greater consistency with the EHR exception. As finalized, the chapeau of the cybersecurity exception mirrors the chapeau in the EHR exception at § 411.357(w)(1), which provides that donated items or services must be necessary and used predominantly to create, maintain, transmit, receive, or protect electronic health records.

Inclusion of the “necessary and used predominantly” condition in the chapeau of the cybersecurity exception underscores that “necessary and used predominantly” has the same meaning in both the EHR and cybersecurity exceptions. We believe this consistency is especially important insofar as cybersecurity software may be donated under both exceptions. We received the following comments and our responses follow.

Comment. One commenter urged CMS to permit, with appropriate safeguards, the donation of both nonmonetary remuneration consisting of cybersecurity technology and services and monetary remuneration to be used for the purchase of cybersecurity technologies and services. The commenter asserted that permitting monetary remuneration in appropriate circumstances could help alleviate what the commenter characterized as the cybersecurity exception's unintended adverse effects on competition, such as a situation where a donor wished to supply cybersecurity technology to two competing small providers and one of the small providers had already purchased the technology but the other had not.

The commenter asserted that protecting monetary reimbursement to the first provider and an in-kind donation to the second provider would be fairer than permitting a donation to one competitor and not the other. Response. We decline to permit reimbursement of previously incurred cybersecurity expenses, as well as the provision of cash remuneration to a physician that is intended to be used for the future purchase of cybersecurity technology and services.

We believe that this would pose a risk of program or patient abuse, as the former would simply be a subsidy of practice expenses that a physician—rather than the donor entity—determined to incur, and the latter involves the provision of cash, some or all of which could be used to offset other practice expenses without ultimately enhancing the cybersecurity posture of the donor entity or the health care ecosystem as a whole. We also highlight that the example provided by the commenter likely would not satisfy the other conditions of this exception even if the exception permitted an entity to provide monetary remuneration. For instance, if a physician has already obtained cybersecurity technology or services, the provision of remuneration in the form of reimbursement would not be necessary to implement, maintain, or reestablish cybersecurity.

Comment. A number of commenters supported the requirement at proposed § 411.357(bb)(1)(i) that the technology and related services must be necessary and used predominantly to implement, maintain, or reestablish cybersecurity. One of the commenters suggested that this provision would ensure the legitimacy of donations and help differentiate the technology and services that may be donated under the cybersecurity exception from technology and services that have multiple uses beyond cybersecurity.

Another commenter urged CMS to require a clear nexus between the cybersecurity donation and the business relationship between the donor and recipient. The commenter explained that the cybersecurity technology should be necessary for the provision of the services involved, such as where a hospital donates cybersecurity technology to a physician to ensure the secure transfer of personal health information and thus improve care coordination for shared patients. The commenter stated that the cybersecurity exception should not protect donations that are used as a way to entice new business.

A different commenter suggested that, provided that donated cybersecurity technology and services substantially further the interests of strengthening cybersecurity for the end user, their donation should be permissible. The commenter agreed with CMS that donors should have the Start Printed Page 77634discretion to choose the amount and nature of cybersecurity technology and services they donate to physicians based on a risk assessment of the potential recipient or based on the risks associated with the type of interface between the parties. Response.

As explained above, the cybersecurity exception is limited to technology and services that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity. However, we are including this limitation in the chapeau of the final cybersecurity exception rather than as a separate requirement of the exception as we proposed. The change in the organization of the exception does not affect or alter the meaning, scope, or application of the requirement that donated technology and services must be necessary and used predominantly to implement, maintain, or reestablish cybersecurity, as that requirement was explained in the proposed rule (84 FR 55831).

The “necessary and used predominantly” language at final § 411.357(bb)(1) delineates the scope of the exception and will ensure that donations are made to address legitimate cybersecurity needs of donors and recipients. With respect to technology and services with multiple uses or functions other than cybersecurity, we note the following. In the 2006 EHR final rule, we acknowledged that electronic health records software is often integrated with other software and functionality, but we explained that such software may still be necessary and used predominantly to create, maintain, transmit, or receive electronic health records if the electronic health records functions predominate (71 FR 45151).

We added that the “core functionality” of the technology must be the creation, maintenance, transmission, or receipt of electronic health records. The same principle applies to technology (as defined at § 411.357(bb)(2)) and services donated under the cybersecurity exception. While donated technology and services may include functions other than cybersecurity, the core functionality of the technology and services must be implementing, maintaining, or reestablishing cybersecurity, and the cybersecurity use must predominate.

Such technology and services must also be necessary for implementing, maintaining, or reestablishing cybersecurity. Although we are not adopting the “clear nexus” standard suggested by the commenter, we question whether donated technology or services would be necessary for the donor or recipient to implement, maintain, or reestablish cybersecurity if the technology or services are not connected to the underlying services furnished by either party. We note also that we are finalizing a requirement that a donor may not directly take into account the volume or value of referrals or other business generated between the parties when determining the eligibility of a potential recipient for donated technology or services, or when determining the amount or nature of the donated technology or services.

This requirement addresses the concern expressed by the commenters regarding parties that improperly use the exception for donations to entice new business. With respect to the last comment, we decline to adopt the commenter's proposal that donations should be permitted under the cybersecurity exception if the donated technology or services “substantially further the interests of strengthening cybersecurity for the end user.” We believe that stakeholders are familiar with the “necessary and used predominantly” condition from the EHR exception, and, insofar as the EHR exception applies to cybersecurity software and services, we believe that it reduces administrative burden to use a similar standard for both the EHR and cybersecurity exceptions. Comment.

Most commenters recommended that we finalize an exception that covers a broad range of cybersecurity technology and services, and some requested specific language or clarifications. In particular, several commenters asked CMS to consider how the proposed exception would apply to cloud-based and subscription-based products and services. One commenter supported many of the examples from the proposed rule of services that could be covered under the cybersecurity exception, while other commenters requested that CMS provide clarity related to the scope of potentially permissible donations through additional examples of the types and amounts of technology and services allowed.

Specifically, commenters asked CMS to clarify whether the exception is applicable to the following services. Assurance, assessment, and certification programs that allow physicians to assess their own cybersecurity and demonstrate that they are trusted participants in health care data exchange. Risk assessment and gap analysis services.

Consulting services to work with a physician to develop and implement specific cybersecurity policies and procedures. Subscription fees required by vendor security products that assist physicians in developing policies and procedures in support of a risk assessment. Implementation, management, and remediation services.

And provision of a full-time cybersecurity officer. Some commenters noted that a cybersecurity-specific help desk may not be realistic and recommended that CMS permit donations of general help desk services, whether through the donor's IT department or the vendor's help desk services. Although many commenters expressed concern about the utility of the exception if it does not apply to a broad enough scope of technology and services, other commenters recommended limiting the scope of cybersecurity technology and services that may be provided to a physician under the exception.

One of these commenters cautioned against permitting donations of “cybersecurity as a service.” The commenter asserted that the “cybersecurity as a service” model, where a third-party manages, monitors, or operates the cybersecurity of a recipient, goes beyond what is reasonable for donated cybersecurity, but did not provide further detail as to how “cybersecurity as a service” would pose a risk of program or patient abuse. Response. As finalized, the exception protects donations of a broad range of technology and services.

Cybersecurity technology and services include both locally installed cybersecurity software and cloud-based cybersecurity software. As explained in section II.E.2.b. Below, the exception also applies to hardware that is necessary and used predominantly to implement, maintain, or reestablish cybersecurity.

We provided multiple examples of items and services to which the cybersecurity exception would apply in the preamble to the proposed rule (84 FR 55832), which is repeated above in this final rule. We continue to believe that the cybersecurity exception is applicable to the examples provided in the proposed rule. We also stated in the proposed rule and reiterate here that “cybersecurity as a service” may be protected, including third-party services managing and monitoring the cybersecurity of a recipient.

Other than a general statement of caution, the commenter that addressed “cybersecurity as a service” did not provide any specific reasons why such a service presents a risk of program or patient abuse, and we see no reason why this cybersecurity format requires a different analysis than cybersecurity installed locally or should be excluded from the scope of the cybersecurity exception. All of the examples provided in the proposed rule Start Printed Page 77635are illustrative only, and the list of examples in the proposed rule is not exhaustive. We intend the exception to be applicable to technology and services that are currently available, as well as technologies and services that will be developed in the future.

Donated technology and services, however, must be necessary and used predominantly to implement, maintain, or reestablish cybersecurity. To the extent that the services described by commenters are necessary and used predominantly to implement, maintain, or reestablish cybersecurity, they may be donated under the cybersecurity exception (if all the remaining requirements of the exception are also satisfied). We recognize that cybersecurity functionality is often incorporated into software or other information technology whose primary use and functionality is not cybersecurity and, further, that certain services may be useful for implementing, maintaining, or reestablishing cybersecurity while also generally serving purposes other than cybersecurity (for example, general IT services that include a cybersecurity component).

However, in order for technology or services to be donated under the cybersecurity exception, the core functionality of the technology or services must be implementing, maintaining, or reestablishing cybersecurity, and the cybersecurity use must predominate. For instance, depending on the facts and circumstances of a particular arrangement, donating a virtual desktop that includes access to programs and services beyond cybersecurity software likely would not be protected because the technology would include functions not necessary and predominantly used to implement, maintain, or reestablish cybersecurity, such as, for example, word processing or claims and billing applications. Similarly, the exception is likely not applicable to general IT help desk services, because the services would not be used predominantly for cybersecurity.

However, we are aware of cybersecurity-specific software and services that include customer service and help desk features for cybersecurity assistance. The cybersecurity exception is applicable to such help desk services if all the requirements of the exception are satisfied. The cybersecurity exception could also be applicable to services provided through an entity's primary help desk, if the services are necessary and used predominantly for cybersecurity (for example, to report cybersecurity incidents).

The provision of a full-time cybersecurity officer in a physician recipient's practice must be necessary, the cybersecurity officer's services must be used predominantly to implement, maintain, or reestablish cybersecurity, and all other requirements of the exception at final § 411.357(bb) must be satisfied in order to avoid violation of the physician self-referral law. Comment. Several commenters interpreted our discussion in the proposed rule of the difficulty of collecting cost contribution amounts for patches and updates to mean that donations of patches or updates to previously donated technology would not fall within the scope of the cybersecurity exception.

The commenters highlighted that patching and updates are critical to managing cybersecurity risks and prohibiting their donation could neutralize any benefits resulting from the cybersecurity exception. One of these commenters noted that, given the fast-paced nature of developments in cybersecurity, it is likely that new tools will need to be deployed on at least an annual basis. The commenters asked that we ensure that the cybersecurity exception, if finalized, applies to ongoing cybersecurity software updates and other patches.

Another commenter requested clarification regarding whether the provision to a physician of a routine or critical update would cause an arrangement to fail to satisfy all the requirements of the cybersecurity exception, noting that patching is sometimes given to physicians for free (because it is built into the contracts with vendors), and some patches may be focused on security while others may be more general. A different commenter asked CMS to provide greater clarity regarding donations of replacement technology in light of the rapid development of new cybersecurity technology. Response.

Constant vigilance is required to maintain the cybersecurity of the health care ecosystem, and we agree with the commenters that patching and updates are critical to managing cybersecurity risks. As we discussed in response to previous comments, we are not excluding any particular type of technology or services—including patches and updates—from the application of the final cybersecurity exception. The ongoing donation of cybersecurity patches and updates will not result in noncompliance with the physician self-referral law, provided that all the requirements of the cybersecurity exception (or another applicable exception) are satisfied at the time of their donation.

We note that the written documentation evidencing the arrangement for the donation of cybersecurity technology or services may account for the future provision of patches and updates, relieving the parties from developing additional documentation each time a patch or update is issued. Also, as described below in section II.E.2.d., the exception at final § 411.357(bb) does not require a financial contribution from the recipient. Therefore, routine patches and upgrades provided to recipients at no cost will not cause the arrangement between the parties to fall out of compliance with the physician self-referral law, provided that all the requirements of the exception are satisfied at the time of their issuance.

Regarding donations of cybersecurity technology or services to physicians who already have some technology or services, the final exception at § 411.357(bb) does not prohibit the donation of replacement technology. However, an arrangement for the provision of cybersecurity technology and services must satisfy all the requirements of the exception. We note that donating replacement technology could satisfy the requirement that the technology or services are necessary to implement, maintain, or reestablish cybersecurity if, for example, the technology that is replaced is outdated or poses a cybersecurity risk.

Comment. One commenter recommended that CMS clarify the scope of the intended “object” to be protected by the cybersecurity technology and services. For example, cybersecurity to protect electronic health records, medical devices, or other IT that uses, captures, or maintains individually identifiable health information.

The commenter noted that the proposed cybersecurity exception was silent as to the “object” of the cybersecurity protection, and asserted that an explicit statement setting broad parameters about the purpose of donated cybersecurity technology and services would provide guidance and potentially cover future technology advances. Another commenter encouraged CMS to specifically permit donations of technology and services related to medical device cybersecurity. Response.

We decline to set parameters or requirements for the intended “object” (or “subject”) of the cybersecurity protection because we are concerned that this could unintentionally limit the scope of the technology and services to which the cybersecurity exception is applicable. If all the requirements of the exception are satisfied, the exception is applicable to cybersecurity technology and services that, among other things, protect Start Printed Page 77636electronic health records, medical devices, or other IT that uses, captures, or maintains individually identifiable health information. Comment.

One commenter objected to what it considered to be CMS' “piecemeal” approach to health care technology, with different exceptions for different types of technology (for example, EHR and cybersecurity) that the commenter asserted must work together to drive care coordination. The commenter urged CMS to broaden the scope of the cybersecurity and EHR exceptions to ensure flexibility to protect technology that can help facilitate the transition to a value-based health care delivery and payment system. The commenter specifically recommended that we make any final cybersecurity exception applicable to data analytics and reporting functionalities.

The commenter provided as an example predictive data analytics tools that allow a hospital to identify and decrease the number of high-risk heart failure patients presenting for admission to the hospital or emergency room. Response. We are not extending the scope of the cybersecurity exception at final § 411.357(bb) to all data analytics and reporting functionality specifically designed to facilitate the transition to a value-based health care delivery and payment system, as requested by the commenter.

As illustrated by the commenter's example, the use and purpose of data analytics and reporting functionality may differ significantly from those of cybersecurity technology and services. The cybersecurity exception at § 411.357(bb) is limited to technology and services that are necessary and used predominantly to implement, maintain, and reestablish cybersecurity, and its requirements of the exception at § 411.357(bb) are not designed to adequately protect against Medicare program or patient abuse where data analytics and reporting functionality are provided at no cost (or reduced cost) to a physician. Other exceptions to the physician self-referral law address the items and services described by the commenter.

We believe that the requirements of those exceptions are appropriate to protect the Medicare program and its patients from abuse when such remuneration is provided by an entity to a physician (or vice versa). With respect to the commenter's concern regarding a piecemeal approach to exceptions under the physician self-referral law, we note that parties seeking to except an arrangement for the donation of technology are not required to utilize multiple exceptions if the separate functions of the technology and the donation satisfy the requirements of a single exception. Comment.

One commenter that generally opposed the cybersecurity exception maintained that effective cybersecurity protection could require a whole suite of services, such as active management, monitoring, and developing an effective response system if an issue arises, and it may not be possible for an outside entity to provide such a broad range of services. The commenter asserted that more limited donations of cybersecurity technology or services, on the other hand, may not provide effective cybersecurity protection for the recipients and may expose the donor to liability in case of a cyberattack. Response.

As described in our responses to other comments, the final cybersecurity exception applies to a wide range of technology and services that implement, maintain, or reestablish cybersecurity (as defined at final § 411.351). Although we established the cybersecurity exception to address real or perceived barriers to improving the cybersecurity posture of the health care industry, the exception does not apply to all remuneration that may be relevant to cybersecurity needs. The final cybersecurity exception permits technology and services that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity.

The protection afforded under the exception is not limited to cybersecurity that is “effective.” In the strict liability context of the physician self-referral law, we are concerned that requiring “effective” cybersecurity at § 411.357(bb)(1) may chill otherwise beneficial cybersecurity donations, as donors and recipients may lack the expertise to understand and determine what constitutes “effective” cybersecurity or there may be disagreement as to whether cybersecurity measures are “effective.” Although donor liability is outside the scope of this rulemaking, we note that nothing in the cybersecurity exception prohibits donors and recipients from addressing such issues through contracts or other agreements. Comment. A number of commenters supported the inclusion of a deeming provision that would allow donors or recipients to demonstrate that the compensation arrangement satisfies the requirement that the technology or services are “necessary” if the donation furthers a recipient's compliance with a written cybersecurity program that reasonably conforms to a widely-recognized cybersecurity framework, such as those developed by NIST, or guidelines developed by the Department of Health and Human Services Office for Civil Rights (OCR) in collaboration with ONC.

One commenter recommended that, in cases where cybersecurity is built into software that gives physicians access to a hospital's computer system, the technology should be deemed to be necessary and used predominantly for cybersecurity. The commenter explained that such a deeming provision is warranted because, as noted in the proposed rule (84 FR 55831), a hospital that has granted physicians access to its system has a vested interest in ensuring that the physicians with whom it shares information are also protected from cyberattacks, particularly where the connections allow the physicians to establish bidirectional interfaces with the entity. A different commenter recommended that any deeming provision remain voluntary, while another commenter supported a deeming provision when the cost of the donation of technology and services exceeds a specified monetary limit.

One commenter supported the inclusion of a deeming provision but only if the parties to the donation arrangement, through an independent third party, demonstrate and certify that the donation ensures compliance with a written cybersecurity program or framework that conforms to NIST standards. In contrast, several commenters objected to the inclusion of any deeming provision, maintaining that it would add unnecessary burden without providing any meaningful protection against program and patient abuse. One of these commenters stated that physicians may struggle to understand what “reasonable conformance” looks like or when a cybersecurity framework or standard is considered “widely recognized.” Response.

We are not including a deeming provision for establishing compliance with the condition that donated technology and services are necessary for cybersecurity in the final rule. We are concerned that any deeming provision that is specific enough to address our program integrity concerns will be of limited or no utility for stakeholders. We also agree with the commenter that parties may struggle to understand what “reasonable conformance” looks like or when a framework or standard is considered “widely recognized.” Without selection of one or more specific frameworks, any deeming provision could be challenging to understand and difficult to enforce.

Regarding the commenter's suggestion that software that grants access to a hospital's system should be deemed to Start Printed Page 77637be necessary and used predominantly for cybersecurity, we agree that the type of connection between a donor and a physician (bidirectional read-write connection versus unidirectional read-only access) is an important factor in determining whether particular technology or services are necessary for cybersecurity. However, we do not believe that any software or other information technology should be deemed to be necessary for cybersecurity simply because the technology permits a physician to access a hospital's computer system. Moreover, the determination of whether technology or services are used predominantly to implement, maintain, or reestablish cybersecurity depends on how the donated technology or services are used in fact and, therefore, not appropriate for a deeming provision.

Although technology or services donated under the cybersecurity exception may have uses or functions other than cybersecurity (for example, software that allows a physician to access a hospital's computer system), the cybersecurity use must in fact predominate. B. Definitions of “Cybersecurity” and “Technology” In the proposed rule, we proposed to define the term “cybersecurity” to mean the process of protecting information by preventing, detecting, and responding to cyberattacks and to define the term “technology” to mean any software or other type of information technology, other than hardware (84 FR 55831).

Because the term “cybersecurity” also appears in the EHR exception at § 411.357(w), which expressly applies to the donation of cybersecurity software and services, we proposed to include the definition of “cybersecurity” in our regulations at § 411.351. Because the term “technology,” as used in the new exception for cybersecurity technology and related services, would be defined solely for purposes of the exception at § 411.357(bb), we proposed to include its definition at § 411.357(bb)(2) (84 FR 55831). We note that the term “technology” is included in several instances in our regulations as part of the term “information technology” and at § 411.357(w)(6)(iv) to describe one of the ways in which the determination of the eligibility of a physician for a donation of EHR items or services, or the amount or nature of the items or services, would be deemed not to be determined in a manner that directly takes into account the volume or value of referrals or other business generated between the parties.

The proposed definition of “technology” was not intended to affect the meaning of the term “information technology” or the interpretation of § 411.357(w)(6)(iv). In the proposed rule, we proposed a broad definition of “cybersecurity” derived from the NIST Framework for Improving Critical Infrastructure,[] a framework that does not apply specifically to the health care industry, but applies generally to any United States critical infrastructure (84 FR 55831). We proposed a broad definition of “cybersecurity” to avoid unintentionally limiting donations by relying on a narrow definition or a definition that might become obsolete over time, although we solicited comments whether a definition tailored to the health care industry would be more appropriate (84 FR 55831).

We proposed a similarly broad definition of “technology” that is neutral with respect to the types of cybersecurity technology to which the exception applies (84 FR 55831). We explained in the proposed rule that the definition of “technology” is broad enough to include cybersecurity software and other IT, such as an Application Programming Interface (API)—which is neither software nor a service, as those terms are generally used—that is available now, as well as technology that may become available as the industry continues to develop. As proposed, “technology” would have excluded hardware.

We explained our concern in the proposed rule that donations of valuable multiuse hardware could pose a risk of program or patient abuse (84 FR 55832). In the proposed rule, we also considered two alternative proposals that would allow for the donation of certain cybersecurity hardware (84 FR 55831 through 55832). Under the first alternative proposal, the cybersecurity exception would cover certain hardware that is necessary for cybersecurity, provided that the hardware is stand-alone (that is, is not integrated within multifunctional equipment) and serves only cybersecurity purposes (for example, a two-factor authentication dongle).

We solicited comments on what types of hardware might meet these criteria and whether such hardware should fall within the scope of the exception. Under the second alternative proposal, parties would be permitted to make more robust donations of cybersecurity hardware if the donor had a cybersecurity risk assessment that identifies the recipient as a risk to its cybersecurity, and the recipient had a cybersecurity risk assessment that provided a reasonable basis to determine that the donated cybersecurity hardware is needed to address a risk or threat identified by a risk assessment (84 FR 55834). We noted in the proposed rule and reiterate here that the exception at § 411.357(bb), both as proposed and finalized, covers only items and services that qualify as cybersecurity technology and services (84 FR 55832).

It does not extend to other types of cybersecurity measures outside of technology or services. For example, the exception does not apply to donations of installation, improvement, or repair of infrastructure related to physical safeguards, even if they could improve cybersecurity (for example, upgraded wiring or installing high security doors). Donations of infrastructure upgrades are extremely valuable and have multiple benefits in addition to cybersecurity, and, thus, permitting an entity to provide such services at no cost to the physician recipient would present a risk of program or patient abuse.

As explained in more detail below, in response to comments we are finalizing the definition of “cybersecurity” as proposed, and finalizing the definition of “technology” without the phrase “other than hardware.” We received the following comments and our responses follow. Comment. Several commenters agreed with the proposed industry-neutral definition of “cybersecurity,” derived from the NIST Cybersecurity Framework (NIST CSF), and most commenters generally agreed that the final rule should include a broad definition of “cybersecurity” to provide sufficient flexibility for future changes, adaptations, and variations in the dynamic world of cybersecurity.

One commenter was generally supportive of the proposed definition of “cybersecurity” but believed it should include the process of protecting information through “identifying” and “recovering” from cyberattacks in order to account for the entire lifecycle of a cyberattack. The commenter presumed that the addition of “recovering” would protect “back-up services” that support reestablishing cybersecurity and reduce the impact of ransomware extortion. Another commenter supported the definition of “cybersecurity” for being fairly broad and including donations of APIs, but requested that we modify the definition to account for what the commenter identified as the three pillars of information security.

Confidentiality of information, integrity of information, and availability of information.Start Printed Page 77638 Response. We agree with the commenters that we should adopt a broad, industry-neutral definition of “cybersecurity.” Consequently, we are finalizing a definition derived from the NIST CSF. The NIST CSF is industry-neutral and widely accepted across public and private sectors and international organizations, and it applies to any critical infrastructure in the United States, which includes health care.

It provides a commonly understood language for donors and recipients seeking to use the cybersecurity exception to improve their cybersecurity posture. We are not adopting a definition of “cybersecurity” that would incorporate specific technology solutions for cyberattacks. We are concerned that, as new cybersecurity technologies are developed and implemented, a definition that incorporates specific technology solutions for cyberattacks could become obsolete.

We believe that the final definition of “cybersecurity” at § 411.351 provides sufficient flexibility while also permitting parties a clear understanding of the technology to which the exception is applicable. Although the cybersecurity exception does not require compliance with the NIST CSF, we encourage potential donors and recipients to ensure a comprehensive, systematic approach to identifying, assessing, and managing cybersecurity risks. We decline to add the terms “identifying” and “recovering” to the definition of “cybersecurity,” as suggested by the commenter, and we noted that these terms also appear in the NIST CSF.

The NIST CSF organizes basic “cybersecurity activities” into five functions. Identify, protect, detect, respond, and recover. The exception at final § 411.357(bb) applies to donations of cybersecurity technology and services that are necessary and used predominantly for one or more of these five functions and the related subfunctions and cybersecurity outcomes that are part of the NIST CSF.

We are not persuaded to adopt a more specific definition of cybersecurity by incorporating additional terminology from the NIST CSF and are finalizing the definition of “cybersecurity” at § 411.351 as proposed. With respect to recovering from cyberattacks in particular, we stress that, although the cybersecurity exception applies to donations of nonmonetary remuneration consisting of technology and services that are necessary and used predominantly for reestablishing cybersecurity, “reestablishing” cybersecurity does not include payment by an entity of any ransom on behalf of a physician recipient in response to a cyberattack (or to reimburse a physician for a ransom paid by the physician). Moreover, the payment or reimbursement of a ransom would not be nonmonetary remuneration.

We also decline to modify the definition of “cybersecurity” to expressly include the three pillars of information security, as requested by the last commenter. We agree that the concepts described by the commenter as the “three pillars” of confidentiality, integrity, and availability of information are fundamental aspects of cybersecurity. The NIST CSF similarly recognizes these concepts.

An outcome category under the “protect” function of cybersecurity includes management of data “consistent with the organization's risk strategy to protect the confidentiality, integrity, and availability of information.” Therefore, the final definition of “cybersecurity” at § 411.351, which includes “the process of protecting information,” accounts for these principles while also providing flexibility and certainty to donors as to the scope of the cybersecurity exception. Comment. One commenter stated that the proposed definition of “cybersecurity” seems oversimplified and not comprehensive.

The commenter suggested that the definition of “cybersecurity” should be inclusive of any unauthorized use, even without deliberate criminal activity or a specific cyberattack, and recommended broadening the definition accordingly. A different commenter maintained that the proposed definition of “cybersecurity” fails to capture all aspects of security controls relevant to patient information, systems processing, or retention of patient information. The commenter recommended that we define “cybersecurity” to mean.

(1) The prevention of damage to, protection of, and restoration of computers, electronic communications systems, electronic communications services, wire communication, and electronic communication, including information contained therein, to ensure its availability, integrity, authentication, confidentiality, and nonrepudiation. (2) the prevention of damage to, unauthorized use of, exploitation of, and—if needed—the restoration of electronic information and communications systems, and the information they contain, in order to strengthen the confidentiality, integrity and availability of these systems. Or (3) the process of protecting information by preventing, detecting, and responding to attacks.

Response. We decline to modify the definition of “cybersecurity” as suggested by the first commenter. We disagree with the commenter's characterization of the definition, and do not believe that the final definition of “cybersecurity” at § 411.351 has the effect of limiting donations of cybersecurity technology and services to only those that prevent criminal misconduct.

The definition of “cybersecurity” adopted in this final rule is unrelated to the intent—criminal or otherwise—of an “unauthorized user.” We believe that the definition adopted in this final rule is broad enough to address the commenter's concerns about unauthorized users. We are also not adopting the definition suggested by the second commenter. The principles underlying the commenter's definition, which the commenter stated are derived from NIST and other Federal government sources, are already generally included in the definition of “cybersecurity.” Moreover, we are concerned that some of the language suggested by the commenter would greatly expand the scope of the cybersecurity exception and the donation of such technology and services could pose a risk of program or patient abuse.

For example, “restoration of computers, electronic communications systems, electronic communications services, wire communication, and electronic communication,” could be lead parties to mistakenly believe that the cybersecurity exception applies to donations of technology and services that are not necessary and used predominantly to implement, maintain, or reestablish cybersecurity, such as donations of entire communication systems. Comment. Most commenters that commented on the proposed definition of “technology” generally agreed with using the NIST CSF as a basis for the definition.

However, many of these commenters requested that we permit donations of certain cybersecurity hardware under the exception and delete the phrase “other than hardware” in the proposed definition of “technology.” In support, some commenters asserted that the lines between hardware, software, services, and other technology that is neither hardware, software, nor a service, are increasingly blurred, and noted that such technologies are often packaged together as a bundle. Other commenters suggested that hardware donations are a foundational requirement to operationalize cybersecurity best practices. These commenters asserted that including hardware within the Start Printed Page 77639definition of “technology” would allow for more aggressive data security and excluding hardware from the definition is shortsighted and could limit the use of effective cybersecurity measures.

A few commenters highlighted that certain cybersecurity software requires specific hardware and requested that we expand the scope of the exception to cover donations of such hardware. For example, a commenter noted that firewalls involve the use of both hardware and software, and suggested that many clinicians would not have the technical knowledge to configure the firewalls. This commenter recommended that we permit the donation of low-cost hardware, potentially up to a dollar threshold that could not be exceeded for the total donation.

Other commenters that supported permitting the donation of hardware under the cybersecurity exception asserted that failing to extend the application of the exception to donations of multifunctional cybersecurity hardware (or software) would limit the utility of the exception because cybersecurity technology often is not standalone in nature. Some of these commenters provided examples of multifunctional hardware they deemed beneficial to cybersecurity hygiene, such as encrypted servers, encrypted drives, network appliances, locks on server closet doors, upgraded wiring, physical security systems, fire retardant or warning technology, and high security doors. Some of these commenters stated that any program integrity concerns with hardware donations are adequately addressed by the requirement that donated technology and services must be necessary and used predominantly to implement, maintain, or reestablish cybersecurity.

In contrast, a few commenters generally supported our proposal to exclude hardware from the definition of technology, citing program integrity concerns. Response. We are modifying the definition of “technology” to remove the phrase “other than hardware.” Thus, the cybersecurity exception at final § 411.357(bb) is applicable to hardware that is necessary and used predominantly to implement, maintain, or reestablish cybersecurity.

We agree with the commenters that our program integrity concerns regarding donations of valuable multifunctional hardware are adequately addressed by making the exception available only to donated technology and services are necessary and used predominantly to implement, maintain, or reestablish cybersecurity, and we do not believe that a monetary cap is necessary. As explained in section II.E.2.a. Above, donated technology, including hardware, may include other functionality or uses besides cybersecurity.

However, the cybersecurity use must predominate and the core functionality of the hardware must be implementing, maintaining, or reestablishing cybersecurity. The hardware must also be necessary for cybersecurity. Certain of the examples offered by commenters, including locks on doors, upgraded wiring, physical security systems, fire retardant or warning technology, and high security doors do not qualify as “technology” under § 411.357(bb)(2) because they are physical infrastructure improvements, not software or other information technology.

Therefore, the cybersecurity exception is not applicable to these items. The cybersecurity exception is applicable to hardware such as encrypted servers, encrypted drives, and network appliances, but only if the hardware is necessary and used predominantly to implement, maintain, or reestablish cybersecurity. If, for example, an encrypted server is used predominantly to host the computer infrastructure of a recipient, it would not satisfy the necessary and used predominantly requirement of § 411.357(bb)(1), even if the encrypted server has ancillary cybersecurity uses and functionality.

Comment. A number of commenters suggested that CMS expand the proposed cybersecurity exception to apply to single-function hardware technologies that have limited or no functionality outside of cybersecurity, such as computer privacy screens, two-factor authentication dongles and security tokens, facial recognition cameras for secure access, biometric authentication, secure identification card and device readers, intrusion detection systems, data backup systems, and data recovery systems. One commenter asserted that the sole purpose of most cybersecurity hardware is to maintain the security of patient data.

Response. The final definition of “technology” does not preclude hardware and should address the commenters' concerns. We agree that certain hardware is limited to cybersecurity uses.

Provided that all the requirements of the exception are satisfied, including the requirement that the donated hardware is necessary and used predominantly to implement, maintain, or reestablish cybersecurity, the exception at § 411.357(bb) will permit the donation of single-use or standalone cybersecurity hardware, including the types described by the commenters. Comment. We received several comments on our alternative proposal to permit more robust donations of cybersecurity hardware, provided that both the donor and the recipient obtain risk assessments which provide a reasonable basis to determine that the donated cybersecurity hardware is necessary.

A number of commenters generally favored the proposal. Some of these commenters asserted that, because the donation is based on the results or recommendations of a risk assessment, there should be no cap or limit on the type or amount of hardware that may be donated and no requirement that a recipient contribute to the cost of donated hardware. Other commenters favored allowing robust donations of cybersecurity hardware, but opposed the requirement in the alternative proposal that both the donor and the recipient first obtain a risk assessment supporting the donation.

One commenter stated that the alternative proposal could pose a risk of program abuse, while a different commenter found the alternative proposal to be too limiting, and suggested that hardware donations be permitted if the hardware is necessary and used predominantly to implement, maintain, or reestablish cybersecurity. Response. We are not adopting a policy that permits the donation of cybersecurity hardware only when the donor has a cybersecurity risk assessment that identifies the recipient as a risk to its cybersecurity, and the recipient has a cybersecurity risk assessment that provides a reasonable basis to determine that the donated cybersecurity hardware is needed to address a risk or threat identified by a risk assessment.

We believe that our expansion of the definition of “technology” to include hardware, coupled with the requirement that any donated hardware is necessary and used predominantly to implement, maintain, or reestablish cybersecurity, provides sufficient flexibility for cybersecurity hardware donations while protecting against program or patient abuse. Although we are not finalizing this alternative proposal, parties remain free, and are encouraged, to perform risk assessments to determine donor and recipient vulnerability to cyberattacks and to assist in creating their own cybersecurity programs. Comment.

One commenter explained that, typically, entities do not purchase the actual software that provides cybersecurity. Rather, entities purchase the right to use the software, which is accomplished through licensing, and Start Printed Page 77640donate a license to use the software to recipients. In these circumstances, the software itself is not donated.

The commenter also recommended that we include installment and repairs among the types of technology and services that may be donated under the exception. Response. We recognize that, in some instances, entities purchase the right to use cybersecurity software, which is accomplished through licensing, and donate that use or license rather than the software itself.

The donation of a license to use cybersecurity software may be permissible under the final exception at § 411.357(bb) in the same way that donating software would be permissible, if all the requirements of the exception are satisfied. We agree with the commenter that installment and repairs should be included among the technology and services to which the cybersecurity exception is applicable, and the final cybersecurity exception is applicable to such services. C.

Requirement for Donors (§ 411.357(bb)(1)(i)) [] In the proposed rule, we proposed a requirement that neither the eligibility of a physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties (84 FR 55833). It is our understanding that the purpose of donating cybersecurity technology and related services is to guard against threats that come from interconnected systems, and we expect that a donor would provide the cybersecurity technology and related services only to physicians that connect to its systems, which includes physicians that refer to the donor. However, this requirement would prohibit the donor from directly taking into account the volume or value of a physician's referrals or the other business generated by the physician when determining.

(1) Whether to make a donation of cybersecurity technology or services. Or (2) how much or the nature of the donated technology or services. We are including this requirement as proposed.

However, it is designated in the final regulation at § 411.357(bb)(1)(i). Nothing in the requirements of the final cybersecurity exception is intended to require a donor to donate cybersecurity technology and related services to every physician that connects to its system. Donors are permitted to select recipients in a variety of ways, provided that neither a physician's eligibility, nor the amount or nature of the cybersecurity technology or related services donated, is determined in a manner that directly takes into account the volume or value of referrals or other business generated between the parties.

For example, a donor could perform a risk assessment of a potential recipient (or require a potential recipient to provide the donor with a risk assessment) before determining whether to make a donation or the scope of a donation. If the donor is a hospital, it might choose to limit donations to physicians on the hospital's medical staff. Or, the donor might select recipients based on the type of actual or proposed interface between them.

For example, an entity may elect to provide a higher level of cybersecurity technology and services to a physician with whom it has a higher-risk, bi-directional read-write connection than the entity would provide to a physician with whom it has a read-only connection to a properly implemented, standards-based API that enables only the secure transmission of a copy of the patient's record to the physician. As discussed in the proposed rule, in contrast to the similar requirement in the EHR exception at § 411.357(w)(6), the cybersecurity exception does not include a list of selection criteria which, if met, would be deemed not to directly take into account the volume or value of referrals or other business generated by the physician (84 FR 55833). We solicited comments on whether we should include deeming provisions in the exception for cybersecurity donations that are similar to the provisions at § 411.357(w)(6), and any other requirements or permitted conduct that we should enumerate in the cybersecurity exception (84 FR 55833).

As explained below, we are not adopting deeming provisions for determining compliance with final § 411.357(bb)(1)(i). We did not propose to restrict the types of entities that may make cybersecurity donations under the cybersecurity exception (84 FR 55833). Although receiving donated cybersecurity technology and related services would relieve a physician of a cost that he or she otherwise would incur, the program integrity risks associated with arrangements for the donation of technology and related services intended to promote cybersecurity are different than those associated with arrangements for the donation of other valuable technology, such as EHR items and services.

However, we solicited comments on whether we should narrow the scope of entities that may provide remuneration under the cybersecurity exception as we have done in other exceptions, such as the EHR exception. As explained in section II.E.2.e. Below, we are not limiting the types of entities that are permitted to make donations under final § 411.357(bb).

Based on the comments, we are finalizing the requirement that neither the eligibility of a physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties, although it is designated in the final exception at § 411.357(bb)(1)(i). Final § 411.357(bb)(1)(i) is identical to proposed § 411.357(bb)(1)(ii). As noted above and explained more fully below in response to comments, we are not adopting deeming provisions that would allow parties to demonstrate compliance with final § 411.357(bb)(1)(i), and we are not restricting the types of entities that may make donations under the final cybersecurity exception at § 411.357(bb).

We received the following comment and our response follows. Comment. Commenters generally supported the requirement at final § 411.357(bb)(1)(i) that neither the eligibility of a physician for cybersecurity technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties.

However, a number of these commenters opposed our proposal to establish a deeming provision, similar to the deeming provision in the EHR exception at § 411.357(w)(6), under which certain selection criteria would be deemed to satisfy the requirement at final § 411.357(bb)(1)(i). One commenter maintained that it would create a risk of program or patient abuse to permit a donor to choose recipients who will receive donations of cybersecurity through a deeming provision. In contrast, other commenters supported the establishment of a deeming provision to provide clarity and guidance with respect to how parties may determine the eligibility of a physician recipient for cybersecurity technology or services, or the nature and Start Printed Page 77641amount of such services, without violating the physician self-referral law.

Response. We are finalizing the requirement that neither the eligibility of a physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties, but are not including a list of selection criteria that, if utilized, would be deemed not to directly take into account the volume or value of referrals or other business generated between the parties. As we explained in the proposed rule, deeming provisions for selection criteria that pertain to a prohibition on taking into account the volume or value of referrals or other business generated between parties are sometimes interpreted as prescriptive requirements, especially in the context of a new exception that applies to emerging and rapidly evolving arrangements such as the cybersecurity exception (84 FR 55833).

In this context, we are concerned that a deeming provision may cause the parties to an arrangement to forgo legitimate and acceptable selection criteria, thus limiting the scope and utility of the cybersecurity exception. Because we do not want to inhibit appropriate cybersecurity donations that are made using selection criteria that are not expressly deemed to be permissible under the cybersecurity exception, we are not finalizing any deeming provisions pertaining to the requirement at final § 411.357(bb)(1)(i). D.

Requirement for Recipients (§ 411.357(bb)(1)(ii)) [] In the proposed rule, we proposed to include in the cybersecurity exception a requirement that neither the physician, nor the physician's practice (including employees or staff members), makes the receipt of cybersecurity technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor (84 FR 55833). This requirement mirrors a requirement in the EHR exception at § 411.357(w)(5). At final § 411.357(bb)(1)(ii), we are finalizing the requirement as proposed.

We did not propose and, thus, are not including in the final cybersecurity exception a requirement that the physician recipient of cybersecurity technology or services must contribute to the cost of the technology or services. As explained earlier in this section II.E.2., with this exception, we seek to remove a barrier to donations that improve cybersecurity throughout the health care industry in response to the critical cybersecurity issues identified in the HCIC Task Force Report, by commenters to the CMS RFI and OIG request for information, and elsewhere. We proposed to include only those requirements under the exception that we believe are necessary to ensure that the arrangements do not pose a risk of program or patient abuse.

In the case of cybersecurity technology and related services, we do not believe that requiring a minimum contribution to the cost by the recipient is necessary or, in some cases, practical. We recognize that the level of services for each recipient might vary, and might be higher or lower each year, each month, or even each week, resulting in the inability of certain physician practices, especially solo practitioners or physician practices in rural areas, to make the required contribution, which, in turn, risks the overall cybersecurity of the health care ecosystem of which the practices are a part. Similarly, donors may aggregate the cost of certain services across all recipients, such as cybersecurity patches and updates, on a regular basis, which may result in a contribution requirement becoming a barrier to widespread, low-cost improvements in cybersecurity because of the amount allocated to each recipient.

Moreover, if physicians are not required to utilize resources to contribute to the cost of cybersecurity that benefits both the donor and the physician, they will instead have the flexibility to contribute to the overall cybersecurity of the health care ecosystem by using available resources for otherwise unprotected cybersecurity-related hardware that is core to their business, including updates or replacements for outdated legacy hardware that may pose a cybersecurity risk. Importantly, although the final cybersecurity exception does not require a recipient to contribute to the cost of donated cybersecurity technology or related services, donors are free to structure donation arrangements under § 411.357(bb) to require that recipients contribute to the cost of cybersecurity technology and related services. However, if a donor gave a full suite of cybersecurity technology and related services at no cost to a high-referring practice but required a low-referring practice to contribute 20 percent of the cost, then the donation could violate the requirement at § 411.357(bb)(1)(i).

Based on the comments, we are finalizing the requirement that neither the physician, nor the physician's practice (including employees or staff members), makes the receipt of cybersecurity technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor as proposed. We received the following comments and our responses follow. Comment.

Several commenters supported the proposed requirement that neither the physician who receives the cybersecurity technology nor the physician's practice (including employees and staff members) makes the receipt of technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor. One of these commenters requested that CMS align its provision on conditioning business on the receipt of cybersecurity technology or services with OIG's safe harbor condition at proposed 42 CFR 1001.952(jj)(3), while another commenter requested that the requirement in the cybersecurity exception mirror the similar requirement in the EHR exception at § 411.357(w)(5). Response.

As proposed and finalized, the prohibition on making the receipt of cybersecurity technology or services a condition of doing business with the donor at final § 411.357(bb)(1)(ii) is substantively identical to the OIG's safe harbor condition at proposed 42 CFR 1001.952(jj)(3) and the similar requirement in the EHR exception at § 411.357(w)(5). Variation in the wording of the regulations reflect differences in the underlying statutes, with respect to the anti-kickback safe harbor, and differences in the application of the EHR and cybersecurity exceptions, with respect to the similar provision in the EHR exception at § 411.357(w)(5). Comment.

Many commenters agreed that we should not require a recipient of cybersecurity technology and services to contribute to the overall cost of the technology and services. Commenters variously asserted that a contribution requirement in the context of cybersecurity may act as a barrier to donations of technology and services because calculations of the cost of technology and services may be imprecise, it may be administratively burdensome to calculate or track contributions, and contributing to the cost of cybersecurity technology and Start Printed Page 77642services may be impossible for some physician recipients. In contrast, several commenters supported a contribution requirement, although one of these commenters suggested that a contribution requirement less than what is required under the EHR exception would be appropriate because, according to the commenter, a 15 percent contribution toward cybersecurity technology and services may be too high for some physicians.

A few commenters that supported a contribution requirement suggested that small and rural providers, those in medically underserved areas, and federally qualified health centers should be exempt from any such requirement. A few other commenters suggested that entities should have the choice whether to require a contribution from recipients, with one of these commenters supporting a prohibition on determining the amount of the contribution from the physician recipient in any manner that takes into account the volume or value of the physician's referrals or the other business generated by the physician. Response.

We did not propose and, thus, are not including a contribution requirement in the final cybersecurity exception at § 411.357(bb). For the reasons stated in the proposed rule (84 FR 55833 through 55834), as well as those identified by commenters, we do not believe that it is necessary or advisable to require the physician recipient of cybersecurity technology or services to contribute to the cost of the technology or services. The exception, as finalized, includes sufficient safeguards against program or patient abuse, and it is not necessary to include a contribution requirement that might undermine our goal of facilitating improvement and maintenance of the cybersecurity of the health care ecosystem.

As we stated in the proposed rule (84 FR 55834), donors are free to require recipients to contribute to the costs of donated cybersecurity technology and services. However, we caution that the determination of the amount of the required contribution may not take into account the volume or value of the physician recipient's referrals or other business generated between the parties. E.

Written Documentation (§ 411.357(bb)(1)(iii)) [] We proposed to require that the arrangement for the provision of cybersecurity technology and related services is documented in writing (84 FR 55834). We stated that, although we would not interpret this requirement to mean that every item of cybersecurity technology and every potential related cybersecurity service must be specified in the documentation evidencing the arrangement, we expect that the written documentation evidencing the arrangement identifies the recipient of the donation and includes the following. A general description of the cybersecurity technology and related services provided to the recipient over the course of the arrangement, the timeframe of donations made under the arrangement, a reasonable estimate of the value of the donation(s), and, if applicable, the recipient's financial responsibility for some (or all) of the cost of the cybersecurity technology and related services that are provided by the donor (84 FR 55834).

We did not propose and, thus, we are not including a requirement in the final cybersecurity exception at § 411.357(bb) that the parties sign the documentation that evidences the arrangement or that the parties document their arrangement in a formal signed contract, because we believe that this requirement may lead to inadvertent violation of the physician self-referral law, especially in situations where donors need to act quickly and decisively—prior to obtaining the signature of each physician who is considered a party to the arrangement—to provide needed cybersecurity technology or related services to physician recipients. In the proposed rule (84 FR 55834), we solicited comments on whether we should specify in regulation which terms are required to be in writing. We also sought comment regarding whether we should include a signature requirement in the cybersecurity exception.

Based on the comments, we are finalizing the writing requirement as proposed. It is designated at final § 411.357(bb)(1)(iii). We are not including regulatory text that specifies which terms of the arrangement must be in writing.

Rather, we believe that the appropriate standard, as described in the CY 2016 PFS, is that the writing requirement of the exception is satisfied if contemporaneous documents would permit a reasonable person to verify compliance with the exception at the time that a referral is made (80 FR 71315). We received the following comments and our responses follow. Comment.

Most commenters supported a writing requirement that provides parties with flexibility in compiling the documentation necessary to satisfy the requirement. However, a few commenters supported the inclusion of a requirement to document the arrangement in a formal written agreement, noting that this would provide transparency with respect to the cybersecurity donation process, especially in the case of hardware donations. Another commenter opined that requiring a formal written agreement between the donor and the recipient would be a reasonable safeguard, as long as the requirements for the written agreement are limited in scope.

The commenter asked CMS to require documentation only of the technology or services to be donated, commercial terms as necessary to satisfy the requirements of the cybersecurity exception, and warranties by both parties to use the technology in compliance with applicable laws and regulations. The commenter also suggested that, if CMS requires a formal written agreement between the parties, to facilitate compliance, CMS should make available on the CMS website a template agreement with standard terms. In contrast, one commenter requested that CMS not impose “burdensome” writing requirements on the parties.

The commenter asserted that, although donors have a vested interest in more robust documentation, for example, requiring recipients to acknowledge applicable security rules, CMS should not mandate the documentation of specific information in order for parties to avail themselves of the cybersecurity exception. Response. We believe that the writing requirement at final § 411.357(bb)(1)(iii) is reasonable in scope, and provides for adequate transparency to protect against program or patient abuse without imposing undue burden.

In the proposed rule (84 FR 55834), we stated that written documentation of the arrangement should include a general description of the cybersecurity technology and related services provided to the recipient over the course of the arrangement, the timeframe of donations made under the arrangement, a reasonable estimate of the value of the donation(s), and, if applicable, the recipient's financial responsibility for some (or all) of the cost of the cybersecurity technology and related services that are provided by the donor (84 FR 55834). We are not persuaded to specify which terms of a cybersecurity donation arrangement must be in writing, and we decline to provide a template cybersecurity donation agreement or standard cybersecurity donation terms, as suggested by the commenter. We remind Start Printed Page 77643stakeholders that the relevant inquiry for determining compliance with the writing requirement at final § 411.357(bb)(iii) is whether contemporaneous documents pertaining to the arrangement would permit a reasonable person to verify compliance with the cybersecurity exception at the time that a referral is made (80 FR 71315).

We believe that providing parties with the flexibility to document their arrangements in any manner that meets this standard is preferable to detailed mandates that could result in noncompliance with the physician self-referral law due to even a slight departure from the documentation requirement. Of course, parties are free to include additional terms in a written agreement related to a cybersecurity donation beyond those required under the exception at § 411.357(bb). Comment.

One commenter requested that CMS address the differences between the documentation and signature requirements in the cybersecurity exception and OIG's cybersecurity safe harbor. The commenter highlighted that the writing requirement in the exception requires that the arrangement is documented in writing but does not require a formal written agreement that is signed by the parties, whereas the corresponding requirement in the OIG's proposed cybersecurity safe harbor requires that the arrangement is set forth in a written agreement that is signed by the parties and describes the technology and services being provided and the amount of the recipient's contribution, if any (84 FR 55765). Another commenter suggested that a signed agreement should be a necessary requirement of the exception, as it would ensure that both the donor and recipient understand what is being donated and the terms of the donation.

A different commenter asserted that it is rare that the need for cybersecurity is so pressing that there is not time for parties to prepare and sign an agreement, and supported the inclusion of a signature requirement in the cybersecurity exception. Response. We are not persuaded to add a requirement that the arrangement is set forth in a single written agreement that is signed by the parties.

Although it is a best practice to reduce the key terms of an arrangement to a writing that is signed by the parties, we are concerned that a signature requirement, in particular, could delay an entity's ability to provide necessary and beneficial cybersecurity technology and services to a physician. The physician self-referral law is a strict liability statute, which requires all the requirements of an exception to be satisfied at the time a referral is made. The failure to fully satisfy even a single requirement of an exception triggers the physician self-referral law's referral and billing prohibitions where a financial relationship exists between a physician and an entity that furnishes designated health services.

We are concerned that a detailed writing requirement or a signature requirement may result in inadvertent violations. We believe that our current standard for written documentation, which requires contemporaneous documents that would permit a reasonable person to verify compliance with the exception at the time a referral is made, provides sufficient transparency and facilitates compliance (80 FR 71315). For the same reasons, we are not persuaded to include a signature requirement in the cybersecurity exception.

E. Miscellaneous Comments In addition to the comments discussed above, we received several comments unrelated to our specific proposals and our responses follow. Comment.

One commenter generally supported the proposed cybersecurity exception, but suggested that CMS adopt the same prohibition on cost-shifting that was proposed in the cybersecurity safe harbor. The commenter stated that, although a hospital's own cybersecurity costs could be an administrative expense on its cost report, hospitals should not be permitted to include donations of cybersecurity technology or services to physicians as an administrative expense on the hospital's cost report. Response.

We do not believe that a prohibition on cost-shifting is necessary in the cybersecurity exception. As explained above, we believe that cybersecurity donations are often self-protective in nature, and thus do not pose the same level of risk as donations of EHR items and services. There is no prohibition on cost-shifting in the EHR exception, and we do not believe that such a prohibition is necessary in the cybersecurity exception.

We note also that Medicare payment rules and regulations that apply to claims for reimbursement address inappropriate cost-shifting by hospitals through other mechanisms. We believe that, as with the EHR exception, the requirements of the cybersecurity exception, coupled with other Medicare rules and regulations pertaining to cost reports, are sufficient to protect against abusive donations of cybersecurity technology and related services. Comment.

One commenter worried that cybersecurity donations could be used as a gift or financial incentive and maintained that cybersecurity donations should be based on risk assessments of the donor's own software, systems, or networks. In addition, the commenter suggested that cybersecurity donations should be made available to all recipients with similar risk assessments and without regard to business relationships or affiliations. For example, the commenter stated that a donation would be appropriate if the level of connectivity between the donor and recipient created a vulnerability that could be targeted and exploited by malicious actors.

Response. Although donors are permitted under the cybersecurity exception to perform a risk assessment of a potential recipient (or require a potential recipient to provide the donor with a risk assessment) before determining whether to make a donation or the scope of a donation, we decline to require donors to base cybersecurity donations on a risk assessment of either the donor or the recipient. We believe that this requirement would be impractical, and it may lead potential donors to not make otherwise beneficial cybersecurity donations.

We also believe it is impracticable that donors would make donations available to all similar recipients with similar risk assessments, independent of the specific cybersecurity needs inherent in connecting to the specific systems with which the donor interacts. Comment. Several organizations representing individuals and entities in the laboratory industry recommended excluding laboratories from utilizing the cybersecurity exception to provide cybersecurity technology and services to physicians.

One commenter opined that the concerns CMS discussed in the 2013 EHR final rule regarding the provision of EHR items and services by laboratory companies similarly apply to cybersecurity donations by these entities. According to another commenter, during the period when laboratories were permitted to donate EHR items and services under the exception at § 411.357(w), physicians implicitly or explicitly conditioned referrals on EHR donations, and EHR vendors encouraged physicians to request costlier EHR software and services from laboratories, putting laboratories in an untenable position. This commenter expressed concern that the same could happen with cybersecurity donations if laboratories are permitted to make donations under the cybersecurity exception, if finalized as proposed.

The commenters stated that the proposed requirements of the exception, including both the Start Printed Page 77644requirements at § 411.357(bb)(1)(i) and § 411.357(bb)(1)(ii), would not be sufficient to curb the risk of program or patient abuse. Response. Although we acknowledge the unique perspective and concerns of the commenters representing the laboratory industry, particularly in light of the laboratory industry's experience with the EHR exception, the final cybersecurity exception does not exclude any type of entity from utilizing the exception.

All individuals and entities, including laboratories, play a role in protecting the health care ecosystem from cybersecurity threats. As described in section II.E.2.d., we are finalizing a requirement at § 411.357(bb)(1)(ii) that prohibits a physician (and the physician's practice, including employees and staff members) from making the receipt of technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor. This requirement is similar to the requirement in the EHR exception at § 411.357(w)(5) and operates in the same manner.

We believe that the requirements of the final cybersecurity exception are sufficient to ensure against program or patient abuse. Therefore, we are not categorically excluding laboratory companies from the cybersecurity exception. Comment.

Several commenters requested that CMS permit cybersecurity donations to physicians from organizations that do not furnish designated health services, such as clinical data registries, manufacturers of medical products, and medical technology companies. The commenters stated that medical technology companies play a central role in the delivery of health care, and that such entities should be permitted to make donations that directly relate to the safe and effective use of the registry or the product the entity manufactures. Another commenter requested confirmation that donations made to physicians by organizations that do not furnish designated health services, such as technology firms, do not implicate the physician self-referral law, and that donations made by entities that do furnish designated health services to individuals other than physicians (or immediate family members of physicians) similarly do not implicate the physician self-referral law.

Response. The physician self-referral law's referral and billing prohibitions apply when there is a financial relationship between a physician (or an immediate family member of a physician) and an entity that furnishes designated health services. Financial relationships include direct compensation arrangements between an entity that furnishes designated health services and a physician (or an immediate family member of a physician), as well as indirect compensation arrangements between such parties.

Indirect compensation arrangements exist where, among other things, between an entity furnishing designated health services and a physician (or an immediate family member of a physician) there is an unbroken chain of any number (but not fewer than one) of persons or entities that have financial relationships between them. An organization that does not furnish designated services, such as a technology firm, or an individual who is not a physician may be a “link” in such an unbroken chain of financial relationships. If all the conditions of § 411.354(c)(2), as revised in this final rule, exist, there would be an indirect compensation arrangement that implicates the physician self-referral law.

If an organization that does not furnish designated health services donates cybersecurity technology or services to a physician (or an immediate family member of a physician), but the donation does not result in an indirect compensation arrangement between that physician (or immediate family member) and an entity that does furnish designated health services, the donation does not implicate the physician self-referral law. However, the provision of such remuneration may implicate the anti-kickback statute. Similarly, donations by an entity that furnishes designated health services directly to a person or organization that is not a physician (or the immediate family member of a physician), such as a nonprofit organization or free or charitable clinic, would not create a direct compensation arrangement that implicates the physician self-referral law.

However, if the recipient of the cybersecurity technology or services has a financial relationship with a physician, there would exist an unbroken chain of financial relationships that must be analyzed to determine whether there exists an indirect compensation arrangement that implicates the physician self-referral law. F. Nonsubstantive Changes and Out-of-Scope Comments 1.

Nonsubstantive Changes We are making some nonsubstantive revisions to our regulation text for consistency with longstanding stated policy and to ensure conformity between the text of similar regulations (for example, changing “can” to “may” at § 411.357(d)(1)(ii) for conformity between the exceptions for personal service arrangements and limited remuneration to a physician). We are also updating language to reflect the agency's current lexicon (for example, changing “through” to “under” in paragraph (2) of the definition of “designated health services” at § 411.351). Finally, we made revisions to improve the grammar and clarity of certain regulations (for example, changing “not including any designated health services” to “does not include any designated health services” in the exception for assistance to compensate a nonphysician practitioner at § 411.357(x)(4)(ii)).

From time to time, changes in the conventions for regulations published in the Code of Federal Regulations necessitate nonsubstantive revisions of existing regulations. In this final rule, we are providing the entire text of §§ 411.351 through 411.357 to aid the regulated industry with compliance efforts. Because of this, we are taking the opportunity to update or include new citations to chapters, section, and paragraphs that are referenced in certain of our regulations in these sections.

For example, we included precise paragraph references in § 411.357(t). In addition, we are including headers for certain paragraphs within our regulations, for example, § 411.354(d)(1) through (6). 2.

Out-of-Scope Comments We received several comments that are outside the scope of this rulemaking, for example, comments requesting revisions to the exception for in-office ancillary services, suggesting policy changes related to physician-owned hospitals, and making recommendations for statutory changes to section 1877 of the Act. In addition, some of the commenters described their interpretations of various physician self-referral issues or asked questions about existing regulations that are not included in this rulemaking. We appreciate these commenters taking the time to present these issues.

However, these comments are beyond the scope of this rulemaking and are not addressed in this final rule. The out-of-scope issues raised by these commenters may be addressed in future rulemaking. We express no view on these issues, and our silence should not be viewed as an affirmation of any commenter's interpretations or views.

III. Collection of Information Requirements Under the Paperwork Reduction Act of 1995, we are required to provide 30-Start Printed Page 77645day 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, the Paperwork Reduction Act of 1995 (44 U.S.C.

3506(c)(2)(A)) requires that we solicited comment on the following issues. The need for the information collection and its usefulness in carrying out the proper functions of our agency. The accuracy of our estimate of the information collection burden.

The quality, utility, and clarity of the information to be collected. Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. We solicited public comment on each of these issues for the following sections of this document that contain information collection requirements (ICRs).

A. ICRs Regarding Exceptions to the Physician Self-Referral Law Related to Compensation (§ 411.357) We are finalizing new exceptions for compensation arrangements that facilitate value-based health care delivery and payment in a value-based enterprise (§ 411.357(aa)). A value-based enterprise is required to have a governing document that describes the enterprise and how its VBE participants intend to achieve the value-based purposes of that enterprise (see the definition of “value-based enterprise” at § 411.351).

The exception for value-based arrangements with meaningful downside financial risk to the physician at § 411.357(aa)(2) requires a description of the nature and extent of the physician's downside financial risk to be set forth in writing. The exception for value-based arrangements at § 411.357(aa)(3) requires the arrangement to be set forth in writing and signed by the parties. All exceptions at § 411.357(aa) require records of the methodology for determining and the actual amount of remuneration paid under the arrangement to be maintained for a period of at least 6 years.

We also added a new exception for cybersecurity technology and related services (§ 411.357(bb)), and arrangements under this new exception have to be documented in writing. Finally, we have streamlined the parties that must sign the writing in the exception for physician recruitment (§ 411.357(e)). The burden associated with writing and signature requirements is the time and effort necessary to prepare written documents and obtain signatures of the parties.

The burden associated with record retention requirements is the time and effort necessary to compile and store the records. While the writing, signature, and record retention requirements are subject to the PRA, we believe the associated burden is exempt under 5 CFR 1320.3(b)(2). We believe that the time, effort, and financial resources necessary to comply with these requirements would be incurred by persons without federal regulation during the normal course of their activities.

Specifically, we believe that, for normal business operations purposes, health care providers and suppliers document their financial arrangements with physicians and others and retain these documents in order to identify and be able to enforce the legal obligations of the parties. Therefore, we believe that the writing, signature and record retention requirements should be considered usual and customary business practices. We did not receive any public comments regarding our position that the burden associated with these requirements is a usual and customary business practice that is exempt from the PRA.

IV. Regulatory Impact Statement (or Analysis) (RIA) A. Statement of Need This final rule aims to remove potential regulatory barriers to care coordination and value-based care created by the physician self-referral law.

Currently, certain beneficial arrangements that would advance the transition to value-based care and the coordination of care among providers in both the Federal and commercial sectors may be impermissible under the physician self-referral law. Industry stakeholders have informed us that, because the consequences of noncompliance with the physician self-referral law are so dire, providers, suppliers, and physicians may be discouraged from entering into innovative arrangements that would improve quality outcomes, produce global health system efficiencies, and lower costs (or slow their rate of growth). This final rule addresses this issue by establishing three new exceptions that protect certain arrangements for value-based activities between physicians and entities that furnish designated health services in a value-based enterprise.

These exceptions provide enhanced flexibility for physicians and entities to innovate and work together while continuing to protect the integrity of the Medicare program. Commenters on the CMS RFI told us that they currently invest sizeable resources to comply with the physician self-referral law's referral and billing prohibitions and avoid substantial penalties related to noncompliance with this and related laws, including the Federal False Claims Act. Commenters on the proposed rule echoed the significant cost burden of complying with the physician self-referral law.

The proposals finalized in this final rule that do not directly address value-based arrangements seek to balance program integrity concerns against the stated considerable burden faced by the regulated industry. These finalized provisions reassess our regulations to ensure that they appropriately reflect the scope of the statute's reach, establish exceptions for common nonabusive compensation arrangements between physicians and the entities to which they refer Medicare beneficiaries for designated health services, and provide guidance for physicians and health care providers and suppliers whose financial relationships are governed by the physician self-referral law. We believe that these reforms will significantly reduce compliance burden by providing additional flexibility to enable parties to enter into nonabusive arrangements and by making physician self-referral law compliance more straightforward.

B. Overall Impact 1. Executive Orders and the Regulatory Flexibility Act We have examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub.

L. 96-354), section 1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995. Pub.

L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C. 804(2)), and Executive Order 13771 on Reducing Regulation and Controlling Regulatory Costs (January 30, 2017).

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety Start Printed Page 77646effects, distributive impacts, and equity). An RIA must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). This rule is considered to be economically significant.

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the Office of Information and Regulatory Affairs designated this rule as a major rule, as defined by 5 U.S.C. 804(2).

The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. For purposes of the RFA, most hospitals and most other providers and suppliers are considered small entities, either by nonprofit status or by having revenues of less than $7.5 million to $38.5 million in any 1 year.

We anticipate that a large portion of affected entities are small based on these standards. The specific affected entities are discussed later in this section. Individuals and states are not included in the definition of a “small entity.” HHS considers a rule to have a significant impact on a substantial number of small entities if it has an impact of at least three percent of revenue on at least five percent of small entities.

We are not preparing an analysis for the RFA because we have determined, and the Secretary certifies, that this final rule will not have a significant economic impact on a substantial number of small entities. We determined that this final rule does not have a significant impact on small businesses because it will likely reduce, not increase, regulatory burden. This final rule will not require existing compliant financial relationships to be restructured.

Instead, it will provide important new flexibilities to enable parties to create new arrangements that advance the transition to a value-based health care system and remove regulatory barriers to certain beneficial and nonabusive arrangements, such as the donation of cybersecurity technology and services. It will also reduce burden by clarifying certain key provisions found in current regulations. Also, although we expect entities to incur costs, these costs are estimated to be less than $1,000 per entity.

These costs are unlikely to have an impact of three percent of revenue, and we expect they will be offset by savings resulting from this rule. Overall, this final rule is accommodating to legitimate financial relationships while reducing regulatory burden and continuing to protect against program and patient abuse. 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 603 of the RFA. 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 for Medicare payment regulations and has fewer than 100 beds. The impact of this rule on small rural hospitals is minimal.

In fact, several provisions of the rule benefit small rural hospitals by giving them more flexibility to maintain operations and participate in innovative arrangements that enhance care coordination and advance the transition to a value-based health care system. Therefore, we are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that this final rule will not have a significant impact on the operations of a substantial number of small rural hospitals. Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation.

In 2019, that threshold is approximately $156 million. This rule imposes no mandates on state, local, or tribal governments, or on the private sector, and reduces regulatory burden on health care providers and suppliers. Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has Federalism implications.

Since this regulation does not impose any costs on state or local governments, the requirements of Executive Order 13132 are not applicable. Executive Order 13771, titled Reducing Regulation and Controlling Regulatory Costs, was issued on January 30, 2017 and requires that the costs associated with significant new regulations “shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.” This final rule is a deregulatory action. 2.

Expected Outcomes and Benefits a. Value-Based Health Care Delivery and Payment A 2019 study of 70 participants—including 62 health plans, seven Medicaid FFS states, and Traditional Medicare—accounting for nearly 226.5 million Americans, or 77 percent of the covered U.S. Population, highlighted the continued move away from a FFS system that pays only on volume and towards value-based health care delivery and payment models.[] The study showed that, in calendar year 2018, 39.1 percent of health care dollars were traditional FFS or other legacy payments not linked to quality, 25.1 percent of health care dollars were FFS payment linked to quality and value (described as pay-for-performance or care coordination fees), 30.7 percent of health care dollars were a composite of shared savings, shared risk, and bundled payments in alternative payment models built on a FFS architecture, and 5.1 percent of health care dollars were population-based payments (that is, capitation, global budget, or percent of premium payments).[] Although the study showed that payors made the majority of 2018 payments on a FFS basis (or in models built on a FFS architecture), the 2018 payments represent a 4.6 percent decline in FFS payments not linked to quality from such payments in 2017 (from 41 percent in 2017 to 39.1 percent in 2018), and a 34.2 percent increase in population-based payments over such payments in 2017 (from 3.8 percent in 2017 to 5.1 percent in 2018).[] In sections I.B.

And II.A.1. Of this final rule, we described the current landscape of health care delivery and payment both within and outside the Medicare program. We explained that the application of the physician self-referral law to all financial relationships between entities and the physicians who refer to them (or the immediate family members of such physicians) has inhibited a more rapid advancement toward a health care system that pays for outcomes rather than procedures.

Based on stakeholder responses to numerous CMS requests for information, including the CMS RFI that is part of the Department's Regulatory Sprint, we proposed regulatory revisions to address barriers to innovative care coordination and value-based health care delivery and payment (84 FR 55766). After considering the comments on the proposed rule, we are finalizing policies intended to facilitate the transition to value-based health care delivery and payment by permitting appropriate compensation arrangements Start Printed Page 77647that further the goals of a value-based system without posing a risk of program or patient abuse. Specifically, as described in section II.A.

Of this final rule, we designed and are finalizing new exceptions for value-based arrangements at final § 411.357(aa)—with safeguards intended to. (1) Protect against program or patient abuse that could lead to increased expenditures. And (2) maximize the potential of value-based care delivery and improved care coordination in reducing waste and program expenditures.

The new exceptions are also applicable to those indirect compensation arrangements between an entity and a physician that involve a value-based arrangement to which the physician (or the physician organization in whose shoes the physician stands) is a direct party. Although existing exceptions utilized by parties to protect financial relationships that exist outside of value-based health care delivery and payment systems also include safeguards designed to protect against program or patient abuse, they do not promote the potential for improvements in quality and reductions in expenditures the way that that the new exceptions set forth in this final rule may. By making available the new exceptions for value-based arrangements established in this final rule, we expect to achieve significant progress in reducing program expenditures without sacrificing program integrity.

However, we are unable to quantify with certainty the overall net costs, including net expenditures of the Medicare program, related to changes in industry behavior that we can reasonably expect following the effective date of this final rule. Even so, we believe that our final policies are reasonably likely to permit, if not encourage, behavior that will reduce waste in the U.S. Health care system, including Medicare and other Federal health programs, and that these changes will result in lower costs for both patients and payors, and generate other benefits, such as improved quality of patient care and lower compliance costs for providers and suppliers.

(1) Expectation of Value-Based Arrangements As discussed in section II.A. Of this final rule, compensation arrangements that qualify as value-based arrangements may take a variety of forms. Those that implicate the physician self-referral law will be directly or indirectly between an entity that furnishes designated health services and a physician who refers to that entity (or the immediate family member of a physician who refers to that entity).

Although some compensation arrangements that qualify as value-based arrangements may satisfy the requirements of a “traditional” exception to the physician self-referral law, most do not. These include arrangements that. (1) Involve the provision of free or reduced cost items and services.

(2) tie compensation to the ordering or furnishing of designated health services. (3) tie compensation to the refraining from ordering, delaying the order of, or furnishing designated health services. Or (4) involve the sharing of profits or losses such that compensation does not directly relate to the items or services actually provided by a physician.

Based on our experience administering the Shared Savings Program and Innovation Center models, information provided by commenters on the CMS RFI and the proposed rule (including payors that supported the establishment of the exceptions at final § 411.357(aa)), and information shared publicly by providers, suppliers, practitioners, health plans, and others, following the issuance of this final rule—and, specifically, once the exceptions at final § 411.357(aa) for value-based arrangements are available—we reasonably expect parties to enter into arrangements such as the following. Providing staff and other resources to physicians at below fair market value to help with patient education, pre-admission evaluations, and post-procedure follow-up and monitoring. Shared savings and shared loss arrangements under which the entity and the physician share financial risk for achievement of the value-based purpose(s) of the value-based enterprise or the outcome measures against which the recipient of the remuneration is assessed.

Arrangements that enhance patient care by providing items at no cost to physicians. We note that an important piece of ensuring good outcomes and fewer complications is patient education. Hospitals are often better-positioned or willing to develop video or print materials to prepare surgical patients for what to expect pre- and post-surgery, but are not in direct contact with patients until the day of surgery.

Under the new exceptions, hospitals could provide those materials at no charge to physicians for use in their practices, benefiting both hospitals and physicians, as well as surgical patients. Providing free telehealth equipment to physicians for use while treating patients in their office locations. The technology could be utilized for consults with a donor hospital to avoid unnecessary ambulance transports, ER visits, and exposing the patient to greater risk when emergencies or complications occur in the physician office, or could be used by primary care physicians to obtain immediate input from specialists while a patient is present in the primary care physician's office.

Provision of data analytics services. A specialty physician practice (or other entity) may wish to provide free data analytic services to a primary care physician practice with which it works closely. The data analytics could, for example, identify practice patterns that deviate from evidence-based protocols or determine whether follow-up care recommended by the specialty physician practice is being sought by patients.

In turn, the identification of deviant practice patterns and when follow up care is recommended could lead to better, more effective care for patients and reduced costs to Federal health care programs. We cannot, however, predict the form of all potential value-based arrangements or which entities and physicians will enter into value-based arrangements and what form their specific arrangements will take. More specifically, based on comments submitted by stakeholders, our understanding of currently existing value-based arrangements and care coordination arrangements, and our assumption that there will be continued innovation, we expect significant heterogeneity in the arrangements for which the new exceptions at final § 411.357(aa) will be utilized.

(2) Potential Outcomes and Benefits of Value-Based Arrangements As described above, we can reasonably predict that our final policies and the exceptions at final § 411.357(aa) will result in changes in stakeholder behavior. Entities and physicians may increase their participation in beneficial nonabusive value-based arrangements, including care coordination arrangements, that implicate the physician self-referral law. In this regard, and with respect to the intended outcomes and benefits related to this final rule, we anticipate that the policies in this final rule may.

(1) Remove barriers to robust participation in value-based health care delivery and payment systems, including those administered by CMS and non-Federal payors. (2) facilitate arrangements for patient care coordination among affiliated and unaffiliated health care providers, practitioners, and suppliers. (3) provide certainty for participants in the Shared Savings Program that wish to establish compensation arrangements outside of Start Printed Page 77648the Shared Savings Program similar to those among providers and suppliers in Shared Savings Program ACOs.

And (4) provide certainty for participants in Innovation Center models that wish to continue compensation arrangements established while participating in an Innovation Center model following the model's conclusion or establish similar arrangements outside of the model. Associated benefits that we anticipate will arise from these intended outcomes are. (1) Better care coordination for patients, including Medicare beneficiaries, resulting in the reduction in costs to payors and patients from poorly coordinated, duplicative care.

(2) improved quality of care and outcomes for patients, including Medicare beneficiaries. (3) substantial reduction in compliance costs to providers and suppliers to which the physician self-referral law's prohibitions apply. And (4) reduction in administrative complexity and related waste from continued progress toward interoperability of data and electronic health records.

(3) Cost Impact of Value-Based Arrangements A. General As noted above, we are unable to quantify with certainty the overall net costs, including net expenditures of the Medicare program, related to the changes in industry behavior that we can reasonably expect following the effective date of this final rule. However, based on the studies and reported experiences of payors, providers, suppliers, and patients that we discuss in this section IV.B.

Of this final rule, we believe that value-based arrangements such as those described in section IV.B.2.a.(1). Of this final rule have great potential to reduce waste in the U.S. Health care system, lower costs for both patients and payors, and generate other benefits such as improved quality of patient care and lower compliance costs for providers and suppliers.

A recent review of literature from January 2012 to May 2019 focusing on unnecessary spending, or waste, in the U.S. Health care system (2019 Waste in U.S. Health Care Study) indicates that waste related to the failure of care coordination alone results in annual costs of $27 billion to $78 billion.[] Much of the research on waste and improvement reviewed in the 2019 Waste in U.S.

Health Care Study was conducted in Medicare populations. The 2019 Waste in U.S. Health Care Study noted compelling empirical evidence that interventions, such as aligning payment models with value or supporting delivery reform to enhance care coordination, safety, and value, can produce meaningful savings and reduce waste by as much as half.

The 2019 Waste in U.S. Health Care Study also identified waste from administrative complexity (resulting from fragmentation in the health care system) as the greatest contributor to waste in the U.S. Health care system at an estimated $266 billion annually, and highlighted the opportunity to reduce waste in this category from enhanced payor collaboration with health care providers and clinicians in the form of value-based payment models.

According to the 2019 Waste in U.S. Health Care Study, as value-based care continues to evolve, there is reason to believe that such interventions can be coordinated and scaled to produce better care at lower cost for all U.S. Residents.

Moreover, in value-based arrangements, improvements could reduce waste related to overtreatment and low-value care, a separate category of waste in the U.S. Health care system. Other recently published peer-reviewed articles also suggest that value-based arrangements can reduce costs.[] A case study targeted at determining the specific factors that reduce Medicare payments and lead to hospital savings in bundled payment models for lower extremity joint replacement surgeries (which provide a lump sum payment to be shared among providers for an episode of care instead of payment for every service performed) in one Texas health system found that, between July 2008 and June 2015, the system's five hospitals were able to reduce total Medicare spending per episode of care by $5,577, or 20.8 percent, in cases without complications, and by $5,321, or 13.8 percent, in cases with complications.[] The hospitals also recognized $6.1 million in internal cost savings, along with slight decreases in emergency room visits and readmission rates, and a decrease in cases with a prolonged length-of-stay admission.

Over half of the internal cost savings were attributable to reduced implant costs.[] We note that the product standardization incentive programs that contribute to such internal cost savings involve compensation arrangements between hospitals and physicians which, depending on their structure, may not satisfy the requirements of any current exceptions to the physician self-referral law, but to which the new exceptions for value-based arrangements apply. Relatedly, in 2018, a large health plan announced that it was expanding a bundled payment program for spinal surgeries and hip/knee replacements to new markets, after finding savings of $18,000 per procedure,[] and a health network reported over $10 million in savings in 2017 with more anticipated savings in 2018.[] B. Medicare Expenditures We cannot predict with certainty how many and which parties will avail themselves of the new and revised exceptions or the changes in provider and supplier behaviors that could result.

Influence on provider and supplier behavior could either reduce or increase overall program spending, although the literature described in this section IV.B.2. Of this final rule indicates great potential for waste reduction and cost savings across the U.S. Health care system, including the Medicare program.

We note that any short-term increase in expenditures could result Start Printed Page 77649from appropriate utilization of services as patients seek and accept medically indicated care that they may have forgone in the absence of care coordination efforts and value-based arrangements for which exceptions were previously unavailable, and that appropriate utilization could prevent greater expenditures and other negative results to life over the longer term. Because of this uncertainty, we cannot quantify any impact on Medicare expenditures. We are confident that the regulations established or revised in this final rule include sufficient and appropriate safeguards to protect against program or patient abuse, including inappropriate utilization due to a physician's financial self-interest.

We believe that our final policies fall squarely within the Secretary's authority under section 1877(b)(4) of the Act to establish exceptions for financial relationships that do not pose a risk of program or patient abuse and, therefore, anticipate no increased spending due to inappropriate utilization. We will continue to assess the impact of our final policies on program expenditures. As noted in more detail later in this RIA, our view of the beneficial anticipated effects that will result from the policies in this final rule remains largely unchanged from the proposed rule.

As noted above, we are not able to provide quantitative estimates of overall savings to or expenditures of the Medicare program that will result from this final rule. However, with respect to parties currently participating in the Shared Savings Program and Innovation Center models, we have determined that this final rule would not significantly alter the conditions upon which such providers and suppliers operate. Although we do not know which new value-based models or programs will be implemented in the future, such programs and models will be associated with an estimated impact at the time they are implemented.

Thus, we have determined that the policies set forth in this final rule will have no impact with regard to Medicare expenditures under the Shared Savings Program and Innovation Center models. C. Commercial Sector and Other Federal Payors A recent survey of over 100 commercial payors showed that, in 2018, “pure FFS” payment—where each medical service is billed and paid for separately—accounts for only 37.2 percent of commercial payor reimbursement, and is expected to drop to 26 percent by 2021.[] According to the payors surveyed, payors that adopted value-based health care delivery and payment models reduced health care costs by an average of 5.6 percent, improved provider collaboration, and created more impactful member engagement.

Although we cannot make any quantitative estimates regarding cost savings or expenditures that may result from this final rule, we are aware of the success of certain innovative value-based arrangements that resulted in cost savings for third-party payors, improvements in quality of care, or both. The reported success of some of these programs exemplifies the promising nature of value-based health care delivery and payment. There are numerous reported examples of successful value-based health care delivery and payment programs developed and implemented by commercial health plans.

For example, one health plan recently reported that it saved $1 billion through avoided costs in 3 years of its recent primary care pay-for-value program that offers primary care practices rewards for their performance on quality, cost, and utilization measures, while also improving outcomes for its members.[] According to this health plan, members treated by a primary care provider in the program had 11 percent fewer emergency room visits in 2017 than members treated by a primary care physician not in the program. The health plan also stated that members with a primary care physician in the program experienced 16 percent fewer inpatient admissions in 2017 compared to members seeing a primary care physician not in the program, potentially saving the health plan $224 million in inpatient care costs.[] A collaboration between a physician-led ACO and a health plan in North Carolina similarly reduced costs while improving quality of care.[] Specifically, a June 2020 study concluded that the 47 primary care practices that participated in the collaboration. (1) Reduced the total cost of care by 4.7 percent for commercial patients.

(2) reduced the total cost of care by 6.1 percent for Medicare Advantage patients. And (3) improved their Medicare star ratings, on average, from 3 to 4.5 stars. Another study, in 2020, by a different health plan analyzed the plan's Medicare Advantage enrollees and network primary care physician practices.

This health plan determined that primary care physicians paid under global capitation improved certain patient outcomes related to preventive care and chronic conditions, such as higher screening rates for colorectal and breast cancer, higher rates of medication review, and higher controlled blood sugar levels.[] There are also studies that suggest that improved care coordination may decrease costs and enhance health outcomes. One randomized, controlled trial evaluated the cost‐effectiveness of a home‐based care coordination program that targeted older adults with problems self‐managing their chronic illnesses.[] Study participants in the test group received care coordination services from a nurse. They also received a pill organizer.

The results of this study showed that, for those beneficiaries who participated in the study for more than 3 months, total Medicare costs were $491 lower per month than in the control group. Another study conducted by the Centers for Disease Control demonstrated that certain interventions, such as team-based or coordinated care, increase patient medication adherence rates.47 Start Printed Page 77650Specifically, in a 2015 study, patients assigned to team-based care—including pharmacist-led medication reconciliation and tailoring, pharmacist-led patient education, collaborative care between pharmacist and primary care provider or cardiologist, and two types of voice messaging—were significantly more adherent with their medication regimen 12 months after hospital discharge (89 percent) compared with patients not receiving team-based care (74 percent). D.

Conclusion We believe that the experience of the payors and organizations described in this section IV.B.2. Of this final rule highlight the potential for eliminating a significant amount of unnecessary expenditures (waste) in the U.S. Health care system, including in the Medicare program.

As noted earlier, the 2019 Waste in U.S. Health Care Study indicates annual costs of $27 billion to $78 billion from the failure of care coordination alone.[] This study identified $266 billion in annual costs from administrative complexity in the furnishing of care and compliance with laws and regulations. We cannot predict with absolute certainty whether value-based arrangements that parties enter into as a result of our final policies will reduce these annual costs, but we believe that it is likely that innovative value-based arrangements and payment for value-based health care delivery will continue to achieve the results described above in this section IV.B.2.

We are also unable to provide quantitative estimates of the impact on costs that such arrangements will have. However, we believe there is great potential for reducing the expense of waste in the U.S. Health care system through improved care coordination and reduced administrative complexity.

B. Clarifying Revisions and New Exceptions for Nonabusive Financial Relationships (1) Key Terminology, the Application and Scope of the Physician Self-Referral Law, and New Exception for Limited Remuneration to a Physician A. Summary of the Final Regulations In addition to the final regulations discussed in subsections 2.a.

And 2.b.(2). Of this section IV.B., this final rule revises numerous current regulations and establishes new regulations, including a new exception at final § 411.357(z) for limited remuneration to a physician, intended to clarify the scope of the prohibitions of the physician self-referral law and simplify compliance with the exceptions to the law's referral and billing prohibitions. To this end, this final rule.

(1) Establishes a definition of the term “commercially reasonable” at § 411.351. (2) establishes special rules at § 411.354(d)(5) and (6) that identify the universe of compensation formulas that are considered to be determined in a manner that takes into account the volume or value of a physician's referrals or the other business generated by a physician. (3) revises the definition of “fair market value” at § 411.351.

(4) clarifies CMS policy regarding the permissible methodologies for distributing profits from designated health services within a group practice. (5) clarifies CMS policy regarding compensation formulas that will be deemed not to directly take into account the referrals of a physician in a group practice. (6) recognizes the independent obligation to comply with the anti-kickback statute and governmental billing and claims submission rules by removing from most exceptions to the physician self-referral law the requirements that the financial relationship between the entity and the physician (or immediate family member of the physician) does not violate the anti-kickback statute and does not violate any Federal or state law or regulation governing billing or claims submission.

(7) revises the definition of “designated health services” at § 411.351 to, in effect, remove inpatient hospital services ordered after a patient's admission to the hospital when such services are ordered by a physician who is not the physician who made the referral for the inpatient admission. (8) revises the definition of “physician” at § 411.351 to limit the physician referrals to which the law's prohibitions apply to only those physicians who qualify as a “physician” under section 1861(r) of the Act. (9) revises the definition of “remuneration” at § 411.351 to clarify that the provision of certain items, devices, and supplies from an entity to a referring physician does not establish a compensation arrangement when those items, devices, or supplies are, in fact, used solely by the physician for the purpose(s) established in the statute and regulation.

(10) revises the definition of “transaction” and establishes a new definition of “isolated financial transaction” at § 411.351 to clarify CMS policy regarding the types of compensation arrangements to which the exception at § 411.357(f) is applicable. (11) alleviates confusion reported by stakeholders regarding the period of disallowance for referrals and billing following a violation of the physician self-referral law. (12) permits parties to reconcile payment discrepancies in compensation arrangements without running afoul of the physician self-referral law.

(13) removes certain interests held by a physician from qualifying as an ownership or investment interest that implicates the physician self-referral law. (14) clarifies when compensation is considered to be “set in advance” for purposes of satisfying the requirements of the exceptions to the physician self-referral law. (15) revises CMS policy regarding modifications to the financial terms of a compensation arrangement to eliminate specific timeframe limitations for such modifications.

(16) clarifies CMS policy regarding the circumstances under which an entity may direct a physician's referrals to a particular provider, practitioner, or supplier. (17) expressly prohibits an entity from conditioning the existence of a compensation arrangement or the amount of a physician's compensation on the number or value of the physician's referrals to a particular provider, practitioner, or supplier. (18) clarifies that required signatures may be electronic or in any other form that is valid under applicable Federal or state law.

(19) allows parties 90 consecutive calendar days to obtain documentation necessary to satisfy the writing requirement of an applicable exception. (20) clarifies the requirement for exclusive use of office space or equipment under the exceptions at § 411.357(a) and (b). (21) clarifies the circumstances under which a physician practice must sign the documentation of a recruitment arrangement between a hospital and a physician.

(22) clarifies and expands the application of the exception at § 411.357(i) for payments by a physician (or immediate family member of a physician) to an entity. (23) expands the application of the exception at § 411.357(l) to fair market value payments for the rental of office space, even where the duration of the arrangement is less than 1 year. (24) makes permanent the EHR exception.

(25) clarifies the scope of the EHR exception to permit donations of cybersecurity software and services that are necessary and used predominantly to create, maintain, transmit, receive, or protect electronic health records. (26) allows for flexible scheduling of physician contribution payments for electronic health records items and services following the initial donation of Start Printed Page 77651such items and services. (27) permits donations of replacement electronic health records items and services, even if the physician already possesses equivalent items or services.

(28) clarifies timing issues related to arrangements between a physician and NPP where the physician receives assistance from a hospital to compensate the NPP. (29) updates and eliminates out-of-date references to bolster clarity of the scope and application of the physician self-referral regulations. (30) establishes a new exception for limited remuneration to a physician that does not require contemporaneous documentation of the terms of the arrangement or that the compensation is set in advance of the provision of the physician's services.

And (31) modifies other exceptions that apply to arrangements for the personal services of physicians to ensure applicability on a going-forward basis following the commencement of an arrangement that satisfies the requirements of the new exception for limited remuneration to a physician. B. Expectation of Industry Behavior Following the effective date of our final policies, we anticipate a reduction in disclosures to the SRDP of potential or actual violations of the physician self-referral law because stakeholders will have a clearer understanding of the scope and application of the physician self-referral law, as well as CMS' interpretation of the law's provisions.

We anticipate that entities will continue to provide electronic health records items and services to physicians with the same scope and frequency as the industry has observed since the issuance of the EHR exception in 2006. We also anticipate that parties that made submissions to the SRDP that have not yet been settled may withdraw all or portions of their disclosures, similar to what occurred following clarifications of physician self-referral policies in the CY 2016 PFS final rule. Although we expect that entities will utilize the new exception at § 411.357(z) for limited remuneration to a physician, as explained in section II.E.1.

Of this final rule, we anticipate that the exception's greatest utility will come during retrospective review of compliance with the physician self-referral law. As we noted in section III.A. Of this final rule, we believe that, for normal business operations purposes, entities document their financial arrangements with physicians and others in order to identify and be able to enforce the legal obligations of the parties.

Thus, we believe that the exception will be utilized more often by parties that did not fully document an arrangement in writing or set compensation in advance than by parties that affirmatively choose not to document their arrangement in writing or set physician compensation in advance when developing a new arrangement for physician services. Finally, we anticipate that some physician practices will revise their compensation methodologies with respect to the distribution of profits from designated health services furnished by the group in order to ensure compliance with the clarifying regulations at § 411.352(i) that become effective January 1, 2022 and continued qualification as a “group practice” under the regulations at § 411.352. C.

Potential Outcomes, Benefits, and Costs of Final Policies Related to Key Terminology, the Application and Scope of the Physician Self-Referral Law, and New Exception for Limited Remuneration to a Physician According to commenters, one of the most significant benefits of this final rule is the establishing of clear boundaries for parties in setting the financial terms of compensation arrangements that do not qualify as value-based arrangements. We are unable to quantify with certainty the impact of our clarifications, expanded flexibilities, and the new exception at final § 411.357(z) on costs to the regulated industry. However, we believe that most entities that have financial relationships with physicians to which the physician self-referral law applies will see some level of reduced expenditures.

Many of the entities whose financial relationships with physicians are subject to the requirements of the physician self-referral law are hospitals and physician groups. An October 2017 study of 190 hospitals in 31 states across the United States revealed that an average community hospital (defined as 161 beds) annually dedicates 2.3 full-time equivalent employees to, and spends almost $350,000 on, compliance with Federal fraud and abuse laws, defined in the study as including the physician self-referral law, the anti-kickback statute, and laws and protocols requiring returning overpayments.[] This study affirms commenter statements included in a 2015 Senate Finance Committee report that noted the high cost and difficulty of complying with the physician self-referral law.[] We expect that the clarifications and regulatory revisions of this final rule will significantly reduce the costs to the regulated industry. (See section IV.C.

Of this final rule for further discussion of this study and the anticipated effects of this final rule on the burden identified in the study.) CMS publishes aggregate SRDP settlement data on its website at https://www.cms.gov/​Medicare/​Fraud-and-Abuse/​PhysicianSelfReferral/​Self-Referral-Disclosure-Protocol-Settlements. To date, we have received over 1200 disclosures to the SRDP. As of December 31, 2019, we have settled 335 disclosures by collecting an aggregate of $31.8 million from disclosing parties.

Although we cannot estimate the number of compensation arrangements included in the pending disclosures that would be affected by the clarifications in this final rule, it is our observation that a substantial portion of the conduct already settled through the SRDP involved the failure of a compensation arrangement to satisfy the writing or signature requirements of an applicable exception, with many of those failures lasting for only a short period of time. Many disclosures involved the disclosing party's incorrect interpretation or misapplication of the physician self-referral law or CMS policy. Therefore, we believe that the clarifications in this final rule will reduce the perceived need for disclosure to the SRDP and allow parties to avoid the costs—including costs of compliance professionals, attorneys, market valuation experts, and accountants—of preparing and submitting a disclosure to the SRDP.

As noted above, we also expect that some entities may withdraw a portion of or their entire SRDP disclosures following the issuance of this final rule. However, we are unable to quantify the avoidance of costs to the industry related to refraining from or withdrawing disclosures. We note that recoveries from SRDP settlements may also diminish, but this does not represent a cost to the Medicare program or trust fund.

Where there is no violation of the physician self-referral law's referral and billing prohibitions, there is no refund due to the government under section 1877(g) of the Act for Medicare payments made to the entity.Start Printed Page 77652 Finally, we believe that the clarifications and revisions to the EHR exception, and the permanency of the exception, will facilitate the continued adoption and use of electronic health records, especially in small physician practices, by making permanent the exception for the donation of such items and services. (2) New Exception for Cybersecurity Items and Services The average breached health care organization faces $8 million dollars in costs as a result of the breach, or $400 per patient record involved.[] One hospital reported spending $10 million to recover from a cyberattack, instead of paying a $30,000 ransom demanded by hackers,[] while another hospital paid a $55,000 ransom to hackers, despite having backup copies of the affected files.[] A cyberattack on a hospital in Germany is the suspected cause of the death of at least one patient.[] A September 2020 cyberattack on a large health care system in the United States affected nearly 400 facilities, causing hospitals to divert ambulances during the initial stages of the attack.[] In addition, staff reported that some lab test results were delayed. The system responded by suspending user access to its information technology applications related to operations across the United States, requiring the use of back-up processes, including paper medical record charting and labeling medications by hand, for nearly three weeks.

According to the Health Sector Cybersecurity Coordination Center (HC3), health care organizations should consider implementing strong risk management practices to help prevent data breaches and minimize any disruptions or loss if a breach occurs.[] HC3 highlights that adequate prevention and preparation for data breaches will protect patients, minimize direct and indirect costs, and allow for more efficient operations of a health care organization.[] Separately, the HCIC Task Force's 2017 report, among other things, highlighted its review of many concerns related to potential constraints imposed by the physician self-referral law and the Federal anti-kickback Statute. The report encouraged the Congress to evaluate an amendment to these laws specifically for cybersecurity software that would allow health care organizations the ability to assist physicians in the acquisition of this technology, through either donation or subsidy.[] The HCIC Task Force noted that the existing regulatory exception to the physician self-referral law (§ 411.357(w)) and the safe harbor to the Federal anti-kickback statute (42 CFR 1001.952(y)) applicable to certain donations of EHR items and services could serve as a perfect template for an analogous cybersecurity provision.[] In 2018, the American Medical Association surveyed over 1,300 physicians in a cybersecurity-related survey. Approximately 83 percent of the participants reported having experienced some sort of cybersecurity attack.[] The study also highlighted that 50 percent of the surveyed physicians wished they could receive donations of security-related hardware and software from other providers, and recommended that we develop an exception to permit it.

As described in section II.E.2 of this final rule, we received overwhelming support from across the health care industry in response to our proposal to establish the new exception for cybersecurity items and services, and we anticipate significant expansion of cybersecurity efforts through donations following the effective date of this final rule, similar to the expanded adoption of EHR items and services reported by stakeholders following the establishment of the EHR exception in 2006. Support for the new cybersecurity exception came from many well-resourced organizations that are potential future donors of cybersecurity technology, such as health plans and large health systems, as well as from likely recipients of donations and trade groups representing practitioners. (We note that not all of the potential donors and recipients are entities and physicians to which the physician self-referral law applies.) Because of the cost of cybersecurity attacks to organizations that wish to donate or receive cybersecurity technology and services, and the general support among donors and recipients for the new cybersecurity exception, we anticipate significant investment in improvements to the cybersecurity hygiene of the health care industry.

An organization's cybersecurity posture is only as strong as its weakest link, including weaknesses of downstream providers, suppliers, and practitioners that wish to receive donations. Thus, donors are incented to protect themselves by donating cybersecurity technology and services that improves their cybersecurity. We expect that the flexibilities afforded by the cybersecurity exception will facilitate the enhancement of protection against the corruption of or access to health records and other information essential to the safe and effective delivery of health care, as well as reduce the impacts of cybersecurity attacks, including the improper disclosure of PHI.

This could ultimately reduce overall costs associated with cybersecurity attacks, including ransom payments, costs to patients whose PHI is improperly disclosed, and costs to providers and suppliers to reestablish cybersecurity. However, there are a variety of factors integral to determining the extent of the impact of the cybersecurity exception on the cybersecurity hygiene of the health care industry that remain too speculative to support a quantitative estimate of the impact of this final rule. For example, we cannot predict with certainty.

(1) How many entities or physicians will Start Printed Page 77653donate cybersecurity technology or services for which the parties may seek protection under the cybersecurity exception. (2) how such donations will improve the cybersecurity hygiene of recipients, donors, and the health care ecosystem as a whole. Or (3) external factors—such as other policies promoting cybersecurity within the health care industry, how hackers will proliferate and develop new hacking strategies, or how cyberattack recovery costs and ransom costs will change—that could enable or hinder improved cybersecurity hygiene and potentially result in increased or decreased costs associated with cyberattacks.

Thus, we cannot predict the specific quantitative impact of the flexibility afforded by the new cybersecurity exception on the costs or benefits to the Medicare program, or other Federal health care programs, beneficiaries, or the health care industry as a whole. Nonetheless, we expect that the flexibility to donate cybersecurity technology and services will benefit the health care ecosystem as a whole, improve cybersecurity across the industry, and reduce costs associated with cyberattacks (by reducing successful cyberattacks, and consequently, ransom fees and recovery costs). 3.

Comment and Response We sought comment on the economic impact of this final rule, including any potential increase or decrease in utilization, any potential effects due to behavioral changes, or any other potential cost savings or expenses to the Government as a result of this rule. We received the following comment and our response follows. Comment.

One commenter requested that we provide detailed estimates of changes in Medicare program spending that CMS expects to result from the proposed new exceptions and other regulatory changes. The commenter asserted that certain successful value-based programs produce limited savings and many value-based programs produce no savings or even increase spending. Response.

We are unable to provide the detailed estimates requested by the commenter. It is impossible for CMS to provide quantitative estimates of savings to or expenditures of the Medicare program that will result from the establishment of the new exceptions at § 411.357(z), (aa), or (bb), or from clarification of key terms integral to the physician self-referral law and other regulatory revisions. However, we emphasize that we engaged in the Regulatory Sprint to facilitate the transition to value-based health care delivery and payment and realize the potential cost savings that come from improved quality and care coordination.

Although we cannot estimate the precise dollar amount of impact, as described throughout this section IV.B.2. Of this final rule, the potential for reduced program expenditures is significant, and the policies set forth in this final rule are intended to maximize this potential. C.

Anticipated Effects This final rule will affect entities that furnish designated health services payable by Medicare and the physicians with whom they have financial relationships. The following items or services are designated health services. (1) Clinical laboratory services.

(2) physical therapy services. (3) occupational therapy services. (4) outpatient speech-language pathology services.

(5) radiology and certain other imaging services. (6) radiation therapy services and supplies. (7) durable medical equipment and supplies.

(8) parenteral and enteral nutrients, equipment, and supplies. (9) prosthetics, orthotics, and prosthetic devices and supplies. (10) home health services.

(11) outpatient prescription drugs. And (12) inpatient and outpatient hospital services. We do not have data on the number of entities and physicians that have financial relationships, but we believe a substantial fraction of Medicare-enrolled physicians, group practices, hospitals, clinical laboratories, and home health agencies are affected by the physician self-referral law.

We anticipate that this final rule will have significant, ongoing benefits for the affected physicians and entities and the entire health care system. To estimate the number of entities directly affected by this rule, we use Medicare enrollment data. According to this data, there were 2,265 single or multispecialty clinics or group practices, 3,159 clinical laboratories (billing independently), 2,016 outpatient physical therapy/speech pathology providers, 2,739 independent diagnostic testing facilities, 11,317 home health agencies, 6,072 inpatient hospitals, 4,402 rural health clinics, 172 comprehensive outpatient rehabilitation facilities, 8,836 federally qualified health centers, and 9,403 medical supply companies enrolled in Medicare in 2018.[] In addition, we estimate that 400 physician practices unassociated with single or multispecialty clinics or group practices will independently review this final rule.

We requested public comment on the entities affected by the rule. We anticipate that directly affected entities will review this final rule in order to determine whether to explore newly permissible value-based arrangements and to take advantage of burden-reducing clarifications provided by the rule. We estimate that all directly affected entities described above that will be eligible to use the final rule will review the rule.

In the proposed rule, we estimated that reviewing the final rule would require an average of 3 hours of time each from the equivalent of a compliance officer and a lawyer (84 FR 55837). The final rule responds to numerous comments received on the proposals discussed in the proposed rule, and includes significantly more information than the proposed rule. Although we did not receive any comments on our proposed estimate of three hours, in light of the increase in length from the proposed rule to the final rule, we have adjusted our estimate for the time required to review the final rule.

We estimate that reviewing the final rule will require an average of 6 hours of time each from the equivalent of a compliance officer and a lawyer, and note that parties may review only the portions of the final rule that are applicable to their specific circumstances and needs. For example, parties that do not wish to participate in value-based health care and delivery at this time may not review sections I.B. And II.A.

Of this final rule. To estimate the costs associated with this review, we use a 2019 wage rate of $35.03 for compliance officers and $69.86 for lawyers from the Bureau of Labor Statistics,[] and we double those wages to account for overhead and benefits. As a result, we estimate total regulatory review costs of $64 million in the first year following publication of the final rule.

We sought public comment on these assumptions. In developing this final rule, we took great care to ensure that the safeguards against program and patient abuse in our new exceptions impose the minimum burden possible while providing robust protection against improper utilization and other harms against which the physician self-referral law is designed to protect. For example, we believe a value-based enterprise would ordinarily develop a governing document that describes the value-based Start Printed Page 77654enterprise and how the VBE participants intend to achieve its value-based purpose(s), so our requirement does not impose any additional burden beyond what we anticipate parties would ordinarily develop.

We also believe that parties to an arrangement under which remuneration is paid already keep business records necessary for a variety of purposes, such as income tax filings, records of compliance with state laws (including fee splitting laws), and, for nonprofit entities, justification of tax-exempt status. Therefore, we do not believe the requirement to maintain records of the methodology for determining and the actual amount of remuneration paid under a value-based arrangement for a period of at least 6 years imposes additional burden. In addition, we believe that physicians and entities routinely document their financial arrangements in writing as a common good business practice so that arrangements can be enforced.

For example, we believe that an entity would ordinarily ensure that the details of a shared loss repayment agreement are documented in writing to ensure that the arrangement can be enforced under state law. Similarly, we believe that entities working together to achieve a purpose would routinely monitor their operations to confirm that their plans are working as intended. We sought comments on these assumptions.

The new exceptions for arrangements intended to facilitate the transition to value-based health care delivery and payment have numerous potential benefits that will reduce costs and improve quality, not only for Medicare and its beneficiaries, but for patients and the health care system in general. For example, the final exceptions provide important new flexibility for physicians and entities to work together to improve patient care and reduce costs. This increased flexibility will provide new opportunities for the private sector to develop and implement cost-saving, quality-improving programs that previously may have been impermissible.

We anticipate that implementation of improvements and efficiencies, such as care redesign protocols resulting from private sector innovation, could have a beneficial effect on the care provided to Medicare beneficiaries and thereby result in savings for beneficiaries and the Trust Funds. We believe that these new exceptions will also increase participation in Innovation Center models because, unlike the fraud and abuse waivers that have been issued for certain Innovation Models, the exceptions will not expire and are not narrowly designed to apply solely to one specific model, allowing parties to enter into value-based arrangements of their own design and to continue such arrangements beyond expiration of fraud and abuse waivers. We also believe that applying the new exceptions will make compliance more straightforward for physicians and entities participating in Innovation Center models, thus resulting in cost savings for these parties.

In addition, we believe that the new exceptions for arrangements intended to facilitate the transition to value-based health care delivery and payment will ensure that the physician self-referral law continues to provide meaningful protection against overutilization and other harms, thus preventing increased Medicare expenditures and associated beneficiary liability. We lack data to quantify these effects and sought public comment on these impacts. We believe that the clarifications and regulatory revisions of key terminology (specifically, the terms “commercially reasonable” and “fair market value,” the volume or value standard, and the other business generated standard) discussed in section II.B.

Of this final rule will have significant, ongoing benefits to all physicians and entities affected by the physician self-referral law. These terms are used throughout the physician self-referral regulations. Commenters on the proposed rule indicated that additional guidance on these terms is necessary to reduce the complexity of structuring financial arrangements to comply with the physician self-referral law.

We anticipate that the changes to decouple the physician self-referral law regulations from the anti-kickback statute and federal and state laws or regulations governing billing or claims submission will reduce burden by making compliance more straightforward for physicians and entities. We stress that the anti-kickback statute and billing laws remain in full force and effect, so those laws will continue to protect against program and patient abuse. We anticipate that our changes to the definitions of “designated health services,” “physician,” and “remuneration” and the changes to the ownership and investment interest provisions in § 411.354(b) will reduce compliance burden by appropriately applying the physician self-referral law's prohibitions and providing protection for nonabusive financial relationships.

Our changes for the exceptions for fair market value payments by a physician and fair market value compensation will make these exceptions available to protect financial arrangements that must currently meet more complicated and burdensome requirements of other exceptions. We anticipate that this added flexibility will provide substantial burden reduction through reduced compliance costs. We have also finalized numerous other changes that, while relatively minor in scope, are intended to collectively reduce burden.

For example, the new special rules on the set in advance requirement clarifies the requirements for modifying compensation terms during the course of an arrangement and correct a common misperception among stakeholders that parties may only modify the compensation terms of an arrangement once during the course of a year. We anticipate that our changes relating to isolated transactions, the period of disallowance, the special rules on compensation arrangements, the exceptions for rental of office space and rental of office equipment, the exception for physician recruitment, and the exception for assistance to compensate a nonphysician practitioner will also have a beneficial impact by reducing the existing burden on physicians and entities through the provision of additional guidance and clarifications. We lack data to quantify these effects and sought public comment on these impacts.

As we stated in the proposed rule, the American Hospital Association estimated compliance costs faced by hospitals.[] It estimated $350,000 [] in annual costs for an average hospital to comply with fraud and abuse regulations, which include the physician self-referral law. To estimate aggregate fraud and abuse compliance costs, we multiply this figure by the number of Medicare enrolled hospitals, which implies $2.1 billion in total annual costs across these hospitals. Based on CMS RFI comments, compliance with the physician self-referral regulations comprises a substantial fraction of these costs.

We anticipate that clarifications provided in this final rule may substantially reduce the complexity of compliance for affected entities. As a result, we expect this rule will substantially reduce net fraud and abuse compliance burden for affected entities, although we lack data to quantify these estimates. We note that hospitals represent a fraction of entities affected by this final rule, and burden is likely to decline substantially for other categories of entities affected by this rule.

We sought public comment on the Start Printed Page 77655extent to which this rule will reduce compliance burden for hospitals and entities other than hospitals. Our final modifications to the EHR exception are modest and clarify that the exception applies to certain cybersecurity technology that is included as part of an electronic health records arrangement, make the exception permanent, and clarify that contribution requirements collected from physicians for updates to previously donated technology need only be collected at reasonable intervals. The EHR exception will continue to be available to physicians and entities other than laboratories.

We expect that the same entities that currently use the EHR exception will continue to use the exception. We anticipate that our final policies will result in an incremental reduction in compliance burden. In section II.E.

Of this final rule, we discuss new exceptions for limited remuneration to a physician and the provision of cybersecurity technology and related services. We anticipate that the new exception for limited remuneration to a physician will ease compliance burden because it allows entities to compensate a physician for items or services provided by the physician without being subject to all the documentation and certain other requirements of existing exceptions to the physician self-referral law. We believe that this new exception will also provide additional flexibility where these arrangements are not covered by an existing exception.

We anticipate that the cybersecurity exception will be widely used by physicians, group practices, and hospitals. We believe that this exception will help to address the growing threat of cyberattacks that infiltrate data systems and corrupt or prevent access to health records and other information essential to the safe and effective delivery of health care. We lack data to quantify these effects and sought public comment on these impacts.

We received the following comments and our responses follow. Comment. The vast majority of commenters supported our proposals, noting generally that the proposed provisions will facilitate compliance with the physician self-referral law and achieve the reduced burden CMS anticipates, although no commenters provided data or other detail that would allow us to quantify the anticipated effects.

Response. We appreciate commenters' feedback confirming our assessment that this final rule will ease compliance with the physician self-referral law and reduce burden on hospitals and other entities. Comment.

A few commenters asserted that the establishment of the accountable body or person and the development of the governing document would require the expenditure of significant resources, including legal expenses, and questioned whether adding this burden was necessary. Response. As discussed in detail in section II.A.2.a.

Of this final rule, we continue to believe that a value-based enterprise would ordinarily develop a governing document and that this final rule will not result in additional burden in that regard. In addition, we have provided additional guidance about these requirements, including that we are not dictating the format or content of the governing document or the structure or composition of the accountable body. Each value-based enterprise has the flexibility to develop and implement the necessary infrastructure to effectively oversee its financial and operational activities commensurate with the size and structure of the value-based enterprise.

Comment. One commenter expressed concern that the revised definition of “remuneration” would increase the burden on parties to monitor the use of items, devices, or services to ensure that physicians are in fact using the items, devices, or services for one or more of the permitted purposes under the statute. Response.

As we mentioned in section II.D.2.d. Of this final rule, we believe that it would be impossible for an entity to monitor how a physician “in fact” uses a multi-use item, device, or supply whose primary purpose is not one or more of the permitted purposes to ensure that the physician in fact uses the item, device, or supply exclusively for one or more of the permitted purposes. However, we believe that the final definition of “remuneration” will not increase the burden of monitoring, because the provision of multi-use items, devices, or supplies whose primary purpose is not one or more of the permitted purposes will not be carved out of the definition of “remuneration.” Comment.

Many commenters maintained that the proposed amendment to clarify the definition of “transaction” at § 411.351 would reduce flexibility and increase the burden of compliance. Response. We discussed this policy in section II.D.2.e.

Of this final rule and explained that the revision simply clarifies an existing policy that the exception for isolated transactions is not available to protect a single payment for multiple or repeated services. This longstanding policy is based on our interpretation of the statute and our mandate under sections 1877(b)(4) and 1877(e)(6)(B) of the Act to permit only those financial relationships that do not pose a risk of program or patient abuse. We do not believe that clarifying existing policy will result in additional burden, particularly in light of new flexibilities included in this final rule.

D. Alternatives Considered This final rule contains a range of policies. The preceding preamble presents rationale for our policies and, where relevant, alternatives that were considered.

We carefully considered the alternative of maintaining the status quo and not pursuing regulatory action. However, we believe that the transition to a value-based health care delivery and payment system is urgently needed due to unsustainable costs inherent in the current volume-based system. We believe this final rule addresses the critical need for additional flexibility that is necessary to advance the transition to value-based health care and improve the coordination of care among providers in both the Federal and commercial sectors.

We also considered proposing to limit the new exceptions for arrangements that facilitate the transition to value-based health care delivery and payment to CMS-sponsored models or establishing separate exceptions with different criteria for arrangements that exist outside CMS-sponsored models. However, we believe that, in their current state, the physician self-referral regulations impede the development and adoption of innovative approaches to delivering health care, across all patient populations and payor types, and over indefinite periods of time. In addition, we considered establishing an exception to protect care coordination activities performed outside of a value-based enterprise.

We rejected this alternative due to program integrity concerns that could exist without the incentives and protections inherent in a value-based enterprise and value-based arrangement, as defined at final § 411.351. We considered including provisions in the exceptions for value-based arrangements that would require compensation to be set in advance, fair market value, and not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated between the parties. We are concerned, however, that the inclusion of such requirements would conflict with our goal of dismantling and addressing Start Printed Page 77656regulatory barriers to value-based care transformation.

We further believe that the disincentives for overutilization, stinting on patient care, and other harms the physician self-referral law was intended to address that are built into the value-based definitions will operate in tandem with the requirements included in the exceptions and be sufficient to protect against program and patient abuse. We also considered whether to exclude laboratories and DMEPOS suppliers from the definition of “VBE participant.” We stated in the proposed rule that it was not clear to us that laboratories and DMEPOS suppliers have the direct patient contacts that would justify their inclusion as parties working under a protected value-based arrangement to achieve the type of patient-centered care that is a core tenet of care coordination and a value-based health care system. As discussed in Section II.A.2.a.

Of this final rule, we have not excluded any entities from the final definition of “VBE participant.” Through our own experience administering the physician self-referral regulations and our thorough analysis of comments, we recognize the urgent and compelling need for additional guidance on the physician self-referral law. In preparing this rule, we conducted an in-depth review of our existing regulations to identify those matters that might benefit from additional guidance. We took great care to provide this guidance in the clearest, most straightforward manner possible.

For example, we considered addressing the need for guidance on the applicability of the physician self-referral law to referrals for inpatient hospital services after admission through modifying the definition of “referral” rather than the definition of “designated health services.” We are concerned that modifying the definition of “referral” could have a broader effect and would not be as clear, and declined to adopt that approach. We have also carefully weighed each proposal to ensure that it does not pose a risk of program or patient abuse. For example, we considered whether to eliminate the requirement that a physician must pay 15 percent of the cost of donated electronic health records items and service, but are concerned that doing so would pose a risk of program or patient abuse.

We sought comments on these regulatory alternatives. As discussed in section II.D.11.e. Of this final rule, the EHR exception maintains the 15 percent contribution requirement.

We received no comments specific to the alternatives considered section of the proposed rule. E. Accounting Statement As required by OMB Circular A-4 (available at http://www.whitehouse.gov/​omb/​circulars/​a004/​a-4.pdf), we have prepared an accounting statement.

The following table provides estimated annualized costs through 2029. Accounting Statement—Estimated Annualized CostsCategoryPrimary estimateLow estimateHigh estimateYear dollarDiscount rate (percent)Period coveredCostsAnnualized Monetized ($millions/year)4.30.00.020187%2020-2029 3.60.00.0201832020-2029Annualized Quantified0.00.00.07 0.00.00.03Qualitative In accordance with the provisions of Executive Order 12866, this final rule was reviewed by the Office of Management and Budget. Based on the tight time constraints and the need to expedite the clearance process to ensure timely publication, OSORA will continue to work with CM to ensure that regulations text is in compliance with the Office of the Federal Register standards and guidance.

Start List of Subjects DiseasesMedicareReporting and recordkeeping requirements End List of Subjects For the reasons set forth in the preamble, the Centers for Medicare &. Medicaid Services amends 42 CFR part 411 as set forth below. Start Part End Part Start Amendment Part1.

The authority citation for part 411 continues to read as follows. End Amendment Part Start Authority 42 U.S.C. 1302, 1395w-101 through 1395w-152, 1395hh, and 1395nn.

End Authority Start Amendment Part2. Subpart J is amended by revising §§ 411.350 through 411.357 to read as follows. End Amendment Part * * * * * 411.350 Scope of subpart.

411.351 Definitions. 411.352 Group practice. 411.353 Prohibition on certain referrals by physicians and limitations on billing.

411.354 Financial relationship, compensation, and ownership or investment interest. 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. 411.356 Exceptions to the referral prohibition related to ownership or investment interests.

411.357 Exceptions to the referral prohibition related to compensation arrangements. Scope of subpart. (a) This subpart implements section 1877 of the Act, which generally prohibits a physician from making a referral under Medicare for designated health services to an entity with which the physician or a member of the physician's immediate family has a financial relationship.

(b) This subpart does not provide for exceptions or immunity from civil or criminal prosecution or other sanctions applicable under any State laws or under Federal law other than section 1877 of the Act. For example, although a particular arrangement involving a physician's financial relationship with an entity may not prohibit the physician from making referrals to the entity under this subpart, the arrangement may nevertheless violate another provision of the Act or other laws administered by HHS, the Federal Trade Commission, the Securities and Exchange Commission, the Internal Revenue Service, or any other Federal or State agency. (c) This subpart requires, with some exceptions, that certain entities furnishing covered services under Medicare report information concerning Start Printed Page 77657ownership, investment, or compensation arrangements in the form, in the manner, and at the times specified by CMS.

(d) This subpart does not alter an individual's or entity's obligations under— (1) The rules regarding reassignment of claims (§ 424.80 of this chapter). (2) The rules regarding purchased diagnostic tests (§ 414.50 of this chapter). (3) The rules regarding payment for services and supplies incident to a physician's professional services (§ 410.26 of this chapter).

Or (4) Any other applicable Medicare laws, rules, or regulations. Definitions. The definitions in this subpart apply only for purposes of section 1877 of the Act and this subpart.

As used in this subpart, unless the context indicates otherwise. Centralized building means all or part of a building, including, for purposes of this subpart only, a mobile vehicle, van, or trailer that is owned or leased on a full-time basis (that is, 24 hours per day, 7 days per week, for a term of not less than 6 months) by a group practice and that is used exclusively by the group practice. Space in a building or a mobile vehicle, van, or trailer that is shared by more than one group practice, by a group practice and one or more solo practitioners, or by a group practice and another provider or supplier (for example, a diagnostic imaging facility) is not a centralized building for purposes of this subpart.

This provision does not preclude a group practice from providing services to other providers or suppliers (for example, purchased diagnostic tests) in the group practice's centralized building. A group practice may have more than one centralized building. Clinical laboratory services means the biological, microbiological, serological, chemical, immunohematological, hematological, biophysical, cytological, pathological, or other examination of materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings, including procedures to determine, measure, or otherwise describe the presence or absence of various substances or organisms in the body, as specifically identified by the List of CPT/HCPCS Codes.

All services so identified on the List of CPT/HCPCS Codes are clinical laboratory services for purposes of this subpart. Any service not specifically identified as a clinical laboratory service on the List of CPT/HCPCS Codes is not a clinical laboratory service for purposes of this subpart. Commercially reasonable means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty.

An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties. Consultation means a professional service furnished to a patient by a physician if the following conditions are satisfied. (1) The physician's opinion or advice regarding evaluation or management or both of a specific medical problem is requested by another physician.

(2) The request and need for the consultation are documented in the patient's medical record. (3) After the consultation is provided, the physician prepares a written report of his or her findings, which is provided to the physician who requested the consultation. (4) With respect to radiation therapy services provided by a radiation oncologist, a course of radiation treatments over a period of time will be considered to be pursuant to a consultation, provided that the radiation oncologist communicates with the referring physician on a regular basis about the patient's course of treatment and progress.

Cybersecurity means the process of protecting information by preventing, detecting, and responding to cyberattacks. Designated health services (DHS) means any of the following services (other than those provided as emergency physician services furnished outside of the U.S.), as they are defined in this section. (1)(i) Clinical laboratory services.

(ii) Physical therapy, occupational therapy, and outpatient speech-language pathology services. (iii) Radiology and certain other imaging services. (iv) Radiation therapy services and supplies.

(v) Durable medical equipment and supplies. (vi) Parenteral and enteral nutrients, equipment, and supplies. (vii) Prosthetics, orthotics, and prosthetic devices and supplies.

(viii) Home health services. (ix) Outpatient prescription drugs. (x) Inpatient and outpatient hospital services.

(2) Except as otherwise noted in this subpart, the term “designated health services” or DHS means only DHS payable, in whole or in part, by Medicare. DHS do not include services that are paid by Medicare as part of a composite rate (for example, SNF Part A payments or ASC services identified at § 416.164(a)), except to the extent that services listed in paragraphs (1)(i) through (1)(x) of this definition are themselves payable under a composite rate (for example, all services provided as home health services or inpatient and outpatient hospital services are DHS). For services furnished to inpatients by a hospital, a service is not a designated health service payable, in whole or in part, by Medicare if the furnishing of the service does not increase the amount of Medicare's payment to the hospital under any of the following prospective payment systems (PPS).

(i) Acute Care Hospital Inpatient (IPPS). (ii) Inpatient Rehabilitation Facility (IRF PPS). (iii) Inpatient Psychiatric Facility (IPF PPS).

Or (iv) Long-Term Care Hospital (LTCH PPS). Does not violate the anti-kickback statute, as used in this subpart only, means that the particular arrangement— (1)(i) Meets a safe harbor under the anti-kickback statute, as set forth at § 1001.952 of this title, “Exceptions”. (ii) Has been specifically approved by the OIG in a favorable advisory opinion issued to a party to the particular arrangement (for example, the entity furnishing DHS) with respect to the particular arrangement (and not a similar arrangement), provided that the arrangement is conducted in accordance with the facts certified by the requesting party and the opinion is otherwise issued in accordance with part 1008 of this title, “Advisory Opinions by the OIG”.

Or (iii) Does not violate the anti-kickback provisions in section 1128B(b) of the Act. (2) For purposes of this definition, a favorable advisory opinion means an opinion in which the OIG opines that— (i) The party's specific arrangement does not implicate the anti-kickback statute, does not constitute prohibited remuneration, or fits in a safe harbor under § 1001.952 of this title. Or (ii) The party will not be subject to any OIG sanctions arising under the anti-kickback statute (for example, under sections 1128A(a)(7) and 1128(b)(7) of the Act) in connection with the party's specific arrangement.

Downstream contractor means a “first tier contractor” as defined at § 1001.952(t)(2)(iii) of this title or a Start Printed Page 77658“downstream contractor” as defined at § 1001.952(t)(2)(i) of this title. Durable medical equipment (DME) and supplies has the meaning given in section 1861(n) of the Act and § 414.202 of this chapter. Electronic health record means a repository of consumer health status information in computer processable form used for clinical diagnosis and treatment for a broad array of clinical conditions.

Employee means any individual who, under the common law rules that apply in determining the employer-employee relationship (as applied for purposes of section 3121(d)(2) of the Internal Revenue Code of 1986), is considered to be employed by, or an employee of, an entity. (Application of these common law rules is discussed in 20 CFR 404.1007 and 26 CFR 31.3121(d)-1(c).) Entity means— (1) A physician's sole practice or a practice of multiple physicians or any other person, sole proprietorship, public or private agency or trust, corporation, partnership, limited liability company, foundation, nonprofit corporation, or unincorporated association that furnishes DHS. An entity does not include the referring physician himself or herself, but does include his or her medical practice.

A person or entity is considered to be furnishing DHS if it— (i) Is the person or entity that has performed services that are billed as DHS. Or (ii) Is the person or entity that has presented a claim to Medicare for the DHS, including the person or entity to which the right to payment for the DHS has been reassigned in accordance with § 424.80(b)(1) (employer) or (b)(2) (payment under a contractual arrangement) of this chapter (other than a health care delivery system that is a health plan (as defined at § 1001.952(l) of this title), and other than any managed care organization (MCO), provider-sponsored organization (PSO), or independent practice association (IPA) with which a health plan contracts for services provided to plan enrollees). (2) A health plan, MCO, PSO, or IPA that employs a supplier or operates a facility that could accept reassignment from a supplier under § 424.80(b)(1) and (b)(2) of this chapter, with respect to any DHS provided by that supplier.

(3) For purposes of this subpart, “entity” does not include a physician's practice when it bills Medicare for the technical component or professional component of a diagnostic test for which the anti-markup provision is applicable in accordance with § 414.50 of this chapter and Pub. 100-04, Medicare Claims Processing Manual, Chapter 1, Section 30.2.9. Fair market value means— (1) General.

The value in an arm's-length transaction, consistent with the general market value of the subject transaction. (2) Rental of equipment. With respect to the rental of equipment, the value in an arm's-length transaction of rental property for general commercial purposes (not taking into account its intended use), consistent with the general market value of the subject transaction.

(3) Rental of office space. With respect to the rental of office space, the value in an arm's-length transaction of rental property for general commercial purposes (not taking into account its intended use), without adjustment to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee, and consistent with the general market value of the subject transaction. General market value means— (1) Assets.

With respect to the purchase of an asset, the price that an asset would bring on the date of acquisition of the asset as the result of bona fide bargaining between a well-informed buyer and seller that are not otherwise in a position to generate business for each other. (2) Compensation. With respect to compensation for services, the compensation that would be paid at the time the parties enter into the service arrangement as the result of bona fide bargaining between well-informed parties that are not otherwise in a position to generate business for each other.

(3) Rental of equipment or office space. With respect to the rental of equipment or the rental of office space, the price that rental property would bring at the time the parties enter into the rental arrangement as the result of bona fide bargaining between a well-informed lessor and lessee that are not otherwise in a position to generate business for each other. Home health services means the services described in section 1861(m) of the Act and part 409, subpart E of this chapter.

Hospital means any entity that qualifies as a “hospital” under section 1861(e) of the Act, as a “psychiatric hospital” under section 1861(f) of the Act, or as a “critical access hospital” under section 1861(mm)(1) of the Act, and refers to any separate legally organized operating entity plus any subsidiary, related entity, or other entities that perform services for the hospital's patients and for which the hospital bills. However, a “hospital” does not include entities that perform services for hospital patients “under arrangements” with the hospital. HPSA means, for purposes of this subpart, an area designated as a health professional shortage area under section 332(a)(1)(A) of the Public Health Service Act for primary medical care professionals (in accordance with the criteria specified in part 5 of this title).

Immediate family member or member of a physician's immediate family means husband or wife. Birth or adoptive parent, child, or sibling. Stepparent, stepchild, stepbrother, or stepsister.

Father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law. Grandparent or grandchild. And spouse of a grandparent or grandchild.

€œIncident to” services or services “incident to” means those services and supplies that meet the requirements of section 1861(s)(2)(A) of the Act, § 410.26 of this chapter, and Pub. 100-02, Medicare Benefit Policy Manual, Chapter 15, Sections 60, 60.1, 60.2, 60.3, and 60.4. Inpatient hospital services means those services defined in section 1861(b) of the Act and § 409.10(a) and (b) of this chapter and include inpatient psychiatric hospital services listed in section 1861(c) of the Act and inpatient critical access hospital services, as defined in section 1861(mm)(2) of the Act.

€œInpatient hospital services” do not include emergency inpatient services provided by a hospital located outside of the U.S. And covered under the authority in section 1814(f)(2) of the Act and part 424, subpart H of this chapter, or emergency inpatient services provided by a nonparticipating hospital within the U.S., as authorized by section 1814(d) of the Act and described in part 424, subpart G of this chapter. €œInpatient hospital services” also do not include dialysis furnished by a hospital that is not certified to provide end-stage renal dialysis (ESRD) services under subpart U of part 405 of this chapter.

€œInpatient hospital services” include services that are furnished either by the hospital directly or under arrangements made by the hospital with others. €œInpatient hospital services” do not include professional services performed by physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse midwives, and certified registered nurse anesthetists and qualified psychologists if Medicare reimburses the services independently and not as part of the Start Printed Page 77659inpatient hospital service (even if they are billed by a hospital under an assignment or reassignment). Interoperable means— (1) Able to securely exchange data with and use data from other health information technology.

And (2) Allows for complete access, exchange, and use of all electronically accessible health information for authorized use under applicable State or Federal law. Isolated financial transaction—(1) Isolated financial transaction means a one-time transaction involving a single payment between two or more persons or a one-time transaction that involves integrally related installment payments, provided that— (i) The total aggregate payment is fixed before the first payment is made and does not take into account the volume or value of referrals or other business generated by the physician. And (ii) The payments are immediately negotiable, guaranteed by a third party, secured by a negotiable promissory note, or subject to a similar mechanism to ensure payment even in the event of default by the purchaser or obligated party.

(2) An isolated financial transaction includes a one-time sale of property or a practice, single instance of forgiveness of an amount owed in settlement of a bona fide dispute, or similar one-time transaction, but does not include a single payment for multiple or repeated services (such as payment for services previously provided but not yet compensated). Laboratory means an entity furnishing biological, microbiological, serological, chemical, immunohematological, hematological, biophysical, cytological, pathological, or other examination of materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings. These examinations also include procedures to determine, measure, or otherwise describe the presence or absence of various substances or organisms in the body.

Entities only collecting or preparing specimens (or both) or only serving as a mailing service and not performing testing are not considered laboratories. List of CPT/HCPCS Codes means the list of CPT and HCPCS codes that identifies those items and services that are DHS under section 1877 of the Act or that may qualify for certain exceptions under section 1877 of the Act. It is updated annually, as published in the Federal Register, and is posted on the CMS website at http://www.cms.hhs.gov/​PhysicianSelfReferral/​11_​_​List_​_​of_​_​Codes.asp#TopOfPage.

Locum tenens physician (or substitute physician) means a physician who substitutes in exigent circumstances for another physician, in accordance with section 1842(b)(6)(D) of the Act and Pub. 100-04, Medicare Claims Processing Manual, Chapter 1, Section 30.2.11. Member of the group or member of a group practice means, for purposes of this subpart, a direct or indirect physician owner of a group practice (including a physician whose interest is held by his or her individual professional corporation or by another entity), a physician employee of the group practice (including a physician employed by his or her individual professional corporation that has an equity interest in the group practice), a locum tenens physician (as defined in this section), or an on-call physician while the physician is providing on-call services for members of the group practice.

A physician is a member of the group during the time he or she furnishes “patient care services” to the group as defined in this section. An independent contractor or a leased employee is not a member of the group (unless the leased employee meets the definition of an “employee” under this section). Outpatient hospital services means the therapeutic, diagnostic, and partial hospitalization services listed under sections 1861(s)(2)(B) and (s)(2)(C) of the Act.

Outpatient services furnished by a psychiatric hospital, as defined in section 1861(f) of the Act. And outpatient critical access hospital services, as defined in section 1861(mm)(3) of the Act. €œOutpatient hospital services” do not include emergency services furnished by nonparticipating hospitals and covered under the conditions described in section 1835(b) of the Act and subpart G of part 424 of this chapter.

€œOutpatient hospital services” include services that are furnished either by the hospital directly or under arrangements made by the hospital with others. €œOutpatient hospital services” do not include professional services performed by physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse midwives, certified registered nurse anesthetists, and qualified psychologists if Medicare reimburses the services independently and not as part of the outpatient hospital service (even if they are billed by a hospital under an assignment or reassignment). Outpatient prescription drugs means all drugs covered by Medicare Part B or D, except for those drugs that are “covered ancillary services,” as defined at § 416.164(b) of this chapter, for which separate payment is made to an ambulatory surgical center.

Parenteral and enteral nutrients, equipment, and supplies means the following services (including all HCPCS level 2 codes for these services). (1) Parenteral nutrients, equipment, and supplies, meaning those items and supplies needed to provide nutriment to a patient with permanent, severe pathology of the alimentary tract that does not allow absorption of sufficient nutrients to maintain strength commensurate with the patient's general condition, as described in Pub. 100-03, Medicare National Coverage Determinations Manual, Chapter 1, Section 180.2, as amended or replaced from time to time.

And (2) Enteral nutrients, equipment, and supplies, meaning items and supplies needed to provide enteral nutrition to a patient with a functioning gastrointestinal tract who, due to pathology to or nonfunction of the structures that normally permit food to reach the digestive tract, cannot maintain weight and strength commensurate with his or her general condition, as described in Pub. 100-03, Medicare National Coverage Determinations Manual, Chapter 1, Section 180.2. Patient care services means any task(s) performed by a physician in the group practice that address the medical needs of specific patients or patients in general, regardless of whether they involve direct patient encounters or generally benefit a particular practice.

Patient care services can include, for example, the services of physicians who do not directly treat patients, such as time spent by a physician consulting with other physicians or reviewing laboratory tests, or time spent training staff members, arranging for equipment, or performing administrative or management tasks. Physical therapy, occupational therapy, and outpatient speech-language pathology services means those particular services so identified on the List of CPT/HCPCS Codes. All services so identified on the List of CPT/HCPCS Codes are physical therapy, occupational therapy, and outpatient speech-language pathology services for purposes of this subpart.

Any service not specifically identified as physical therapy, occupational therapy or outpatient speech-language pathology on the List of CPT/HCPCS Codes is not a physical therapy, occupational Start Printed Page 77660therapy, or outpatient speech-language pathology service for purposes of this subpart. The list of codes identifying physical therapy, occupational therapy, and outpatient speech-language pathology services for purposes of this regulation includes the following. (1) Physical therapy services, meaning those outpatient physical therapy services described in section 1861(p) of the Act that are covered under Medicare Part A or Part B, regardless of who provides them, if the services include— (i) Assessments, function tests, and measurements of strength, balance, endurance, range of motion, and activities of daily living.

(ii) Therapeutic exercises, massage, and use of physical medicine modalities, assistive devices, and adaptive equipment. Or (iii) Establishment of a maintenance therapy program for an individual whose restoration potential has been reached. However, maintenance therapy itself is not covered as part of these services.

(2) Occupational therapy services, meaning those services described in section 1861(g) of the Act that are covered under Medicare Part A or Part B, regardless of who provides them, if the services include— (i) Teaching of compensatory techniques to permit an individual with a physical or cognitive impairment or limitation to engage in daily activities. (ii) Evaluation of an individual's level of independent functioning. (iii) Selection and teaching of task-oriented therapeutic activities to restore sensory-integrative function.

Or (iv) Assessment of an individual's vocational potential, except when the assessment is related solely to vocational rehabilitation. (3) Outpatient speech-language pathology services, meaning those services as described in section 1861(ll)(2) of the Act that are for the diagnosis and treatment of speech, language, and cognitive disorders that include swallowing and other oral-motor dysfunctions. Physician has the meaning set forth in section 1861(r) of the Act.

A physician and the professional corporation of which he or she is a sole owner are the same for purposes of this subpart. Physician in the group practice means a member of the group practice, as well as an independent contractor physician during the time the independent contractor is furnishing patient care services (as defined in this section) for the group practice under a contractual arrangement directly with the group practice to provide services to the group practice's patients in the group practice's facilities. The contract must contain the same restrictions on compensation that apply to members of the group practice under § 411.352(g) (or the contract must satisfy the requirements of the personal service arrangements exception in § 411.357(d)), and the independent contractor's arrangement with the group practice must comply with the reassignment rules in § 424.80(b)(2) of this chapter (see also Pub.

L. 100-04, Medicare Claims Processing Manual, Chapter 1, Section 30.2.7, as amended or replaced from time to time). Referrals from an independent contractor who is a physician in the group practice are subject to the prohibition on referrals in § 411.353(a), and the group practice is subject to the limitation on billing for those referrals in § 411.353(b).

Physician incentive plan means any compensation arrangement between an entity (or downstream contractor) and a physician or physician group that may directly or indirectly have the effect of reducing or limiting services furnished with respect to individuals enrolled with the entity. Physician organization means a physician, a physician practice, or a group practice that complies with the requirements of § 411.352. Plan of care means the establishment by a physician of a course of diagnosis or treatment (or both) for a particular patient, including the ordering of services.

Professional courtesy means the provision of free or discounted health care items or services to a physician or his or her immediate family members or office staff. Prosthetics, Orthotics, and Prosthetic Devices and Supplies means the following services (including all HCPCS level 2 codes for these items and services that are covered by Medicare). (1) Orthotics, meaning leg, arm, back, and neck braces, as listed in section 1861(s)(9) of the Act.

(2) Prosthetics, meaning artificial legs, arms, and eyes, as described in section 1861(s)(9) of the Act. (3) Prosthetic devices, meaning devices (other than a dental device) listed in section 1861(s)(8) of the Act that replace all or part of an internal body organ, including colostomy bags, and one pair of conventional eyeglasses or contact lenses furnished subsequent to each cataract surgery with insertion of an intraocular lens. (4) Prosthetic supplies, meaning supplies that are necessary for the effective use of a prosthetic device (including supplies directly related to colostomy care).

Radiation therapy services and supplies means those particular services and supplies, including (effective January 1, 2007) therapeutic nuclear medicine services and supplies, so identified on the List of CPT/HCPCS Codes. All services and supplies so identified on the List of CPT/HCPCS Codes are radiation therapy services and supplies for purposes of this subpart. Any service or supply not specifically identified as radiation therapy services or supplies on the List of CPT/HCPCS Codes is not a radiation therapy service or supply for purposes of this subpart.

The list of codes identifying radiation therapy services and supplies is based on section 1861(s)(4) of the Act and § 410.35 of this chapter. Radiology and certain other imaging services means those particular services so identified on the List of CPT/HCPCS Codes. All services identified on the List of CPT/HCPCS Codes are radiology and certain other imaging services for purposes of this subpart.

Any service not specifically identified as radiology and certain other imaging services on the List of CPT/HCPCS Codes is not a radiology or certain other imaging service for purposes of this subpart. The list of codes identifying radiology and certain other imaging services includes the professional and technical components of any diagnostic test or procedure using x-rays, ultrasound, computerized axial tomography, magnetic resonance imaging, nuclear medicine (effective January 1, 2007), or other imaging services. All codes identified as radiology and certain other imaging services are covered under section 1861(s)(3) of the Act and §§ 410.32 and 410.34 of this chapter, but do not include— (1) X-ray, fluoroscopy, or ultrasound procedures that require the insertion of a needle, catheter, tube, or probe through the skin or into a body orifice.

(2) Radiology or certain other imaging services that are integral to the performance of a medical procedure that is not identified on the list of CPT/HCPCS codes as a radiology or certain other imaging service and is performed— (i) Immediately prior to or during the medical procedure. Or (ii) Immediately following the medical procedure when necessary to confirm placement of an item placed during the medical procedure. (3) Radiology and certain other imaging services that are “covered ancillary services,” as defined at § 416.164(b), for which separate payment is made to an ASC.

Referral— (1) Means either of the following:Start Printed Page 77661 (i) Except as provided in paragraph (2) of this definition, the request by a physician for, or ordering of, or the certifying or recertifying of the need for, any designated health service for which payment may be made under Medicare Part B, including a request for a consultation with another physician and any test or procedure ordered by or to be performed by (or under the supervision of) that other physician, but not including any designated health service personally performed or provided by the referring physician. A designated health service is not personally performed or provided by the referring physician if it is performed or provided by any other person, including, but not limited to, the referring physician's employees, independent contractors, or group practice members. (ii) Except as provided in paragraph (2) of this definition, a request by a physician that includes the provision of any designated health service for which payment may be made under Medicare, the establishment of a plan of care by a physician that includes the provision of such a designated health service, or the certifying or recertifying of the need for such a designated health service, but not including any designated health service personally performed or provided by the referring physician.

A designated health service is not personally performed or provided by the referring physician if it is performed or provided by any other person including, but not limited to, the referring physician's employees, independent contractors, or group practice members. (2) Does not include a request by a pathologist for clinical diagnostic laboratory tests and pathological examination services, by a radiologist for diagnostic radiology services, and by a radiation oncologist for radiation therapy or ancillary services necessary for, and integral to, the provision of radiation therapy, if— (i) The request results from a consultation initiated by another physician (whether the request for a consultation was made to a particular physician or to an entity with which the physician is affiliated). And (ii) The tests or services are furnished by or under the supervision of the pathologist, radiologist, or radiation oncologist, or under the supervision of a pathologist, radiologist, or radiation oncologist, respectively, in the same group practice as the pathologist, radiologist, or radiation oncologist.

(3) Can be in any form, including, but not limited to, written, oral, or electronic. (4) A referral is not an item or service for purposes of section 1877 of the Act and this subpart. Referring physician means a physician who makes a referral as defined in this section or who directs another person or entity to make a referral or who controls referrals made by another person or entity.

A referring physician and the professional corporation of which he or she is a sole owner are the same for purposes of this subpart. Remuneration means any payment or other benefit made directly or indirectly, overtly or covertly, in cash or in kind, except that the following are not considered remuneration for purposes of this section. (1) The forgiveness of amounts owed for inaccurate tests or procedures, mistakenly performed tests or procedures, or the correction of minor billing errors.

(2) The furnishing of items, devices, or supplies that are, in fact, used solely for one or more of the following purposes. (i) Collecting specimens for the entity furnishing the items, devices or supplies. (ii) Transporting specimens for the entity furnishing the items, devices or supplies.

(iii) Processing specimens for the entity furnishing the items, devices or supplies. (iv) Storing specimens for the entity furnishing the items, devices or supplies. (v) Ordering tests or procedures for the entity furnishing the items, devices or supplies.

Or (vi) Communicating the results of tests or procedures for the entity furnishing the items, devices or supplies. (3) A payment made by an insurer or a self-insured plan (or a subcontractor of the insurer or self-insured plan) to a physician to satisfy a claim, submitted on a fee-for-service basis, for the furnishing of health services by that physician to an individual who is covered by a policy with the insurer or by the self-insured plan, if— (i) The health services are not furnished, and the payment is not made, under a contract or other arrangement between the insurer or the self-insured plan (or a subcontractor of the insurer or self-insured plan) and the physician. (ii) The payment is made to the physician on behalf of the covered individual and would otherwise be made directly to the individual.

And (iii) The amount of the payment is set in advance, does not exceed fair market value, and is not determined in any manner that takes into account the volume or value of referrals. Rural area means an area that is not an urban area as defined at § 412.62(f)(1)(ii) of this chapter. Same building means a structure with, or combination of structures that share, a single street address as assigned by the U.S.

Postal Service, excluding all exterior spaces (for example, lawns, courtyards, driveways, parking lots) and interior loading docks or parking garages. For purposes of this section, the “same building” does not include a mobile vehicle, van, or trailer. Specialty hospital means.

(1) A subsection (d) hospital (as defined in section 1886(d)(1)(B) of the Act) that is primarily or exclusively engaged in the care and treatment of one of the following. (i) Patients with a cardiac condition. (ii) Patients with an orthopedic condition.

(iii) Patients receiving a surgical procedure. Or (iv) Any other specialized category of services that the Secretary designates as inconsistent with the purpose of permitting physician ownership and investment interests in a hospital. (2) A “specialty hospital” does not include any hospital— (i) Determined by the Secretary to be in operation before or under development as of November 18, 2003.

(ii) For which the number of physician investors at any time on or after such date is no greater than the number of such investors as of such date. (iii) For which the type of categories described above is no different at any time on or after such date than the type of such categories as of such date. (iv) For which any increase in the number of beds occurs only in the facilities on the main campus of the hospital and does not exceed 50 percent of the number of beds in the hospital as of November 18, 2003, or 5 beds, whichever is greater.

And (v) That meets such other requirements as the Secretary may specify. Target patient population means an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that— (1) Are set out in writing in advance of the commencement of the value-based arrangement. And (2) Further the value-based enterprise's value-based purpose(s).

Transaction means an instance of two or more persons or entities doing business. Value-based activity means any of the following activities, provided that the Start Printed Page 77662activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise. (1) The provision of an item or service.

(2) The taking of an action. Or (3) The refraining from taking an action. Value-based arrangement means an arrangement for the provision of at least one value-based activity for a target patient population to which the only parties are— (1) The value-based enterprise and one or more of its VBE participants.

Or (2) VBE participants in the same value-based enterprise. Value-based enterprise (VBE) means two or more VBE participants— (1) Collaborating to achieve at least one value-based purpose. (2) Each of which is a party to a value-based arrangement with the other or at least one other VBE participant in the value-based enterprise.

(3) That have an accountable body or person responsible for the financial and operational oversight of the value-based enterprise. And (4) That have a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s). Value-based purpose means any of the following.

(1) Coordinating and managing the care of a target patient population. (2) Improving the quality of care for a target patient population. (3) Appropriately reducing the costs to or growth in expenditures of payors without reducing the quality of care for a target patient population.

Or (4) Transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population. VBE participant means a person or entity that engages in at least one value-based activity as part of a value-based enterprise. Group practice.

For purposes of this subpart, a group practice is a physician practice that meets the following conditions. (a) Single legal entity. The group practice must consist of a single legal entity operating primarily for the purpose of being a physician group practice in any organizational form recognized by the State in which the group practice achieves its legal status, including, but not limited to, a partnership, professional corporation, limited liability company, foundation, nonprofit corporation, faculty practice plan, or similar association.

The single legal entity may be organized by any party or parties, including, but not limited to, physicians, health care facilities, or other persons or entities (including, but not limited to, physicians individually incorporated as professional corporations). The single legal entity may be organized or owned (in whole or in part) by another medical practice, provided that the other medical practice is not an operating physician practice (and regardless of whether the medical practice meets the conditions for a group practice under this section). For purposes of this subpart, a single legal entity does not include informal affiliations of physicians formed substantially to share profits from referrals, or separate group practices under common ownership or control through a physician practice management company, hospital, health system, or other entity or organization.

A group practice that is otherwise a single legal entity may itself own subsidiary entities. A group practice operating in more than one State will be considered to be a single legal entity notwithstanding that it is composed of multiple legal entities, provided that— (1) The States in which the group practice is operating are contiguous (although each State need not be contiguous to every other State). (2) The legal entities are absolutely identical as to ownership, governance, and operation.

And (3) Organization of the group practice into multiple entities is necessary to comply with jurisdictional licensing laws of the States in which the group practice operates. (b) Physicians. The group practice must have at least two physicians who are members of the group (whether employees or direct or indirect owners), as defined at § 411.351.

(c) Range of care. Each physician who is a member of the group, as defined at § 411.351, must furnish substantially the full range of patient care services that the physician routinely furnishes, including medical care, consultation, diagnosis, and treatment, through the joint use of shared office space, facilities, equipment, and personnel. (d) Services furnished by group practice members.

(1) Except as otherwise provided in paragraphs (d)(3) through (6) of this section, substantially all of the patient care services of the physicians who are members of the group (that is, at least 75 percent of the total patient care services of the group practice members) must be furnished through the group and billed under a billing number assigned to the group, and the amounts received must be treated as receipts of the group. Patient care services must be measured by one of the following. (i) The total time each member spends on patient care services documented by any reasonable means (including, but not limited to, time cards, appointment schedules, or personal diaries).

(For example, if a physician practices 40 hours a week and spends 30 hours a week on patient care services for a group practice, the physician has spent 75 percent of his or her time providing patient care services for the group.) (ii) Any alternative measure that is reasonable, fixed in advance of the performance of the services being measured, uniformly applied over time, verifiable, and documented. (2) The data used to calculate compliance with this substantially all test and related supportive documentation must be made available to the Secretary upon request. (3) The substantially all test set forth in paragraph (d)(1) of this section does not apply to any group practice that is located solely in a HPSA, as defined at § 411.351.

(4) For a group practice located outside of a HPSA (as defined at § 411.351), any time spent by a group practice member providing services in a HPSA should not be used to calculate whether the group practice has met the substantially all test, regardless of whether the member's time in the HPSA is spent in a group practice, clinic, or office setting. (5) During the start up period (not to exceed 12 months) that begins on the date of the initial formation of a new group practice, a group practice must make a reasonable, good faith effort to ensure that the group practice complies with the substantially all test requirement set forth in paragraph (d)(1) of this section as soon as practicable, but no later than 12 months from the date of the initial formation of the group practice. This paragraph (d)(5) does not apply when an existing group practice admits a new member or reorganizes.

(6)(i) If the addition to an existing group practice of a new member who would be considered to have relocated his or her medical practice under § 411.357(e)(2) would result in the existing group practice not meeting the substantially all test set forth in paragraph (d)(1) of this section, the group practice will have 12 months following the addition of the new member to come back into full compliance, provided that— (A) For the 12-month period the group practice is fully compliant with the substantially all test if the new member Start Printed Page 77663is not counted as a member of the group for purposes of § 411.352. And (B) The new member's employment with, or ownership interest in, the group practice is documented in writing no later than the beginning of his or her new employment, ownership, or investment. (ii) This paragraph (d)(6) does not apply when an existing group practice reorganizes or admits a new member who is not relocating his or her medical practice.

(e) Distribution of expenses and income. The overhead expenses of, and income from, the practice must be distributed according to methods that are determined before the receipt of payment for the services giving rise to the overhead expense or producing the income. Nothing in this section prevents a group practice from adjusting its compensation methodology prospectively, subject to restrictions on the distribution of revenue from DHS under paragraph (i) of this section.

(f) Unified business. (1) The group practice must be a unified business having at least the following features. (i) Centralized decision-making by a body representative of the group practice that maintains effective control over the group's assets and liabilities (including, but not limited to, budgets, compensation, and salaries).

And (ii) Consolidated billing, accounting, and financial reporting. (2) Location and specialty-based compensation practices are permitted with respect to revenues derived from services that are not DHS and may be permitted with respect to revenues derived from DHS under paragraph (i) of this section. (g) Volume or value of referrals.

No physician who is a member of the group practice directly or indirectly receives compensation based on the volume or value of his or her referrals, except as provided in paragraph (i) of this section. (h) Physician-patient encounters. Members of the group must personally conduct no less than 75 percent of the physician-patient encounters of the group practice.

(i) Special rule for productivity bonuses and profit shares. (1) A physician in the group practice may be paid a share of overall profits of the group, provided that the share is not determined in any manner that is directly related to the volume or value of referrals of DHS by the physician. A physician in the group practice may be paid a productivity bonus based on services that he or she has personally performed, or services “incident to” such personally performed services, or both, provided that the bonus is not determined in any manner that is directly related to the volume or value of referrals of DHS by the physician (except that the bonus may directly relate to the volume or value of DHS referrals by the physician if the referrals are for services “incident to” the physician's personally performed services).

(2) Overall profits means the group's entire profits derived from DHS payable by Medicare or Medicaid or the profits derived from DHS payable by Medicare or Medicaid of any component of the group practice that consists of at least five physicians. Overall profits should be divided in a reasonable and verifiable manner that is not directly related to the volume or value of the physician's referrals of DHS. The share of overall profits will be deemed not to relate directly to the volume or value of referrals if one of the following conditions is met.

(i) The group's profits are divided per capita (for example, per member of the group or per physician in the group). (ii) Revenues derived from DHS are distributed based on the distribution of the group practice's revenues attributed to services that are not DHS payable by any Federal health care program or private payer. (iii) Revenues derived from DHS constitute less than 5 percent of the group practice's total revenues, and the allocated portion of those revenues to each physician in the group practice constitutes 5 percent or less of his or her total compensation from the group.

(3) A productivity bonus must be calculated in a reasonable and verifiable manner that is not directly related to the volume or value of the physician's referrals of DHS. A productivity bonus will be deemed not to relate directly to the volume or value of referrals of DHS if one of the following conditions is met. (i) The bonus is based on the physician's total patient encounters or relative value units (RVUs).

(The methodology for establishing RVUs is set forth in § 414.22 of this chapter.) (ii) The bonus is based on the allocation of the physician's compensation attributable to services that are not DHS payable by any Federal health care program or private payer. (iii) Revenues derived from DHS are less than 5 percent of the group practice's total revenues, and the allocated portion of those revenues to each physician in the group practice constitutes 5 percent or less of his or her total compensation from the group practice. (4) Supporting documentation verifying the method used to calculate the profit share or productivity bonus under paragraphs (i)(2) and (3) of this section, and the resulting amount of compensation, must be made available to the Secretary upon request.

Prohibition on certain referrals by physicians and limitations on billing. (a) Prohibition on referrals. Except as provided in this subpart, a physician who has a direct or indirect financial relationship with an entity, or who has an immediate family member who has a direct or indirect financial relationship with the entity, may not make a referral to that entity for the furnishing of DHS for which payment otherwise may be made under Medicare.

A physician's prohibited financial relationship with an entity that furnishes DHS is not imputed to his or her group practice or its members or its staff. However, a referral made by a physician's group practice, its members, or its staff may be imputed to the physician if the physician directs the group practice, its members, or its staff to make the referral or if the physician controls referrals made by his or her group practice, its members, or its staff. (b) Limitations on billing.

An entity that furnishes DHS pursuant to a referral that is prohibited by paragraph (a) of this section may not present or cause to be presented a claim or bill to the Medicare program or to any individual, third party payer, or other entity for the DHS performed pursuant to the prohibited referral. (c) Denial of payment for services furnished under a prohibited referral. (1) Except as provided in paragraph (e) of this section, no Medicare payment may be made for a designated health service that is furnished pursuant to a prohibited referral.

(2) When payment for a designated health service is denied on the basis that the service was furnished pursuant to a prohibited referral, and such payment denial is appealed— (i) The ultimate burden of proof (burden of persuasion) at each level of appeal is on the entity submitting the claim for payment to establish that the service was not furnished pursuant to a prohibited referral (and not on CMS or its contractors to establish that the service was furnished pursuant to a prohibited referral). And (ii) The burden of production on each issue at each level of appeal is initially on the claimant, but may shift to CMS or its contractors during the course of the appellate proceeding, depending on the evidence presented by the claimant. (d) Refunds.

An entity that collects payment for a designated health service that was performed pursuant to a prohibited referral must refund all Start Printed Page 77664collected amounts on a timely basis, as defined at § 1003.101 of this title. (e) Exception for certain entities. Payment may be made to an entity that submits a claim for a designated health service if— (1) The entity did not have actual knowledge of, and did not act in reckless disregard or deliberate ignorance of, the identity of the physician who made the referral of the designated health service to the entity.

And (2) The claim otherwise complies with all applicable Federal and State laws, rules, and regulations. (f) Exception for certain arrangements involving temporary noncompliance. (1) Except as provided in paragraphs (f)(2) through (4) of this section, an entity may submit a claim or bill and payment may be made to an entity that submits a claim or bill for a designated health service if— (i) The financial relationship between the entity and the referring physician fully complied with an applicable exception under § 411.355, 411.356, or 411.357 for at least 180 consecutive calendar days immediately preceding the date on which the financial relationship became noncompliant with the exception.

And (ii) The financial relationship has fallen out of compliance with the exception for reasons beyond the control of the entity, and the entity promptly takes steps to rectify the noncompliance. (2) Paragraph (f)(1) of this section applies only to DHS furnished during the period of time it takes the entity to rectify the noncompliance, which must not exceed 90 consecutive calendar days following the date on which the financial relationship became noncompliant with an exception. (3) Paragraph (f)(1) may be used by an entity only once every 3 years with respect to the same referring physician.

(4) Paragraph (f)(1) does not apply if the exception with which the financial relationship previously complied was § 411.357(k) or (m). (g) [Reserved] (h) Special rule for reconciling compensation. An entity may submit a claim or bill and payment may be made to an entity that submits a claim or bill for a designated health service if— (1) No later than 90 consecutive calendar days following the expiration or termination of a compensation arrangement, the entity and the physician (or immediate family member of a physician) that are parties to the compensation arrangement reconcile all discrepancies in payments under the arrangement such that, following the reconciliation, the entire amount of remuneration for items or services has been paid as required under the terms and conditions of the arrangement.

And (2) Except for the discrepancies in payments described in paragraph (h)(1) of this section, the compensation arrangement fully complies with an applicable exception in this subpart. Financial relationship, compensation, and ownership or investment interest. (a) Financial relationships—(1) Financial relationship means— (i) A direct or indirect ownership or investment interest (as defined in paragraph (b) of this section) in any entity that furnishes DHS.

Or (ii) A direct or indirect compensation arrangement (as defined in paragraph (c) of this section) with an entity that furnishes DHS. (2) Types of financial relationships. (i) A direct financial relationship exists if remuneration passes between the referring physician (or a member of his or her immediate family) and the entity furnishing DHS without any intervening persons or entities between the entity furnishing DHS and the referring physician (or a member of his or her immediate family).

(ii) An indirect financial relationship exists under the conditions described in paragraphs (b)(5) and (c)(2) of this section. (b) Ownership or investment interest. An ownership or investment interest in the entity may be through equity, debt, or other means, and includes an interest in an entity that holds an ownership or investment interest in any entity that furnishes DHS.

(1) An ownership or investment interest includes, but is not limited to, stock, stock options other than those described in paragraph (b)(3)(ii) of this section, partnership shares, limited liability company memberships, as well as loans, bonds, or other financial instruments that are secured with an entity's property or revenue or a portion of that property or revenue. (2) An ownership or investment interest in a subsidiary company is neither an ownership or investment interest in the parent company, nor in any other subsidiary of the parent, unless the subsidiary company itself has an ownership or investment interest in the parent or such other subsidiaries. It may, however, be part of an indirect financial relationship.

(3) Ownership and investment interests do not include, among other things— (i) An interest in an entity that arises from a retirement plan offered by that entity to the physician (or a member of his or her immediate family) through the physician's (or immediate family member's) employment with that entity. (ii) Stock options and convertible securities received as compensation until the stock options are exercised or the convertible securities are converted to equity (before this time the stock options or convertible securities are compensation arrangements as defined in paragraph (c) of this section). (iii) An unsecured loan subordinated to a credit facility (which is a compensation arrangement as defined in paragraph (c) of this section).

(iv) An “under arrangements” contract between a hospital and an entity owned by one or more physicians (or a group of physicians) providing DHS “under arrangements” with the hospital (such a contract is a compensation arrangement as defined in paragraph (c) of this section). (v) A security interest held by a physician in equipment sold by the physician to a hospital and financed through a loan from the physician to the hospital (such an interest is a compensation arrangement as defined in paragraph (c) of this section). (vi) A titular ownership or investment interest that excludes the ability or right to receive the financial benefits of ownership or investment, including, but not limited to, the distribution of profits, dividends, proceeds of sale, or similar returns on investment.

Or (vii) An interest in an entity that arises from an employee stock ownership plan (ESOP) that is qualified under Internal Revenue Code section 401(a). (4) An ownership or investment interest that meets an exception set forth in § 411.355 or § 411.356 need not also meet an exception for compensation arrangements set forth in § 411.357 with respect to profit distributions, dividends, or interest payments on secured obligations. (5)(i) An indirect ownership or investment interest exists if— (A) Between the referring physician (or immediate family member) and the entity furnishing DHS there exists an unbroken chain of any number (but no fewer than one) of persons or entities having ownership or investment interests.

And (B) The entity furnishing DHS has actual knowledge of, or acts in reckless disregard or deliberate ignorance of, the fact that the referring physician (or immediate family member) has some ownership or investment interest (through any number of intermediary ownership or investment interests) in the entity furnishing the DHS.Start Printed Page 77665 (ii) An indirect ownership or investment interest exists even though the entity furnishing DHS does not know, or acts in reckless disregard or deliberate ignorance of, the precise composition of the unbroken chain or the specific terms of the ownership or investment interests that form the links in the chain. (iii) Notwithstanding anything in this paragraph (b)(5), common ownership or investment in an entity does not, in and of itself, establish an indirect ownership or investment interest by one common owner or investor in another common owner or investor. (iv) An indirect ownership or investment interest requires an unbroken chain of ownership interests between the referring physician and the entity furnishing DHS such that the referring physician has an indirect ownership or investment interest in the entity furnishing DHS.

(c) Compensation arrangement. A compensation arrangement is any arrangement involving remuneration, direct or indirect, between a physician (or a member of a physician's immediate family) and an entity. An “under arrangements” contract between a hospital and an entity providing DHS “under arrangements” to the hospital creates a compensation arrangement for purposes of these regulations.

A compensation arrangement does not include the portion of any business arrangement that consists solely of the remuneration described in section 1877(h)(1)(C) of the Act and in paragraphs (1) through (3) of the definition of the term “remuneration” at § 411.351. (However, any other portion of the arrangement may still constitute a compensation arrangement.) (1)(i) A direct compensation arrangement exists if remuneration passes between the referring physician (or a member of his or her immediate family) and the entity furnishing DHS without any intervening persons or entities. (ii) Except as provided in paragraph (c)(3)(ii)(C) of this section, a physician is deemed to “stand in the shoes” of his or her physician organization and have a direct compensation arrangement with an entity furnishing DHS if— (A) The only intervening entity between the physician and the entity furnishing DHS is his or her physician organization.

And (B) The physician has an ownership or investment interest in the physician organization. (iii) A physician (other than a physician described in paragraph (c)(1)(ii)(B) of this section) is permitted to “stand in the shoes” of his or her physician organization and have a direct compensation arrangement with an entity furnishing DHS if the only intervening entity between the physician and the entity furnishing DHS is his or her physician organization. (2) An indirect compensation arrangement exists if all of the conditions of paragraphs (c)(2)(i) through (iii) of this section exist.

(i) Between the referring physician (or a member of his or her immediate family) and the entity furnishing DHS there exists an unbroken chain of any number (but not fewer than one) of persons or entities that have financial relationships (as defined in paragraph (a) of this section) between them (that is, each link in the chain has either an ownership or investment interest or a compensation arrangement with the preceding link). (ii)(A) The referring physician (or immediate family member) receives aggregate compensation from the person or entity in the chain with which the physician (or immediate family member) has a direct financial relationship that varies with the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS and the individual unit of compensation received by the physician (or immediate family member)— (1) Is not fair market value for items or services actually provided. (2) Includes the physician's referrals to the entity furnishing DHS as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the number or value of the physician's referrals to the entity.

Or (3) Includes other business generated by the physician for the entity furnishing DHS as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the physician's generation of other business for the entity. (B) For purposes of applying paragraph (c)(2)(ii)(A) of this section, a positive correlation between two variables exists when one variable decreases as the other variable decreases, or one variable increases as the other variable increases. (C) If the financial relationship between the physician (or immediate family member) and the person or entity in the chain with which the referring physician (or immediate family member) has a direct financial relationship is an ownership or investment interest, the determination whether the aggregate compensation varies with the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS will be measured by the nonownership or noninvestment interest closest to the referring physician (or immediate family member).

(For example, if a referring physician has an ownership interest in company A, which owns company B, which has a compensation arrangement with company C, which has a compensation arrangement with entity D that furnishes DHS, we would look to the aggregate compensation between company B and company C for purposes of this paragraph (c)(2)(ii)). (iii) The entity furnishing DHS has actual knowledge of, or acts in reckless disregard or deliberate ignorance of, the fact that the referring physician (or immediate family member) receives aggregate compensation that varies with the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS. (iv)(A) For purposes of paragraph (c)(2)(i) of this section, except as provided in paragraph (c)(3)(ii)(C) of this section, a physician is deemed to “stand in the shoes” of his or her physician organization if the physician has an ownership or investment interest in the physician organization.

(B) For purposes of paragraph (c)(2)(i) of this section, a physician (other than a physician described in paragraph (c)(2)(iv)(A) of this section) is permitted to “stand in the shoes” of his or her physician organization. (3)(i) For purposes of paragraphs (c)(1)(ii) and (c)(2)(iv) of this section, a physician who “stands in the shoes” of his or her physician organization is deemed to have the same compensation arrangements (with the same parties and on the same terms) as the physician organization. When applying the exceptions in §§ 411.355 and 411.357 to arrangements in which a physician stands in the shoes of his or her physician organization, the “parties to the arrangements” are considered to be— (A) With respect to a signature requirement, the physician organization and any physician who “stands in the shoes” of the physician organization as required under paragraph (c)(1)(ii) or (c)(2)(iv)(A) of this section.

And (B) With respect to all other requirements of the exception, including the relevant referrals and other business generated between the parties, the entity furnishing DHS and the physician organization (including Start Printed Page 77666all members, employees, and independent contractor physicians). (ii) The provisions of paragraphs (c)(1)(ii) and (c)(2)(iv)(A) of this section— (A) Need not apply during the original term or current renewal term of an arrangement that satisfied the requirements of § 411.357(p) as of September 5, 2007 (see 42 CFR parts 400-413, revised as of October 1, 2007). (B) Do not apply to an arrangement that satisfies the requirements of § 411.355(e).

And (C) Do not apply to a physician whose ownership or investment interest is titular only. A titular ownership or investment interest is an ownership or investment interest that excludes the ability or right to receive the financial benefits of ownership or investment, including, but not limited to, the distribution of profits, dividends, proceeds of sale, or similar returns on investment. (iii) An arrangement structured to comply with an exception in § 411.357 (other than § 411.357(p)), but which would otherwise qualify as an indirect compensation arrangement under this paragraph as of August 19, 2008, need not be restructured to satisfy the requirements of § 411.357(p) until the expiration of the original term or current renewal term of the arrangement.

(4)(i) Exceptions applicable to indirect compensation arrangements—General. Except as provided in this paragraph (c)(4) of this section, only the exceptions at §§ 411.355 and 411.357(p) are applicable to indirect compensation arrangements. (ii) Special rule for indirect compensation arrangements involving a MCO or IPA and a referring physician.

Only the exceptions at §§ 411.355, 411.357(n), and 411.357(p) are applicable in the case of an indirect compensation arrangement in which the entity furnishing DHS described in paragraph (c)(2)(i) of this section is a MCO or IPA. (iii) Special rule for indirect compensation arrangements involving value-based arrangements. When an unbroken chain described in paragraph (c)(2)(i) of this section includes a value-based arrangement (as defined at § 411.351) to which the physician (or the physician organization in whose shoes the physician stands under this paragraph) is a direct party— (A) Only the exceptions at §§ 411.355, 411.357(p), and 411.357(aa) are applicable to the indirect compensation arrangement if the entity furnishing DHS is not a MCO or IPA.

And (B) Only the exceptions at §§ 411.355, 411.357(n), 411.357(p), and 411.357(aa) are applicable to the indirect compensation arrangement if the entity furnishing DHS is a MCO or IPA. (d) Special rules on compensation. The following special rules apply only to compensation under section 1877 of the Act and subpart J of this part.

(1) Set in advance. (i) Compensation is deemed to be “set in advance” if the aggregate compensation, a time-based or per-unit of service-based (whether per-use or per-service) amount, or a specific formula for calculating the compensation is set out in writing before the furnishing of the items, services, office space, or equipment for which the compensation is to be paid. The formula for determining the compensation must be set forth in sufficient detail so that it can be objectively verified.

(ii) Notwithstanding paragraph (d)(1)(i) of this section, compensation (or a formula for determining the compensation) may be modified at any time during the course of a compensation arrangement and satisfy the requirement that it is “set in advance” if all of the following conditions are met. (A) All requirements of an applicable exception in §§ 411.355 through 411.357 are met on the effective date of the modified compensation (or the formula for determining the modified compensation). (B) The modified compensation (or the formula for determining the modified compensation) is determined before the furnishing of the items, services, office space, or equipment for which the modified compensation is to be paid.

(C) Before the furnishing of the items, services, office space, or equipment for which the modified compensation is to be paid, the formula for the modified compensation is set forth in writing in sufficient detail so that it can be objectively verified. Paragraph (e)(4) of this section does not apply for purposes of this paragraph (d)(1)(ii)(C). (2) Unit-based compensation and the volume or value standard.

Unit-based compensation (including time-based or per-unit of service-based compensation) is deemed not to take into account the volume or value of referrals if the compensation is fair market value for items or services actually provided and does not vary during the course of the compensation arrangement in any manner that takes into account referrals of designated health services. This paragraph (d)(2) does not apply for purposes of paragraphs (d)(5)(i) and (6)(i) of this section. (3) Unit-based compensation and the other business generated standard.

Unit-based compensation (including time-based or per-unit of service-based compensation) is deemed not to take into account other business generated between the parties or other business generated by the referring physician if the compensation is fair market value for items and services actually provided and does not vary during the course of the compensation arrangement in any manner that takes into account referrals or other business generated by the referring physician, including private pay health care business (except for services personally performed by the referring physician, which are not considered “other business generated” by the referring physician). This paragraph (d)(3) does not apply for purposes of paragraphs (d)(5)(ii) and (d)(6)(ii) of this section. (4) Directed referral requirement.

If a physician's compensation under a bona fide employment relationship, personal service arrangement, or managed care contract is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, all of the following conditions must be met. (i) The compensation, or a formula for determining the compensation, is set in advance for the duration of the arrangement. Any changes to the compensation (or the formula for determining the compensation) must be made prospectively.

(ii) The compensation is consistent with the fair market value of the physician's services. (iii) The compensation arrangement otherwise satisfies the requirements of an applicable exception at § 411.355 or § 411.357. (iv) The compensation arrangement complies with both of the following conditions.

(A) The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties. (B) The requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier.

Or the referral is not in the patient's best medical interests in the physician's judgment. (v) The required referrals relate solely to the physician's services covered by the scope of the employment, personal service arrangement, or managed care contract, and the referral requirement is reasonably necessary to effectuate the legitimate business purposes of the compensation arrangement. In no event may the physician be required to make Start Printed Page 77667referrals that relate to services that are not provided by the physician under the scope of his or her employment, personal service arrangement, or managed care contract.

(vi) Regardless of whether the physician's compensation takes into account the volume or value of referrals by the physician as set forth at paragraph (d)(5)(i) of this section, neither the existence of the compensation arrangement nor the amount of the compensation is contingent on the number or value of the physician's referrals to the particular provider, practitioner, or supplier. The requirement to make referrals to a particular provider, practitioner, or supplier may require that the physician refer an established percentage or ratio of the physician's referrals to a particular provider, practitioner, or supplier. (5) Compensation to a physician.

(i) Compensation from an entity furnishing designated health services to a physician (or immediate family member of the physician) takes into account the volume or value of referrals only if the formula used to calculate the physician's (or immediate family member's) compensation includes the physician's referrals to the entity as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the number or value of the physician's referrals to the entity. (ii) Compensation from an entity furnishing designated health services to a physician (or immediate family member of the physician) takes into account the volume or value of other business generated only if the formula used to calculate the physician's (or immediate family member's) compensation includes other business generated by the physician for the entity as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the physician's generation of other business for the entity. (iii) For purposes of applying this paragraph (d)(5), a positive correlation between two variables exists when one variable decreases as the other variable decreases, or one variable increases as the other variable increases.

(iv) This paragraph (d)(5) does not apply for purposes of applying the special rules in paragraphs (d)(2) and (3) of this section or the exceptions at § 411.357(m), (s), (u), (v), (w), and (bb). (6) Compensation from a physician. (i) Compensation from a physician (or immediate family member of the physician) to an entity furnishing designated health services takes into account the volume or value of referrals only if the formula used to calculate the entity's compensation includes the physician's referrals to the entity as a variable, resulting in an increase or decrease in the entity's compensation that negatively correlates with the number or value of the physician's referrals to the entity.

(ii) Compensation from a physician (or immediate family member of the physician) to an entity furnishing designated health services takes into account the volume or value of other business generated only if the formula used to calculate the entity's compensation includes other business generated by the physician for the entity as a variable, resulting in an increase or decrease in the entity's compensation that negatively correlates with the physician's generation of other business for the entity. (iii) For purposes of applying this paragraph (d)(6), a negative correlation between two variables exists when one variable increases as the other variable decreases, or when one variable decreases as the other variable increases. (iv) This paragraph (d)(6) does not apply for purposes of applying the special rules in paragraphs (d)(2) and (3) of this section or the exceptions at § 411.357(m), (s), (u), (v), (w), and (bb).

(e) Special rule on compensation arrangements—(1) Application. This paragraph (e) applies only to compensation arrangements as defined in section 1877 of the Act and this subpart. (2) Writing requirement.

In the case of any requirement in this subpart for a compensation arrangement to be in writing, such requirement may be satisfied by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties. (3) Signature requirement. In the case of any signature requirement in this subpart, such requirement may be satisfied by an electronic or other signature that is valid under applicable Federal or State law.

(4) Special rule on writing and signature requirements. In the case of any requirement in this subpart for a compensation arrangement to be in writing and signed by the parties, the writing requirement or the signature requirement is satisfied if— (i) The compensation arrangement between the entity and the physician fully complies with an applicable exception in this subpart except with respect to the writing or signature requirement of the exception. And (ii) The parties obtain the required writing(s) or signature(s) within 90 consecutive calendar days immediately following the date on which the compensation arrangement became noncompliant with the requirements of the applicable exception (that is, the date on which the writing(s) or signature(s) were required under the applicable exception but the parties had not yet obtained them).

General exceptions to the referral prohibition related to both ownership/investment and compensation. The prohibition on referrals set forth in § 411.353 does not apply to the following types of services. (a) Physician services.

(1) Physician services as defined at § 410.20(a) of this chapter that are furnished— (i) Personally by another physician who is a member of the referring physician's group practice or is a physician in the same group practice (as defined at § 411.351) as the referring physician. Or (ii) Under the supervision of another physician who is a member of the referring physician's group practice or is a physician in the same group practice (as defined at § 411.351) as the referring physician, provided that the supervision complies with all other applicable Medicare payment and coverage rules for the physician services. (2) For purposes of this paragraph (a), “physician services” include only those “incident to” services (as defined at § 411.351) that are physician services under § 410.20(a) of this chapter.

(b) In-office ancillary services. Services (including certain items of durable medical equipment (DME), as defined in paragraph (b)(4) of this section, and infusion pumps that are DME (including external ambulatory infusion pumps), but excluding all other DME and parenteral and enteral nutrients, equipment, and supplies (such as infusion pumps used for PEN)), that meet the following conditions. (1) Individual who furnishes the service.

They are furnished personally by one of the following individuals. (i) The referring physician. (ii) A physician who is a member of the same group practice as the referring physician.

(iii) An individual who is supervised by the referring physician or, if the referring physician is in a group practice, by another physician in the group practice, provided that the supervision complies with all other applicable Medicare payment and coverage rules for the services.Start Printed Page 77668 (2) Location where service is furnished. They are furnished in one of the following locations. (i) The same building (as defined at § 411.351), but not necessarily in the same space or part of the building, in which all of the conditions of paragraph (b)(2)(i)(A), (b)(2)(i)(B), or (b)(2)(i)(C) of this section are satisfied.

(A)(1) The referring physician or his or her group practice (if any) has an office that is normally open to the physician's or group's patients for medical services at least 35 hours per week. And (2) The referring physician or one or more members of the referring physician's group practice regularly practices medicine and furnishes physician services to patients at least 30 hours per week. The 30 hours must include some physician services that are unrelated to the furnishing of DHS payable by Medicare, any other Federal health care payer, or a private payer, even though the physician services may lead to the ordering of DHS.

Or (B)(1) The patient receiving the DHS usually receives physician services from the referring physician or members of the referring physician's group practice (if any). (2) The referring physician or the referring physician's group practice owns or rents an office that is normally open to the physician's or group's patients for medical services at least 8 hours per week. And (3) The referring physician regularly practices medicine and furnishes physician services to patients at least 6 hours per week.

The 6 hours must include some physician services that are unrelated to the furnishing of DHS payable by Medicare, any other Federal health care payer, or a private payer, even though the physician services may lead to the ordering of DHS. Or (C)(1) The referring physician is present and orders the DHS during a patient visit on the premises as set forth in paragraph (b)(2)(i)(C)(2) of this section or the referring physician or a member of the referring physician's group practice (if any) is present while the DHS is furnished during occupancy of the premises as set forth in paragraph (b)(2)(i)(C)(2) of this section. (2) The referring physician or the referring physician's group practice owns or rents an office that is normally open to the physician's or group's patients for medical services at least 8 hours per week.

And (3) The referring physician or one or more members of the referring physician's group practice regularly practices medicine and furnishes physician services to patients at least 6 hours per week. The 6 hours must include some physician services that are unrelated to the furnishing of DHS payable by Medicare, any other Federal health care payer, or a private payer, even though the physician services may lead to the ordering of DHS. (ii) A centralized building (as defined at § 411.351) that is used by the group practice for the provision of some or all of the group practice's clinical laboratory services.

(iii) A centralized building (as defined at § 411.351) that is used by the group practice for the provision of some or all of the group practice's DHS (other than clinical laboratory services). (3) Billing of the service. They are billed by one of the following.

(i) The physician performing or supervising the service. (ii) The group practice of which the performing or supervising physician is a member under a billing number assigned to the group practice. (iii) The group practice if the supervising physician is a “physician in the group practice” (as defined at § 411.351) under a billing number assigned to the group practice.

(iv) An entity that is wholly owned by the performing or supervising physician or by that physician's group practice under the entity's own billing number or under a billing number assigned to the physician or group practice. (v) An independent third party billing company acting as an agent of the physician, group practice, or entity specified in paragraphs (b)(3)(i) through (iv) of this section under a billing number assigned to the physician, group practice, or entity, provided that the billing arrangement meets the requirements of § 424.80(b)(5) of this chapter. For purposes of this paragraph (b)(3), a group practice may have, and bill under, more than one Medicare billing number, subject to any applicable Medicare program restrictions.

(4) Durable Medical Equipment. For purposes of this paragraph (b), DME covered by the in-office ancillary services exception means canes, crutches, walkers and folding manual wheelchairs, and blood glucose monitors, that meet the following conditions. (i) The item is one that a patient requires for the purpose of ambulating, a patient uses in order to depart from the physician's office, or is a blood glucose monitor (including one starter set of test strips and lancets, consisting of no more than 100 of each).

A blood glucose monitor may be furnished only by a physician or employee of a physician or group practice that also furnishes outpatient diabetes self-management training to the patient. (ii) The item is furnished in a building that meets the “same building” requirements in the in-office ancillary services exception as part of the treatment for the specific condition for which the patient-physician encounter occurred. (iii) The item is furnished personally by the physician who ordered the DME, by another physician in the group practice, or by an employee of the physician or the group practice.

(iv) A physician or group practice that furnishes the DME meets all DME supplier standards set forth in § 424.57(c) of this chapter. (v) [Reserved] (vi) All other requirements of the in-office ancillary services exception in this paragraph (b) are met. (5) Furnishing a service.

A designated health service is “furnished” for purposes of this paragraph (b) in the location where the service is actually performed upon a patient or where an item is dispensed to a patient in a manner that is sufficient to meet the applicable Medicare payment and coverage rules. (6) Special rule for home care physicians. In the case of a referring physician whose principal medical practice consists of treating patients in their private homes, the “same building” requirements of paragraph (b)(2)(i) of this section are met if the referring physician (or a qualified person accompanying the physician, such as a nurse or technician) provides the DHS contemporaneously with a physician service that is not a designated health service provided by the referring physician to the patient in the patient's private home.

For purposes of paragraph (b)(5) of this section only, a private home does not include a nursing, long-term care, or other facility or institution, except that a patient may have a private home in an assisted living or independent living facility. (7) Disclosure requirement for certain imaging services. (i) With respect to magnetic resonance imaging, computed tomography, and positron emission tomography services identified as “radiology and certain other imaging services” on the List of CPT/HCPCS Codes, the referring physician must provide written notice to the patient at the time of the referral that the patient may receive the same services from a person other than one described in paragraph (b)(1) of this section.

Except as set forth in paragraph (b)(7)(ii) of this section, the written notice must include a list of at least 5 other suppliers (as defined at § 400.202 of this chapter) that Start Printed Page 77669provide the services for which the individual is being referred and which are located within a 25-mile radius of the referring physician's office location at the time of the referral. The notice should be written in a manner sufficient to be reasonably understood by all patients and should include for each supplier on the list, at a minimum, the supplier's name, address, and telephone number. (ii) If there are fewer than 5 other suppliers located within a 25-mile radius of the physician's office location at the time of the referral, the physician must list all of the other suppliers of the imaging service that are present within a 25-mile radius of the referring physician's office location.

Provision of the written list of alternate suppliers will not be required if no other suppliers provide the services for which the individual is being referred within the 25-mile radius. (c) Services furnished by an organization (or its contractors or subcontractors) to enrollees. Services furnished by an organization (or its contractors or subcontractors) to enrollees of one of the following prepaid health plans (not including services provided to enrollees in any other plan or line of business offered or administered by the same organization).

(1) An HMO or a CMP in accordance with a contract with CMS under section 1876 of the Act and part 417, subparts J through M of this chapter. (2) A health care prepayment plan in accordance with an agreement with CMS under section 1833(a)(1)(A) of the Act and part 417, subpart U of this chapter. (3) An organization that is receiving payments on a prepaid basis for Medicare enrollees through a demonstration project under section 402(a) of the Social Security Amendments of 1967 (42 U.S.C.

1395b-1) or under section 222(a) of the Social Security Amendments of 1972 (42 U.S.C. 1395b-1 note). (4) A qualified HMO (within the meaning of section 1310(d) of the Public Health Service Act).

(5) A coordinated care plan (within the meaning of section 1851(a)(2)(A) of the Act) offered by a Medicare Advantage organization in accordance with a contract with CMS under section 1857 of the Act and part 422 of this chapter. (6) A MCO contracting with a State under section 1903(m) of the Act. (7) A prepaid inpatient health plan (PIHP) or prepaid ambulance health plan (PAHP) contracting with a State under part 438 of this chapter.

(8) A health insuring organization (HIO) contracting with a State under part 438, subpart D of this chapter. (9) An entity operating under a demonstration project under sections 1115(a), 1915(a), 1915(b), or 1932(a) of the Act. (d) [Reserved] (e) Academic medical centers.

(1) Services provided by an academic medical center if all of the following conditions are met. (i) The referring physician— (A) Is a bona fide employee of a component of the academic medical center on a full-time or substantial part-time basis. (A “component” of an academic medical center means an affiliated medical school, faculty practice plan, hospital, teaching facility, institution of higher education, departmental professional corporation, or nonprofit support organization whose primary purpose is supporting the teaching mission of the academic medical center.) The components need not be separate legal entities.

(B) Is licensed to practice medicine in the State(s) in which he or she practices medicine. (C) Has a bona fide faculty appointment at the affiliated medical school or at one or more of the educational programs at the accredited academic hospital (as defined at § 411.355(e)(3)). And (D) Provides either substantial academic services or substantial clinical teaching services (or a combination of academic services and clinical teaching services) for which the faculty member receives compensation as part of his or her employment relationship with the academic medical center.

Parties should use a reasonable and consistent method for calculating a physician's academic services and clinical teaching services. A physician will be deemed to meet this requirement if he or she spends at least 20 percent of his or her professional time or 8 hours per week providing academic services or clinical teaching services (or a combination of academic services or clinical teaching services). A physician who does not spend at least 20 percent of his or her professional time or 8 hours per week providing academic services or clinical teaching services (or a combination of academic services or clinical teaching services) is not precluded from qualifying under this paragraph (e)(1)(i)(D).

(ii) The compensation paid to the referring physician must meet all of the following conditions. (A) The total compensation paid by each academic medical center component to the referring physician is set in advance. (B) In the aggregate, the compensation paid by all academic medical center components to the referring physician does not exceed fair market value for the services provided.

(C) The total compensation paid by each academic medical center component is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician within the academic medical center. (D) If any compensation paid to the referring physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4). (iii) The academic medical center must meet all of the following conditions.

(A) All transfers of money between components of the academic medical center must directly or indirectly support the missions of teaching, indigent care, research, or community service. (B) The relationship of the components of the academic medical center must be set forth in one or more written agreements or other written documents that have been adopted by the governing body of each component. If the academic medical center is one legal entity, this requirement will be satisfied if transfers of funds between components of the academic medical center are reflected in the routine financial reports covering the components.

(C) All money paid to a referring physician for research must be used solely to support bona fide research or teaching and must be consistent with the terms and conditions of the grant. (2) The “academic medical center” for purposes of this section consists of— (i) An accredited medical school (including a university, when appropriate) or an accredited academic hospital (as defined at paragraph (e)(3) of this section). (ii) One or more faculty practice plans affiliated with the medical school, the affiliated hospital(s), or the accredited academic hospital.

And (iii) One or more affiliated hospitals in which a majority of the physicians on the medical staff consists of physicians who are faculty members and a majority of all hospital admissions is made by physicians who are faculty members. The hospital for purposes of this paragraph (e)(2)(iii) may be the same hospital that satisfies the requirement of paragraph (e)(2)(i) of this section. For purposes of this paragraph (e)(2)(iii), a faculty member is a physician who is Start Printed Page 77670either on the faculty of the affiliated medical school or on the faculty of one or more of the educational programs at the accredited academic hospital.

In meeting this paragraph (e)(2)(iii), faculty from any affiliated medical school or accredited academic hospital education program may be aggregated, and residents and non-physician professionals need not be counted. Any faculty member may be counted, including courtesy and volunteer faculty. For purposes of determining whether the majority of physicians on the medical staff consists of faculty members, the affiliated hospital must include or exclude all individual physicians with the same class of privileges at the affiliated hospital (for example, physicians holding courtesy privileges).

(3) An accredited academic hospital for purposes of this section means a hospital or a health system that sponsors four or more approved medical education programs. (f) Implants furnished by an ASC. Implants furnished by an ASC, including, but not limited to, cochlear implants, intraocular lenses, and other implanted prosthetics, implanted prosthetic devices, and implanted DME that meet the following conditions.

(1) The implant is implanted by the referring physician or a member of the referring physician's group practice in an ASC that is certified by Medicare under part 416 of this chapter and with which the referring physician has a financial relationship. (2) The implant is implanted in the patient during a surgical procedure paid by Medicare to the ASC as an ASC procedure under § 416.65 of this chapter. (3) [Reserved] (4) [Reserved] (5) The exception set forth in this paragraph (f) does not apply to any financial relationships between the referring physician and any entity other than the ASC in which the implant is furnished to, and implanted in, the patient.

(g) EPO and other dialysis-related drugs. EPO and other dialysis-related drugs that meet the following conditions. (1) The EPO and other dialysis-related drugs are furnished in or by an ESRD facility.

For purposes of this paragraph (g)(1), “EPO and other dialysis-related drugs” means certain outpatient prescription drugs that are required for the efficacy of dialysis and identified as eligible for this exception on the List of CPT/HCPCS Codes. And “furnished” means that the EPO or dialysis-related drugs are administered to a patient in the ESRD facility or, in the case of EPO or Aranesp (or equivalent drug identified on the List of CPT/HCPCS Codes) only, are dispensed by the ESRD facility for use at home. (2) [Reserved] (3) [Reserved] (4) The exception set forth in this paragraph (g) does not apply to any financial relationship between the referring physician and any entity other than the ESRD facility that furnishes the EPO and other dialysis-related drugs to the patient.

(h) Preventive screening tests, immunizations, and treatments. Preventive screening tests, immunizations, and treatments that meet the following conditions. (1) The preventive screening tests, immunizations, and treatments are subject to CMS-mandated frequency limits.

(2) [Reserved] (3) [Reserved] (4) The preventive screening tests, immunizations, and treatments must be covered by Medicare and must be listed as eligible for this exception on the List of CPT/HCPCS Codes. (i) Eyeglasses and contact lenses following cataract surgery. Eyeglasses and contact lenses that are covered by Medicare when furnished to patients following cataract surgery that meet the following conditions.

(1) The eyeglasses or contact lenses are provided in accordance with the coverage and payment provisions set forth in §§ 410.36(a)(2)(ii) and 414.228 of this chapter, respectively. (2) [Reserved] (j) Intra-family rural referrals. (1) Services provided pursuant to a referral from a referring physician to his or her immediate family member or to an entity furnishing DHS with which the immediate family member has a financial relationship, if all of the following conditions are met.

(i) The patient who is referred resides in a rural area as defined at § 411.351 of this subpart. (ii) Except as provided in paragraph (j)(1)(iii) of this section, in light of the patient's condition, no other person or entity is available to furnish the services in a timely manner within 25 miles of or 45 minutes transportation time from the patient's residence. (iii) In the case of services furnished to patients where they reside (for example, home health services or DME), no other person or entity is available to furnish the services in a timely manner in light of the patient's condition.

And (2) The referring physician or the immediate family member must make reasonable inquiries as to the availability of other persons or entities to furnish the DHS. However, neither the referring physician nor the immediate family member has any obligation to inquire as to the availability of persons or entities located farther than 25 miles of or 45 minutes transportation time from (whichever test the referring physician utilized for purposes of paragraph (j)(1)(ii)) the patient's residence. Exceptions to the referral prohibition related to ownership or investment interests.

For purposes of § 411.353, the following ownership or investment interests do not constitute a financial relationship. (a) Publicly traded securities. Ownership of investment securities (including shares or bonds, debentures, notes, or other debt instruments) that at the time the DHS referral was made could be purchased on the open market and that meet the requirements of paragraphs (a)(1) and (2) of this section.

(1) They are either— (i) Listed for trading on the New York Stock Exchange, the American Stock Exchange, or any regional exchange in which quotations are published on a daily basis, or foreign securities listed on a recognized foreign, national, or regional exchange in which quotations are published on a daily basis. (ii) Traded under an automated interdealer quotation system operated by the National Association of Securities Dealers. Or (iii) Listed for trading on an electronic stock market or over-the-counter quotation system in which quotations are published on a daily basis and trades are standardized and publicly transparent.

(2) They are in a corporation that had stockholder equity exceeding $75 million at the end of the corporation's most recent fiscal year or on average during the previous 3 fiscal years. €œStockholder equity” is the difference in value between a corporation's total assets and total liabilities. (b) Mutual funds.

Ownership of shares in a regulated investment company as defined in section 851(a) of the Internal Revenue Code of 1986, if the company had, at the end of its most recent fiscal year, or on average during the previous 3 fiscal years, total assets exceeding $75 million. (c) Specific providers. Ownership or investment interest in the following entities, for purposes of the services specified.

(1) A rural provider, in the case of DHS furnished in a rural area (as defined at § 411.351 of this part) by the provider. A “rural provider” is an entity Start Printed Page 77671that furnishes substantially all (not less than 75 percent) of the DHS that it furnishes to residents of a rural area and, for the 18-month period beginning on December 8, 2003 (or such other period as Congress may specify), is not a specialty hospital, and in the case where the entity is a hospital, the hospital meets the requirements of § 411.362 no later than September 23, 2011. (2) A hospital that is located in Puerto Rico, in the case of DHS furnished by such a hospital.

(3) A hospital that is located outside of Puerto Rico, in the case of DHS furnished by such a hospital, if— (i) The referring physician is authorized to perform services at the hospital. (ii) Effective for the 18-month period beginning on December 8, 2003 (or such other period as Congress may specify), the hospital is not a specialty hospital. (iii) The ownership or investment interest is in the entire hospital and not merely in a distinct part or department of the hospital.

And (iv) The hospital meets the requirements described in § 411.362 not later than September 23, 2011. Exceptions to the referral prohibition related to compensation arrangements. For purposes of § 411.353, the following compensation arrangements do not constitute a financial relationship.

(a) Rental of office space. Payments for the use of office space made by a lessee to a lessor if the arrangement meets the following requirements. (1) The lease arrangement is set out in writing, is signed by the parties, and specifies the premises it covers.

(2) The duration of the lease arrangement is at least 1 year. To meet this requirement, if the lease arrangement is terminated with or without cause, the parties may not enter into a new lease arrangement for the same space during the first year of the original lease arrangement. (3) The space rented or leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement and is used exclusively by the lessee when being used by the lessee (and is not shared with or used by the lessor or any person or entity related to the lessor), except that the lessee may make payments for the use of space consisting of common areas if the payments do not exceed the lessee's pro rata share of expenses for the space based upon the ratio of the space used exclusively by the lessee to the total amount of space (other than common areas) occupied by all persons using the common areas.

For purposes of this paragraph (a), exclusive use means that the lessee (and any other lessees of the same office space) uses the office space to the exclusion of the lessor (or any person or entity related to the lessor). The lessor (or any person or entity related to the lessor) may not be an invitee of the lessee to use the office space. (4) The rental charges over the term of the lease arrangement are set in advance and are consistent with fair market value.

(5) The rental charges over the term of the lease arrangement are not determined— (i) In any manner that takes into account the volume or value of referrals or other business generated between the parties. Or (ii) Using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space. Or (B) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee.

(6) The lease arrangement would be commercially reasonable even if no referrals were made between the lessee and the lessor. (7) If the lease arrangement expires after a term of at least 1 year, a holdover lease arrangement immediately following the expiration of the lease arrangement satisfies the requirements of paragraph (a) of this section if the following conditions are met. (i) The lease arrangement met the conditions of paragraphs (a)(1) through (6) of this section when the arrangement expired.

(ii) The holdover lease arrangement is on the same terms and conditions as the immediately preceding arrangement. And (iii) The holdover lease arrangement continues to satisfy the conditions of paragraphs (a)(1) through (6) of this section. (b) Rental of equipment.

Payments made by a lessee to a lessor for the use of equipment under the following conditions. (1) The lease arrangement is set out in writing, is signed by the parties, and specifies the equipment it covers. (2) The equipment leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement and is used exclusively by the lessee when being used by the lessee (and is not shared with or used by the lessor or any person or entity related to the lessor).

For purposes of this paragraph (b), exclusive use means that the lessee (and any other lessees of the same equipment) uses the equipment to the exclusion of the lessor (or any person or entity related to the lessor). The lessor (or any person or entity related to the lessor) may not be an invitee of the lessee to use the equipment. (3) The duration of the lease arrangement is at least 1 year.

To meet this requirement, if the lease arrangement is terminated with or without cause, the parties may not enter into a new lease arrangement for the same equipment during the first year of the original lease arrangement. (4) The rental charges over the term of the lease arrangement are set in advance, are consistent with fair market value, and are not determined— (i) In any manner that takes into account the volume or value of referrals or other business generated between the parties. Or (ii) Using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed on or business generated through the use of the equipment.

Or (B) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee. (5) The lease arrangement would be commercially reasonable even if no referrals were made between the parties. (6) If the lease arrangement expires after a term of at least 1 year, a holdover lease arrangement immediately following the expiration of the lease arrangement satisfies the requirements of this paragraph (b) if the following conditions are met.

(i) The lease arrangement met the conditions of paragraphs (b)(1) through (5) of this section when the arrangement expired. (ii) The holdover lease arrangement is on the same terms and conditions as the immediately preceding lease arrangement. And (iii) The holdover lease arrangement continues to satisfy the conditions of paragraphs (b)(1) through (5) of this section.

(c) Bona fide employment relationships. Any amount paid by an employer to a physician (or immediate family member) who has a bona fide employment relationship with the employer for the provision of services if the following conditions are met. (1) The employment is for identifiable services.

(2) The amount of the remuneration under the employment is—Start Printed Page 77672 (i) Consistent with the fair market value of the services. And (ii) Except as provided in paragraph (c)(4) of this section, is not determined in any manner that takes into account the volume or value of referrals by the referring physician. (3) The remuneration is provided under an arrangement that would be commercially reasonable even if no referrals were made to the employer.

(4) Paragraph (c)(2)(ii) of this section does not prohibit payment of remuneration in the form of a productivity bonus based on services performed personally by the physician (or immediate family member of the physician). (5) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4). (d) Personal service arrangements—(1) General.

Remuneration from an entity under an arrangement or multiple arrangements to a physician or his or her immediate family member, or to a group practice, including remuneration for specific physician services furnished to a nonprofit blood center, if the following conditions are met. (i) Each arrangement is set out in writing, is signed by the parties, and specifies the services covered by the arrangement. (ii) Except for services provided under an arrangement that satisfies all of the conditions of paragraph (z) of this section, the arrangement(s) covers all of the services to be furnished by the physician (or an immediate family member of the physician) to the entity.

This requirement is met if all separate arrangements between the entity and the physician and the entity and any family members incorporate each other by reference or if they cross-reference a master list of contracts that is maintained and updated centrally and is available for review by the Secretary upon request. The master list must be maintained in a manner that preserves the historical record of contracts. A physician or family member may “furnish” services through employees whom they have hired for the purpose of performing the services.

Through a wholly-owned entity. Or through locum tenens physicians (as defined at § 411.351, except that the regular physician need not be a member of a group practice). (iii) The aggregate services covered by the arrangement do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement(s).

(iv) The duration of each arrangement is at least 1 year. To meet this requirement, if an arrangement is terminated with or without cause, the parties may not enter into the same or substantially the same arrangement during the first year of the original arrangement. (v) The compensation to be paid over the term of each arrangement is set in advance, does not exceed fair market value, and, except in the case of a physician incentive plan (as defined at § 411.351), is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties.

(vi) The services to be furnished under each arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates any Federal or State law. (vii) If the arrangement expires after a term of at least 1 year, a holdover arrangement immediately following the expiration of the arrangement satisfies the requirements of paragraph (d) of this section if the following conditions are met. (A) The arrangement met the conditions of paragraphs (d)(1)(i) through (vi) of this section when the arrangement expired.

(B) The holdover arrangement is on the same terms and conditions as the immediately preceding arrangement. And (C) The holdover arrangement continues to satisfy the conditions of paragraphs (d)(1)(i) through (vi) of this section. (viii) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4).

(2) Physician incentive plan exception. In the case of a physician incentive plan (as defined at § 411.351) between a physician and an entity (or downstream contractor), the compensation may be determined in any manner (through a withhold, capitation, bonus, or otherwise) that takes into account the volume or value of referrals or other business generated between the parties, if the plan meets the following requirements. (i) No specific payment is made directly or indirectly under the plan to a physician or a physician group as an inducement to reduce or limit medically necessary services furnished with respect to a specific individual enrolled with the entity.

(ii) Upon request of the Secretary, the entity provides the Secretary with access to information regarding the plan (including any downstream contractor plans), in order to permit the Secretary to determine whether the plan is in compliance with paragraph (d)(2) of this section. (iii) In the case of a plan that places a physician or a physician group at substantial financial risk as defined at § 422.208, the entity or any downstream contractor (or both) complies with the requirements concerning physician incentive plans set forth in §§ 422.208 and 422.210 of this chapter. (iv) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4).

(e) Physician recruitment. (1) Remuneration provided by a hospital to recruit a physician that is paid directly to the physician and that is intended to induce the physician to relocate his or her medical practice to the geographic area served by the hospital in order to become a member of the hospital's medical staff, if all of the following conditions are met. (i) The arrangement is set out in writing and signed by both parties.

(ii) The arrangement is not conditioned on the physician's referral of patients to the hospital. (iii) The amount of remuneration under the arrangement is not determined in any manner that takes into account the volume or value of actual or anticipated referrals by the physician or other business generated between the parties. And (iv) The physician is allowed to establish staff privileges at any other hospital(s) and to refer business to any other entities (except as referrals may be restricted under an employment or services arrangement that complies with § 411.354(d)(4)).

(2)(i) Geographic area served by the hospital—defined. The “geographic area served by the hospital” is the area composed of the lowest number of contiguous zip codes from which the hospital draws at least 75 percent of its inpatients. The geographic area served by the hospital may include one or more zip codes from which the hospital draws no inpatients, provided that such zip codes are entirely surrounded by zip codes in the geographic area described above from which the hospital draws at least 75 percent of its inpatients.

(ii) Noncontiguous zip codes. With respect to a hospital that draws fewer than 75 percent of its inpatients from all of the contiguous zip codes from which it draws inpatients, the “geographic area served by the hospital” will be deemed to be the area composed of all of the Start Printed Page 77673contiguous zip codes from which the hospital draws its inpatients. (iii) Special optional rule for rural hospitals.

In the case of a hospital located in a rural area (as defined at § 411.351), the “geographic area served by the hospital” may also be the area composed of the lowest number of contiguous zip codes from which the hospital draws at least 90 percent of its inpatients. If the hospital draws fewer than 90 percent of its inpatients from all of the contiguous zip codes from which it draws inpatients, the “geographic area served by the hospital” may include noncontiguous zip codes, beginning with the noncontiguous zip code in which the highest percentage of the hospital's inpatients resides, and continuing to add noncontiguous zip codes in decreasing order of percentage of inpatients. (iv) Relocation of medical practice.

A physician will be considered to have relocated his or her medical practice if the medical practice was located outside the geographic area served by the hospital and— (A) The physician moves his or her medical practice at least 25 miles and into the geographic area served by the hospital. Or (B) The physician moves his medical practice into the geographic area served by the hospital, and the physician's new medical practice derives at least 75 percent of its revenues from professional services furnished to patients (including hospital inpatients) not seen or treated by the physician at his or her prior medical practice site during the preceding 3 years, measured on an annual basis (fiscal or calendar year). For the initial “start up” year of the recruited physician's practice, the 75 percent test in the preceding sentence will be satisfied if there is a reasonable expectation that the recruited physician's medical practice for the year will derive at least 75 percent of its revenues from professional services furnished to patients not seen or treated by the physician at his or her prior medical practice site during the preceding 3 years.

(3) The recruited physician will not be subject to the relocation requirement of this paragraph (e), provided that he or she establishes his or her medical practice in the geographic area served by the recruiting hospital, if— (i) He or she is a resident or physician who has been in practice 1 year or less. (ii) He or she was employed on a full-time basis for at least 2 years immediately prior to the recruitment arrangement by one of the following (and did not maintain a private practice in addition to such full-time employment). (A) A Federal or State bureau of prisons (or similar entity operating one or more correctional facilities) to serve a prison population.

(B) The Department of Defense or Department of Veterans Affairs to serve active or veteran military personnel and their families. Or (C) A facility of the Indian Health Service to serve patients who receive medical care exclusively through the Indian Health Service. Or (iii) The Secretary has deemed in an advisory opinion issued under section 1877(g) of the Act that the physician does not have an established medical practice that serves or could serve a significant number of patients who are or could become patients of the recruiting hospital.

(4) In the case of remuneration provided by a hospital to a physician either indirectly through payments made to another physician practice, or directly to a physician who joins a physician practice, the following additional conditions must be met. (i) The writing in paragraph (e)(1) of this section is also signed by the physician practice if the remuneration is provided indirectly to the physician through payments made to the physician practice and the physician practice does not pass directly through to the physician all of the remuneration from the hospital. (ii) Except for actual costs incurred by the physician practice in recruiting the new physician, the remuneration is passed directly through to or remains with the recruited physician.

(iii) In the case of an income guarantee of any type made by the hospital to a recruited physician who joins a physician practice, the costs allocated by the physician practice to the recruited physician do not exceed the actual additional incremental costs attributable to the recruited physician. With respect to a physician recruited to join a physician practice located in a rural area or HPSA, if the physician is recruited to replace a physician who, within the previous 12-month period, retired, relocated outside of the geographic area served by the hospital, or died, the costs allocated by the physician practice to the recruited physician do not exceed either— (A) The actual additional incremental costs attributable to the recruited physician. Or (B) The lower of a per capita allocation or 20 percent of the practice's aggregate costs.

(iv) Records of the actual costs and the passed-through amounts are maintained for a period of at least 6 years and made available to the Secretary upon request. (v) The remuneration from the hospital under the arrangement is not determined in any manner that takes into account the volume or value of actual or anticipated referrals by the recruited physician or the physician practice (or any physician affiliated with the physician practice) receiving the direct payments from the hospital. (vi) The physician practice may not impose on the recruited physician practice restrictions that unreasonably restrict the recruited physician's ability to practice medicine in the geographic area served by the hospital.

(5) Recruitment of a physician by a hospital located in a rural area (as defined at § 411.351) to an area outside the geographic area served by the hospital is permitted under this exception if the Secretary determines in an advisory opinion issued under section 1877(g) of the Act that the area has a demonstrated need for the recruited physician and all other requirements of this paragraph (e) are met. (6)(i) This paragraph (e) applies to remuneration provided by a federally qualified health center or a rural health clinic in the same manner as it applies to remuneration provided by a hospital. (ii) The “geographic area served” by a federally qualified health center or a rural health clinic is the area composed of the lowest number of contiguous or noncontiguous zip codes from which the federally qualified health center or rural health clinic draws at least 90 percent of its patients, as determined on an encounter basis.

The geographic area served by the federally qualified health center or rural health clinic may include one or more zip codes from which the federally qualified health center or rural health clinic draws no patients, provided that such zip codes are entirely surrounded by zip codes in the geographic area described above from which the federally qualified health center or rural health clinic draws at least 90 percent of its patients. (f) Isolated transactions. Isolated financial transactions, such as a one-time sale of property or a practice, or a single instance of forgiveness of an amount owed in settlement of a bona fide dispute, if all of the following conditions are met.

(1) The amount of remuneration under the isolated financial transaction is— (i) Consistent with the fair market value of the isolated financial transaction. AndStart Printed Page 77674 (ii) Not determined in any manner that takes into account the volume or value of referrals by the referring physician or other business generated between the parties. (2) The remuneration is provided under an arrangement that would be commercially reasonable even if the physician made no referrals to the entity.

(3) There are no additional transactions between the parties for 6 months after the isolated transaction, except for transactions that are specifically excepted under the other provisions in §§ 411.355 through 411.357 and except for commercially reasonable post-closing adjustments that do not take into account the volume or value of referrals or other business generated by the referring physician. (4) An isolated financial transaction that is an instance of forgiveness of an amount owed in settlement of a bona fide dispute is not part of the compensation arrangement giving rise to the bona fide dispute. (g) Certain arrangements with hospitals.

Remuneration provided by a hospital to a physician if the remuneration does not relate, directly or indirectly, to the furnishing of DHS. To qualify as “unrelated,” remuneration must be wholly unrelated to the furnishing of DHS and must not in any way take into account the volume or value of a physician's referrals. Remuneration relates to the furnishing of DHS if it— (1) Is an item, service, or cost that could be allocated in whole or in part to Medicare or Medicaid under cost reporting principles.

(2) Is furnished, directly or indirectly, explicitly or implicitly, in a selective, targeted, preferential, or conditioned manner to medical staff or other persons in a position to make or influence referrals. Or (3) Otherwise takes into account the volume or value of referrals or other business generated by the referring physician. (h) Group practice arrangements with a hospital.

An arrangement between a hospital and a group practice under which DHS are furnished by the group but are billed by the hospital if the following conditions are met. (1) With respect to services furnished to an inpatient of the hospital, the arrangement is pursuant to the provision of inpatient hospital services under section 1861(b)(3) of the Act. (2) The arrangement began before, and has continued in effect without interruption since, December 19, 1989.

(3) With respect to the DHS covered under the arrangement, at least 75 percent of these services furnished to patients of the hospital are furnished by the group under the arrangement. (4) The arrangement is in accordance with a written agreement that specifies the services to be furnished by the parties and the compensation for services furnished under the agreement. (5) The compensation paid over the term of the agreement is consistent with fair market value, and the compensation per unit of service is fixed in advance and is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties.

(6) The compensation is provided in accordance with an agreement that would be commercially reasonable even if no referrals were made to the entity. (7) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4). (i) Payments by a physician.

Payments made by a physician (or his or her immediate family member)— (1) To a laboratory in exchange for the provision of clinical laboratory services. Or (2) To an entity as compensation for any other items or services— (i) That are furnished at a price that is consistent with fair market value. And (ii) To which the exceptions in paragraphs (a) through (h) of this section are not applicable.

(3) For purposes of this paragraph (i), “services” means services of any kind (not merely those defined as “services” for purposes of the Medicare program in § 400.202 of this chapter). (j) Charitable donations by a physician. Bona fide charitable donations made by a physician (or immediate family member) to an entity if all of the following conditions are satisfied.

(1) The charitable donation is made to an organization exempt from taxation under the Internal Revenue Code (or to a supporting organization). (2) The donation is neither solicited, nor offered, in any manner that takes into account the volume or value of referrals or other business generated between the physician and the entity. And (k) Nonmonetary compensation.

(1) Compensation from an entity in the form of items or services (not including cash or cash equivalents) that does not exceed an aggregate of $300 per calendar year, as adjusted for inflation in accordance with paragraph (k)(2) of this section, if all of the following conditions are satisfied. (i) The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician. (ii) The compensation may not be solicited by the physician or the physician's practice (including employees and staff members).

(2) The annual aggregate nonmonetary compensation limit in this paragraph (k) is adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index—Urban All Items (CPI-U) for the 12-month period ending the preceding September 30. CMS displays after September 30 each year both the increase in the CPI-U for the 12-month period and the new nonmonetary compensation limit on the physician self-referral website at http://www.cms.hhs.gov/​PhysicianSelfReferral/​10_​CPI-U_​Updates.asp. (3) Where an entity has inadvertently provided nonmonetary compensation to a physician in excess of the limit (as set forth in paragraph (k)(1) of this section), such compensation is deemed to be within the limit if— (i) The value of the excess nonmonetary compensation is no more than 50 percent of the limit.

And (ii) The physician returns to the entity the excess nonmonetary compensation (or an amount equal to the value of the excess nonmonetary compensation) by the end of the calendar year in which the excess nonmonetary compensation was received or within 180 consecutive calendar days following the date the excess nonmonetary compensation was received by the physician, whichever is earlier. (iii) This paragraph (k)(3) may be used by an entity only once every 3 years with respect to the same referring physician. (4) In addition to nonmonetary compensation up to the limit described in paragraph (k)(1) of this section, an entity that has a formal medical staff may provide one local medical staff appreciation event per year for the entire medical staff.

Any gifts or gratuities provided in connection with the medical staff appreciation event are subject to the limit in paragraph (k)(1). (l) Fair market value compensation. Compensation resulting from an arrangement between an entity and a physician (or an immediate family member) or any group of physicians (regardless of whether the group meets the definition of a group practice set forth in § 411.352) for the provision of items or services or for the lease of office space or equipment by the physician (or an immediate family Start Printed Page 77675member) or group of physicians to the entity, or by the entity to the physician (or an immediate family member) or a group of physicians, if the arrangement meets the following conditions.

(1) The arrangement is in writing, signed by the parties, and covers only identifiable items, services, office space, or equipment. The writing specifies— (i) The items, services, office space, or equipment covered under the arrangement. (ii) The compensation that will be provided under the arrangement.

And (iii) The timeframe for the arrangement. (2) An arrangement may be for any period of time and contain a termination clause. An arrangement may be renewed any number of times if the terms of the arrangement and the compensation for the same items, services, office space, or equipment do not change.

Other than an arrangement that satisfies all of the conditions of paragraph (z) of this section, the parties may not enter into more than one arrangement for the same items, services, office space, or equipment during the course of a year. (3) The compensation must be set in advance, consistent with fair market value, and not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician. Compensation for the rental of office space or equipment may not be determined using a formula based on— (i) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space or to the services performed on or business generated through the use of the equipment.

Or (ii) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee. (4) The arrangement would be commercially reasonable even if no referrals were made between the parties. (5) The arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act).

(6) The services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates a Federal or State law. (7) The arrangement satisfies the requirements of § 411.354(d)(4) in the case of— (i) Remuneration to the physician that is conditioned on the physician's referrals to a particular provider, practitioner, or supplier. Or (ii) Remuneration paid to the group of physicians that is conditioned on one or more of the group's physicians' referrals to a particular provider, practitioner, or supplier.

(m) Medical staff incidental benefits. Compensation in the form of items or services (not including cash or cash equivalents) from a hospital to a member of its medical staff when the item or service is used on the hospital's campus, if all of the following conditions are met. (1) The compensation is offered to all members of the medical staff practicing in the same specialty (but not necessarily accepted by every member to whom it is offered) and is not offered in any manner that takes into account the volume or value of referrals or other business generated between the parties.

(2) Except with respect to identification of medical staff on a hospital website or in hospital advertising, the compensation is provided only during periods when the medical staff members are making rounds or are engaged in other services or activities that benefit the hospital or its patients. (3) The compensation is provided by the hospital and used by the medical staff members only on the hospital's campus. Compensation, including, but not limited to, internet access, pagers, or two-way radios, used away from the campus only to access hospital medical records or information or to access patients or personnel who are on the hospital campus, as well as the identification of the medical staff on a hospital website or in hospital advertising, meets the “on campus” requirement of this paragraph (m).

(4) The compensation is reasonably related to the provision of, or designed to facilitate directly or indirectly the delivery of, medical services at the hospital. (5) The compensation is of low value (that is, less than $25) with respect to each occurrence of the benefit (for example, each meal given to a physician while he or she is serving patients who are hospitalized must be of low value). The $25 limit in this paragraph (m)(5) is adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index—Urban All Items (CPI-I) for the 12 month period ending the preceding September 30.

CMS displays after September 30 each year both the increase in the CPI-I for the 12 month period and the new limits on the physician self-referral website at http://www.cms.hhs.gov/​PhysicianSelfReferral/​10_​CPI-U_​Updates.asp. (6) The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties. (7) [Reserved] (8) Other facilities and health care clinics (including, but not limited to, federally qualified health centers) that have bona fide medical staffs may provide compensation under this paragraph (m) on the same terms and conditions applied to hospitals under this paragraph (m).

(n) Risk-sharing arrangements. Compensation paid directly or indirectly by a MCO or an IPA to a physician pursuant to a risk-sharing arrangement (including, but not limited to, withholds, bonuses, and risk pools) for services provided by the physician to enrollees of a health plan. For purposes of this paragraph (n), “health plan” and “enrollees” have the meanings set forth in § 1001.952(l) of this title.

(o) Compliance training. Compliance training provided by an entity to a physician (or to the physician's immediate family member or office staff) who practices in the entity's local community or service area, provided that the training is held in the local community or service area. For purposes of this paragraph (o), “compliance training” means training regarding the basic elements of a compliance program (for example, establishing policies and procedures, training of staff, internal monitoring, or reporting).

Specific training regarding the requirements of Federal and State health care programs (for example, billing, coding, reasonable and necessary services, documentation, or unlawful referral arrangements). Or training regarding other Federal, State, or local laws, regulations, or rules governing the conduct of the party for whom the training is provided. For purposes of this paragraph, “compliance training” includes programs that offer continuing medical education credit, provided that compliance training is the primary purpose of the program.

(p) Indirect compensation arrangements. Indirect compensation arrangements, as defined at § 411.354(c)(2), if all of the following conditions are satisfied. (1)(i) The compensation received by the referring physician (or immediate family member) described in § 411.354(c)(2)(ii) is fair market value for services and items actually provided and not determined in any manner that takes into account the volume or value of referrals or other business generated Start Printed Page 77676by the referring physician for the entity furnishing DHS.

(ii) Compensation for the rental of office space or equipment may not be determined using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space or to the services performed on or business generated through the use of the equipment. Or (B) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee. (2) The compensation arrangement described in § 411.354(c)(2)(ii) is set out in writing, signed by the parties, and specifies the services covered by the arrangement, except in the case of a bona fide employment relationship between an employer and an employee, in which case the arrangement need not be set out in writing, but must be for identifiable services and be commercially reasonable even if no referrals are made to the employer.

(3) [Reserved] (4) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the compensation arrangement described in § 411.354(c)(2)(ii) satisfies the conditions of § 411.354(d)(4). (q) Referral services. Remuneration that meets all of the conditions set forth in § 1001.952(f) of this title.

(r) Obstetrical malpractice insurance subsidies. Remuneration that meets all of the conditions of paragraph (r)(1) or (2) of this section. (1) Remuneration that meets all of the conditions set forth in § 1001.952(o) of this title.

(2) A payment from a hospital, federally qualified health center, or rural health clinic that is used to pay for some or all of the costs of malpractice insurance premiums for a physician who engages in obstetrical practice as a routine part of his or her medical practice, if all of the following conditions are met. (i)(A) The physician's medical practice is located in a rural area, a primary care HPSA, or an area with demonstrated need for the physician's obstetrical services as determined by the Secretary in an advisory opinion issued in accordance with section 1877(g)(6) of the Act. Or (B) At least 75 percent of the physician's obstetrical patients reside in a medically underserved area or are members of a medically underserved population.

(ii) The arrangement is set out in writing, is signed by the physician and the hospital, federally qualified health center, or rural health clinic providing the payment, and specifies the payment to be made by the hospital, federally qualified health center, or rural health clinic and the terms under which the payment is to be provided. (iii) The arrangement is not conditioned on the physician's referral of patients to the hospital, federally qualified health center, or rural health clinic providing the payment. (iv) The hospital, federally qualified health center, or rural health clinic does not determine the amount of the payment in any manner that takes into account the volume or value of referrals by the physician or any other business generated between the parties.

(v) The physician is allowed to establish staff privileges at any hospital(s), federally qualified health center(s), or rural health clinic(s) and to refer business to any other entities (except as referrals may be restricted under an employment arrangement or services arrangement that complies with § 411.354(d)(4)). (vi) The payment is made to a person or organization (other than the physician) that is providing malpractice insurance (including a self-funded organization). (vii) The physician treats obstetrical patients who receive medical benefits or assistance under any Federal health care program in a nondiscriminatory manner.

(viii) The insurance is a bona fide malpractice insurance policy or program, and the premium, if any, is calculated based on a bona fide assessment of the liability risk covered under the insurance. (ix)(A) For each coverage period (not to exceed 1 year), at least 75 percent of the physician's obstetrical patients treated under the coverage of the obstetrical malpractice insurance during the prior period (not to exceed 1 year)— (1) Resided in a rural area, HPSA, medically underserved area, or an area with a demonstrated need for the physician's obstetrical services as determined by the Secretary in an advisory opinion issued in accordance with section 1877(g)(6) of the Act. Or (2) Were part of a medically underserved population.

(B) For the initial coverage period (not to exceed 1 year), the requirements of paragraph (r)(2)(ix)(A) of this section will be satisfied if the physician certifies that he or she has a reasonable expectation that at least 75 percent of the physician's obstetrical patients treated under the coverage of the malpractice insurance will— (1) Reside in a rural area, HPSA, medically underserved area, or an area with a demonstrated need for the physician's obstetrical services as determined by the Secretary in an advisory opinion issued in accordance with section 1877(g)(6) of the Act. Or (2) Be part of a medically underserved population. (3) For purposes of paragraph (r)(2) of this section, costs of malpractice insurance premiums means.

(i) For physicians who engage in obstetrical practice on a full-time basis, any costs attributable to malpractice insurance. Or (ii) For physicians who engage in obstetrical practice on a part-time or sporadic basis, the costs attributable exclusively to the obstetrical portion of the physician's malpractice insurance, and related exclusively to obstetrical services provided— (A) In a rural area, primary care HPSA, or an area with demonstrated need for the physician's obstetrical services, as determined by the Secretary in an advisory opinion issued in accordance with section 1877(g)(6) of the Act. Or (B) In any area, provided that at least 75 percent of the physician's obstetrical patients treated in the coverage period (not to exceed 1 year) resided in a medically underserved area or were part of a medically underserved population.

(s) Professional courtesy. Professional courtesy (as defined at § 411.351) offered by an entity with a formal medical staff to a physician or a physician's immediate family member or office staff if all of the following conditions are met. (1) The professional courtesy is offered to all physicians on the entity's bona fide medical staff or in such entity's local community or service area, and the offer does not take into account the volume or value of referrals or other business generated between the parties.

(2) The health care items and services provided are of a type routinely provided by the entity. (3) The entity has a professional courtesy policy that is set out in writing and approved in advance by the entity's governing body. (4) The professional courtesy is not offered to a physician (or immediate family member) who is a Federal health care program beneficiary, unless there has been a good faith showing of financial need.

And (t) Retention payments in underserved areas—(1) Bona fide written offer. Remuneration provided by a hospital directly to a physician on the hospital's medical staff to retain the physician's medical practice in the geographic area Start Printed Page 77677served by the hospital (as defined in paragraph (e)(2) of this section), if all of the following conditions are met. (i) The physician has a bona fide firm, written recruitment offer or offer of employment from a hospital, academic medical center (as defined at § 411.355(e)), or physician organization (as defined at § 411.351) that is not related to the hospital making the payment, and the offer specifies the remuneration being offered and requires the physician to move the location of his or her medical practice at least 25 miles and outside of the geographic area served by the hospital making the retention payment.

(ii) The requirements of paragraphs (e)(1)(i) through (iv) of this section are satisfied. (iii) Any retention payment is subject to the same obligations and restrictions, if any, on repayment or forgiveness of indebtedness as the written recruitment offer or offer of employment. (iv) The retention payment does not exceed the lower of— (A) The amount obtained by subtracting the physician's current income from physician and related services from the income the physician would receive from comparable physician and related services in the written recruitment or employment offer, provided that the respective incomes are determined using a reasonable and consistent methodology, and that they are calculated uniformly over no more than a 24-month period.

Or (B) The reasonable costs the hospital would otherwise have to expend to recruit a new physician to the geographic area served by the hospital to join the medical staff of the hospital to replace the retained physician. (v) The requirements of paragraph (t)(3) of this setion are satisfied. (2) Written certification from physician.

Remuneration provided by a hospital directly to a physician on the hospital's medical staff to retain the physician's medical practice in the geographic area served by the hospital (as defined in paragraph (e)(2) of this section), if all of the following conditions are met. (i) The physician furnishes to the hospital before the retention payment is made a written certification that the physician has a bona fide opportunity for future employment by a hospital, academic medical center (as defined at § 411.355(e)), or physician organization (as defined at § 411.351) that requires the physician to move the location of his or her medical practice at least 25 miles and outside the geographic area served by the hospital. The certification contains at least the following— (A) Details regarding the steps taken by the physician to effectuate the employment opportunity.

(B) Details of the physician's employment opportunity, including the identity and location of the physician's future employer or employment location or both, and the anticipated income and benefits (or a range for income and benefits). (C) A statement that the future employer is not related to the hospital making the payment. (D) The date on which the physician anticipates relocating his or her medical practice outside of the geographic area served by the hospital.

And (E) Information sufficient for the hospital to verify the information included in the written certification. (ii) The hospital takes reasonable steps to verify that the physician has a bona fide opportunity for future employment that requires the physician to relocate outside the geographic area served by the hospital. (iii) The requirements of paragraphs (e)(1)(i) through (iv) of this section are satisfied.

(iv) The retention payment does not exceed the lower of— (A) An amount equal to 25 percent of the physician's current annual income (averaged over the previous 24 months), using a reasonable and consistent methodology that is calculated uniformly. Or (B) The reasonable costs the hospital would otherwise have to expend to recruit a new physician to the geographic area served by the hospital to join the medical staff of the hospital to replace the retained physician. (v) The requirements of paragraph (t)(3) of this section are satisfied.

(3) Additional requirements. Remuneration provided under paragraph (t)(1) or (2) of this section must meet the following additional requirements. (i)(A) The physician's current medical practice is located in a rural area or HPSA (regardless of the physician's specialty) or is located in an area with demonstrated need for the physician as determined by the Secretary in an advisory opinion issued in accordance with section 1877(g)(6) of the Act.

Or (B) At least 75 percent of the physician's patients reside in a medically underserved area or are members of a medically underserved population. (ii) The hospital does not enter into a retention arrangement with a particular referring physician more frequently than once every 5 years. (iii) The amount and terms of the retention payment are not altered during the term of the arrangement in any manner that takes into account the volume or value of referrals or other business generated by the physician.

(4) Waiver of relocation requirement. The Secretary may waive the relocation requirement of paragraphs (t)(1) and (t)(2) of this section for payments made to physicians practicing in a HPSA or an area with demonstrated need for the physician through an advisory opinion issued in accordance with section 1877(g)(6) of the Act, if the retention payment arrangement otherwise complies with all of the conditions of this paragraph (t). (5) Application to other entities.

This paragraph (t) applies to remuneration provided by a federally qualified health center or a rural health clinic in the same manner as it applies to remuneration provided by a hospital. (u) Community-wide health information systems. Items or services of information technology provided by an entity to a physician that allow access to, and sharing of, electronic health care records and any complementary drug information systems, general health information, medical alerts, and related information for patients served by community providers and practitioners, in order to enhance the community's overall health, provided that— (1) The items or services are available as necessary to enable the physician to participate in a community-wide health information system, are principally used by the physician as part of the community-wide health information system, and are not provided to the physician in any manner that takes into account the volume or value of referrals or other business generated by the physician.

(2) The community-wide health information systems are available to all providers, practitioners, and residents of the community who desire to participate. And (v) Electronic prescribing items and services. Nonmonetary remuneration (consisting of items and services in the form of hardware, software, or information technology and training services) necessary and used solely to receive and transmit electronic prescription information, if all of the following conditions are met.

(1) The items and services are provided by a— (i) Hospital to a physician who is a member of its medical staff. (ii) Group practice (as defined at § 411.352) to a physician who is a Start Printed Page 77678member of the group (as defined at § 411.351). Or (iii) PDP sponsor or MA organization to a prescribing physician.

(2) The items and services are provided as part of, or are used to access, an electronic prescription drug program that meets the applicable standards under Medicare Part D at the time the items and services are provided. (3) The donor (or any person on the donor's behalf) does not take any action to limit or restrict the use or compatibility of the items or services with other electronic prescribing or electronic health records systems. (4) For items or services that are of the type that can be used for any patient without regard to payer status, the donor does not restrict, or take any action to limit, the physician's right or ability to use the items or services for any patient.

(5) Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of items or services, or the amount or nature of the items or services, a condition of doing business with the donor. (6) Neither the eligibility of a physician for the items or services, nor the amount or nature of the items or services, is determined in a manner that takes into account the volume or value of referrals or other business generated between the parties. (7) The arrangement is set forth in a written agreement that— (i) Is signed by the parties.

(ii) Specifies the items and services being provided and the donor's cost of the items and services. And (iii) Covers all of the electronic prescribing items and services to be provided by the donor. This requirement is met if all separate agreements between the donor and the physician (and the donor and any family members of the physician) incorporate each other by reference or if they cross-reference a master list of agreements that is maintained and updated centrally and is available for review by the Secretary upon request.

The master list must be maintained in a manner that preserves the historical record of agreements. (8) The donor does not have actual knowledge of, and does not act in reckless disregard or deliberate ignorance of, the fact that the physician possesses or has obtained items or services equivalent to those provided by the donor. (w) Electronic health records items and services.

Nonmonetary remuneration (consisting of items and services in the form of software or information technology and training services, including cybersecurity software and services) necessary and used predominantly to create, maintain, transmit, receive, or protect electronic health records, if all of the following conditions are met. (1) The items and services are provided to a physician by an entity (as defined at § 411.351) that is not a laboratory company. (2) The software is interoperable (as defined at § 411.351) at the time it is provided to the physician.

For purposes of this paragraph (w), software is deemed to be interoperable if, on the date it is provided to the physician, it is certified by a certifying body authorized by the National Coordinator for Health Information Technology to certification criteria identified in the then-applicable version of 45 CFR part 170. (3) [Reserved] (4)(i) Before receipt of the initial donation of items and services or the donation of replacement items and services, the physician pays 15 percent of the donor's cost for the items and services. (ii) Except as provided in paragraph (w)(4)(i) of this section, with respect to items and services received from the donor after the initial donation of items and services or the donation of replacement items and services, the physician pays 15 percent of the donor's cost for the items and services at reasonable intervals.

(iii) The donor (or any party related to the donor) does not finance the physician's payment or loan funds to be used by the physician to pay for the items and services. (5) Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of items or services, or the amount or nature of the items or services, a condition of doing business with the donor. (6) Neither the eligibility of a physician for the items or services, nor the amount or nature of the items or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties.

For purposes of this paragraph (w), the determination is deemed not to directly take into account the volume or value of referrals or other business generated between the parties if any one of the following conditions is met. (i) The determination is based on the total number of prescriptions written by the physician (but not the volume or value of prescriptions dispensed or paid by the donor or billed to the program). (ii) The determination is based on the size of the physician's medical practice (for example, total patients, total patient encounters, or total relative value units).

(iii) The determination is based on the total number of hours that the physician practices medicine. (iv) The determination is based on the physician's overall use of automated technology in his or her medical practice (without specific reference to the use of technology in connection with referrals made to the donor). (v) The determination is based on whether the physician is a member of the donor's medical staff, if the donor has a formal medical staff.

(vi) The determination is based on the level of uncompensated care provided by the physician. Or (vii) The determination is made in any reasonable and verifiable manner that does not directly take into account the volume or value of referrals or other business generated between the parties. (7) The arrangement is set forth in a written agreement that— (i) Is signed by the parties.

(ii) Specifies the items and services being provided, the donor's cost of the items and services, and the amount of the physician's contribution. And (iii) Covers all of the electronic health records items and services to be provided by the donor. This requirement is met if all separate agreements between the donor and the physician (and the donor and any family members of the physician) incorporate each other by reference or if they cross-reference a master list of agreements that is maintained and updated centrally and is available for review by the Secretary upon request.

The master list must be maintained in a manner that preserves the historical record of agreements. (8) [Reserved] (9) For items or services that are of the type that can be used for any patient without regard to payer status, the donor does not restrict, or take any action to limit, the physician's right or ability to use the items or services for any patient. (10) The items and services do not include staffing of physician offices and are not used primarily to conduct personal business or business unrelated to the physician's medical practice.

(x) Assistance to compensate a nonphysician practitioner. (1) Remuneration provided by a hospital to a physician to compensate a nonphysician practitioner to provide NPP patient care services, if all of the following conditions are met:Start Printed Page 77679 (i) The arrangement— (A) Is set out in writing and signed by the hospital, the physician, and the nonphysician practitioner. And (B) Commences before the physician (or the physician organization in whose shoes the physician stands under § 411.354(c)) enters into the compensation arrangement described in paragraph (x)(1)(vi)(A) of this section.

(ii) The arrangement is not conditioned on— (A) The physician's referrals to the hospital. Or (B) The nonphysician practitioner's NPP referrals to the hospital. (iii) The remuneration from the hospital— (A) Does not exceed 50 percent of the actual compensation, signing bonus, and benefits paid by the physician to the nonphysician practitioner during a period not to exceed the first 2 consecutive years of the compensation arrangement between the nonphysician practitioner and the physician (or the physician organization in whose shoes the physician stands).

And (B) Is not determined in any manner that takes into account the volume or value of actual or anticipated referrals by— (1) Referrals by the physician (or any physician in the physician's practice) or other business generated between the parties. Or (2) NPP referrals by the nonphysician practitioner (or any nonphysician practitioner in the physician's practice) or other business generated between the parties. (iv) The compensation, signing bonus, and benefits paid to the nonphysician practitioner by the physician does not exceed fair market value for the NPP patient care services furnished by the nonphysician practitioner to patients of the physician's practice.

(v) The nonphysician practitioner has not, within 1 year of the commencement of his or her compensation arrangement with the physician (or the physician organization in whose shoes the physician stands under § 411.354(c))— (A) Furnished NPP patient care services in the geographic area served by the hospital. Or (B) Been employed or otherwise engaged to provide NPP patient care services by a physician or a physician organization that has a medical practice site located in the geographic area served by the hospital, regardless of whether the nonphysician practitioner furnished NPP patient care services at the medical practice site located in the geographic area served by the hospital. (vi)(A) The nonphysician practitioner has a compensation arrangement directly with the physician or the physician organization in whose shoes the physician stands under § 411.354(c).

And (B) Substantially all of the NPP patient care services that the nonphysician practitioner furnishes to patients of the physician's practice are primary care services or mental health care services. (vii) The physician does not impose practice restrictions on the nonphysician practitioner that unreasonably restrict the nonphysician practitioner's ability to provide NPP patient care services in the geographic area served by the hospital. (2) Records of the actual amount of remuneration provided under paragraph (x)(1) of this section by the hospital to the physician, and by the physician to the nonphysician practitioner, must be maintained for a period of at least 6 years and made available to the Secretary upon request.

(3) For purposes of this paragraph (x), “nonphysician practitioner” means a physician assistant as defined in section 1861(aa)(5) of the Act, a nurse practitioner or clinical nurse specialist as defined in section 1861(aa)(5) of the Act, a certified nurse-midwife as defined in section 1861(gg) of the Act, a clinical social worker as defined in section 1861(hh) of the Act, or a clinical psychologist as defined at § 410.71(d) of this subchapter. (4) For purposes of this paragraph (x), the following terms have the meanings indicated. (i) “NPP patient care services” means direct patient care services furnished by a nonphysician practitioner that address the medical needs of specific patients or any task performed by a nonphysician practitioner that promotes the care of patients of the physician or physician organization with which the nonphysician practitioner has a compensation arrangement.

(ii) “NPP referral” means a request by a nonphysician practitioner that includes the provision of any designated health service for which payment may be made under Medicare, the establishment of any plan of care by a nonphysician practitioner that includes the provision of such a designated health service, or the certifying or recertifying of the need for such a designated health service, but does not include any designated health service personally performed or provided by the nonphysician practitioner. (5) For purposes of paragraph (x)(1) of this section, “geographic area served by the hospital” has the meaning set forth in paragraph (e)(2) of this section. (6) For purposes of paragraph (x)(1) of this section, a “compensation arrangement” between a physician (or the physician organization in whose shoes the physician stands under § 411.354(c)) and a nonphysician practitioner— (i) Means an employment, contractual, or other arrangement under which remuneration passes between the parties.

And (ii) Does not include a nonphysician practitioner's ownership or investment interest in a physician organization. (7)(i) This paragraph (x) may be used by a hospital, federally qualified health center, or rural health clinic only once every 3 years with respect to the same referring physician. (ii) Paragraph (x)(7)(i) of this section does not apply to remuneration provided by a hospital, federally qualified health center, or rural health clinic to a physician to compensate a nonphysician practitioner to provide NPP patient care services if— (A) The nonphysician practitioner is replacing a nonphysician practitioner who terminated his or her employment or contractual arrangement to provide NPP patient care services with the physician (or the physician organization in whose shoes the physician stands) within 1 year of the commencement of the employment or contractual arrangement.

And (B) The remuneration provided to the physician is provided during a period that does not exceed 2 consecutive years as measured from the commencement of the compensation arrangement between the nonphysician practitioner who is being replaced and the physician (or the physician organization in whose shoes the physician stands). (8)(i) This paragraph (x) applies to remuneration provided by a federally qualified health center or a rural health clinic in the same manner as it applies to remuneration provided by a hospital. (ii) The “geographic area served” by a federally qualified health center or a rural health clinic has the meaning set forth in paragraph (e)(6)(ii) of this section.

(y) Timeshare arrangements. Remuneration provided under an arrangement for the use of premises, equipment, personnel, items, supplies, or services if the following conditions are met. (1) The arrangement is set out in writing, signed by the parties, and specifies the premises, equipment, personnel, items, supplies, and services covered by the arrangement.

(2) The arrangement is between a physician (or the physician organization Start Printed Page 77680in whose shoes the physician stands under § 411.354(c)) and— (i) A hospital. Or (ii) Physician organization of which the physician is not an owner, employee, or contractor. (3) The premises, equipment, personnel, items, supplies, and services covered by the arrangement are used— (i) Predominantly for the provision of evaluation and management services to patients.

And (ii) On the same schedule. (4) The equipment covered by the arrangement is— (i) Located in the same building where the evaluation and management services are furnished. (ii) Not used to furnish designated health services other than those incidental to the evaluation and management services furnished at the time of the patient's evaluation and management visit.

And (iii) Not advanced imaging equipment, radiation therapy equipment, or clinical or pathology laboratory equipment (other than equipment used to perform CLIA-waived laboratory tests). (5) The arrangement is not conditioned on the referral of patients by the physician who is a party to the arrangement to the hospital or physician organization of which the physician is not an owner, employee, or contractor. (6) The compensation over the term of the arrangement is set in advance, consistent with fair market value, and not determined— (i) In any manner that takes into account the volume or value of referrals or other business generated between the parties.

Or (ii) Using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services provided while using the premises, equipment, personnel, items, supplies, or services covered by the arrangement. Or (B) Per-unit of service fees that are not time-based, to the extent that such fees reflect services provided to patients referred by the party granting permission to use the premises, equipment, personnel, items, supplies, or services covered by the arrangement to the party to which the permission is granted. (7) The arrangement would be commercially reasonable even if no referrals were made between the parties.

(8) [Reserved] (9) The arrangement does not convey a possessory leasehold interest in the office space that is the subject of the arrangement. (z) Limited remuneration to a physician. (1) Remuneration from an entity to a physician for the provision of items or services provided by the physician to the entity that does not exceed an aggregate of $5,000 per calendar year, as adjusted for inflation in accordance with paragraph (z)(3) of this section, if all of the following conditions are satisfied.

(i) The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the physician. (ii) The compensation does not exceed the fair market value of the items or services. (iii) The arrangement would be commercially reasonable even if no referrals were made between the parties.

(iv) Compensation for the lease of office space or equipment is not determined using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space or to the services performed on or business generated through the use of the equipment. Or (B) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee. (v) Compensation for the use of premises or equipment is not determined using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services provided while using the premises or equipment covered by the arrangement.

Or (B) Per-unit of service fees that are not time-based, to the extent that such fees reflect services provided to patients referred by the party granting permission to use the premises or equipment covered by the arrangement to the party to which the permission is granted. (vi) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4). (2) A physician may provide items or services through employees whom the physician has hired for the purpose of performing the services.

Through a wholly-owned entity. Or through locum tenens physicians (as defined at § 411.351, except that the regular physician need not be a member of a group practice). (3) The annual aggregate remuneration limit in this paragraph (z) is adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index—Urban All Items (CPI-U) for the 12-month period ending the preceding September 30.

CMS displays after September 30 each year both the increase in the CPI-U for the 12-month period and the new remuneration limit on the physician self-referral website at http://www.cms.hhs.gov/​PhysicianSelfReferral/​10_​CPI-U_​Updates.asp. (aa) Arrangements that facilitate value-based health care delivery and payment—(1) Full financial risk—Remuneration paid under a value-based arrangement, as defined at § 411.351, if the following conditions are met. (i) The value-based enterprise is at full financial risk (or is contractually obligated to be at full financial risk within the 12 months following the commencement of the value-based arrangement) during the entire duration of the value-based arrangement.

(ii) The remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population. (iii) The remuneration is not an inducement to reduce or limit medically necessary items or services to any patient. (iv) The remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement.

(v) If remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions. (A) The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties. (B) The requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier.

The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment. (vi) Records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Secretary upon request.

(vii) For purposes of this paragraph (aa), “full financial risk” means that the value-based enterprise is financially responsible on a prospective basis for Start Printed Page 77681the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. For purposes of this paragraph (aa), “prospective basis” means that the value-based enterprise has assumed financial responsibility for the cost of all patient care items and services covered by the applicable payor prior to providing patient care items and services to patients in the target patient population. (2) Value-based arrangements with meaningful downside financial risk to the physician—Remuneration paid under a value-based arrangement, as defined at § 411.351, if the following conditions are met.

(i) The physician is at meaningful downside financial risk for failure to achieve the value-based purpose(s) of the value-based enterprise during the entire duration of the value-based arrangement. (ii) A description of the nature and extent of the physician's downside financial risk is set forth in writing. (iii) The methodology used to determine the amount of the remuneration is set in advance of the undertaking of value-based activities for which the remuneration is paid.

(iv) The remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population. (v) The remuneration is not an inducement to reduce or limit medically necessary items or services to any patient. (vi) The remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement.

(vii) If remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions. (A) The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties. (B) The requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier.

The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment. (viii) Records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Secretary upon request.

(ix) For purposes of this paragraph (aa), “meaningful downside financial risk” means that the physician is responsible to repay or forgo no less than 10 percent of the total value of the remuneration the physician receives under the value-based arrangement. (3) Value-based arrangements. Remuneration paid under a value-based arrangement, as defined at § 411.351, if the following conditions are met.

(i) The arrangement is set forth in writing and signed by the parties. The writing includes a description of— (A) The value-based activities to be undertaken under the arrangement. (B) How the value-based activities are expected to further the value-based purpose(s) of the value-based enterprise.

(C) The target patient population for the arrangement. (D) The type or nature of the remuneration. (E) The methodology used to determine the remuneration.

And (F) The outcome measures against which the recipient of the remuneration is assessed, if any. (ii) The outcome measures against which the recipient of the remuneration is assessed, if any, are objective, measurable, and selected based on clinical evidence or credible medical support. (iii) Any changes to the outcome measures against which the recipient of the remuneration will be assessed are made prospectively and set forth in writing.

(iv) The methodology used to determine the amount of the remuneration is set in advance of the undertaking of value-based activities for which the remuneration is paid. (v) The remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population. (vi) The arrangement is commercially reasonable.

(vii)(A) No less frequently than annually, or at least once during the term of the arrangement if the arrangement has a duration of less than 1 year, the value-based enterprise or one or more of the parties monitor. (1) Whether the parties have furnished the value-based activities required under the arrangement. (2) Whether and how continuation of the value-based activities is expected to further the value-based purpose(s) of the value-based enterprise.

And (3) Progress toward attainment of the outcome measure(s), if any, against which the recipient of the remuneration is assessed. (B) If the monitoring indicates that a value-based activity is not expected to further the value-based purpose(s) of the value-based enterprise, the parties must terminate the ineffective value-based activity. Following completion of monitoring that identifies an ineffective value-based activity, the value-based activity is deemed to be reasonably designed to achieve at least one value-based purpose of the value-based enterprise— (1) For 30 consecutive calendar days after completion of the monitoring, if the parties terminate the arrangement.

Or (2) For 90 consecutive calendar days after completion of the monitoring, if the parties modify the arrangement to terminate the ineffective value-based activity. (C) If the monitoring indicates that an outcome measure is unattainable during the remaining term of the arrangement, the parties must terminate or replace the unattainable outcome measure within 90 consecutive calendar days after completion of the monitoring. (viii) The remuneration is not an inducement to reduce or limit medically necessary items or services to any patient.

(ix) The remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement. (x) If the remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions. (A) The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties.

(B) The requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment.

(xi) Records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Secretary upon request. (xii) For purposes of this paragraph (aa)(3), “outcome measure” means a benchmark that quantifies. (A) Improvements in or maintenance of the quality of patient care.

OrStart Printed Page 77682 (B) Reductions in the costs to or reductions in growth in expenditures of payors while maintaining or improving the quality of patient care. (bb) Cybersecurity technology and related services. (1) Nonmonetary remuneration (consisting of technology and services) necessary and used predominantly to implement, maintain, or reestablish cybersecurity, if all of the following conditions are met.

(i) Neither the eligibility of a physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties. (ii) Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor. (iii) The arrangement is documented in writing.

(2) For purposes of this paragraph (bb), “technology” means any software or other types of information technology. Start Amendment Part3. Effective January 1, 2022, § 411.352 is further amended by revising paragraph (i) to read as follows.

End Amendment Part Group practice. * * * * * (i) Special rules for profit shares and productivity bonuses—(1) Overall profits. (i) Notwithstanding paragraph (g) of this section, a physician in the group may be paid a share of overall profits that is not directly related to the volume or value of the physician's referrals.

(ii) Overall profits means the profits derived from all the designated health services of any component of the group that consists of at least five physicians, which may include all physicians in the group. If there are fewer than five physicians in the group, overall profits means the profits derived from all the designated health services of the group. (iii) Overall profits must be divided in a reasonable and verifiable manner.

The share of overall profits will be deemed not to directly relate to the volume or value of referrals if one of the following conditions is met. (A) Overall profits are divided per capita (for example, per member of the group or per physician in the group). (B) Overall profits are distributed based on the distribution of the group's revenues attributed to services that are not designated health services and would not be considered designated health services if they were payable by Medicare.

(C) Revenues derived from designated health services constitute less than 5 percent of the group's total revenues, and the portion of those revenues distributed to each physician in the group constitutes 5 percent or less of his or her total compensation from the group. (2) Productivity bonuses. (i) Notwithstanding paragraph (g) of this section, a physician in the group may be paid a productivity bonus based on services that he or she has personally performed, or services “incident to” such personally performed services, that is not directly related to the volume or value of the physician's referrals (except that the bonus may directly relate to the volume or value of the physician's referrals if the referrals are for services “incident to” the physician's personally performed services).

(ii) A productivity bonus must be calculated in a reasonable and verifiable manner. A productivity bonus will be deemed not to relate directly to the volume or value of referrals if one of the following conditions is met. (A) The productivity bonus is based on the physician's total patient encounters or the relative value units (RVUs) personally performed by the physician.

(B) The services on which the productivity bonus is based are not designated health services and would not be considered designated health services if they were payable by Medicare. (C) Revenues derived from designated health services constitute less than 5 percent of the group's total revenues, and the portion of those revenues distributed to each physician in the group constitutes 5 percent or less of his or her total compensation from the group. (3) Value-based enterprise participation.

Notwithstanding paragraph (g) of this section, profits from designated health services that are directly attributable to a physician's participation in a value-based enterprise, as defined at § 411.351, may be distributed to the participating physician. (4) Supporting documentation. Supporting documentation verifying the method used to calculate the profit share or productivity bonus under paragraphs (i)(1), (2), and (3) of this section, and the resulting amount of compensation, must be made available to the Secretary upon request.

Start Signature Dated. Novemeber 19, 2020. Seema Verma, Administrator, Centers for Medicare &.

Medicaid Services. Alex M. Azar II, Secretary, Department of Health and Human Services.

End Signature End Supplemental Information [FR Doc. 2020-26140 Filed 11-20-20. 4:15 pm] BILLING CODE 4120-01-P.

Start Preamble buy flagyl online fast delivery Notice of Amendment and Republished Can you buy diflucan over the counter in canada Declaration. The Secretary issues this amendment pursuant to section 319F-3 of the Public Health Service Act to amend his March 10, 2020 Declaration Under the Public Readiness and Emergency Preparedness Act for Medical Countermeasures Against buy antibiotics. The amendments to the Declaration are applicable buy flagyl online fast delivery as of February 4, 2020, except as otherwise specified in Section XII. Start Further Info Robert P.

Kadlec, MD, MTM&H, MS, Assistant Secretary for Preparedness and Response, Office of the Secretary, Department of Health and Human Services, 200 Independence Avenue Start Printed Page 79191SW, Washington, DC 20201. Telephone. 202-205-2882. End Further Info End Preamble Start Supplemental Information The Public Readiness and Emergency Preparedness (PREP) Act, 42 U.S.C.

247d-6d et. Seq., authorizes the Secretary of Health and Human Services (the Secretary) to issue a declaration to provide liability protections to certain individuals and entities (Covered Persons) against any claim of loss caused by, arising out of, relating to, or resulting from, the manufacture, distribution, administration, or use of certain medical countermeasures (Covered Countermeasures), except for claims involving “willful misconduct,” as defined in the PREP Act. Such declarations are subject to amendment as circumstances warrant. The PREP Act was enacted on December 30, 2005, as Public Law 109-148, Division C, Section 2.

It amended the Public Health Service (PHS) Act, adding Section 319F-3, which addresses liability immunity, and Section 319F-4, which creates a compensation program. These sections are codified at 42 U.S.C. 247d-6d and 42 U.S.C. 247d-6e, respectively.

Section 319F-3 of the PHS Act has been amended by the flagyl and All-Hazards Preparedness Reauthorization Act (PAHPRA), Public Law 113-5, enacted on March 13, 2013, and the antibiotics Aid, Relief, and Economic Security (CARES) Act, Public Law 116-136, enacted on March 27, 2020, to expand Covered Countermeasures under the PREP Act. On January 31, 2020, the Secretary declared a public health emergency pursuant to section 319 of the PHS Act, 42 U.S.C. 247d, effective January 27, 2020, for the entire United States to aid in the response to the antibiotics Disease 2019 (buy antibiotics) outbreak, which subsequently became a global flagyl. Pursuant to section 319 of the PHS Act, the Secretary renewed that declaration on April 21, 2020, July 23, 2020, and October 2, 2020.

On March 10, 2020, the Secretary issued a declaration under the PREP Act for medical countermeasures against buy antibiotics.[] On April 10, the Secretary amended the Declaration to extend liability protections to Covered Countermeasures authorized under the CARES Act.[] On June 4, the Secretary amended the Declaration to clarify that Covered Countermeasures under the Declaration include qualified flagyl and epidemic products that limit the harm that buy antibiotics might otherwise cause.[] On August 19, the Secretary amended the Declaration to add additional categories of Qualified Persons and to amend the category of disease, health condition, or threat for which he recommends the administration or use of Covered Countermeasures.[] The Secretary now further amends the Declaration pursuant to section 319F-3 of the Public Health Service Act. This Fourth Amendment to the Declaration. (a) Clarifies that the Declaration must be construed in accordance with the Department of Health and Human Services (HHS) Office of the General Counsel (OGC) Advisory Opinions on the Public Readiness and Emergency Preparedness Act and the Declaration (Advisory Opinions).[] The Declaration incorporates the Advisory Opinions for that purpose. (b) Incorporates authorizations that the HHS Office of the Assistant Secretary for Health (OASH) has issued as an Authority Having Jurisdiction.[] (c) Adds an additional category of Qualified Persons under Section V of the Declaration and 42 U.S.C.

247d-6d(i)(8)(B), i.e., healthcare personnel using telehealth to order or administer Covered Countermeasures for patients in a state other than the state where the healthcare personnel are permitted to practice.[] (d) Modifies and clarifies the training requirements for certain licensed pharmacists and pharmacy interns to administer certain routine childhood or buy antibiotics vaccinations. (e) Makes explicit that Section VI covers all qualified flagyl and epidemic products under the PREP Act. (f) Adds a third method of distribution under Section VII of the Declaration and 42 U.S.C. 247d-6d(a)(5) that would provide liability protections for, among other things, additional private-distribution channels.

(g) Makes explicit in Section IX that there can be situations where not administering a covered countermeasure to a particular individual can fall within the PREP Act and this Declaration's liability protections. (h) Makes explicit in Section XI that there are substantial federal legal and policy issues, and substantial federal legal and policy interests, in having a unified, whole-of-nation response to the buy antibiotics flagyl among federal, state, local, and private-sector entities. The world is facing an unprecedented flagyl. To effectively respond, there must be a more consistent pathway for Covered Persons to manufacture, distribute, administer or use Covered Countermeasures across the nation and the world.Start Printed Page 79192 (i) Revises the effective time period of the Declaration in light of the amendments to the Declaration.[] The Secretary republishes the Declaration, as amended, in full.

Unless otherwise noted, all statutory citations are to the U.S. Code. Description of This Amendment Declaration The Declaration has fifteen sections describing PREP Act coverage for medical countermeasures against buy antibiotics. OGC has issued Advisory Opinions interpreting the PREP Act and reflecting the Secretary's interpretation of the Declaration.[] The Secretary now amends the Declaration to clarify that the Declaration must be construed in accordance with the Advisory Opinions.

The Secretary expressly incorporates the Advisory Opinions for that purpose. Section V. Covered Persons Section V of the Declaration describes Covered Persons, including additional qualified persons identified by the Secretary, as required under the PREP Act. The Secretary amends Section V to specify an additional category of qualified persons.

Specifically, healthcare personnel who are permitted to order and administer a Covered Countermeasure through telehealth in a state may do so for patients in another state so long as the healthcare personnel comply with the legal requirements of the state in which the healthcare personnel are permitted to order and administer the Covered Countermeasure by means of telehealth. Telehealth is widely recognized as a valuable tool to promote public health during this flagyl. According to the Centers for Disease Control and Prevention (CDC), Telehealth services can facilitate public health mitigation strategies during this flagyl by increasing social distancing. These services can be a safer option for [healthcare personnel (HCP)] and patients by reducing potential infectious exposures.

They can reduce the strain on healthcare systems by minimizing the surge of patient demand on facilities and reduce the use of [personal protective equipment (PPE)] by healthcare providers. Maintaining continuity of care to the extent possible can avoid additional negative consequences from delayed preventive, chronic, or routine care. Remote access to healthcare services may increase participation for those who are medically or socially vulnerable or who do not have ready access to providers. Remote access can also help preserve the patient-provider relationship at times when an in-person visit is not practical or feasible.

Telehealth services can be used to. Screen patients who may have symptoms of buy antibiotics and refer as appropriate Provide low-risk urgent care for non-buy antibiotics conditions, identify those persons who may need additional medical consultation or assessment, and refer as appropriate Access primary care providers and specialists, including mental and behavioral health, for chronic health conditions and medication management Provide coaching and support for patients managing chronic health conditions, including weight management and nutrition counseling Participate in physical therapy, occupational therapy, and other modalities as a hybrid approach to in-person care for optimal health Monitor clinical signs of certain chronic medical conditions (e.g., blood pressure, blood glucose, other remote assessments) Engage in case management for patients who have difficulty accessing care (e.g., those who live in very rural settings, older adults, those with limited mobility) Follow up with patients after hospitalization Deliver advance care planning and counseling to patients and caregivers to document preferences if a life-threatening event or medical crisis occurs Provide non-emergent care to residents in long-term care facilities Provide education and training for HCP through peer-to-peer professional medical consultations (inpatient or outpatient) that are not locally available, particularly in rural areas.[] Similarly, CMS has stressed the importance of telehealth during this flagyl. Telehealth, telemedicine, and related terms generally refer to the exchange of medical information from one site to another through electronic communication to improve a patient's health. Innovative uses of this kind of technology in the provision of healthcare is increasing.

And with the emergence of the flagyl causing the disease buy antibiotics, there is an urgency to expand the use of technology to help people who need routine care, and keep vulnerable beneficiaries and beneficiaries with mild symptoms in their homes while maintaining access to the care they need. Limiting community spread of the flagyl, as well as limiting the exposure to other patients and staff members will slow viral spread.[] Accordingly, CMS and other HHS components has substantially expanded the scope of services paid under Medicare when furnished using telehealth technologies during this flagyl. Other HHS components have also taken steps to expand the use of telehealth during the flagyl.[] Moreover, to expand the use of telehealth during this flagyl, the Office for Civil Rights (OCR) at HHS is exercising enforcement discretion and will not impose penalties for noncompliance with the regulatory requirements under the Health Insurance Portability and Accountability Act (HIPAA) Rules against covered healthcare providers that serve patients through everyday communications technologies during the buy antibiotics nationwide public health emergency.[] This exercise of discretion Start Printed Page 79193applies to widely available communications apps, such as FaceTime or Skype, when used in good faith for any telehealth treatment or diagnostic purpose, regardless of whether the telehealth service is directly related to buy antibiotics.[] Many states have authorized out-of-state healthcare personnel to deliver telehealth services to in-state patients, either generally or in the context of buy antibiotics.[] To help maximize the utility of telehealth, the Secretary declares that the term “qualified person” under 42 U.S.C. 247d-6d(i)(8)(B) includes healthcare personnel using telehealth to order or administer Covered Countermeasures for patients in a state other than the state where the healthcare personnel are permitted to practice.

When ordering and administering Covered Countermeasures through telehealth to patients in a state where the healthcare personnel are not already permitted to do so, the healthcare personnel must comply with all requirements for ordering and administering Covered Countermeasures to patients through telehealth in the state where the healthcare personnel are licensed or otherwise permitted to practice. Any state law that prohibits or effectively prohibits such a qualified person from ordering and administering Covered Countermeasures through telehealth is preempted.[] Nothing in this Declaration shall preempt state laws that permit additional persons to deliver telehealth services. The Secretary also amends Section V to include several examples of Covered Persons who are Qualified Persons, because they are authorized in accordance with the public health and medical emergency response of the Authority Having Jurisdiction to prescribe, administer, deliver, distribute or dispense the Covered Countermeasures. Those examples include certain pharmacists, pharmacy interns, and pharmacy technicians who order or administer certain buy antibiotics tests and certain treatments.[] These examples are not an exclusive or exhaustive list of persons who are qualified persons identified by the Secretary in Section V.

The Secretary also amends Section V to make explicit that the requirement in that section for certain qualified persons to have a current certificate in basic cardiopulmonary resuscitation is satisfied by, among other things, a certification in basic cardiopulmonary resuscitation by an online program that has received accreditation from the American Nurses Credentialing Center, the Accreditation Council for Pharmacy Education (ACPE), or the Accreditation Council for Continuing Medical Education. The Secretary also amends Section V's training requirements for licensed pharmacists to order and administer certain childhood or buy antibiotics treatments. To order and administer treatments, the licensed pharmacist must have completed the immunization training that the licensing State requires in order for pharmacists to administer treatments. If the State does not specify training requirements for the licensed pharmacist to order and administer treatments, the licensed pharmacist must complete a vaccination training program of at least 20 hours that is approved by the Accreditation Council for Pharmacy Education (ACPE) to order and administer treatments.

This training program must include hands-on injection technique, clinical evaluation of indications and contraindications of treatments, and the recognition and treatment of emergency reactions to treatments. Other than the basic cardiopulmonary resuscitation requirement and the practical training program requirement, this Amendment does not change the requirements for a pharmacist, pharmacy intern, or pharmacy technician to be a “qualified person” under 42 U.S.C. 247d-6d(i)(8)(B) who can order or administer childhood or buy antibiotics treatments pursuant to the Declaration. Section VI.

Covered Countermeasures The Secretary amends Section VI to make explicit that Section VI covers all qualified flagyl and epidemic products under the PREP Act.Start Printed Page 79194 Section VII. Limitations on Distribution The Secretary may specify that liability protections are in effect only for Covered Countermeasures obtained through a particular means of distribution. The Declaration previously stated that liability immunity is afforded to Covered Persons only for Recommended Activities related to (a) present or future federal contracts, cooperative agreements, grants, other transactions, interagency agreements, or memoranda of understanding or other federal agreements. Or (b) activities authorized in accordance with the public health and medical response of the Authority Having Jurisdiction to prescribe, administer, deliver, distribute, or dispense the Covered Countermeasures following a declaration of an emergency.

buy antibiotics is an unprecedented global challenge that requires a whole-of-nation response that utilizes federal-, state-, and local- distribution channels as well as private-distribution channels. Given the broad scale of this flagyl, the Secretary amends the Declaration to extend PREP Act coverage to additional private-distribution channels, as set forth below. The amended Section VII adds that PREP Act liability protections also extend to Covered Persons for Recommended Activities that are related to any Covered Countermeasure that is. (a) Licensed, approved, cleared, or authorized by the Food and Drug Administration (FDA) (or that is permitted to be used under an Investigational New Drug Application or an Investigational Device Exemption) under the Federal Food, Drug, and Cosmetic (FD&C) Act or Public Health Service (PHS) Act to treat, diagnose, cure, prevent, mitigate or limit the harm from buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom.

Or (b) a respiratory protective device approved by the National Institute for Occupational Safety and Health (NIOSH) under 42 CFR part 84, or any successor regulations, that the Secretary determines to be a priority for use during a public health emergency declared under section 319 of the PHS Act to prevent, mitigate, or limit the harm from, buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom. To qualify for this third distribution channel (but not necessarily to qualify for the other distribution channels), a Covered Person must manufacture, test, develop, distribute, administer, or use the Covered Countermeasure pursuant to the FDA licensure, approval, clearance, or authorization (or pursuant to an Investigational New Drug Application or Investigational Device Exemption), or the NIOSH approval. This third distribution channel may extend PREP Act coverage when there is no federal agreement or authorization in accordance with the public health and medical response of the Authority Having Jurisdiction to prescribe, administer, deliver, distribute or dispense the Covered Countermeasures following a declaration of an emergency. For example, a manufacturer, distributor, program planner, or qualified person engages in manufacturing, testing, development, distribution, administration, or use of a buy antibiotics test pursuant to an FDA Emergency Use Authorization for that buy antibiotics test.

If the Covered Person satisfies all other requirements of the PREP Act and Declaration, there will be PREP Act coverage even if there is no federal agreement to cover those activities and those activities are not part of the authorized activity of an Authority Having Jurisdiction. Section IX. Administration of Covered Countermeasures The Secretary amends Section IX to make explicit that there can be situations where not administering a covered countermeasure to a particular individual can fall within the PREP Act and this Declaration's liability protections. Section XI.

Geographic Area The Secretary makes explicit in Section XI that there are substantial federal legal and policy issues, and substantial federal legal and policy interests within the meaning of Grable &. Sons Metal Products, Inc. V. Darue Eng'g.

&. Mf'g., 545 U.S. 308 (2005), in having a unified, whole-of-nation response to the buy antibiotics flagyl among federal, state, local, and private-sector entities. The world is facing an unprecedented global flagyl.

To effectively respond, there must be a more consistent pathway for Covered Persons to manufacture, distribute, administer or use Covered Countermeasures across the nation and the world. Thus, there are substantial federal legal and policy issues, and substantial federal legal and policy interests within the meaning of Grable &. Sons Metal Products, Inc. V.

Darue Eng'g. &. Mf'g., 545 U.S. 308 (2005), in having a uniform interpretation of the PREP Act.

Under the PREP Act, the sole exception to the immunity from suit and liability of covered persons is an exclusive Federal cause of action against a Covered Person for death or serious physical injury proximately caused by willful misconduct by such Covered Person. In all other cases, an injured party's exclusive remedy is an administrative remedy under section 319F-4 of the PHS Act. Through the PREP Act, Congress delegated to me the authority to strike the appropriate Federal-state balance with respect to particular Covered Countermeasures through PREP Act declarations. Section XII.

Effective Time Period The Secretary amends Section XII to provide that liability protections for all Covered Countermeasures administered and used in accordance with the public health and medical response of the Authority Having Jurisdiction, as identified in Section VII(b) of this Declaration, begins with a “Declaration of Emergency,” as defined in Section VII (except that, with respect to qualified persons who order or administer a routine childhood vaccination that ACIP recommends to persons ages three through 18 according to ACIP's standard immunization schedule, PREP Act coverage began on August 24, 2020), and lasts through (a) the final day the Declaration of Emergency is in effect, or (b) October 1, 2024, whichever occurs first. This change is to conform the text of the Declaration to the Third Amendment.[] The Secretary also amends Section XII to provide that liability protections for all Covered Countermeasures identified in Section VII(c) of this Declaration begins on the date of this amended Declaration and lasts through (a) the final day the Declaration of Emergency is in effect, or (b) October 1, 2024, whichever occurs first. Because the Secretary is adding Section VII(c) to the Declaration in this Amendment, Section XII provides that Section VII(c) is effective as of the date this amended Declaration is published. Additional Amendments The Secretary also makes other, non-substantive amendments.

Declaration, as Amended, for Public Readiness and Emergency Preparedness Act Coverage for Medical Countermeasures Against buy antibiotics To the extent any term previously in the Declaration, including its amendments, is inconsistent with any provision of this Republished Declaration, the terms of this Republished Declaration are controlling. This Declaration must be construed in accordance with the Advisory Opinions Start Printed Page 79195of the Office of the General Counsel (Advisory Opinions). I incorporate those Advisory Opinions as part of this Declaration.[] This Declaration is a “requirement” under the PREP Act. I.

Determination of Public Health Emergency 42 U.S.C. 247d-6d(b)(1) I have determined that the spread of antibiotics or a flagyl mutating therefrom and the resulting disease buy antibiotics constitutes a public health emergency. I further determine that use of any respiratory protective device approved by NIOSH under 42 CFR part 84, or any successor regulations, is a priority for use during the public health emergency that I declared on January 31, 2020 under section 319 of the PHS Act for the entire United States to aid in the response of the nation's healthcare community to the buy antibiotics outbreak. II.

Factors Considered 42 U.S.C. 247d-6d(b)(6) I have considered the desirability of encouraging the design, development, clinical testing, or investigation, manufacture, labeling, distribution, formulation, packaging, marketing, promotion, sale, purchase, donation, dispensing, prescribing, administration, licensing, and use of the Covered Countermeasures. III. Recommended Activities 42 U.S.C.

247d-6d(b)(1) I recommend, under the conditions stated in this Declaration, the manufacture, testing, development, distribution, administration, and use of the Covered Countermeasures. IV. Liability Protections 42 U.S.C. 247d-6d(a), 247d-6d(b)(1) Liability protections as prescribed in the PREP Act and conditions stated in this Declaration are in effect for the Recommended Activities described in Section III.

V. Covered Persons 42 U.S.C. 247d-6d(i)(2), (3), (4), (6), (8)(A) and (B) Covered Persons who are afforded liability protections under this Declaration are “manufacturers,” “distributors,” “program planners,” and “qualified persons,” as those terms are defined in the PREP Act. Their officials, agents, and employees.

And the United States. In addition, I have determined that the following additional persons are qualified persons. (a) Any person authorized in accordance with the public health and medical emergency response of the Authority Having Jurisdiction, as described in Section VII below, to prescribe, administer, deliver, distribute or dispense the Covered Countermeasures, and their officials, agents, employees, contractors and volunteers, following a Declaration of Emergency, as that term is defined in Section VII of this Declaration; [] (b) any person authorized to prescribe, administer, or dispense the Covered Countermeasures or who is otherwise authorized to perform an activity under an Emergency Use Authorization in accordance with Section 564 of the FD&C Act. (c) any person authorized to prescribe, administer, or dispense Covered Countermeasures in accordance with Section 564A of the FD&C Act.

(d) a State-licensed pharmacist who orders and administers, and pharmacy interns who administer (if the pharmacy intern acts under the supervision of such pharmacist and the pharmacy intern is licensed or registered by his or her State board of pharmacy), [] (1) treatments that the Advisory Committee on Immunization Practices (ACIP) recommends to persons ages three through 18 according to ACIP's standard immunization schedule or (2) FDA-authorized or FDA-licensed buy antibiotics treatments to persons ages three or older. Such State-licensed pharmacists and the State-licensed or registered interns under their supervision are qualified persons only if the following requirements are met. I. The treatment must be authorized, approved, or licensed by the FDA.

Ii. In the case of a buy antibiotics treatment, the vaccination must be ordered and administered according to ACIP's buy antibiotics treatment recommendation(s). Iii. In the case of a childhood treatment, the vaccination must be ordered and administered according to ACIP's standard immunization schedule.

Iv. The licensed pharmacist must have completed the immunization training that the licensing State requires in order for pharmacists to order and administer treatments. If the State does not specify training requirements for the licensed pharmacist to order and administer treatments, the licensed pharmacist must complete a vaccination training program of at least 20 hours that is approved by the Accreditation Start Printed Page 79196Council for Pharmacy Education (ACPE) to order and administer treatments. Such a training program must include hands-on injection technique, clinical evaluation of indications and contraindications of treatments, and the recognition and treatment of emergency reactions to treatments.

V. The licensed or registered pharmacy intern must complete a practical training program that is approved by the ACPE. This training program must include hands-on injection technique, clinical evaluation of indications and contraindications of treatments, and the recognition and treatment of emergency reactions to treatments. Vi.

The licensed pharmacist and licensed or registered pharmacy intern must have a current certificate in basic cardiopulmonary resuscitation; [] vii. The licensed pharmacist must complete a minimum of two hours of ACPE-approved, immunization-related continuing pharmacy education during each State licensing period. Viii. The licensed pharmacist must comply with recordkeeping and reporting requirements of the jurisdiction in which he or she administers treatments, including informing the patient's primary-care provider when available, submitting the required immunization information to the State or local immunization information system (treatment registry), complying with requirements with respect to reporting adverse events, and complying with requirements whereby the person administering a treatment must review the treatment registry or other vaccination records prior to administering a treatment.

And ix. The licensed pharmacist must inform his or her childhood-vaccination patients and the adult caregiver accompanying the child of the importance of a well-child visit with a pediatrician or other licensed primary care provider and refer patients as appropriate. X. The licensed pharmacist and the licensed or registered pharmacy intern must comply with any applicable requirements (or conditions of use) as set forth in the Centers for Disease Control and Prevention (CDC) buy antibiotics vaccination provider agreement and any other federal requirements that apply to the administration of buy antibiotics treatment(s).

(e) Healthcare personnel using telehealth to order or administer Covered Countermeasures for patients in a state other than the state where the healthcare personnel are licensed or otherwise permitted to practice. When ordering and administering Covered Countermeasures by means of telehealth to patients in a state where the healthcare personnel are not already permitted to practice, the healthcare personnel must comply with all requirements for ordering and administering Covered Countermeasures to patients by means of telehealth in the state where the healthcare personnel are permitted to practice. Any state law that prohibits or effectively prohibits such a qualified person from ordering and administering Covered Countermeasures by means of telehealth is preempted.[] Nothing in this Declaration shall preempt state laws that permit additional persons to deliver telehealth services. Nothing in this Declaration shall be construed to affect the National treatment Injury Compensation Program, including an injured party's ability to obtain compensation under that program.

Covered Countermeasures that are subject to the National treatment Injury Compensation Program authorized under 42 U.S.C. 300aa-10 et seq. Are covered under this Declaration for the purposes of liability immunity and injury compensation only to the extent that injury compensation is not provided under that Program. All other terms and conditions of the Declaration apply to such Covered Countermeasures.

VI. Covered Countermeasures 42 U.S.C. 247d-6b(c)(1)(B), 42 U.S.C. 247d-6d(i)(1) and (7) Covered Countermeasures are.

(a) Any antiviral, any drug, any biologic, any diagnostic, any other device, any respiratory protective device, or any treatment manufactured, used, designed, developed, modified, licensed, or procured. I. To diagnose, mitigate, prevent, treat, or cure buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom. Or ii.

To limit the harm that buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom, might otherwise cause. (b) a product manufactured, used, designed, developed, modified, licensed, or procured to diagnose, mitigate, prevent, treat, or cure a serious or life-threatening disease or condition caused by a product described in paragraph (a) above. (c) a product or technology intended to enhance the use or effect of a product described in paragraph (a) or (b) above. Or (d) any device used in the administration of any such product, and all components and constituent materials of any such product.

To be a Covered Countermeasure under the Declaration, a product must also meet 42 U.S.C. 247d-6d(i)(1)'s definition of “Covered Countermeasure.” VII. Limitations on Distribution 42 U.S.C. 247d-6d(a)(5) and (b)(2)(E) I have determined that liability protections are afforded to Covered Persons only for Recommended Activities involving.

(a) Covered Countermeasures that are related to present or future federal contracts, cooperative agreements, grants, other transactions, interagency agreements, memoranda of understanding, or other federal agreements. (b) Covered Countermeasures that are related to activities authorized in accordance with the public health and medical response of the Authority Having Jurisdiction to prescribe, administer, deliver, distribute or dispense the Covered Countermeasures following a Declaration of Emergency. Or (c) Covered Countermeasures that are. I.

Licensed, approved, cleared, or authorized by the FDA (or that are permitted to be used under an Investigational New Drug Application or an Investigational Device Exemption) under the FD&C Act or PHS Act to treat, diagnose, cure, prevent, mitigate, or limit the harm from buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom. OrStart Printed Page 79197 ii. A respiratory protective device approved by NIOSH under 42 CFR part 84, or any successor regulations, that the Secretary determines to be a priority for use during a public health emergency declared under section 319 of the PHS Act to prevent, mitigate, or limit the harm from buy antibiotics, or the transmission of antibiotics or a flagyl mutating therefrom. To qualify for this third distribution channel, a Covered Person must manufacture, test, develop, distribute, administer, or use the Covered Countermeasure pursuant to the FDA licensure, approval, clearance, or authorization (or pursuant to an Investigational New Drug Application or Investigational Device Exemption), or the NIOSH approval.

As used in this Declaration, the terms “Authority Having Jurisdiction” and “Declaration of Emergency” have the following meanings. (a) The Authority Having Jurisdiction means the public agency or its delegate that has legal responsibility and authority for responding to an incident, based on political or geographical (e.g., city, county, tribal, state, or federal boundary lines) or functional (e.g., law enforcement, public health) range or sphere of authority. (b) A Declaration of Emergency means any declaration by any authorized local, regional, state, or federal official of an emergency specific to events that indicate an immediate need to administer and use the Covered Countermeasures, with the exception of a federal declaration in support of an Emergency Use Authorization under Section 564 of the FD&C Act unless such declaration specifies otherwise. I have also determined that, for governmental program planners only, liability protections are afforded only to the extent such program planners obtain Covered Countermeasures through voluntary means, such as (a) donation.

(b) commercial sale. (c) deployment of Covered Countermeasures from federal stockpiles. Or (d) deployment of donated, purchased, or otherwise voluntarily obtained Covered Countermeasures from state, local, or private stockpiles. VIII.

Category of Disease, Health Condition, or Threat 42 U.S.C. 247d-6d(b)(2)(A) The category of disease, health condition, or threat for which I recommend the administration or use of the Covered Countermeasures is not only buy antibiotics caused by antibiotics, or a flagyl mutating therefrom, but also other diseases, health conditions, or threats that may have been caused by buy antibiotics, antibiotics, or a flagyl mutating therefrom, including the decrease in the rate of childhood immunizations, which will lead to an increase in the rate of infectious diseases. IX. Administration of Covered Countermeasures 42 U.S.C.

247d-6d(a)(2)(B) Administration of the Covered Countermeasure means physical provision of the countermeasures to recipients, or activities and decisions directly relating to public and private delivery, distribution and dispensing of the countermeasures to recipients, management and operation of countermeasure programs, or management and operation of locations for the purpose of distributing and dispensing countermeasures. Where there are limited Covered Countermeasures, not administering a Covered Countermeasure to one individual in order to administer it to another individual can constitute “relating to. . .

The administration to. . . An individual” under 42 U.S.C.

247d-6d. For example, consider a situation where there is only one dose [] of a buy antibiotics treatment, and a person in a vulnerable population and a person in a less vulnerable population both request it from a healthcare professional. In that situation, the healthcare professional administers the one dose to the person who is more vulnerable to buy antibiotics. In that circumstance, the failure to administer the buy antibiotics treatment to the person in a less-vulnerable population “relat[es] to.

. . The administration to” the person in a vulnerable population. The person in the vulnerable population was able to receive the treatment only because it was not administered to the person in the less-vulnerable population.

Prioritization or purposeful allocation of a Covered Countermeasure, particularly if done in accordance with a public health authority's directive, can fall within the PREP Act and this Declaration's liability protections. X. Population 42 U.S.C. 247d-6d(a)(4), 247d-6d(b)(2)(C) The populations of individuals to whom the liability protections of this Declaration extend include any individual who uses or is administered the Covered Countermeasures in accordance with this Declaration.

Liability protections are afforded to manufacturers and distributors without regard to whether the countermeasure is used by or administered to this population. Liability protections are afforded to program planners and qualified persons when the countermeasure is used by or administered to this population, or the program planner or qualified person reasonably could have believed the recipient was in this population. XI. Geographic Area 42 U.S.C.

247d-6d(a)(4), 247d-6d(b)(2)(D) Liability protections are afforded for the administration or use of a Covered Countermeasure without geographic limitation. Liability protections are afforded to manufacturers and distributors without regard to whether the Covered Countermeasure is used by or administered in any designated geographic area. Liability protections are afforded to program planners and qualified persons when the countermeasure is used by or administered in any designated geographic area, or the program planner or qualified person reasonably could have believed the recipient was in that geographic area. buy antibiotics is a global challenge that requires a whole-of-nation response.

There are substantial federal legal and policy issues, and substantial federal legal and policy interests within the meaning of Grable &. Sons Metal Products, Inc. V. Darue Eng'g.

&. Mf'g., 545 U.S. 308 (2005), in having a unified, whole-of-nation response to the buy antibiotics flagyl among federal, state, local, and private-sector entities. The world is facing an unprecedented flagyl.

To effectively respond, there must be a more consistent pathway for Covered Persons to manufacture, distribute, administer or use Covered Countermeasures across the nation and the world. Thus, there are substantial federal legal and policy issues, and substantial federal legal and policy interests within the meaning of Grable &. Sons Metal Products, Inc. V.

Darue Eng'g. &. Mf'g., 545 U.S. 308 (2005), in having a uniform interpretation of the PREP Act.

Under the PREP Act, the sole exception to the immunity from suit and liability of covered persons under the PREP Act is an exclusive Federal cause of action against a covered person for death or serious physical injury proximately caused by willful misconduct by such covered person. In all other cases, an injured party's exclusive remedy is an administrative Start Printed Page 79198remedy under section 319F-4 of the PHS Act. Through the PREP Act, Congress delegated to me the authority to strike the appropriate Federal-state balance with respect to particular Covered Countermeasures through PREP Act declarations.[] XII. Effective Time Period 42 U.S.C.

247d-6d(b)(2)(B) Liability protections for any respiratory protective device approved by NIOSH under 42 CFR part 84, or any successor regulations, through the means of distribution identified in Section VII(a) of this Declaration, begin on March 27, 2020 and extend through October 1, 2024. Liability protections for all other Covered Countermeasures identified in Section VI of this Declaration, through means of distribution identified in Section VII(a) of this Declaration, begin on February 4, 2020 and extend through October 1, 2024. Liability protections for all Covered Countermeasures administered and used in accordance with the public health and medical response of the Authority Having Jurisdiction, as identified in Section VII(b) of this Declaration, begin with a Declaration of Emergency as that term is defined in Section VII (except that, with respect to qualified persons who order or administer a routine childhood vaccination that ACIP recommends to persons ages three through 18 according to ACIP's standard immunization schedule, liability protections began on August 24, 2020), and last through (a) the final day the Declaration of Emergency is in effect, or (b) October 1, 2024, whichever occurs first. Liability protections for all Covered Countermeasures identified in Section VII(c) of this Declaration begin on the date of this amended Declaration and last through (a) the final day the Declaration of Emergency is in effect, or (b) October 1, 2024, whichever occurs first.

XIII. Additional Time Period of Coverage 42 U.S.C. 247d-6d(b)(3)(B) and (C) I have determined that an additional 12 months of liability protection is reasonable to allow for the manufacturer(s) to arrange for disposition of the Covered Countermeasure, including return of the Covered Countermeasures to the manufacturer, and for Covered Persons to take such other actions as are appropriate to limit the administration or use of the Covered Countermeasures. Covered Countermeasures obtained for the SNS during the effective period of this Declaration are covered through the date of administration or use pursuant to a distribution or release from the SNS.

XIV. Countermeasures Injury Compensation Program 42 U.S.C 247d-6e The PREP Act authorizes the Countermeasures Injury Compensation Program (CICP) to provide benefits to certain individuals or estates of individuals who sustain a covered serious physical injury as the direct result of the administration or use of the Covered Countermeasures, and benefits to certain survivors of individuals who die as a direct result of the administration or use of the Covered Countermeasures. The causal connection between the countermeasure and the serious physical injury must be supported by compelling, reliable, valid, medical and scientific evidence in order for the individual to be considered for compensation. The CICP is administered by the Health Resources and Services Administration, within the Department of Health and Human Services.

Information about the CICP is available at the toll-free number 1-855-266-2427 or http://www.hrsa.gov/​cicp/​. XV. Amendments 42 U.S.C. 247d-6d(b)(4) Amendments to this Declaration will be published in the Federal Register, as warranted.

Start Authority 42 U.S.C. 247d-6d. End Authority Start Signature Dated. December 3, 2020.

Alex M. Azar II, Secretary of Health and Human Services. End Signature End Supplemental Information [FR Doc. 2020-26977 Filed 12-8-20.

8:45 am]BILLING CODE 4150-37-PStart Preamble Start Printed Page 77492 Centers for Medicare &. Medicaid Services (CMS), HHS. Final rule. This final rule addresses any undue regulatory impact and burden of the physician self-referral law.

This final rule is being issued in conjunction with the Centers for Medicare &. Medicaid Services' (CMS) Patients over Paperwork initiative and the Department of Health and Human Services' (the Department or HHS) Regulatory Sprint to Coordinated Care. This final rule establishes exceptions to the physician self-referral law for certain value-based compensation arrangements between or among physicians, providers, and suppliers. It also establishes a new exception for certain arrangements under which a physician receives limited remuneration for items or services actually provided by the physician.

Establishes a new exception for donations of cybersecurity technology and related services. And amends the existing exception for electronic health records (EHR) items and services. This final rule also provides critically necessary guidance for physicians and health care providers and suppliers whose financial relationships are governed by the physician self-referral statute and regulations. These regulations are effective on January 19, 2021, except for amendment number 3, which further amends section 411.352(i), which is effective January 1, 2022.

Start Further Info Lisa O. Wilson, (410) 786-8852. Matthew Edgar, (410) 786-0698. Catherine Martin, (410) 786-8382.

End Further Info End Preamble Start Supplemental Information I. Background A. Statutory and Regulatory History Section 1877 of the Social Security Act (the Act), also known as the physician self-referral law. (1) Prohibits a physician from making referrals for certain designated health services payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship, unless an exception applies.

And (2) prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third party payor) for those referred services. A financial relationship is an ownership or investment interest in the entity or a compensation arrangement with the entity. The statute establishes a number of specific exceptions and grants the Secretary of the Department of Health and Human Services (the Secretary) the authority to create regulatory exceptions for financial relationships that do not pose a risk of program or patient abuse. Section 1903(s) of the Act extends aspects of the physician self-referral prohibitions to Medicaid.

For additional information about section 1903(s) of the Act, see 66 FR 857 through 858. This rulemaking follows a history of rulemakings related to the physician self-referral law. The following discussion provides a chronology of our more significant and comprehensive rulemakings. It is not an exhaustive list of all rulemakings related to the physician self-referral law.

After the passage of section 1877 of the Act, we proposed rulemakings in 1992 (related only to referrals for clinical laboratory services) (57 FR 8588) (the 1992 proposed rule) and 1998 (addressing referrals for all designated health services) (63 FR 1659) (the 1998 proposed rule). We finalized the proposals from the 1992 proposed rule in 1995 (60 FR 41914) (the 1995 final rule), and issued final rules following the 1998 proposed rule in three stages. The first final rulemaking (Phase I) was published in the Federal Register on January 4, 2001 as a final rule with comment period (66 FR 856). The second final rulemaking (Phase II) was published in the Federal Register on March 26, 2004 as an interim final rule with comment period (69 FR 16054).

Due to a printing error, a portion of the Phase II preamble was omitted from the March 26, 2004 Federal Register publication. That portion of the preamble, which addressed reporting requirements and sanctions, was published on April 6, 2004 (69 FR 17933). The third final rulemaking (Phase III) was published in the Federal Register on September 5, 2007 as a final rule (72 FR 51012). In addition to Phase I, Phase II, and Phase III, we issued final regulations on August 19, 2008 in the Fiscal Year (FY) 2009 Inpatient Prospective Payment System final rule with comment period (73 FR 48434) (the FY 2009 IPPS final rule).

That rulemaking made various revisions to the physician self-referral regulations, including. (1) Revisions to the “stand in the shoes” provisions. (2) establishment of provisions regarding the period of disallowance and temporary noncompliance with signature requirements. (3) prohibitions on per unit of service (“per-click”) and percentage-based compensation formulas for determining the rental charges for office space and equipment lease arrangements.

And (4) expansion of the definition of “entity.” After passage of the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148) (Affordable Care Act), we issued final regulations on November 29, 2010 in the Calendar Year (CY) 2011 Physician Fee Schedule (PFS) final rule with comment period that codified a disclosure requirement established by the Affordable Care Act for the in-office ancillary services exception (75 FR 73443). We also issued final regulations on November 24, 2010 in the CY 2011 Outpatient Prospective Payment System (OPPS) final rule with comment period (75 FR 71800), on November 30, 2011 in the CY 2012 OPPS final rule with comment period (76 FR 74122), and on November 10, 2014 in the CY 2015 OPPS final rule with comment period (79 FR 66987) that established or revised certain regulatory provisions concerning physician-owned hospitals to codify and interpret the Affordable Care Act's revisions to section 1877 of the Act.

On November 16, 2015, in the CY 2016 PFS final rule, we issued regulations to reduce burden and facilitate compliance (80 FR 71300 through 71341). In that rulemaking, we established two new exceptions, clarified certain provisions of the physician self-referral regulations, updated regulations to reflect changes in terminology, and revised definitions related to physician-owned hospitals. On November 15, 2016, we included in the CY 2017 PFS final rule, at § 411.357(a)(5)(ii)(B), (b)(4)(ii)(B), (l)(3)(ii), and (p)(1)(ii)(B), requirements identical to regulations that have been in effect since October 1, 2009 that the rental charges for the lease of office space or equipment are not determined using a formula based on per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee (81 FR 80533 through 80534). On November 23, 2018, in our most recent substantive update, the CY 2019 PFS final rule (83 FR 59715 through 59717), we incorporated into our regulations provisions at sections 1877(h)(1)(D) and (E) of the Act that were added by section 50404 of the Bipartisan Budget Act of 2018 (Pub.

L. Start Printed Page 77493115-123). Specifically, we codified in regulations our longstanding policy that the writing requirement in various compensation arrangement exceptions in § 411.357 may be satisfied by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties. We also amended the special rule for temporary noncompliance with signature requirements at § 411.353(g), removing the limitation on the use of the rule to once every 3 years with respect to the same physician and making other changes to conform the regulatory provision to section 1877(h)(1)(E) of the Act.

B. Health Care Delivery and Payment Reform. Transition to Value-Based Care 1. The Regulatory Sprint to Coordinated Care The Department identified the broad reach of the physician self-referral law, as well as the Federal anti-kickback statute and beneficiary inducements civil monetary penalty (CMP) law, sections 1128B(b) and 1128A(a)(5) of the Act, respectively, as potentially inhibiting beneficial arrangements that would advance the transition to value-based care and the coordination of care among providers in both the Federal and commercial sectors.

Industry stakeholders informed us that, because the consequences of noncompliance with the physician self-referral law (and the anti-kickback statute) are so dire, providers, suppliers, and physicians may be discouraged from entering into innovative arrangements that would improve quality outcomes, produce health system efficiencies, and lower costs (or slow their rate of growth). To address these concerns, and to help accelerate the transformation of the health care system into one that better pays for value and promotes care coordination, HHS launched a Regulatory Sprint to Coordinated Care (the Regulatory Sprint), led by the Deputy Secretary of HHS. This Regulatory Sprint aims to remove potential regulatory barriers to care coordination and value-based care created by four key Federal health care laws and associated regulations. (1) The physician self-referral law.

(2) the anti-kickback statute. (3) the Health Insurance Portability and Accountability Act of 1996 (Pub. L. 104-191) (HIPAA).

And (4) the rules under 42 CFR part 2 related to opioid and substance use disorder treatment. Through the Regulatory Sprint, HHS aims to encourage and improve— A patient's ability to understand treatment plans and make empowered decisions. Providers' alignment on an end-to-end treatment approach (that is, coordination among providers along the patient's full care journey). Incentives for providers to coordinate, collaborate, and provide patients with tools to be more involved.

And Information-sharing among providers, facilities, and other stakeholders in a manner that facilitates efficient care while preserving and protecting patient access to data. The Department believes that the realization of these goals would meaningfully improve the quality of care received by all American patients. As part of the Regulatory Sprint, CMS, the HHS Office of Inspector General (OIG), and the HHS Office for Civil Rights (OCR) each issued requests for information to solicit comments that may help to inform the Department's approach to achieving the goals of the Regulatory Sprint (83 FR 29524, 83 FR 43607, and 83 FR 64302, respectively). We discuss our request for information in this section of this final rule.

2. Policy Considerations and Other Information Relevant to the Development of This Final Rule a. Medicare Payment Was Volume-Based When the Physician Self-Referral Statute Was Enacted When the physician self-referral statute was enacted in 1989, under traditional fee-for-service (FFS) Medicare (that is, Parts A and B), the vast majority of covered services were paid based on volume. Although some services were “bundled” into a single payment, such as inpatient hospital services that were paid on the basis of the diagnosis-related group (DRG) that corresponded to the patient's diagnosis and the services provided (known as the Hospital Inpatient Prospective Payment System, or IPPS), in general, Medicare made a payment each time a provider or supplier furnished a service to a beneficiary.

Thus, the more services a provider or supplier furnished, the more Medicare payments it would receive. Importantly, these bundled payments typically covered services furnished by a single provider or supplier, directly or by contract. Payments were not bundled across multiple providers, with each billing independently. This volume-based reimbursement system continues to apply under traditional Medicare to both services paid under a prospective payment system (PPS) and services paid under a retrospective FFS system.

As described in this final rule, the physician self-referral statute was enacted to address concerns that arose in Medicare's volume-based reimbursement system where the more designated health services that a physician ordered, the more payments Medicare would make to the entity that furnished the designated health services. If the referring physician had an ownership or investment interest in the entity furnishing the designated health services, he or she could increase the entity's revenue by referring patients for more or higher value services, potentially increasing the profit distributions tied to the physician's ownership interest. Similarly, a physician who had a service or other compensation arrangement with an entity might increase his or her aggregate compensation if he or she made referrals that resulted in more Medicare payments to the entity. The physician self-referral statute was enacted to combat the potential that financial self-interest would affect a physician's medical decision making and ensure that patients have options for quality care.

The law's prohibitions were intended to prevent a patient from being referred for services that are not needed or steered to less convenient, lower quality, or more expensive health care providers because the patient's physician may improve his or her financial standing through those referrals. This statutory structure was designed for and made sense in Medicare's then-largely volume-based reimbursement system. B. The Medicare Shared Savings Program, the Center for Medicare and Medicaid Innovation, and Medicare's Transition to Value-Based Payment Since the enactment of the physician self-referral statute in 1989, significant changes in the delivery of health care services and the payment for such services have occurred, both within the Medicare and Medicaid programs and for non-Federal payors and patients.

For some time, CMS has engaged in efforts to align payment under the Medicare program with the quality of the care provided to our beneficiaries. Laws such as the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173) (MMA), the Deficit Reduction Act of 2005 (Pub.

L. 109-171) (DRA), and the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275) (MIPPA) guided our early efforts to move toward health care delivery and payment reform.

More recently, the Affordable Care Act required significant changes to the Medicare program's Start Printed Page 77494payment systems and provides the Secretary with broad authority to test innovative payment and service delivery models. Section 3022 of the Affordable Care Act established the Medicare Shared Savings Program (Shared Savings Program). The Congress created the Shared Savings Program to promote accountability for a patient population and coordinate items and services under Medicare Parts A and B and encourage investment in infrastructure and redesigned care processes for high-quality and efficient service delivery. In essence, the Shared Savings Program facilitates coordination among providers to improve the quality of care for Medicare FFS beneficiaries and reduce unnecessary costs.

Physicians, hospitals, and other eligible providers and suppliers may participate in the Shared Savings Program by creating or participating in an accountable care organization (ACO) that agrees to be held accountable for the quality, cost, and experience of care of an assigned Medicare FFS beneficiary population. ACOs that successfully meet quality and savings requirements share a percentage of the achieved savings with Medicare. Since enactment, we have issued numerous regulations to implement and update the Shared Savings Program. For example, in keeping with the Secretary's vision for achieving value-based transformation by pioneering new payment models, in 2018, we finalized changes to the Shared Savings Program that are intended to put the program on a path toward achieving a more measurable move to value, demonstrate savings to the Medicare program, and promote a competitive and accountable marketplace (83 FR 67816).

Specifically, we finalized a significant redesign of the participation options available under the Shared Savings Program to encourage ACOs to transition to two-sided risk models (in which they may share in savings and are accountable for repaying shared losses), increase savings and mitigate losses for the Medicare Trust Funds, and increase program integrity.[] Section 1115A of the Act, as added by section 3021 of the Affordable Care Act, established the Center for Medicare and Medicaid Innovation (the Innovation Center) within CMS. The purpose of the Innovation Center is to test innovative payment and service delivery models to reduce expenditures for the care furnished to patients in the Medicare and Medicaid programs and the Children's Health Insurance Program (CHIP) while preserving or enhancing the quality of that care. Using its authority in section 1115A of the Act, the Innovation Center has tested numerous health care delivery and payment models in which providers, suppliers, and individual practitioners participate. Most Innovation Center models generally fall into three categories.

Accountable care models, episode-based payment models, and primary care transformation models. The Innovation Center also tests initiatives targeted to the Medicaid and CHIP population and to Medicare-Medicaid (dual eligible) enrollees, and is focused on other initiatives to accelerate the development and testing of new payment and service delivery models, as well as to speed the adoption of best practices.[] The Congress also granted the Secretary broad authority to waive provisions of section 1877 of the Act and certain other Federal fraud and abuse laws when he determines it is necessary to implement the Shared Savings Program (see section 1899(f) of the Act) or test models under the Innovation Center's authority (see section 1115A(d)(1) of the Act).[] c. Commercial Payor and Provider-Driven Activity Although payments made directly from a payor to a physician generally do not implicate the physician self-referral law unless the payor is itself an entity that furnishes designated health services, remuneration between physicians and other health care providers that provide care to a payor's enrolled patients (or subscribers) likely does implicate the physician self-referral law. Commercial payors and health care providers have implemented and continue to develop numerous innovative health care payment and care delivery models that do not include or specifically relate to CMS.

Even though the physicians and health care providers that participate in these initiatives do not necessarily provide designated health services payable by Medicare as part of the initiatives, financial relationships between them may nonetheless implicate the physician self-referral law, which, in turn, may restrict referrals of Medicare patients. D. Request for Information Regarding the Physician Self-Referral Law (CMS-1720-NC) The Secretary identified four priorities for HHS, the first of which is transforming our health care system into one that pays for value. Dramatically different from the system that existed when the physician self-referral statute was enacted, a value-driven health care system pays for outcomes rather than procedures.

We believe that a successful value-based system requires integration and coordination among physicians and other health care providers and suppliers. The Secretary laid out four areas of emphasis for building a system that delivers value. (1) Maximizing the promise of health information technology (IT). (2) improving transparency in price and quality.

(3) pioneering bold new models in Medicare and Medicaid. And (4) removing government burdens that impede care coordination. (See https://www.hhs.gov/​about/​leadership/​secretary/​priorities/​index.html#value-based-healthcare.) This final rule focuses primarily on the final two areas of emphasis for value-based transformation—pioneering new models in Medicare and Medicaid and removing regulatory barriers that impede care coordination. As the Secretary and the Administrator of CMS (the Administrator) have acknowledged, there are burdens associated with the physician self-referral regulations that may be inhibiting health care professionals and organizations, especially with respect to care coordination.

In 2017, through the annual payment rules, CMS requested comments on improvements that could be made to the health care delivery system to reduce unnecessary burdens for clinicians, other providers, and patients and their families. In response, commenters shared information regarding the barriers to participation in health care delivery and payment reform efforts, both public and private, as well as the burdens of compliance with the physician self-referral statute and regulations. As a result of our review of these comments, and with a goal of reducing regulatory burden and dismantling barriers to value-based care transformation while also protecting the integrity of the Medicare program, on June 25, 2018, we published in the Federal Register a Request for Information Regarding the Physician Self-Referral Law (the CMS RFI) seeking recommendations and input from the Start Printed Page 77495public on how to address any undue impact and burden of the physician self-referral statute and regulations (83 FR 29524). Comments on the CMS RFI fell within five general themes.

First, commenters requested new exceptions to the physician self-referral law to protect a variety of compensation arrangements between and among parties in CMS-sponsored alternative payment models and also those models that are sponsored by other payors, including Federal payors. Commenters also requested protection for care coordination arrangements, including arrangements where entities and physicians share resources to facilitate the care of their common patients. Generally, commenters recognized the need for appropriate safeguards in exceptions for arrangements among parties that participate in alternative payment models. Second, commenters requested a new exception to permit entities to donate cybersecurity technology and services to physicians.

Third, commenters provided helpful feedback on terminology and concepts critical to the physician self-referral law, such as commercial reasonableness, fair market value, and compensation that “takes into account” the volume or value of referrals and is “set in advance.” Fourth, some commenters expressed concerns that new exceptions or easing current restrictions could exacerbate overutilization and other harms. For example, some commenters indicated that financial gain should never be permitted to influence medical decision making, and some expressed concern that value-based payment systems drive industry consolidation and reduce competition. Finally, a few commenters provided feedback on issues that were not specifically discussed in the CMS RFI, such as requests to eliminate or keep the statutory restrictions for physician-owned hospitals and requests to eliminate, expand, or limit the scope and availability of the in-office ancillary services exception. Commenters on the CMS RFI provided valuable information used to develop the proposals that we are finalizing in this final rule.

E. Notice of Proposed Rulemaking In the October 17, 2019 Federal Register, we published a proposed rule (84 FR 55766) (the proposed rule) in which we proposed a comprehensive package of reforms to modernize and clarify the regulations that interpret the physician self-referral law. These proposed policies were developed in support of the CMS Patients over Paperwork initiative, the Regulatory Sprint, and based on our experience in administering the physician self-referral law, including the CMS Voluntary Self-Referral Disclosure Protocol (SRDP). The CMS Patients over Paperwork initiative emphasizes a commitment to removing regulatory obstacles to providers spending time with patients.

Reducing unnecessary burden generally is a shared goal of the Patients over Paperwork initiative and the Regulatory Sprint. The Regulatory Sprint is focused specifically on identifying regulatory requirements or prohibitions that may act as barriers to coordinated care, assessing whether those regulatory provisions are unnecessary obstacles to coordinated care, and issuing guidance or revising regulations to address such obstacles and, as appropriate, encouraging and incentivizing coordinated care. To facilitate the transition of our health care system to one that is based on value rather than volume, we proposed new exceptions to the physician self-referral law for value-based arrangements, along with integrally-related definitions for value-based enterprises, activities, arrangements, and purposes, the providers and suppliers that participate in a value-based enterprise, and the target patient population for whom the parties' efforts are undertaken. We also proposed new and revised policies that balance program integrity concerns against the burden of the physician self-referral law's referral and billing prohibitions by.

Providing guidance for physicians and health care providers and suppliers whose financial relationships are governed by the physician self-referral statute and regulations. Reassessing the scope of the statute's reach. And establishing new exceptions for common nonabusive compensation arrangements between physicians and the entities to which they refer Medicare beneficiaries for designated health services. As part of the Regulatory Sprint and also in the October 17, 2019 Federal Register, OIG published a proposed rule under the anti-kickback statute and CMP law to address concerns regarding provisions in those statutes that may act as barriers to coordinated care (84 FR 55694).

Because many of the compensation arrangements between parties that participate in alternative payment models and other novel financial arrangements implicate both the physician self-referral law and the anti-kickback statute, we coordinated closely with OIG in developing certain provisions of our proposals. Our aim was to promote alignment across our agencies, where appropriate, to ease the compliance burden on the regulated industry. In some cases, our proposals were different in application or potentially more restrictive than OIG's comparable proposals, in recognition of the differences in statutory structures, authorities, and penalties. In other cases, OIG's proposals were more restrictive.

In the proposed rule, we stated that, for some arrangements, it may be appropriate for the anti-kickback statute, which is an intent-based criminal law, to serve as “backstop” protection for arrangements that might be protected by an exception to the strict liability physician self-referral law (84 FR 55772). C. Application and Scope of the Physician Self-Referral Law As we emphasized in the proposed rule, our intent in interpreting and implementing section 1877 of the Act has always been “to interpret the [referral and billing] prohibitions narrowly and the exceptions broadly, to the extent consistent with statutory language and intent,” and we have not vacillated from this position (84 FR 55771. See also, 66 FR 860).

Our 1998 proposed rule was informed by our review of the legislative history of section 1877 of the Act, consultation with our law enforcement partners about their experience implementing and enforcing the Federal fraud and abuse laws, and empirical studies of physicians' referral patterns and practices, which concluded that a physician's financial relationship with an entity can affect a physician's medical decision making and lead to overutilization. At the time of our earliest rulemakings, we did not have as much experience in administering the physician self-referral law or working with our law enforcement partners on investigations and actions involving violations of the physician self-referral law. Thus, despite our stated intention to interpret the law's prohibitions narrowly and the exceptions broadly, we proceeded with great caution when designing exceptions. Over the past decade, we have vastly expanded our knowledge of the aspects of financial relationships that result in Medicare program or patient abuse.

Our administration of the SRDP, which has received over 1,200 submissions since its inception in 2010, has provided us insight into thousands of financial relationships—most of which were compensation arrangements—that ran afoul of the physician self-referral law but posed little risk of Medicare program or patient abuse. We made revisions to our regulations and shared policy clarifications in the CY 2016 and Start Printed Page 774962019 PFS rulemakings to address many issues related to the documentation requirements in the statutory and regulatory exceptions to the physician self-referral law, but had not, until now, addressed other requirements in the regulatory exceptions that stakeholders identified as adding unnecessary complexity without increasing safeguards for program integrity. As described in more detail in section II of this final rule, we are eliminating certain requirements in our regulatory exceptions that may be unnecessary and revising existing exceptions. We are also establishing new exceptions for nonabusive arrangements for which there is currently no applicable exception to the physician self-referral law's referral and billing prohibitions.

D. Purpose of the Final Rule This final rule modernizes and clarifies the regulations that interpret the Medicare physician self-referral law. Following an extensive review of policies that originated in the context of a health care delivery and payment system that operates based on the volume of services, and to support the innovation necessary for a health care delivery and payment system that pays for value, we are establishing new, permanent exceptions to the physician self-referral law for value-based arrangements and definitions for terminology integral to such a system. This final rule also includes clarifying provisions and guidance intended to reduce unnecessary regulatory burden on physicians and other health care providers and suppliers, while reinforcing the physician self-referral law's goal of protecting against program and patient abuse.

Finally, we are establishing new exceptions for nonabusive arrangements for which there is currently no applicable exception to the physician self-referral law's referral and billing prohibitions. II. Provisions of the Final Rule A. Facilitating the Transition to Value-Based Care and Fostering Care Coordination 1.

Background Transforming our health care system into one that pays for value is one of the Secretary's priorities. As we stated in the proposed rule, there is broad consensus throughout the health care industry regarding the urgent need for a movement away from legacy systems that pay for care on a FFS basis (84 FR 55772). Identifying and addressing regulatory barriers to value-based care transformation is a critical step in this movement. We are aware of the effect the physician self-referral law may have on parties participating or considering participation in integrated care delivery models, alternative payment models, and arrangements to incent improvements in outcomes and reductions in cost, and we share the optimism of commenters on the CMS RFI and the proposed rule that the changes to the physician self-referral regulations will allow greater innovation and enable HHS to realize its goal of transforming the health care system into one that pays for value.

The health care landscape when the physician self-referral law was enacted bears little resemblance to the landscape of today. As many commenters on the CMS RFI and the proposed rule highlighted, the physician self-referral law was enacted at a time when the goals of the various components of the health care system were often in conflict, with each component competing for a bigger share of the health care dollar without regard to the inefficiencies that resulted for the system as a whole—in other words, a volume-based system. According to these commenters, the current physician self-referral regulations—intended to combat overutilization in a volume-based system—are outmoded because, by their nature, integrated care models protect against overutilization by aligning clinical and economic performance as the benchmarks for value. And, in general, the greater the economic risk that providers assume, the greater the economic disincentive to overutilize services.

According to some of these commenters, the current prohibitions are even antithetical to the stated goals of policy makers, both in the Congress and within HHS, for health care delivery and payment reform. We agree in concept and, as described below in this section II.A. Of this final rule, we are finalizing an interwoven set of definitions and exceptions that depart from the historic exceptions to the physician self-referral law in order to facilitate the transition to a value-based health care delivery and payment system. We intend for the policies finalized in this final rule to facilitate an evolving health care delivery system, and endeavored to design policies that will stand the test of time.

We believe that our final policies achieve the right balance between ensuring program integrity, making compliance with the physician self-referral law readily achievable, and providing the flexibility required by participants in value-based health care delivery and payment systems. As we did with respect to the proposed rule, we coordinated closely with OIG in developing our final exceptions, definitions, and related policies. However, for the reasons described in this final rule, the final definitions and exceptions that pertain to the physician self-referral law differ in some respects from the final definitions and safe harbors that pertain to the anti-kickback statute. Compensation arrangements may implicate both statutes and, therefore, should be analyzed for compliance with each statute.

2. Definitions and Exceptions In § 411.357(aa), we are finalizing new exceptions to the physician self-referral law for compensation arrangements that satisfy specified requirements based on the characteristics of the arrangement and the level of financial risk undertaken by the parties to the arrangement or the value-based enterprise of which they are participants. The exceptions apply regardless of whether the arrangement relates to care furnished to Medicare beneficiaries, non-Medicare patients, or a combination of both. Although revisions to the physician self-referral regulations are crucial to facilitating the transition to a value-based health care delivery and payment system, nothing in our final policies is intended to suggest that many value-based arrangements, such as pay-for-performance arrangements or certain risk-sharing arrangements, do not satisfy the requirements of existing exceptions to the physician self-referral law.

For purposes of applying the exceptions, we are finalizing new definitions at § 411.351 for the following terms. Value-based activity. Value-based arrangement. Value-based enterprise.

Value-based purpose. VBE participant. And target patient population. The definitions are essential to the application of the exceptions, which apply only to compensation arrangements that qualify as value-based arrangements.

Thus, the exceptions may be accessed only by those parties that qualify as VBE participants in the same value-based enterprise. The definitions and exceptions together create the set of requirements for protection from the physician self-referral law's referral and billing prohibitions. Again, where possible and feasible, we have aligned with OIG's final policies to ease the compliance burden on the regulated industry. Specifically, with respect to the value-based terminology as defined in this final rule, we are aligned with the OIG in most respects, and points of difference are explained below.

To facilitate readers' review of our final policies, we first discuss the value-Start Printed Page 77497based definitions we are finalizing in this final rule. A. Definitions The final definitions and exceptions together create the set of requirements for protection from the physician self-referral law's referral and billing prohibitions. The “value-based” definitions are interconnected and, for the best understanding, should be read together.

In the proposed rule (84 FR 55773), we proposed the following terms and definitions for purposes of applying the new exceptions at § 411.357(aa). Value-based activity means any of the following activities, provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise. (1) The provision of an item or service. (2) the taking of an action.

Or (3) the refraining from taking an action. We also proposed that the making of a referral is not a value-based activity. Value-based arrangement means an arrangement for the provision of at least one value-based activity for a target patient population between or among. (1) The value-based enterprise and one or more of its VBE participants.

Or (2) VBE participants in the same value-based enterprise. Value-based enterprise means two or more VBE participants. (1) Collaborating to achieve at least one value-based purpose. (2) each of which is a party to a value-based arrangement with the other or at least one other VBE participant in the value-based enterprise.

(3) that have an accountable body or person responsible for financial and operational oversight of the value-based enterprise. And (4) that have a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s). Value-based purpose means. (1) Coordinating and managing the care of a target patient population.

(2) improving the quality of care for a target patient population. (3) appropriately reducing the costs to, or growth in expenditures of, payors without reducing the quality of care for a target patient population. Or (4) transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population. VBE participant means an individual or entity that engages in at least one value-based activity as part of a value-based enterprise.

Target patient population means an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that are set out in writing in advance of the commencement of the value-based arrangement and further the value-based enterprise's value-based purpose(s). We are finalizing the definitions as proposed, with the modifications described below in this section II.A.2.a. Of this final rule. The activities undertaken by the parties to a compensation arrangement are key to the arrangement qualifying as a “value-based arrangement” to which the exceptions at § 411.357(aa) apply.

We refer to these activities as value-based activities. In the proposed rule, we acknowledged that sometimes value-based activities are easily identifiable as the provision of items or services to a patient and, other times, identifying a specific activity responsible for an outcome in a value-based health care system can be difficult (84 FR 55773). We appreciate that remuneration paid in furtherance of the objectives of a value-based health care system does not always involve one-to-one payments for items or services provided by a party to an arrangement. For example, a shared savings payment distributed by an entity to a downstream physician who joined with other providers and suppliers to achieve the savings represents the physician's agreed upon share of such savings rather than a payment for specific items or services furnished by the physician to the entity (or on the entity's behalf).

And, when payments are made to encourage a physician to adhere to a redesigned care protocol, such payments are made, in part, in consideration of the physician refraining from following or altering his or her past patient care practices rather than for direct patient care items or services provided by the physician. Therefore, at final § 411.351, “value-based activity” is defined to mean the provision of an item or service, the taking of an action, or the refraining from taking an action, provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise of which the parties to the arrangement are participants. In the proposed rule, we stated that the act of referring patients for designated health services is itself not a value-based activity. In addition, as a general matter, referrals are not items or services for which a physician may be compensated under the physician self-referral law, and payments for referrals are antithetical to the purpose of the statute (84 FR 55773).

Because of this view, we proposed to expressly state in the definition of “value-based activity” that the making of a referral is not a value-based activity in order to make clear that the exceptions would not protect the direct payment for referrals. For the reasons discussed in response to comments below, we are not finalizing this part of our proposal. However, as discussed in section II.D.2.c. Of this final rule, we are revising the definition of “referral” at § 411.351 to affirm our policy that, as a general matter, referrals are not items or services for which a physician may be compensated under the physician self-referral law.

Our final definition of “value-based activity” requires that the activities must be reasonably designed to achieve at least one value-based purpose of the value-based enterprise. For example, if the value-based purpose of the enterprise is to coordinate and manage the care of patients who undergo lower extremity joint replacement procedures, a value-based arrangement might require routine post-discharge meetings between a hospital and the physician primarily responsible for the care of the patient following discharge from the hospital. The value-based activity—that is, the physician's participation in the post-discharge meetings—would be reasonably designed to achieve the enterprise's value-based purpose. In contrast, if the value-based purpose of the enterprise is to reduce the costs to or growth in expenditures of payors while improving or maintaining the quality of care for the target patient population, providing patient care services (the purported value-based activity) without monitoring their utilization would not appear to be reasonably designed to achieve that purpose.

The definition of “value-based arrangement” is key to our final policies aimed at facilitating the transition to value-based care and fostering care coordination, as the final exceptions apply only to arrangements that qualify as value-based arrangements. At final § 411.351, “value-based arrangement” is defined to mean an arrangement for the provision of at least one value-based activity for a target patient population to which the only parties are. (1) A value-based enterprise and one or more of its VBE participants. Or (2) VBE participants in the same value-based enterprise.

We have revised the language of our proposed definition by substituting “to which the only parties are” for “between or among” to make clear that all parties to the value-based arrangement must be VBE participants in the same value-based enterprise. For Start Printed Page 77498instance, a value-based arrangement between an imaging center and a physician would not be a value-based arrangement if the imaging center is not part of the same value-based enterprise as the physician. Effectively, the parties to a value-based arrangement must include an entity (as defined at § 411.351) and a physician. Otherwise, the physician self-referral law's prohibitions would not be implicated.

Also, because the exceptions at final § 411.357(aa) apply only to compensation arrangements (as defined at § 411.354(c)), the value-based arrangement must be a compensation arrangement and not another type of financial relationship to which the physician self-referral law applies. Patient care coordination and management are the foundation of a value-based health care delivery system. Reform of the delivery of health care through better care coordination—including more efficient transitions for patients moving between and across care settings and providers,[] reduction of orders for duplicative items and services, and open sharing of medical records and other important health data across care settings and among a patient's providers (consistent with privacy and security rules)—is integrally connected to reforming health care payment systems to shift from volume-driven to value-driven payment models. We expect that most value-based arrangements would involve activities that coordinate and manage the care of a target patient population, but did not propose to limit the universe of compensation arrangements that will qualify as value-based arrangements to those arrangements specifically for the coordination and management of patient care.

Rather, we sought comment on our approach and whether we should revise the definition of “value-based arrangement” to require care coordination and management in order to qualify as a value-based arrangement. As discussed in more detail later in this section, the final definition of “value-based arrangement” does not require care coordination and management in order to qualify as a value-based arrangement. Therefore, we are not including a corollary definition of “care coordination and management” in our final regulations. The final exceptions at § 411.357(aa) apply only to value-based arrangements, the only parties to which, as described previously, are a value-based enterprise and one or more of its VBE participants or VBE participants in the same value-based enterprise.

At final § 411.351, value-based enterprise is defined to mean two or more VBE participants. (1) Collaborating to achieve at least one value-based purpose. (2) each of which is a party to a value-based arrangement with the other or at least one other VBE participant in the value-based enterprise. (3) that have an accountable body or person responsible for the financial and operational oversight of the value-based enterprise.

And (4) that have a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s). A “value-based enterprise” includes only organized groups of health care providers, suppliers, and other components of the health care system collaborating to achieve the goals of a value-based health care delivery and payment system. As we stated in the proposed rule, an “enterprise” may be a distinct legal entity—such as an ACO—with a formal governing body, operating agreement or bylaws, and the ability to receive payment on behalf of its affiliated health care providers (84 FR 55774). An “enterprise” may also consist only of the two parties to a value-based arrangement with the written documentation recording the arrangement serving as the required governing document that describes the enterprise and how the parties intend to achieve its value-based purpose(s).

Whatever its size and structure, a value-based enterprise is essentially a network of participants (such as clinicians, providers, and suppliers) that have agreed to collaborate with regard to a target patient population to put the patient at the center of care through care coordination, increase efficiencies in the delivery of care, and improve outcomes for patients. The definition of “value-based enterprise” finalized at § 411.351 is focused on the functions of the enterprise, as it is not our intention to dictate or limit the appropriate legal structures for qualifying as a value-based enterprise. To qualify as a value-based enterprise, among other things, each participant in the enterprise, whom we refer to as a VBE participant, must be a party to at least one value-based arrangement with at least one other participant in the enterprise. If a value-based enterprise is comprised of only two VBE participants, they must have at least one value-based arrangement with each other in order for the enterprise to qualify as a value-based enterprise.

(Provided that a value-based enterprise exists, an arrangement between the enterprise and a physician who is a VBE participant in the value-based enterprise may qualify as a “value-based arrangement” for purposes of the exceptions at § 411.357(aa) if the value-based enterprise is itself an “entity” as defined at § 411.351.) In addition, a value-based enterprise must have an accountable body or person that is responsible for the financial and operational oversight of the enterprise. This may be the governing board, a committee of the governing board, or a corporate officer of the legal entity that is the value-based enterprise, or this may be the party to a value-based arrangement that is designated as being responsible for the financial and operational oversight of the arrangement between the parties (for example, if the “enterprise” consists of just the two parties). Finally, a value-based enterprise must have a governing document that describes the enterprise and how its VBE participants intend to achieve its value-based purpose(s). Implicit in this requirement is that the value-based enterprise must have at least one value-based purpose.

Also critical to qualifying as a value-based arrangement are the scope and objective of the arrangement. As noted previously, only an arrangement for activities that are reasonably designed to achieve at least one of the value-based enterprise's value-based purposes may qualify as a value-based arrangement to which the exceptions at § 411.357(aa) apply. At final § 411.351, value-based purpose is defined to mean. (1) Coordinating and managing the care of a target patient population.

(2) improving the quality of care for a target patient population. (3) appropriately reducing the costs to or growth in expenditures of payors without reducing the quality of care for a target patient population. Or (4) transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population. As we stated in the proposed rule, some of these goals are recognizable as part of the successor frameworks to the “triple aim” that are integral to CMS' value-based programs and our larger quality strategy to reform how health care is delivered and reimbursed (84 FR 55774).

Our definition of “value-based purpose” identifies four core goals related to a target patient population. One or more of these goals must anchor the activities underlying every compensation arrangement that qualifies as a value-Start Printed Page 77499based arrangement to which the exceptions at final § 411.357(aa) apply. In the proposed rule, we sought comment on whether it would be desirable or necessary to codify in regulation text what is meant by “coordinating and managing care” and, if so, whether “coordinating and managing care” should be defined to mean the deliberate organization of patient care activities and sharing of information between two or more VBE participants, tailored to improving the health outcomes of the target patient population, in order to achieve safer and more effective care for the target patient population (84 FR 55775). This definition was intended to correspond to a similar definition proposed by OIG.

As described in more detail below, we are not finalizing a definition of “coordinating and managing care” in our regulations. We also sought comment regarding whether additional interpretation of the other proposed value-based purposes is necessary, but did not receive comments on the need for additional interpretation of any other aspect of the definition of “value-based purpose.” We respond to comments on this topic below. We proposed to define VBE participant (that is, a participant in a value-based enterprise) to mean an individual or entity that engages in at least one value-based activity as part of a value-based enterprise. We noted in the proposed rule that the word “entity,” as used in the definition of “VBE participant,” is not limited to non-natural persons that qualify as “entities” as defined at § 411.351 (84 FR 55775).

We proposed to use the word “entity” in the definition of “VBE participant” in order to align with the definition proposed by OIG. We sought comment regarding whether the use of the word “entity” in this definition would cause confusion due to the fact that the universe of non-natural persons (that is, entities) that could qualify as VBE participants is greater than the universe of non-natural persons that qualify as “entities” under § 411.351 and, if so, what alternatives exist for defining “VBE participant” for purposes of the physician self-referral law. As discussed in more detail below, we are modifying the definition of VBE participant in this final rule to mean a person or entity that engages in at least one value-based activity as part of a value-based enterprise. The phrase “person or entity” is used more frequently throughout our regulations and, even though the word “entity” (as included in the definition of “VBE participant”) is not limited to an “entity” as defined at § 411.351 and its use could result in some confusion for stakeholders, we believe that it is less disruptive to use the already-common phrase “person or entity” to define VBE participant.

We may consider whether to replace the word “entity” throughout our regulations in those instances where it is not intended to be limited to the defined term at § 411.351. However, any revisions to our regulations to achieve this substitution would occur through future notice-and-comment rulemaking. In the proposed rule, we also discussed the experiences of our law enforcement partners, including oversight experience, and the resulting concern about protecting potentially abusive arrangements between certain types of entities that furnish designated health services for purposes of the physician self-referral law (84 FR 55775). Specifically, we discussed concerns about compensation arrangements between physicians and laboratories or suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) that may be intended to improperly influence or capture referrals without contributing to the better coordination of care for patients (84 FR 55776).

We stated that we were considering whether to exclude laboratories and DMEPOS suppliers from the definition of VBE participant or, in the alternative, whether to include in the exceptions at § 411.357(aa), a requirement that the arrangement is not between a physician (or immediate family member of a physician) and a laboratory or DMEPOS supplier. We also stated that, in particular, we were uncertain as to whether laboratories and DMEPOS suppliers have the direct patient contacts that would justify their inclusion as parties working under a protected value-based arrangement to achieve the type of patient-centered care that is a core tenet of care coordination and a value-based health care system. In addition, due to our (and our law enforcement partners') ongoing program integrity concerns with certain other participants in the health care system and to maintain consistency with policies proposed by OIG, we stated that we were also considering whether to exclude the following providers, suppliers, and other persons from the definition of “VBE participant”. Pharmaceutical manufacturers.

Manufacturers and distributors of DMEPOS. Pharmacy benefit managers (PBMs). Wholesalers. And distributors.

At final § 411.351, “VBE participant” is defined to mean a person or entity that engages in at least one value-based activity as part of a value-based enterprise. The definition of “VBE participant” finalized here does not exclude any specific persons, entities, or organizations from qualifying as a VBE participant. Lastly, we are finalizing the definition of “target patient population” as proposed, without modification. Specifically, the target patient population for which VBE participants undertake value-based activities is defined at final § 411.351 to mean an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that.

(1) Are set out in writing in advance of the commencement of the value-based arrangement. And (2) further the value-based enterprise's value-based purpose(s). We affirm in this final rule that legitimate and verifiable criteria may include medical or health characteristics (for example, patients undergoing knee replacement surgery or patients with newly diagnosed type 2 diabetes), geographic characteristics (for example, all patients in an identified county or set of zip codes), payor status (for example, all patients with a particular health insurance plan or payor), or other defining characteristics. As we stated in the proposed rule, selecting a target patient population consisting of only lucrative or adherent patients (cherry-picking) and avoiding costly or noncompliant patients (lemon-dropping) would not be permissible under most circumstances, as we would not consider the selection criteria to be legitimate (even if verifiable) (84 FR 55776).

We received comments on the proposed definitions of value-based activity, value-based arrangement, value-based enterprise, value-based purpose, VBE participant, and target patient population. Our responses follow. Comment. Most commenters supported our proposed definition of value-based activity, but many requested further guidance regarding what CMS would consider appropriate value-based activities.

Specifically, some commenters asked whether particular items or services, such as transportation services or the provision of non-medical personnel, would qualify as value-based activities. Commenters did not explain how the arrangements for those particular items or services would implicate the physician self-referral law. That is, whether the items or services are in-kind remuneration provided by an entity to a physician or an immediate family member of a physician under an arrangement between a physician (or Start Printed Page 77500immediate family member of a physician), whether the items or services are provided by one of the parties to a value-based arrangement and paid for by the recipient of the items or services, or whether the services are provided to patients. Response.

We decline to provide a list of items or services, actions, and ways to refrain from taking an action that qualify as value-based activities. We are concerned that even a non-exhaustive list of common value-based activities could unintentionally limit innovation and inhibit robust participation in value-based health care delivery and payment systems. The final definition of “value-based activity” provides the flexibility for parties to design arrangements that further the value-based purpose(s) of value-based enterprises. The determination regarding whether the provision of an item or service, the taking of an action, or the refraining from taking an action constitutes a value-based activity is a fact-specific analysis and turns on whether the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise.

With respect to the examples provided by the commenters, we note that the scope of the physician self-referral law is limited to a financial relationship between a physician (or the immediate family member of a physician) and the entity to which the physician makes referrals for designated health services. We assume that the commenters were referring to the provision of transportation services to a beneficiary, which would not implicate the law unless the beneficiary was a physician or an immediate family member of a physician. With respect to the commenters' inquiry regarding the provision of non-medical personnel, assuming that the commenters were referring to the provision of non-medical personnel to a physician by an entity, we are uncertain whether the commenter is referring to in-kind remuneration between an entity and a physician in the form of the services of non-medical personnel without expectation of payment or whether the provision of non-medical personnel would be paid for in cash under the terms of an arrangement between an entity and a physician. Therefore, we are unable to provide specific guidance in response to the inquiry.

Comment. A few commenters requested guidance on what it means for a value-based activity to be reasonably designed to achieve at least one value-based purpose. Some of the commenters expressed concern that our solicitation of comments in the proposed rule could be interpreted to signal that success is required in order for the protections of the value-based exceptions to apply, noting that success of a value-based activity in achieving the intended value-based purpose is never guaranteed. One of the commenters urged CMS to confirm that “satisfying the value-based purposes element of various value-based definitions does not necessarily mean actual success in achieving the purposes but means engaging in collaboration and activities `reasonably designed to achieve' one or more of these value-based purposes.” Response.

The determination regarding whether a value-based activity is reasonably designed to achieve at least one value-based purpose is a fact-specific determination. Parties must have a good faith belief that the value-based activity will achieve or lead to the achievement of at least one value-based purpose of the value-based enterprise in which the parties to the arrangement are VBE participants. We recognize that parties may undertake activities that do not ultimately achieve the value-based purpose(s) of the enterprise. Nothing in our final regulations requires that the value-based purpose(s) must be achieved in order for a value-based arrangement to be protected under an applicable exception at § 411.357(aa).

However, if the parties are aware that the provision of the item or service, the taking of the action, or the refraining from taking the action will not further the value-based purpose(s) of the value-based enterprise, it will cease to qualify as a value-based activity and the parties may need to amend or terminate their arrangement. As discussed in section II.A.2.b.(3). Of this final rule, we are including a requirement in the final exception for value-based arrangements at § 411.357(aa)(3)(vii) that parties must monitor whether they have furnished the value-based activities required under the arrangement and whether and how continuation of the value-based activities is expected to further the value-based purpose(s) of the value-based enterprise. Comment.

A few commenters requested guidance on how parties can document or otherwise show that a value-based activity is “reasonably designed” to achieve a value-based purpose. Response. We do not dictate how parties should analyze the design of their value-based arrangements to ensure that the value-based activities they undertake are reasonably designed to achieve at least one value-based purpose of the value-based enterprise of which they are participants or how they should substantiate their efforts. We note that contemporaneous documentation is a best practice, and we encourage parties to follow this practice.

We also remind parties that the burden of proof to show compliance with the physician self-referral law is set forth at § 411.353 and is applicable to parties utilizing the new exceptions for value-based arrangements at final § 411.357(aa). We emphasize that the new exceptions do not impose an additional or different burden of proof. It is the responsibility of the entity submitting a claim for payment for designated health services furnished pursuant to a referral from a physician with which it has a financial relationship to ensure compliance with the physician self-referral law at the time of submission of the claim. That is, parties must ensure that their financial relationship satisfies all the requirements of an applicable exception at the time the physician makes a referral for designated health service(s).

Comment. Several commenters expressed concern with our statement that the making of a referral is not a value-based activity and requested that CMS revise the definition of value-based activity to include the making of a referral. These commenters noted that the definition of “referral” at § 411.351 includes the establishment of a plan of care that includes the provision of designated health services. The commenters also asserted that referrals are an integral part of a value-based health care delivery and payment system, especially with respect to care planning, and contended that excluding the making of a referral from the definition of “value-based activity” would significantly limit the utility of the exceptions.

Some commenters urged CMS to revise the definition of “value-based activity” to specifically include the making of a referral as a value-based activity. Response. The commenters raise important points about the scope of the definition of “referral” at § 411.351 and the exclusion of the making of a referral from the definition of “value-based activity.” It was not our intention to exclude the development of a care plan that includes the furnishing of designated health services from the definition of “value-based activity.” Accordingly, we are not finalizing the reference to the making of a referral in the definition of “value-based activity.” We are defining value-based activity to mean any of the following activities, provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise. (1) The provision of an item Start Printed Page 77501or service.

(2) the taking of an action. Or (3) the refraining from taking an action. Care planning activities that meet the definition of “referral” at § 411.351 will qualify as “the taking of an action” for purposes of applying the definition of “value-based activity.” As discussed in section II.D.2.c. Of this final rule, we are revising the definition of “referral” at § 411.351 to codify in regulation text our policy that a referral is not an item or service for purposes of section 1877 of the Act and the physician self-referral law regulations.

Comment. Most commenters supported the proposed definition of “value-based arrangement.” However, a few commenters requested that we expand the definition to specifically include the following alternative payment models (APMs). Advanced APMs, all-payor/other-payor APMs, and Merit-based Incentive Payment System (MIPS) Alternative Payment Models (APMs) under the Quality Payment Program (QPP). The commenters also requested that we include State-based Medicaid initiatives in the definition of “value-based arrangement.” Response.

We decline to adopt the commenters' suggestion and are finalizing the definition as proposed. The models referenced by the commenters relate to value-based payments from a payor to a physician under a payment arrangement between the payor and the physician. For purposes of the physician self-referral law, a compensation arrangement is an arrangement between a physician (or immediate family member of a physician) and the entity to which the physician makes referrals for designated health services. The definition of “value-based arrangement” relates to a compensation arrangement between a physician and an entity that participate in the same value-based enterprise.

It does not cover compensation arrangements between a payor and a physician. Comment. Most commenters generally supported our proposed definition of “value-based enterprise,” although one commenter had concerns with the requirement that each VBE participant must be a party to a value-based arrangement with at least one other VBE participant in the value-based enterprise. This commenter interpreted this requirement to preclude the addition of VBE participants to a value-based arrangement after the value-based arrangement has begun.

The commenter requested that we permit parties to add VBE participants to a value-based arrangement throughout the duration of the arrangement, either on an ongoing basis or at least annually. Response. The design and structure of contracts is separate and distinct from the analysis of financial relationships under the physician self-referral law. Although nothing in our regulations prohibits having multiple parties to a contract or adding parties after the effective date of the contract, each of the financial relationships that results from the contract must be analyzed separately under the physician self-referral law.

The commenter described adding new physicians to an existing value-based arrangement. For purposes of determining compliance with the physician self-referral law, an arrangement between an entity and a “new” physician engaging in value-based activities will not be viewed as an “addition” to an existing value-based arrangement but, rather, a separate and distinct compensation arrangement that must be analyzed for compliance with an applicable exception. To illustrate, assume that a hospital and a physician organization enter into a value-based arrangement under which the physician organization agrees that all its physicians will abide by the hospital's care protocols for a period of 2 years. During the course of the value-based arrangement, the physician organization hires a new physician who agrees to abide by the hospital's care protocols as called for by the physician organization's arrangement with the hospital.

Assuming the new physician stands in the shoes of the physician organization under § 411.354(c), the “addition” of the new physician to the physician organization creates a separate new financial relationship between the hospital and the new physician that must satisfy the requirements of an applicable exception to the physician self-referral law. Nothing in the definition of “value-based enterprise” will preclude a new VBE participant from providing value-based activities and participating in a value-based arrangement with another VBE participant or the value-based enterprise itself (if the value-based enterprise is an entity for purposes of the physician self-referral law). Comment. Many commenters sought additional guidance regarding the type of organized network or group of persons or entities that may qualify as a value-based enterprise.

Response. A value-based enterprise may be a distinct legal entity—such as an ACO—with a formal governing body, operating agreement or bylaws, and the ability to receive payment on behalf of its affiliated health care providers and suppliers. A value-based enterprise may also be an informal affiliation, even consisting of only the two parties to a value-based arrangement. The definition of “value-based enterprise” is intended to include only organized groups of health care providers, suppliers, and other components of the health care system collaborating to achieve the goals of a value-based health care delivery and payment system.

Whatever its size and structure, a value-based enterprise is essentially a network of participants (such as clinicians, providers, and suppliers) that have agreed to collaborate with regard to a target patient population to put the patient at the center of care through care coordination, increase efficiencies in the delivery of care, and improve outcomes for patients. Simply stated, a value-based enterprise is a network of individuals and entities that are collaborating to achieve one or more value-based purposes of the value-based enterprise. We do not believe that it would be beneficial to dictate particular legal or other structural requirements for a value-based enterprise. Rather, the definition of “value-based enterprise” is intended to encompass a wide-range of structures to help facilitate health care providers' transition to a value-based health care delivery and payment system.

Comment. A few commenters requested guidance with respect to the requirement that the value-based enterprise have an accountable body or person responsible for the financial and operational oversight of the value-based enterprise, specifically with respect to the responsibilities, requirements, structure, and composition of the accountable body. One commenter requested confirmation that an ACO could rely on its existing governing body and would not need to establish a separate accountable body or identify a person other than the ACO's governing body to be responsible for the financial and operational oversight of the value-based enterprise. Several commenters expressed concern that requiring one individual or entity to assume responsibility for the financial and operational oversight of the value-based enterprise could create tension between VBE participants and limit the utility of the exceptions for smaller value-based enterprises.

Other commenters asserted that the establishment of the accountable body or person and the development of the governing document would require the expenditure of significant resources, including legal expenses, and questioned whether this burden is necessary. One of these commenters suggested that this requirement is especially burdensome for small or rural practices that may not Start Printed Page 77502have sufficient resources to satisfy the requirement. Some commenters also requested explicit guidance regarding the governing document that describes the value-based enterprise and how its VBE participants intend to achieve the enterprise's value-based purpose(s). Response.

Transparency and accountability are critical to a successful transition to a value-based health care delivery and payment system. It is essential that CMS and our law enforcement partners are able to identify the person or organization ultimately responsible for the financial and operational oversight of a value-based enterprise. We do not believe that requiring a value-based enterprise to have an accountable body or responsible person and a governing document creates an administrative or financial burden beyond what parties that wish to transition to value-based health care would already incur. We are not persuaded to abandon the requirement that a value-based enterprise must have an accountable body or person that is responsible for the financial and operational oversight of the enterprise.

As discussed in the proposed rule and as noted above, the accountable body or person that is responsible for the financial and operational oversight of the enterprise may be the governing board, a committee of the governing board, or a corporate officer of the legal entity that is the value-based enterprise, or may be the party to a value-based arrangement that is designated as being responsible for the financial and operational oversight of the arrangement between the parties (if the “enterprise” is a network consisting of just the two parties) (84 FR 55774). We expect that a value-based enterprise would establish an accountable body or designate a responsible person commensurate with the scope and objectives of the value-based enterprise and its available resources. We are also maintaining the requirement that the enterprise must have a governing document that describes the value-based enterprise and how its VBE participants intend to achieve its value-based purpose(s). Parties regularly enter into payor contracts, employment relationships, service arrangements, and other arrangements for items and services related to the provision of patient care services.

It is a matter of general contracting practice that these contracts and written agreements specify the rights, responsibilities, and obligations of the parties. We expect that independent health care providers that wish to organize and collaborate to achieve value-based purposes would utilize these same basic practices to reduce their arrangements to writing, including their arrangement to form a value-based enterprise. We believe that the same is true for the development of a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s). We remind parties that we are not dictating particular legal or other structural requirements for a value-based enterprise.

Rather, the final regulations accommodate both formal and informal value-based enterprises. As a result, the written agreements and contracts that parties enter into in the normal course of their business dealings could serve as the documentation required under the new exception for value-based arrangements. It is simply not possible to establish one set of financial and operational oversight requirements that would be applicable to value-based enterprises of all types and sizes. The financial and operational oversight of a value-based enterprise and the related governing document for a value-based enterprise made up of only a hospital and physician will look very different from that of an ACO that contracts with thousands of providers and suppliers.

Again, we do not dictate the structure or composition of the accountable body. Rather, we simply require that the accountable body or responsible person for the value-based enterprise exercise appropriate financial and operational oversight of the value-based enterprise. Similarly, we do not dictate the format or content of the governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s). The necessary infrastructure to effectively oversee the financial and operational activities of the value-based enterprise and the governing document will depend on the size and structure of the value-based enterprise.

Comment. Several commenters recommended that CMS not limit the types of entities that may qualify as a VBE participant out of concern that any such limitations could slow down or inhibit the movement of the entire health care industry towards value-based health care delivery and significantly limit the utility of the exceptions. The commenters provided detailed examples of how laboratories and DMEPOS suppliers, in particular, contribute to the value-based health care delivery and payment system by collaborating with other sectors of the health care industry to improve care, lower costs, and ensure that patients are receiving appropriate care. Other commenters expressed concern that the exclusion of laboratories and DMEPOS suppliers from participation in value-based enterprises would impact the ability of health systems that own laboratories or DMEPOS suppliers from participating in value-based health care delivery.

Response. We are not excluding any specific persons, entities, or organizations from the definition of “VBE participant.” We find the commenters' assertions that laboratories and DMEPOS suppliers may play a beneficial role in the delivery of value-based health care persuasive. However, we will continue to monitor the evolution of the value-based health care delivery and payment system to ensure that the inclusion of all types of providers and suppliers as VBE participants does not create a program integrity risk. Comment.

A number of commenters supported the inclusion of coordinating and managing the care of a target patient population as an appropriate value-based purpose, although the majority of these commenters urged CMS to not define “coordinating and managing care” in regulation text, suggesting that the phrase is self-explanatory and defining it could inadvertently limit or interfere with innovation. Commenters that were open to the inclusion of a definition of “coordinating and managing care” stressed the need for any such definition to be drafted broadly. Other commenters suggested that, if we codify a definition of “coordinating and managing care,” it should align with any definition of the same term adopted by OIG. Response.

We agree with the commenters that it is not necessary to define “coordinating and managing care” for purposes of the definition of “value-based purpose.” In addition, we do not believe that it is necessary to define “coordinating and managing care” for purposes of the exceptions finalized at § 411.357(aa), as they are not limited only to value-based arrangements for the coordination or management of care. Comment. Many commenters requested that we include as a value-based purpose the maintenance of quality of care for the target population without requiring a reduction in costs to payors. Response.

We decline to include the maintenance of quality of care as a permissible value-based purpose in the absence of reduction of the costs to or growth in expenditures of payors. Although we recognize that the maintenance of quality of care may advance the goals of a value-based Start Printed Page 77503enterprise or the specific parties to a value-based arrangement, we do not believe that the maintenance of quality of care in the absence of a reduction in the costs to or growth in expenditures of payors advances the goals of the Regulatory Sprint. Thus, it is not appropriate to include the maintenance of quality of care as a stand-alone value-based purpose that would unlock access to the exceptions at § 411.357(aa). We note that numerous CMS programs and Medicare payment mechanisms already require the maintenance of quality across the care continuum and encourage improvement and maintenance of quality through use of payment incentives and payment reductions.

For example, under the Hospital Inpatient Quality Reporting Program, CMS collects quality data from hospitals paid under the IPPS. Data for selected measures are used for paying a portion of hospitals based on the quality and efficiency of care, including the Hospital-Acquired Condition Reduction Program, Hospital Readmissions Reduction Program, and Hospital Value-Based Purchasing Program, which rewards acute care hospitals with incentive payments based on the quality of care they provide, rather than just the quantity of services they provide. Comment. The majority of commenters supported the definition of “value-based purpose” and urged CMS to finalize the definition without modifications.

A few commenters requested that we revise the definition of “value-based purpose” to include the reduction in costs to or growth in expenditures of health care providers and suppliers. These commenters asserted that limiting the definition of value-based purpose to reducing the costs to or growth in expenditures of only payors fails to recognize the benefits to Medicare that come from the reduction of provider costs, such as reporting lower costs to Medicare on the hospital's cost report, which, in turn, result in lower Medicare expenditures. These commenters pointed to internal cost savings programs that distribute savings generated from implementing specific cost saving measures to physicians. The commenters expressed concern that hospital-initiated quality and efficiency programs that drive down hospital costs, improve efficiency, and improve quality of care would not be protected by the exceptions because the hospital's program would not directly reduce costs to or growth in expenditures of payors.

Response. We are not persuaded to revise the definition of “value-based purpose” as requested by the commenters. We believe that the four purposes included in the definition are sufficiently inclusive to allow for innovative value-based arrangements while protecting against program or patient abuse. We do not believe that permitting a value-based enterprise to exist solely for the purpose of reducing costs to its VBE participants would adequately protect the Medicare program and its beneficiaries from abuse.

Moreover, allowing parties to share in the reduction of costs without also improving or maintaining quality of care for patients or otherwise benefitting payors does not advance the transition to a value-based health care delivery and payment system. We note that nothing in this final rule precludes the sharing of cost savings and other entity-specific savings programs, provided those programs are part of a value-based arrangement for value-based activities reasonably designed to further at least one value-based purpose of the value-based enterprise of which the parties to the arrangement are VBE participants. The compensation to a physician under such a value-based arrangement could include a share of the savings that result from a hospital's internal cost sharing (or gainsharing) program. Comment.

A few commenters specifically supported the inclusion as a value-based purpose “transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.” These commenters stated that allowing a value-based enterprise to operate for this purpose is necessary to achieve CMS' goal of transitioning to a value-based health care delivery and payment system and strikes the right balance between precision and flexibility. The commenters asserted that value-based enterprises would rely on this purpose to cover the clinical integration and infrastructure activities necessary to develop and implement a value-based enterprise and to meet future operational and capital requirements. Commenters likened this value-based purpose to the purpose underlying the pre-participation waiver for the Shared Savings Program. The commenters recommended that we make no further refinement to this value-based purpose.

Response. The commenters' understanding of the scope of this value-based purpose is correct. As we discussed in the proposed rule, this value-based purpose is intended to accommodate efforts aimed at transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for the target patient population (84 FR 55775). Generally speaking, we interpret “transitioning” to mean undergoing the process or period of transition from one state or condition to another and, specifically, with respect to this value-based purpose, the process or period of transition from furnishing patient care services in a FFS volume-based system to furnishing patient care services in a value-based health care delivery and payment system.

Thus, this value-based purpose applies during the period of a value-based enterprise's start-up or preparatory activities. In the proposed rule, we interpreted this value-based purpose as a category that includes the integration of VBE participants in team-based coordinated care models, establishing the infrastructure necessary to provide patient-centered coordinated care, and accepting (or preparing to accept) increased levels of financial risk from payors or other VBE participants in value-based arrangements (84 FR 55775). This purpose will also apply to activities undertaken by an unincorporated value-based enterprise that wishes to formalize its legal and operational structure, as well as the preparation by a value-based enterprise to accept financial risk and the preparation of VBE participants to furnish services in a manner focused on the value of those services instead of volume. We agree that this value-based purpose shares certain aspects of the pre-participation waiver under the Shared Savings Program.

In our discussion of the Shared Savings Program pre-participation waiver in our October 29, 2015 Shared Savings Program Final Waivers in Connection with the Shared Savings Program Final Rule (80 FR 66726) (the SSP waivers final rule), we provided examples of start-up arrangements as guideposts for determining whether a particular arrangement may qualify for protection under the pre-participation waiver (80 FR 66733). We believe those examples, to the extent they create a compensation relationship for purposes of the physician self-referral law, may be illustrative for purposes of interpreting the scope of “transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.” In the SSP waivers final rule (80 FR 66733), we stated that the following types of start-up arrangements Start Printed Page 77504may qualify under the Shared Savings Program pre-participation waiver. Infrastructure creation and provision. Network development and management, including the configuration of a correct ambulatory network and the restructuring of existing providers and suppliers to provide efficient care.

Care coordination mechanisms, including care coordination processes across multiple organizations. Clinical management systems. Quality improvement mechanisms including a mechanism to improve patient experience of care. Creation of governance and management structure.

Care utilization management, including chronic disease management, limiting hospital readmissions, creation of care protocols, and patient education. Creation of incentives for performance-based payment systems and the transition from fee-for-service payment system to one of shared risk of losses. Hiring of new staff, including care coordinators (including nurses, technicians, physicians, and/or non- physician practitioners), umbrella organization management, quality leadership, analytical team, liaison team, IT support, financial management, contracting, and risk management. IT, including EHR systems, electronic health information exchanges that allow for electronic data exchange across multiple platforms, data reporting systems (including all payor claims data reporting systems), and data analytics (including staff and systems, such as software tools, to perform such analytic functions).

Consultant and other professional support, including market analysis for antitrust review, legal services, and financial and accounting services. Organization and staff training costs. Incentives to attract primary care physicians. Capital investments, including loans, capital contributions, grants, and withholds.

Many of these activities similarly facilitate a value-based enterprise's (and its VBE participants') transition from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population. Comment. We received a number of comments regarding the selection criteria that may be used to choose a target patient population and, specifically, what it means for selection criteria to be legitimate and verifiable. Although several commenters supported the standard that selection criteria must be legitimate and verifiable, stating that it struck the right balance between encouraging innovation and protecting against fraud and abuse, other commenters expressed concern with the use of the term “legitimate,” asserting that it is ambiguous and may expose parties to litigation and enforcement risk.

Some commenters requested that we instead prohibit the specific selection criteria that we believe are inappropriate, such as cherry-picking and lemon-dropping, while others requested that we provide a list of selection criteria that would be deemed permissible. A few commenters asked whether specific selection criteria would be acceptable, such as identifying the target patient population by the MS-DRG assigned to the patient, geography, demographic criteria (for example, age or socioeconomic status), or payor (for example, Medicaid or non-Federal payor). Response. At final § 411.351, “target patient population” means an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that are set out in writing in advance of the commencement of the value-based arrangement and further the value-based enterprise's value-based purpose(s).

We do not believe that it is necessary to further define the term “legitimate.” It has been used throughout the physician self-referral regulations for decades. For example, the exception for personal service arrangements includes a requirement at § 411.357(d)(1)(iii) that the aggregate services covered by the arrangement do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement. The term “legitimate” does not carry a new or different definition for purposes of interpreting the value-based definitions or the exceptions at § 411.357(aa). We refer readers to section II.B.2.

Of this final rule for further discussion of the term “legitimate” within our regulations. With respect to the commenters' requests for lists of impermissible and permissible selection criteria, it is not feasible to provide such an exhaustive list of selection criteria that we consider unacceptable. Similarly, we believe that providing a list of acceptable selection criteria could serve to interfere with or limit a value-based enterprise's or VBE participant's ability to identify and utilize selection criteria. Deeming provisions sometimes have a chilling effect because they are, in practice, interpreted by the regulated industry as mandatory or otherwise prescriptive rules.

We believe the approach we have finalized balances the need for clear guidelines with the need for flexibility. Finally, with respect to the commenters' request for confirmation that specific selection criteria are permissible, we reiterate that the determination whether the selection criteria used to identify a target patient population are legitimate and verifiable is dependent on the facts and circumstances of the parties. If the criteria are selected primarily for their effect on the parties' profits or purely financial concerns, they will not be considered legitimate and, therefore, are impermissible. None of the selection criteria examples shared by the commenters are per se impermissible.

Comment. Some commenters expressed concern with our statement in the proposed rule that choosing a target patient population in a manner driven by profit motive or purely financial concerns would not be legitimate (84 FR 55776). These commenters suggested that this calls into question proven cost-saving techniques, such as product standardization, aimed at reductions in cost or unnecessary care that impact financial performance. The commenters requested that CMS clarify the distinction between reducing costs and problematic criteria, and asked us to explicitly acknowledge that it is permissible to choose a target patient population that could generate cost reductions from activities like product standardization alone.

Response. It appears to us that these commenters have conflated the acceptable criteria for selecting a target patient population and the requirements for selecting activities to be performed under a value-based arrangement. The target patient population is the group of individuals for whom the parties to a value-based arrangement are undertaking value-based activities. Our statement regarding profit motive or purely financial concerns relates to choosing the patient population for which the parties will undertake value-based activities and not the value-based activities themselves.

We reiterate that the selection of the target patient population may not be driven by profit motive or purely financial concerns. As we stated in the proposed rule, selecting a target patient population consisting of only lucrative or adherent patients (cherry-picking) and avoiding costly or noncompliant patients (lemon-dropping) would not be permissible under most circumstances, as we will not consider the selection criteria to be Start Printed Page 77505legitimate (even if verifiable) (84 FR 55776). Choosing a target patient population solely because it appears likely to reduce the costs to one of the parties to a value-based arrangement would be suspect. As described earlier in this section and in our response to other comments, a value-based activity must be reasonably designed to achieve at least one value-based purpose of the value-based enterprise.

With respect to the commenter's specific inquiry, we note that a value-based activity that requires a physician to utilize a standardized list of products, where appropriate, may be reasonably designed to achieve at least one value-based purpose of the value-based enterprise, depending on the enterprise's value-based purposes. Comment. A large number of commenters expressed concern with a requirement that the patients in the target patient population have at least one chronic condition to be addressed by the value-based arrangement and urged CMS to not limit the target patient population to chronic patients. The commenters stated that such a requirement would severely constrict the types of value-based arrangements protected under the new exceptions.

Response. Although we sought comment as to whether we should incorporate a requirement that patients in the target patient population have at least one chronic condition in order to align with OIG's proposals, we are not including this provision in the final definition of “target patient population” at § 411.351. As finalized, target patient population means an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that are set out in writing in advance of the commencement of the value-based arrangement and further the value-based enterprise's value-based purpose(s). We are not limiting a target patient population to patients with at least one chronic condition.

Comment. A few commenters requested clarification that the definition of “target patient population” would include patient populations that are retroactively attributed, noting as an example the use of a retrospective claims-based methodology. Response. A target patient population must be selected based on legitimate and verifiable criteria that are set out in writing in advance of the commencement of the value-based arrangement.

The commenter's concerns appear to relate to the requirement that selection criteria for the target patient population must be set out in writing in advance of the commencement of the value-based arrangement. Where a target patient population is ascribed to the value-based enterprise (or the VBE participants that are parties to the specific value-based arrangement) by the payor, the payor establishes the criteria for selecting the target patient population. However, this does not affect the obligation of the value-based enterprise or its VBE participants to select the target patient population for purposes of the physician self-referral law and qualification to use the exceptions at § 411.357(aa). The definition of “target patient population” at final § 411.351 requires that the target patient population is selected by the value-based enterprise or its VBE participants based on legitimate and verifiable criteria that are set out in writing in advance of the commencement of the value-based arrangement under which value-based activities are undertaken for the target patient population and that further the value-based enterprise's value-based purpose(s).

Thus, where a target patient population is ascribed to the value-based enterprise (or the VBE participants that are parties to the specific value-based arrangement) by the payor, the value-based enterprise or its VBE participants must ensure that the requirements of the definition of “target patient population” are satisfied. In the circumstances described by the commenters, the selection criteria for the target patient population could be described as “the target patient population to be identified by the payor in accordance with criteria established by the payor for retrospective attribution.” The value-based enterprise or the VBE participants that are parties to the specific value-based arrangement under which value-based activities are undertaken for the target patient population must ensure that the payor's methodology for attribution of the target patient population are legitimate and verifiable and that they will further the value-based enterprise's value-based purpose(s). In addition, the selection criteria must be documented in advance of the commencement of the value-based arrangement. It is not sufficient for the value-based enterprise or its VBE participants to merely state that the selection criteria will be determined by another party (in this case, the payor).

The value-based enterprise or its VBE participants may need to collaborate with the payor to ensure that the patient population attributed meets the definition of “target patient population.” Comment. Most commenters supported the proposed definition of “VBE participant.” A few commenters objected to the use of the term “entity” in the definition of “VBE participant,” because the term “entity” is ascribed a specific meaning at § 411.351, but, as used in the definition of “VBE participant,” would not be limited to that meaning. Commenters noted that using the same term in two different ways within the same regulatory scheme creates unnecessary complexity and compliance concerns. Commenters sought clarity on this issue, and requested that we either revise the definition of “entity” at § 411.351 or use a different term for purposes of the definition of “VBE participant.” Response.

Although we understand the commenter's concerns, we are not revising the definition of “VBE participant” to replace the term “entity” with another term, nor are we revising the definition of “entity” at § 411.351. In the physician self-referral regulations, the term “entity” is used to indicate an entity (as defined at § 411.351) furnishing designated health services and also to indicate its general meaning of an organization (such as a business) that has an identity separate from those of its members. As used in the final definition of “VBE participant,” the term “entity” is not limited to an entity furnishing designated health services. Rather, it has its general meaning.

Although we retain the term “entity” in the definition of “VBE participant,” we are replacing the term “individual” (as proposed) with the term “person.” Thus, under our final regulation, VBE participant means a person or entity that engages in at least one value-based activity as part of a value-based enterprise. We intend for “person or entity” to refer to both natural and non-natural persons. Again, the term “entity” in this context is not limited to an entity that furnishes designated health services. Our review of the physician self-referral regulations indicates that the term “person or entity” is used numerous times throughout the regulations.

For example, as defined at § 411.351, a “referring physician” is a physician who makes a referral or who directs another person or entity to make a referral or who controls referrals made by another person or entity. The regulations regarding indirect compensation arrangements at § 411.354(c)(2) state that one element of an indirect compensation arrangement is that there exists between the referring physician (or a member of his or her immediate family member) and the entity furnishing designated health services an unbroken chain of any number (but not fewer than one) of persons or entities that have financial Start Printed Page 77506relationships between them. The regulations also use this term in the context of the person or entity from whom the referring physician or immediate family member receives aggregate compensation under the arrangement. The exceptions for the rental of office space and the rental of equipment reference a person or entity in the exclusive use requirements at § 411.357(a)(3) and (b)(2).

For consistency with our existing regulations, we are including the term “person or entity” in our final definition of “VBE participant.” b. Exceptions The physician self-referral law (along with other Federal fraud and abuse laws) provides critical protection against a range of troubling patient and program abuses that may result from volume-driven, FFS payment. These abuses include unnecessary utilization, increased costs to payors and patients, inappropriate steering of patients, corruption of medical decision making, and competition based on buying referrals instead of delivering quality, convenient care. While value-based payment models hold promise for addressing these abuses, they may pose risks of their own, including risks of stinting on care (underutilization), cherry-picking, lemon-dropping, and manipulation or falsification of data used to verify outcomes.

Moreover, during the transformation to value-based payment, many new delivery and payment models include both FFS and value-based payment mechanisms in the same model, subjecting providers to mixed incentives, and presenting the possibility of arrangements that pose both traditional FFS risk and emerging value-based payment risks. When the physician self-referral law was expanded in 1993 to apply to designated health services beyond the clinical laboratory services to which the original 1989 law applied, according to the sponsor of the legislation, the Honorable Fortney “Pete” Stark, the physician self-referral law was intended to address physician referrals that drive up health care costs and result in unnecessary utilization of services. (See Opening Statement of the Honorable Pete Stark, Physician Ownership and Referral Arrangements and H.R. 345, “The Comprehensive Physician Ownership and Referral Act of 1993,” House of Representatives, Committee on Ways and Means, Subcommittee on Health, April 20, 1993, p.

144.) Mr. Stark went on to emphasize the importance of a physician's ability to offer patients neutral advice about whether or not services are necessary, which services are preferable, and who should provide them. He noted that the physician self-referral law would improve consumers' confidence in their physicians and the health care system generally. In other words, the legislation was proposed (and the law ultimately enacted) to counter the effects of physician decision making driven by financial self-interest—overutilization of health care services, the suppression of patient choice, and the impact on the medical marketplace.

As discussed in section I.B.2.a. Of this final rule, in 1989 and 1993, the vast majority of Medicare services were reimbursed based on volume under a retrospective FFS system. The statutory exceptions to the physician self-referral law's referral and billing prohibitions were developed during this time of FFS, volume-based payment, with conditions which, if met, would allow the physician's ownership or investment interest or compensation arrangement to proceed without triggering the ban on the physician's referrals or the entity's claims submission. We believe that the exceptions in section 1877 of the Act indicate the Congress' stance on what safeguards are necessary to protect against program or patient abuse in a system where Medicare payment is available for each service referred by a physician and furnished by a provider or supplier.

To date, the exceptions for compensation arrangements issued under section 1877(b)(4) of the Act, which grants the Secretary authority to establish exceptions for financial relationships that the Secretary determines do not pose a risk of program or patient abuse, have generally followed the blueprint established by the Congress for compensation arrangements that exist in a FFS system. Value-based health care delivery and payment shifts the paradigm of our analysis under section 1877(b)(4) of the Act. When no longer operating in a volume-based system, or operating in a system that reduces the amount of FFS payment by combining it with some level of value-based payment, our exceptions need fewer “traditional” requirements to ensure the arrangements they protect do not pose a risk of program or patient abuse. This is because a value-based health care delivery and payment system, by design, provides safeguards against harms such as overutilization, care stinting, patient steering, and negative impacts on the medical marketplace.

Using the Secretary's authority under section 1877(b)(4) of the Act, we are adding three exceptions for compensation arrangements that do not pose a risk of program or patient abuse when considered in concert with. (1) The program integrity and other requirements integrated in the definitions used to apply the exceptions only to compensation arrangements that qualify as “value-based arrangements;” and (2) the disincentives to perpetrate the harms the physician self-referral law was intended to deter that are intrinsic in the assumption of substantial downside financial risk and meaningful participation in value-based health care delivery and payment models. In removing regulatory barriers to innovative care coordination and value-based arrangements, we are faced with the challenge of designing protection for emerging health care arrangements, the optimal form, design, and efficacy of which remains unknown or unproven. This is a fundamental challenge of regulating during a period of innovation and experimentation.

Matters are further complicated by the substantial variation in care coordination and value-based arrangements contemplated by the health care industry, variation among patient populations and providers, emerging health technologies and data capabilities, and our desire not to chill beneficial innovations. Thus, a one-size-fits-all approach to protection from the physician self-referral law's prohibitions is not optimal. The design and structure of our exceptions are intended to further several complementary goals. First, we have endeavored to remove regulatory barriers, real or perceived, to create space and flexibility for industry-led innovation in the delivery of better and more efficient coordinated health care for patients and improved health outcomes.

Second, consistent with the Secretary's priorities, the historical trend toward improving health care through better care coordination, and the increasing adoption of value-based models in the health care industry, the final exceptions are intended to create additional incentives for the industry to move away from volume-based health care delivery and payment and toward population health and other non-FFS payment models. In this regard, our exception structure incorporates additional flexibilities for compensation arrangements between parties that have increased their participation in mature value-based payment models and their assumption of downside financial risk under such models. As discussed in the proposed rule (84 FR 55776) and in more detail in this section II.A.2.b. Of the final rule, our expectation is that meaningful assumption of downside financial risk would not only serve the overall transformation of industry payment systems, but could also curb, at Start Printed Page 77507least to some degree, FFS incentives to order medically unnecessary or overly costly items and services, key patient and program harms addressed by the physician self-referral law (and other Federal fraud and abuse laws).

The current exceptions to the physician self-referral law include requirements that may create significant challenges for parties that wish to develop novel financial arrangements to facilitate their successful participation in health care delivery and payment reform efforts (84 FR 55776 through 55778). Most of the commonly relied upon exceptions to the physician self-referral law include requirements related to compensation that may be difficult to satisfy where the arrangement is designed to foster the behavior shaping necessary for the provision of high-quality patient care that is not reimbursed on a traditional FFS basis. Requirements that compensation be set in advance, fair market value, and not take into account the volume or value of a physician's referrals or the other business generated by the physician may inhibit the innovation necessary to achieve well-coordinated care that results in better health outcomes and reduced expenditures (or reduced growth in expenditures). For example, depending on their structure, arrangements for the distribution of shared savings or repayment of shared losses, gainsharing arrangements, and pay-for-performance arrangements that provide for payments to refrain from ordering unnecessary care, among others, may be unable to satisfy the requirements of an existing exception to the physician self-referral law.

Thus, rather than being a check on bad actors, in the context of value-based care models, the physician self-referral law may actually be having a chilling effect on models and arrangements designed to bend the cost curve and improve quality of care to patients. We have carefully considered the CMS RFI comments, the comments to the proposed rule, and anecdotal information shared by stakeholders regarding the impact of the specific requirements that compensation must be set in advance, fair market value, and not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician, law enforcement and judicial activity related to these requirements, and our own observations from our work (including our work on fraud and abuse waivers for CMS accountable care and other models). We remain concerned that the inclusion of such requirements in the exceptions for value-based arrangements at § 411.357(aa) would conflict with our goal of addressing regulatory barriers to value-based care transformation. As discussed in more detail below, we are not including these requirements in the final exceptions for value-based arrangements at § 411.357(aa).

We note that two of the final exceptions for value-based arrangements are available to protect arrangements even when payments from the payor are made on a FFS basis. Even so, we are not finalizing a requirement that remuneration is consistent with fair market value and not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician for the entity. Instead, we are finalizing a carefully woven fabric of safeguards, including requirements incorporated through the applicable value-based definitions. The disincentives for overutilization, stinting on patient care, and other harms the physician self-referral law was intended to address that are built into the value-based definitions will operate in tandem with the requirements included in the exceptions and are sufficient to protect against program and patient abuse.

This is especially true where a value-based enterprise assumes full or meaningful downside financial risk. The beneficiary's right to choose a provider of care is expressed and reinforced in almost every aspect of the Medicare program. We believe that a patient's control over who provides his or her care directly contributes to improved health outcomes and patient satisfaction, enhanced quality of care and efficiency in the delivery of care, increased competition among providers, and reduced medical costs, all of which are aims of the Medicare program. Protection of patient choice is especially critical in the context of referrals made by a physician to an entity with which the physician has a financial relationship, as the physician's financial self-interest may impact, if not infringe on, patients' rights to control who furnishes their care.

For this reason, we are making compliance with § 411.354(d)(4)(iv) a requirement of the exceptions that apply to employment arrangements, personal service arrangements, or managed care contracts that purport to restrict or direct physician referrals, including the exceptions at § 411.357(aa) for value-based arrangements. We are finalizing in all three exceptions at § 411.357(aa) a separate requirement to ensure that, regardless of the nature of the value-based arrangement and its value-based purpose(s), the regulation adequately protects a patient's choice of health care provider, the physician's medical judgment, and the ability of health insurers to efficiently provide care to their members. Specifically, even if the applicable exception at § 411.357(aa) does not require that the arrangement is set out in writing, any requirement to make referrals to a particular provider, practitioner, or supplier must be set out in writing and signed by the parties, and the requirement may not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier.

Or the referral is not in the patient's best medical interests in the physician's judgment. We believe that well-coordinated and managed patient care is the cornerstone of a value-based health care system. We solicited comments regarding whether it is necessary to include in the exceptions for value-based arrangements, a requirement that the parties to a value-based arrangement engage in value-based activities that include, at a minimum, the coordination and management of the care of the target patient population or that the value-based arrangement is reasonably designed, at a minimum, to coordinate and manage the care of the target patient population (84 FR 55780). We are not including such a requirement in the final exceptions at § 411.357(aa).

In our experience, and as confirmed by commenters, most arrangements that qualify as value-based arrangements, by their nature, have care coordination and management at their heart, eliminating the need for an explicit requirement. Moreover, we remain concerned that requiring every value-based arrangement to include the coordination and management of care of the target patient population could leave beneficial value-based arrangements that do not directly coordinate or manage the care of the target patient population without access to any of the new exceptions at § 411.357(aa) and potentially unable to meet the requirements of any existing exception to the physician self-referral law. Finally, we have endeavored to be as neutral as possible with respect to the types of value-based enterprises and value-based arrangements the final exceptions will cover in order to allow for innovation and experimentation in the health care marketplace and so that compliance with the physician self-referral law is not the driver of innovation or the barrier to innovation. The final exceptions at § 411.357(aa) are applicable to the compensation Start Printed Page 77508arrangements between parties in a CMS-sponsored model, program, or other initiative (provided that the compensation arrangement at issue qualifies as “value-based arrangement”), and we believe that compensation arrangements between parties in a CMS-sponsored model, program, or other initiative can be structured to satisfy the requirements of at least one of the exceptions at § 411.357(aa).

It is our expectation that the suite of value-based exceptions finalized here will eliminate the need for any new waivers of section 1877 of the Act for value-based arrangements. (We note that parties are not required to utilize the value-based exceptions and may elect to use the waivers applicable to the CMS-sponsored models, programs, or initiatives in which they participate.) However, the final exceptions are not limited to CMS-sponsored models (that is, Innovation Center models) or establish separate exceptions with different criteria for arrangements that exist outside of CMS-sponsored models. At § 411.357(aa)(1), we are finalizing an exception that applies to a value-based arrangement where a value-based enterprise has, during the entire duration of the arrangement, assumed full financial risk from a payor for patient care services for a target patient population. At § 411.357(aa)(2), we are finalizing an exception that applies to a value-based arrangement under which the physician is at meaningful downside financial risk for failure to achieve the value-based purposes of the value-based enterprise during the entire duration of the arrangement.

Finally, at § 411.357(aa)(3), we are finalizing an exception that applies to any value-based arrangement, provided that the arrangement satisfies specified requirements. We received the following general comments on the value-based exceptions and our responses follow. Comment. Several commenters encouraged CMS and OIG to work together to more closely align their final rules.

The commenters expressed concern that notable differences between the two rules, if finalized as proposed, would create a dual regulatory environment, where a value-based arrangement could meet the requirements for protection under one law but not the other, which could hinder the transition to a value-based health care delivery and payment system. These commenters expressed concern with administrative burden and compliance concerns in the event that the OIG and CMS final rules are not aligned. One commenter viewed the exceptions to the physician self-referral law as having little value if the safe harbors to the anti-kickback statute are not revised to mirror the exceptions noting that participants are likely to abide by the more stringent requirements included in the safe harbors. Response.

We share the commenters' concerns about dual regulatory schemes and the challenges for stakeholders in ensuring compliance with both. We have worked closely with OIG to ensure consistency between our respective rules to reduce administrative burden on the regulated industry. As noted in section II.A.2.a. Of this final rule, the final value-based definitions at § 411.351 are aligned in nearly all respects with OIG's final value-based definitions.

However, because of the fundamental differences in the statutory structure, operation, and penalties between the physician self-referral law and the anti-kickback statute, complete alignment between the exceptions to the physician self-referral law and safe harbors to the anti-kickback statute is not feasible. Reflecting these statutory differences, the regulations that CMS and OIG are finalizing include intentional differences that allow the anti-kickback statute to provide “backstop” protection for Federal health care programs and beneficiaries against abusive arrangements that involve the exchange of remuneration intended to induce or reward referrals under arrangements that could potentially satisfy the requirements of an exception to the physician self-referral law. In this way, the CMS and OIG regulations, operating together, balance the need for parties entering into arrangements that are subject to both laws to develop and implement value-based arrangements that avoid the strict liability referral and billing prohibitions of the physician self-referral law, while ensuring that law enforcement, including OIG, can take action against parties engaging in arrangements that are intentional kickback schemes. Comment.

A few commenters recommended that we finalize one all-inclusive exception to the physician self-referral law for any type of value-based arrangement rather than the three-exception structure proposed. These commenters asserted that replacing the three value-based exceptions with one exception would reduce the complexity of the regulatory scheme and the burden associated with the transition to value-based health care delivery and payment. Response. We are finalizing our proposed structure with three exceptions to the physician self-referral law that apply based on the level of risk assumed by the value-based enterprise or the physician who is a party to the value-based arrangement and the characteristics of the value-based arrangement.

We disagree with the commenters that one exception would be less complex and burdensome, and do not believe that a one-size fits all approach to exceptions to the physician self-referral law to facilitate the transition to a value-based health care delivery and payment system is possible. Comment. The majority of commenters strongly urged CMS to not include in any of the final value-based exceptions the “traditional” requirements that compensation is set in advance, fair market value, and not determined in any manner that takes into account the volume or value of a physician's referrals or other business generated by the physician for the entity. Some commenters also requested that we not include a requirement that the value-based arrangement is commercially reasonable.

The commenters opined that inclusion of these standards in the context of value-based health care delivery and payment is neither appropriate nor necessary, and asserted that inclusion of these standards would create a barrier to the transition to a value-based health care delivery and payment system, leaving the value-based exceptions of limited or no utility. These commenters noted that nonmonetary remuneration, in particular, that is provided under a value-based arrangement is not necessarily consistent with the fair market value of items or services provided by the recipient (or value-based activities undertaken by the recipient) and asserted that requiring that such compensation is fair market value would impact the ability of parties to share necessary infrastructure, care coordination, and patient engagement tools. The commenters also stated that many value-based arrangements are, by nature, related to the volume or value of referrals, and requiring that compensation is not determined in any manner that takes into account the volume or value of a physician's referrals or other business generated by the physician would limit the utility of the exceptions. Finally, a few commenters asserted that there is no need for a commercial reasonableness standard in light of the definition of “value-based purpose,” which the commenters interpreted to serve the same function and require the same analysis as that of the commercial reasonableness of an arrangement.

These commenters also asserted that value-based arrangements are, by their Start Printed Page 77509nature, commercially reasonable. In contrast, a few commenters urged CMS to include requirements that the value-based arrangement is commercially reasonable, the compensation is not determined in any manner that takes into account the volume or value of a physician's referrals or other business generated by the physician, and the compensation is fair market value in order to protect against program or patient abuse. The commenters did not explain why omitting these requirements creates a risk of program or patient abuse. Response.

As noted above and for the reasons described in the proposed rule, we are not including in the final exceptions at § 411.357(aa) the traditional requirements that compensation is set in advance, consistent with fair market value of the value-based activities provided under the value-based arrangement, and not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician for the entity. However, we are requiring that the compensation arrangement is commercially reasonable. As we stated in the proposed rule, disincentives for overutilization, stinting on patient care, and other harms the physician self-referral law was intended to address are built into the value-based definitions and will operate in tandem with the requirements included in the exceptions to protect against program and patient abuse (84 FR 55777). It is this framework that allows us to forgo the requirements in the current exceptions to the physician self-referral law that may create significant challenges to innovation in a value-based health care delivery and payment system.

We are cognizant that requirements that remuneration be fair market value and not take into account the volume or value of a physician's referrals or the other business generated by a physician may inhibit the innovation necessary to achieve well-coordinated care that results in better health outcomes and reduced expenditures (or reduced growth in expenditures). We agree with the commenters that these standards, which play an important role in the other exceptions to the physician self-referral law, may be counter to the underlying policy goals of value-based health care delivery and payment. We also agree that compensation arrangements that qualify as value-based arrangements under the new value-based definitions at § 411.351, satisfy all the requirements of an applicable exception at final § 411.357(aa), and are aimed at reducing cost and improving quality are likely commercially reasonable. Even so, we believe that this additional program integrity safeguard is warranted.

As defined at final § 411.351, “commercially reasonable” means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. The requirement at final § 411.357(aa)(3)(vi) will ensure that parties to a value-based arrangement structure the arrangement in a manner intended to further their legitimate business purposes, which must include achievement of the value-based purpose(s) of the value-based enterprise of which they are participants. Comment. Several commenters urged us to create separate exceptions for CMS-sponsored model arrangements and CMS-sponsored model patient incentives consistent with existing waivers for these programs that would work in conjunction with or mirror the safe harbors at proposed 42 CFR 1001.952(ii).

Some commenters expressed concern over parties having to identify and comply with an applicable exception to the physician self-referral law and also comply with the safe harbor under the anti-kickback statute for CMS-sponsored programs. Several other commenters requested assurance that all existing fraud and abuse waivers for CMS-sponsored models, programs, and initiatives will remain in effect as implemented and will not be impacted by the new exceptions for value-based arrangements. Response. The commenters did not provide any specific examples of existing financial arrangements under a CMS-sponsored model, program, or other initiative between an entity and a physician (or immediate family member) to which none of the exceptions at final § 411.357(aa)(3) would apply.

We carefully evaluated our final exceptions against the existing CMS-sponsored models, programs, and other initiatives, and are confident that at least one of the new exceptions at § 411.357(aa) is applicable to the types of compensation arrangements contemplated under each model, program, or initiative. The design of the final exceptions should result in a smooth transition from participation in a CMS-sponsored model, program, or initiative if the parties wish to continue their compensation arrangements and rely on the new value-based exceptions at § 411.357(aa). Thus, it is not necessary to establish an exception specific to arrangements undertaken pursuant to a CMS-sponsored model, program, or initiative as requested by the commenters. Importantly, the existing model-specific or program-specific fraud and abuse waivers will remain in place and are not affected by the existence of the value-based exceptions.

Also, the Secretary retains authority under section 1115A(d)(1) of the Act to waive certain fraud and abuse laws as necessary solely for purposes of testing payment and service delivery models developed by the Innovation Center, and this authority can be used to address future financial arrangements under Innovation Center models that may not fit within the final value-based exceptions framework. Finally, the final fraud and abuse waivers issued in connection with the Shared Savings Program are permanent waivers that are unaffected by the value-based exceptions finalized in this final rule. Comment. Some commenters sought clarification regarding the interaction between the value-based exceptions and existing exceptions to the physician self-referral law.

A few commenters questioned whether an entity currently relies on the exception for bona fide employment relationships at § 411.357(c) to protect compensation arrangements with employed physicians may continue to utilize the exception at § 411.357(c), or whether its compensation arrangements that qualify as value-based arrangements must satisfy the requirements of one of the new value-based exceptions at § 411.357(aa). The commenters stated a desire to continue to utilize the exception at § 411.357(c) for value-based arrangements with employed physicians rather than the new value-based exceptions. The commenters also sought guidance regarding whether the value-based exceptions could be utilized concurrently with “traditional exceptions” when an entity has multiple compensation arrangements with the same physician and, if so, how requirements of the exceptions, such as the requirement that compensation is fair market value, would apply if the parties are utilizing multiple exceptions. A few commenters requested that we confirm that compensation for care coordination, quality improvement, and cost containment activities are not prohibited under the exception for bona fide employment relationships or the services exceptions at § 411.355.

Response. Nothing in this final rule mandates the use of the value-based exceptions. As we have stated before, parties may use any applicable exception to the physician self-referral law provided that all the requirements of the exception are satisfied (66 FR 916 and 72 FR 51047). The value-based Start Printed Page 77510exceptions, however, are only available to parties that qualify under the value-based definitions.

Parties may utilize the exception at § 411.357(c) to protect a value-based arrangement, however, the value-based arrangement must satisfy all the requirements of the exception in order to avoid the referral and billing prohibitions of the physician self-referral law. The same is true with respect to the availability of and compliance with any other existing exception that is applicable to the parties' financial relationship or the physician's referrals of designated health services. The exception for bona fide employment relationships includes requirements that the arrangement is commercially reasonable, the compensation paid to the physician is fair market value, and the compensation is not determined in any manner that takes into account the volume or value of the physician's referrals. None of these requirements are included in the final exceptions at § 411.357(aa).

Thus, depending on the terms and conditions of the value-based arrangement, the arrangement may be unable to satisfy all the requirements of the exception for bona fide employment relationships. That determination is, of course, fact-specific. Comment. Several commenters expressed concern that the requirements of the value-based definitions and exceptions could disadvantage rural providers and small physician practices that desire to participate in value-based arrangements, and that these providers and suppliers face greater challenges when transitioning to a value-based health care delivery and payment system.

The commenters stated that these challenges include financial burdens, the complexity of the value-based exceptions and definitions, and inadequate resources to successfully implement value-based arrangements. Commenters urged CMS to make revisions to the proposed value-based exceptions to accommodate rural providers and small physician practices, specifically suggesting that we either limit the number of requirements under the value-based exceptions that would be applicable to rural providers and small physician practices to help alleviate the burden associated with complying with the exceptions or establish a separate, less onerous exception applicable only to these providers and suppliers. Response. We are not persuaded that an exception for value-based arrangements that is exclusively available to rural providers and small physician practices is necessary, nor are we revising the exceptions to limit the requirements under the value-based exceptions applicable to these providers and suppliers.

We understand the challenges faced by rural providers and small physician practices, including resource limitations, and appreciate the important role of rural providers as a safety net for their communities. The value-based arrangements exception finalized at § 411.357(aa)(3) is applicable to all value-based arrangements, regardless of the size or nature of the parties to the arrangement, the financial risk undertaken by the value-based enterprise, or the financial risk undertaken by the physician who is a party to the value-based arrangement. We expect that this exception may be utilized by rural providers and small physician practices more frequently than the full financial risk and meaningful downside financial risk exceptions. As discussed elsewhere in this final rule, we are not requiring a financial contribution from the recipient of remuneration under any of our final value-based exceptions.

We believe this addresses some of the commenters' concerns. (1) Full Financial Risk (§ 411.357(aa)(1)) We proposed at § 411.357(aa)(1) an exception to the physician self-referral law (the “full financial risk exception”) that applies to value-based arrangements between VBE participants in a value-based enterprise that has assumed “full financial risk” for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. That is, the value-based enterprise is financially responsible (or is contractually obligated to be financially responsible within the 6 months following the commencement date of the value-based arrangement) on a prospective basis for the cost of such patient care items and services. For Medicare beneficiaries, we noted that we intend for this requirement to mean that the value-based enterprise, at a minimum, is responsible for all items and services covered under Parts A and B.

We are finalizing the exception with one modification. We are extending the period of time during which the exception will be available prior to the value-based enterprise's financial responsibility for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population. Specifically, we are replacing the requirement that the value-based enterprise is contractually obligated to be financially responsible within the 6 months following the commencement date of the value-based arrangement with a 12-month timeframe. Thus, under this final rule, the value-based enterprise must be financially responsible (or must be contractually obligated to be financially responsible within the 12 months following the commencement date of the value-based arrangement) on a prospective basis for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time.

As described in more detail below, we believe that extending this “pre-risk period” to 12 months is consistent with the timeframe established in the Shared Savings Program pre-participation waiver (80 FR 66742), and, as with the Shared Savings Program pre-participation waiver, we do not believe that establishing a 12-month pre-risk period poses a risk of program or patient abuse. As we stated in the proposed rule, full financial risk may take the form of capitation payments (that is, a predetermined payment per patient per month or other period of time) or global budget payment from a payor that compensates the value-based enterprise for providing all patient care items and services for a target patient population for a predetermined period of time (84 FR 55779). We noted that the full financial risk exception would not prohibit other approaches to full financial risk and sought comment on other approaches to full financial risk that may exist currently or that stakeholders anticipate for the future. We are not prescribing a specific manner for the assumption of full financial risk in this final rule.

A value-based enterprise need not be a separate legal entity with the power to contract on its own (84 FR 55779). Rather, networks of physicians, entities furnishing designated health services, and other components of the health care system collaborating to achieve the goals of a value-based health care system, organized with legal formality or not, may qualify as a value-based enterprise. A value-based enterprise may assume legal obligations in different ways. For example, all VBE participants in a value-based enterprise could each sign the contract for the value-based enterprise to assume full financial risk from a payor.

Or, the VBE participants in a value-based enterprise could have contractual arrangements among themselves that assign risk jointly and severally. Or, similar to physicians in an independent practice association (IPA), VBE participants could vest the authority to bind all VBE participants in the value-based enterprise with a designated person that Start Printed Page 77511contracts for the assumption of full financial risk on behalf of the value-based enterprise and its VBE participants. As explained in more detail below, we are not requiring that the value-based enterprise is a separate legal entity with contracting powers or requiring a particular structure for the value-based enterprise. The value-based enterprise's financial risk must be prospective.

That is, the contract between the value-based enterprise and the payor may not allow for any additional payment to compensate for costs incurred by the value-based enterprise in providing specific patient care items and services to the target patient population, nor may any VBE participant claim payment from the payor for such items or services. We define “prospective basis” in this final rule at § 411.357(aa)(1)(vii) to mean that the value-based enterprise has assumed financial responsibility for the cost of all patient care items and services covered by the applicable payor prior to providing patient care items and services to patients in the target patient population. As noted in the proposed rule (84 FR 55780) and discussed more fully below, the final definition of “full financial risk” does not prohibit a payor from making payments to a value-based enterprise to offset losses incurred by the enterprise above those prospectively agreed to by the parties. The payment of shared savings or other incentive payments for achieving quality, performance, or other benchmarks are also not prohibited.

The final exception is available to protect value-based arrangements entered into in preparation for the implementation of the value-based enterprise's full financial risk payor contract where such arrangements begin after the value-based enterprise is contractually obligated to assume full financial risk for the cost of patient care items and services for the target patient population but prior to the date the provision of patient care items and services under the contract begin. As stated above, the final exception limits this period to the 12 months prior to the effective date of the full financial risk payor contract. In other words, the value-based enterprise must be at full financial risk within the 12 months following the commencement of the value-based arrangement. We believe that full financial risk is one of the defining characteristic of a mature value-based payment system.

When a value-based enterprise is at full financial risk for the cost of all patient care services, the incentives to order unnecessary services or steer patients to higher-cost sites of service are diminished. Even when downstream contractors are paid on something other than a full-risk basis, the value-based enterprise itself is incented to monitor for appropriate utilization, referral patterns, and quality performance, which we believe helps to reduce the risk of program or patient abuse. Accordingly, these kinds of payment limitations provide stronger and more effective safeguards against increases in the volume and costs of services than the physician self-referral law ever placed on the FFS system. Nonetheless, as a precaution, we proposed and are finalizing several important safeguards in the full financial risk exception.

The value-based enterprise must be at full financial risk during the entire duration of the value-based arrangement for which the parties to the arrangement seek protection (84 FR 55780). Thus, the final exception will not protect arrangements that begin at some point during a period when the value-based enterprise has assumed full financial risk, but that continue into a timeframe when the safeguards intrinsic to full-financial risk payment, such as the disincentive to overutilize or stint on medically necessary care, no longer exist. However, one or both of the other exceptions finalized at § 411.357(aa)(2) and (3) may be available to protect value-based arrangements that exist during a period when the value-based enterprise is not at full financial risk (or contractually obligated to be at full financial risk within the 12 months following the commencement of the value-based arrangement) for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population. We also proposed and are finalizing a requirement that the remuneration under the value-based arrangement is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population.

As we discussed in the proposed rule, we recognize that payments under certain incentive payment arrangements, such as gainsharing arrangements, may be difficult to tie to specific items or services furnished by a VBE participant (84 FR 55780). We do not interpret the requirement at § 411.357(aa)(1)(ii) as mandating a one-to-one payment for an item or service (or other value-based activity). Gainsharing payments, shared savings distributions, and similar payments may result from value-based activities undertaken by the recipient of the payment for patients in the target patient population. The requirement that the remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population addresses this issue.

We intend for this to be an objective standard. That is, the remuneration must, in fact, be for or result from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population (84 FR 55780). The final exception, therefore, will not protect payments for referrals or any other actions or business unrelated to the target patient population, such as general marketing or sales arrangements. With respect to in-kind remuneration, it is our position that the remuneration must be necessary and not simply duplicate technology or other infrastructure that the recipient already has.

Finally, although the remuneration must be for or result from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population, parties would not be prohibited from using the remuneration for the benefit of patients who are not part of the target patient population. In the proposed rule, we discussed the fact that integrated into most of the CMS-sponsored models is a requirement that any remuneration between parties to an allowable financial arrangement is not provided as an inducement to reduce or limit medically necessary items or services to any patient in the assigned patient population (84 FR 55780). This is an important safeguard for patient safety and quality of care, regardless of whether Medicare is the ultimate payor for the services. Therefore, we proposed a requirement at § 411.357(aa)(1)(iii) that remuneration under a value-based arrangement is not provided as an inducement to reduce or limit medically necessary items or services to any patient, whether in the target patient population or not.

We are finalizing this requirement at § 411.357(aa)(1)(iii). We note that remuneration that leads to a reduction in medically necessary services would be inherently suspect and could implicate sections 1128A(b)(1) and (2) of the Act. In addition, we proposed to protect only those value-based arrangements under which remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement (84 FR 55781). Although this requirement is similar to the requirement that remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population, as discussed in the proposed rule, it is Start Printed Page 77512intended to address a different concern.

We are finalizing at § 411.357(aa)(1)(iv) the requirement that the remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement. The final exception does not protect arrangements where one or both parties have made referrals or other business not covered by the value-based arrangement a condition of the remuneration. By way of example, if the value-based enterprise is at full financial risk for the total cost of care for all of a commercial payor's enrollees in a particular county, the exception will not protect a value-based arrangement between an entity and a physician that are VBE participants in the value-based enterprise if the entity requires the physician to refer Medicare patients who are not part of the target patient population for designated health services furnished by the entity. Similarly, the exception will not protect a value-based arrangement related to knee replacement services furnished to Medicare beneficiaries if the arrangement requires that the physician perform all his or her other orthopedic surgeries at the hospital.

We also proposed and are finalizing a requirement at § 411.357(aa)(1)(v) related to directing a physician's referrals to a particular provider, practitioner, or supplier (84 FR 55781). Under final § 411.357(aa)(1)(v), if remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions. (A) The requirement to make referrals to a particular provider, practitioner, or supplier must be set out in writing and signed by the parties. And (B) the requirement to make referrals to a particular provider, practitioner, or supplier may not apply if the patient expresses a preference for a different provider, practitioner, or supplier.

The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment. See section II.B.4. Of this final rule for a complete discussion of our interpretation of this requirement.

Finally, we proposed to require that records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement be maintained for a period of at least 6 years and made available to the Secretary upon request (84 FR 55781). We noted in the proposed rule that requirements similar to this are found in our existing regulations in the group practice rules at § 411.352(d)(2) and (i), the exception for physician recruitment at § 411.357(e)(4)(iv), and the exception for assistance to compensate a nonphysician practitioner at § 411.357(x)(2) (84 FR 55781). We are finalizing at § 411.357(aa)(3)(xi) the requirement that records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Secretary upon request. We expect that parties are familiar with these requirements and that the maintenance of such records is part of their routine business practices.

As we discussed in the proposed rule (84 FR 55781), we consider the exception at § 411.357(aa)(1) comparable, in some respects, to the exception at § 411.357(n) for risk-sharing arrangements, which, as we noted in Phase II, is intended to be a broad exception with maximum flexibility, covering all risk-sharing compensation paid to a physician by any type of health plan, insurance company, or health maintenance organization (that is, any “managed care organization” (MCO)) or IPA, provided the arrangement relates to enrollees and meets the conditions set forth in the exception (69 FR 16114). A downstream arrangement that creates an indirect compensation arrangement between an MCO or IPA and a physician is included within the scope of the exception for risk-sharing arrangements. (See section II.A.2.b.(4) of this final rule for a full discussion of the applicability or the exception for risk-sharing arrangements at § 411.357(n).) Although the final exception at § 411.357(aa)(1) is not limited to “risk-sharing compensation” paid to a physician, but, rather, covers any type of remuneration paid under a value-based arrangement that is for or results from value-based activities undertaken by the recipient of the remuneration, for the reasons discussed throughout section II.A. Of this final rule, we believe that the flexibility provided in the exception for risk-sharing arrangements is also warranted in the full financial risk exception.

Finally, like the exception at § 411.357(n) for risk-sharing arrangements, we did not propose, nor are we finalizing, documentation requirements in the full financial risk exception. Nevertheless, it is a good business practice to reduce to writing any arrangement between referral sources as it allows the parties to monitor and confirm that an arrangement is operating as intended. We received the following comments and our responses follow. Comment.

Several commenters urged CMS to expand the definition of “full financial risk” at § 411.357(aa)(1)(vii) to exclude defined sets of patient care items or services for a target patient population, or specific diseases or conditions, similar to episode-based bundled payment models. By way of example, commenters suggested that full financial risk should be limited to only the items and services required to treat patients with diabetes or during an episode of care for a knee replacement. Commenters perceived the full financial risk exception as having limited utility, asserting that the health care industry is currently not well-positioned to take on full financial risk for all patient care items and services covered by the applicable payor for each patient in the target patient population. Commenters suggested that allowing protection under the full financial risk exception for arrangements where the parties take on full financial risk for only a subset of items or services covered by the applicable payor, such as joint replacement surgery, would increase the utility of the full financial exception and help to facilitate the transition to a value-based health care delivery and payment system.

Response. We are not revising the definition of “full financial risk” to mean a defined set of patient care items or services (similar to episode-based bundled payment models) or anything less than financial responsibility, on a prospective basis, for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population. To do so could undermine the Secretary's policy goals of moving more health care providers and practitioners into two-sided risk payment structures. The full financial risk exception applies to value-based arrangements between VBE participants in a value-based enterprise that has assumed “full financial risk” on a prospective basis for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time.

It also applies to a value-based arrangement between the value-based enterprise (if it is an entity as defined at § 411.351) and a physician who is a VBE participant in the value-based enterprise. The value-based enterprise must be financially responsible (or be contractually obligated to be financially responsible within the 12 months following the commencement date of the value-based Start Printed Page 77513arrangement) on a prospective basis for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. As noted in the proposed rule and above, we believe that full financial risk is an important defining characteristic of a mature value-based health care delivery and payment system (84 FR 55780). When a value-based enterprise is at full financial risk for the cost of all patient care items and services, the incentives to order unnecessary services or steer patients to high-cost sites of services are diminished.

Those same incentives are not necessarily present in episode-based bundled payment models. Expanding the applicability of the exception at § 411.357(aa)(1) to protect value-based arrangements under episode-based bundled payment models would result in heightened program integrity concerns, and therefore, would not fall within the Secretary's authority under section 1877(b)(4) of the Act upon which we relied to establish this exception. We recognize that providers may not be well-positioned at this time to transition to a full financial risk model. However, it is our hope that, by reducing the burden of the physician self-referral law, we can provide a pathway for participants in the value-based system to evolve and more meaningfully participate in the value-based system.

As discussed in detail in II.A.2.b.(3). Of this final rule, we are finalizing at § 411.357(aa)(3) an exception applicable to value-based arrangements where the value-based enterprise assumes less than full financial risk, including arrangements where neither the value-based enterprise nor the parties to the particular arrangement have assumed any financial risk. That exception may facilitate the entry of providers and suppliers into value-based health care delivery and payment with the goal of moving eventually to two-sided risk models. Comment.

Several commenters stated that the full financial risk exception would be of limited utility if high-cost or specialty items and services, such as organ transplants or pharmacy benefits, are not carved out of the definition of “full financial risk.” The commenters noted that, even in more advanced value-based arrangements, payors exclude high-cost or specialty items or services from the risk arrangement. The commenters urged CMS to permit a value-based enterprise to qualify as being at full financial risk without taking on the responsibility for high cost or specialty items and services. Similarly, these commenters requested clarification regarding the ability of the value-based enterprise to offset losses while still meeting the definition of full financial risk for purposes of the exception. Other commenters urged CMS to allow a value-based enterprise to enter into payor arrangements with risk mitigation terms to protect against catastrophic losses, such as risk corridors, global risk adjustments, reinsurance, stop loss agreements.

Response. We decline to carve out high-cost or specialty items or services from the definition of “full financial risk.” In addition, we do not believe that revisions are necessary to specifically address mechanisms by which parties to a full financial risk payor arrangement may protect against significant or catastrophic losses. Further, the exclusion of high-cost or specialty items and services could potentially interfere with private payor contracts among health care providers, suppliers, and physicians. Importantly, nothing in the final full financial risk exception or the definition of “full financial risk” prohibits a value-based enterprise from contracting with a payor for stop-loss protection or applying risk corridors to limit exposure to significant losses related to such high-cost items or services or overall expenses.

A payor arrangement may include risk mitigation terms such as risk corridors, global risk adjustments, reinsurance, or stop-loss provisions to protect against significant and catastrophic losses. As noted above, the financial risk assumed by the value-based enterprise must be prospective. Thus, the contract between the value-based enterprise and the payor may not allow for any additional fee for service or other payments to compensate for costs incurred by the value-based enterprise in providing specific patient care items and services to the target patient population, nor may any VBE participant claim payment from the payor for such items or services. Risk mitigation tools are not new to CMS-sponsored value-based initiatives.

In fact, some of the initiatives of the Innovation Center, where Medicare is the payor, anticipate potential burdens on participants related to high cost items and services and the need for protection against significant and catastrophic losses. These Innovation Center initiatives include stop-loss provisions to mitigate the risk of overall costs being higher than expected. For instance, the Bundled Payment for Care Improvement, Next Gen ACO, and Comprehensive Care for Joint Replacement models all include some form of stop-loss assurance to mitigate financial risk. Finally, there is nothing in this final rule that will prohibit a value-based enterprise and a payor from negotiating and designing a full financial risk payor arrangement that would address the concerns raised by the commenters.

We are not imposing a specific limit on the amount of loss coverage a value-based enterprise may have, but we caution that we will expect any stop-loss or other risk adjustment provisions to act as protection for the value-based enterprise against catastrophic losses and not a means by which to shift material financial risk back to the payor. To be clear, the definition of “full financial risk” would not permit the full offset of a value-based enterprise's losses. Comment. The majority of commenters agreed that the full financial risk exception should extend to compensation arrangements related to activities taken in preparation for the implementation of the value-based enterprises' full financial risk payor contract, but requested that CMS extend the 6-month “pre-risk” period to a 12-month period.

The commenters noted that at least 12 months of preparation are often necessary to develop and operationalize a successful value-based enterprise, even when it will not be assuming full financial risk. Commenters highlighted activities such as the development of care redesign protocols, implementation of IT infrastructure, and deployment of care coordinators as necessary for the successful undertaking of full financial risk by a value-based enterprise and its VBE participants. Response. We are persuaded to extend the “pre-risk” period under the full financial risk exception to 12 months.

Under the regulation finalized in this final rule, the value-based enterprise must be financially responsible (or be contractually obligated to be financially responsible within the 12 months following the commencement date of the value-based arrangement) on a prospective basis for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. Extending this pre-risk period to 12 months should allow parties sufficient time to work together in preparation for taking on full financial risk. A 12-month period is consistent with the Shared Savings Program pre-participation waiver, and we are not aware of any program integrity concerns with respect to the 12-month start-up period to date. We see no reason why providing for a 12-Start Printed Page 77514month pre-risk period in the full financial risk exception would pose a risk of program or patient abuse.

Comment. Some commenters explained that certain States, such as California, require providers or suppliers that assume full financial risk for health care items and services are required to become licensed as a health plan. The commenters noted that the expense and regulatory burden associated with becoming a licensed health plan would deter most providers or suppliers from taking that step, making the full financial risk exception of no utility to them. The commenters recommended that CMS modify the full financial risk exception to address this State law issue.

Some of the commenters also noted that certain States prohibit a provider or supplier from assuming financial risk for items and services other than those typically provided by that provider or supplier type. For instance, a hospital could not assume financial risk for physician services and vice versa. Response. We are not prescribing a specific manner for the assumption of full financial risk by a value-based enterprise.

The full financial risk exception applies to value-based arrangements between VBE participants in a value-based enterprise that has assumed full financial risk on a prospective basis for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. Nothing in this final rule precludes the various VBE participants in the value-based enterprise from aggregating the risk that each individual VBE participant assumes to reach full financial risk for the value-based enterprise as a whole. For instance, assume a value-based enterprise has as its VBE participants a hospital, skilled nursing facility, physicians, and a full complement of providers and suppliers that, together, provide all the patient care services covered by an applicable payor. If each of the VBE participants is at full financial risk for the cost of all patient care items or services that it furnishes, the VBE participants could aggregate their risk so that the value-based enterprise is, in total, at full financial risk for the cost of all patient care items or services covered by the applicable payor.

Essentially, the hospital could assume full financial risk for hospital services, the skilled nursing facility could assume full financial risk for skilled nursing services, the physicians could assume full financial risk for physician services, etc. As long as there are no services covered by the applicable payor for which the VBE participants have not assumed full financial risk, the value-based enterprise will be at full financial risk for purposes of § 411.357(aa)(1). We see no reason why allocating the full financial risk among the VBE participants of the value-based enterprise—as opposed to a single organization (the value-based enterprise) assuming the full financial risk—would pose an additional risk of program or patient abuse. Finally, we note that nothing in this final rule preempts any applicable State law, and we remind parties that other exceptions may be available to protect arrangements where State law restrictions make satisfaction of certain requirements of an exception challenging or impossible.

Comment. Many commenters acknowledged the importance of preserving patient choice but stressed that, in a value-based health care delivery and payment system, the ability to guide a patient to a high quality provider is imperative. The commenters requested that we include any patient choice requirements in the regulation text of the value-based exceptions rather than cross-referencing the requirements of the special rules on compensation at § 411.354(d)(4)(iv). Response.

As discussed above, protection of patient choice is especially critical in the context of referrals made by a physician to an entity with which the physician has a financial relationship, as the physician's financial self-interest may impact, if not infringe on, a patient's right to control who furnishes his or her care. We are finalizing in the full financial risk exception a separate requirement to ensure that, regardless of the nature of the value-based arrangement and the value-based enterprise's value-based purpose(s), the regulation adequately protects a patient's choice of health care provider, the physician's medical judgment, and the ability of health insurers to efficiently provide care to their members. The final exception provides at § 411.357(aa)(1)(v) that, if remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions. (A) The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties.

And (B) the requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment. We have included this language in all three of the value-based exceptions.

Comment. A few commenters questioned whether the full financial risk exception is even necessary, suggesting that CMS should instead modify the exception at § 411.357(n) for risk-sharing arrangements to accommodate value-based arrangements where the value-based enterprise is at full financial risk. Response. We decline to modify the exception at § 411.357(n) to accommodate value-based arrangements as requested by the commenters.

As discussed more fully in section II.A.2.b.(4) of this final rule, the exception at § 411.357(n) applies to compensation arrangements between an MCO or an IPA and a physician for services provided to enrollees of a health plan, provided that the compensation arrangement qualifies as a risk-sharing arrangement. The compensation arrangement between the MCO or IPA and the physician may be direct or indirect. The exception does not apply to a compensation arrangement—whether direct or indirect—between a physician and an entity that is anything other than an MCO or IPA. The value-based exceptions finalized in this final rule will apply to any value-based arrangement, direct or indirect, between a physician and any entity that furnishes designated health services to which the physician makes referrals.

Thus, the value-based exceptions are broader in applicability than the exception for risk-sharing arrangements. As discussed in the proposed rule and above, we have designed a carefully woven fabric of definitions and exceptions that protect against program and patient abuse while providing flexibility for experimentation in the design and implementation of value-based care arrangements (84 FR 55777). We believe that this framework is crucial to achieving the Department's goal of moving to a value-based health care delivery and payment system, and that most value-based arrangements between an entity and a physician in a value-based enterprise that has assumed full financial risk should remain within this framework. (2) Value-Based Arrangements With Meaningful Downside Financial Risk to the Physician (§ 411.357(aa)(2)) As we stated in the proposed rule, a few CMS RFI commenters opined that the health care industry is in the early Start Printed Page 77515stages of its transition to value-based health care delivery and payment (84 FR 55781).

After reviewing the comments on the CMS RFI and the proposed rule, we acknowledge that, although CMS, non-Federal payors, and a significant segment of the health care industry have made advancements in value-based health care delivery and payment, many physicians and providers are not yet prepared or willing to be responsible for the total cost of patient care services for a target patient population. However, we are also aware that some physicians are participating in or considering participating in alternative payment models that provide for potential financial gain in exchange for the undertaking of some level of downside financial risk. Financial risk assumed directly by a physician will likely affect his or her practice and referral patterns in a way that curbs the influence of traditional FFS, volume-based payment. Further, financial risk is tied to the achievement or, or failure to achieve, value-based purposes incents the type of behavior-shaping necessary to transform our health care delivery system into one that improves patient outcomes, eliminates waste and inefficiencies, and reduces the costs to or growth in expenditures of payors.

Arrangements under which a physician is at meaningful downside financial risk for failure to achieve predetermined cost, quality, or other performance benchmarks contain inherent protections against program or patient abuse. In recognition of this, we proposed an exception that would protect remuneration paid under a value-based arrangement where the physician is at meaningful downside financial risk for failure to achieve the value-based purpose(s) of the value-based enterprise (the “meaningful downside financial risk exception”) (84 FR 55781). Under the meaningful downside financial risk exception, although the physician must be at meaningful downside financial risk for the entire term of the value-based arrangement, the remuneration could be paid to or from the physician. We proposed to define “meaningful downside financial risk” to mean that the physician is responsible to pay the entity no less than 25 percent of the value of the remuneration the physician receives under the value-based arrangement.

We stated that we believe that this level of financial risk is high enough to curb the influence of traditional FFS, volume-based payment and achieve the type of behavior-shaping necessary to facilitate achievement of the goals set forth in this final rule (84 FR 55782). We related the definition of “meaningful downside financial risk” to the 25 percent threshold determined by the Secretary for the statutory and regulatory exceptions for physician incentive plans at section 1877(e)(3)(B) of the Act and § 411.357(d)(2), respectively, which reference “substantial financial risk” to a physician (or physician group), and sought comment on whether defining meaningful downside financial risk as 25 percent of the value of the remuneration the physician receives under the value-based arrangement is appropriate. Upon consideration of the public comments, we are revising the definition of “meaningful downside financial risk” to mean that the physician is responsible to repay or forgo no less than 10 percent of the total value of the remuneration the physician receives under the value-based arrangement. Because the exception does not limit the type of remuneration that may be provided, under the final regulation, the risk of repayment or the amount the physician must be at risk to forgo may be no less than 10 percent of the value of the remuneration to account for remuneration that may be provided in-kind, such as infrastructure or care coordination services.

In the proposed rule, we also provided an alternative definition to meaningful downside financial risk that would also include the physician's full financial risk to the entity, recognizing that a physician who assumes full financial risk for all or a defined set of patient care services for the target patient population would certainly be considered at “meaningful downside financial risk” (84 FR 55782). We are not finalizing our proposal for an expanded definition of “meaningful downside financial risk.” As discussed in the proposed rule, because the exception at § 411.357(aa)(2) does not require the type of global risk to the value-based enterprise that is required in the full financial risk exception, additional or different requirements are necessary to protect against program or patient abuse (84 FR 55782). We proposed requiring that the physician must be at meaningful downside financial risk for the entire duration of the value-based arrangement to curtail any gaming that could occur by adding meaningful downside financial risk to a physician during only a short portion of an arrangement. We are finalizing this requirement at § 411.357(aa)(2)(i).

To buttress our oversight ability and that of our law enforcement partners, we proposed a requirement that the nature and extent of the physician's financial risk is set forth in writing. We are finalizing this requirement at § 411.357(aa)(2)(ii). We note that this is also a good business practice that allows the parties to monitor their value-based arrangements and ensure that they are operating as intended. For similar reasons, but also as a safeguard against manipulating a value-based arrangement to reward referrals, we proposed to require that the methodology used to determine the amount of the remuneration is set in advance of the furnishing of the items or services for which the remuneration is provided.

We noted that the special rule on compensation at § 411.354(d)(1) that deems compensation to be set in advance when certain conditions are met would apply, however, that provision is merely a deeming provision and parties are free to confirm satisfaction of the requirement another way. We are finalizing this requirement at § 411.357(aa)(2)(iii). Integrated into most of the CMS-sponsored models is a requirement that any remuneration between parties to an allowable financial arrangement is not provided as an inducement to reduce or limit medically necessary items or services to any patient in the assigned patient population (84 FR 55782). This is an important safeguard for patient safety and quality of care, regardless of whether Medicare is the ultimate payor for the services, and we proposed including this safeguard in the meaningful downside financial risk exception by requiring that remuneration is not provided as an inducement to reduce or limit medically necessary items or services to any patient, whether in the target patient population or not.

Remuneration that leads to a reduction in medically necessary services would be inherently suspect and could implicate sections 1128A(b)(1) and (2) of the Act. We are finalizing this requirement at § 411.357(aa)(2)(v). For the reasons we explained with respect to the full financial risk exception, we proposed to include in the meaningful downside financial risk exception requirements that the remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population. Remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement.

And that records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Start Printed Page 77516Secretary upon request. We are finalizing our proposals to include these requirements in the meaningful downside financial risk exception at § 411.357(aa)(2)(iv), (vi), and (viii). We also proposed a requirement at § 411.357(aa)(2)(vii) related to directing a physician's referrals to a particular provider, practitioner, or supplier (84 FR 55781). Under final § 411.357(aa)(2)(vii), if remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions.

(1) The requirement to make referrals to a particular provider, practitioner, or supplier must be set out in writing and signed by the parties. And (2) the requirement to make referrals to a particular provider, practitioner, or supplier may not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment.

See section II.B.4. Of this final rule for a complete discussion of our interpretation of this requirement. We received the following comments on the proposed meaningful downside financial risk exception. Our responses follow.

Comment. Several commenters disagreed with the design of the meaningful downside financial risk exception and the focus of the exception on the physician's level of risk rather than that of the entity. The commenters viewed the meaningful downside financial risk exception, as proposed, as being of limited utility and not reflective of current real-world financial risk arrangements. Some commenters urged CMS to modify the meaningful downside financial risk exception to protect arrangements where the entity assumes the financial risk noting that entities, such as hospitals, are better positioned to assume risk from payors.

These commenters expressed concern as to whether physician behavior has evolved to the point of being able to assume meaningful downside financial risk as required by the exception. Some commenters requested that we permit an entity to assume meaningful downside financial risk and then allocate the risk down to the physician. Response. We are not making the modifications suggested by the commenters.

These commenters appear to misunderstand the scope of the meaningful downside financial risk exception and the intent behind it. The meaningful downside financial risk exception covers individual compensation arrangements that qualify as value-based arrangements between an entity and a physician that are VBE participants in the same value-based enterprise, regardless of whether the value-based enterprise or the entity has assumed financial risk from a payor. The exception is available to protect value-based arrangements under which the physician has assumed financial risk from the entity that is party to the arrangement, and where such risk is tied to the achievement of the value-based purpose(s) of the value-based enterprise of which the physician and the entity are VBE participants. The value-based exceptions at § 411.357(aa) are designed to accommodate movement toward two-sided financial risk.

Although we recognize that many physicians may not be prepared or willing to assume full (or substantially full) financial risk, the exception at § 411.357(aa)(2) is available to protect those value-based arrangements under which either meaningful downside financial risk is incorporated into the physician's compensation. There is great potential for behavior-shaping when a physician's failure to achieve value-based purposes is tied to his or her remuneration. This behavior-shaping is critical to transforming our health care delivery system into one that improves patient outcomes, eliminates waste and inefficiencies, and reduces costs to or growth in expenditures of payors. Comment.

Most of the commenters that addressed the proposed exception at § 411.357(aa)(2), disliked the 25 percent threshold for qualification as meaningful downside financial risk. These commenters asserted that a 25 percent threshold is too high and would limit physician participation in value-based health care delivery and payment systems. Some of the commenters suggested that physicians who are new to value-based health care would be reluctant to put 25 percent of their compensation at risk. These commenters requested that we reduce the threshold to 10 percent, referencing a 2018 Deloitte Survey of U.S.

Physicians [] that surveyed 624 primary care and specialty physicians practicing in a variety of health care settings and found that most physicians are willing to tie approximately 10 percent of their compensation to quality and cost measures (the Deloitte Study). Several other commenters suggested a 5 percent threshold, noting that certain CMS payment systems or programs, such as advanced APMs and MIPS APMs, set financial risk percentages for physicians ranging from 5 to 9 percent. A few commenters suggested that we adopt a threshold of 15 percent for consistency with the contribution requirement under the exception for EHR items and services at § 411.357(w). Some of the commenters suggested a scaled approach under which the exception initially would require a lower level of downside financial risk and increase to a higher level of downside financial risk as the physician acclimates to and participates in the value-based health care delivery and payment system.

The commenters suggested that, in the alternative, CMS could set a lower threshold for meaningful downside financial risk in this final rule and increase the threshold in a future rulemaking. A few commenters viewed the 25 percent threshold as appropriate and consistent with the physician incentive plan rules applicable to Medicare and Medicaid managed care plans and federal health maintenance organizations. Response. We find the commenters' statements and the Deloitte Study compelling, and our final regulation incorporates a lower threshold for meaningful downside financial risk of no less than 10 percent of the total value of the remuneration the physician receives under the value-based arrangement.

The Deloitte Study found that physicians are willing to tie a greater percentage of their compensation (10 percent) to cost and quality measures than they have been previously, but physicians still need cost and quality data and analytic tools that may not be readily available to all physicians to find success in a value-based health care delivery and payment system. We believe that the assumption by a physician of 10 percent downside financial risk is sufficient to curb the influences of traditional FFS payment systems. We reiterate that, the downside financial risk threshold, for purposes of the exception at § 411.357(aa)(2), relates to remuneration from an entity to a physician. Therefore, we do not believe that it is appropriate to link this threshold to the level of risk related to payments for services from a payor, for example, by linking to risk levels under MIPS or the Medicare Access and CHIP Reauthorization Act (MACRA).

Comment. Several commenters urged us to revise the definition of “meaningful downside financial risk” to mirror the risk levels found in OIG's proposed safe harbor for value-based arrangements with substantial downside financial risk. The commenters suggested this would avoid the need for Start Printed Page 77517parties to navigate different regulatory frameworks under the anti-kickback statute and physician self-referral law. These commenters asserted that the lack of alignment between OIG and CMS could create unnecessary burden on the regulated industry.

Response. It appears that the comments are based on a perception of the meaningful downside financial risk exception as a parallel to the OIG substantial downside financial risk safe harbor. It is not. Under the substantial downside financial risk safe harbor, the required financial risk is at the value-based enterprise level.

That is, the value-based enterprise, either directly or through its VBE participants, must assume substantial downside financial risk in order for the safe harbor to be available. Under the meaningful downside financial risk exception, the focus is on the risk assumed by the individual physician to the value-based arrangement being assessed for satisfaction of the requirements of the exception. It would be incongruous to match the risk requirements in the exception and safe harbor as requested by the commenters. Comment.

Some commenters questioned whether the meaningful downside financial risk exception applies only when a physician is required to repay remuneration already received or whether the exception would also apply to value-based arrangements under which a portion of the physician's compensation is withheld until achievement of the value-based purpose(s) of the value-based enterprise. Other commenters asked whether the meaningful downside financial risk exception is applicable to value-based arrangements under which the physician is eligible to receive or would forgo incentive pay, depending on whether the physician satisfies the goals of the value-based arrangement or the performance or quality standards required under the value-based arrangement. A few commenters expressed concern that a repayment requirement could result in noncompliance where cash flow or other factors impact the ability of the physician to make repayment. The commenters also asserted that a “repayment-only” policy is inconsistent with the structure of many financial risk arrangements that permit payments to either be withheld, reduced, or repaid for not meeting stated goals or performance and quality standards.

Response. We are clarifying the regulation at § 411.357(aa)(2)(ix) to explicitly state that meaningful downside financial risk means that the physician is responsible to repay or forgo no less than 10 percent of the total value of the remuneration the physician receives under the value-based arrangement. The scope of the meaningful downside financial risk exception is not limited to value-based arrangements under which a physician is required to repay remuneration already received from the entity. The structures of the financial terms of a value-based arrangement described by the commenters are permissible, provided that the arrangement otherwise complies with the value-based definitions and satisfies all the requirements of the meaningful downside financial risk exception.

Withholds, repayment requirements, or incentive pay tied to meeting goals or outcome measures are all permissible options for structuring the financial terms of a value-based arrangement between an entity and a physician, provided that the physician's downside financial risk is tied to the achievement of the value-based purpose(s) of the value-based enterprise and not the goals of the parties or the arrangement (unless the parties alone comprise the value-based enterprise). In addition, the meaningful downside financial risk exception applies only where the physician is at risk for failure to achieve the value-based purpose(s) of the value-based enterprise during the entire duration of the value-based arrangement. To illustrate, if a physician is entitled to a base payment of $50,000 with the ability to earn an additional $25,000 for performing certain value-based activities, meaningful downside financial risk equals at least 10 percent of the total compensation of $75,000, or $7,500. The $25,000 that is at risk for purposes of this example exceeds the 10 percent requirement.

However, unless the receipt of the $25,000 is tied to the achievement of the value-based purpose(s) of the value-based enterprise, the arrangement will not satisfy the requirement at final § 411.357(aa)(2)(i). By way of another example, assume that there exists a value-based arrangement between an entity and a physician that are the only VBE participants in the value-based enterprise (that is, they are a value-based enterprise of two) under which the total remuneration potentially due to the physician is $100,000, but $20,000 is withheld and payable only upon successfully completing the value-based activities called for under the arrangement. Meaningful downside financial risk equals at least 10 percent of the total compensation of the $100,000 total available remuneration, or $10,000. The $20,000 withhold in this example exceeds the 10 percent requirement.

Comment. Some commenters shared their confusion regarding the proposed alternative definition of meaningful downside financial risk under which a physician would be considered to be at meaningful downside financial risk if the physician is financially responsible to the entity on a prospective basis for the cost of all or a defined set of patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. The commenters requested that CMS revise or omit the alternative definition. The commenters also questioned the utility of the definition, noting that it is unlikely that an individual physician would assume full financial risk from an entity (or a payor).

Response. We agree with the commenters that it is unlikely that an individual physician would assume full financial risk from the entity with which the physician has the value-based arrangement for the cost of all or a defined set of items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. We are not finalizing this portion of the definition of “meaningful downside financial risk” and have omitted the language from the final regulation. As set forth at final § 411.357(aa)(2)(ix), meaningful downside financial risk means that the physician is responsible to repay or forgo no less than 10 percent of the total value of the remuneration the physician receives under the value-based arrangement.

Comment. A number of commenters requested that CMS adopt the same “pre-risk” period during which the exception is applicable prior to the assumption of financial risk that was included in the proposed full financial risk exception, but did not explain the need for a pre-risk period under the meaningful downside financial risk exception, which applies only to a single arrangement between an entity and a physician. Most of the commenters requested a 12-month “pre-risk” period. Response.

We are not permitting the use of the meaningful downside financial risk exception during the period prior to the physician's assumption of meaningful downside financial risk. We see no need to allow the use of the exception at § 411.357(aa)(2) prior to the physician's assumption of meaningful downside financial risk and believe that it would be a program integrity risk to do so. The Secretary's authority at section Start Printed Page 775181877(b)(4) of the Act to issue exceptions to the physician self-referral law is limited to only those financial relationships that the Secretary determines do not pose a risk of program or patient abuse. We are concerned that unscrupulous parties could “front load” the remuneration by providing high-value remuneration to the physician in the “pre-risk” period before the physician is required to assume meaningful downside financial risk.

This concern is heightened in light of the final definition of “meaningful downside financial risk,” which sets the threshold for downside financial risk at 10 percent of the value of the remuneration rather than the 25 percent threshold proposed. Further, we note that financial risk in an arrangement between an entity and an individual physician, which is the foundation of the meaningful downside financial risk exception, is not an analog to the financial risk assumed by a value-based enterprise, which is the foundation of the full financial risk exception. As we explained in section II.A.2.b.(1). Of this final rule, VBE participants may need to develop infrastructure and perform certain activities necessary to be successful in a full financial risk payment model before the enterprise's assumption of full financial risk.

The same is not true with respect to a physician who assumes meaningful downside financial risk under an individual value-based arrangement with an entity. Comment. Several commenters asserted that the requirement that the methodology used to determine the amount of the remuneration under the value-based arrangement is set in advance of the undertaking of the value-based activities for which the remuneration is paid fails to provide sufficient flexibility. The commenters requested that we “soften” the set in advance requirement to accommodate the change of compensation formulas or other requirements established by payors.

Response. We decline to revise the requirement as requested by the commenters. As a safeguard against gaming or manipulating a value-based arrangement to reward referrals, we require in the final meaningful downside financial risk exception that the methodology used to determine the amount of the remuneration is set in advance of the undertaking of the value-based activities for which the remuneration is paid. We interpret this requirement in the same way as the requirement found throughout the exceptions to the physician self-referral law that compensation (or a formula for the compensation) is set in advance before the furnishing of the items or services for which the compensation is to be paid.

In the final meaningful downside risk exception, we are requiring only that the methodology used to determine the amount of the remuneration is set in advance of the undertaking of value-based activities for which the remuneration is paid. Parties need not know the ultimate amount of remuneration under the value-based arrangement. Thus, prior to the commencement of a value-based arrangement, if the parties agree that a physician will be paid $10 for each completed patient assessment (assuming the completion of the patient assessment qualifies as a “value-based activity”), the methodology for determining the amount of the physician's remuneration is set in advance. If the parties later determine to increase the payment to $12 for each completed patient assessment, the revised remuneration would be considered set in advance, provided that the new remuneration terms are effective on a prospective basis only.

We explore our policies regarding compensation that is set in advance with respect to outcome measures in our discussion of the value-based arrangements exception at § 411.357(aa)(3) in section II.A.1.2.b.(3). And more generally in section II.D.5. Of this final rule. (3) Value-Based Arrangements (§ 411.357(aa)(3)) The transformation to a value-based health care delivery and payment system is heavily dependent on physician engagement.

As we noted in the proposed rule, commenters on the CMS RFI stated that, because physician decisions drive the overwhelming majority of all health care spending and patient outcomes, it is not possible to transform health care without a strong, aligned partnership between entities furnishing designated health services and physicians (84 FR 55783). Those commenters noted that this alignment of financial interests is key to the behavior shaping necessary to succeed in a value-based payment system. They also asserted that permitting physicians and physician groups (especially smaller practices that are not used to risk-sharing or are too small to absorb downside financial risk) to assume only upside risk—or, for that matter, no financial risk—would encourage more physicians to participate in care coordination activities now while they continue to build toward entering into two-sided risk-sharing arrangements. In consideration of these and similar comments, as well as our belief that bold reforms to the physician self-referral regulations are necessary to foster the delivery of coordinated patient care and achieve the Secretary's vision of transitioning to a truly value-based health care delivery and payment system, we proposed an exception at § 411.357(aa)(3) for compensation arrangements that qualify as value-based arrangements, regardless of the level of risk undertaken by the value-based enterprise or any of its VBE participants (the “value-based arrangement exception”) (84 FR 55783).

As proposed, the value-based arrangement exception would permit both monetary and nonmonetary remuneration between the parties, although we considered whether to limit the scope of the exception to nonmonetary remuneration only and sought comment regarding the impact such a limitation may have on the transition to a value-based health care delivery and payment system (84 FR 55783). The final exception is not limited to the provision of only nonmonetary compensation. We also proposed to include in the value-based arrangement exception certain requirements that were included in the proposed meaningful downside financial risk exception, some of which were also included in the proposed full financial risk exception (84 FR 55783). We stated that we would interpret these requirements in the same way as in the proposed full financial risk and meaningful downside financial risk exceptions, and included them in the value-based arrangement exception for the same reasons articulated with respect to those exceptions.

These requirements are. The remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population. Remuneration is not provided as an inducement to reduce or limit medically necessary items or services to a patient in the target patient population. Remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered by the value-based arrangement.

The methodology used to determine the amount of the remuneration is set in advance of the furnishing of the items or services for which the remuneration is provided. And records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Secretary upon request (84 FR 55783).Start Printed Page 77519 Because the exception at proposed § 411.357(aa)(3) would be applicable even to value-based arrangements where neither party, but especially not the physician, has undertaken any downside financial risk, we stated that safeguards beyond those included in the meaningful downside financial risk exception are necessary to protect against program or patient abuse (84 FR 55783). To address this, we proposed to replace the requirement that remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered by the value-based arrangement with a requirement that remuneration is not conditioned on the volume or value of referrals of any patients, including patients in the target patient population, to the entity or the volume or value of any other business generated, including business covered by the value-based arrangement, by the physician for the entity. We did not propose to include a requirement that the remuneration is not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician for the entity.

We sought comments regarding this alternative proposal. The interplay of the alternative requirement with our longstanding policy that the entity of which the physician is a bona fide employee or independent contractor, or that is a party to a managed care contract with the physician, may direct the physician's referrals to a particular provider, practitioner, or supplier, as long as the compensation arrangement meets specified conditions designed to preserve the physician's judgment as to the patient's best medical interests, avoid interfering in an insurer's operations, and protect patient choice. And whether including such an alternative requirement would impede parties' ability to achieve the value-based purposes on which their value-based arrangement is premised if the entity cannot direct referrals as historically permitted. We are finalizing the proposed safeguards that are also included in the meaningful downside risk exception at § 411.357(aa)(2), but we are not finalizing the alternative proposal regarding the conditioning of remuneration.

Final § 411.357(aa)(3)(ix) requires that the remuneration under the value-based arrangement is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement. However, we are finalizing a requirement regarding patient choice, which is included in the regulations for all three of the value-based exceptions. See section II.B.4. Of this final rule for a complete discussion of our interpretation of this requirement.

In addition, we proposed requirements in the exception at § 411.357(aa)(3) that the value-based arrangement is set forth in writing and signed by the parties, and that the writing includes a description of the value-based activities to be undertaken under the arrangement. How the value-based activities are expected to further the value-based purpose(s) of the value-based enterprise. The target patient population for the arrangement. The type or nature of the remuneration.

The methodology used to determine the amount of the remuneration. And the performance or quality standards against which the recipient of the remuneration will be measured, if any (84 FR 55783). We believe that the documentation requirements are self-explanatory. We stated that, although we expect that parties would plan to satisfy the writing requirement in advance of the commencement of the value-based arrangement, the special rule at § 411.354(e)(3) (modified, in part, from existing § 411.353(g)(1)(ii)) would apply.

We are finalizing our proposal regarding the writing and signature requirements in the exception at § 411.357(aa)(3). We remind readers that the value-based purpose of the arrangement must relate to the value-based enterprise as a whole (which, as noted previously in section II.A.2.a. Of this final rule, may be the two parties to the value-based arrangement), and that the exception will not protect a “side” arrangement between two VBE participants that is unrelated to the goals and objectives (that is, the value-based purposes) of the value-based enterprise of which they are participants, even if the arrangement itself serves a value-based purpose. We also proposed to require that the performance or quality standards against which the recipient of the remuneration will be measured, if any, are objective and measurable, and that such standards must be determined prospectively, with any changes to the performance or quality standards set forth in writing and applicable only prospectively (84 FR 55784).

Because commenters expressed concern regarding the term “performance or quality standards,” and in an effort to reduce burden on stakeholders by aligning our terminology with OIG, we are modifying this requirement to apply to “outcome measures” rather than “performance or quality standards” and defining “outcome measure” at § 411.357(aa)(3)(xii) to mean a benchmark that quantifies. (A) Improvements in or maintenance of the quality of patient care. Or (B) reductions in the costs to or reductions in growth in expenditures of payors while maintaining or improving the quality of patient care. Final § 411.357(aa)(3)(ii) requires that the outcome measures against which the recipient of remuneration will be assessed, if any, are objective, measurable, and selected based on clinical evidence or credible medical support.

To promote clarity, we discuss our proposals and respond to comments on our proposals regarding the performance or quality standards against which a recipient of remuneration will be assessed in terms of the “outcome measures” against which the recipient of the remuneration will be assessed. We discuss this modification more fully below. We recognize that outcome measures may not be applicable to all value-based arrangements—for example, an arrangement under which a hospital provides needed infrastructure to a physician in the same value-based enterprise may not require the physician to meet specific outcome measures in order to receive or keep the infrastructure items or services. However, if the value-based arrangement does include outcome measures that relate to the receipt of the remuneration—for example, an arrangement to share the internal cost savings achieved if the physician meaningfully participates in the hospital's quality and outcomes improvement program and reaches or exceeds predetermined benchmarks for his or her personal performance or quality measurement—such outcome measures must be determined in advance of their implementation.

The exception would not protect arrangements where the outcome measures are set retrospectively (84 FR 55784). In the proposed rule, to align with OIG's proposals, we considered whether to require that outcome measures be designed to drive meaningful improvements in physician performance, quality, health outcomes, or efficiencies in care delivery (84 FR 55784). We sought comment regarding whether we should include this as a requirement of the value-based arrangement exception and the burden or cost of including such a requirement. As discussed more fully below, we are not including a requirement in this final rule that outcome measures must be designed to drive meaningful improvements in physician performance, quality, health outcomes, Start Printed Page 77520or efficiencies in care delivery in this final rule.

As we stated in the proposed rule, we expect that, as a prudent business practice, parties would monitor their arrangements to determine whether they are operating as intended and serving their intended purposes—regardless of whether the arrangements are value-based—and have in place mechanisms to address identified deficiencies, as appropriate (84 FR 55784). We explained that there is an implicit ongoing obligation for an entity to monitor each of its financial relationships with a physician for compliance with an applicable exception. In general, if a physician has a financial relationship with an entity that does not satisfy all the requirements of an applicable exception (after applying any special rules), section 1877(a)(1)(A) of the Act prohibits the physician from making a referral to the entity for the furnishing of designated health services for which payment may otherwise be made under Medicare, section 1877(a)(1)(B) of the Act prohibits the entity from presenting or causing to present a claim under Medicare for the designated health services furnished pursuant to a prohibited referral, and section 1877(g)(1) of the Act prohibits Medicare from making payment for a designated health service that is provided pursuant to a prohibited referral. Thus, parties must ensure the compliance of their financial relationship with an applicable exception at the time the physician makes a referral for designated health service(s).

In the proposed rule, we discussed at length the importance of monitoring arrangements that implicate the physician self-referral law (84 FR 55784). More specifically, we discussed the implicit ongoing compliance monitoring obligation for arrangements that would qualify for protection under the value-based arrangement exception at § 411.357(aa)(3). We provided a detailed example of appropriate monitoring of a value-based arrangement for compliance with the proposed exception at § 411.357(aa)(3), including the consequences of value-based activities that can no longer be considered to be reasonably designed to achieve the value-based purpose(s) of a value-based enterprise (84 FR 55784 through 55785). We considered whether to include program integrity safeguards that.

(1) Require the value-based enterprise or the VBE participant providing the remuneration to monitor to determine whether the value-based activities under the arrangement are furthering the value-based purpose(s) of the value-based enterprise. And (2) if the value-based activities will be unable to achieve the value-based purpose(s) of the arrangement, require the physician to cease referring designated health services to the entity, either immediately upon the determination that the value-based purpose(s) will not be achieved through the value-based activities or within 60 days of such determination (84 FR 55785). We sought comment regarding whether we should include these as requirements of the value-based arrangement exception, how parties could monitor for achievement of value-based purposes, and the burden or cost of including such a requirement. Specifically, we sought comment regarding whether we should require that monitoring should occur at specified intervals and, if so, what the intervals should be.

Recognizing that cost savings, in particular, may take an extended period of time to achieve, we also sought comment regarding whether to impose time limits with respect to a value-based enterprise's or VBE participant's determination that the value-based purpose of the enterprise will not be achieved through the value-based activities required under the arrangement. That is, require that the value-based purpose must be achieved within a certain timeframe, such as 3 years, and, if it is not, the value-based purpose would be deemed not achievable through the value-based activities required under the arrangement. As explained in our response to comments below, we are including an explicit monitoring requirement at final § 411.357(aa)(3)(vii). Parties seeking to utilize the value-based arrangement exception (or the value-based enterprise in which they participate) must monitor the value-based arrangement no less frequently than annually, or at least once during the term of the arrangement if the arrangement has a duration of less than 1 year, to determine whether the parties have furnished the value-based activities required under the arrangement, and whether and how continuation of the value-based activities is expected to further the value-based purpose(s) of the value-based enterprise.

If the monitoring indicates that a value-based activity is not expected to further the value-based purpose(s) of the value-based enterprise, the parties must terminate the ineffective value-based activity. The parties may do so by terminating the value-based arrangement or by modifying the arrangement to terminate the ineffective value-based activity after completion of the monitoring. If the parties complete the required action within the applicable timeframe, the ineffective value-based activity is deemed to be reasonably designed to achieve at least one value-based purpose of the value-based enterprise during the entire period during which it was undertaken by the parties. In addition, during the same timeframes, either the value-based enterprise or one or more of the parties to the arrangement must monitor progress toward attainment of the outcome measure(s), if any, against which the recipient of the remuneration is assessed.

If the monitoring indicates that an outcome measure is unattainable during the remaining term of the arrangement, the parties must terminate or replace the unattainable outcome measure within 90 consecutive calendar days after completion of the monitoring. If the parties fail to monitor outcome measures within the prescribed timeframes, or fail to terminate or replace an unattainable outcome measure within the prescribed timeframe, the value-based arrangement will no longer satisfy the requirements of the exception at § 411.357(aa)(3). We emphasize that parties may amend their value-based arrangements to address identified deficiencies at any time, provided that the amendments are prospective only, including any amendments to the compensation terms of the arrangement. We refer readers to section II.E.1.

Of this final rule for a discussion of the provisions on amending arrangements newly codified at § 411.354(d)(1). We believe that requiring immediate termination of a value-based arrangement due to an ineffective value-based activity would be counterproductive to the underlying goal of encouraging the transition to a value-based health care delivery and payment system. We are providing for the noted “grace periods” because we recognize that parties to a value-based arrangement may need time to address an ineffective value-based activity identified through their monitoring. As discussed in the proposed rule, the physician self-referral law would prohibit a physician from making referrals to an entity, and prohibit the entity from submitting claims for designated health services referred by the physician, if the value-based arrangement does not satisfy all the requirements of an applicable exception at the time of the referral.

This includes the requirement that the value-based activities undertaken under the arrangement, by definition, are reasonably designed to achieve one or more value-base purposes of the value-Start Printed Page 77521based enterprise (84 FR 55785). We believe that it is necessary to allow parties an appropriate amount of time to address the findings of their monitoring without fear of violating the physician self-referral law. We also believe that a policy under which parties that act quickly to rectify the ineffectiveness of their value-based activities will not run afoul of the physician self-referral law does not pose a risk of program or patient abuse. As described above, we are finalizing a policy under which a value-based activity will be deemed to be reasonably designed to achieve at least one value-based purpose of the value-based enterprise during the entire period during which it was undertaken by the parties if the parties terminate the arrangement within 30 consecutive calendar days after the completion of the required monitoring or modify their arrangement to terminate the ineffective value-based activity within 90 consecutive calendar days after completion of the monitoring.

Similarly, we are finalizing a policy that provides for 90 consecutive calendar days for parties to terminate or replace an outcome measure that their monitoring indicates is unattainable. To illustrate the monitoring requirement at final § 411.357(aa)(3)(vii) with respect to monitoring of value-based activities, we apply it here in the context of the scenario described in the proposed rule (84 FR 55784 through 55785). Assume a hospital revised its care protocol for screening for a certain type of cancer to incorporate newly issued guidelines from a nationally recognized organization. The new guidelines, and the revised protocol, no longer support a single screening modality for the disease.

Instead, the organization recommends screening by combining two modalities to achieve more accurate results. The revised guidelines and hospital care protocol are intended to improve the quality of care for patients by detecting more cancers and avoiding potential unnecessary overtreatment of false positive results (which can be frequent for single-modality screening for the disease). The hospital observes that most community physicians continue to refer patients to the hospital for single-modality screening. To align referring physician practices with the hospital's revised care protocol, the hospital offers to pay physicians $10 for each instance that they order dual-modality screening in accordance with the revised care protocol during a 2-year period beginning on January 1, 2021.

The hospital expects that it would take approximately 2 years to shape physician behavior to always follow the recommended care protocol (except when not medically appropriate for the particular patient). Assume that both single-modality and dual-modality screening are designated health services payable by Medicare. In this illustration, the value-based enterprise is the hospital and identified community physicians. (The hospital and the community physicians could also be part of a larger value-based enterprise.) The target patient population is patients in the hospital's service area that receive screening for the particular disease.

The value-based activity is adherence with the hospital's revised care protocol by ordering dual-modality screening instead of single-modality screening. The value-based purpose of the value-based enterprise is to improve the quality of care for patients in the hospital's service area by detecting more cancers and avoiding potential unnecessary overtreatment of false positive results. At its inception, provided that an arrangement between the hospital and a physician satisfies all the requirements of § 411.357(aa)(3), the physician's referrals of designated health services to the hospital and the hospital's submission of claims to Medicare for the designated health services referred by the physician would not violate the physician self-referral law. However, assume that during the first year of the arrangement, the hospital determines through its monitoring that its data analysis indicates that the use of dual-modality screening not only does not result in earlier detection of cancer, but results in more false positive results, invasive biopsies, and unnecessary treatment than single-modality screening.

As a result, the hospital determines that the use of dual-modality screening, despite the nationally-recognized recommendations, will not achieve the goal of improving the quality of care for patients in the hospital's service area by detecting more cancers and avoiding potential unnecessary overtreatment of false positive results. The compliance monitoring, which occurred in the first year of the arrangement, has identified that the continuation of the value-based activity, dual-modality screening, is no longer expected to further the value-based purpose of improving the quality of care for patients in the hospital's service area by detecting more cancers and avoiding potential unnecessary overtreatment of false positive results. Once the hospital has identified the ineffective value-based activity, the hospital has two options to maintain compliance with the physician self-referral law. Under final § 411.357(aa)(3)(vii)(B), the parties could terminate the arrangement within 30 consecutive calendar days of the date of completion of the monitoring indicating that the value-based activity was ineffective, or the parties could modify the arrangement to terminate the ineffective value-based activity within 90 consecutive calendar days of completion of the monitoring and, if they choose, replace it with a different value-based activity with prospective applicability.

If the parties fail to take one of these actions, the physician would be prohibited from making referrals of any designated health services to the hospital from the date the hospital became aware that its value-based arrangement no longer satisfied the requirements of § 411.357(aa)(3) (unless the arrangement satisfies the requirements of another applicable exception to the physician self-referral law, which it likely would not). In addition, the hospital would be prohibited from submitting claims to Medicare for any improperly referred designated health services. The parties' lack of knowledge does not affect compliance with the physician self-referral law. The hospital's (or value-based enterprise's) failure to monitor as required under our final regulations for progress toward achievement of the value-based purpose of the value-based enterprise would not nullify the parties' noncompliance with the physician self-referral law.

The physician's referrals would be prohibited due to the fact that adherence to the revised care protocol could not, in fact, achieve the value-based purpose of the value-based enterprise and would no longer qualify as a “value-based activity” as that term is defined at final § 411.351. In turn, the arrangement would not qualify as a “value-based arrangement” and the exception at § 411.357(aa)(3) would no longer be available to protect the physician's referrals. In the proposed rule, we also considered whether to require the recipient of any nonmonetary remuneration under a value-based arrangement to contribute at least 15 percent of the donor's cost of the nonmonetary remuneration (84 FR 55785 through 55786). We stated that requiring financial participation by a recipient of nonmonetary remuneration under a value-based arrangement would help ensure that the nonmonetary remuneration is appropriate and beneficial for the achievement of the value-based purpose(s) of the value-based enterprise, as well as ensuring Start Printed Page 77522that the recipient will actually use the nonmonetary remuneration.

However, we also stated our concern that such a requirement could inhibit the adoption of value-based arrangements. As discussed in section II.D.11.d.(1). Of this final rule, even though many commenters asserted that the 15 percent contribution requirement under the existing exception for EHR items and services is burdensome to some recipients and acts as a barrier to adoption of EHR technology, we are retaining the 15 percent contribution requirement for the existing EHR exception as an important program integrity safeguard where the compensation arrangement between the parties is not a value-based arrangement. We are concerned, however, that requiring a 15 percent contribution from the recipient of nonmonetary compensation under a value-based arrangement could inhibit the goal of transitioning to a value-based health care delivery and payment system.

We are not including a contribution requirement in the value-based arrangement exception finalized in this final rule. We received the following comments and our responses follow. Comment. The vast majority of commenters supported the adoption of a value-based arrangement exception and urged CMS to finalize the exception without modification in order to support the transition to a value-based health care delivery and payment system.

Commenters expressed appreciation for the creation of a value-based exception with no downside risk, asserting that the exception will be beneficial to rural providers, small practices, and others wanting to explore value-based health care delivery and payment, but not yet well-positioned to take on meaningful financial risk. A few commenters suggested that the value-based arrangement exception is complex and burdensome, and could act as a deterrent to participation in value-based health care. A small number of commenters urged us not to finalize the value-based arrangement exception, citing program integrity concerns. Response.

We agree with the commenters that the exception at § 411.357(aa)(3) is necessary to facilitate robust participation in a value-based health care delivery and payment system. We are finalizing the exception with the modifications discussed above and in our response to other comments in this section II.A.2. Although we appreciate the program integrity concerns raised by some commenters, we are confident that the integrated approach to safeguards against program and patient abuse found in the value-based definitions and exceptions will ensure that even “no risk” value-based arrangements that satisfy all the requirements of the definitions and the requirements of § 411.357(aa)(3) will not pose a risk of program or patient abuse. Comment.

The majority of commenters urged CMS not to limit the value-based arrangement exception to nonmonetary remuneration. The commenters pointed to value-based arrangements commonplace in the industry, such as payment for adherence to care protocols or shared savings models that utilize cash incentives to shape physician behavior, improve quality, and reduce waste. One commenter expressed concern that, by limiting the type of remuneration permissible under the exception, CMS would create a complicated patchwork of protections depending on the type of remuneration at issue. Response.

We are not limiting the value-based arrangement exception to nonmonetary remuneration only. Limiting the exception to nonmonetary remuneration could undermine the Secretary's goal of robust participation in a value-based health care delivery and payment system by artificially restricting the types of arrangements that are appropriate for protection from the prohibitions of the physician self-referral law. Comment. Commenters nearly universally opposed the inclusion of a contribution requirement for nonmonetary remuneration provided under a value-based arrangement.

Commenters asserted that such a contribution requirement would create a barrier to widespread participation in a value-based health care delivery and payment system. Many commenters echoed our concerns in the proposed rule that a contribution requirement for nonmonetary remuneration would unfairly impact small and rural physician practices, providers, and suppliers that cannot afford the contribution (84 FR 55786). Response. We agree with the commenters that requiring a 15 percent contribution for nonmonetary remuneration provided under a value-based arrangement could create barriers to the transition to a value-based health care delivery and payment system, particularly for small and rural physician practices, providers, and suppliers.

The final value-based arrangement exception does not require a contribution for nonmonetary remuneration. Comment. A few commenters expressed concern regarding the requirement that a value-based arrangement must be set forth in writing and signed by the parties. These commenters viewed these documentation requirements as unnecessary and creating an administrative burden.

A few commenters requested confirmation that the writing requirements of § 411.357(aa)(3) may be satisfied through a collection of contemporaneous documents evidencing the conduct between the parties and that a single, formal contract is not required. These same commenters also requested confirmation that the special rule for signature requirements at § 411.354(e) (formerly at § 411.353(g)) would apply to value-based arrangements. One commenter requested that we eliminate the signature requirement from the value-based arrangement exception to avoid what the commenter called “technical violations.” Response. We do not consider the documentation requirements under the final value-based arrangement exception burdensome.

As discussed above, we view the documentation requirements as self-explanatory and a necessary program integrity safeguard. As we have stated in prior rulemakings, we believe that it is a usual and customary business practice to document and sign arrangements and the requirements of the exceptions to the physician self-referral law do not add burden to these practices. (See, for example, 83 FR 59993.) Nothing in the final value-based arrangement exception at § 411.357(aa)(3)—or any other exception to the physician self-referral law—requires a single formal contract to satisfy the writing requirement of the exceptions. Comment.

Several commenters raised concerns with our discussion in the proposed rule that parties have an implicit obligation to monitor their arrangements for compliance with the physician self-referral law (84 FR 55784). These commenters asserted that the use of the term “implicit” introduces ambiguity that is not appropriate for a strict liability statute. The commenters requested that any monitoring obligations, including the scope and frequency of the monitoring, be clearly stated in the regulations. A few of the commenters suggested that CMS provide flexibility in monitoring and assessing progress of a value-based arrangement, asserting that the monitoring requirement should be tailored to the resources and sophistication of the parties to the value-based arrangement.

Some commenters stated that monitoring for compliance with the requirements of an Start Printed Page 77523applicable exception at the outset of an arrangement and upon renewal of the arrangement is a common industry practice and suggested that we adopt a similar policy for monitoring value-based arrangements. Response. The commenters' statements regarding parties' obligations to monitor for ongoing compliance with the physician self-referral law are surprising, as are their statements that references to this implicit obligation would introduce ambiguity into their ability to utilize the value-based arrangement exception. Our expectation of monitoring for ongoing compliance in the context of the physician self-referral law is not a new concept.

As we stated in Phase II, section 1877 of the Act is clearly intended to make entities responsible for monitoring their compensation arrangements with physicians (69 FR 16112). As discussed above, the core principle of the physician self-referral law is that, if a physician has a financial relationship with an entity that does not satisfy all the requirements of an applicable exception (after applying any special rules), section 1877(a)(1)(A) of the Act prohibits the physician from making a referral to the entity for the furnishing of designated health services for which payment may otherwise be made under Medicare, section 1877(a)(1)(B) of the Act prohibits the entity from presenting or causing to present a claim under Medicare for the designated health services furnished pursuant to a prohibited referral, and section 1877(g)(1) of the Act prohibits Medicare from making payment for a designated health service that is provided pursuant to a prohibited referral. Parties must ensure the compliance of their financial relationships with an applicable exception at the time the physician makes a referral for designated health service(s). We agree with the commenters that the government's expectations regarding monitoring of value-based arrangements should be explicitly stated in regulation text, and we are including at final § 411.357(aa)(3)(vii) a monitoring requirement that provides the guidelines requested by the commenters.

Under the final regulation, the value-based enterprise or one or more of the parties to a value-based arrangement must monitor the arrangement no less frequently than annually, or at least once during the term of the arrangement if the arrangement has a duration of less than 1 year. This timeframe coincides with that proposed by OIG in its safe harbors for value-based arrangements and finalized elsewhere in this issue of the Federal Register. To facilitate the assessment of ongoing compliance with the physician self-referral law, we are finalizing our proposal to require that the value-based enterprise or one or more of the parties to the value-based arrangement must monitor whether the parties have furnished the value-based activities required under the arrangement and whether and how continuation of the value-based activities is expected to further the value-based purpose(s) of the value-based enterprise. If the monitoring indicates that a value-based activity is not expected to further the value-based purpose(s) of the value-based enterprise, the parties must terminate the ineffective value-based activity.

In addition, during the same timeframes, either the value-based enterprise or one or more of the parties to the arrangement must monitor progress toward attainment of the outcome measure(s), if any, against which the recipient of the remuneration is assessed. If the monitoring indicates that an outcome measure is unattainable during the remaining term of the arrangement, the parties must terminate or replace the unattainable outcome measure. As discussed in response to the comment below, the final regulation at § 411.357(aa)(3)(vii) sets forth specific timeframes in which the parties must take action following completion of monitoring that identifies an ineffective value-based activity or that an outcome measure is unattainable during the remaining term of the arrangement. If the parties take action within the timeframe specific to the chosen action (that is, termination or modification of the value-based arrangement), a value-based activity will be deemed to be reasonably designed to achieve at least one value-based purpose of the value-based enterprise for the entire period during which it was undertaken by the parties.

Similarly, the arrangement will not fail to satisfy the requirements of the exception at § 411.357(aa)(3) if, within 90 consecutive calendar days after completion of the monitoring, the parties terminate or replace an outcome measure determined to be unattainable. We are not prescribing in this final rule how value-based enterprises, entities, and physicians should monitor their value-based arrangements. Rather, we expect value-based enterprises, entities, and physicians to design their monitoring and other compliance efforts in a manner that is appropriate for the particular value-based arrangement. Comment.

Several commenters urged us not to require termination of a value-based arrangement due to a value-based activity no longer furthering the value-based purpose of the value-based enterprise. These commenters recommended that we establish a timeframe for “curing” noncompliance or create a transition period that allows the parties to the value-based arrangement to redesign or replace the deficient value-based activity, with a couple commenters suggesting 90 days for that timeframe. A few commenters suggested giving parties the option of terminating the arrangement in its entirety or allowing them to implement a written plan to remediate the noncompliance no later than 60 days from the date they determine that the value-based activities are unable to achieve the value-based purposes. One commenter requested that we adopt a policy that an arrangement would not lose protection under the value-based arrangement exception for a period of 12 months from the date of commencement of the arrangement as long as the value-based activities were reasonably designed to achieve the value-based purpose at its outset.

Some commenters suggested that a policy under which a physician's referrals are considered to violate the physician self-referral law if value-based activities do not immediately succeed in achieving the value-based purpose(s) of the value-based enterprise would create a “fear of failure” that would dissuade parties from attempting to deliver health care in new and innovative value-based ways. These commenters asserted that allowing parties to cure defects in arrangements would remove the “fear of failure” and promote value-based health care delivery. A different commenter requested that we establish a specific timeframe for a value-based arrangement to achieve its value-based purpose without risking violation of the physician self-referral law. Response.

As discussed above, if parties to a value-based arrangement, through monitoring efforts or otherwise, determine that a value-based activity no longer furthers the value-based purpose(s) of the value-based enterprise, the parties may either terminate the arrangement or modify the arrangement to remove the ineffective value-based activity. The commenters mistakenly assumed that termination of a value-based arrangement is required if a value-based activity is no longer reasonably designed to further the value-based purpose(s) of the value-based enterprise. Our proposal required the cessation of the physician's referrals of designated health services, either immediately or within 60 days of the determination that the value-based activities would be Start Printed Page 77524unable to achieve the value-based purpose(s) of the value-based enterprise. We did not intend to prohibit modification of arrangements that would allow continuation of physician referrals.

We recognize that the design and implementation of value-based arrangements require a certain level of fluidity, although we are not persuaded to implement a 12-month “deeming” timeframe under which a value-based arrangement would be deemed to satisfy the requirement that its value-based activities are reasonably designed to further the value-based purpose(s) of the value-based enterprise for a period of 12 months from their implementation. Such a policy would permit parties with actual knowledge that the value-based activities will be unable to achieve the value-based purpose(s) to make referrals and submit claims for designated health services potentially much longer than we believe is necessary to make appropriate modifications to their arrangement. We agree with the commenters that identified 90 days as the amount of time that parties would need to make adjustments to their value-based arrangements when they are aware that a value-based activity will no longer further the value-based purpose(s) of the value-based enterprise. We note that this timeframe is consistent with other timeframes for remediating temporary noncompliance, documentation deficiencies, and other discrepancies in our regulations.

We do not believe that parties that elect to terminate their value-based arrangement would need as much time. Accordingly, we have established in our final regulation timeframes in which the parties to a value-based arrangement may address any identified deficiencies with their value-based activities without running afoul of the physician self-referral law. Under the final regulations at § 411.357(aa)(3)(vii)(B)(1) and (2), a value-based activity will be deemed to be reasonably designed to achieve at least one value-based purpose of the value-based enterprise for the entire period during which it was undertaken if the parties terminate the arrangement within 30 consecutive calendar days or modify the arrangement within 90 consecutive calendar days after completion of the monitoring. We believe that parties to a value-based arrangement that identify ineffective value-based activities should be able to decide whether to terminate the entire arrangement and effectuate such a termination within 30 consecutive calendar days of identifying the ineffective value-based activities.

In order to protect against program and patient abuse that could arise with an unlimited timeframe in which to terminate specific value-based activities, we are establishing at § 411.357(aa)(3)(vii)(B)(2) a 90-day timeframe for the termination of value-based activities that are not expected to further the value-based purpose(s) of the value-based enterprise. To maintain consistency with other regulations that require remedial action within certain timeframes, the regulation requires that the termination of the arrangement or the ineffective value-based activity must occur within the specified number of consecutive calendar days. The provisions of final § 411.357(aa)(3)(vii)(B)(1) and (2) should address the concerns raised by the commenters without risking program or patient abuse. Comment.

Several commenters inquired about the proposed requirement that performance or quality standards against which the recipient of the remuneration will be measured, if any, are objective and measurable. The commenters generally supported a requirement that performance or quality standards must be objective and measurable, but requested additional guidance regarding what qualifies as a “performance or quality standards.” The commenters generally opposed our alternative proposal to require that performance or quality standards must be designed to drive meaningful improvements in physician performance, quality, health outcomes, or efficiencies in care delivery. Commenters asserted that this alternative proposal and the use of the language “designed to drive meaningful improvements” created ambiguity that would hinder participation in value-based arrangements. Response.

The final regulations at § 411.357(aa)(3)(i)(F) and (ii) replace the term “performance and quality standards” with the term “outcome measures.” The final exception requires at § 411.357(aa)(3)(ii) that the outcome measures against which the recipient of remuneration under a value-based arrangement will be measured, if any, are objective and measurable, and any changes to the outcome measures must be made prospectively and set forth in writing. We have also added a new paragraph (xii) that defines “outcome measure,” for purposes of the value-based arrangement exception, to mean a benchmark that quantifies. (A) Improvements in or maintenance of the quality of patient care. Or (B) reductions in the costs to or reductions in growth in expenditures of payors while maintaining or improving the quality of patient care.

This definition is intended to align with OIG's final regulations. We are sympathetic to commenters' concerns regarding the difficulty in ascertaining that a measure is designed to drive meaningful improvements in physician performance, quality, health outcomes, or efficiencies in care delivery. We are not adopting our alternative proposal to require that outcome measures against which recipients of remuneration are measured are designed to drive meaningful improvements in physician performance, quality, health outcomes, or efficiencies in care delivery. Comment.

Many commenters appear to have misinterpreted the meaning of the requirement at § 411.357(aa)(3)(ii) that the outcome measures against which the recipient of the remuneration will be measured, if any, are objective and measurable, and any changes to the outcome measures must be made prospectively and set forth in writing. The commenters interpreted this provision to require the inclusion of outcome measures in all value-based arrangements and questioned whether that is practical. Some of the commenters noted that preventive care and primary care services do not necessarily lend themselves to outcome measures, asserting that benefits of these services may not be immediately measureable. Response.

The requirements at final § 411.357(aa)(3)(i)(F) and (ii) specifically include the language “if any” to indicate that outcome measures are not required in every value-based arrangement. We recognize that outcome measures may not be available for or applicable to certain value-based activities. For instance, the adoption of the same EHR system or the completion of training on the EHR system are potential value-based activities that likely would not have an associated outcome measure. However, if outcome measures are included as part of the value-based arrangement, those outcome measures must be objective and measurable and determined prospectively.

In addition, under final § 411.357(aa)(3)(vii), either the value-based enterprise or one or more of the parties to the arrangement must monitor progress toward attainment of the outcome measure(s) against which the recipient of the remuneration is assessed. If the monitoring indicates that an outcome measure is unattainable during the remaining term of the arrangement, the parties must terminate or replace the unattainable outcome measure within 90 consecutive calendar days after completion of the monitoring.Start Printed Page 77525 Comment. A few commenters stated that they interpreted the requirement that the outcome measures against which the recipient of the remuneration will be measured, if any, are objective and measurable, and any changes to the outcome measures must be made prospectively and set forth in writing to mean that constant improvement or the achievement of the outcome measures is required. Some of the commenters also interpreted this requirement to mean that parties to a value-based arrangement may not substitute outcome measures or make other adjustments to the outcome measures during the term of the value-based arrangement.

These commenters asserted that it is common for parties to value-based arrangements to reevaluate outcome measures and make modifications necessary to continue moving towards achievement of the purposes of the value-based enterprise. The commenters sought confirmation that parties are permitted to modify their arrangements, including making changes to outcome measures, and make other necessary adjustments over the course of a value-based arrangement without losing the protection of the exception. Response. The commenters may have misinterpreted the requirements of the proposed exception.

We are defining “outcome measure” in this final rule to mean a benchmark that quantifies. (A) Improvements in or maintenance of the quality of patient care. Or (B) reductions in the costs to or reductions in growth in expenditures of payors while maintaining or improving the quality of patient care. Outcome measures are used to evaluate the provision and effectiveness of value-based activities to ensure that the value-based activities are continuing to further the value-based purposes of the value-based enterprise.

Nothing in this final rule prohibits the replacement or substitution of outcome measures against which the recipient of the remuneration is measured under a value-based arrangement, provided that any changes to the outcome measures are made prospectively and set forth in writing. For example, assume that a physician can earn incentive pay under a value-based arrangement for providing certain post-discharge follow-up services to patients in a target patient population following their discharge from the hospital, and that the value-based purpose of the value-based enterprise is to improve the quality of patient care by facilitating a smooth transition from an acute care setting to the appropriate post-acute care setting and lowering readmissions to the hospital. The physician's remuneration for providing post-discharge follow-up services under the arrangement may be, in whole or in part, dependent on whether the hospital reduces its readmission rate to 65 percent or lower for patients treated by the physician. The “outcome measure” is the readmission rate.

If the parties wish to revise this outcome measure—for example, because the hospital realizes that a readmission rate of 65 percent or lower is too easily attainable or is unrealistic given the severity of the medical conditions of the patients in the target patient population and, specifically, the patients treated by the physician—they may make necessary adjustments to the readmission measure, provided any changes to the measure are prospective only and set forth in writing. It would not be permissible to change the outcome measure to a lower, more attainable readmission percentage and apply that new outcome measure retroactively in order to allow the physician to earn the incentive payment under the value-based arrangement as originally designed. To the extent that commenters were concerned that parties may not amend their value-based arrangements to require more or different value-based activities than those included in the arrangement as originally designed, we emphasize that nothing in final § 411.357(aa)(3) prohibits termination or substitution of value-based activities to be undertaken under a value-based arrangement, provided that all modifications to the value-based arrangement are effective prospectively and comply with any applicable regulations regarding the modification of compensation arrangements. (4) Indirect Compensation Arrangements to Which the Exceptions at § 411.357(aa) Are Applicable (§ 411.354(c)(4)) The prohibitions of section 1877 of the Act apply if a physician (or an immediate family member of a physician) has an ownership or investment interest in an entity or a compensation arrangement with an entity.

For purposes of the physician self-referral law, a compensation arrangement is any arrangement involving direct or indirect remuneration between a physician (or an immediate family member of the physician) and an entity, and remuneration means any payment or other benefit made directly, indirectly, overtly, covertly, in cash, or in kind. (See §§ 411.351 and 411.354(c).) In Phase I, we finalized regulations that define when an indirect compensation arrangement exists between a physician and the entity to which he or she refers designated health services (66 FR 864). For purposes of applying these regulations, in the FY 2009 IPPS final rule, we finalized additional regulations that deem a physician to stand in the shoes of his or her physician organization if the physician has an ownership or investment interest in the physician organization that is not merely a titular interest (73 FR 48693). These regulations are found at § 411.354(c)(2) and (3).

Under our current regulations, if an indirect compensation arrangement exists, the exception for indirect compensation arrangements at § 411.357(p) is available to protect the compensation arrangement. In addition, if the entity with which the physician has the indirect compensation arrangement is a MCO or IPA, the exception at § 411.357(n) is also available to protect the compensation arrangement. If all the requirements of one of the applicable exceptions are satisfied, the physician would not be barred from referring patients to the entity for designated health services and the entity would not be barred from submitting claims for the referred services. No other exception in § 411.357 is applicable to indirect compensation arrangements.

However, the parties may elect to protect individual referrals of and claims for designated health services using an applicable exception in § 411.355 of our regulations. As we stated in the proposed rule (84 FR 55786), an unbroken chain of financial relationships described in § 411.354(c)(2)(i) may include a value-based arrangement as defined at § 411.351 in this final rule. Thus, an unbroken chain of financial relationships that includes a value-based arrangement could form an “indirect compensation arrangement” for purposes of the physician self-referral law if the circumstances described in § 411.354(c)(2)(ii) and (iii) also exist. Unless the entity furnishing the designated health services is a MCO or IPA, the parties would have to rely on the exception at § 411.357(p), which includes requirements not found in the exceptions for value-based arrangements at § 411.357(aa), in order to ensure the permissibility of all the physician's referrals to the entity (assuming no other financial relationships exist between the parties).

(If the parties elect to utilize a “services” exception at § 411.355, designated health services are protected only on a service-by-service basis, and satisfaction of the requirements of an applicable exception permits only the referral of and claims submission for the Start Printed Page 77526particular designated health service that satisfied the requirements of the exception.) As commenters on the CMS RFI noted and commenters on the proposed rule confirmed, because compensation to the physician under a value-based arrangement could take into account the volume or value of referrals or other business generated by the physician for the entity or may not be fair market value for specific items or services provided by the physician, an indirect compensation arrangement that includes a value-based arrangement in the unbroken chain of financial relationships that forms the indirect compensation arrangement may be unable to satisfy the requirements of § 411.357(p). To avoid a blanket prohibition on indirect compensation arrangements that enhance value-based health care delivery and payment, we are finalizing our proposal to make additional exceptions available to certain indirect compensation arrangements that include a value-based arrangement in the unbroken chain of financial relationships described in § 411.354(c)(2)(i). As described in section II.A.2.b. Of this final rule, we are finalizing exceptions available only to compensation arrangements that qualify as value-based arrangements.

Although the exceptions do not limit their applicability to value-based arrangements directly between a physician and the entity to which he or she refers designated health services, the definition of “value-based arrangement” finalized at § 411.351 establishes that the only potential parties to a value-based arrangement are the value-based enterprise and VBE participants. In order to fully support the transition to a value-based health care delivery and payment system, we believe that it is important to make the exceptions at § 411.357(aa) applicable to certain indirect compensation arrangements that include a value-based arrangement in the unbroken chain of financial relationships described in § 411.354(c)(2)(i). Following review of the comments on our proposed alternative approaches for addressing indirect compensation arrangements in which one link in the unbroken chain of financial relationships between an entity and a physician is a value-based arrangement, with technical revisions to the proposed regulation text, we are finalizing our primary proposal to make the exceptions at § 411.357(aa) applicable to certain indirect compensation arrangements that include a value-based arrangement in the unbroken chain of financial relationships described in § 411.354(c)(2)(i). Specifically, under the regulation finalized at § 411.354(c)(4)(iii), the exceptions at § 411.357(aa) are available to protect the physician's referrals to the entity when an indirect compensation arrangement (as defined at § 411.354(c)(4)(2)) includes a value-based arrangement (as defined at § 411.351) to which the physician (or the physician organization in whose shoes the physician stands) is a direct party.

To be clear, the link closest to the physician may not be an ownership interest. It must be a compensation arrangement that meets the definition of value-based arrangement finalized at § 411.351. Under this final rule, parties would first determine if an indirect compensation arrangement exists and, if it does, determine whether the compensation arrangement to which the physician (or the physician organization in whose shoes the physician stands) is a direct party qualifies as a value-based arrangement. If so, the exceptions at § 411.357(aa) for value-based arrangements would be applicable.

To illustrate, assume an unbroken chain of financial relationships between a hospital and a physician that runs. Hospital—(owned by)—parent organization—(owns)—physician practice—(employs)—physician. Thus, the links in the unbroken chain are ownership or investment interest—ownership or investment interest—compensation arrangement. For purposes of determining whether an indirect compensation arrangement exists between the physician and the hospital, under § 411.354(c)(2)(ii), we would analyze the compensation arrangement between the physician practice and the physician.

Assume also that the compensation paid to the physician under her employment arrangement varies with the volume or value of her referrals to the hospital because she is paid a bonus for each referral for designated health services furnished by the hospital, provided that she adheres to redesigned care protocols intended to further one or more value-based purposes (as defined at § 411.351 in this final rule). Finally, assume that the hospital has actual knowledge that the physician receives aggregate compensation that varies with the volume or value of her referrals to the hospital. The unbroken chain of financial relationships establishes an indirect compensation arrangement. Therefore, in order for the physician to refer patients to the hospital for designated health services and for the hospital to submit claims to Medicare for the referred designated health services, the indirect compensation arrangement must satisfy the requirements of an applicable exception.

Under the final regulation at § 411.354(c)(4)(iii), if the compensation arrangement in this example between the physician practice and the physician qualifies as a value-based arrangement (as defined at § 411.351 in this final rule), the exceptions at § 411.357(aa) would be available to protect the value-based arrangement (that is, the indirect compensation arrangement) between the hospital and the physician. (The parties could also utilize an applicable exception in § 411.355 to protect individual referrals for designated health services or the exception at § 411.357(p) to protect the indirect compensation arrangement between the hospital and the physician, but it is unlikely that all the requirements of § 411.357(p) would be satisfied in this hypothetical fact pattern.) In the proposed rule, we described an alternative proposal under which we would define “indirect value-based arrangement” and specify in regulation that the exceptions at § 411.357(aa) would be available to protect an indirect value-based arrangement (84 FR 55787). Under our alternative proposal, an indirect value-based arrangement would exist if. (1) Between the physician and the entity there exists an unbroken chain of any number (but not fewer than one) of persons (including but not limited to natural persons, corporations, and municipal organizations) that have financial relationships (as defined at § 411.354(a)) between them (that is, each person in the unbroken chain is linked to the preceding person by either an ownership or investment interest or a compensation arrangement).

(2) the financial relationship between the physician and the person with which he or she is directly linked is a value-based arrangement. And (3) the entity has actual knowledge of the value-based arrangement in subparagraph (2). We proposed that, if an unbroken chain of financial relationships between a physician and an entity qualifies as an “indirect value-based arrangement,” the exceptions at § 411.357(aa) would be applicable and the requirements of at least one of the applicable exceptions must be satisfied in order for the physician to refer patients to the hospital for designated health services and for the hospital to submit claims to Medicare for the referred designated health services. Following review of the comments on our alternative approach for addressing indirect compensation arrangements in which one link in the Start Printed Page 77527unbroken chain of financial relationships between an entity and a physician is a value-based arrangement, we are not finalizing the alternative proposal.

We also stated in the proposed rule that we were considering whether to exclude an unbroken chain of financial relationships between an entity and a physician from the definition of “indirect value-based arrangement” if the link closest to the physician (that is, the value-based arrangement to which the physician is a party) is a compensation arrangement between the physician and a pharmaceutical manufacturer. Manufacturer, distributor, or supplier of DMEPOS. Laboratory. Pharmacy benefit manager.

Wholesaler. Or distributor. In the alternative, we stated that we were considering whether to exclude an unbroken chain of financial relationships between an entity and a physician from the definition of “indirect value-based arrangement” if one of these persons or organizations is a party to any financial relationship in the chain of financial relationships. Finally, we stated that we were considering whether to include health technology companies in any such exclusion in order to align our policies with policies proposed by OIG (84 FR 55786 through 55787).

We sought comment on these approaches and their effectiveness in enhancing program integrity. We are not finalizing any of the proposed restrictions on the identity of the parties to the financial relationships in the unbroken chain of financial relationships between an entity and a physician. We received the following comments and our responses follow. Comment.

The majority of the commenters that commented on this proposal preferred our primary approach for addressing indirect compensation arrangements in which one of the financial relationships between a physician (or the immediate family member of the physician) and the entity to which the physician refers patients for designated health services is a value-based arrangement. Commenters noted that an indirect compensation arrangement that involves a value-based arrangement may not satisfy the requirements of the exception at § 411.357(p) because the compensation paid to the physician may take into account the volume or value of the physician's referrals or the other business generated by the physician for the entity, or the compensation may not meet the fair market value requirement of the exception. Response. We are finalizing regulations at § 411.354(c)(4)(iii) to provide that the exceptions at § 411.357(aa) are applicable when an unbroken chain described in § 411.354(c)(2)(i) includes a value-based arrangement (as defined in § 411.351) to which the physician (or the physician organization in whose shoes the physician stands) is a direct party.

In order to determine whether the physician's referrals to the entity with which the physician has the indirect compensation arrangement do not violate the physician self-referral law, parties would determine whether the value-based arrangement to which the physician (or the physician organization in whose shoes the physician stands) is a direct party satisfies all the requirements of one of the exceptions finalized at § 411.357(aa) (or another applicable exception). If the value-based arrangement to which the physician is a direct party is with an entity (as defined at § 411.351) other than the entity with which the physician has the indirect compensation arrangement, that direct compensation arrangement must also satisfy the requirements of an applicable exception in order for the physician to make referrals to that entity. Comment. A few commenters expressed concern regarding our statement in the proposed rule that, besides the exception at § 411.357(p), no other exception in § 411.357 is applicable to indirect compensation arrangements (84 FR 55786).

The commenters requested that we confirm that the exception at § 411.357(n) for risk-sharing arrangements is applicable to indirect compensation arrangements, including an indirect compensation arrangement that involves a value-based arrangement. One of the commenters noted that the exception for risk-sharing arrangements expressly references compensation conveyed “directly or indirectly” to a physician. This commenter and others asserted that the exception for risk-sharing arrangements should remain available to entities, such as hospitals, that have indirect compensation arrangements with physicians resulting from risk-sharing arrangements. Response.

Some of the commenters misunderstand the application of the exception for risk-sharing arrangements. The exception at § 411.357(n) applies to compensation arrangements between a MCO or an IPA and a physician for services provided to enrollees of a health plan, provided that the compensation arrangement qualifies as a risk-sharing arrangement. In Phase I, we established the exception at § 411.357(n) for remuneration provided pursuant to a risk-sharing arrangement between a physician and a health plan. There, we stated that physicians generally are compensated for services to managed care enrollees in one of three ways, the first two of which do not vary based on the volume or value of referrals.

(1) A salary, in the case of a physician who is an employee. (2) a “fee-for-service” contractual arrangement under which the physician assumes no risk. Or (3) a risk-sharing arrangement, under which the physician assumes risk for the costs of services, either through a capitation arrangement, or through a withhold, bonus, or risk-corridor approach. We noted that the first two types of compensation arrangements are eligible for the statutory exceptions for bona fide employment relationships and personal service arrangements,[] while the third is potentially eligible for the exception for risk-sharing arrangements at § 411.357(n).

The exception at § 411.357(n) does not apply to a compensation arrangement—whether direct or indirect—between a physician and an entity that is anything other than a MCO or IPA. The risk-sharing arrangement between the MCO or IPA and the physician may be direct or indirect. An indirect risk-sharing arrangement would run MCO or IPA—subcontractor—physician. For example, MCO—(compensation arrangement)—hospital—(compensation arrangement)—physician.

In this example, if the MCO is an “entity” (as defined at § 411.351), the unbroken chain of financial relationships may constitute an indirect compensation arrangement under § 411.354(c)(2). If so, the exception at § 411.357(n) would be available to protect the physician's referrals to the MCO, provided that all the requirements of the exception are satisfied. The exception for indirect compensation arrangements at § 411.357(p) would also apply. If the MCO or IPA is not itself furnishing designated health services (as described in § 411.351), it would not be an “entity” and, in the example above, would not have a direct or indirect compensation arrangement with the physician.

(Note that, in Phase I, we clarified and significantly narrowed the situations in which a MCO will be considered an entity furnishing designated health services by refocusing the definition on the party submitting a claim to Medicare rather than the party “providing for” or “arranging for” the furnishing of designated health services Start Printed Page 77528for which a claim is submitted to Medicare.) To be clear, the exception for risk-sharing arrangements at § 411.357(n) is not applicable to all risk-sharing arrangements between entities and physicians that provide services to enrollees of the same health plan. Contrary to commenters' stated understanding of the application of § 411.357(n), the exception for risk-sharing arrangements does not apply to indirect compensation arrangements between hospitals and physicians, even if both are contractors (or subcontractors) of the same MCO or IPA. In Phase II, a commenter requested confirmation that the exception at § 411.357(n) is meant to cover all risk-sharing compensation paid to physicians by an entity downstream of any type of health plan, insurance company, or health maintenance organization. We confirmed the commenter's understanding of the applicability of the exception (69 FR 16114), and stated that all downstream entities are included.

We purposefully declined to define the term “managed care organization” so as to create a broad exception with maximum flexibility. Although we did not in Phase II (or any subsequent rulemaking) modify the text of § 411.357(n) to extend the applicability of the exception to compensation pursuant to a risk-sharing arrangement (directly or indirectly) between a physician and any entity other than a MCO or IPA, we recognize why the commenters on the proposed rule could be under the impression that our response in the Phase II preamble was intended to do so. For this reason, we are finalizing revisions to the exception at § 411.357(n) to clarify the scope and application of the exception. The revisions are effective as of the date set forth in this final rule and apply prospectively only.

Comment. A few commenters requested that we include a reference to § 411.357(n) in the regulation text identifying which exceptions are applicable to indirect compensation arrangements that involve value-based arrangements. Response. To clarify the applicability of the exception for risk-sharing arrangements, we are finalizing regulations at § 411.354(c)(4)(ii) and (iii)(B) that expressly state that the exception at § 411.357(n) is applicable in the case of an indirect compensation arrangement in which the entity furnishing designated health services described in § 411.354(c)(2)(i) is a MCO or IPA.

If the entity with which the physician has an indirect compensation arrangement is not a MCO or IPA, the exception for risk-sharing arrangements is not applicable to the indirect compensation arrangement. (5) Price Transparency Price transparency is a critical component of a health care system that pays for value and aligns with our desire to reinforce and support patient freedom of choice. We believe that transparency in pricing can empower consumers of health care services to make more informed decisions about their care and lower the rate of growth in health care costs. Health care consumers today lack meaningful and timely access to pricing information that could, if available, help them choose a lower-cost setting or a higher-value provider.

Patients are often unaware of site-of-care cost differentials until it is too late (see Aparna Higgins &. German Veselovskiy, Does the Cite of Care Change the Cost of Care, Health Affairs (June 2, 2016), https://www.healthaffairs.org/​do/​10.1377/​hblog20160602.055132/​full/​). Multiple surveys and studies have revealed that patients want their health care providers to engage in cost discussions, and one recent national survey found that a majority of physicians want to have cost of care discussions with their patients (see Caroline E. Sloan, MD &.

Peter A. Ubel, MD, The 7 Habits of Highly Effective Cost-of-Care Conversations, Annals of Internal Medicine (May 7, 2019), https://annals.org/​aim/​issue/​937992, and Let's Talk About Money, The University of Utah (2018), https://uofuhealth.utah.edu/​value/​lets-talk-about-money.php). The point of referral presents an ideal opportunity to have such cost-of-care discussions. In the CMS RFI, we solicited comment on the role of transparency in the context of the physician self-referral law.

In particular, we solicited comment on whether, if provided by the referring physician to a beneficiary, transparency about a physician's financial relationships, price transparency, or the availability of other data necessary for informed consumer purchasing (such as data about quality of services provided) would reduce or eliminate the harms to the Medicare program and its beneficiaries that the physician self-referral law is intended to address. Many commenters replied that making a physician's financial relationships and cost of care information available could be useful. One commenter suggested that providing clear and transparent information was vital in the health care industry where patients are often vulnerable, confused, and unsure of their options. This commenter further opined that informed patients are empowered to take charge of their health care and better assist their providers in fulfilling their health care needs.

Several commenters shared similar support for transparency efforts. Another commenter stated that transparency of a physician's financial relationships along with price and quality of care information would be valuable to patients in choosing providers and care pathways. This commenter maintained that these actions would also engage patients in protecting against possible unintended consequences of value-based arrangements. Other commenters raised concerns that information on price transparency and a physician's financial relationships with other health care providers, in combination with already-required disclosures under HIPAA, informed consent information and forms, insurance payment authorization forms, and other paperwork that patients receive or must complete would serve only to inundate patients with paperwork that they will find confusing or simply not read.

These commenters contended that, although transparency is an appealing concept, requiring additional disclosures would result in more burden than benefit. The June 24, 2019 Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First [] recognizes the importance of price transparency. The Executive Order directs Federal agencies to take historic steps toward getting patients the information they need and when they need it to make well-informed decisions about their health care. CMS has already acted on the Executive Order in two ways.

First, by finalizing price transparency requirements in the CY 2020 OPPS final rule (84 FR 65524) to improve the availability of meaningful pricing information to the public by requiring hospitals to make public a machine-readable file that contains a hospital's gross charges and payer-specific negotiated charges, plus discounted cash prices, the de-identified minimum negotiated charge, and the de-identified maximum negotiated charge for all items and services provided by the hospital beginning January 1, 2021. Second, through the Transparency in Coverage final rule (85 FR 72158), HHS, along with the Departments of Labor and Treasury, finalized requirements for Start Printed Page 77529health insurance issuers and plans in the individual and group markets to make health care prices and expected out-of-pocket costs for enrollees available to the general public to help facilitate more informed health care purchasing decisions with the goal of driving down health care costs. We continue to believe that all consumers need price and quality information in advance to make an informed decision when they choose a good or service, including at the point of a referral for such goods or services. As we stated in the proposed rule, by making meaningful price and quality information more broadly available, we can protect patients and increase competition, innovation, and value in the health care system (84 FR 55788).

We remain committed to ensuring that physician self-referral law policies do not infringe on patient choice and the ability of physicians and patients to make health care decisions that are in the patient's best interest. We continue to believe that it is important for patients to have timely access to information about all aspects of their care, including information about the factors that may affect the cost of services for which they are referred. As stated in the proposed rule, a patient who is made aware, for example, that costs may differ based on the site of service where the referred services are furnished, may become a more conscious consumer of health care services (84 FR 55788). Access to such information may also spark important conversations between patients and their physicians, promoting patient choice and the ability of physicians and patients to make health care decisions that are in the patient's best interest.

In conjunction with their physicians' determination of the need for recommended health care services and the urgency of that need, information on the factors that may affect the cost of such services could ensure that patients have the information they need to shop and seek out high-quality care at the lowest possible cost. It remains CMS' goal to establish policies that facilitate consumers' ability to participate actively and meaningfully in decisions relating to their care. At the same time, we continue to be cognizant that including requirements regarding price transparency in the exceptions to the physician self-referral law raises certain challenges for the regulated industry. In the proposed rule, we sought comments on how to pursue our price transparency objectives in the context of the physician self-referral law, both in the context of a value-based health care system and otherwise, and how to overcome the technical, operational, legal, cultural, and other challenges to including price transparency requirements in the physician self-referral regulations (84 FR 55788).

Specifically, we requested comments regarding the availability of pricing information and out-of-pocket costs to patients (including information specific to a particular patient's insurance, such as the satisfaction of the patient's applicable deductible, copayment, and coinsurance obligations). The appropriate timing for the dissemination of information (that is, whether the information should be provided at the time of the referral, the time the service is scheduled, or some other time). And the burden associated with compliance with a requirement in an exception to the physician self-referral law to provide information about the factors that may affect the cost of services for which a patient is referred. Finally, we sought comment regarding whether the inclusion of a price transparency requirement in a value-based exception would provide additional protections against program or patient abuse through the active participation of patients in selecting their health care providers and suppliers.

In furtherance of our goal of price transparency for all patients, we solicited comments regarding whether to consider a requirement related to price transparency in every exception for value-based arrangements at § 411.357(aa) (84 FR 55789). While we did not propose regulatory changes, we considered whether to require that a physician provide a notice or have a policy regarding the provision of a public notice that alerts patients that their out-of-pocket costs for items and services for which they are referred by the physician may vary based on the site where the services are furnished and based on the type of insurance that they have. Because of limits on currently available pricing data, we continue to believe that such a requirement could be an important first step in breaking down barriers to cost-of-care discussions that play a beneficial role in a value-based health care system. We further explained the public notice provided or reflected in the policy could be made in any form or manner that is accessible to patients.

For example, a notice on the physician's website, a poster on the wall in the physician's office, or a notice in a patient portal used by the physician's patients would all be acceptable. We stated our expectation that any notice would be written in plain language that would be understood by the general public. We refer readers to the Plain Writing Act of 2010 (Pub. L.

111-274, enacted on October 13, 2010) for further information. We sought comment on whether, if we finalize such a requirement, it would be helpful for CMS to provide a sample notice and, if we provide a sample notice, whether we should deem such a notice to satisfy the requirement described. We stated that we would not require public notice in advance of referrals for emergency hospital services to avoid delays in urgently needed care. We solicited comment on other options for price transparency requirements in the value-based exceptions to the physician self-referral law, as well as whether we should consider for a future rulemaking the inclusion of price transparency requirements in exceptions to the physician self-referral law included in our existing regulations.

We received several comments from both consumers of health care and entities that provide health care services. Nearly all the commenters were united in their support that patients should have access to clear, accurate, and actionable cost-sharing information and recognized the important role price transparency has in patient care. However, many supportive commenters also asserted that requiring price transparency disclosures as a requirement of an exception to the physician self-referral law is not an appropriate mechanism for promoting price transparency objectives given the strict liability nature of the law. We continue to believe that health care markets work more efficiently and provide consumers with higher-value health care if we promote policies that encourage choice and competition.

We thank the commenters for their thoughtful responses, which will help inform future agency policy making on this important objective. We are not finalizing any price transparency provisions in this rulemaking. B. Fundamental Terminology and Requirements 1.

Background As described in the proposed rule and in greater detail in this section of the final rule, many of the statutory and regulatory exceptions to the physician self-referral law include one, two, or all the following requirements. The compensation arrangement itself is commercially reasonable. The amount of the compensation is fair market value. And the compensation paid under the arrangement is not determined in a manner that takes into account the volume or value of referrals (or, in some Start Printed Page 77530cases, other business generated between the parties).

These requirements are presented in various ways within the statutory and regulatory exceptions, but it is clear that they are separate and distinct requirements, each of which must be satisfied when included in an exception. As we stated in the proposed rule, the regulated industry and its complementary parts, such as the health care valuation community, have sought additional guidance from CMS regarding whether compliance with one of the requirements is dependent on compliance with one or both of the others (84 FR 55789). In addition, these and other stakeholders have requested clarification on our policy with respect to when an arrangement is considered commercially reasonable, under what circumstances compensation is considered to take into account the volume or value of referrals or other business generated between the parties, and how to determine the fair market value of compensation. According to stakeholders and commenters on the proposed rule, False Claims Act (31 U.S.C.

3729 through 3733) case law has exacerbated the challenge of complying with these three fundamental requirements. Endeavoring to establish bright-line, objective regulations for each of these fundamental requirements, we proposed a new definition of “commercially reasonable” at § 411.351, proposed to establish special rules that identify the universe of circumstances under which compensation would be considered to take into account the volume or value of a physician's referrals or the other business generated by a physician for the entity paying the compensation, and proposed to revise the definitions of “fair market value” and “general market value” in our regulations at § 411.351. Our overall intention with these policies is to reduce the burden of compliance with the physician self-referral law, provide clarification where possible, and achieve the goals of the Regulatory Sprint. As we stated in the proposed rule, we believe that clear, bright-line rules would enhance both stakeholder compliance efforts and our enforcement capability.

We believe that the policies finalized here will provide the clarity that will benefit the regulated industry, CMS, and our law enforcement partners (84 FR 55789). In developing our proposals for guidance on the fundamental terminology and requirements, we considered three basic questions— Does the arrangement make sense as a means to accomplish the parties' goals?. How did the parties calculate the remuneration?. Did the calculation result in compensation that is fair market value for the asset, item, service, or rental property?.

These questions relate, respectively, to the definition of commercial reasonableness, the volume or value standard and the other business generated standard, and the definition of fair market value. In this section of the final rule, we provide detailed descriptions of our final definitions and special rules. Importantly, our final policies relate only to the application of section 1877 of the Act and our physician self-referral regulations. Although other laws and regulations, including the anti-kickback statute and CMP law, may utilize the same or similar terminology, the policies finalized in this final rule do not affect or in any way bind OIG's (or any other governmental agency's) interpretation or ability to interpret such terms for purposes of laws or regulations other than the physician self-referral law.

In addition, our interpretation of these key terms does not relate to and in no way binds the Internal Revenue Service with respect to its rulings and interpretation of the Internal Revenue Code or State agencies with respect to any State law or regulation that may utilize the same or similar terminology. We note further that, to the extent terminology is the same as or similar to terminology used in the Quality Payment Program within the PFS, our final policies do not affect or apply to the Quality Payment Program. We received the following general comment on our discussion of the three key requirements in the exceptions to the physician self-referral law, and our response follows. We respond to comments specific to each of the key requirements in sections II.B.2.

Through II.B.4. Of this final rule. Comment. Several commenters requested that CMS' articulation of the “big three” requirements should be preserved in the final rule.

Specifically, commenters described as “cornerstones” of exceptions to the physician self-referral law the requirements that. (1) The compensation arrangement is commercially reasonable. (2) the compensation is not determined in any manner that takes into account the volume or value of a physician's referrals (the volume or value standard) or the other business generated by a physician for the entity (the other business generated standard). And (3) the amount of compensation is fair market value for the items or services furnished under the arrangement.

Commenters strongly agreed with our statements that these requirements are separate and distinct and should be disentangled from each other. Response. We agree with the commenters that it is important to reiterate that the statutory and regulatory requirements regarding compensation arrangements that are commercially reasonable, compensation that is not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by a physician, and compensation that is fair market value for items or services actually furnished are separate and distinct requirements, each of which must be satisfied when included in an exception to the physician self-referral law. 2.

Commercially Reasonable (§ 411.351) In the proposed rule, we proposed to include at § 411.351 a definition for the term “commercially reasonable.” As described previously, many of the statutory and regulatory exceptions to the physician self-referral law include a requirement that the compensation arrangement is commercially reasonable. For example, the exception at section 1877(e)(2) of the Act for bona fide employment relationships requires that the remuneration provided to the physician is pursuant to an arrangement that would be commercially reasonable (even if no referrals were made to the employer). The exception at section 1877(e)(3)(A) of the Act for personal service arrangements uses slightly different language to describe this general concept, and requires that the aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement. The exception at § 411.357(y) for timeshare arrangements, which the Secretary established in regulation using his authority at section 1877(b)(4) of the Act, requires that the arrangement would be commercially reasonable even if no referrals were made between the parties.

Despite the prevalence of this requirement (in one form or another), as we stated in the proposed rule (84 FR 55790), we addressed the concept of commercial reasonableness only once—in our 1998 proposed rule—where we stated that we are interpreting “commercially reasonable” to mean that an arrangement appears to be a sensible, prudent business agreement, from the perspective of the particular parties involved, even in the absence of any potential referrals (63 FR 1700). Until now, the physician self-referral regulations themselves lacked a codified Start Printed Page 77531definition for the term commercially reasonable. As discussed previously in this section II.B.2., the key question to ask when determining whether an arrangement is commercially reasonable is simply whether the arrangement makes sense as a means to accomplish the parties' goals. The determination of commercial reasonableness is not one of valuation.

We continue to believe that this determination should be made from the perspective of the particular parties involved in the arrangement. In addition, the determination that an arrangement is commercially reasonable does not turn on whether the arrangement is profitable. Compensation arrangements that do not result in profit for one or more of the parties may nonetheless be commercially reasonable. In the proposed rule, we described numerous examples of compensation arrangements that commenters on the CMS RFI asserted would be commercially reasonable, despite the fact that the party paying the remuneration does not recognize an equivalent or greater financial benefit from the items or services purchased in the transaction, or that the party receiving the remuneration incurs costs in furnishing the items or services that are greater than the amount of the remuneration received.

We acknowledge that, even knowing in advance that an arrangement may result in losses to one or more parties, it may be reasonable, if not necessary, to nevertheless enter into the arrangement. Examples of reasons why parties would enter into such transactions include community need, timely access to health care services, fulfillment of licensure or regulatory obligations, including those under the Emergency Medical Treatment and Labor Act (EMTALA), the provision of charity care, and the improvement of quality and health outcomes. To provide the certainty requested by stakeholders, we proposed to codify in regulation the definition of “commercially reasonable” at § 411.351. We proposed two alternative definitions for the term.

First, we proposed to define “commercially reasonable” to mean that the particular arrangement furthers a legitimate business purpose of the parties and is on similar terms and conditions as like arrangements. In the alternative, we proposed to define “commercially reasonable” to mean that the arrangement makes commercial sense and is entered into by a reasonable entity of similar type and size and a reasonable physician of similar scope and specialty. We sought comment on each of these definitions as well as input from stakeholders regarding other possible definitions that would provide clear guidance to enable parties to structure their arrangements in a manner that ensures compliance with the requirement that their particular arrangement is commercially reasonable. We also proposed to clarify in regulation text that an arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties (84 FR 55790).

After considering the comments on the definition of “commercially reasonable,” we are finalizing in our regulation at § 411.351 that commercially reasonable means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. The final regulation also states that an arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties. Finally, many of the exceptions to the physician self-referral law require that an arrangement is commercially reasonable “even if no referrals were made between the parties” or “even if no referrals were made to the employer.” The exceptions use varying phrasing to describe this requirement and we do not repeat each iteration here. Although we did not include this language in the final definition of “commercially reasonable,” it remains an important constraint when determining whether an arrangement satisfies the requirements of an applicable exception.

As described elsewhere in this final rule, we have revised the exception for fair market value compensation to include this important constraint in the requirement at § 411.357(l)(4) that a compensation arrangement is commercially reasonable. In addition, we included this requirement in the new exception for limited remuneration to a physician that we are finalizing at § 411.357(z). We received the following comments and our responses follow. Comment.

Most commenters supported our proposal to define the term “commercially reasonable” in regulation, stating a preference for one of the two alternative definitions that we proposed. A few commenters offered alternative definitions of “commercially reasonable,” such as an arrangement that is “appropriately designed to meet the parties' legitimate business goals from the perspective of the parties to the arrangement” and an arrangement that is “entered into for a legitimate business interest and is reasonably structured to achieve the legitimate business interest.” A small number of commenters urged us not to finalize the proposed definition so that parties could rely on CMS' statements in the 1998 proposed rule, noting that it has been workable for industry stakeholders for many years. Several commenters requested that, if we finalize the first alternative proposed definition, we strike the limitation that the arrangement is on similar terms and conditions as like arrangements. These commenters asserted that parties to an arrangement would not have access to data to identify “like arrangements” or be aware of their terms and conditions.

In addition, parties may enter into a novel compensation arrangement that bears minimal, if any, resemblance to existing arrangements against which it could be compared for “similar terms.” The commenters also highlighted the burden associated with obtaining third party opinions in order to satisfy this requirement. Other commenters preferred the second alternative definition because of its focus on the comparison to other similarly situated providers, suppliers, and physicians, although one of these commenters noted that the requirement that an arrangement makes “commercial sense” could exclude arrangements for noncommercial purposes, such as meeting community needs. A few other commenters suggested combining the two proposed definitions in order to emphasize that the determination of commercial reasonableness should be from the perspective of, and further a legitimate business need of, the particular parties to the arrangement, and also that the arrangement should be compared to arrangements with similarly situated parties. One of these commenters also suggested that the definition of “commercially reasonable” should reflect the importance of evaluating the market conditions relevant to the arrangement.

A few other commenters offered that CMS should finalize a policy under which an arrangement would be commercially reasonable if it meets either of the proposed alternative definitions. Another commenter urged CMS to ensure that the definition of “commercially reasonable” does not shelter abusive arrangements. Response. We agree that a definition requiring a compensation arrangement to be on similar terms as like arrangements in order to be commercially reasonable does not provide for the clarity that we and stakeholders seek and, in fact, could increase the burden on parties that must seek the expertise of outside Start Printed Page 77532organizations to ensure compliance with the requirement that their arrangement is commercially reasonable.

We are finalizing a modified definition of “commercially reasonable” to address commenters' concerns. In line with the suggestion of some commenters, the final definition of “commercially reasonable” incorporates aspects of each of the proposed alternative definitions. Under the definition finalized at § 411.351, commercially reasonable means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. We believe that the definition of “commercially reasonable” at final § 411.351 is consistent with the guidance we provided in the 1998 proposed rule, appropriately considers the characteristics of the parties to the actual arrangement being assessed for its commercial reasonableness, and will adequately ensure that parties cannot protect abusive arrangements under the guise of “commercial reasonableness.” Comment.

One commenter asked us to confirm that the test of commercial reasonableness relates primarily to the non-financial elements of an arrangement. Response. We understand the commenter to be inquiring whether the existence of the compensation arrangement must be commercially reasonable as opposed to whether the precise compensation terms of the arrangement must be commercially reasonable. That is, we understand the commenter to be seeking confirmation that the concept of commercial reasonableness does not relate to the amount of or formula for compensation paid under an arrangement, but rather whether the entire arrangement is commercially reasonable.

As we stated in the proposed rule and previously in this final rule, when determining the commercial reasonableness of an arrangement, the question to ask is whether the arrangement makes sense as a means to accomplish the parties' goals. The test is not whether the compensation terms alone make sense as a means to accomplish the parties' goals. However, the compensation terms of an arrangement are an integral part of the arrangement and impact its ability to accomplish the parties' goals (84 FR 55790). Comment.

One commenter urged us to adopt a policy under which an arrangement would be presumed to be commercially reasonable if, contemporaneously with the commencement of the arrangement, the governing body of the entity (or its designee) documents in writing that the arrangement furthers the legitimate business purpose of the parties. Another commenter urged us to adopt an irrebuttable presumption that, if the purpose of an arrangement is documented and achieved, the commercial reasonableness of the arrangement cannot be contradicted by extrinsic evidence. The commenter asserted that, in the absence of such a presumption, entities are left susceptible to the potential for False Claims Act litigation predicated on an unsupported inference of ill intent on behalf of the contracting parties. Response.

We do not believe that merely documenting in writing that an arrangement furthers a legitimate business purpose of the parties is sufficient to ensure that the arrangement is commercially reasonable, even if the identified purpose is achieved. Moreover, our final definition of “commercially reasonable” requires more than furtherance of a legitimate business purpose of the parties. The arrangement must also be sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. If the only requirement to demonstrate that an arrangement is commercially reasonable is contemporaneous written documentation stating that it is commercially reasonable, unscrupulous parties could satisfy the requirement simply by including sufficient template language in their documentation, even if, in reality, the arrangement could not further the legitimate business purposes of the parties (assuming they have a legitimate business need for the arrangement) or is not sensible, considering the characteristics of the parties, including their size, type, scope, and specialty.

Further, the fact that an arrangement ultimately achieved a legitimate business purpose of the parties does not necessarily mean that it was a commercially reasonable arrangement. Where a financial relationship exists between a physician (or an immediate family member of a physician) and an entity to which the physician makes referrals for designated health services, compliance with the physician self-referral law requires substantive compliance, not merely documentary (or “paper”) compliance, with the requirements of an applicable exception. An irrebuttable presumption of commercial reasonableness that ensures that parties are shielded from allegations of violation of the False Claims Act if their documentation includes specific language or their arrangement ultimately achieved its intended purpose would pose a risk of program or patient abuse. Comment.

A few commenters requested that we include in regulation text a non-exhaustive list of legitimate business purposes for purposes of applying the definition of “commercially reasonable.” One commenter specifically referenced our discussion in the proposed rule of examples of compensation arrangements that CMS RFI commenters believed would be commercially reasonable even if they did not result in profit for one or more of the parties. Response. As we stated in the proposed rule, we find compelling the comments of commenters on the CMS RFI regarding the types of arrangements they believed would be commercially reasonable even if they did not result in profit for one or more of the parties (84 FR 55790). However, these types of arrangements do not depict the entire universe of arrangements that could be commercially reasonable.

We decline to provide examples in regulation text of arrangements that may be commercially reasonable, because the determination of whether a compensation arrangement is commercially reasonable is dependent on the facts and circumstances of the parties. Even a non-exhaustive list of the types of arrangements that are potentially commercially reasonable could inadvertently limit or otherwise proscribe the types of arrangements that parties undertake. Moreover, it is not possible to know definitively that, in every instance, a particular type of arrangement would be commercially reasonable. An arrangement that is commercially reasonable for one set of parties may not be commercially reasonable for another.

Comment. One commenter that asked us to provide examples of arrangements that would be considered commercially reasonable asserted that examples are necessary so that parties may avoid unintentional noncompliance with the commercial reasonableness requirement, particularly in the context of value-based arrangements for which the commercial reasonableness of the arrangement is required. Another commenter stated its assumption that CMS “expects that value-based payments must still be tested for commercial reasonableness” and asked us to confirm its belief. The commenter specifically requested us to confirm that, for any new exceptions for value-based arrangements, the determination of commercial reasonableness may be based on more than just cost savings to the value-based enterprise.

The commenter asserted that, in Start Printed Page 77533arrangements where cost savings are negligible, enhanced access to care, increased care coordination, and improved quality of care may support a determination of the value-based arrangement's commercial reasonableness. Response. As we explained in section II.A.2. Of this final rule, the new exceptions for value-based arrangements finalized at § 411.357(aa) do not include a requirement that the value-based arrangement is commercially reasonable.

Of course, parties may utilize any applicable exception to demonstrate compliance with the physician self-referral law. If the exception upon which parties to a value-based arrangement rely includes a requirement that the arrangement is commercially reasonable, the arrangement must further a legitimate business purpose of the parties. In addition, it must be sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. However, as we stated in the proposed rule, the determination of whether the arrangement is commercially reasonable is not one of valuation (84 FR 55790), and an arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.

Comment. A few commenters expressed concern that the term “legitimate business purpose” does not provide enough certainty for stakeholders. Another commenter asked how the requirement that an arrangement must further a legitimate business purpose of the parties in order to be commercially reasonable is different from a query into the subjective intent of the parties (that is, whether a purpose of the arrangement is to induce or reward referrals). Response.

The term “legitimate business purpose” appears in both the statutory and regulatory exceptions to the physician self-referral law. The commenter did not clearly explain how the use of this term in the definition of “commercially reasonable” is any less clear or appropriate than its use in the special rule at § 411.354(d)(4)(v) or the exceptions for the rental of office space at § 411.357(a)(3), the rental of equipment at § 411.357(b)(2), personal service arrangements at § 411.357(d)(1)(iii), and fair market value compensation at § 411.357(l)(4) (prior to its revision in this final rule). Given that the language finalized in our definition of “commercially reasonable” is identical to that used in longstanding statutory and regulatory exceptions and our special rule at § 411.354(d)(4)(v), we see no reason why stakeholders would be suddenly unable to ascertain the meaning of the term. We see great benefit in using consistent terminology throughout our regulations where we intend an identical policy or standard.

With respect to the second commenter's question, we believe that the requirement represents an objective standard. This requirement in the definition of “commercially reasonable” is similar to the requirements in the exceptions referenced, all of which represent objective standards. Although identifying the business purpose of an arrangement may entail an inquiry into the parties' intent for the arrangement, the requirement in the definition of “commercially reasonable” that the arrangement furthers a legitimate business purpose of the parties would be considered only after the determination that there actually exists a legitimate business purpose for the arrangement. As we stated in the proposed rule, conduct that violates a criminal law, such as inducing or rewarding referrals in violation of the anti-kickback statute, would not be a legitimate business purpose for an arrangement (84 FR 55791).

Thus, the arrangement would not be commercially reasonable, and the question of whether the arrangement furthers a legitimate business purpose would not be reached. Comment. One commenter agreed that an arrangement does not further the legitimate business purposes of the parties if, for example, a hospital engages more medical directors than it needs to furnish required medical direction, but asked for additional guidance on our interpretation of the term “legitimate business purpose.” Another commenter expressed concern that unscrupulous parties could identify the goal of attracting a physician's business as a “legitimate business purpose” of its compensation arrangement with the physician. This commenter also suggested that an arrangement that is unprofitable should have discrete and well-documented factors establishing that it furthers a legitimate business purpose of the parties (such as a regulatory or licensure requirement or a patient access issue) in order to qualify as commercially reasonable.

Response. As we noted in the proposed rule, arrangements that, on their face, appear to further a legitimate business purpose of the parties may not be commercially reasonable if they merely duplicate other facially legitimate arrangements (84 FR 55790). For example, a hospital may enter into an arrangement for the personal services of a physician to oversee its oncology department. If the hospital needs only one medical director for the oncology department, but later enters into a second arrangement with another physician for oversight of the department, the second arrangement merely duplicates the already-obtained medical directorship services and may not be commercially reasonable.

Although the evaluation of compliance with the physician self-referral law always requires a review of the facts and circumstances of the financial relationship between the parties, the commercial reasonableness of multiple arrangements for the same services is questionable. In the proposed rule, we discussed numerous examples of compensation arrangements described by CMS RFI commenters as commercially reasonable, in their opinions, despite the fact that the party paying the remuneration does not recognize an equivalent or greater financial benefit from the items or services purchased in the transaction, or that the party receiving the remuneration incurs costs in furnishing the items or services that are greater than the amount of the remuneration received (84 FR 55790). The underlying purposes of the compensation arrangements described by the CMS RFI commenters included addressing community need, timely access to health care services, fulfillment of licensure or regulatory obligations (including those under the Emergency Medical Treatment and Labor Act (EMTALA)), the provision of charity care, and the improvement of quality and health outcomes. We believe that all of these purposes could qualify as “legitimate business purposes” of the parties to an arrangement, depending on the facts and circumstances of the parties.

We share the second commenter's concern that unscrupulous parties could claim that a compensation arrangement is commercially reasonable by claiming that attracting a physician's business is a “legitimate business purpose” for their arrangement. In the proposed rule, we explained that we were not proposing to include the phrase “even if no referrals were made” in the definition of “commercially reasonable” because this qualifying phrase (or similar language) appears in the regulation text of many exceptions that require an arrangement to be commercially reasonable (84 FR 55791). Thus, it would be redundant to include the language in the definition of “commercially reasonable” itself. We were clear that we were not proposing to remove this qualifying language from the exceptions in which it appears.

We believe that this qualifying language provides critical protection against Start Printed Page 77534program or patient abuse, as an arrangement must be commercially reasonable even if no referrals were made by the physician. As described in greater detail in sections II.D.10. And II.E.1. Of this final rule, we are adding this language where it had not previously been included in the exception for fair market value compensation at § 411.357(l) and in the new exception for limited remuneration to a physician finalized at § 411.357(z).

An arrangement whose purpose is to attract a physician's business, even if the parties claim this purpose, would not be commercially reasonable in the absence of the physician's referrals and, thus, would not satisfy this important requirement of the exceptions generally applicable to compensation arrangements that call for items or services to be provided by a physician. Finally, in the proposed rule, we also discussed our review of Internal Revenue Service (IRS) Revenue Ruling 97-21 and its conclusion that a hospital may not engage in substantial unlawful activities and maintain its tax-exempt status because the conduct of an unlawful activity is inconsistent with charitable purposes (84 FR 55790). In this final rule, we are similarly taking the position that an activity that is in violation of a criminal law would not be a legitimate business purpose of the parties and, therefore, would not be commercially reasonable for purposes of the physician self-referral law. We note that the absence of a criminal violation would not, in and of itself, establish that an arrangement is commercially reasonable.

Comment. Several commenters addressed our preamble discussion regarding the requirement in our regulations that a compensation arrangement must be commercially reasonable even if no referrals were made between the parties. One commenter suggested that, if CMS intends that an arrangement should be commercially reasonable even in the absence of referrals, that phrase should be added to the exceptions or, if referrals may be considered, CMS should so state. These commenters requested that we expressly confirm that the term “referral” in these references in our exceptions has the meaning set forth in § 411.351 of our regulations.

Another commenter asserted that the “even if no referrals were made” requirement is an integral part of commercial reasonableness in applying the physician self-referral law. This commenter suggested that we add this limiting phrase to § 411.357(l)(4). Response. We agree with the commenters regarding the inclusion of the language “even if no referrals were made between the parties” and, for the reasons explained in our response to the previous comment, have added this language to the exception for fair market value compensation at § 411.357(l) and the new exception for limited remuneration to a physician at § 411.357(z).

Unless the context indicates otherwise, the term “referral” has the meaning set forth in § 411.351 throughout the physician self-referral regulations, including in this limiting phrase. Comment. Most commenters that addressed the definition of “commercially reasonable” expressed appreciation for the clarification in the proposed rule of our position that compensation arrangements that do not result in profit for one or more of the parties may nonetheless be commercially reasonable (84 FR 55790), and supported the inclusion of this policy statement at proposed § 411.351. Commenters echoed the potential reasons set forth in the proposed rule why an arrangement may not be profitable, but yet still commercially reasonable, and added that, despite the parties' prediction of profitability at the onset of an arrangement, an arrangement may simply not “pan out.” Many of these commenters requested that we extend our policy regarding the effect that the profitability of a compensation arrangement has on the arrangement's ability to satisfy the requirement that it is commercially reasonable to state that commercial reasonableness is unrelated, wholly unrelated, or irrelevant to the profitability of the arrangement to one or more of the parties.

One commenter suggested that we state in regulation text that profitability is not a requirement for an arrangement to be commercially reasonable. Another commenter expressed concern that the use of the word “may” does not provide a bright-line rule for stakeholders. One commenter noted that the concept of commercial reasonableness has been used as an enforcement tool for business decisions that might not have turned out to be good business decisions, but were made in good faith, or that are strategic in nature without making absolute “commercial sense.” In contrast, a few commenters asserted that there are circumstances under which it would not be commercially reasonable for parties to enter into an arrangement that they know would result in substantial losses to one or more of the parties. One commenter, while agreeing that the issue of commercial reasonableness is not solely determined by physician practice profitability, stated that physician practice losses may indicate arrangements that should be further scrutinized as possible fraud and abuse risks.

Response. We decline to adopt the commenters' suggestions regarding the extension of our policy. Although we believe that compensation arrangements that do not result in profit for one or more of the parties may nonetheless be commercially reasonable, we are not convinced that the profitability of an arrangement is completely irrelevant or always unrelated to a determination of its commercial reasonableness, for instance, in a case where the parties enter into an arrangement aware of its certain unprofitability and there exists no identifiable need or justification—other than to capture the physician's referrals—for the arrangement. We agree with the commenters that it is appropriate and helpful to include in regulation text our policy regarding the impact of an arrangement's profitability on its ability to satisfy the requirement that it is commercially reasonable.

We are not adopting the alternative characterization of our policy as “profitability is not a requirement for an arrangement to be commercially reasonable” because we do not believe that this language is as clear or precise as the language we proposed. We are finalizing in regulation text at § 411.351 our policy that “an arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.” Comment. One commenter asked for confirmation that any definition of “commercially reasonable” finalized by CMS will not apply to regulations enforced by the IRS, OIG or pursuant to state law. Response.

The commenter is correct. The introductory language to § 411.351 where the definition of “commercially reasonable” appears in our regulation text states that the definitions in [Title 42, part 411, Subpart J] apply only for purposes of section 1877 of the Act and [Subpart J]. Comment. One commenter asked how CMS interprets the requirements at § 411.357(a)(3) and (b)(2) in the exceptions for the rental of office space and equipment, respectively, that the leased office space or equipment does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement.

The commenter noted that this requirement and a requirement that the compensation arrangement is commercially reasonable are included in each of these statutory (and regulatory) exceptions. The commenter expressed confusion about our Start Printed Page 77535description in the proposed rule of the requirement in the statutory exception for personal service arrangements that the aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement as another form of the requirement that an arrangement is commercially reasonable (84 FR 55790). Response. We believe that the requirement that the leased office space or equipment does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement is intended to prevent sham lease arrangements under which a lessee pays remuneration to the lessor under the guise of rental charges where the rental charges are for office space or equipment for which the lessee has no genuine or reasonable use.

The statutory and regulatory exceptions for the rental of office space and the rental of equipment also include a requirement that the lease arrangement would be commercially reasonable even if no referrals were made between the lessee and the lessor. The new definition of “commercially reasonable” at final § 411.351 applies for purposes of interpreting this requirement. Thus, the particular lease arrangement must further a legitimate business purpose of the parties to the arrangement and must be sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. The statutory exception at section 1877(e)(3)(A) of the Act for personal service arrangements includes a requirement that the aggregate services contracted for under the personal service arrangement do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement.

We included this requirement in the regulatory exception for personal service arrangements at § 411.357(d)(1)(iii). Unlike the exceptions for the rental of office space and the rental of equipment, the exception for personal service arrangements does not include—either in the statute or our regulations—a separate requirement that the arrangement is commercially reasonable. The commenter raises a valid point regarding our statement in the proposed rule that, with respect to the exception for personal services, the “does not exceed what is reasonable and necessary” requirement is a different form of the requirement that the arrangement is commercially reasonable. Upon further review of the similarities and differences in the requirements in the statutory and regulatory exceptions for the rental of office space, the rental of equipment, and personal service arrangements, we are retracting our statement from the proposed rule that the requirement at section 1877(e)(3)(A) of the Act (incorporated at § 411.357(d)(1)(iii)) equates to a requirement that the personal service arrangement is commercially reasonable.

As we stated in this section II.B.2., with respect to lease arrangements for office space and equipment, we interpret the “does not exceed what is reasonable and necessary” requirement as a protection against sham lease arrangements under which a lessee pays remuneration to the lessor under the guise of rental charges where the rental charges are for office space or equipment for which the lessee has no genuine or reasonable use. We similarly interpret this requirement in the context of the exception for personal service arrangements as a protection against sham arrangements for the services of a physician for which the entity has no genuine or reasonable use. In the proposed rule, we stated that arrangements that, on their face, appear to further a legitimate business purpose of the parties may not be commercially reasonable if they merely duplicate other facially legitimate arrangements (84 FR 55790). We provided the example of a hospital that enters into multiple arrangements for medical director services for a single department even though the hospital needs only one medical director for the department.

We stated that the commercial reasonableness of multiple arrangements for the same services is questionable. Multiple arrangements for the same personal services may also result in the failure of the duplicate arrangements to satisfy the “reasonable and necessary” requirement in the exception for personal services at section 1877(e)(3)(A) of the Act and § 411.357(d)(1)(iii). In the proposed rule, we also discussed our view that an activity that is in violation of criminal law would not be a legitimate business purpose of the parties and, therefore, would not be commercially reasonable for purposes of the physician self-referral law (84 FR 55791). Activity that is in violation of criminal law would also fail to satisfy the requirement in the exception for personal service arrangements that the services to be furnished under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates any Federal or State law.

Thus, although the exception for personal service arrangements does not include a requirement that the arrangement is commercially reasonable, the other requirements in the exception guard against program or patient abuse in an important and essentially equivalent way. We note that the exception for personal service arrangements at § 411.357(d)(1) includes a requirement that the arrangement covers all the services to be furnished by the physician (or an immediate family member of the physician) to the entity. The exception permits the use of a master list of contracts that is maintained and updated centrally and available for review by the Secretary upon request. In addition, a personal service arrangement must have a duration of at least 1 year in order to qualify for protection under the exception at § 411.357(d)(1).

We are aware that, because personal service arrangements may not satisfy these requirements, parties often rely on the exception at § 411.357(l) for fair market value compensation to protect their arrangements for the personal services of physicians and their immediate family members. We remind readers that the exception for fair market value compensation includes a requirement that the arrangement is commercially reasonable, and as explained in section II.D.10. Of this final rule, we are revising the regulation text of that exception to require that the arrangement is commercially reasonable even if no referrals were made between the parties. 3.

The Volume or Value Standard and the Other Business Generated Standard (§ 411.354(d)(5) and (6)) Many of the exceptions at section 1877(e) of the Act (“Exceptions Relating to Other Compensation Arrangements”) and in our regulations include a requirement that the compensation paid under the arrangement is not determined in any manner that takes into account the volume or value of referrals by the physician who is a party to the arrangement, and some exceptions also include a requirement that the compensation is not determined in any manner that takes into account other business generated between the parties. We refer to these as the “volume or value standard” and the “other business generated standard,” respectively. Throughout the regulatory history of the physician self-referral law, we have shared our interpretation of these standards and responded to comments as they arose. Despite our attempt at establishing clear guidance regarding the application of the volume or value standard and the other business generated standard, commenters to several requests for information, Start Printed Page 77536including the CMS RFI, identified their lack of a clear understanding as to whether compensation will be considered to take into account the volume or value of referrals or other business generated by the physician as one of the greatest risks they face when structuring arrangements between entities furnishing designated health services and the physicians who refer to them.

They stated that, not only do they face the risk of penalties under the physician self-referral law, but, because a violation of the physician self-referral law may be the predicate for liability under the False Claims Act, entities are susceptible to both government and whistleblower actions that can result in significant penalties through litigation or settlement. In the proposed rule, we proposed regulations intended to provide objective tests for determining whether compensation takes into account the volume or value of referrals or the volume or value of other business generated by the physician. We also provided a brief history of the guidance to date on the volume or value standard and the other business generated standard. We believe it is useful to repeat that history in this final rule.

In the 1998 proposed rule, we discussed the volume or value standard as it pertains to the criteria that a physician practice must meet to qualify as a “group practice” (63 FR 1690). We also stated that we would apply this interpretation of the volume or value standard throughout our regulations (63 FR 1699 through 1700). In the discussion of group practices, we stated that we believe that the volume or value standard precludes a group practice from paying physician members for each referral they personally make or based on the volume or value of the referred services (63 FR 1690). We went on to state that the most straightforward way for a physician practice to demonstrate that it is meeting the requirements for group practices would be for the practice to avoid a link between physician compensation and the volume or value of any referrals, regardless of whether the referrals involve Medicare or Medicaid patients (63 FR 1690).

However, because our definition of “referral” at § 411.351 includes only referrals for designated health services, we also noted that a physician practice could compensate its members on the basis of non-Medicare and non-Medicaid referrals, but would be required to separately account for revenues and distributions related to referrals for designated health services for Medicare and Medicaid patients (63 FR 1690). (See section II.C. Of this final rule for a discussion of the historical inclusion of Medicaid referrals in our regulations and our revisions to the group practice rules.) Outside of the group practice context, these principles apply generally to compensation from an entity to a physician. We also addressed the other business generated standard in the 1998 proposed rule, stating that we believe that the Congress may not have wished to except arrangements that include additional compensation for other business dealings and that, if a party's compensation contains payment for other business generated between the parties, we would expect the parties to separately determine if this extra payment falls within one of the exceptions (63 FR 1700).

In Phase I, we finalized our policy regarding the volume or value standard and the other business generated standard, responding to comments on the proposals included in the 1998 proposed rule. Most importantly, we revised the scope of the volume or value standard to permit time-based or unit of service-based compensation formulas (66 FR 876). We also stated that the phrase “does not take into account other business generated between the parties” means that the fixed, fair market value payment cannot take into account, or vary with, referrals of designated health services payable by Medicare or Medicaid or any other business generated by the referring physician, including other Federal and private pay business (66 FR 877), noting that the phrase “generated between the parties” means business generated by the referring physician for purposes of the physician self-referral law (66 FR 876). We stated that section 1877 of the Act establishes a straightforward test that compensation should be at fair market value for the work or service performed or the equipment or [office] space leased—not inflated to compensate for the physician's ability to generate other revenue (66 FR 877).

Finally, in response to a comment about whether the compensation paid to a physician for the purchase of his or her practice could include the value of the physician's referrals of designated health services to the practice, we stated that compensation may include the value of designated health services made by the physician to his or her practice if the designated health services referred by the selling physician satisfied the requirements of an applicable exception, such as the in-office ancillary services exception, and the purchase arrangement is not contingent on future referrals (66 FR 877). This policy would apply also to the value of the physician's referrals of designated health services to his or her practice if the compensation arrangement between the physician and the practice satisfied the requirements of an applicable exception. Also in Phase I, we established special rules on compensation at § 411.354(d)(2) and (3) that deem unit-based compensation not to take into account the volume or value of referrals or other business generated between the parties if certain conditions are met (66 FR 876 through 877). These rules state that unit-based compensation will be deemed not to take into account the volume or value of referrals if the compensation is fair market value for items or services actually provided and does not vary during the course of the compensation arrangement in any manner that takes into account referrals of designated health services.

Unit-based compensation will be deemed not to take into account the volume or value of other business generated between the parties to a compensation arrangement if the compensation is fair market value for items or services actually provided and does not vary during the term of the compensation arrangement in any manner that takes into account referrals or other business generated by the referring physician, including private pay health care business. We note that the special rules use the phrase “takes into account referrals” (or other business generated) rather than “takes into account the volume or value of referrals” (or other business generated). Both special rules apply to time-based or per-unit of service-based (“per-click”) compensation formulas. However, as we later noted in Phase II, the special rules on unit-based compensation are intended to be safe harbors, and there may be some situations not described in § 411.354(d)(2) or (3) where an arrangement does not take into account the volume or value of referrals or other business generated between the parties (69 FR 16070).

In Phase II, we clarified that personally performed services are not considered other business generated by the referring physician (69 FR 16068). We also stated that fixed compensation (that is, one lump-sum payment or several individual payments aggregated together) can take into account or otherwise reflect the volume or value of referrals (for example, if the payment exceeds the fair market value for the items or services provided) (69 FR 16059). We noted that a determination whether the compensation does, in fact, take into account or otherwise reflect the volume or value of referrals will Start Printed Page 77537require a case-by-case examination based on the facts and circumstances. (We note that the language “otherwise reflects” was determined to be superfluous and removed from our regulation text in Phase III (72 FR 51027).) Until now, we had not codified regulations defining the volume or value standard or the other business generated standard, although the special rule at § 411.354(d)(4) sets forth the circumstances under which a physician's compensation under a bona fide employment relationship, personal service arrangement, or managed care contract may be conditioned on the physician's referrals to a particular provider, practitioner, or supplier without running afoul of the volume or value standard.

For the reasons explained in more detail below and in our responses to comments, in this final rule, we are finalizing special rules at § 411.354(d)(5) and (6) that supersede our previous guidance, including guidance with which they may be (or appear to be) inconsistent. Our final policies relate to the volume or value and other business generated standards as they apply to the definition of remuneration at section 1877(h)(1)(C) of the Act and § 411.351 of our regulations, the exception for academic medical centers at § 411.355(e)(1)(ii), and various exceptions for compensation arrangements in section 1877(e) of the Act and § 411.357 of our regulations, including the new exception established in this final rule for limited remuneration to a physician at § 411.357(z). In addition, the regulation at final § 411.354(d)(5)(i) applies for purposes of section 1877(h)(4) of the Act and the group practice regulations at § 411.352(g) and (i). The final policies do not apply for purposes of applying the exceptions at § 411.357(m), (s), (u), (v), and (w), or for purposes of applying the new exception finalized in this final rule at § 411.357(bb) for cybersecurity items and services.

We are including regulation text at § 411.354(d)(5)(iv) and (6)(iv) regarding the application of the volume or value standard and the other business generated standard for purposes of applying these exceptions. Given the revisions to our regulations at § 411.354(c)(2) and (d)(1), which eliminate language regarding compensation that is determined in any manner that takes into account the volume or value of referrals or other business generated by a physician, the final special rules at § 411.354(d)(5) and (6) do not apply for purposes of determining the existence of an indirect compensation arrangement under § 411.354(c)(2) or applying the special rule on compensation that is deemed to be set in advance at § 411.354(d)(1). For the reasons discussed below in response to comments, the final special rules at § 411.354(d)(5) and (6) do not apply for purposes of applying the special rules for unit-based compensation at § 411.354(d)(2) and (3). We are including regulation text at § 411.354(d)(5)(iv) and (6)(iv) regarding the application of the volume or value standard and the other business generated standard for purposes of applying the special rules for unit-based compensation.

As we stated in the proposed rule, we believe there is great value in having an objective test for determining whether the compensation is determined in any manner that takes into account the volume or value of referrals or takes into account other business generated between the parties (84 FR 55793). Our final rules establish such a test. We are finalizing an approach that, rather than deeming compensation under certain circumstances not to have been determined in a manner that takes into account the volume or value of referrals or takes into account other business generated between the parties, defines exactly when compensation will be considered to take into account the volume or value of referrals or take into account other business generated between the parties. Under our final regulations, which we believe create the bright-line rule sought by commenters and other stakeholders, outside of the circumstances at § 411.354(d)(5) and (6), compensation will not be considered to take into account the volume or value of referrals or take into account other business generated between the parties, respectively.

In other words, only when the mathematical formula used to calculate the amount of the compensation includes referrals or other business generated as a variable, and the amount of the compensation correlates with the number or value of the physician's referrals to or the physician's generation of other business for the entity, is the compensation considered to take into account the volume or value of referrals or take into account the volume or value of other business generated. We believe that our final regulations are consistent with the position we articulated in Phase I where we stated that, in general, we believe that a compensation structure does not directly take into account the volume or value of referrals if there is no direct correlation between the total amount of a physician's compensation and the volume or value of the physician's referrals of designated health services (66 FR 908). In the proposed rule, we explained that, even with nonsubstantive changes to standardize (where possible) the language used to describe the volume or value standard and the other business generated standard in our regulations, due to the varying language used throughout the statutory and regulatory schemes, we find it impossible to establish a single definition for the volume or value and other business generated standards (84 FR 55793). Therefore, instead of a definition at § 411.351, we proposed special rules for compensation arrangements that would apply regardless of the exact language used to describe the standards in the statute and our regulations.

We also explained that, because section 1877 of the Act defines a compensation arrangement as any arrangement involving any remuneration between a physician (or an immediate family member of such physician) and an entity, we believe that it is necessary that the tests address circumstances where the compensation is from the entity to the physician, as well as where the compensation is from the physician to the entity. Therefore, we proposed two separate special rules for the volume or value standard and two separate special rules for the other business generated standard. Under our proposals, compensation from an entity to a physician (or immediate family member of the physician) would take into account the volume or value of referrals only if the formula used to calculate the physician's (or immediate family member's) compensation includes the physician's referrals to the entity as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the number or value of the physician's referrals to the entity. For example, if the physician (or immediate family member) receives additional compensation as the number or value of the physician's referrals to the entity increase, the physician's (or immediate family member's) compensation would positively correlate with the number or value of the physician's referrals.

In the proposed rule, we stated that, unless the special rule at § 411.354(d)(2) for unit-based compensation applies and its conditions are met, the physician's (or immediate family member's) compensation would take into account the volume or value of referrals (84 FR 55793). For the reasons explained in our response to comments below, we are retracting this statement. Under the Start Printed Page 77538policies set forth in this final rule, as described in our response to comments below, the special rules at § 411.354(d)(2) and (3) are not applicable to compensation that takes into account the volume or value of referrals under final § 411.354(d)(5)(i) or (6)(i) or to compensation that takes into account other business generated by a physician under final § 411.354(d)(5)(ii) or (6)(ii). We have revised the regulation text at § 411.354(d)(2) and (3) accordingly.

If compensation takes into account the volume or value of referrals or the volume or value of other business generated under final § 411.354(d)(5) or (6), that determination is final. The special rules at § 411.354(d)(2) and (3) may not be applied to then deem the compensation not to take into account the volume or value of referrals or other business generated. To illustrate our proposed policy, in the proposed rule, we provided an example under which a physician organization does not qualify as a group practice under § 411.352 of the physician self-referral regulations. Under the example, the physician organization pays its physicians a percentage of collections attributed to the physician, including personally performed services and services furnished by the physician organization (the physician's “pool”).

If a physician's pool includes amounts collected for designated health services furnished by the physician organization that he ordered but did not personally perform, the physician's compensation takes into account the volume or value of his referrals to the physician organization. Assuming the physician is paid 50 percent of the amount in his pool, the mathematical formula that illustrates the physician's compensation would be. Compensation = (.50 × collections from personally performed services) + (.50 × collections from referred designated health services) + (.50 × collections from non-designated health services referrals). The policy proposed with respect to when compensation from an entity to a physician (or immediate family member of the physician) takes into account other business generated would operate in the same manner (84 FR 55793).

Analogously, we proposed that compensation from a physician (or immediate family member of the physician) to an entity takes into account the volume or value of referrals only if the formula used to calculate the compensation paid by the physician includes the physician's referrals to the entity as a variable, resulting in an increase or decrease in the compensation that negatively correlates with the number or value of the physician's referrals to the entity. For example, if a physician (or immediate family member) pays less compensation as the number or value of the physician's referrals to the entity increases, the compensation from the physician to the entity would negatively correlate with the number or value of the physician's referrals. In the proposed rule, we stated that, unless the special rule at § 411.354(d)(2) for unit-based compensation applies and its requirements are met (which seems unlikely), the compensation would take into account the volume or value of referrals (84 FR 55793). We are retracting this statement.

Under the policies set forth in this final rule, as described above and in our response to comments below, the special rules at § 411.354(d)(2) and (3) are not applicable to compensation that takes into account the volume or value of referrals under final § 411.354(d)(5)(i) or (6)(i) or to compensation that takes into account the volume or value of other business generated by the physician under final § 411.354(d)(5)(ii) or (6)(ii). If compensation takes into account the volume or value of referrals or the volume or value of other business generated under final § 411.354(d)(5) or (6), that determination is final. The special rules at § 411.354(d)(2) and (3) may not be applied to then deem the compensation not to take into account the volume or value of referrals or other business generated. To illustrate our proposed policy, in the proposed rule, we provided an example under which a physician leases medical office space from a hospital.

Our example assumed that the rental charges are $5,000 per month and the arrangement provides that the monthly rental charges will be reduced by $5 for each diagnostic test ordered by the physician and furnished in one of the hospital's outpatient departments. Under our proposal, the compensation (that is, the rental charges) would take into account the volume or value of the physician's referrals to the hospital. The mathematical formula that illustrates the rental charges paid by the physician to the hospital would be. Compensation = $5,000−($5 × the number of designated health services referrals).

The proposed policy with respect to when compensation from a physician (or immediate family member of the physician) to an entity takes into account other business generated would operate in the same manner (84 FR 55793 through 55794). We are finalizing our proposals with modifications to the structure of the regulations. The final regulations are designated at § 411.354(d)(5)(i), (ii), and (iii) (with respect to compensation from an entity to a physician (or immediate family member of a physician)) and § 411.354(d)(6)(i), (ii), and (iii) (with respect to compensation from a physician (or immediate family member of a physician) to an entity). As set forth at final § 411.354(d)(5)(iv) and (6)(iv), these special rules do not apply for purposes of applying the exceptions at § 411.357(m), (s), (u), (v), and (w), or for purposes of applying the new exception established in this final rule at § 411.357(bb) for cybersecurity items and services.

Although our final regulations are “special rules” on compensation, we interpret them in the same manner as definitions. That is, the special rules are intended to define the universe of circumstances under which compensation is considered to take into account the volume or value of referrals or other business generated by the physician. If the methodology used to determine the physician's compensation or the payment from the physician does not fall squarely within the defined circumstances, the compensation is not considered to take into account the volume or value of the physician's referrals or other business generated by the physician, as appropriate, for purposes of the physician self-referral law. We also proposed additional policies at proposed § 411.354(d)(5)(i)(B) and (ii)(B), and at proposed § 411.354(d)(6)(i)(B) and (ii)(B), outlining narrowly-defined circumstances under which fixed-rate compensation (for example, a fixed annual salary or an unvarying per-unit rate of compensation) would be considered to be determined in a manner that takes into account the volume or value of referrals or other business generated by a physician for the entity paying the compensation.

For the reasons described in response to comments below and in section II.B.4. Of this final rule, we are not finalizing the proposed regulations. However, to address the concerns prompting the policy described in the proposed rule with respect to referrals of designated health services, we are revising § 411.354(d)(4), which sets forth requirements that must be met if a physician's compensation is conditioned on the physician's referrals to a particular provider, practitioner, or supplier. That is, if, under the bona fide employment relationship, personal service arrangement, or managed care contract the physician's referrals are directed to a particular provider, practitioner, or supplier.

The final Start Printed Page 77539policy is designated at § 411.354(d)(4)(vi) and states that, regardless of whether the physician's compensation takes into account the volume or value of referrals by the physician, neither the existence of the compensation arrangement nor the amount of the compensation may be contingent on the volume or value of the physician's referrals to the particular provider, practitioner, or supplier. See section II.B.4. Of this final rule for further discussion of § 411.354(d)(4)(vi). In the proposed rule, we stated that we believe that the modifier “directly or indirectly” is implicit in the requirements that compensation is not determined in any manner that takes into account the volume or value of referrals or the volume or value of other business generated (84 FR 55794).

We are finalizing our proposal to remove the modifier from the regulations where it appears in connection with the standards and the related requirements. We also highlighted that, where the statute or regulations specifically allow parties to determine compensation in a manner that only indirectly takes into account the volume or value of referrals (for example, in the exception for EHR items and services at § 411.357(w)(6) and the rules for a group practice's distribution of profit shares and payment of productivity bonuses at section 1877(h)(4)(B) of the Act and § 411.352(i)), our regulations include guidance regarding direct versus indirect manners of determining compensation. We solicited comment on the need for additional guidance or regulation text that includes deeming provisions related to the volume or value standard in these exceptions. Based on the comments we received, we are not revising our regulations to provide further guidance on the deeming provisions (except as provided in section II.D.11.

Of this final rule with respect to the deeming provision in the exception at § 411.357(w) for EHR items and services). Finally, in the proposed rule, we discussed related guidance in our Phase II regulation (69 FR 16088 through 16089). In Phase II, a commenter presented a scenario under which a hospital employs a physician at an outpatient clinic and pays the physician for each patient seen at the clinic. The physician reassigns his or her right to payment to the hospital, and the hospital bills for the Part B physician service (with a site-of-service reduction).

And the hospital also bills for the hospital outpatient services, which may include some procedures furnished as “incident to” services in a hospital setting. The Phase II commenter's concern was that the payment to the physician is inevitably linked to a facility fee, which is a designated health service (that is, a hospital service). Accordingly, the commenter wondered whether the payment to the physician would be considered an improper productivity bonus based on a referral of designated health services (that is, the facility fee). In response, we stated that the fact that corresponding hospital services are billed would not invalidate an employed physician's personally performed work, for which the physician may be paid a productivity bonus (subject to the fair market value requirement).

We acknowledged stakeholder concerns that, following the July 2, 2015 opinion of the United States Court of Appeals for the Fourth Circuit in United States ex rel. Drakeford v. Tuomey Healthcare System, Inc. (792 F.3d 364) (Tuomey), CMS may no longer endorse this policy.

We stated that we believe that the objective tests for determining whether compensation takes into account the volume or value of referrals or the volume or value of other business generated may address these concerns. However, for clarity, we reaffirmed the position we took in the Phase II regulation. We stated that, with respect to employed physicians, a productivity bonus will not take into account the volume or value of the physician's referrals solely because corresponding hospital services (that is, designated health services) are billed each time the employed physician personally performs a service. We also clarified that our guidance extends to compensation arrangements that do not rely on the exception for bona fide employment relationships at § 411.357(c), and under which a physician is paid using a unit-based compensation formula for his or her personally performed services, provided that the compensation meets the conditions in the special rule at § 411.354(d)(2).

That is, under a personal service arrangement, an entity may compensate a physician for his or her personally performed services using a unit-based compensation formula—even when the entity bills for designated health services that correspond to such personally performed services—and the compensation will not take into account the volume or value of the physician's referrals if the compensation meets the conditions in the special rule at § 411.354(d)(2) (see 69 FR 16067). This is true whether the compensation arrangement is analyzed under an exception applicable to compensation arrangements directly between an entity and a physician or is an indirect compensation arrangement analyzed under the exception at § 411.357(p). Our position has not changed since the publication of Phase II, and we reaffirm here our statements in the proposed rule. An association between personally performed physician services and designated health services furnished by an entity does not convert compensation tied solely to the physician's personal productivity into compensation that takes into account the volume or value of a physician's referrals to the entity or the volume or value of other business generated by the physician for the entity.

Although commenters requested that we codify these policies in regulation text, we decline to do so, as we do not believe that it is necessary given the policies set forth in the final regulations at § 411.354(d)(5) and (6). However, as described below in our response to comments, we are revising the regulations at § 411.354(c)(2) regarding the existence (that is, definition) of an indirect compensation arrangement. We believe the revisions to § 411.354(c)(2) may alleviate the commenters' concerns. We received the following comments and our responses follow.

Comment. Most commenters supported the proposed special rules on the volume or value standard and the other business generated standard. Some commenters requested modification of the standards, as described in other comments below. The commenters in support of our proposed special rules generally appreciated the clarification of terms that they asserted have been a source of confusion among providers, physicians, qui tam relators, and courts.

The commenters stated that the objective tests established in the proposed special rules are easily understood, which, in turn, will greatly ease the burden on providers and suppliers attempting to ensure compliance with the volume or value and other business generated standards, as well as make a clear path for law enforcement and the regulated industry. Commenters urged CMS to finalize objective standards for this critical terminology. In contrast, one commenter asserted that the proposed special rules do not adequately explain what is meant by “includes the physician's referrals to the entity as a variable” and would create significantly more confusion than the current standard. This commenter asserted that this lack of clarity could allow for abusive compensation arrangements and hamper enforcement efforts.Start Printed Page 77540 Response.

We are finalizing most of our proposals to establish objective tests for whether compensation takes into account the volume or value of a physician's referrals to an entity or the volume or value of other business generated by a physician for an entity. We agree with the commenters that our final policies will establish a clear path for parties to design compensation arrangements that comply with the volume or value standard and other business generated standard found in many of the exceptions to the physician self-referral law. In turn, the objective standards should assist in law enforcement efforts by making it clear whether compensation paid to or from a physician takes into account the volume or value of a physician's referrals to an entity or the volume or value of other business generated by a physician for an entity. As discussed more fully in our response to other comments, we are also clarifying in regulation text that, if compensation takes into account the volume or value of a physician's referrals to an entity or the volume or value of other business generated by a physician for an entity under final § 411.354(d)(5) or (6), no special rule, including those at § 411.354(d)(2) and (3), may be applied to reverse that determination.

We disagree with the commenter that asserted that the proposed special rules would create significantly more confusion related to the volume or value standard and the other business generated standard, and note that nearly all other commenters that addressed these specific proposals asserted that the proposed special rules would provide clarity for parties seeking to ensure that compensation is not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by a physician. With respect to the meaning of “includes the physician's referrals to the entity as a variable” as included in the regulation text at final § 411.354(d)(5)(i) and (6)(i), we refer readers to the examples provided in the proposed rule and restated above that illustrate the mathematical formulas for determining compensation that takes into account the volume or value of a physician's referrals. The term “variable” has the meaning it does with respect to general mathematical principles—a symbol for a number we do not yet know. Thus, if an entity pays a physician one-fifth of a bonus pool that includes all collections from a set of services furnished by an entity, including those from designated health services referred by a physician to the entity, the formula used to calculate the physician's compensation is.

(.20 × the value of the physician's referrals of designated health services) + (.20 × the value of the other business generated by the physician for the entity) + (.20 × the value of services furnished by the entity that were not referred or generated by the physician). The value of the physician's referrals to the entity is a variable in this formula, as is the value of the other business generated by the physician. Comment. A small number of commenters did not support our proposals for special rules that identify the universe of compensation formulas that take into account the volume or value of a physician's referrals or the other business generated by the physician for an entity.

One of the commenters asserted that the standards were too narrow to protect the Medicare program from abuse, noting that, under our proposals, a hospital could make payment to a physician in anticipation of future referrals without a mathematical formula explicitly delineating it. Other commenters opposed CMS finalizing any of its proposals, while not specifically opposing the proposed special rules for the volume or value and other business generated standards. Response. Although we agree with the commenters regarding the importance of program integrity, we believe that the certainty afforded by the objective standards we are finalizing is critical to reduce the burden associated with compliance with the physician self-referral law's volume or value and other business generated standards.

We believe that the policies finalized at § 411.354(d)(5) and (6), coupled with the new condition at § 411.354(d)(4)(vi) prohibiting an entity from making the existence of a compensation arrangement or the amount of the compensation contingent on the volume or value of the physician's referrals to the particular provider, practitioner, or supplier (as well as the other requirements of our exceptions) mitigates the potential for program or patient abuse asserted by the commenters. We remind parties that arrangements that involve remuneration from an entity to a physician (or vice versa) implicate the anti-kickback statute. An arrangement under which a hospital makes a payment to a physician in anticipation of future referrals would be suspect under the anti-kickback statute. Moreover, our revised definition of “referral” at § 411.351 clarifies that referrals are not items or services to be protected under the exceptions to the physician self-referral law, regardless of whether or not it is possible to ascribe a fair market value to them.

Comment. A large number of commenters requested that CMS specifically address personal productivity compensation by finalizing in regulation text the interpretations we described in the proposed rule (84 FR 55795). Some commenters requested that CMS confirm that personal productivity compensation is permissible in all settings. Others requested that we revise the exceptions for personal service arrangements, fair market value compensation, and indirect compensation arrangements to expressly permit compensation formulas based on a physician's personal productivity.

All of the commenters noted that productivity pay for personally performed services is among the most prevalent compensation methodologies used by hospitals and other entities to compensate surgeons and other proceduralists, as well as physicians who do not attend to patients in a hospital setting. Commenters stated that, despite our affirmative statements in the proposed rule that, under a personal service arrangement, an entity may compensate a physician for his or her personally performed services using a unit-based compensation formula even when the entity bills for designated health services that correspond to such personally performed services, and the compensation will not take into account the volume or value of the physician's referrals if the compensation meets the conditions of the special rule at § 411.354(d)(2) (84 FR 55795), they remain concerned that an entity may still have to defend its compensation practices in the event of a False Claims Act allegation because satisfaction of all the requirements of an applicable exception to the physician self-referral law is an affirmative defense. Response. We decline to revise the text of the regulations as requested by the commenters.

We reaffirm our statements in the proposed rule, including those with respect to productivity-based compensation under a bona fide employment relationship. We also confirm that our policy applies to indirect compensation arrangements. To be clear, under a bona fide employment relationship, personal service arrangement, or indirect compensation arrangement, a physician may be compensated for his or her personally performed services using a unit-based compensation formula—even when the entity with which the physician has a direct or indirect compensation arrangement bills for designated health services that Start Printed Page 77541correspond to such personally performed services—and the compensation will not take into account the volume or value of the physician's referrals if the unit-based compensation meets the conditions of the special rule at § 411.354(d)(2). Similarly, under a personal service arrangement or indirect compensation arrangement, a physician may be compensated for his or her personally performed services using a unit-based compensation formula—even when the entity with which the physician has a direct or indirect compensation arrangement bills for other business that correspond to such personally performed services—and the compensation will not take into account other business generated by the physician if the unit-based compensation meets the conditions of the special rule at § 411.354(d)(3).

We note that the policies described in the proposed rule (84 FR 55795) and in this response regarding the application of the special rules for unit-based compensation have been superseded by the policies finalized in this final rule. However, these policies would be applied when analyzing compensation arrangements for compliance with the physician self-referral law during periods prior to the effective date of this final rule. They have never applied and will continue not to apply for purposes of analyzing ownership or investment interests for compliance with the physician self-referral law, as none of our exceptions in § 411.356 include a requirement identical or analogous to the volume or value standard or other business generated standard. To reiterate, neither the special rules at § 411.354(d)(2) and (3) nor any guidance regarding our interpretation of the volume or value standard or other business generated standard are relevant for purposes of applying the exceptions at § 411.356(c)(1) and (3), both of which incorporate the requirements of § 411.362, including the requirement at § 411.362(b)(3)(ii)(B) that a hospital must not condition any physician ownership or investment interests either directly or indirectly on the physician owner or investor making or influencing referrals to the hospital or otherwise generating business for the hospital.

Comment. A significant number of commenters requested that we clarify that the positions CMS took in prior litigation, including Tuomey, and the discussion in the proposed rule regarding productivity-based compensation were based on its then-current policy, not on the policies finalized here. Commenters asserted that this is necessary to avoid confusing the special rules on the volume or value standard and other business generated standard that we are finalizing in this final rule—under which productivity compensation would not trigger the volume or value standard of the exceptions for bona fide employment relationships, personal service arrangements, or fair market value compensation—with Tuomey's “correlation theory.” The commenters also asserted that, under the policies finalized here, there would no longer be a need for the productivity bonus “safe harbor” at § 411.357(c)(4). Response.

Productivity compensation based solely on a physician's personally performed services does not take into account the volume or value of the physician's referrals or other business generated by a physician under the policies finalized in this final rule. Such compensation would satisfy the volume or value standard and the other business generated standard, where it appears, in the exceptions for bona fide employment relationships, personal service arrangements, and fair market value compensation, all of which apply to direct compensation arrangements between entities and physicians. Although the productivity bonus “safe harbor” at § 411.357(c)(4) would not be necessary to protect productivity compensation based solely on a physician's personally performed services under this final rule, the provision is included in section 1877(e)(2) of the Act and, therefore, we are not removing it from our regulations. Prior to this final rule, productivity compensation based solely on a physician's personally performed services would not take into account the volume or value of a physician's referrals if the conditions of the special rule at § 411.354(d)(2) were met.

Thus, even prior to this final rule, the productivity bonus “safe harbor” at § 411.357(c)(4) would not have been necessary to ensure that a physician's referrals to his or her employer did not violate the physician self-referral law due to the fact that the physician received productivity compensation from the employer based solely on the physician's personally performed services. As we stated in the proposed rule and repeated above, the special rules at § 411.354(d)(5) and (6), as finalized, supersede our previous guidance, including guidance with which they may be (or appear to be) inconsistent (84 FR 55792). The policies finalized here are prospective only and represent CMS policy regarding the volume or value standard and the other business generated standard going forward from the effective date of this final rule. Comment.

Two commenters asked us to confirm whether a “tiered” compensation model would take into account the volume or value of a physician's referrals. The commenters both presented the following example. For the first 50 procedures that a physician performs at a hospital, the physician is paid $X per procedure. For the next 25 procedures that the physician performs at the hospital, the physician is paid $X + $20.

The commenters did not specify whether the physician made the referrals for the corresponding designated health services furnished by the hospital. Response. The commenters did not provide sufficient facts to enable us to respond to their request. Parties may use the process set forth in our regulations at §§ 411.370 through 411.389 to request an advisory opinion on whether a specific referral or referrals relating to designated health services (other than clinical laboratory services) is prohibited under section 1877 of the Act.

Comment. One commenter expressed support for the approach of identifying the universe of circumstances in which compensation will be considered to take into account the volume or value of referrals or other business generated, rather than the current approach that identifies limited circumstances in which compensation is deemed to not take into account the volume or value of a physician's referrals or other business generated by the physician for an entity. The commenter asserted that the regulatory certainty provided under our approach will allow hospitals to encourage physicians to improve quality, reduce cost, and provide leadership by permitting quality and outcomes-based bonuses payable to physicians, bonuses to physician leaders based on system success, and unit-based compensation based on personally performed services that sometimes, but not always, result in referrals of designated health services. Another commenter asked whether incentive compensation paid only in the event of the hospital's achievement of overall financial performance goals would take into account the volume or value of a particular physician's compensation.

The commenter gave the example of a physician receiving a 15 percent bonus if the system has a 2 percent margin, and a 20 percent bonus if the system has a 4 percent margin. Response. We agree that identifying for stakeholders the universe of circumstances in which we believe compensation is determined in a Start Printed Page 77542manner that takes into account the volume or value of a physician's referrals or other business generated by the physician is preferable to our former policy, which articulated a general rule that compensation may not be determined in any manner that takes into account the volume or value of referrals (or other business generated by a physician) and provided a single “safe harbor” for assurance that the specific compensation does not violate the general rule. We caution that outcomes-based bonuses, as described by the commenter, could fall within the circumstances of the special rules at final § 411.354(d)(5) and (6), depending on how they are structured and whether referrals to the entity or other business generated by the physician for the entity are variables anywhere in the mathematical formula for determining the compensation.

Although bonus compensation based on “system success” may not include referrals to or other business generated for the entity as a variable in many instances, the determination of whether the formula to determine the compensation includes such variables must be made on a case-by-case basis. As we explain above and in our response to other comments, unit-based compensation based solely on personally performed services would not include the physician's referrals to or the other business generated by the physician for the entity as a variable and, regardless of whether an entity furnishes designated health services in conjunction with the physician's personally performed services, would not take into account the volume or value of the physician's referrals or other business generated by the physician. Comment. Many commenters noted that our proposed interpretations of the volume or value and other business generated standards do not readily translate in the context of nonmonetary compensation such as the donation of EHR items and services or medical staff incidental benefits.

These commenters requested that we not apply the special rules at § 411.354(d)(5) and (6) to the exceptions where the remuneration to or from a physician generally is not calculated as a mathematical formula. Response. We agree with the commenters in part. The final special rules at § 411.354(d)(5) and (6) do not apply for purposes of applying the exceptions for medical staff incidental benefits at § 411.357(m), professional courtesy at § 411.357(s), community-wide health information systems at § 411.357(u), electronic prescribing items and services at § 411.357(v), electronic health records items and services at § 411.357(w), and cybersecurity technology and related services at new § 411.357(bb).

These exceptions have “volume or value” requirements that are somewhat unique and the special rules are not a perfect fit. We have included language at final § 411.354(d)(5)(iv) and (6)(iv) to indicate the inapplicability of the special rules for purposes of applying these particular exceptions to the physician self-referral law. However, the requirement in the exception for nonmonetary compensation at § 411.357(k)(1)(i), which requires that the nonmonetary compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician, is similar to those in the exceptions where cash remuneration may be provided and the special rules at final § 411.354(d)(5) and (6) can be easily applied. Comment.

A few commenters requested that CMS confirm that the proposed special rules at § 411.354(d)(5) and (6) would apply to the determination of whether an indirect compensation arrangement exists. Another commenter requested confirmation that the special rules set forth at final § 411.354(d)(5) and (6) would apply to the determination of whether a physician who is a member of the group practice directly or indirectly receives compensation based on the volume or value of his or her referrals (§ 411.352(g)) and the requirements under the special rules for profit shares and productivity bonuses at § 411.352(i). Response. Except as specified in § 411.354(d)(5)(iv) and (6)(iv), the proposed special rules interpreting the volume or value standard at § 411.354(d)(5)(i) and (6)(i) apply in all instances where our regulations require an analysis of whether compensation is determined in any manner that takes into account the volume or value of a physician's referrals.

Likewise, except as specified in § 411.354(d)(5)(iv) and (6)(iv), the proposed special rules interpreting the other business generated standard at § 411.354(d)(5)(ii) and (6)(ii) apply in all instances where our regulations require an analysis of whether compensation is determined in any manner that takes into account the volume or value of other business generated by a physician. Given the revisions to the regulations at § 411.354(c)(2) finalized in this final rule, and because the special rules at final § 411.354(d)(5) and (6) have only prospective application, the special rules at § 411.354(d)(5) and (6) do not apply to the determination of whether an indirect compensation arrangement exists under § 411.354(c)(2). For the reasons explained in the response to a comment below, the special rules at final § 411.354(d)(5) and (6) do not apply for purposes of applying the special rules on unit-based compensation at § 411.354(d)(2) and (3). As described in section II.C.1.

Of this final rule, the terms “based on” and “related to” exist in the regulation text at § 411.352(g) and (i). We interpret these terms to equate to “takes into account” when referring to the volume or value of referrals. Thus, the special rule at final § 411.354(d)(5)(i) applies for purposes of interpreting and applying the group practice regulations at § 411.352(g) and (i), which apply only to compensation from the group practice to the physician and the physician's referrals (but do not apply to the other business generated by the physician for the group practice). Comment.

Citing concerns related to recent False Claims Act litigation, many commenters asked CMS to refrain from using the term “correlation” in the final regulations. Commenters suggested that we use the term “causal relationship” in lieu of “correlation” in the special rules. The commenters were concerned that the term “correlation” could create an inference that compensation could violate the volume or value or other business generated standards without a causal relationship between referrals or other business generated and the compensation to or from the physician. Response.

We have provided definitions for “positive correlation” and “negative correlation” to indicate specifically what mathematical formulas will be problematic under the final rules. We believe that our regulations, as finalized, are clear and express the agency's interpretation of the volume or value standard and the other business generated standard. Comment. A few commenters requested that CMS require that the physician's referrals are a written or otherwise expressly articulated variable in the formula for calculating the compensation paid to a physician.

The commenters asserted that, under the proposed special rule, it is not clear how the formula would be assessed, and recommended language would signify that, for purposes of applying § 411.357(d)(5), the test is not one of subjective intent. The commenters made the same request, for the same reasons, with respect to the other business generated standard. Another commenter suggested that we require that the compensation formula has a “direct and explicit” variable that results in an increase or decrease in the physician's Start Printed Page 77543compensation that “directly, explicitly and” positively (or negatively) correlates with the number of value of the physician's referrals to (or other business generated for) the entity in order to take into account the volume or value of referrals (or other business generated). Response.

We decline to adopt the commenter's suggestions. We believe that the special rules finalized at § 411.354(d)(5) and (6) sufficiently articulate objective tests for assessing whether compensation takes into account the volume or value of a physician's referrals or the other business generated by a physician for an entity. We disagree that the final special rules lack clarity or imply that the volume or value standard and other business generated standard are subjective tests. Compensation paid to a physician takes into account the volume or value of referrals if the formula used to calculate the physician's (or immediate family member's) compensation includes the physician's referrals to the entity as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the number or value of the physician's referrals to the entity, regardless of whether the formula is written in a particular place or manner.

The same applies to compensation that takes into account other business generated by the physician for the entity making the payment to the physician. Comment. A large number of commenters requested that we not finalize our proposal to consider fixed-rate compensation for which there is a predetermined, direct correlation to the physician's prior referrals to the entity or the other business previously generated by the physician for the entity to take into account the volume or value of referrals or other business generated by the physician. Noting that fixed rate compensation (for example, $200,000 per year) qualifies as unit-based compensation, some commenters asserted that, even if we were to finalize this proposal, once the special rules for unit-based compensation at § 411.354(d)(2) and (3) are applied, fixed-rate compensation that fails the proposed test(s) would nonetheless be deemed not to take into account the volume or value of referrals or other business generated under the existing regulations at § 411.354(d)(2) and (3).

Other commenters stated that the proposal regarding fixed-rate compensation would not establish the objective rule we sought and would continue the uncertainty that the industry currently faces. Response. We agree with the commenters that the special rules for unit-based compensation at § 411.354(d)(2) and (3) essentially nullify the proposed special rule regarding fixed-rate compensation that takes into account the volume or value of a physician's referrals or other business generated by the physician for an entity. We are not finalizing our proposals for additional special rules outlining the circumstances under which we would consider fixed-rate compensation to be determined in a manner that takes into account the volume or value of referrals or other business generated by a physician for the entity paying the compensation.

In the proposed rule, we stated that merely hoping for or even anticipating future referrals or other business is not enough to show that compensation is determined in a manner that takes into account the volume or value of referrals or other business generated by the physician for the entity. However, we also stated that we are concerned with an “if X, then Y” correlation between compensation in the current term and prior referrals or previous other business generated by a physician (84 FR 55794). Our proposed policy focused on fixed-rate compensation under a current arrangement where there is a predetermined, direct correlation between the volume or value of a physician's prior referrals or the other business previously generated for the entity and the rate of compensation paid to or by the physician (or immediate family member of the physician). We provided examples of objectionable tiered compensation structures that condition a physician's compensation on the volume or value of his or her referrals to an entity.

The conditioning of the existence of a compensation arrangement would also fall within such a structure. For example, “if the value of the physician's referrals does not equal $1,000,000 in the prior period, the physician's employment arrangement will be terminated and his compensation from the entity will equal $0.” We believe that there is a risk of program or patient abuse when a physician will receive no future compensation if he or she fails to refer as required. The same is true if the amount of the physician's compensation conditioned on the volume or value of a physician's referrals to an entity (or another provider, practitioner, or supplier). Therefore, in lieu of the proposed policies treating “if X, then Y” compensation methodologies as potential concerns under the volume or value standard and other business generated standard, we are revising the special rule at § 411.354(d)(4) to address our concerns when a physician's compensation under a bona fide employment relationship, personal service arrangement, or managed care contract is conditioned on the physician's referrals to a particular provider, practitioner, or supplier (including the entity providing the compensation to the physician)—in other words, when the physician's referrals are directed to a particular provider, practitioner, or supplier.

Under the policy at final § 411.354(d)(4)(vi), regardless of whether the physician's compensation takes into account the volume or value of referrals by the physician as set forth at paragraph (d)(5) of this section, neither the existence of the compensation arrangement nor the amount of the compensation is contingent on the volume or value of the physician's referrals to the particular provider, practitioner, or supplier. We discuss this revision in more detail in section II.B.4. Of this final rule. Comment.

A few commenters requested clarification of the examples in the proposed rule regarding fixed-rate tiered compensation set using a predetermined, “if X, then Y” methodology. One commenter suggested that our statement in the proposed rule that the tiered compensation methodology in the example provided (84 FR 55794) is at odds with our confirmation that a productivity bonus will not take into account the volume or value of referrals solely because corresponding hospital services (that is, designated health services) are billed each time the employed physician personally performs a service. Response. The example of tiered compensation referenced by the commenter related to our proposal regarding fixed-rate compensation.

We are not finalizing our proposal to consider fixed-rate compensation to take into account the volume or value of referrals or other business generated by a physician. Therefore, it is unnecessary to further address the examples as requested by the commenters in the context of the volume or value standard. We note that the regulation at final § 411.354(d)(4)(vi) regarding making the existence of a compensation arrangement or the amount of a physician's compensation contingent on the volume or value of a physician's referrals to a particular provider, practitioner, or supplier may apply to the commenter's examples. See section II.B.4.

Of this final rule for a further discussion of final § 411.354(d)(4)(vi).Start Printed Page 77544 Comment. A few commenters asserted that the existing special rules at § 411.354(d)(2) and (3) regarding per-unit compensation create confusion when considered in light of the new special rules interpreting the volume or value standard and other business generated standard. Some of the commenters suggested that CMS should remove the regulations at § 411.354(d)(2) and (3), because they would no longer be necessary if we finalize our proposals at § 411.354(d)(5) and (6). The commenters suggested revisions to § 411.354(d)(2) and (3) in the event CMS does not finalize the proposals for special rules at interpreting the volume or value standard and other business generated standard § 411.354(d)(5) and (6).

One commenter described a hypothetical arrangement under which a hospital contracts with a surgeon for professional services, the surgeon performs surgeries at the hospital, and the hospital pays the surgeon a fixed amount per personally-performed relative value unit (RVU) that is consistent with the fair market value of the physician's services. Assuming that the compensation would be viewed as not taking into account the volume or value of the physician's referrals to the hospital or other business generated by the physician for the hospital, the commenter asked whether this is the case based on the application of the special rules at final § 411.354(d)(5) and (6) or whether it is because the unit-based compensation satisfies the requirements of the special rules for per-unit compensation at § 411.354(d)(2) and (3). The commenter then questioned whether the special rules for unit-based compensation at § 411.354(d)(2) and (3) would continue to be necessary if we finalize our proposals. Response.

We agree with the commenters that, under the policies finalized here, there is effectively no longer a need for the “unit-based deeming provision” at § 411.354(d)(2). The same is true for the deeming provision at § 411.354(d)(3). Unit-based compensation that does not include a physician's referrals to the entity as a variable in the formula used to calculate the physician's (or immediate family member's) compensation would not take into account the volume or value of the physician's referrals and, therefore, there would be no need to apply the special rule at § 411.354(d)(2). Similarly, unit-based compensation that does not include other business generated by a physician for the entity as a variable in the formula used to calculate the physician's (or immediate family member's) compensation would not take into account the volume or value of other business generated and, therefore, there would be no need to apply the special rule at § 411.354(d)(3).

If the formula used to calculate a physician's (or immediate family member's) compensation does include the physician's referrals to the entity or other business generated by the physician for the entity as a variable (for example, a payment of $50 to the immediate family member of a physician for each patient who receives items or services furnished by the DMEPOS supplier making the payment, including items or service referred by the physician), the compensation would take into account the volume or value of the physician's referrals or other business generated and, under the revisions to § 411.354(d)(2) and (3) finalized here, the special rules for unit-based compensation would not apply. On and after the effective date of this final rule, the special rules at § 411.354(d)(2) and (3) will be either unnecessary or inapplicable to deem unit-based compensation not to take into account the volume or value of a physician's referrals or other business generated by a physician. However, it is important to preserve the regulations at § 411.354(d)(2) and (3) to assist parties, CMS, and law enforcement in applying the historical policies in effect at the time of the existence of the compensation arrangement being analyzed for compliance with the physician self-referral law. Therefore, we are not removing the regulations at § 411.354(d)(2) and (3) from the physician self-referral regulations, although we are adding language to both § 411.354(d)(2) and (3) to make clear that the regulations may not be applied to deem unit-based compensation not to take into account the volume or value of referrals or other business generated by a physician if the compensation formula used to calculate the physician's (or immediate family member's) compensation is determined to take into account the volume or value of referrals or other business generated under final § 411.354(d)(5) or (6).

Because the special rules at final § 411.354(d)(5) and (6) have prospective application only, we are confirming in regulation text at § 411.354(d)(5)(iv) and (6)(iv) that they do not apply for purposes of applying the special rules on unit-based compensation at § 411.354(d)(2) and (3), which, as we explained, remain in our regulations only for historical purposes to assist parties, CMS, and law enforcement in applying the historical policies in effect at the time of the existence of the compensation arrangement being analyzed for compliance with the physician self-referral law. Comment. Several commenters expressed strong support for the proposal to remove the term “varies with” from the regulations at § 411.354(c)(2)(ii) and (iii) identifying when an indirect compensation arrangement exists, stating that this would be consistent with CMS' expressed intent for the volume or value standard and other business generated standard to have the same meaning wherever they occur in our regulations. Using the same example from the immediately previous comment, one commenter asked whether, under the regulation at proposed § 411.354(c)(2), the compensation arrangement would constitute an indirect compensation arrangement if the compensation was paid to the physician by an affiliate of the hospital with which the hospital has a financial relationship, forming an unbroken chain of financial relationships between the hospital and the physician.

Other commenters questioned whether any unbroken chain of financial relationships would create an indirect compensation arrangement if CMS finalizes its proposals to remove the term “varies with” from the regulations at § 411.352(c)(2) and establish the special rules interpreting the volume or value standard and other business generated standard at § 411.354(d)(5) and (6). Response. As we stated in the proposed rule, we proposed nonsubstantive changes to standardize where possible the language used to describe the volume or value standard and the other business generated standard in our regulations (84 FR 55793). Our proposal to remove the term “varies with” from the regulation at § 411.354(c)(2) originated with our attempt at standardizing this language.

Upon consideration of the comments and after developing our responses, we are not finalizing our proposal to remove the term “varies with” from § 411.354(c)(2). If finalized as proposed, the regulatory scheme outlining the conditions under which an indirect compensation arrangement exists would have eliminated most unbroken chains of financial relationships between entities that furnish designated health services and the physicians who refer to them from the scrutiny of the physician self-referral law without affording CMS the opportunity to confirm that the compensation paid to the physician does not pose a risk of the harm section 1877 of the Act is intended to avoid, namely, that the compensation could improperly influence the physician's Start Printed Page 77545medical decision making. We continue to believe in the importance of ensuring that compensation paid to a physician by someone (or some organization) that has a financial relationship with an entity does not improperly influence the physician's medical decision making, resulting in the overutilization of designated health services, patient steering, or other program or patient abuse. However, we believe that the regulatory scheme that casts a wide net to include the vast majority of unbroken chains of financial relationships between an entity and a physician and then weeds out most of those unbroken chains through a showing of compliance with the requirements of the special rules at § 411.354(d)(2) and (3) and the exception at § 411.357(p) is unnecessarily burdensome.

The identification of truly problematic physician compensation may be achieved at an earlier stage of analysis. Therefore, we are revising § 411.354(c)(2) to more precisely identify compensation arrangements that may pose a risk of program or patient abuse. As we stated in Phase I, the existence of a financial relationship between an entity and a physician (or the immediate family member of a physician) is the factual predicate triggering the application of section 1877 of the Act (66 FR 864). (For a similar discussion in Phase II, see 69 FR 16057.).

Because section 1877 of the Act expressly contemplates that a financial relationship and, specifically, a compensation arrangement, may be directly or indirectly between an entity and a physician (or an immediate family member of a physician), in Phase I, we established a three-part test for determining when an indirect compensation arrangement exists (66 FR 865 through 866). Once all three parts of the test are met, there exists an indirect compensation arrangement that must satisfy the requirements of an applicable exception in order to avoid the referral and billing prohibitions of the physician self-referral law. Also in Phase I, we finalized the exception at § 411.357(p) for indirect compensation arrangements that would apply to unbroken chains of financial relationships that result in indirect compensation arrangements. In Phase I, we explained that some of the statutory and regulatory exceptions operate to exclude certain categories of services from the reach of section 1877 of the Act when certain requirements are satisfied.

In effect, services described in those exceptions are not designated health services for purposes of the physician self-referral law (66 FR 867). The service-based exceptions are found in § 411.355 of our regulations. Thus, even if there is an indirect compensation arrangement between an entity and a physician, the service-based exceptions may apply to and protect referrals of the particular services described in the exception. However, referrals for designated health services that do not satisfy the requirements of an applicable service-based exception would be prohibited unless the indirect compensation arrangement satisfies all the requirements of the exception for indirect compensation arrangements at § 411.357(p) (66 FR 867) or, if the entity is a MCO or IPA, the exception at § 411.357(n) for risk-sharing arrangements.

(We refer readers to section II.A.2.b.(4). Of this final rule for a discussion of the applicability of the exception at § 411.357(n) to indirect compensation arrangements.) In Phase I, we also finalized special rules related to unit-based compensation at § 411.354(d)(2) and (3) to be applied when analyzing compliance with the requirements of the exceptions in § 411.357, including the exception for indirect compensation arrangements at § 411.357(p) (66 FR 876 through 878). Following the publication of Phase I, we received comments regarding the interplay of the definition of “indirect compensation arrangement,” the exception at § 411.357(p) for indirect compensation arrangements, and the special rules that deem unit-based compensation not to take into account the volume or value of referrals or other business generated at § 411.354(d)(2) and (3), respectively, when certain conditions are met. The commenters questioned whether an indirect compensation arrangement exists at all if a referring physician receives time-based or unit-of-service based compensation that is fair market value and does not vary over the term of the arrangement—that is, compensation that, by definition, does not take into account the volume or value of referrals or other business generated under § 411.354(d)(2) and (3).

Commenters noted that, similarly, the exception for indirect compensation arrangements at § 411.357(p), like § 411.354(d)(2) and (3), does not look to aggregate compensation and incorporates a fair market value test. Given this, the commenters pointed out that the ultimate result would be the same whether time-based and unit-of-service based compensation arrangements are initially excluded from the definition of “indirect compensation arrangement” at § 411.354(c)(2) or included in the definition and then excepted under § 411.357(p) after applying the special rules at § 411.354(d)(2) and (3). In response, we stated that, although we agree that the ultimate result may be the same—time, unit-of-service, or other “per click” based arrangements are generally permitted if they are at fair market value without reference to referrals—we believe that [the Phase I regulatory] construct more closely corresponds to the statutory treatment of direct compensation arrangements (69 FR 16059). We elected to retain the regulatory structure finalized in Phase I, noting a two-fold intent.

We stated that we intended to include in the definition of “indirect compensation arrangement” any compensation arrangements (including time-based or unit-of-service based compensation arrangements) where the aggregate compensation received by the referring physician varies with, or otherwise takes into account, the volume or value of referrals or other business generated between the parties, regardless of whether the individual unit of compensation qualifies under § 411.354(d)(2) and (3) (69 FR 16059). We continued that we intended to exclude under the exception at § 411.357(p) that subset of indirect compensation arrangements where the compensation is fair market value and does not reflect the volume or value of referrals or other business generated (and the other requirements of the exception are satisfied). We stated that per-unit compensation will meet this test if it complies with the conditions of § 411.354(d)(2) and (3). In developing our response to the commenters to the proposed rule, we revisited the regulatory construct for determining which unbroken chains of financial relationships between entities and physicians (or immediate family members of a physician) establish indirect compensation arrangements and how to determine if they pose a risk of program or patient abuse.

One of the driving goals of this final rulemaking, which is a shared goal of the Patients over Paperwork initiative and the Regulatory Sprint, is to reduce unnecessary burden on providers and suppliers. As we discussed in section I.D. Of this final rule, our final policies are intended to balance genuine program integrity concerns against the considerable burden of the physician self-referral law's referral and billing prohibitions. We see no need to continue to treat compensation arrangements that may qualify as “indirect compensation arrangements” in the exact same way that the statute treats direct compensation arrangements Start Printed Page 77546when that construct creates unnecessary burden on the regulated industry.

We believe that it is possible to simplify the analysis of whether an unbroken chain of financial relationships between an entity and a physician (or immediate family member of a physician) poses a risk of program or patient abuse without raising program integrity concerns, and we are finalizing revisions to the regulations at § 411.354(c)(2) that we believe achieve the same result as the Phase I regulatory construct in protecting against program or patient abuse but reduce unnecessary burden on the regulated industry. We are revising our regulations at § 411.354(c)(2)(ii) to effectively incorporate and apply the conditions of the special rules on unit-based compensation at the definitional level when determining whether an indirect compensation arrangement exists that must satisfy the requirements of an applicable exception in order to avoid the prohibitions of the physician self-referral law. Unless all the elements of final § 411.354(c)(2)(i), (ii) and (iii) exist, the unbroken chain of financial relationships between an entity furnishing designated health services and a physician (or immediate family member of a physician) will not be considered an indirect compensation arrangement. Nor will the unbroken chain of financial relationships be considered a direct compensation arrangement under § 411.354(c)(1).

Therefore, the referral and billing prohibitions of the physician self-referral law will not apply. Under the regulations finalized in this final rule, an unbroken chain of financial relationships between an entity and a physician will be considered an indirect compensation arrangement if the physician (or immediate family member of the physician) receives aggregate compensation from the person or entity in the chain with which the physician (or immediate family member) has a direct financial relationship that varies with the volume or value of referrals or other business generated by the physician for the entity furnishing the designated health services, and any of the following are true. (1) The individual unit of compensation received by the physician (or immediate family member) is not fair market value for items or services actually provided. (2) the individual unit of compensation received by the physician (or immediate family member) is calculated using a formula that includes the physician's referrals to the entity furnishing designated health services as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the number or value of the physician's referrals to the entity.

Or (3) the individual unit of compensation received by the physician (or immediate family member) is calculated using a formula that includes other business generated by the physician for the entity furnishing designated health services as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the physician's generation of other business for the entity. In addition, the entity must have actual knowledge of, or act in reckless disregard or deliberate ignorance of, the fact that the referring physician (or immediate family member) receives aggregate compensation that varies with the volume or value of referrals or other business generated by the referring physician for the entity. We acknowledge that our final policies will reduce the number of unbroken chains of financial relationships that fall within the ambit of the physician self-referral law as indirect compensation arrangements (although they may still implicate the anti-kickback statute, depending on the facts and circumstances). We also acknowledge that, by analyzing unit-based compensation at the definitional stage at final § 411.354(c)(2)(ii), many unbroken chains of financial relationships will no longer be required to satisfy the writing requirement at § 411.357(p)(2), potentially limiting our and law enforcement's visibility into the compensation received by physicians who make referrals for designated health services to the entities at the other end of the unbroken chain of financial relationships between them.

However, as we have stated many times in previous rulemakings and in this final rule, we believe that it is a common practice (if not the best practice), and required by other Federal and State statutes and regulations, for parties to reduce their arrangements to writing, including the compensation and other terms of their arrangements. Also, we remind readers that compliance with the physician self-referral law is a prerequisite for submitting a claim to Medicare for a designated health service referred by a physician who has (or whose immediate family member has) a financial relationship with the entity submitting the claim. Included in the burden of proof to show that a claim for designated health services is permissible is the burden to show either that the physician self-referral law does not apply because the parties do not have a financial relationship within the meaning of the physician self-referral law or, if the law does apply because the parties have a financial relationship within the meaning of the physician self-referral law, that all the requirements of an applicable exception are satisfied. An entity's mistaken belief that no indirect compensation arrangement exists does not eliminate the need to satisfy the requirements of an applicable exception to the physician self-referral law.

Comment. One commenter requested that we deem certain compensation formulas that do include the physician's referrals to an entity or other business generated by a physician for the entity as a variable to nonetheless not take into account the volume or value of referrals or other business generated if the compensation arrangement is consistent with value-based care goals but does not qualify for or satisfy the requirements of the new exceptions at § 411.357(aa). Response. We decline to permit any arrangement under which compensation is determined using a formula that includes a physician's referrals to or other business generated for the entity as a variable and creates the positive or negative correlation with the compensation paid to or from the physician, as applicable.

If a compensation arrangement does not qualify for or does not satisfy all the requirements of an exception at new § 411.357(aa), the compensation paid under the arrangement may not take into account the volume or value of the physician's referrals or other business generated by the physician for the entity. Although the new exceptions at § 411.357(aa) do not include a requirement that the compensation does not take into account the volume or value of a physician's referrals or other business generated by the physician, they include substitute safeguards against program or patient abuse through their limited application and included requirements. Permitting an arrangement to circumvent those safeguards and the volume or value and other business generated standards of the traditional exceptions would pose a risk of program or patient abuse. Comment.

One commenter requested clarification of the term “other business generated.” The commenter stated that industry guidance suggests that other business generated means services that are not designated health services. The commenter proposed that the definition of “other business generated” should include only services paid by government payors, and should not Start Printed Page 77547extend to services paid by private or commercial payors. Response. Our interpretation of the term “other business generated” is longstanding and settled.

In Phase I, we stated that, based on our review of the legislative history, we believe that the Congress intended the “other business generated” language to be a limitation on the compensation or payment formula parallel to the statutory and regulatory prohibition on taking into account referrals of designated health services. We further stated that, in the provisions in which the phrase appears, affected payments cannot be based or adjusted in any way on referrals of designated health services or on any other business referred by the physician, including other Federal and private pay business (66 FR 877). We see no reason to revisit this interpretation as suggested by the commenter. Comment.

A few commenters objected to our proposals to establish special rules on the volume or value standard and the other business generated standard based on what appear to be fair market value concerns. The commenters provided the example of a hospital that determines the amount of fixed-rate compensation at a higher level than a physician practice might pay the physician because the hospital knows that it can direct the physician's referrals to the hospital and its affiliates to “make up the difference” in billings for those services. Response. We assume the commenters are referring to compensation that is based on the physician's personally performed services and not referrals of designated health services or other business generated by the physician for the entity paying the compensation, for instance, a salary of $300,000 per year.

Although the formula for calculating fixed-rate compensation for a physician's personally performed services would not include the physician's referrals to the entity or other business generated by the physician for the entity as variables—in our example, the physician's compensation would be $300,000 × the number of years of the arrangement's duration—the compensation arrangement must satisfy all the requirements of an applicable exception in order not to trigger the referral and billing prohibitions of the physician self-referral law. Compensation that is inflated to recognize the ability of the hospital to receive payment under the IPPS and OPPS for designated health services that it requires the physician to refer to the hospital or a specific provider, practitioner, or supplier within the hospital's health system may not be fair market value for the physician's personally performed services under our existing definition of “fair market value” and the revised definition of “fair market value” finalized in this final rule. See section II.B.5. Of this final rule for a detailed discussion of our final policies with respect to the definition of “fair market value.” Also, as described above and in more detail in section II.B.4.

Of this final rule, if any compensation paid to the referring physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement must satisfy the conditions of § 411.354(d)(4). 4. Patient Choice and Directed Referrals (§ 411.354(d)(4)) Historically, when the conditions of the special rule at § 411.354(d)(4) are met, compensation from a bona fide employer, under a managed care contract, or under a personal service arrangement is deemed not to take into account the volume or value of referrals, even if the physician's compensation is predicated, either expressly or otherwise, on the physician making referrals to a particular provider, practitioner, or supplier. This special rule was established in Phase I after many commenters objected to our statement in the 1998 proposed rule that fixed payments to a physician could be considered to take into account the volume or value of referrals if a condition or requirement for receiving the payment was that the physician refer designated health services to a given entity, such as an employer or an affiliated entity (63 FR 1700).

In Phase I, we acknowledged that the proposed interpretation could have had far-reaching effects, especially for managed care arrangements and group practices (66 FR 878). We determined that we would not consider a physician's compensation to take into account the volume or value of his or her referrals, as long as the directed referral requirement does not apply if a patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment (66 FR 878).

In addition, the referral requirement must be set out in writing and signed by the parties, and the compensation to the physician must be. (1) Set in advance for the term of the compensation arrangement. And (2) consistent with fair market value for the services performed. Finally, the compensation arrangement must otherwise comply with an applicable exception in § 411.355 or § 411.357.

We continue to believe in the importance of preserving patient choice, protecting the physician's professional medical judgment, and avoiding interference in the operations of a managed care organization. In the proposed rule, we expressed concern that, given our proposed interpretation of the volume or value standard, § 411.354(d)(4) may apply in fewer instances, if at all, to serve these important goals. To reiterate how critical these protections are, we proposed to include in the exceptions applicable to the types of contracts or arrangements to which the special rule has historically applied an affirmative requirement that the compensation arrangement meet the conditions of the special rule at § 411.354(d)(4). To that end, we proposed to include in the exceptions at § 411.355(e) for academic medical centers, § 411.357(c) for bona fide employment relationships, § 411.357(d)(1) for personal service arrangements, § 411.357(d)(2) for physician incentive plans, § 411.357(h) for group practice arrangements with a hospital, § 411.357(l) for fair market value compensation, and § 411.357(p) for indirect compensation arrangements, a requirement that, in addition to satisfying the other requirements of the exception, the relevant arrangement must comply with the conditions of the revised special rule at § 411.354(d)(4).

In making this proposal, we relied on the authority granted to the Secretary under sections 1877(b)(4), (e)(2)(D), (e)(3)(A)(vii), (e)(3)(B)(i)(II), and (e)(7)(vii) of the Act. We solicited comment as to whether, given the nature of academic medical centers, the conditions of revised § 411.354(d)(4) are necessary. We are finalizing our proposal to include an affirmative requirement that the compensation arrangement meet the conditions of the special rule at § 411.354(d)(4) in all of the exceptions identified in the proposed rule. As explained in section II.E.1.

Of this final rule, we are also finalizing this requirement in the new exception for limited remuneration to a physician at § 411.357(z). Although the requirement is not included in the new exceptions for value-based arrangements at final § 411.357(aa), as discussed in section II.A.2. Of this final rule, we have incorporated into these exceptions specific requirements related to remuneration paid to a physician that is conditioned on the physician's referrals to a particular provider, practitioner, or supplier. In the 1998 proposed rule, highlighting stakeholder inquiries Start Printed Page 77548regarding whether an arrangement fails to meet the volume or value standard only in situations in which a physician's payments from an entity fluctuate in a manner that reflects referrals, we expressed our view that an arrangement can also fail to meet this standard in some cases when a physician's payments from an entity are stable, but predicated, either expressly or otherwise, on the physician making referrals to a particular provider.

We gave the example of a hospital that includes as a condition of a physician's employment the requirement that the physician refer only within the hospital's own network of ancillary service providers, such as to the hospital's own home health agency. We stated that, in these situations, a physician's compensation reflects the volume or value of his or her referrals in the sense that the physician will receive no future compensation if he or she fails to refer as required. We continue to believe that conditioning a physician's future compensation on his or her referrals could improperly influence the physician's medical decision making, potentially impacting patient choice or the utilization of services. However, upon further examination of the policy goals behind our statements in the 1998 proposed rule (63 FR 1700), the special rule finalized in Phase I (66 FR 878), and the comments on the proposed rule, we no longer believe that compensation predicated, either expressly or otherwise, on the physician making referrals of designated health services to a particular provider, practitioner, or supplier should be evaluated for compliance with the volume or value standard.

As described in the proposed rule (84 FR 55789) and in section II.B.3. Of this final rule, after reviewing the statute and our regulations in a fresh light, we now believe that the volume or value standard is most appropriately interpreted as relating to how compensation is calculated. That is, what formula is used to determine the amount of the physician's compensation. We are finalizing special rules at § 411.354(d)(5)(i) and (6)(i) that set forth mathematical formulas that identify compensation that takes into account the volume or value of a physician's referrals.

However, a review of the mathematical formula that determines the amount of the physician's compensation would not be sufficient to identify a referral requirement that could lead to program or patient abuse. Rather, payment conditioned on the physician's referrals of designated health services to a given entity, such as an employer or an affiliated entity, should be evaluated for compliance with the special rule at § 411.354(d)(4), which is mandatory under the policies finalized in this final rule. As we explained in the proposed rule (84 FR 55794) and our response to comments in section II.B.3. Of this final rule, there is a risk of program or patient abuse when a physician will receive no future compensation if he or she fails to refer as required.

The same is true if the amount of the physician's compensation is tied to the physician's referral to a particular provider, practitioner, or supplier. To address this risk, we are revising § 411.354(d)(4) to include a condition at § 411.354(d)(4)(vi) that neither the existence of the compensation arrangement nor the amount of the compensation is contingent on the number or value of the physician's referrals to the particular provider, practitioner, or supplier. This condition must be met regardless of whether the physician's compensation takes into account the volume or value of his or her referrals to the entity with which the physician has the compensation arrangement. As applied, under final § 411.354(d)(4)(vi), where an entity requires a physician to refer patients for designated health services to a particular provider, practitioner, or supplier and the applicable exception requires compliance with § 411.354(d)(4), in addition to meeting the other conditions of § 411.354(d)(4), neither the existence of the compensation arrangement nor the amount of the compensation may be contingent on the number or value of the physician's referrals to the particular provider, practitioner, or supplier.

The requirement to make referrals to a particular provider, practitioner, or supplier may require that the physician refer an established percentage or ratio of the physician's referrals to a particular provider, practitioner, or supplier. In the proposed rule, we described this type of contingency as a direct “if X, then Y” correlation (84 FR 55794). The proposed special rule built upon the concerns described above, which we originally described in the 1998 proposed rule as relating to a nexus between fixed-rate compensation and the volume or value of a physician's compensation. We believe that the condition at final § 411.354(d)(4)(vi) provides a clearer standard for stakeholders and better addresses our concerns than the proposed special rule that would have considered fixed-rate compensation to take into account the volume or value of referrals if there is a predetermined, direct correlation between the physician's prior referrals to the entity and the prospective rate of compensation to be paid over the entire duration of the arrangement for which the compensation is determined.

We provide the following example to illustrate the application of our final regulation at § 411.354(d)(4)(vi). Assume that a hospital directly employs a cardiologist to treat patients in the hospital's outpatient cardiology department. The physician is paid a predetermined, unvarying annual salary. Under the employment arrangement, the hospital requires the physician to refer patients to the hospital or other providers and suppliers wholly owned by the hospital, unless the patient expresses a preference for a different provider, practitioner, or supplier.

The patient's insurer determines the provider, practitioner or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment. When negotiating an extension of the employment arrangement and revised compensation terms, the hospital reviews the past performance of the physician, including the physician's referrals for diagnostic testing. At final § 411.357(c)(5), the exception for bona fide employment relationships requires compliance with the conditions of the special rule for directed referrals at § 411.354(d)(4).

(The exceptions for personal service arrangements and fair market value compensation have identical requirements at § 411.357(d)(1)(viii) and (l)(7), respectively.) Under § 411.354(d)(4)(vi), the amount of the physician's compensation may not be contingent on the number or value of the physician's referrals under the directed referral requirement. Thus, if, for example, the hospital increases the physician's compensation in the renewal term only if the physician made a targeted number of referrals for diagnostic testing to the hospital or the designated wholly-owned providers and suppliers in the current term, the compensation would not meet the condition at § 411.354(d)(4)(vi). Similarly, if, for example, the hospital refuses to renew the employment arrangement (or terminates it in the current term) unless the value of the physician's diagnostic testing referrals generates sufficient profit to the hospital (or its wholly-owned providers and suppliers), the existence of the compensation arrangement would be contingent on the value of the physician's referrals in violation of § 411.354(d)(4)(vi).Start Printed Page 77549 We also proposed to revise § 411.354(d)(4) to eliminate certain language regarding. (1) Whether the “set in advance” and “fair market value” conditions of the special rule apply to the compensation arrangement (as stated in the regulation) or to the compensation itself.

And (2) when compensation is considered fair market value. The proposed revisions were intended to clarify that the physician's compensation must be set in advance. Any changes to the compensation (or the formula for determining the compensation) must also be set in advance (that is, made prospectively). (See section II.D.5.

Of this final rule for a detailed discussion of the “set in advance” deeming provision at § 411.354(d)(1).) We proposed to clarify that the physician's compensation must be consistent with the fair market value of the services performed. In addition, we proposed to eliminate the parenthetical language in existing § 411.354(d)(4) as it conflates the concept of fair market value and the volume or value standard. As noted in response to the comment in section II.B.1. Of this final rule, these are separate standards, and compliance with one is not contingent on compliance with the other.

We also proposed nonsubstantive revisions for clarity. We noted that, although revised § 411.354(d)(4) sets forth protections that apply to both the compensation arrangement that includes a directed referral requirement and also specifically to the compensation itself, for continuity in the application of the regulation, we would leave the regulation in § 411.354(d), which sets forth special rules on compensation, rather than include it in § 411.354(e), which sets forth special rules for compensation arrangements. We are finalizing the proposed restructuring of and nonsubstantive revisions to § 411.354(d)(4). We received the following comments and our responses follow.

Comment. Many commenters recognized that directed referral requirements would be permitted without limitation if we finalized our proposed interpretation of the volume or value standard at § 411.354(d)(5). Commenters agreed that compliance with the conditions of the special rule at § 411.354(d)(4) provides important protections for patients and the independence of a physician's medical decision making. Several commenters supported our proposal to continue this protection by including in the exceptions at § 411.355(e) for academic medical centers, § 411.357(c) for bona fide employment relationships, § 411.357(d)(1) for personal service arrangements, § 411.357(d)(2) for physician incentive plans, § 411.357(h) for group practice arrangements with a hospital, § 411.357(l) for fair market value compensation, and § 411.357(p) for indirect compensation arrangements an affirmative requirement for compliance with § 411.354(d)(4) when a physician's compensation is conditioned on his or her referrals to a particular provider, practitioner, or supplier.

Response. We agree with the commenters that patient choice, independent medical decision making, and avoiding interference with managed care contracts should be protected. We are finalizing our proposals and, as discussed in section II.E.1. Of this final rule, are including the requirement in the new exception for limited remuneration to a physician at § 411.357(z).

As the previous commenter described, directed referral requirements can take the form of conditioning the existence of the arrangement itself on the physician's referrals to a particular provider, practitioner, or supplier, or they may condition the amount of the physician's compensation on his or her referrals to a particular provider, practitioner, or supplier. Because both types of conditioning represent threats to patient choice and the independence of a physician's medical decision making, in order to reflect both of these conditioning requirements, we are revising the language of § 411.354(d)(4), with which the compensation arrangement must comply under the exceptions at §§ 411.355(e) and 411.357(c), (d)(1), (d)(2), (h), (l), (p), and (z). In each of the exceptions noted, if the physician referrals are directed to a particular provider, practitioner, or supplier, the arrangement must satisfy the conditions of § 411.354(d)(4). Comment.

A few commenters stated that they did not oppose the policy stated in the proposed rule (84 FR 55796) that § 411.354(d)(4) applies to both the situation where the compensation arrangement is contingent on the physician's required referrals and the situation where the compensation amount is contingent on the physician's required referrals, but requested guidance on the precise function of the special rule at § 411.354(d)(4) in light of our proposed interpretation of the volume or value standard. One of these commenters focused on the contractual terms between the parties to the compensation arrangement, and asked whether the volume or value standard would be violated if the breach of a directed referral requirement resulted only in termination of the arrangement, rather than an impact on the amount of the physician's compensation from the entity. This commenter provided a second example of a directed referral requirement that it stated would affect the amount of a physician's compensation. Under that example, a physician is paid different stipulated percentages of a bonus pool depending on the percentage of the physician's referrals that are “in network” (that is, to a particular provider, practitioner, or supplier).

The commenter requested clarification of the applicability of the special rule at § 411.354(d)(4) and whether provisions such as those described would violate the volume or value standard as proposed. A different commenter described a compensation arrangement under which a physician is paid an amount that does not result from a mathematical model tied to individual referrals of designated health services, but rather a “model” under which the entity knows it will generate revenue by requiring physician referrals to a particular provider, practitioner, or supplier. The commenter stated that, under the scenario presented, the entity is not rewarding (paying) the physician for referrals but would terminate the physician's employment if he or she does not actively participate in the mandated referrals. The commenter asked whether CMS views this type of compensation model as taking into account the volume or value of the physician's referrals.

Response. In light of this specific comment and other similar comments, we revisited the history of § 411.354(d)(4) and our previously-stated concerns regarding directed referral requirements that ultimately led to the establishment of the special rule. As we stated in Phase I, we understand that directed referral requirements are a common and integral part of employment relationships, personal service arrangements, and managed care contracts (66 FR 878). Even so, we continue to believe that payments tied to referral requirements can be abused, and appropriate safeguards should be in place to protect against the risk of program or patient abuse when an entity directs a physician where to make referrals of designated health services.

After review of the regulatory history of our interpretation of the volume or value standard and the establishment of the special rule at § 411.354(d)(4), we now believe that the best approach to addressing the risks of directed referral requirements is to affirmatively require compliance with the conditions of Start Printed Page 77550§ 411.354(d)(4) whenever an entity conditions the compensation of a physician with whom it has an employment relationship, personal service arrangement, or managed care contract on the physician's referrals for designated health services to a particular provider, practitioner, or supplier. Compensation conditioned, either expressly or otherwise, on the physician making referrals of designated health services to a particular provider, practitioner, or supplier should not be evaluated for compliance with the volume or value standard. Because we are finalizing requirements in certain exceptions for affirmative compliance with the conditions of § 411.354(d)(4), and directed referral requirements will no longer be considered in the context of compliance with the volume or value standards, we are applying the condition at final § 411.354(d)(4)(vi), rather than the final regulation at § 411.354(d)(5)(i), in our response to the commenters. The condition at § 411.354(d)(vi) applies to a directed referral requirement which, if not achieved, would result in the termination of a physician's compensation arrangement, even if it would not impact the amount of the physician's compensation from the entity.

The condition at § 411.354(d)(4)(vi) prohibits making the existence of a compensation arrangement contingent on the number or value of the physician's referrals to a particular provider, practitioner, or supplier. If the compensation arrangement would be terminated if the physician failed to refer a sufficient number of patients for designated health services, or if the value of the physician's referrals of designated health services failed to achieve the target established under the directed referral requirement, the directed referral requirement would be impermissible and the compensation arrangement would not satisfy the applicable exception's requirement of compliance with § 411.354(d)(4). We emphasize that § 411.354(d)(4)(vi) does not prohibit directed referral requirements based on an established percentage—rather than the number or value—of a physician's referrals. Therefore, if the directed referral requirement in the commenter's example provided for termination of the compensation arrangement if the physician failed to refer 90 percent, for example, of his or her patients to a particular provider, practitioner, or supplier, it would not run afoul of the special rule at § 411.354(d)(4) or jeopardize compliance with the requirement of the applicable exception.

With respect to the commenter's second example that ties the amount of the physician's compensation to achievement of a directed referral requirement, the condition at § 411.354(d)(4)(vi) would apply in the same manner. A directed referral requirement under which a physician is paid different stipulated percentages of a bonus pool depending on the percentage of the physician's referrals that are “in network” (that is, to a particular provider, practitioner, or supplier) would not be categorically prohibited under § 411.354(d)(4)(vi). However, we caution that the composition of the bonus pool must be analyzed to ensure that the formula for the compensation ultimately paid to the physician does not include referrals of designated health services or other business generated by the physician as a variable. Also, if the directed referral requirement was tied to the number or value of the physician's referrals, it would run afoul of the special rule at § 411.354(d)(4) and and the compensation arrangement would not satisfy the applicable exception's requirement of compliance with § 411.354(d)(4).

Comment. One commenter expressed support for the affirmative requirement for compliance with the conditions of § 411.354(d)(4) where a physician is directed to refer patients to a particular provider, practitioner, or supplier under the physician's compensation arrangement with the entity directing the referrals. The commenter recommended that we finalize our proposal to make the compliance requirement mandatory, and that we apply the rule where the referral requirement is not only express, but where it occurs as the practical result of processes that steer a physician's referrals for designated health service to a provider, practitioner, or supplier selected by the entity. Response.

The affirmative obligation finalized in the exceptions at §§ 411.355(e) and 411.357(c), (d)(1), (d)(2), (h), (l), (p), and (z) is not limited to express or written requirements to refer patients to particular provider, practitioner, or supplier selected by the entity paying the compensation. Rather, the condition at § 411.354(d)(4)(vi), as finalized, prohibits making the existence of the compensation arrangement or any compensation paid to the referring physician contingent on the physician's referrals to a particular provider, practitioner, or supplier. Comment. One commenter expressed general agreement with the proposals to include compliance with the conditions of § 411.354(d)(4) as an affirmative requirement in exceptions applicable to compensation for physician services in those instances where the physician's compensation is conditioned on the physician's referrals to a particular provider, practitioner, or supplier.

The commenter also supported leaving the regulation in § 411.354(d)(4), rather than include it with other special rules related to compensation arrangements at § 411.354(e). Response. We are finalizing our proposals with the modifications explained in the responses to other comments. We agree with the commenter that the regulation should remain at § 411.354(d)(4).

We believe this will avoid disruption with stakeholder compliance efforts and our enforcement efforts. Comment. One commenter urged CMS not to adopt an affirmative requirement to comply with the conditions of § 411.354(d)(4) when a physician's compensation is conditioned on the physician's referrals to a particular provider, practitioner, or supplier. Despite its stated support for patient preference in referrals, the commenter asserted that the requirement would place additional burden on physicians and other providers.

Response. Where such referral requirements have existed, they have historically implicated the volume or value standard under our historic interpretation of that standard. Thus, parties would have had to comply with the conditions of § 411.354(d)(4) in order to be assured not to run afoul of the volume or value standard, or offer some other proof of compliance with the volume or value standard. This is not a new requirement.

Comment. A few commenters discussed what they termed “employee workplace requirements” that require an employed physician to treat the employer's patients in a specified workplace, typically the location of a medical practice or clinic and the address of an affiliated hospital. The commenters questioned whether such requirements were of concern to CMS. The commenters requested that CMS provide guidance on employee workplace requirements, suggesting that several approaches might be appropriate.

The commenters offered that CMS could take the position that employee workplace requirements are not directed referral requirements that trigger the need for compliance with the volume or value standard because the employed physician is merely restricted by his or her employment from working Start Printed Page 77551elsewhere and is not expressly required to refer patients to the employer. In the alternative, the commenters offered that CMS could take the position that such workplace requirements are directed referral requirements because the employer is effectively requiring the physician to refer his or her patients to the employer and, for example, an affiliated hospital for designated health services. If so, the commenters requested that CMS confirm that § 411.354(d)(4) requires only that the employer permits the physician to refer the patient to another physician who can provide the services (such as a surgery or other procedure) at a different location based on patient preference, payor requirements, or the best medical interest of the patient. The commenters requested specific confirmation that § 411.354(d)(4) does not require the employer to permit the employed physician to personally treat the patient in a location other than that specified in the physician's employment contract.

Response. Under the policies finalized in this final rule, a directed referral requirement will not trigger analysis for compliance with the volume or value standard at final § 411.354(d)(5). However, a compensation arrangement will have to satisfy the conditions of § 411.354(d)(4) if any of the physician's compensation is conditioned on the physician's referrals to a particular provider, practitioner, or supplier and the parties intend to rely on the exception at § 411.355(e) or § 411.357(c), (d)(1), (d)(2), (h), (l), (p), or (z). The commenter is correct that the requirement to comply with § 411.354(d)(4) is not intended to interfere with employer's rights or operations or infringe on the employer-employee relationship.

The condition at § 411.354(d)(4)(iv)(B) requires only that the requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment. Requiring that the employed physician refer the patient to another physician for treatment is permissible, provided that the referral is appropriate.

We wish to make clear that the permissibility of the referral to another physician for purposes of the physician self-referral law has no bearing on whether the employed physician complies with any State law and common law requirements, such as laws regarding patient abandonment. Comment. Many commenters noted that the term “referrals” is used throughout our physician self-referral regulations. Commenters stated that, although the term is defined at § 411.351, they were uncertain whether the term “referrals” has the meaning ascribed to it at § 411.351 in all instances in which it appears in the regulations.

Several commenters asked if the term “referrals” in § 411.354(d)(4) is intended to encompass more than the defined term “referrals” at § 411.351. One commenter stated that, if the meaning of “referrals,” as used at § 411.354(d)(4), is not limited to the definition at § 411.351, the proposed inclusion of a requirement for compliance with the conditions of § 411.354(d)(4) as an element of the exceptions for bona fide employment relationships, personal service arrangements, and others has the effect of introducing an all-payor volume or value standard into these exceptions. The commenters requested that CMS expressly clarify in commentary that, unless otherwise noted, when “referrals” appears in the physician self-referral regulations, it has the meaning set forth at § 411.351. Response.

The introductory language to § 411.351 states clearly that, unless the context indicates otherwise, the term “referral” has the meaning set forth in § 411.351. The term “referral,” as used at § 411.354(d)(4) and the new requirement in certain exceptions that, if remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4) have the meaning set forth in the definition of “referral” at § 411.351. In Phase I, we discussed the scope of the term “referral” with reference to a requirement that a physician refer designated health services to a given entity (66 FR 878). As we stated above in section II.B.2.

Of this final rule, unless the context indicates otherwise, the term “referral” has the meaning set forth in § 411.351 throughout the physician self-referral regulations, including in the special rules on compensation at § 411.354(d). 5. Fair Market Value (§ 411.351) The term “fair market value,” as it is defined at section 1877(h)(3) of the Act, consists of three basic components. Fair market value is defined generally as “the value in arms length [sic] transactions, consistent with the general market value.” The statutory definition includes additional qualifications for leases generally, providing that fair market value with respect to rentals or leases also means “the value of rental property for general commercial purposes (not taking into account its intended use).” Finally, with respect to the lease of office space, in particular, the statutory definition further stipulates that fair market value also means that the value of the rental property is “not adjusted to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee.” Most of the statutory exceptions at section 1877(e) of the Act relating to compensation arrangements include requirements pertaining to fair market value compensation, including the exceptions for the rental of office space, the rental of equipment, bona fide employment relationships, personal service arrangements, isolated transactions, and payments by a physician.

Many of the regulatory exceptions created using the Secretary's authority under section 1877(b)(4) of the Act also include requirements pertaining to fair market value compensation, including the exceptions for academic medical centers, fair market value compensation, indirect compensation arrangements, EHR items and services, and assistance to compensate a nonphysician practitioner. The term “fair market value” is defined in our regulations in § 411.351. In the 1992 proposed rule (57 FR 8602) and the 1995 final rule (60 FR 41978), we incorporated the statutory definition of “fair market value” into our regulations without modification. In the 1998 proposed rule (63 FR 1686), we proposed to include in our definition of “fair market value” a definition of “general market value,” to explain what it means for a value to be “consistent with the general market value.” In an attempt to ensure consistency across our regulations, we proposed to adopt the definition of “general market value” from part 413 of our regulations, which pertains to reasonable cost reimbursement for end stage renal disease services.

In the context of determining the cost incurred by a present owner in acquiring an asset, § 413.134(b)(2) defined “fair market value” as “the price that the asset would bring by bona fide bargaining between well-informed buyers and sellers at the date of acquisition. Usually the fair market price is the price that bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition.” We modified the Start Printed Page 77552definition drawn from § 413.134(b)(2) to include analogous provisions for determining the fair market value of any items or services, including personal services, employment relationships, and rental arrangements. As proposed in the 1998 proposed rule, “general market value” would mean. The price that an asset would bring, as the result of bona fide bargaining between well-informed buyers and sellers, or the compensation that would be included in a service agreement, as the result of bona fide bargaining between well-informed parties to the agreement, on the date of acquisition of the asset or at the time of the service agreement.

Usually the fair market price is the price at which bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition, or the compensation that has been included in bona fide service agreements with comparable terms at the time of the agreement. The proposed definition of “fair market value” in the 1998 proposed rule did not substantively modify the provisions of the fair market value definition pertaining to leases in general and office space leases in particular. In Phase I, we finalized the definition of “fair market value” from the 1998 proposed rule with one modification (66 FR 944 through 945). The definition of “fair market” value finalized in Phase I clarified that a rental payment “does not take into account intended use if it takes into account costs incurred by the lessor in developing or upgrading the property or maintaining the property or its improvements.” In Phase I we also responded to commenters that requested guidance on how to determine fair market value in a variety of circumstances.

We stated that we would accept any commercially reasonable method for determining fair market value. However, we noted that, in most exceptions, the fair market value requirement is further modified by language that precludes taking into account the volume or value of referrals, and, in some cases, other business generated by the referring physician. We concluded that, in determining whether compensation is fair market value, requirements pertaining to the volume or value of referrals and other business generated may preclude reliance on comparables that involve entities and physicians in a position to refer or generate business (66 FR 944). Elsewhere in Phase I, we suggested a similar underlying connection between the fair market value requirement and requirements pertaining to the volume or value of a physician's referrals and other business generated (66 FR 877).

In a discussion of our then-interpretation of the fair market value standard in light of our Phase I interpretation of the requirement that compensation not take into account other business generated, we stated that— [T]he additional limiting phrase `not taking into account * * * other business generated between the parties' means simply that the fixed, fair market value payment cannot take into account, or vary with, referrals of Medicare or Medicaid [designated health services] or any other business generated by the referring physician, including other Federal and private pay business. Simply stated, section 1877 of the Act establishes a straightforward test that compensation arrangements should be at fair market value for the work or service performed or the equipment or space leased—not inflated to compensate for the physician's ability to generate other revenues. Despite our intimation in Phase I that the concepts of fair market value and the volume and value of referrals or other business generated were fundamentally interrelated, the definition of fair market value finalized in Phase I did not include any reference to the volume or value of a physician's referrals. In Phase II, we made two significant modifications to the definition of “fair market value.” First, we proposed certain “safe harbors” for determining fair market value for hourly payments made to physicians for physician services (69 FR 16092 and 16107).

(These safe harbors were not finalized.) Second, and more importantly, we incorporated into the definition of “fair market value” a reference to the volume or value standard found in many exceptions to the physician self-referral law. The Phase II definition of “fair market value” provided, in relevant part, that fair market value is usually the price at which bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition, or the compensation that has been included in bona fide service agreements with comparable terms at the time of the agreement, where the price or compensation has not been determined in any manner that takes into account the volume or value of anticipated or actual referrals. We explained our view that the determination of fair market value under the physician self-referral law differs in significant respects from standard valuation techniques and methodologies. In particular, we noted that the methodology must exclude valuations where the parties to the transactions are at arm's length but in a position to refer to one another (69 FR 16107).

We made no substantive changes to the definition of “fair market value” in Phase III or in any of our subsequent rulemaking. As a preliminary matter and as described previously in section II.B.1. Of this final rule, a careful reading of the statute shows that the fair market value requirement is separate and distinct from the volume or value standard and the other business generated standard. (See section II.B.3.

Of this final rule for a detailed discussion of the volume or value standard and the other business generated standard.) The volume or value and other business generated standards do not merely serve as “limiting phrases” to modify the fair market value requirement. In order to satisfy the requirements of the exceptions in which these concepts appear, compensation must both. (1) Be fair market value for items or services provided. And (2) not take into account the volume or value of referrals (or the volume or value of other business generated by the physician, where such standard appears).

We believe that the appropriate reading of the statute is that the requirement that compensation does not take into account the volume or value of referrals—which is plainly set out as an independent requirement of the relevant exceptions—is not also part of the definition of “fair market value.” We note that the statutory definition of “fair market value” at section 1877(h)(3) of the Act includes no reference to the volume or value of referrals (or other business generated between the parties or by the physician). For these reasons and as described further below, we are finalizing our proposal to eliminate the connection to the volume or value standard in the definitions of “fair market value” and “general market value.” Our proposals to revise the definition of “fair market value” at § 411.351 were premised on our goal to give meaning to the statutory language at section 1877(h)(3) of the Act. As described previously in this section II.B.5., the statute states a general definition of “fair market value” and then modifies that definition for application to leases of equipment and office space. One of the modifications applies to leases of both equipment and office space.

The other applies only to the lease of office space. To illustrate this more clearly in our regulations, we proposed to modify the definition of “fair market value” to provide for a definition of general application, a definition applicable to the rental of equipment, and a definition Start Printed Page 77553applicable to the rental of office space. (We proposed to use the terms “rental” of equipment and “rental” of office space as those are the titles of the statutory exceptions at section 1877(e)(1)(A) and (B) of the Act and our regulatory exceptions at § 411.357(a) and (b).) We are finalizing our proposals to restructure the regulation in this way. We believe that this approach provides parties with ready access to the definition of “fair market value,” with the attendant modifiers, that is applicable to the specific type of compensation arrangement at issue.

Under the final regulation at § 411.351, generally, fair market value means the value in an arm's-length transaction, consistent with the general market value of the subject transaction. With respect to the rental of equipment, fair market value means the value in an arm's-length transaction of rental property for general commercial purposes (not taking into account its intended use), consistent with the general market value of the subject transaction. And with respect to the rental of office space, fair market value means the value in an arm's length transaction of rental property for general commercial purposes (not taking into account its intended use), without adjustment to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee, and consistent with the general market value of the subject transaction. We are not finalizing the proposed references to “like parties and under like circumstances.” We note that the structure of the final regulation merely reorganizes for clarity, but does not significantly differ from, the statutory language at section 1877(h)(3) of the Act.

We also proposed changes to the definition of “general market value,” which, until now, was included within the definition of fair market value at § 411.351. As we explained in the proposed rule, the definition of “fair market value” finalized in Phase II states the following, some of which relates to fair market value and some of which relates to the included term, “general market value” (84 FR 55797). Numerical references are added here for ease but did not appear in the regulation at § 411.351. (1) Fair market value means the value in arm's-length transactions, consistent with the general market value.

(2) General market value means the price that an asset would bring as the result of bona fide bargaining between well-informed buyers and sellers who are not otherwise in a position to generate business for the other party, or the compensation that would be included in a service agreement as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party, on the date of acquisition of the asset or at the time of the service agreement. (3) Usually, the fair market price is the price at which bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition, or the compensation that has been included in bona fide service agreements with comparable terms at the time of the agreement, where the price or compensation has not been determined in any manner that takes into account the volume or value of anticipated or actual referrals. (4) With respect to rentals and leases described in § 411.357(a), (b), and (l) (as to equipment leases only), “fair market value” means the value of rental property for general commercial purposes (not taking into account its intended use). (5) In the case of a lease of space, this value may not be adjusted to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor when the lessor is a potential source of patient referrals to the lessee.

(6) For purposes of this definition, a rental payment does not take into account intended use if it takes into account costs incurred by the lessor in developing or upgrading the property or maintaining the property or its improvements. Items one, four, and five essentially restate the language at section 1877(h)(3) of the Act, albeit with the intervening language in items two and three, and item six was added in Phase I in response to a comment for the purpose of interpreting the modifier “(not taking into account its intended use)” in item four and at section 1877(h)(3) of the Act. We stated in the 1998 proposed rule that items two and three were our attempt to give meaning to the statutory requirement that the fair market value of compensation must be “consistent with the general market value.” In doing so, we relied on a regulation that relates to the circumstances under which an appropriate allowance for depreciation on buildings and equipment used in furnishing patient care can be an allowable cost. We stated in the proposed rule that we no longer see the benefit of connecting the definition of “general market value” to principles of reasonable cost reimbursement for end stage renal disease services in order to explain what it means for a value to be consistent with general market value, as required by the statute.

Moreover, the definition at § 413.134(b)(2) upon which we relied states that fair market value (not general market value) is defined as the price that the asset would bring by bona fide bargaining between well-informed buyers and sellers at the date of acquisition. The regulation goes on to state that, usually the fair market price is the price that bona fide sales have been consummated for assets of like type, quality, and quantity in a particular market at the time of acquisition. This definition more closely ties to the widely accepted IRS definition of “fair market value,” [] not general market value. Therefore, we considered whether current § 411.351 includes an appropriate definition for “general market value.” We stated in the proposed rule that we see no indication in the legislative history or the statutory language itself that the Congress intended that the definition of “general market value” for purposes of the physician self-referral law should deviate from general concepts and principles in the valuation community.

We discussed in detail the basis for our proposals to revise the definition of “general market value” in accordance with our belief that the Congress used the term “general market value” to ensure that the fair market value of the remuneration is generally consistent with the valuation that would result using accepted valuation principles (84 FR 55798). However, after reviewing the comments, to which our detailed responses are provided below, we believe that our proposals, if finalized, could have had an unintended limiting effect on the regulated community, as well as the valuation community. Our use of the term “market value” in our preamble discussion, although not carried into the proposed definition of “general market value,” may have been inaccurate. Therefore, we are retracting our statements equating “general market value,” as that term appears in the statute and our regulations, with “market value,” the term we identified as uniformly used in the valuation industry (84 FR 55798).Start Printed Page 77554 We continue to believe that the general market value of a transaction is based solely on consideration of the economics of the subject transaction and should not include any consideration of other business the parties may have with one another.

Thus, for example, when parties to a potential medical director arrangement determine the value of the physician's administrative services, they must not consider that the physician could also refer patients to the entity when not acting as its medical director. After reviewing the comments on our proposed definition of “general market value” and the existing regulation at § 411.351, we determined that the best way to state this policy is to remove the language regarding the volume or value standard (item three above) and restructure the definition to emphasize our policy that the valuation of the remuneration terms of a transaction should not include any consideration of other business the actual parties to the transaction may have with one another. Also, for clarity and as supported by commenters, we are finalizing definitions of “general market value” specific to each of the types of transactions contemplated in the exceptions to the physician self-referral law—asset acquisition, compensation for services, and rental of equipment or office space. Under our final regulation at § 411.351, “general market value” means, with respect to the purchase of an asset, the price that an asset would bring on the date of acquisition of the asset as the result of bona fide bargaining between a well-informed buyer and seller that are not otherwise in a position to generate business for each other.

With respect to compensation for services, “general market value” means the compensation that would be paid at the time the parties enter into the service arrangement as the result of bona fide bargaining between well-informed parties that are not otherwise in a position to generate business for each other. And, with respect to the rental of equipment or the rental of office space, “general market value” means the price that rental property would bring at the time the parties enter into the rental arrangement as the result of bona fide bargaining between a well-informed lessor and lessee that are not otherwise in a position to generate business for each other. In the proposed rule, we stated that it is our view that the concept of fair market value relates to the value of an asset or service to hypothetical parties in a hypothetical transaction (that is, typical transactions for like assets or services, with like buyers and sellers, and under like circumstances), while general market value relates to the value of an asset or service to the actual parties to a transaction that is set to occur within a specified timeframe. We provided examples of compensation arrangements under which compensation outside the parameters of salary survey data could be appropriate (84 FR 55798 through 55799).

Although we are not finalizing the proposed analytical framework related to “hypothetical” versus “actual” transactions, we continue to believe that the fair market value of a transaction—and particularly, compensation for physician services—may not always align with published valuation data compilations, such as salary surveys. In other words, the rate of compensation set forth in a salary survey may not always be identical to the worth of a particular physician's services. For this reason, we are affirming the examples provided in the proposed rule and restate them here, with modifications to eliminate terminology not included in our final analytical framework and regulations. As we stated in the proposed rule, extenuating circumstances may dictate that parties to an arm's length transaction veer from values identified in salary surveys and other valuation data compilations that are not specific to the actual parties to the subject transaction (84 FR 55799).

By way of example, assume a hospital is engaged in negotiations to employ an orthopedic surgeon. Independent salary surveys indicate that compensation of $450,000 per year would be appropriate for an orthopedic surgeon in the geographic location of the hospital. However, the orthopedic surgeon with whom the hospital is negotiating is one of the top orthopedic surgeons in the entire country and is highly sought after by professional athletes with knee injuries due to his specialized techniques and success rate. Thus, although the employee compensation of a hypothetical orthopedic surgeon may be $450,000 per year, this particular physician commands a significantly higher salary.

In this example, compensation substantially above $450,000 per year may be fair market value. On the other hand, hypothetical data may result in hospitals and other entities paying more than they believe appropriate for physician services. Assume a hospital is engaged in negotiations to employ a family physician. Independent salary surveys indicate that compensation of $250,000 per year would be appropriate for a family physician nationally.

No local salary surveys are available. However, the cost of living in the geographic location of the hospital is very low despite its proximity to good schools and desirable recreation opportunities, and, due to declining reimbursement rates and a somewhat poor payor mix, the hospital's economic position is tenuous. Although the physician may request the $250,000 that the salary survey indicates would be appropriate for a hypothetical (unidentified) physician to earn, and the hospital may believe that it is compelled to pay the physician this amount, the fair market value of the physician's compensation may be less than $250,000 per year (84 FR 55799). We also proposed to remove from the regulation text at § 411.351 the statement that, for purposes of the definition of “fair market value,” a rental payment does not take into account intended use if it takes into account costs incurred by the lessor in developing or upgrading the property or maintaining the property or its improvements (84 FR 55798).

This language was added to the regulation text as a result of our response in Phase I to a commenter to the 1998 proposed rule, where we stated that a rental payment does not violate the requirement that the fair market value of rental property is the value of the property for general commercial purposes, not taking into account its intended use, merely because it reflects any costs that were incurred by the lessor in developing or upgrading the property, or maintaining the property or its improvements, regardless of why the improvements were added (66 FR 945). That is, the rental payment may reflect the value of any similar commercial property with improvements or amenities of a similar value, regardless of why the property was improved. This regulation text appears to have caused confusion among stakeholders. Although it remains our policy, to avoid further confusion and provide certainty in the final definitions of “fair market value” and “general market value,” we are finalizing our proposal to remove this language from the definition of “fair market value” at § 411.351.

Lastly, we noted in the proposed rule that many CMS RFI commenters requested that we simply return to the statutory language defining fair market value (84 FR 55798). Some commenters on the proposed rule made similar requests. We continue to disagree that this would be the best approach. We believe that it is important to provide guidance with respect to the requirement that compensation is fair market value in order not to stymy our Start Printed Page 77555enforcement efforts (or those of our law enforcement partners).

This guidance is also crucial to support the compliance efforts of the regulated industry. We received the following comments and our responses follow. Comment. Some commenters supported our proposal to remove the language regarding bargaining between well-informed buyers and sellers who are not otherwise in a position to generate business for the other party, suggesting that this language essentially links the volume or value standard with the definition of “fair market value.” The commenters noted that CMS clearly stated in the proposed rule that the volume or value standard and other business generated standard are distinct and separate requirements of many exceptions to the physician self-referral law (84 FR 55797).

These commenters also referenced court opinions in which they believe the standards were blended or conflated by the court, causing confusion, additional litigation, and what they termed a “torrent of unnecessary effort to reexamine arrangements long-believed to comply with the law.” The commenters contended that parties should not have to search for market data that isolates transactions with physicians who are not in a position to refer to the entities with which they have compensation arrangements. In contrast, one commenter strongly opposed our proposal to remove the language regarding well-informed buyers and sellers that are not otherwise in a position to generate business for each other from the definition of “general market value.” A few other commenters asserted that, by defining general market value as the value determined by the parties to the subject transaction, the standard would simply be a subjective test of how parties to the transaction value the services, which could include additional payment for referrals or the generation of business. These commenters asserted that delinking the definition of “general market value” from the ability to generate business could result in the parties comparing the subject transaction to other transactions under which compensation is inflated by the value of referrals. One commenter suggested that we include in regulation text our preamble statement that [general] market value is based solely on consideration of the economics of the subject transaction and should not include any consideration of other business the parties may have with one another (84 FR 55798).

The commenter asserted that this would address the legitimate concern about valuations for purposes of the physician self-referral law being distorted by considerations of referrals. The commenter suggested that we include this statement at the end of the proposed definition of “general market value” for clarity. Response. Although we disagree with the characterization of our proposal to define general market value merely as the value determined by the parties to the subject transaction, we find the program integrity concerns highlighted by the latter commenters compelling.

It was not our intention to define “general market value” in a way that permits the inappropriate consideration of the value of a physician's referrals or the other business that a physician could generate for an entity in a determination of the fair market value of compensation. In Phase I, based on our then-interpretation that the “volume or value restriction” in the exceptions to the physician self-referral law established a limitation on the fair market value of compensation rather than represent a separate and distinct requirement of the exceptions, we stated that, depending on the circumstances, the “volume or value” restriction will preclude reliance on comparables that involve entities and physicians in a position to refer or generate business for each other (66 FR 944). In Phase II, we stated that, if parties are using comparables to establish fair market value, they should take reasonable steps to ensure that the comparables are not distorted (69 FR 16107). Although we have renounced the interpretation of the volume or value and other business generated standards as merely limiting or modifying the fair market value requirement (84 FR 55797), we continue to believe that precluding reliance on comparables that involve entities and physicians in a position to refer or generate business for each other in the determination of fair market value and general market value is an important program integrity safeguard.

We are finalizing a definition of “general market value” that retains this language from the current regulation defining general market value. We believe this will be less disruptive to the regulated industry and valuation professionals that have developed compliance protocols and valuation standards that have incorporated this requirement for the past two decades, while still achieving our goal of disentangling the volume or value and other business generated standards from the requirement that compensation is fair market value. We are not including in the definition of “general market value” a statement that general market value is based solely on consideration of the economics of the subject transaction and should not include any consideration of other business the parties may have with one another. Although we continue to believe that the determination of general market value should be based solely on consideration of the economics of the subject transaction and should not include any consideration of other business the parties may have with one another, we do not believe that it is necessary to include this statement because the final definition of “general market value” retains the essentially equivalent requirement for bona fide bargaining between well-informed parties that are not otherwise in a position to generate business for each other.

Compensation to or from a physician should not be inflated or reduced simply because the entity paying or receiving the compensation values the referrals or other business that the physician may generate more than a different potential buyer of the items or services. This means that a hospital may not value a physician's services at a higher rate than a private equity investor or another physician practice simply because the hospital could bill for designated health services referred by the physician under the OPPS, whereas a physician practice owned by the private equity investor or other physicians would have to bill under the PFS, which may have lower payment rates. Put another way, the value of a physician's services should be the same regardless of the identity of the purchaser of those services. We recognize that reliance on similar transactions in the marketplace could simplify the process of determining fair market value for purposes of the physician self-referral law, but adopting such a standard would allow parties to consider the additional (or investment) value to certain types of entities, skewing the buyer-neutral fair market value.

Comment. One commenter asserted that the definition of “fair market value” should include a statement that organizations compensating individuals at an ongoing loss may create risk that the compensation is not representative of fair market value. The commenter explained its concern in an example involving a hospital compensating a physician at an amount greater than the collections for the physician's services, asserting that the hospital is able to do so because it controls referrals within its network and increased facility revenues offset the physician practice losses. In the commenter's view, this creates a situation in which hospitals are taking Start Printed Page 77556into account the value of referrals when setting physician compensation.

The commenter noted that, from a fair market value and [general] market value perspective, two hypothetical parties (that cannot consider the fact that one party can generate business for the other) would never enter into a situation in which the physician's compensation and benefits exceeded direct revenue. A different commenter asserted that a payment to a physician above what the entity collects for the physician's services is inherently not fair market value. Response. We agree that, in some circumstances, an entity's compensation of a physician at an ongoing loss may present program integrity concerns, but see no need to include the language requested by the commenter in regulation.

As we stated earlier, we are retaining the language “not in a position to generate business” in the definition of “general market value.” We believe this addresses the commenter's concern, at least in part, as it requires that the nature or identity of the purchaser of the items or services (in the commenter's example, the hospital) is irrelevant to a determination of “general market value” and, thus, “fair market value.” In the commenter's example, the value of the physician's services is the value to any willing buyer, and the fact that the hospital could make up losses for the physician's compensation through designated health services reimbursed at facility rates under OPPS rather than PFS, may not be considered. Also, we disagree that parties would never enter into such an arrangement. As we stated above in section II.B.2 (with respect to the definition of “commercially reasonable”), there are many valid reasons and legitimate business purposes for entering into an arrangement that will not result in profit for one or more of the parties to the arrangement. Comment.

A few commenters raised the point that, with respect to our statements in the proposed rule connecting the statutory term “general market value” to the valuation principle of “market value” (84 FR 55798), “general market value” does not equate to the “market value” of a transaction, as that term is used in the valuation industry. One of these commenters suggested that what CMS described as “market value” actually corresponds to “investment value” as defined by the four commercial valuation disciplines. Business valuation, compensation valuation, machinery and equipment valuation, and real estate valuation. Commenters expressed concern that this focus would narrow the universe of appropriate valuation methodologies for purposes of the physician self-referral law solely to the “market value” approach.

One commenter asserted that stakeholders should not be restricted to exclusive use of the market approach to value a physician's personal services or promote exclusive use by valuators of physician compensation survey data. Other commenters requested that hospitals should be permitted to use existing written offers to a physician from other similarly situated providers to support a valuation. One of these commenters requested guidance on how fair market value should be determined and documented for timeshare arrangements, citing the “cost plus” guidance from Phase I regarding equipment leases as potentially appropriate (66 FR 876 through 877). Another of the commenters asked for additional guidance on recruiting and paying physicians in rural areas, including the use of supply, demand, access, and community need to support the fair market value of a physician's compensation.

Another commenter requested that CMS provide additional guidance or examples on what data, facts, and circumstances should be applied to evaluate fair market value. The commenter requested specific guidance on the relevance of payor mix, market supply and demand data, cost of living, physician skills, and experience. A different commenter noted costs of care, costs for medical liability insurance, costs of equipment and staffing, certificate of need laws, and provider and related taxes on health care services and centers as relevant factors when determining the fair market value of compensation. Response.

As discussed above, we are retracting our statements in the proposed rule equating “general market value” with the valuation principle of “market value” (84 FR 55798). We did not intend to limit the valuation of assets, compensation, or rental property to the market approach or prescribe any other particular method for determining the fair market value and general market value of compensation. As we have stated consistently in prior rulemakings, to establish the fair market value (and general market value) of a transaction that involves compensation paid for assets or services, we intend to accept any method that is commercially reasonable and provides us with evidence that the compensation is comparable to what is ordinarily paid for an item or service in the location at issue, by parties in arm's-length transactions that are not in a position to refer to one another (66 FR 944). We emphasize that our use of the language “commercially reasonable” in Phase I (and again in Phase III (72 FR 51015 through 51016)) was also not intended to limit the valuation of assets, compensation, or rental property to a specific valuation approach or prescribe any other particular method for determining the fair market value and general market value of compensation.

Rather, as stated in Phase II and reiterated in Phase III, we will consider a range of methods of determining fair market value and that the appropriate method will depend on the nature of the transaction, its location, and other factors (69 FR 16107 and 72 FR 51015 through 51016). We decline to affirm the specific valuation suggestions of the commenters because the amount or type of documentation that will be sufficient to confirm fair market value (and general market value) will vary depending on the circumstances in any given case (66 FR 944), but refer readers to the Phase I rulemaking for an extensive discussion on potentially acceptable valuation methods (66 FR 944 through 945). Comment. Several commenters expressed appreciation for the examples in the proposed rule regarding when an arrangement may involve compensation above or below what national market data (salary surveys) suggests would be appropriate.

The commenters stated that the ability to factor in unique circumstances, such as whether a physician is particularly remarkable in his or her field, will allow entities to design compensation packages that more fully account for the broader circumstances of an arrangement. One commenter emphasized that the analysis of fair market value is always predicated on an analysis of the actual terms of a transaction and the actual facts and circumstances, while another commenter agreed specifically that extenuating circumstances may dictate that parties to an arm's-length transaction veer from values identified in salary surveys and other hypothetical valuation data that is not specific to the actual parties. The commenter urged CMS to include this language (or similar language) in regulation text to provide further assurances to stakeholders of CMS' policy. Another commenter requested that we acknowledge that there are other factors that may justify higher levels of compensation rates for physician services in markets that may have relatively low cost of living standards due to market supply and demand.

A different commenter discussed the difficulty of establishing fair market value in rural areas and Start Printed Page 77557other challenging markets. This commenter noted that, in some instances, a hospital might need to compensate a physician above what is indicated in some published salary schedules in order to convince the physician to relocate to the market area and fill a dire patient need. The commenter was concerned that the example in the proposed rule regarding lower cost of living in certain markets could be read to prohibit compensation above what is found in salary schedules. Some commenters requested additional examples of circumstances that could justify deviating from salary survey data.

A few other commenters objected to the examples and disagreed that extenuating circumstances could require a downward deviation from salary surveys. Response. It appears from the comments that stakeholders may have been under the impression that it is CMS policy that reliance on salary surveys will result, in all cases, in a determination of fair market value for a physician's professional services. It is not CMS policy that salary surveys necessarily provide an accurate determination of fair market value in all cases.

However, we decline to include in regulation text, as requested by one of the commenters, a statement that extenuating circumstances may dictate that parties to an arm's-length transaction should veer from values identified in salary surveys and other hypothetical valuation data that is not specific to the actual parties to the transaction when determining the fair market value of the compensation under their transaction. We believe such a statement is unnecessary in light of our policy discussion in the proposed rule and this final rule and our concern that it could reduce the clarity in the definitions of “fair market value” and “general market value” that we and stakeholders seek. Consulting salary schedules or other hypothetical data is an appropriate starting point in the determination of fair market value, and in many cases, it may be all that is required. However, we agree with the commenter that asserted that a hospital may find it necessary to pay a physician above what is in the salary schedule, especially where there is a compelling need for the physician's services.

For example, in an area that has two interventional cardiologists but no cardiothoracic surgeon who could perform surgery in the event of an emergency during a catheterization, a hospital may need to pay above the amount indicated at a particular percentile in a salary schedule to attract and employ a cardiothoracic surgeon. We also agree with the commenter that emphasized the need for an analysis of the actual terms of a transaction and the actual facts and circumstances of the parties. In our view, each compensation arrangement is different and must be evaluated based on its unique factors. That is not to say that common arrangements, where the services required are identical regardless of the identity of the physician providing them, do not lend themselves well to the use of salary surveys for determining compensation that is fair market value.

Our examples in the proposed rule were intended to show that a variety of factors could affect whether the amount shown in a salary schedule is too high or too low to be fair market value for the services of the subject transaction. In some instances, it is exactly right. Parties do not necessarily fail to satisfy the fair market value requirement simply because the compensation exceeds a particular percentile in a salary schedule. Nor are parties required to pay a physician what is shown in a salary schedule if the specific circumstances do not warrant that level of compensation.

With respect to the commenters that took issue with the statements in the proposed rule that the fair market value of a particular physician's services may be below what is indicated in a salary schedule, we believe that salary schedules should not be used by a physician to demand compensation that is above what well-informed parties that are not in a position to generate business for each other would agree is the fair market value of the physician's services. We wish to be perfectly clear that nothing in our commentary was intended to imply that an independent valuation is required for all compensation arrangements. Comment. Two commenters, in identical statements, expressed concern with the proposed definition of “general market value.” The commenters contended that, despite the statutory language that fair market value means the value in an arm's-length transaction, consistent with the general market value, there is no reason to believe that the reference to “general market value” modifies “fair market value” such that fair market value means anything other than what it means to the business valuation profession, and suggested that CMS leave the determination of fair market value to the business valuation profession.

These commenters shared a definition of “fair market value” found in the International Glossary of Business Valuation Terms, with slight modification to recognize the valuation of services and resources as well as property and goods. Specifically, the price, expressed in terms of cash equivalents, at which property, services, and resources would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm's-length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts. The commenters asserted that this definition would not require valuators to limit themselves to the market approach or depart from time-honored valuation principles of their profession, including consideration of more than just physician compensation survey data. Ultimately, the commenters requested that CMS not adopt a new definition of “fair market value” (with or without a definition of “general market value”) to take advantage of the consensus reached within the valuation profession.

Response. We decline to retain the current definition of “fair market value” (with or without a definition of “general market value”) as requested by the commenters. First, the term “general market value” is included in the statutory definition of “fair market value” and we cannot ignore it for purposes of the statutory exceptions or remove it from our regulations. Second, we expect that our retraction of certain statements from the proposed rule and the clarification of previous commentary on valuation methods will assuage the commenters' concerns.

As described above, we are finalizing only slight modifications to the existing definitions of “fair market value” and “general market value” to clearly indicate the statute's specific requirements for determining the fair market value of rental property and to disentangle the volume or value and other business generated standards of the exceptions to the physician self-referral law from the definition of “general market value.” Comment. Most commenters supported the reorganization of the definitions, noting that the proposed structure provides better clarity. Some commenters urged CMS to adopt the definitions of “fair market value” and “general market value” as proposed. The commenters expressed appreciation for the restructuring of the existing definition of “fair market value” to extract the separate term “general market value” and the link to the volume or value standard.

One of the commenters stated that the proposed definition of “fair market value” better aligns with the definition set forth in the statute.Start Printed Page 77558 Response. We agree that the final structure of the definitions of “fair market value” and “general market value” is clearer than our existing regulations. As we discussed above and in response to earlier comments, we are finalizing slight modifications to the proposed definitions. We are finalizing our proposal to remove the link to the volume or value standard in the definition of “general market value” as requested by the commenters.

We believe that structuring the definition of “fair market value” to provide for a definition of general application, a definition applicable to the rental of equipment, and a definition applicable to the rental of office space facilitate parties' compliance with the fair market value requirement in the exceptions to the physician self-referral law that apply to the specific type of compensation arrangement between them. Similarly, we believe that definitions of “general market value” specific to each of the types of transactions contemplated in the exceptions to the physician self-referral law—asset acquisition, compensation for services, and rental of equipment or office space—will facilitate stakeholders' understanding of the requirements for fair market value compensation that is consistent with the general market value and ease overall compliance efforts. Comment. A large number of commenters requested that we establish rebuttable presumptions that compensation is fair market value or “safe harbors” that would deem compensation to be fair market value if certain conditions are met.

The commenters variously suggested that the following should be deemed to be fair market value. Compensation set within a range of percentiles identified in independent salary surveys (with a wider band of permissible compensation for physicians who practice in medically underserved areas, health professional shortage areas, or rural areas), compensation set within the parameters of an independent third-party valuation, and compensation set in accordance with a valuation process that meets certain conditions patterned after those set forth in IRS regulations at 26 CFR 53.4958-6 (related to excess benefit transactions). Some of the commenters asserted that a “safe harbor” based on a range of values in salary surveys would be consistent with what they stated was established CMS policy that compensation set at or below the 75th percentile in a salary schedule is appropriate and compensation set above the 75th percentile is suspect, if not presumed inappropriate. Response.

For the reasons explained in Phase I (66 FR 944 through 945), Phase II (69 FR 16092), and Phase III (72 FR 51015), we decline to establish the rebuttable presumptions and “safe harbors” requested by the commenters. We are uncertain why the commenters believe that it is CMS policy that compensation set at or below the 75th percentile in a salary schedule is always appropriate, and that compensation set above the 75th percentile is suspect, if not presumed inappropriate. The commenters are incorrect that this is CMS policy. C.

Group Practices (§ 411.352) In the proposed rule, we proposed certain revisions to the group practice rules at § 411.352 that relate to corresponding proposals regarding the definitions and special rules for “commercially reasonable” compensation arrangements, “fair market value” compensation, and the volume or value standard applicable throughout the physician self-referral law and regulations (84 FR 55799 through 55802). We also proposed a revision to the rules regarding the distribution of overall profits intended to support our policies related to the transition from a volume-based to a value-based health care system (84 FR 55800 through 55801). We discuss these proposals and our final regulations in section II.C.2. Of this final rule.

1. Interpretation of the “Volume or Value Standard” for Purposes of the Group Practice Regulations (§ 411.352(g)) As we discussed in the proposed rule, in conjunction with our proposals related to the volume or value standards, we reviewed the physician self-referral regulations to ensure that the standards related to the volume or value of a physician's referrals (the volume or value standard) and the other business generated by the physician (the other business generated standard) are expressed using standardized terminology (84 FR 55799). We identified several occurrences of inconsistent expression of the standards. Although section 1877 of the Act uses more than one phrase to describe the volume or value and other business generated standards, which may be one reason for variations in the regulation text, we believe that the references are all to the same underlying prohibition on compensation that fluctuates with the volume or value of a physician's referrals or the other business generated by a physician for the entity providing the remuneration.

Therefore, as discussed in section II.B.3. Of this final rule, we proposed and are finalizing conforming changes throughout our regulations to delineate these standards as a prohibition on compensation that takes into account the volume or value of a physician's referrals or other business generated by the physician for the entity providing the remuneration. However, because the language in § 411.352(g) and (i) mirrors the statutory language at section 1877(h)(4)(iv) of the Act, we did not propose changes to the “volume or value” regulation text in either of those paragraphs. The terms “based on” and “related to” remain in the regulation text at § 411.352(g) and (i).

We are affirming here that we interpret the requirements of § 411.352(g) and (i) to incorporate the volume or value standard as it relates to a physician's referrals. That is, compensation to a physician who is a member of a group practice may not be determined in any manner that takes into account the volume or value of the physician's referrals (except as provided in § 411.352(i)), and profit shares and productivity bonuses paid to a physician in the group may not be determined in any manner that takes into account the volume or value of the physician's referrals (except that a productivity bonus may directly take into account the volume or value of the physician's referrals if the referrals are for services “incident to” the physician's personally performed services). Prior to the revisions we are finalizing in this final rule, the regulation at § 411.352(g) stated that “[n]o physician who is a member of the group practice directly or indirectly receives compensation based on the volume or value of his or her referrals, except as provided in § 411.352(i)” (emphasis added). We interpret this to mean that, in order to satisfy this requirement for qualification as a “group practice,” no physician who is a member of the group practice receives compensation that directly or indirectly takes into account the volume or value of his or her referrals (unless permitted under § 411.352(i)).

Our interpretation is consistent with the interpretation of “related to” set forth in Phase I, where we used the terms “based on,” “related to,” and “takes into account” interchangeably when describing the final group practice regulations (66 FR 908 through 910). Prior to the revisions we are finalizing in this final rule, the regulation at § 411.352(i) stated that a physician in a group practice may be paid a share of overall profits of the group practice, provided that the share is not Start Printed Page 77559determined in any manner that is directly related to the volume or value of referrals by the physician. We have long interpreted “is directly related to” the volume or value of referrals to mean “takes into account” the volume or value of referrals. In Phase I, we discussed this provision and stated that the Congress expressly limited profit shares for group practice members to methodologies that do not directly take into account the member's designated health services referrals, and that, under the statutory scheme, revenues generated by designated health services may be distributed to group practice members and physicians in the group in accordance with methods that indirectly take into account referrals (emphasis added) (66 FR 862 and 908).

Despite the varying language of the regulations, as detailed in the proposed rule (84 FR 55800), we consider the regulations at § 411.352(g) and (i) to prohibit compensation to physicians in a group practice that is determined in any manner that takes into account the volume or value of the physician's referrals to the group practice. The new special rule at § 411.354(d)(5) establishes the universe of compensation that we consider to be determined in a manner that takes into account the volume or value of a physician's referrals to the entity paying the compensation. As described in section II.B.3. Of this final rule, this special rule applies in all instances where our regulations include the volume or value standard, except as specified in § 411.354(d)(5)(iv).

Therefore, with respect to both § 411.352(g) and (i), when determining whether the physician's compensation, share of overall profits, or productivity bonus is based on, is directly or indirectly related to, or takes into account the volume or value of the physician's referrals to the group practice, the special rule at final § 411.354(d)(5) applies. We received the following general comment and our response follows. Comment. Some commenters argued that we should not finalize our proposals because group practices need the utmost flexibility to participate and succeed in value-based health care delivery and payment systems.

Response. Nothing in our final regulations prohibits a group practice (or any physician practice) that furnishes designated health services and the physicians who are owners, employees, or independent contractors of the practice from qualifying as a value-based enterprise. The new exceptions at § 411.357(aa)(3) may be available to such an enterprise, assuming it meets all the requirements of the definitions and exceptions. Those exceptions do not include fair market value or volume or value requirements.

The regulations at § 411.352 apply to group practices that operate in a FFS payment environment. We do not agree that our final regulations at § 411.352 will prohibit a group practice from participating and succeeding in a value-based health care delivery and payment system. 2. Special Rules for Profit Shares and Productivity Bonuses (§ 411.352(i)) a.

Distribution of Profits Related to Participation in a Value-Based Enterprise We proposed a new § 411.352(i)(3) to address downstream compensation that derives from payments made to a group practice, rather than payments made directly to a physician in the group, that relate to the physician's participation in a value-based arrangement. Certain downstream distribution arrangements are currently protected under waivers in the Shared Savings Program and certain Innovation Center models. However, outside of the Shared Savings Program or an Innovation Center model, profit shares or productivity bonuses paid to a physician in a group practice that are determined in any manner that directly takes into account the volume or value of his or her referrals to the group practice are strictly prohibited by the physician self-referral statute and regulations. The special rules for the profit shares and productivity bonuses paid to physicians in a group practice prohibit calculation methodologies that directly take into account the volume or value of the recipient physician's referrals to the group practice.

Thus, by way of example, in a 100-physician group practice where only two of the physicians participate with a hospital as a value-based enterprise in a commercial payor-sponsored alternative payment model, the profits from the designated health services ordered by the physicians and furnished by the group practice to beneficiaries assigned to the model may not be allocated directly to the two physicians. We explained in the proposed rule that commenters on the CMS RFI interpreted this to mean that the special rules at § 411.352(i) would restrict the group practice to allocating alternative payment model-derived income that includes revenues from designated health services among all physicians in the group (or a component of at least five physicians in the group) in order to ensure that such income is allocated in a manner that only indirectly takes into account the volume or value of the two physicians' referrals. The commenters suggested that this restriction discourages physician participation in alternative payment or other value-based care models because physicians cannot be suitably rewarded for their accomplishments in advancing the goals of the model, which is at odds with the Secretary's vision for achieving value-based transformation by pioneering bold new payment models. We also described the assertion of another commenter on the CMS RFI that, because physician decisions drive the overwhelming majority of all health care spending and patient outcomes, it is not possible to transform health care without the participation of physicians in value-based health care delivery and payment models with other health care providers.

We stated that we share the commenters' concerns regarding physician participation in value-based health care delivery and payment models and are also concerned that our regulations could undermine the success of the Regulatory Sprint or the larger transition to a value-based health care system. Therefore, we proposed changes to § 411.352(i) with respect to the payment of profit shares to eliminate this potential barrier to robust physician participation in value-based care delivery (84 FR 55800). We are finalizing our proposal with modifications to the regulation text as proposed. As explained in our responses to comments below, the policy will be codified at revised § 411.352(i)(3) and effective on January 1, 2022.

For the reasons described elsewhere in this final rule, in the exceptions for value-based arrangements at new § 411.357(aa), we did not propose to prohibit remuneration that takes into account the volume or value of a physician's referrals. The revisions finalized at § 411.352(i)(3) are an extension of this policy. Specifically, we are finalizing a provision related to the distribution of profits from designated health services that are directly attributable to a physician's participation in a value-based enterprise. Under our final policy at § 411.352(i)(3), such profits may be distributed to the participating physician and will not be considered to directly relate to (or take into account) the volume or value of the physician's referrals.

In other words, a group practice may distribute directly to a physician in the group the profits from designated health services furnished by the group that are derived from the Start Printed Page 77560physician's participation in a value-based enterprise, including profits from designated health services referred by the physician, and such remuneration will be deemed not to be based on (or take into account) the volume or value of the physician's referrals. The regulation finalized at § 411.352(i)(3) would permit the 100-physician group practice in the previous example to distribute the profits from designated health services derived from the two physicians' participation in value-based enterprise directly to those physicians. Physician #1 could receive a profit distribution that considers his or her referrals to the group that are directly attributable to his or her participation in the value-based enterprise (and its corresponding participation in the model), and Physician #2 could receive a profit distribution that considers his or her referrals to the group that are directly attributable to his or her participation in the value-based enterprise (and its corresponding participation in the model). Neither distribution would jeopardize the group's ability to qualify as a “group practice” under § 411.352.

In the proposed rule, we sought comment regarding whether we should permit the distribution of “revenue” from designated health services, as opposed to “profits” from designated health services in order to effectuate the goals described elsewhere in the proposed rule (84 FR 55801) and this final rule. As explained in our responses to comments below, we are finalizing our proposal to apply the rule at final § 411.352(i)(3) to “profits” from designated health services, which will be effective on January 1, 2022. We received the following comments and our responses follow. Comment.

Commenters widely supported our proposal to address the distribution of profits from designated health services that are derived from the participation in a value-based enterprise by a physician in a group practice. Commenters urged us to finalize our proposal to permit the distribution of profits from designated health services that are directly attributable to a physician's participation in a value-based enterprise without having to aggregate the profits with the overall profits of the group practice or a component of five physicians within the group practice. Commenters asserted that this flexibility will encourage physicians to incorporate value-based elements into their practices, as well as physician participation in value-based enterprises on an individual basis and in circumstances where the entire group practice's participation may not be warranted or desirable. Response.

We agree with the commenters regarding the potential impact of the permitted distributions. Namely, that individual physicians in a group practice may be encouraged to participate in a value-based enterprise with providers and suppliers outside of the physician's own group practice even when the group practice does not participate as a whole in the value-based enterprise. We believe that the protection afforded by the safeguards in the new definitions and exceptions related to value-based care delivery and payment will ensure that distribution of profits to an individual physician (or subset of physicians) within a group practice should not increase the risk of inappropriate utilization of designated health services or program or patient abuse. Comment.

One commenter noted that proposed § 411.352(i)(3) was not structured in the same way as the “special rules” for distribution of overall profits and payment of productivity bonuses. The commenter expressed concern that the proposed regulation text would not create the deeming provision we intended. The commenter requested that we revise the regulation to expressly state that, where a group practice's profits from designated health services are directly attributable to a physician's participation in a value-based enterprise and those profits are distributed to the physician, the compensation to the physician is deemed not to take into account the volume or value of the physician's referrals under § 411.352(g). The commenter asserted that making these revisions would eliminate any inference that § 411.352(i)(3) is not an exception to § 411.352(g).

Response. The commenter is correct about the structure of the three provisions in § 411.352(i) that describe methodologies for the distribution of profits from designated health services and the payment of productivity bonuses. We agree that standard language and further clarification of the provision at § 411.352(i)(3) is warranted to ensure the provision operates as a deeming provision as we intend. We have revised the final regulation accordingly.

Specifically, final § 411.352(i)(3) provides that notwithstanding paragraph (g) of § 411.352, profits from designated health services that are directly attributable to a physician's participation in a value-based enterprise, as defined at § 411.351, may be distributed to the participating physician. Comment. With respect to our proposal to permit the distribution of profits from designated health services that are directly attributable to a physician's participation in a value-based enterprise, we sought comment regarding whether we should permit the distribution of “revenue” from designated health services, as opposed to “profits” from designated health services in order to effectuate the goals described elsewhere in the proposed rule and this final rule. One commenter stated that the furnishing of certain designated health services does not always result in profit for the group practice and suggested that permitting the distribution of revenue from designated health services would provide needed flexibility to encourage physicians to participate in value-based care delivery.

Another commenter suggested that we permit the distribution of revenue from designated health services to simplify the regulation because revenues are easier to calculate than profits. Response. We have no reason to doubt the commenter's assertion that a group practice does not realize a profit on every designated health service that it furnishes. Thus, it is possible that a group practice could have no profits to distribute to a physician in the group who makes a referral of designated health services for a patient in the target patient population while undertaking value-based activities as a VBE participant in a value-based enterprise.

Although it may be true that it is easier to calculate revenues than to calculate profits, in general, we believe that a group practice's distribution of revenues to a referring physician rather than profits, which are calculated by deducting the expenses incurred in furnishing the designated health service, could serve as an inducement to make additional and potentially inappropriate referrals to the group practice. This is consistent with our statement in the 1998 proposed rule that rewarding a physician each time he or she self-refers for a designated health service can constitute an incentive to overutilize services (63 FR 1691). We are unclear how the sharing of a group practice's revenues with a physician would encourage the physician's participation in value-based care delivery or how the physician's participation in his or her individual capacity in a value-based enterprise would mitigate our concerns regarding the inducement to refer any of the physician's patients outside the target patient population for designated health services furnished by the group practice. We are not adopting the Start Printed Page 77561commenters' recommendation to permit the distribution of revenues from designated health services that are directly attributable to a physician's participation in a value-based enterprise.

B. Clarifying Revisions (1) Restructuring of the Regulation at § 411.352(i) We proposed to restructure and renumber § 411.352(i) as well as clarify several provisions of the regulation. As we stated in the proposed rule, we believe that the revisions will enable groups to determine with more certainty whether compensation paid to a physician in the group as profit shares or productivity bonuses takes into account the volume or value of referrals and, if it does, whether there is a direct or indirect connection to the volume or value of the physician's referrals (84 FR 55801). Except as noted above with respect to the uniformity of the structure of the provisions in § 411.352(i), we received no comments on the general restructuring of the regulations, and are finalizing our proposal to restructure and renumber the regulations at § 411.352(i) without modification to the proposed numbering and headers of the regulation.

Our purpose in restructuring the regulation is to more closely adhere to the structure of section 1877(h)(4)(B) of the Act and to express in affirmative language which profit shares and productivity bonuses are permissible. That is, permitting the payment of a profit share or productivity bonus that does not directly take into account the volume or value of referrals is the affirmative and more simple way of saying, as our current regulations do, that the profit share or productivity bonus is permissible but only if it does not directly take into account the volume or value of referrals. In addition, the special rules for profit shares and productivity bonuses, as finalized, follow the format of our special rules on compensation at § 411.354(d) and our special rules for compensation arrangements at § 411.354(e). As stated in the proposed rule, our addition of introductory language at § 411.352(i) and revised language at § 411.352(i)(1) and 411.352(i)(2) do not constitute a substantive change to the noted provisions (84 FR 55801).

(2) Overall Profits We proposed revisions to clarify our interpretation of the overall profits of a group that can be distributed to physicians in the group. Until now, the term “overall profits” was defined to mean two different things. (1) The group's entire profits derived from designated health services. And (2) the profits derived from designated health services of any component of the group practice that consists of at least five physicians.

As stated in the proposed rule, stakeholders informed us that they were confused about the definition. For example, stakeholders informally inquired whether the profits of a group practice that has only two, three, or four physicians may be distributed at all. We proposed to revise the definition of “overall profits” to mean the profits derived from all the designated health services of any component of the group that consists of at least five physicians, which may include all physicians in the group. To further clarify this definition, we proposed regulation text at revised § 411.352(i)(1)(ii) stating that, if there are fewer than five physicians in the group, “overall profits” means the profits derived from all the designated health services of the group.

We stated that we believe that this more precisely states the policy articulated in Phase I (66 FR 909 through 910). For the reasons explained in our responses to comments, we are finalizing the definition of “overall profits” at § 411.352(i)(1)(ii) as proposed. We highlight that the final regulation at § 411.352(i)(1)(ii) includes the words “all the” before “designated health services.” As we stated in the proposed rule, stakeholders' informal inquiries regarding the permissible methods of distributing profits from designated health services indicated that the regulation text may not have precisely evidenced our intent (84 FR 55801). Such inquiries included whether it is permissible to distribute profit shares of only some types of designated health services provided by a group practice without distributing the profits from the other types of designated health services provided by the group practice, and whether a group practice may share profits from one type of designated health service with a subset of physicians in a group practice and the profits from another type of designated health service with a different (possibly overlapping) subset of physicians in the group practice.

As discussed, we are finalizing at § 411.352(i)(1)(ii) that overall profits means “the profits derived from all the designated health services.” Thus, the profits from all the designated health services of any component of the group that consists of at least five physicians (which may include all physicians in the group) must be aggregated before distribution. Under this final rule, a physician practice that wishes to qualify as a group practice may not distribute profits from designated health services on a service-by-service basis. To illustrate, suppose a physician practice provides both clinical laboratory services and diagnostic imaging services—both designated health services—to its patients in a centralized building (as defined at § 411.351) or a location that qualifies as a “same building” under § 411.351 and meets the requirements at § 411.355(b)(2)(i). If the practice wishes to qualify as a group practice, it may not distribute the profits from clinical laboratory services to one subset of its physicians and distribute the profits from diagnostic imaging to a different subset of its physicians.

We are cognizant that, under the requirement at § 411.352(e), to qualify as a “group practice,” the overhead expenses of, and income from, a practice must be distributed according to methods that are determined before the receipt of payment for the services giving rise to the overhead expense or producing the income. Essentially, a group practice's compensation methodology must be established prospectively. Based on the comments, it is our understanding that group practice physician compensation methodologies are often established prior to the beginning of a calendar year. We are concerned that the regulations we are finalizing in this final rule may require group practices that relied on their interpretation of § 411.352(i) (as it existed prior to this final rule) to adjust their compensation methodologies and, if so, they may not have sufficient time prior to the end of the current calendar year to make necessary adjustments to their compensation methodologies.

As explained in our responses to comments below, we are delaying the effective date of revised § 411.352(i)(1) until January 1, 2022. Through December 31, 2021, the definition of “overall profits” will be as set forth at existing § 411.352(i)(2). We also proposed to remove the reference to Medicaid from the definition of “overall profits.” We believe that the inclusion of this reference unnecessarily complicates the regulation. In the proposed rule, we noted that it is possible that the reference to designated health services payable by Medicaid is related to the definition of “referral” in the 1998 proposed rule (63 FR 1692).

There, with respect to the definition of group practice, we stated that, because of our interpretation of what constitutes a “referral,” an entity wishing to be considered a group practice in order to use the in-office ancillary services exception may not compensate its members based on the volume or value Start Printed Page 77562of referrals for designated health services for Medicare or Medicaid patients but could do so in the case of other patients (63 FR 1690). However, when the 1998 proposed policies were finalized, the definition of “referral” omitted all references to Medicaid. Nonetheless, the reference to Medicaid in final § 411.352(i)(2), which was also proposed in the 1998 proposed rule (as a definition in § 411.351), was not congruently omitted when finalized. We explained further in the proposed rule that, under the definition of “designated health services” at § 411.351, “designated health services payable by.

. . Medicaid” would not include any services. This is because the definition of “designated health services” includes only those services payable in whole or in part by Medicare.

Although the qualifying language in this definition potentially allows for a different definition “as otherwise noted in this subpart,” the regulations at existing § 411.352(i)(2) do not expressly articulate an alternative definition for “designated health services.” Rather, they simply state that the overall profits of a group include profits derived from designated health services payable by Medicare or Medicaid. For consistency with the definitions and regulations we proposed (and are finalizing here), we proposed to eliminate the references to Medicaid in the definition of “overall profits.” We are finalizing our proposal. However, as explained in our responses to comments below, we are delaying the effective date of these updates until January 1, 2022 to coincide with the effective date of the other revisions to the definition of “overall profits.” Our group practice regulations also articulate the general rule that overall profits should be divided in a reasonable and verifiable manner that is not directly related to the volume or value of the physician's referrals of designated health services. In this final rule, we are finalizing our proposal to move the prefatory language of this requirement from existing § 411.352(i)(2) to revised § 411.352(i)(1)(iii) without substantive change.

We are also finalizing our proposal to replace the varying language in the methods deemed not to relate directly to the volume or value of referrals (the deeming provisions). One of the current deeming provisions references “the group's profits” and another references “revenues” where both should reference “overall profits.” We are finalizing the revision to use the term “overall profits” in both of these deeming provisions in order to articulate more clearly that the deeming provisions relate to methods for distributing a share of overall profits, not “profits” or “revenues.” To avoid complications associated with the restructuring of § 411.352(i), as explained in our responses to comments below, we are delaying the effective date of these updates until January 1, 2022 to coincide with the effective date of the revised definition of “overall profits.” We also proposed to revise the language related to one of the deemed permissible methods for distributing shares of overall profits by replacing “are not [designated health services] payable by any Federal health care program or private [payor]” with “and would not be considered designated health services if they were payable by Medicare.” This change is reflected in revised § 411.352(i)(1)(iii)(B). Current regulations provide that a share of overall profits will be deemed not to directly take into account the volume or value of referrals if revenues derived from designated health services are distributed based on the distribution of the group practice's revenues attributed to services that are not designated health services payable by “any Federal health care program or private payer.” As we explained in the proposed rule, the definition of “designated health services” includes only those specified services that are payable by Medicare (84 FR 55802). Thus, we believe a better way to reflect our policy that overall profits may be distributed based on the distribution of the group practice's revenues from services other than those in the categories of services that are “designated health services” is to deem the payment of a share of overall profits not to directly take into account the volume or value of a physician's referrals if overall profits are distributed based on the distribution of the group's revenues attributed to services that are not designated health services and would not be considered designated health services if they were payable by Medicare.

We proposed to revise the regulation in this manner and renumber current § 411.352(i)(2)(ii) to § 411.352(i)(1)(iii)(B). We are finalizing this proposal. As noted, to avoid complications associated with the restructuring of § 411.352(i), as explained in our responses to comments below, we are delaying the effective date of these updates until January 1, 2022 to coincide with the effective date of the revised definition of “overall profits.” Lastly, we did not propose to revise the third deeming provision to replace the term “revenues” with “overall profits.” The third deeming provision states that a share of overall profits will be deemed not to relate directly to the volume or value of referrals if revenues derived from designated health services constitute less than 5 percent of the group practice's total revenues, and the allocated portion of those revenues to each physician in the group practice constitutes 5 percent or less of his or her total compensation from the group. We did, however, propose nonsubstantive updates to the language used in this deeming provision and we are finalizing those nonsubstantive changes.

Final § 411.352(i)(1)(iii)(C) deems as a permissible methodology for distributing overall profits a methodology under which revenues derived from designated health services constitute less than 5 percent of the group's total revenues, and the portion of those revenues distributed to each physician in the group constitutes 5 percent or less of his or her total compensation from the group. Again, to avoid complications associated with the restructuring of § 411.352(i), as explained in our responses to comments below, we are delaying the effective date of these updates until January 1, 2022 to coincide with the effective date of the revised definition of “overall profits.” We received the following comments and our responses follow. Comment. One commenter characterized our policy clarifications as an attempt to micromanage the organization, governance, and operation of group practices.

The commenter opposed any revisions to the group practice regulations (except for the addition of new § 411.352(i)(3), which the commenter found beneficial for group practices). The commenter asserted that we should not finalize the revisions to § 411.352(i)(1) because the statute is not prescriptive with respect to what methodologies are permissible for distributing overall profits to physicians. Another commenter asserted that we gave no rationale to support our interpretation of the statutory term “overall profits” as meaning profits from all the designated health services of a group practice or a component of at least five physicians in the group practice (which may include all physicians in the group practice). Response.

The commenter is correct that section 1877(h)(4)(B) of the Act does not prescribe the methodology that a group practice may use to pay shares of its overall profits, provided that the share is not determined in any manner that is directly related to the volume or value of referrals by the physician to whom the share is paid. The commenter appears to confuse our proposal to clarify our interpretation of the term “overall profits” as used in section 1877(h)(4)(B) of the Act with a proposal Start Printed Page 77563to limit payment methodologies, although our final regulations may indeed result in some group practices modifying their physician compensation with respect to payment of shares of overall profits from designated health services. We have long interpreted the term “overall profits” as the profits from the group practice's overall pooled revenues from designated health services (63 FR 1691). In the 1998 proposed rule, we stated that we regard “overall profits of the group” to mean all of the profits a group can distribute in any form to physicians in the group, even if the group is located in two different states or has many different locations within one state, and that we would not interpret “overall profits” as the profits that belong only to a particular specialty or subspecialty group (63 FR 1691).

When finalizing our proposals related to the payment of shares of overall profits in Phase I, we stated that the Congress recognized that, in the case of group practices, revenues derived from designated health services must be distributed to the group practice physicians in some fashion, even though the physicians generate the revenue (66 FR 876). However, because the Congress wished to minimize the economic incentives to generate unnecessary referrals for designated health services, section 1877(h)(4)(B) of the Act permits a physician in the group practice to receive a share of the overall profits of the group practice, provided that the share is not determined in any manner that is directly related to the volume or value of referrals by the physician. We described our proposals in the 1998 proposed rule as requiring that profits must be aggregated at the group level and not at a component level (66 FR 908). In Phase I, we defined “share of overall profits” to mean a share of the entire profits of the entire group (or any component of the group that consists of at least five physicians) derived from designated health services (66 FR 908) (emphasis added).

We stated that overall profit shares must be derived from aggregations of the entire practice or a component of the practice consisting of at least five physicians (66 FR 907). The regulation text defining “overall profits” finalized in Phase I stated that overall profits means the group's entire profits derived from “DHS” payable by Medicare or Medicaid or the profits derived from “DHS” payable by Medicare or Medicaid of any component of the group practice that consists of at least five physicians. The regulation text does not accord precisely with our preamble guidance that states that overall profits means the entire profits of the entire group. It has not been revised until now.

We note that, in § 411.351, the regulation text provides a definition for “designated health services (DHS).” The definition states that DHS means any of the following services (other than those provided as emergency physician services furnished outside of the U.S.), as they are defined in § 411.351, and lists the various individual categories of services that are considered designated health services. Stakeholders may have evaluated this portion of the definition of “designated health services” within the context of the definition of “overall profits” and interpreted “overall profits” to mean the group's entire profits from any one of the individual categories of designated health services identified in the definition at § 411.351. This was not our intention when using the acronym “DHS” in the definition of “overall profits” in the regulation text at § 411.352(i). We are finalizing our proposal to clarify our longstanding interpretation of the term “overall profits” as used in section 1877(h)(4)(B) of the Act at final § 411.352(i)(1)(ii).

However, because the regulation text at § 411.352(i) has not fully and exactly depicted the policy set forth in our Phase I preamble guidance, we are making the revisions prospective. In addition, for the reasons set forth in the response to comments below, we are delaying the effective date of the revisions to § 411.352(i) until January 1, 2022. Comment. Some commenters opposed our proposal to define “overall profits” to mean the profits derived from all the designated health services of any component of the group that consists of at least five physicians, which may include all physicians in the group, asserting that group practices should be able to distribute profits of some types of designated health services, but not others.

Other commenters asked for clarification regarding whether a group practice could retain its profits (from designated health services or otherwise), or whether our revisions would require a group practice to distribute all of its profits to physicians in the group in order to qualify as a group practice. Response. Nothing in final § 411.352(i)(1)(ii) (or any other physician self-referral regulation) requires the distribution of a group practice's profits from designated health services. However, if a group practice wishes to pay shares of overall profits to any of its physicians, it must first aggregate.

(1) The entire profits from the entire group. Or (2) the entire profits from any component of the group that consists of at least five physicians. Once aggregated, the group practice may choose to retain some of the profits or distribute all of the profits through shares of overall profits paid to its physicians. A group practice need not treat all components of at least five physicians the same with respect to the distribution of shares of overall profits from designated health services.

That is, the group practice may choose to distribute all of the overall profits from designated health services of one of its components of five physicians to the physicians in that component, and choose to retain some or all of the overall profits from designated health services of another of its components of five physicians. Moreover, we are aware that group practices may utilize eligibility standards to determine whether a physician is eligible for a profit share, such as length of time with the group practice, whether the physician is an owner, employee, or independent contractor of the group practice, or the amount of time that the physician practices (for example, full-time or part-time). Nothing in our regulations prohibits the use of eligibility standards, provided that they do not result in the payment of a profit share that is determined in a manner that is directly related to the volume or value of a physician's referrals. In sum, a group practice may determine for itself how much of the aggregate overall profits it chooses to share with its physicians and which physicians are entitled to a share of the group practice's overall profits.

However, all payments of shares of overall profits must comply with the requirements of § 411.352(g) and (i). Comment. A number of commenters opposed our proposal to define “overall profits” from designated health services to mean the profits from all the designated health services of the group practice (or a component of the group that consists of at least five physicians), asserting that group practices should be permitted to distribute the profits from designated health services on a service-by-service basis, which some of the commenters referred to as “split pooling.” These commenters variously stated that service-by-service profit shares would allow physicians to receive profits shares more closely related to the services they referred, their specialty, the services they provide, or the expenses they have personally incurred. One of the commenters explained that, for large or multispecialty group practices, in particular, different practice locations or specialties commonly use ancillary Start Printed Page 77564designated health services to varying degrees in connection with the delivery of care in their location or specialty, and another stated that the proposed “limits” may inadvertently penalize the “practices” within a group that are more profitable due to efficiency and reward those that are less efficient.

Another of the commenters asserted that a service-by-service allocation methodology aligns compensation with the physicians who are furnishing professional services in conjunction with designated health services and incurring the related expenses. The commenter complained that not allowing what it referred to as “pooling by designated health service,” physicians who have no treatment involvement in the designated health services are nonetheless rewarded financially. A different commenter gave the example of a subset of physicians within a group practice that agree to assume all of the costs of expensive diagnostic testing equipment when there is a dispute within the group as to whether to purchase the equipment. The commenter asserted that service-by-service distribution of profits is appropriate so that the physicians who bear the cost of the equipment also receive the profits arising from the use of the equipment.

One commenter stated that distributing profits from designated health services on a service-by-service basis is not an issue, but offered no reason why this is the case. In contrast, several commenters commended CMS for proposing the clarifying language at § 411.352(i)(1)(ii) and supported finalizing the regulatory revisions. Response. Section 1877(h)(4)(B) of the Act permits a group practice to pay a physician in the group practice a share of overall profits of the group.

In Phase I, we shared our interpretation that the term “overall profits” means the entire profits of the entire group (or any component of the group that consists of at least five physicians) derived from designated health services (66 FR 908) (emphasis added). The proposed revisions at § 411.352(i)(1)(ii), which we are finalizing in this final rule, incorporate this long-held interpretation. Commenters provided no justification for their preferred interpretation of the statutory term “overall profits”—which makes no reference to designated health services as the services that generated the profits—as meaning the profits from any one type of designated health service. We remind readers that, in order to qualify as a group practice, a physician practice must meet all the requirements set forth in § 411.352.

These include that the practice is a unified business with centralized decision making by a body representative of the practice that maintains effective control over the practice's assets and liabilities (including, but not limited to, budgets, compensation, and salaries) and consolidated billing, accounting, and financial reporting. In addition, revenues from patient care services must be treated as receipts of the practice. Certain of the justifications for the commenters' assertions that we should permit a group practice to share the profits from designated health services on a service-by-service basis call into question whether a physician practice that operates as described in the comments could satisfy the unified business test at § 411.352(f) or, potentially, whether the revenues from patient care services are treated as receipts of the practice, as required at § 411.352(d)(1). As we stated in Phase I, the Congress intended to confer group practice status on bona fide group practices and not on loose confederations of physicians who come together substantially in order to capture the profits from referrals of designated health services protected under the exception for in-office ancillary services (66 FR 875).

For that reason, we established the unified business test at § 411.352(f). To meet the unified business test, a group practice must be organized and operated on a bona fide basis as a single integrated business enterprise with legal and organizational integration (66 FR 906). We designed the group practice rules at § 411.352 to preclude group practice status for loose confederations of physicians that are group practices in name, but not operation. In Phase I, in response to a comment on our 1998 proposed rule, we stated that we generally agree that a group practice should consist of a single medical business whose equity holders operate as a single business by sharing such things as contracts, liability, facilities, equipment, support personnel, management, and a pension plan, and that this aspect of a group practice is addressed by the unified business test at § 411.352(f) (66 FR 898).

The essential elements of a unified business are. (1) Centralized decision making by a body representative of the practice that maintains effective control over the group's assets and liabilities (including budgets, compensation, and salaries). And (2) consolidated billing, accounting, and financial reporting. As we stated in Phase I, group practices may distribute the revenues from services that are not designated health services in any manner they wish.

The unified business test permits group practices to use cost- and location-based accounting with respect to services that are not designated health services, and, in some cases, with respect to services that are designated health services if the compensation method is not directly related to the volume or value of the physician's referrals and other conditions are satisfied (66 FR 895). However, if a physician practice's payment methods do not indicate a unified business (or indicate a business that is unified solely with respect to the provision of designated health services), the physician practice may not qualify as a group practice under section 1877(h)(4) of the Act and § 411.352 (66 FR 907). With respect to the specific comments regarding the need for the payment of profit shares on a service-by-service basis, we assume the reference to “practices” within a group practice pertains to specialties or locations of the group practice. We remind parties that, if a “practice” within a group practice is comprised of five or more physicians, the group practice may aggregate the profits from all the designated health services of the component and pay shares of the overall profits to the physicians in the component, provided that the group practice satisfies all the requirements of § 411.352, including § 411.352(g) and (i).

If a “practice” within a group practice is not comprised of at least five physicians, the group practice would have to include additional physicians in the component and aggregate the profits from all the designated health services of the component. Comment. One commenter stated that disparate state certificate of need and self-referral laws result in a patchwork of permitted and prohibited designated health services within different segments or practice locations of the same group practice. The commenter suggested that requiring group practices that operate in multiple states to aggregate all their profits from designated health services will be challenging, but did not elaborate on what those challenges are.

Response. Group practices may use the “component of five” rule to aggregate and distribute profit shares. We think that most large group practices, including those that operate in more than one state, will be able to use the component of five rule to establish workable profit distribution methodologies to address issues related to the distribution of profits from designated health services for which all physicians in the group do not make Start Printed Page 77565referrals and discrepancies in the types of designated health services furnished among practice locations due to state certificate of need and self-referral laws. Comment.

Some of the commenters that objected to the proposed revisions to the group practice rules regarding the distribution of shares of overall profits noted that our proposals, if finalized, would require changes to the internal compensation practices in many medical groups. Some of these commenters requested that, if we finalize the proposed changes to the regulation text, we provide a sufficient timeframe of at least one year for all group practices to revise their compensation methodologies. Another commenter was generally supportive of the revisions to § 411.352(i), but expressed concern about the time and effort involved in revising compensation arrangements for group practices that have separated profits by service type until now. Response.

We agree with the commenters that parties may need time to revise compensation methodologies and arrangements for group practice physicians. For that reason, we are delaying the effective date of final § 411.352(i)(1) until January 1, 2022. We believe this will provide group practices sufficient time to evaluate their current compensation methodologies for compliance with final § 411.352(i)(1) and make necessary revisions. Through December 31, 2021, the definition of “overall profits” will be as set forth at existing § 411.352(i)(2).

We note that the delayed effective date applies to all revisions at final § 411.352(i)(1), including the removal of the reference to “Medicaid.” Also, to avoid complications associated with the restructuring of § 411.352(i), we are also delaying the effective date of final § 411.352(i)(2) and (4) to coincide with the effective date of the revised definition of “overall profits.” Comment. One commenter was concerned that new § 411.352(i)(3) would negatively impact physicians who are employees or independent contractors of a group practice, noting that only group practice owners are able to share in the group's profits. Response. The commenter is mistaken.

Nothing in section 1877 of the Act or our physician self-referral regulations limits the payment of a share of overall profits to owners of a group practice. Under section 1877(h)(4)(B) of the Act and our regulations, any physician in the group may be paid a share of overall profits of the group practice. Comment. One commenter requested confirmation that a group practice may designate more than one component of at least five physicians for the allocation of overall profits from designated health services as long as the profits from all the designated health services referred by the physicians in a component are aggregated and the profits shared with the physicians in that component.

The commenter also sought confirmation that the various components could be established by grouping together physicians of the same specialty or by any other pooling mechanism, as long as each component consists of at least five physicians. Response. A group practice may designate more than one component of at least five physicians for the allocation of overall profits from designated health services as long as the profits from all the designated health services referred by the physicians in a component are aggregated and the profits shared with the physicians in that component. Provided that the share of overall profits received by a physician is not determined in any manner that is directly related to the volume or value of the physician's referrals, a group may establish components of at least five physicians by including physicians with similar practice patterns, who practice in the same location, with similar years of experience, with similar tenure with the group practice, or who meet other criteria determined by the group practice.

We continue to believe, as we stated in Phase I, that a threshold of at least five physicians is likely to be broad enough to attenuate the ties between compensation and referrals of designated health services (66 FR 909). Comment. Some commenters asked whether a group practice must use a single methodology for distributing the shares of overall profits attributable to each of its designated components of five physicians. In other words, if a group practice has three designated “pools” of at least five physicians (components A, B, and C), must the group practice use the same methodology for distributing the profits for components A, B, and C?.

The commenters referenced the example in the proposed rule where we stated that a group practice may not distribute the profits from clinical laboratory services to one subset of its physicians or using a particular methodology and distribute the profits from diagnostic imaging to a different subset of physicians (or the same subset of its physicians but using a different methodology) (84 FR 55801). Response. The example provided in the proposed rule was intended to illustrate the application of the policy that does not permit service-by-service distribution of profits from designated health services (which one of the commenters referred to as “split pooling”). However, as noted by the commenters, the statement could appear to prohibit the use of different distribution methodologies for different components of five physicians in a group practice.

To the extent that parties understood this to be our policy and an indication of how we would interpret the regulations, we are clarifying that a group practice may utilize different distribution methodologies to distribute shares of the overall profits from all the designated health services of each of its components of at least five physicians, provided that the distribution to any physician is not directly related to the volume or value of the physician's referrals. To illustrate, assume a group practice comprised of 15 physicians furnishes clinical laboratory services, diagnostic imaging services, and radiation oncology services. Assume further that the group practice has divided its physicians into three components of five physicians (component A, component B, and component C) for purposes of distributing the overall profits from the designated services of the group practice. Under the final regulations, for each component, the group practice must aggregate the profits from all the designated health services furnished by the group and referred by any of the five physicians in the component.

The group practice may distribute the overall profits from all the designated health services of component A using one methodology (for example, a per-capita distribution methodology), distribute the overall profits from all the designated health services of component B using a different methodology (for example, a personal productivity methodology in compliance with § 411.352(i)(1)(iii)(B)), and distribute the overall profits from all the designated health services of component C using a third methodology that does not directly relate to the volume or value of the component physicians' referrals (or the methodology used for component A or B). However, a group practice must utilize the same methodology for distributing overall profits for every physician in the component. That is, using the illustration above, the group practice must use the per-capita distribution methodology for each physician in component A, the personal productivity methodology for each physician in component B, and the same methodology (whichever it utilizes) for each physician in component C. As described in our responses to other comments in this Start Printed Page 77566section II.C.2.b., the group practice could not use different methodologies to distribute the profits of the different types of designated health services within a component.

Comment. Most commenters that commented on our proposals to revise the group practice regulations supported the removal of the reference to Medicaid from the definition of “overall profits” and the clarifying discussion in the proposed rule. Response. As stated above, we are finalizing our proposal to revise § 411.352(i).

However, we are delaying the effective date of these updates until January 1, 2022 to coincide with the effective date of the other revisions to the definition of “overall profits.” (3) Productivity Bonuses For consistency with the regulations related to the payment of a share of overall profits, we proposed to revise the introductory language in the deeming provisions for productivity bonuses at renumbered § 411.352(i)(2)(ii) to state that a productivity bonus must be calculated in a reasonable and verifiable manner. We also proposed to renumber the regulation that lists the deeming provisions related to the payment of productivity bonuses from § 411.352(i)(3) to § 411.352(i)(2) and proposed minor changes to the deeming provisions themselves. In addition, we proposed to update the language of existing § 411.352(i)(1) (relocated to § 411.352(i)(2)(i)) to remove “or both” as unnecessary because the word “or” is interpreted to mean the conjunctive “and” as well as the disjunctive “or.” We stated that groups may continue to pay a productivity bonus based on services that the physician has personally performed, or services “incident to” such personally performed services, or both, provided that the bonus does not directly take into account the volume or value of the physician's referrals (except that the bonus may directly take into account the volume or value of referrals by the physician if the referrals are for services “incident to” the physician's personally performed services). To correct a misstatement about the nature of § 414.22 of this chapter included in existing § 411.352(i)(3)(i), we proposed to revise the deeming provision related to the physician's total patient encounters or relative value units to state that a productivity bonus will be deemed not to relate directly to the volume or value of a physician's referrals if it is based on the physician's total patient encounters or the relative value units personally performed by the physician.

We sought comment in the proposed rule regarding whether this provision should limit the methodology to physician work relative value units as defined at § 414.22(a) or whether any personally-performed relative value units should be an acceptable basis for calculating a productivity bonus that is deemed not to relate directly to (that is, directly take into account) the volume or value of referrals. The regulation that deems a productivity bonus not to directly take into account the volume or value of a physician's referrals under certain circumstances includes a provision similar to that at final § 411.352(i)(1)(iii)(B). Therefore, we proposed corresponding revisions at § 411.352(i)(2)(ii)(B) (to be renumbered from current § 411.352(i)(3)(ii)) that would deem the payment of a productivity bonus not to directly relate to (or, as explained in this section II.C.2.b(1), take into account) the volume or value of a physician's referrals if the services on which the productivity bonus is based are not revenues derived from designated health services and would not be considered designated health services if they were payable by Medicare. Finally, we proposed to replace the term “allocated” with “distributed” at (redesignated) § 411.352(i)(1)(iii)(C) as the latter term reflects the actual payment of the profit share (84 FR 55802).

We are finalizing all of our proposals related to the payment of productivity bonuses by a group practice. However, to avoid complications associated with the restructuring of § 411.352(i), as explained in our responses to comments below, we are delaying the effective date of these updates at final § 411.352(i)(2) until January 1, 2022 to coincide with the effective date of the revised definition of “overall profits.” We received the following comments and our responses follow. Comment. One commenter requested that we permit a physician to receive a productivity bonus based on services that the physician or the physician's “care team” has personally performed, provided that the productivity bonus is not determined in any manner that is directly related to the volume or value of the physician's referrals of designated health services.

Response. Whether or not a productivity bonus paid to a physician in a group practice would violate the prohibition on compensation that takes into account the volume or value of the physician's referrals at § 411.352(g) depends on the basis for the productivity bonus. To the extent that a productivity bonus (or the portion of a productivity bonus) paid by a group practice to a physician in the group is solely based on services personally performed by the physician (which are not referrals, even if they are designated health services), the productivity bonus (or the portion of the productivity bonus) would not violate § 411.352(g). To the extent that a productivity bonus (or the portion of a productivity bonus) paid by a group practice to a physician in the group is solely based on services performed by a member of the physician's care team that are not designated health services, the productivity bonus (or the portion of the productivity bonus) would not violate § 411.352(g).

To the extent that a productivity bonus (or the portion of a productivity bonus) paid by a group practice to a physician in the group is solely based on designated health services ordered by the physician and furnished by members of the physician's care team “incident to” the physician's services and billed to Medicare as such, the productivity bonus (or the portion of the productivity bonus) would not violate § 411.352(g). To the extent that a productivity bonus (or the portion of a productivity bonus) paid by a group practice to a physician in the group is solely based on designated health services ordered by the physician and furnished by members of the physician's care team, but not furnished “incident to” the physician's services, the productivity bonus (or the portion of the productivity bonus) may only indirectly relate to the volume or value of the physician's referrals for the designated health services furnished by the members of the physician's care team. Comment. Most commenters that commented on our solicitation regarding whether the deeming provision related to the relative value units personally performed by a physician did not support a limitation of this deeming methodology to only the physician's relative value units as defined at § 414.22.

Commenters urged us to finalize our proposal to include as a deemed permissible productivity bonus methodology one that is based on the physician's total patient encounters. One commenter urged us not to make any revision to this regulation, stating that it works as currently structured and revising it would create additional regulatory burden. Response. We are finalizing § 411.352(i)(2)(ii)(A) as proposed.

Under our longstanding regulations, as well as those proposed, a physician in the group practice may be paid a productivity bonus based on services that he or she has personally performed or services “incident to” such Start Printed Page 77567personally performed services (or both). The productivity bonus may not be determined in any manner that is directly related to the volume or value of referrals by the physician, except that the productivity bonus may directly relate to the volume or value of referrals by the physician if the referrals are for services “incident to” the physician's personally performed services. The regulation at § 414.22(a) relates to the establishment of physician work RVUs. The regulation at § 414.22(b) relates to the computation of practice expense RVUs.

The regulation at § 414.22(c) relates to the computation of malpractice expense RVUs. We believe the reference to § 414.22 generally to describe a “physician's RVUs” is misplaced in our current regulations. Our clarification is intended only to marry the general requirement for productivity bonuses based on services that are personally performed by a physician with the deeming provision that allows productivity bonuses based on total patient encounters or RVUs. It is not intended to, nor do we believe it will, limit the payment of productivity bonuses currently permissible under our regulations.

Therefore, we see no reason why the revisions finalized at § 411.352(i)(2)(ii)(A) would create additional regulatory burden for group practices. D. Recalibrating the Scope and Application of the Regulations As we stated previously and in our Phase I rulemaking, our intent in implementing section 1877 of the Act was “to interpret the [referral and billing] prohibitions narrowly and the exceptions broadly, to the extent consistent with statutory language and intent” (66 FR 860). One purpose of this final rule is to reexamine our current regulations to assess whether we have held true to that intention.

In doing so, we have considered our own experience in administering the SRDP, stakeholder interactions, comments to the CMS RFI and to our proposed rule, and our experience working with our law enforcement partners. In the proposed rule, we proposed revisions to, including deletions of, certain requirements in our regulatory exceptions. In this section II.D. Of the final rule, we explain which of our proposals to recalibrate the scope and application of the physician self-referral regulations that we are finalizing and any modifications resulting from our consideration of the comments on the proposed rule.

1. Decoupling the Physician Self-Referral Law From the Federal Anti-Kickback Statute and Federal and State Laws or Regulations Governing Billing or Claims Submission Section 1877 of the Act established numerous exceptions to the statute's referral and billing prohibitions and granted the Secretary authority to establish regulatory exceptions for other financial relationships that do not pose a risk of program or patient abuse. The majority of the exceptions issued using the Secretary's authority under section 1877(b)(4) of the Act (which we often refer to as the “regulatory exceptions”) require that the arrangement does not violate the anti-kickback statute. Most of these exceptions also require that the arrangement does not violate any Federal or State law or regulation governing billing or claims submission.

In Phase I, we stated that the requirements pertaining to the anti-kickback statute and billing or claims submission are necessary in regulatory exceptions to ensure that the excepted financial relationships do not pose a risk of program or patient abuse (66 FR 863). Even though we acknowledged that the physician self-referral law and the anti-kickback statute are different statutes, we were concerned that, if the regulatory exceptions did not require compliance with the anti-kickback statute, unscrupulous physicians and entities could potentially protect intentional unlawful and abusive conduct by complying with the minimal requirements of a regulatory exception. In Phase II, we stated our interpretation that the statutory “no risk” standard is not limited to risks as determined under the physician self-referral law (69 FR 16108). We added that many arrangements that might otherwise warrant an exception under section 1877 of the Act—a strict liability statute—pose some degree of risk under the anti-kickback statute.

These arrangements cannot, therefore, be said to pose no risk. Similarly, we stated that some arrangements that may be permissible under the physician self-referral law could pose a risk of violating certain laws pertaining to billing or claims submission. Therefore, we concluded that the regulatory exceptions created using the Secretary's authority under section 1877(b)(4) of the Act must require that the excepted financial relationship not violate the anti-kickback statute or any Federal or State law or regulation governing billing or claims submission. A substantial number of CMS RFI commenters expressed opposition to the continued coupling of the physician self-referral law with the anti-kickback statute and other billing and claims submission laws, explaining the significant burden associated with the inclusion of these requirements in regulatory exceptions to the physician self-referral law.

CMS RFI commenters noted that the physician self-referral law is a strict liability statute and compliance with each element of an exception is mandatory if the entity wishes to submit a claim for designated health services referred by a physician with which it has a financial relationship, while the anti-kickback statute is an intent-based criminal statute and compliance with a safe harbor is not required. These commenters asserted that the inclusion of a requirement for compliance with the anti-kickback statute is misplaced in an exception to the physician self-referral law because it introduces an intent-based requirement into a strict liability statute. The commenters further noted that this requirement can make it unreasonably difficult for entities to meet their burden of proof under § 411.353(c)(2) that a referral and claim for designated health services does not violate the physician self-referral law. CMS RFI commenters also noted that the requirement for compliance with the anti-kickback statute and the requirement pertaining to Federal or State laws or regulations governing billing or claims submission are not necessary, because parties remain subject to these laws or regulations, regardless of whether their financial relationships otherwise comply with the physician self-referral law.

As discussed below, commenters on the proposed rule have many of these same concerns. As we stated in the proposed rule, based on our experience working with our law enforcement partners in reviewing conduct that implicates the physician self-referral law and other Federal fraud and abuse laws, when a compensation arrangement violates the intent-based criminal anti-kickback statute, it will likely also fail to meet one or more of the key requirements of an exception to the physician self-referral law (84 FR 55803). That is, the compensation in such cases likely is not fair market value or is determined in a manner that takes into account the volume or value of the physician's referrals or other business generated for the entity. As noted in the proposed rule, since the Phase I regulation was issued, we are unaware of any instances of noncompliance with the physician self-referral law that turned solely on an underlying violation of the anti-kickback statute (or any other Federal or Start Printed Page 77568State law governing billing or claims submission).

We also emphasized in the proposed rule and reiterate here that, although we were considering removing the requirement that the arrangement does not violate the anti-kickback statute from some or all of the regulatory exceptions, we believe that the Secretary has the authority under the statute to impose a requirement that the financial relationship not violate the anti-kickback statute or any other requirement if the Secretary determines it necessary and appropriate to ensure that an excepted financial relationship does not pose a risk of program or patient abuse. We also stated that we intend to monitor excepted financial relationships, and that we may propose in a future rulemaking to reinstate the requirements for deletion in some or all of the exceptions issued pursuant to the Secretary's statutory authority if we determine such requirements are necessary or appropriate to protect against program or patient abuse (84 FR 55802 through 55803). Based on our experience working with our law enforcement partners since our regulations were finalized, as well as comments received in response to the CMS RFI, we stated in the proposed rule that we no longer believe that it is necessary or appropriate to include requirements pertaining to compliance with the anti-kickback statute and Federal and State laws or regulations governing billing or claims submission as requirements of the exceptions to the physician self-referral law. We noted further that the Congress did not require compliance with the anti-kickback statute or any other law in existence at the time of enactment of the statute or its subsequent revision in order to avoid the law's referral and billing prohibitions.

Therefore, we proposed to remove from the exceptions in 42 CFR part 411, subpart J the requirement that the arrangement does not violate the anti-kickback statute or any Federal or State law or regulation governing billing or claims submission wherever such requirements appear. Specifically, we proposed to remove the following sections from our regulations. § 411.353(f)(1)(iii). § 411.355(b)(4)(v), (e)(1)(iv), (f)(3), (f)(4), (g)(2), (g)(3), (h)(2), (h)(3), (i)(2), (i)(3), (j)(1)(iv).

§ 411.357(e)(4)(vii), (j)(3), (k)(1)(iii), (l)(5), (m)(7), (p)(3), (r)(2)(x), (s)(5), (t)(3)(iv), (u)(3), (w)(12), (x)(1)(viii), and (y)(8). We also proposed to delete the following clause from § 411.357(e)(6)(i) and (n). €œ, provided that the arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission.” Finally, we proposed to remove the definition of “does not violate the anti-kickback statute” in § 411.351. We noted that the exceptions for referral services at § 411.357(q) and obstetrical malpractice subsidies at § 411.357(r)(1) provide that arrangements satisfy the requirements of the exception if the arrangements comply with the requirements of certain specified safe harbors to the anti-kickback statute, and stated that our proposal did not apply to or affect these provisions.

After reviewing comments on our proposed rule, we no longer believe that it is appropriate to remove the requirement that the arrangement does not violate the anti-kickback statute from the exception for fair market value compensation at § 411.357(l), and we are not finalizing our proposal to remove that requirement at § 411.357(l)(5). We are finalizing our proposal to remove the requirement that the arrangement does not violate the anti-kickback statute from all other regulatory exceptions, and to remove requirements pertaining to Federal or State laws or regulations governing billing or claims submissions from all the regulatory exceptions, including § 411.357(l)(5). In the proposed rule, we noted that the Congress did not require compliance with the anti-kickback statute or any other law in existence at the time of enactment of the statute or its subsequent revision in order to avoid the physician self-referral law's referral and billing prohibitions (84 FR 55803). However, the regulatory exception for fair market value compensation at § 411.357(l) applies to many arrangements that also could be protected by a statutory exception.

In particular, as explained in section II.D.10 of this final rule, we are finalizing our proposal to permit arrangements for the lease of office space to be excepted under § 411.357(l). The statutory exception for the rental of office space at section 1877(e)(1) of the Act and § 411.357(a) of our regulations requires, among other things, that the space rented or leased does not exceed that which is reasonable or necessary for the legitimate purposes of the lease and is used exclusively by the lessee when being used by the lessee. There are similar requirements in the statutory exception for the rental of equipment at § 411.357(b)(2). The regulatory exception for fair market value compensation, on the other hand, does not include such requirements.

To the extent that the exception for fair market value compensation does not contain substitute requirements or safeguards, there is a possibility that certain potentially abusive arrangements that would not be permitted under a statutory exception could be protected by this regulatory exception. We believe that requiring that the arrangement does not violate the anti-kickback statute in the exception for fair market value compensation at § 411.357(l) serves as a substitute safeguard, in lieu of certain safeguards that are included in the statutory exceptions but omitted from § 411.357(l). The exclusive use requirement in the statutory exceptions for the rental of office space and equipment, for example, prevents sham or “paper” leases, where a lessor receives payment from a lessee for space that the lessor continues to use (63 FR 1714 and 69 FR 16086). We believe that sham or paper lease arrangements would likely violate the anti-kickback statute.

Therefore, the requirement at § 411.357(l)(5) that the arrangement not violate the anti-kickback statute provides a substitute safeguard for the statutory exclusive use requirement and serves to prevent program or patient abuse. Without the requirement that the arrangement not violate the anti-kickback statute, sham lease arrangements or other abusive arrangements could potentially be excepted under § 411.357(l), and the exception for fair market value compensation would not satisfy the requirement at section 1877(b)(4) of the Act that financial relationships protected by the exception do not pose a risk of program or patient abuse. On the other hand, we are no longer convinced that the requirement at § 411.357(l)(5) that an arrangement must not violate Federal or State laws or regulations governing billing or claims submission is needed as a substitute safeguard to prevent program or patient abuse, and we are therefore finalizing the proposal to remove that requirement from § 411.357(l)(5). In sum, the exception for fair market value compensation offers greater flexibility than certain overlapping statutory exceptions insofar as it omits some statutory requirements, but the greater flexibility could, in certain instances, increase the risk of program or patient abuse.

Therefore, the requirement that the arrangement does not violate the anti-kickback statute should not be deleted from § 411.357(l)(5). We emphasized in the proposed rule and reiterate here that our final rule in no way affects parties' liability under the anti-kickback statute. Indeed, the Congress clarified when enacting section 1877 of the Act that “any Start Printed Page 77569prohibition, exemption, or exception authorized under this provision in no way alters (or reflects on) the scope and application of the anti-kickback provisions in section 1128B of the Social Security Act” (H. Report 101-386, 856 (1989)).

Most importantly, the fact that a financial relationship satisfies the requirements of an applicable exception to the physician self-referral law does not entail that the financial relationship does not violate the anti-kickback statute. (See 66 FR 879.) Similarly, compliance with the anti-kickback statute does not entail compliance with the physician self-referral law. To the extent that a financial relationship is governed by other laws or regulations, our action does not affect the parties' compliance obligations under those other laws or regulations. Specifically, claims submitted to the Medicare program must comply with all laws, regulations, and other requirements governing billing and claims submission.

After reviewing the comments on the proposed rule, we are finalizing our proposal to remove the requirement that an arrangement not violate the anti-kickback statute from all the regulatory exceptions except the exception for fair market value compensation at § 411.357(l). Because this requirement will remain in § 411.357(l), we are not finalizing our proposal to delete the definition of “does not violate the anti-kickback statute” at § 411.351. We are finalizing without modification our proposal to remove from all the applicable regulatory exceptions the requirement that an arrangement not violate any Federal or State law or regulation governing billing and claims submissions. We received the following comments and our responses follow.

Comment. Nearly all the commenters that addressed the proposal favored removing provisions requiring that the arrangement does not violate the anti-kickback statute or Federal and State laws or regulations governing billing and claims submissions from the regulatory exceptions. The commenters stated that the requirements are unnecessary because parties must comply with these laws independently of the physician self-referral law. One of these commenters stated that removing the requirement that an arrangement that satisfies an exception to the physician self-referral law must also fit within a safe harbor under the anti-kickback is a welcome streamlining of the regulations.

Some commenters stressed that the incorporation of the intent-based Federal anti-kickback statute into the strict-liability framework of the physician self-referral law causes confusion and compliance risk without affording any additional protection of the Medicare program. Commenters in favor of removing the requirement that the arrangement does not violate the anti-kickback statute also requested that CMS delete the definition of “does not violate the anti-kickback statute” in § 411.351. One of these commenters maintained that the definition is circular, because it includes the phrase “does not violate the anti-kickback provision in section 1128B(b) of the Act.” Lastly, one commenter generally opposed removing the requirement that the arrangement does not violate the anti-kickback statute from the regulatory exceptions, stating that finalizing the proposal would lead to program or patient abuse. Response.

We agree with the majority of the commenters that the requirement that an arrangement not violate any Federal or State law or regulation governing billing or claims submission should be removed from all the regulatory exceptions. Parties have an independent obligation to follow such laws, and we no longer believe that the Secretary must require compliance with such laws and regulations to ensure that financial relationships excepted under a regulatory exception do not pose a risk of program or patient abuse. With respect to the anti-kickback statute, we continue to believe that, as a general matter, the requirement that the arrangement does not violate the anti-kickback statute in most regulatory exceptions would not further protect against program or patient abuse because the parties to the compensation arrangement are already required to comply with all Federal laws, including the anti-kickback statute. We understand the concerns raised by commenters that inclusion of the intent-based anti-kickback statute in the strict liability framework of the physician self-referral law may increase the burden of compliance with the physician self-referral law, and we are finalizing our proposal to remove this requirement from all regulatory exceptions except the exception at § 411.357(l) for fair market value compensation.

As previously noted in this final rule, the requirement that the arrangement does not violate the anti-kickback statute in § 411.357(l)(5) is an important substitute requirement for certain statutory requirements that would otherwise apply to arrangements to which the regulatory exception at § 411.357(l) is applicable, such as the exclusive use requirement for leases of office space and equipment. Given the current requirements in the exception for fair market value compensation, we are not convinced that it is appropriate to protect leases of office space and certain other arrangements under § 411.357(l) without the requirement that the arrangement does not violate the anti-kickback statute. Thus, we are not finalizing our proposal to remove this requirement from § 411.357(l)(5). Because we are not finalizing our proposal to remove the requirement that the arrangement does not violate the anti-kickback statute from the exception for fair market value compensation, we are not deleting the definition of “does not violate the anti-kickback statute” at § 411.351.

We note that the requirement that the arrangement does not violate the anti-kickback statute at § 411.357(l)(5) does not and never has required that an arrangement fit into a safe harbor under the anti-kickback statute. Rather the requirement remains that the arrangement does not violate the anti-kickback statute. As the term is defined at § 411.351, an arrangement “does not violate the anti-kickback statute” if it meets a safe harbor under the anti-kickback statute, has been specifically approved by OIG in a favorable advisory opinion issued to a party to the particular arrangement with respect to the particular arrangement (and not a similar arrangement), or does not violate the anti-kickback provisions in section 1128B(b) of the Act. We did not propose and are not finalizing any specific substantive modifications of this definition.

Lastly, we are taking this opportunity to reiterate that the Secretary retains the authority to impose, in future rulemaking, requirements pertaining to the anti-kickback statute and Federal or State laws or regulations governing billing or claims submissions in some or all of the regulatory exceptions issued under section 1877(b)(4) of the Act, if the Secretary determines that such requirements are necessary to prevent program or patient abuse. We intend to monitor excepted financial relationships, and we may propose in a future rulemaking to include the requirements in some or all of the exceptions issued pursuant to the Secretary's authority if we determine such requirements are necessary or appropriate to protect against program or patient abuse. 2. Definitions (§ 411.351) a.

Designated Health Services Section 1877(1)(A) of the Act provides that, unless the requirements of an applicable exception are satisfied, if a physician (or an immediate family member of a physician) has a financial Start Printed Page 77570relationship with an entity, the physician may not make a referral to the entity for the furnishing of a designated health service for which payment may otherwise be made under Title XVIII of the Act (that is, Medicare). The referral prohibition is codified in our regulations at § 411.353(a). In the 1998 proposed rule, we interpreted the phrase “designated health service for which payment otherwise may be made” broadly to mean “any designated health service that ordinarily `may be' covered under Medicare (that is, that could be a covered service under Medicare in the community in which the service has been provided) for a Medicare-eligible individual, regardless of whether Medicare would actually pay for this particular service, at the time, for that particular individual (for example, the individual may not have met his or her deductible)” (63 FR 1694). Our definition of the term “designated health services” in the 1998 proposed rule was consistent with this broad interpretation of the referral prohibition.

Section 1877(h)(6) of the Act defines “designated health services” by listing various categories of services that qualify as designated health services (for example, clinical laboratory services). In the 1998 proposed rule, we stated that a designated health service remains such “even if it is billed as something else or is subsumed within another service category by being bundled with other services for billing purposes” (63 FR 1673). By way of example, we stated that clinical laboratory services that are provided by a skilled nursing facility (SNF) and reimbursed as part of the SNF composite rate would remain designated health services for purposes of section 1877 of the Act, even though SNF services are not listed as designated health services at section 1877(h)(6) of the Act and Medicare would not separately pay for the clinical laboratory service furnished by the SNF. The now-deleted exception at § 411.355(d), which was first finalized in the 1995 final rule, served as a counterbalance to the broad interpretation of designated health services that was proposed in the 1998 proposed rule.

As finalized in the 1995 final rule, § 411.355(d) provided that the referral prohibition in § 411.353 did not apply to services furnished in an ambulatory surgical center (ASC) or end-stage renal disease (ESRD) facility, or by a hospice, if payment for those services was included in the ASC rate, the ESRD composite rate, or as part of the per diem hospice charge (60 FR 41980). We explained that the application of a composite rate payment “constitutes a barrier to either Medicare program or patient abuse because the Medicare program will pay only a set amount to the facilities irrespective of the number and frequency of laboratory tests that are ordered” (60 FR 41940). In the 1998 proposed rule, we proposed an amendment to § 411.355(d) that would have excepted services furnished under other payment rates that that the Secretary determines provide no financial incentive for under- or overutilization or any other risk of program or patient abuse (63 FR 1666). However, in Phase I, instead of expanding the exception at § 411.355(d) to include services furnished under other payment rates, we narrowed the definition of “designated health services” to exclude certain services that are paid as part of a composite rate, and solicited comments on whether the exception at § 411.355(d) was still necessary in light of the narrowed definition of “designated health services” (66 FR 923 through 924).

We ultimately determined in Phase II that § 411.355(d) was no longer necessary, given the change to the definition of “designated health services” finalized in Phase I, and we removed the exception from our regulations (69 FR 16111). As finalized in Phase I, the definition of “designated health services” includes only designated health services payable, in whole or in part, by Medicare, and does not include services that would otherwise constitute designated health services, but that are reimbursed by Medicare as part of a composite rate, except to the extent that the services are specifically identified in § 411.351 and are themselves payable through a composite rate. SNF services paid by Medicare under the Part A composite rate (that is, the Skilled Nursing Facility Prospective Payment System (SNF PPS)), for example, are not designated health services, even if the bundle of services includes services that would otherwise be designated health services, such as clinical laboratory services.[] In contrast, although home health and inpatient and outpatient hospital services are paid under a composite rate, they remain designated health services under the definition finalized in Phase I because section 1877(h)(6) of the Act explicitly lists these services as designated health services. We explained in Phase I that our ultimate definition of “designated health services” was based on issues of statutory construction (66 FR 923).

In particular, commenters on the 1998 proposed rule asserted that the definition of designated health services would have expanded the list of services that are considered to be designated health services beyond the services explicitly listed at section 1877(h)(1) of the Act. For example, clinical laboratory services furnished by a SNF and reimbursed under the SNF PPS would have been considered designated health services under the definition, even though SNF services are not included in the statutory list of designated health services. The commenters maintained that, where the Congress intended the physician self-referral law to cover specific services, including services that are paid under a composite rate such as home health services, it did so by explicitly listing the services at section 1877(h)(6) of the Act. We agreed and finalized the definition of “designated health services” to include only those services paid under a composite rate that are explicitly listed at section 1877(h)(1) of the Act.

That is, home health services and inpatient and outpatient hospital services. As we stated in the proposed rule, in light of our experience with the SRDP and our review of the comments to the CMS RFI, we reviewed the regulatory history of our definition of “designated health services” at § 411.351 to identify whether further clarification regarding what constitutes a designated health service is necessary (84 FR 55805). We proposed to revise the definition of “designated health services” to clarify that a service provided by a hospital to an inpatient does not constitute a designated health service payable, in whole or in part, by Medicare, if the furnishing of the service does not affect the amount of Medicare's payment to the hospital under the Acute Care Hospital Inpatient Prospective Payment System (IPPS). To illustrate, suppose that, after an inpatient has been admitted to a hospital under an established Medicare Severity Diagnosis Related Group (MS-DRG), the patient's attending physician requests a consultation with a specialist who was not responsible for the patient's admission, and the specialist orders an X-ray.

By the time the specialist orders the X-ray, the rate of Medicare payment under the IPPS has already been established by the MS-DRG (diagnostic Start Printed Page 77571imaging is bundled into the payment for the inpatient admission), and, unless the X-ray results in an outlier payment, the hospital will not receive any additional payment for the service over and above the payment rate established by the MS-DRG. Moreover, insofar as the provision of the X-ray does not affect the rate of payment, the physician has no financial incentive to over-prescribe the service. As illustrated here, we do not believe that the X-ray is a designated health service that is payable, in whole or part, by Medicare, and our definition of “designated health services” at § 411.351 would exclude this service from the definition of designated health services, even though it falls within a category of services that, when billed separately, would be “designated health services.” Thus, assuming the specialist had a financial relationship with the hospital that failed to satisfy the requirements of an applicable exception to the physician self-referral law at the time the X-ray was ordered, the inpatient hospital services would not be tainted by the unexcepted financial relationship, and the hospital would not be prohibited from billing Medicare for the admission. On the other hand, if the physician who ordered the inpatient hospital admission had a financial relationship with the hospital that failed to satisfy the requirements of an applicable exception, § 411.353(b) would prohibit the hospital for billing for the inpatient hospital services.

In the proposed rule, we stated that we are aware that not all hospitals are paid under the IPPS (84 FR 55805). We solicited comments as to whether our proposal regarding certain hospital services that are not “designated health services payable, in whole or in part, by Medicare” should be extended to analogous services provided by hospitals that are not paid under the IPPS, and, if so, how we should effectuate this change in our regulation text. We also stated that, although hospital outpatient services are also paid under a composite rate, we believe that there is typically only one ordering physician for outpatient services, and it would be rare for a physician other than the ordering physician to refer an outpatient for additional hospital outpatient services that are compensated within the same ambulatory payment classification (APC) under the Hospital Outpatient Prospective Payment System (OPPS). For this reason, we did not propose to apply the modified definition of “designated health services” at § 411.351 to outpatient hospital services paid under the OPPS.

In this final rule, we are extending the proposed policy to apply to hospital services furnished to inpatients that are paid under additional prospective payment systems. Specifically, we are revising the definition of “designated health services” to state that, for services furnished to inpatients by a hospital, a service is not a designated health service payable, in whole or in part, by Medicare if the furnishing of the service does not increase the amount of Medicare's payment to the hospital under any of the following prospective payment systems (PPS). (i) Acute Care Hospital Inpatient (IPPS). (ii) Inpatient Rehabilitation Facility (IRF PPS).

(iii) Inpatient Psychiatric Facility (IPF PPS). Or (iv) Long-Term Care Hospital (LTCH PPS). For the reasons explained in our response to comments below, we are not extending the proposed policy to apply to hospital services furnished to outpatients. We are also making nonsubstantive revisions to the definition of “designated health services” for consistency regarding the terms “paid” and “payable” and making a minor grammatical change.

We received the following comments and our responses follow. Comment. The vast majority of commenters that commented on this proposal supported our proposal to exclude from the definition of “designated health service payable, in whole or in part, by Medicare” those services furnished by a hospital to an inpatient that do not affect the amount of Medicare's payment to the hospital under the IPPS. Commenters indicated that the revision would bring clarity to hospitals when assessing compliance with the physician self-referral law and calculating potential overpayments for violations of the law.

Some commenters highlighted the onerous compliance burdens associated with quantifying a potential overpayment when the financial relationship that does not satisfy the requirements of an applicable exception is with a physician other than the physician who referred the patient for the inpatient admission. Nearly all of the commenters that supported our proposal requested that we expand the policy to other composite rate payment systems under which hospitals are paid. Some commenters suggested limiting the expansion to payments for services to inpatients under the IRF PPS, IPF PPS, and LTCH PPS. Other commenters suggested that we expand the policy to any composite rate payment system under which a hospital is paid for either inpatient or outpatient services, including OPPS.

The commenters suggesting expansion to OPPS stated (in identical language) that they are aware of circumstances where physicians other than the ordering physician refer outpatients for additional outpatient services that would not be compensated separately under the OPPS. However, none of these commenters provided a specific example or identified a specific APC. Response. We believe that expanding our policy to other payment systems applicable to the furnishing of services to inpatients would not pose a risk of program or patient abuse.

The IRF PPS, IPF PPS, and LTCH PPS operate similarly to IPPS. No additional payment is available where additional hospital services are ordered after a patient's admission by a physician who was not responsible for the patient's admission, except in limited circumstances. We are not persuaded to expand the policy to the OPPS. As we stated in the proposed rule, we believe that there is typically only one ordering physician for outpatient services, and it would be rare that a physician other than the ordering physician would refer an outpatient for additional outpatient services that would not be paid separately under the OPPS (84 FR 55805).

The commenters that asserted the existence of circumstances where physicians other than the ordering physician refer outpatients for additional outpatient services that would not be paid separately under the OPPS provided no evidence or examples of such circumstances for us to confirm. Finally, we believe that extending the rule to designated health services paid under the OPPS would be burdensome and challenging for stakeholders, CMS, and our law enforcement partners to implement and enforce. We decline to extend the policy to the OPPS. Comment.

One commenter questioned whether a service would be considered a designated health service if the hospital's furnishing of the service to an inpatient decreased the IPPS payment to the hospital. Another commenter requested clarification of the meaning of “affects” the amount of Medicare payment. A few commenters requested additional examples of hospital services that would or would not “affect” an IPPS payment under the revised definition of “designated health services,” if finalized. Response.

Although we do not believe it is likely that the ordering of additional services for an inpatient would decrease the amount of Medicare's payment for the admission, we are replacing the word “affect” with “increase” to express our policy with more precision. As noted, under the definition of “designated health Start Printed Page 77572services” finalized at § 411.351, for services furnished to inpatients by a hospital, a service is not a designated health service payable, in whole or in part, by Medicare if the furnishing of the service does not increase the amount of Medicare's payment to the hospital under any of the following prospective payment systems (PPS). (i) Acute Care Hospital Inpatient (IPPS). (ii) Inpatient Rehabilitation Facility (IRF PPS).

(iii) Inpatient Psychiatric Facility (IPF PPS). Or (iv) Long-Term Care Hospital (LTCH PPS). Comment. One commenter in opposition to our proposal described a summary of the proposed rule prepared by an independent law firm that identified what the law firm assumed the rationale behind our proposal to be.

Physicians have no financial incentive to overprescribe services that do not affect the rate of payment. The commenter disagreed with that rationale as support for our proposal, and described a complicated situation that could present a risk of abuse based on hospital referrals to service lines within the hospital in which certain physicians, but not the referring physicians addressed in our proposal, could profit. The commenter expressed concern that the revised definition of “designated health services” would likely eliminate inpatient hospitalization from the reach of the physician self-referral law. The commenter also asserted that there exists no opposition to the current definition of “designated health services” and urged CMS not to finalize the proposal.

Response. All inpatient and outpatient hospital services will remain designated health services except for services furnished to an inpatient after he or she becomes an inpatient and only where those additional services do not increase the amount of Medicare's payment to the hospital for the inpatient admission. For the reasons stated in the proposed rule and in this final rule, we are finalizing our proposal with the modification described above. Comment.

A few commenters expressed uncertainty with respect to a hospital's ability to know whether services furnished to an inpatient pursuant to a prohibited referral from a physician other than the physician who made the referral for the inpatient admission result in outlier payments under the IPPS such that the “caveat” in the exclusion from the definition would apply. The commenters also stated that they lacked clarity regarding when a hospital could know that an outlier payment is triggered by a particular inpatient admission. The commenters asserted that this makes the revised definition of “designated health services” unworkable. Response.

We see no reason why a hospital would be unable to identify referrals made by physicians with whom the hospital has financial relationships that do not satisfy the requirements of an applicable exception. As we have stated repeatedly throughout our rulemaking history, the physician self-referral law's billing prohibition requires that the entity submitting a claim to Medicare for payment for designated health services has the burden of ensuring that the services were not furnished as a result of a prohibited referral. It is incumbent upon hospitals to implement effective compliance programs to identify financial relationships with physicians that do not satisfy the requirements of an applicable exception to the physician self-referral law and take action not to submit prohibited claims for payment. If a hospital did not identify the financial relationship with a referring physician until after a claim was submitted and paid, the hospital would need to identify admissions for which payments in excess of the expected MS-DRG payment (or other PPS payment) were received and identify any prohibited referrals for services furnished to the inpatients for whom the excess payments relate.

We believe that our rules and regulations regarding outlier payments are clear and we are unaware of any reason that a hospital would be unable to utilize its medical record and billing systems to identify inpatient admissions that resulted in payments in addition to the expected MS-DRG payment (or other PPS payment) for the inpatient admission. B. Physician In the 1992 proposed rule, we stated that, for purposes of the physician self-referral law, physicians are certain professionals who are “legally authorized to practice by the State in which they perform their professional functions or actions and when they are acting within the scope of their licenses.” (57 FR 8593). We included in the definition a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of optometry, and a chiropractor who meets certain qualifications.

In Phase I, we finalized our definition of “physician” at § 411.351, defining the term as “a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor, as defined at section 1861(r) of the Act.” (66 FR 955). Since Phase I, our definition of “physician” at § 411.351 has consistently referred to the definition of “physician” at section 1861(r) of the Act. However, although the definition of “physician” at § 411.351 cross-references section 1861(r) of the Act, the two definitions are not entirely harmonious. In particular, the definition of “physician” at § 411.351 does not include all the limitations imposed by the definition of “physician” at section 1861(r) of the Act.

In order to correct this discrepancy and provide uniformity between Title XVIII of the Act and our regulations with regard to the definition of a “physician,” in the proposed rule, we proposed to amend the definition of “physician” at § 411.351 (84 FR 55805 through 55806). Under the proposed definition, the types of practitioners who qualify as “physicians” for purposes of the physician self-referral law would be defined by cross-reference to section 1861(r) of the Act. Therefore, the definition of “physician” at § 411.351 would incorporate the statutory limitations imposed on the definition of “physician” by section 1861(r) of the Act. As proposed, the definition at § 411.351 would continue to provide that a physician is considered the same as his or her professional corporation for purposes of the physician self-referral law.

After reviewing the comments, we are finalizing the definition of “physician” as proposed. We received the following comment and our response follows. Comment. Several commenters generally supported the regulatory change to cross-reference the definition of “physician” at § 411.351 to the definition in section 1861 of the Act.

A few commenters maintained that the definition of “physician” should be limited to doctors who have a Doctor of Medicine, Doctor of Osteopathic Medicine, or a recognized equivalent physician degree. One commenter questioned the practical effect of incorporating into our definition of physician at § 411.351 the statutory limitations imposed in the definition of “physician” under section 1861(r) of the Act. Specifically, the commenter asked whether the policy excludes podiatrists, optometrists, and chiropractors from the definition of “physician” for purposes of the physician self-referral law, because, according to the commenter, the statutory limitations related to those three types of practitioners restrict when they are considered physicians under section 1861(r) of the Act to very limited circumstances, none of which reference the physician self-referral law. Response.

We are finalizing the definition of “physician” as proposed. Start Printed Page 77573The revised definition will align the regulatory definition of “physician” at § 411.351 with the statutory definition of “physician” in section 1861(r) of the Act to ensure that there are no inconsistencies between our regulations and the statutory definition. Because the physician self-referral statute is in Title XVIII of the Act, in the absence of a definition of “physician” in section 1877 of the Act, definitions of general applicability, such as the definition of “physician” at section 1861(r) of the Act, are applicable to the physician self-referral law. Under section 1861(r) of the Act, a “physician” includes a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, and a chiropractor, but provides for limitations on when such doctors are considered “physicians” for purposes of Title XVIII of the Act.

We do not believe that the definition of “physician” in our regulations should be either more limited or more expansive than the statutory definition. Thus, to the extent that the statutory definition of “physician” includes doctors other than doctors of medicine and osteopathy, those practitioners fall within the ambit of the physician self-referral law. However, we do not believe that the referral prohibition at § 411.353(a) should apply to any doctor during the period he or she is not considered to be a physician for purposes of Title XVIII of the Act. In those instances when a doctor of medicine or osteopathy, doctor of dental surgery or dental medicine, doctor of podiatric medicine, doctor of optometry, or chiropractor is considered a physician under section 1861(r) of the Act, the doctor or chiropractor will be considered a physician for purposes of the physician self-referral law.

C. Referral In Phase II, we stated that the exception for fair market value compensation is not available to protect recruitment arrangements (69 FR 16096). We noted that a hospital is not permitted to pay a physician for the benefit of receiving the physician's referrals, and that such payments are antithetical to the premise of the statute. In the proposed rule, we reaffirmed that a physician's referrals are not items or services for which payment may be made under the physician self-referral law, and that neither the existing exceptions to the physician self-referral law nor the exceptions proposed in the proposed rule would protect such payments.

We proposed to revise the definition of “referral” at § 411.351 to explicitly state our longstanding policy that a referral is not an item or service for purposes of section 1877 of the Act and the physician self-referral regulations (84 FR 55806). After reviewing the comments, we are finalizing our modification of the definition of “referral” as proposed. We received the following comment and our response follows. Comment.

Numerous commenters supported the proposed revision of the definition of “referral.” We also received comments on our proposed definition of “referral” that pertained to the volume or value standard and the payment of productivity bonuses. Response. We are finalizing the definition as proposed. Comments pertaining to the volume or value standard and the payment of productivity bonuses are addressed in section II.B.3.

Of this final rule. D. Remuneration A compensation arrangement between a physician (or an immediate family member of such physician) and an entity (as defined at § 411.351) implicates the referral and billing prohibitions of the physician self-referral law. Section 1877(h)(1)(A) of the Act defines the term “compensation arrangement” as any arrangement involving any “remuneration” between a physician (or an immediate family member of such physician) and an entity.

However, section 1877(h)(1)(C) of the Act identifies certain types of remuneration which, if provided, would not create a compensation arrangement subject to the referral and billing prohibitions of the physician self-referral law. Under section 1877(h)(1)(C)(ii) of the Act, the provision of the following does not create a compensation arrangement between the parties. Items, devices, or supplies that are used solely to collect, transport, process, or store specimens for the entity providing the items, devices, or supplies, or to order or communicate the results of tests or procedures for such entity. Furthermore, under our definition of “remuneration” at § 411.351, the provision of such items, devices, or supplies is not considered to be remuneration.

In the 1998 proposed rule we explained our interpretation of the phrase “used solely” at section 1877(h)(1)(C)(ii) of the Act (66 FR 1693 through 1694). We observed that some pathology laboratories had been furnishing physicians with materials ranging from basic collection and storage items to more specialized or sophisticated items, devices, or equipment. We clarified that, in order for these items and devices to meet the statutory requirement, they must be used solely to collect, transport, process, or store specimens for the entity that provided the items and devices, or to order or communicate the results of tests or procedures for such entity. We provided examples of items that could meet the “used solely” test, including cups used for urine collection or vials used to hold and transport blood to the entity that supplied the items or devices.

We emphasized that an item or device would not meet the “used solely” requirement if it is used for any purpose besides the purposes listed in the statute. In particular, we noted that certain surgical tools that can be used to collect or store samples, but are also routinely used as part of a surgical or medical procedure, would not satisfy the “used solely” requirement. As finalized in Phase I, the definition of “remuneration” included a parenthetical stipulating that the provision of surgical items, devices, and supplies would not qualify for the carve-out to the definition of “remuneration” for items, devices, or supplies that are used solely for the purposes listed at section 1877(h)(1)(C)(ii) of the Act (66 FR 947). We explained that we did not believe that the Congress intended section 1877(h)(1)(C)(ii) of the Act to allow entities to supply physicians with surgical items for free or below fair market value prices, noting that such items may have independent economic value to physicians apart from the six statutorily permitted uses.

We stated our belief that the Congress intended to include at section 1877(h)(1)(C)(ii) of the Act single-use items, devices, and supplies of low value that are primarily provided by laboratories to ensure proper collection of specimens. In this context, we explained that reusable items may have value to physicians unrelated to the collection of specimens, and therefore could not meet the “used solely” requirement. Lastly, we stated that the provision of an excessive number of collection supplies creates an inference that the supplies are not provided “solely” to collect, transport, process, or store specimens for the entity that furnished them. We made no changes to the definition of “remuneration” in Phase II or Phase III.

In the CY 2016 PFS final rule, we clarified that the provision of an item, device, or supply that is used for one or more of the six purposes listed in the statute, and no other purpose, does not constitute remuneration (80 FR 71321). In two advisory opinions issued in 2013 we applied the definition of “remuneration” at § 411.351 to two proposed arrangements to provide Start Printed Page 77574certain devices to physicians free of charge. In CMS-AO-2013-01, we concluded that, based on the specific facts certified by the requestor of the opinion, the provision of liquid-based Pap smear specimen collection kits did not constitute remuneration, because the collection kits are not surgical devices, and because the devices are used solely in the collection of specimens. Among other things, our “used solely” analysis highlighted the following facts, as certified by the requestor.

(1) The Pap smear collection kits contain only disposable items that cannot be reused after a specimen is collected. And (2) the entity furnishing the Pap smear collection kits has a system in place to ensure that physicians receive only the quantity of devices necessary for their practice needs, and to address potential instances of separation of the devices into their component parts for use other than to collect specimens. In contrast, in CMS-AO-2013-02, we concluded that, based on the specific facts certified by the requestor of the opinion, the furnishing of certain disposable biopsy brushes for use in obtaining a biopsy of visible exocervical lesions constituted remuneration under the definition at § 411.351. We noted that, as certified by the requestor, the biopsy brush is a disposable, single-use, cervical biopsy device that is used to collect a specimen to be sent to a laboratory.

After reviewing FDA rules and regulations and American Medical Association guidelines, and consulting with CMS medical officers, we concluded that the device is a “surgical item, device, or supply” for purposes of the physician self-referral law and, therefore, that the provision of the device constitutes remuneration under § 411.351. After further consideration of our interpretation of section 1877(h)(1)(C)(ii) of the Act and the analysis set forth in the 2013 advisory opinions, in the proposed rule, we proposed certain modifications to the definition of “remuneration” at § 411.351 (84 FR 55806 through 55807). Specifically, we proposed to remove the parenthetical in the current definition of “remuneration,” which stipulates that the carve-out to the definition of “remuneration” does not apply to surgical items, devices, or supplies. We stated that we are no longer convinced that the mere fact that an item, device, or supply is routinely used as part of a surgical procedure means that the item, device, or supply is not used solely for one of the six purposes listed at section 1877(h)(1)(C)(ii) of the Act.

Rather, the relevant inquiry for purposes of the physician self-referral law is whether the item, device, or supply is used solely for one or more of the statutory purposes, regardless of whether the device is also classified as a surgical device. To be clear, we continue to believe that the Congress intended the carve-out at section 1877(h)(1)(C)(ii) of the Act to cover single-use items, devices, or supplies of low value [] that are primarily provided by laboratories to ensure proper collection of specimens, but we are no longer convinced that the mere fact that an item, supply, or device is classified as a “surgical device” means that it does not fall within the carve-out. In the proposed rule, we also clarified the “used solely” requirement at § 411.351. Although the furnished item, device, or supply may not be used for any purpose other than one or more of the six purposes listed in the statute, we recognize that, in many instances, the item, device, or supply could theoretically be used for numerous purposes.

For example, a specimen lockbox could potentially be used for several purposes. It could be used to store unused specimen collection supplies or as a doorstop. However, if, during the course of the arrangement, the specimen box provided to the physician is not used for any of these purposes and is, in fact, used only for one or more of the six purposes outlined in the statute and our regulations, the furnishing of the specimen box would not be considered remuneration between parties. In other words, the mere fact that an item, device, or supply could be used for a purpose other than one or more of the permitted purposes does not automatically mean that the furnishing of the item, device, or supply at no cost constitutes remuneration.

We proposed to add the phrase “in fact” to the “used solely” requirement to clarify that an item, device, or supply can have several uses, including uses that are not among the six purposes listed in the statute. However, the furnishing of such items, supplies, or devices would not be considered remuneration if the item, device, or supply in question is, in fact, only used for one or more of the six purposes outlined in the statute. We again refer readers to the guidance provided in the 1998 proposed rule and in Phase I on steps that a party can take to ensure that the furnished items, supplies, or devices are used appropriately (63 FR 1693 through 1694 and 66 FR 947 through 948, respectively). Although we proposed certain modifications to the definition of “remuneration,” we did not propose to exclude from the definition of “remuneration” those items, devices, or supplies whose main function is to prevent contamination or , even if the item, device, or supply could potentially be used for one or more of the six statutory purposes at section 1877(h)(1)(C)(ii) of the Act.

In Phase I, we made clear that, although sterile gloves are essential to the proper collection of specimens, we believe they are not items, devices, or supplies that are used solely to collect, transport, process, or store specimens (66 FR 948). Sterile gloves are essential to the specimen collection process, but their primary purpose is to prevent or contamination. In addition, sterile gloves are fungible, general purpose items, and we continue to believe it would be impractical for parties to monitor the use of the gloves to ensure that they are used solely for one or more of the purposes listed at section 1877(h)(1)(C)(ii) of the Act. Likewise, although there may be certain specialized equipment (including surgical tools) that may be used for one or more of the purposes described in the statute, in order not to be considered remuneration, the item, device, or supply must not have a primary function of preventing or contamination, or some other purpose besides one of the six purposes listed in the statute.

After reviewing the comments, we are finalizing our revision of the definition of “remuneration” as proposed. We received the following comments and our responses follow. Comment. Numerous commenters supported our proposed revision of the definition of “remuneration,” including our proposal to remove the phrase “not including surgical supplies, devices, or supplies” and our proposal to clarify that items, devices, and supplies are not remuneration if they are, “in fact,” used exclusively for one or more of the permitted purposes.

Several of the commenters that supported our proposed revision of the definition of “remuneration” also supported our statement that those items, devices, or supplies whose main function is to prevent contamination or are not carved out of the definition of “remuneration.” One commenter suggested that the proposed changes to the definition will reduce physician hesitancy regarding the acceptance of such items, devices, and supplies and will reduce administrative burden.Start Printed Page 77575 Response. We agree that the revisions to the definition of “remuneration” will provide additional clarification and reduce administrative burden, and are revising the definition of “remuneration” as proposed. Comment. One commenter objected to the proposal to strike the parenthetical pertaining to surgical items, devices, or supplies from the definition of “remuneration” and urged CMS not to finalize the proposal.

The commenter maintained that CMS did not explain the rationale for the policy change in the proposed rule, and that CMS did not provide any examples of surgical items, devices, or supplies that would not be considered remuneration. According to the commenter, it is relatively straightforward for a laboratory to determine if an item, device, or supply is classified as “surgical,” and thus is not excluded from the definition of remuneration. The commenter asserted that it would be more difficult, if not impossible, for a laboratory to determine whether a physician in fact uses a surgical item, device, or supply for one of the permitted purposes under the statute. The commenter noted that CMS acknowledged in the proposed rule the difficulty of monitoring the use of sterile gloves.

The commenter concluded that, given the difficulty of monitoring actual use, the proposal, if finalized, would create a “slippery slope” that would permit unscrupulous actors to provide items, devices, or supplies that are routinely used as part of a surgical procedure as opposed to one of the permitted purposes under the statute. A different commenter raised similar objections to the proposal. This commenter acknowledged that the proposal to no longer categorically include surgical items, devices, or supplies in the definition of “remuneration” provides some additional flexibility under our regulations, but urged CMS to ensure that the items, devices, or supplies not considered to be remuneration continue to be single-use items, devices, or supplies with little, if any, independent value to the physicians who receive them. The commenter expressed concern that, under the proposal, valuable items, devices, or supplies, such as bone marrow kits, would no longer be considered remuneration, thus increasing the risk of program or patient abuse.

The commenter also expressed concern that it would increase the burden on parties to monitor the use of items, devices, or services, to ensure that physicians are in fact using the items, devices, or services for one or more of the permitted purposes under the statute. Response. The purpose of the revision to the definition of “remuneration” is to increase flexibility under our regulations and to clarify the “used solely” requirement. As noted in the proposed rule, we no longer believe that the mere fact that an item, device, or supply is classified as “surgical” means that the item, device, or supply is not used solely for one or more of the permitted purposes.

Although the categorical inclusion of surgical items, devices, or supplies in the definition of “remuneration” may provide a bright line test for determining which items may be furnished to physicians at reduced or no cost, it also may include certain items, device, or supplies in the definition of “remuneration” that the Congress meant to exclude in section 1877(h)(1)(C)(ii) of the Act. Nothing in the regulation compels an entity to provide any item, device, or supply to a physician below fair market value or for free. Entities concerned about monitoring for “sole use” may elect not to give away surgical (or any other) item, device, or supply. Moreover, items, devices, and supplies that do not constitute remuneration for purposes of the physician self-referral law may nonetheless implicate the anti-kickback statute.

Similarly, our clarification of the “used solely” requirement was not intended to loosen the requirement or to create a slippery slope that will lead to abusive arrangements. Prior to the proposed rule, we received inquiries from stakeholders questioning whether the mere fact that an item, device, or supply could be used for a purpose other than one or more of the permitted purposes means that the provision of such an item, device, or supply constitutes “remuneration” under our regulations. We are adding the phrase “in fact” to the definition to clarify that this is not the case and to provide certainty to parties regarding items, devices, or supplies with potential ancillary functions outside of one or more of the permitted purposes. At the same time, as indicated in our discussion of the provision of sterile gloves, we continue to believe that, for an item, device, or supply (including surgical tools) to satisfy the “used solely” requirement, the primary purpose of the item, device, or supply must be one or more of the uses permitted under the statute.

Sterile gloves and other multi-use items, devices, or supplies whose primary purpose is not one of the permitted purposes are not excluded from the definition of “remuneration,” even if a particular physician in fact only uses the item, device, or supply for one of the permitted purposes. We do not disagree that it may be difficult for an entity to monitor how a physician “in fact” uses a multi-use item, device, or supply whose primary purpose is not one or more of the permitted purposes to ensure that the physician in fact uses the item, device, or supply exclusively for one or more of the permitted purposes. However, because the provision of multi-use items, devices, or supplies whose primary purpose is not one or more of the permitted purposes will not be carved out of the definition of remuneration. We continue to believe that the Congress intended the carve-out at section 1877(h)(1)(C)(ii) of the Act to cover single-use items, devices, or supplies of low value that are primarily provided by laboratories to ensure proper collection of specimens.

We note that, in the OBRA 1993 Conference Report, H.R. 103-213 pp. 818 through 819, the Congress characterized section 1877(h)(1)(C)(ii) of the Act as an “exception” for “certain minor remuneration.” Although we are not finalizing a monetary limit for the carve-out, we continue to believe that the items carved out of the definition of “remuneration” must be low value. We also reaffirm that the items, devices, or supplies provided to a physician must have little or no independent value to the physician.

In this context, it is important to note that both the statute and our regulations provide that the items, devices, or supplies provided must serve a purpose for the entity providing the items, devices, or supplies. For example, collecting specimens for the entity. We believe that the phrase “for the entity” underscores that the items, devices, or supplies must have little, if any, independent value for the physician. Lastly, we emphasize that, even if the provision of an item, device, or supply is carved out of the definition of “remuneration” under the physician self-referral law, the provision of such items, devices, and supplies implicates the anti-kickback statute.

E. Transaction (and Isolated Financial Transaction) Section 1877(e)(6) of the Act provides that an isolated financial transaction, such as a one-time sale of property or practice, is not a compensation arrangement for purposes of the physician self-referral law if. (1) The amount of remuneration under the transaction is consistent with the fair market value of the transaction and is not determined in a manner that takes into account (directly or indirectly) the Start Printed Page 77576volume or value of referrals by the referring physician. (2) the remuneration is pursuant to an arrangement that would be commercially reasonable even if no referrals were made to the entity.

And (3) the transaction meets any other requirements that the Secretary imposes by regulation as needed to protect against program or patient abuse. As enacted by OBRA 1989, the statutory exception identified a one-time sale of property as an example of an isolated financial transaction. In OBRA 1993, the Congress further clarified the statutory exception by providing an additional example of an isolated transaction, namely, a one-time sale of a practice. (See House Conference Report at H.R.

Rep. No. 213, 103d Cong., 1st Sess. 813-815 (1993).) In the 1992 proposed rule, we proposed an exception (ultimately codified at § 411.357(f)) to mirror the statutory exception at section 1877(e)(6) of the Act for certain isolated financial transactions (both titled and together referred to as the exception for isolated transactions) (57 FR 8591).

In our proposal, we included a requirement—in addition to the statutory requirements—that there be no other transactions (that is, financial relationships) between the parties for 1 year before and 1 year after the financial transaction to ensure that financial transactions excepted under section 1877(e)(6) of the Act and § 411.357(f) are truly isolated in nature (57 FR 8599). In the 1995 final rule, we finalized an exception for isolated financial transactions at § 411.357(f), and we modified the proposed 1-year requirement in response to commenters that asserted that the requirement would create substantial and unnecessary problems (60 FR 41960). We stated that a transaction would be considered an isolated transaction for purposes of § 411.357(f) if there were no other transactions between the parties for 6 months after the transaction, except those transactions that are specifically excepted by another provision in §§ 411.355 through 411.357. We further stated that individual payments between parties generally characterize a compensation arrangement.

However, debt, as described in the definition of “ownership or investment interest” at section 1877(a)(2) of the Act, can constitute an ownership interest that continues to exist until the debt is paid off (60 FR 41960). The 1995 final rule also established definitions of “transaction” and “isolated transaction” at § 411.351. We defined a “transaction” as an instance or process of two or more persons doing business and an “isolated transaction” as a transaction involving a single payment between two or more persons. The regulation at § 411.351 specified that a transaction involving long-term or installment payments is not considered an isolated transaction.

In the 1998 proposed rule, we proposed to revise the definition of “transaction” at § 411.351 to clarify that a transaction can involve persons or entities, but did not propose any substantive changes to the exception at § 411.357(f) (63 FR 1669). This definition was finalized in Phase II, with modification to permit installment payments (and post-closing adjustments) under certain circumstances (69 FR 16098). In Phase II, we also responded to commenters that objected to the prohibition on other transactions within 6 months of the excepted transaction. We declined to modify the 6-month prohibition on other transactions, and we explained that the concept of an isolated transaction is incompatible with the parties routinely engaging in multiple transactions in a year or during a short period of time.

In Phase III, we made no changes to the exception at § 411.357(f), but updated the term “isolated transaction” at § 411.351 to refer to an “isolated financial transaction,” as that specific term is used in the statutory and regulatory exceptions (72 FR 51084). Through our administration of the SRDP, work with our law enforcement partners, and interactions with stakeholders, it has come to our attention that some parties may believe that CMS' policy is that the exceptions in section 1877(e)(6) of the Act and § 411.357(f) for isolated transactions are available to protect service arrangements where a party makes a single payment for multiple services provided over an extended period of time. To illustrate, assume that a hospital makes a single payment to a physician for working multiple call coverage shifts over the course of a month (or several months) and seeks to utilize the exception at § 411.357(f) to avoid qualification of the payment as a financial relationship subject to the physician self-referral law's referral and billing prohibitions. That is, the parties wish to consider the single payment for multiple services an “isolated financial transaction.” We have observed that parties turn to the exception for isolated transactions to protect single payments for multiple services when they discover, typically after the services have been provided, that they failed to set forth the service arrangement in writing, and thus cannot rely on the exceptions for personal service arrangements or fair market value compensation.

In fact, it is our policy that the exception for isolated transactions is not available to except payments for multiple services provided over an extended period of time, even if there is only a single payment for all the services. We see no reason to unduly stretch the meaning and applicability of the exception for isolated transactions beyond what was intended by the Congress. As described elsewhere in this final rule, our final regulations should facilitate compliance with the physician self-referral law in general and the writing and signature requirements in particular, including a 90-day period to reduce arrangements to a signed writing and an exception for limited remuneration to a physician. We believe that these final provisions will afford parties with sufficient flexibility to ensure that personal service and other compensation arrangements comply with the physician self-referral law.

To illustrate the kind of transactions that section 1877(e)(6) of the Act is meant to exempt, the Congress provided as examples a one-time sale of property and a one-time sale of a practice. In our view, a one-time sale of property or a practice is a unique, singular transaction. It is not possible for one party to repeatedly offer and sell the same property or medical practice to another party. In contrast, in service arrangements where multiple services are provided over an extended duration of time, the same services are provided on a repeated basis, even if there is only one payment for the multiple services provided.

Also, in a one-time sale of property or a practice, the consideration for the transaction (that is, the transfer of ownership of the property or practice) is exchanged at the time payment is made in a single transaction (although § 411.357(f) permits installment payments under certain circumstances). In contrast, if a physician provides multiple services to an entity over an extended period of time, remuneration in the form of an in-kind benefit has passed repeatedly from the physician to the entity receiving the service prior to the payment date. We remind parties that the provision of remuneration in the form of services commences a compensation arrangement at the time the services are provided, and the compensation arrangement must satisfy the requirements of an applicable exception at that time if the physician makes referrals for designated health services and the entity wishes to bill Medicare for such services. Thus, the exception for isolated transactions is not available Start Printed Page 77577to retroactively cure noncompliance with the physician self-referral law.

Our position is buttressed by the fact that the Congress created an exception for personal service arrangements at section 1877(e)(3) of the Act and required, among other things, that the arrangement is set out in writing and signed by the parties, that the term of the arrangement is at least 1 year, and that the compensation is set in advance. We do not believe that the Congress would impose such requirements for service arrangements under this exception, and then permit parties to avoid these requirements as long as the parties made one retrospective payment for multiple services provided over an extended period of time relying on the exception for isolated transactions. After reviewing the comments, we are finalizing the proposed independent definition of “isolated financial transaction” at § 411.351, which clarifies that an “isolated financial transaction” does not include a single payment for multiple services provided over an extended period, with the following modifications. First, the final definition of “isolated financial transaction” specifies that an isolated transaction is a one-time transaction.

Second, subparagraph (2) of the definition of “isolated financial transaction” at § 411.351 and the introductory chapeau language in § 411.357(f) provides as an additional example of an isolated financial transaction a single instance of forgiveness of an amount owed in settlement of a bona fide dispute. Third, we are clarifying at § 411.357(f)(4) that an isolated financial transaction that is an instance of forgiveness of an amount owed in settlement of a bona fide dispute is not part of the compensation arrangement giving rise to the bona fide dispute. Fourth, although we did not propose further changes to the definition of “transaction” at § 411.351, we are modifying the definition in response to comments to remove the phrase “or process,” because the term “process” has led some stakeholders to conclude that the exception is available to protect a single payment for multiple services provided over an extended period of time. Lastly, we are finalizing corresponding revisions to the exception for isolated transactions at § 411.357(f) to reference isolated financial transactions in order to align the exception text with the statutory provisions at section 1877(e)(6) of the Act.

Even though the exception at § 411.357(f) applies to isolated financial transactions, we did not propose and we are not finalizing a change in the title of the exception from “isolated transactions” to “isolated financial transactions,” as the title of the statutory exception is “isolated transactions.” We received the following comments and our responses follow. Comment. Many commenters expressed concern that, given the proposed definition of “isolated financial transaction,” the exception at § 411.357(f) would not apply to the settlement of a bona fide legal dispute, especially a dispute arising from an ongoing service arrangement, may not be excepted under § 411.357(f). Commenters noted that parties to a service arrangement may have a legitimate dispute concerning the amount of compensation due under a service arrangement, for example, where the terms of a contract documenting the arrangement are ambiguous.

In these circumstances, a physician may have reasonable belief that he or she is owed more money under the contract, while the entity may believe in good faith that the physician is entitled to less than what the physician claims. Under such circumstances, the parties may wish to settle the matter to avoid litigation. The commenters expressed concern that the settlement could be construed as a single payment for multiple services previously provided by the physician and, therefore, the exception at § 411.357(f) would be unavailable to protect the compensation arrangement arising from the settlement payment (or reduction in debt). Several commenters maintained that resolution of a bona fide dispute is altogether different from making a single payment for multiple services provided over an extended period of time.

The commenters requested that CMS expressly include a settlement of a bona fide legal dispute, along with a one-time sale of a property or practice, in the definition of “isolated financial transaction,” and strike language stating that an isolated financial transaction does not include a single payment for multiple services. Response. Our policy has always been that the exception for isolated transactions at § 411.357(f) is applicable to a compensation arrangement arising from the settlement of a bona fide dispute, even if the dispute originates from a service arrangement where multiple services have been provided over an extended period of time. To clarify our longstanding policy, we are modifying the definition of “isolated financial transaction” at § 411.351 to include in subparagraph (2) a single instance of forgiveness of an amount owed in settlement of a bona fide dispute, and we are including similar language in the introductory chapeau language at § 411.357(f).

However, the exception is not applicable to the compensation arrangement that the parties dispute. We agree with the commenters that stated that settlement of a bona fide dispute arising from an arrangement is fundamentally different from making a payment, including a single payment, for items or services provided under the arrangement. Although the settlement of a bona fide dispute may include a one-time payment made by a party (or installment payments as permitted under the exception), the cornerstone of a settlement of a bona fide dispute, as opposed to a payment for items or services, is that one or more of the parties forgoes a good faith claim to be paid more under the arrangement than the party actually receives. Therefore, we are describing the settlement of a bona fide dispute in the definition of “isolated financial transaction” and in the exception at § 411.357(f) as an instance of forgiveness of an amount owed.

We are further clarifying at § 411.357(f)(4) that an isolated financial transaction that is an instance of forgiveness of an amount owed in settlement of a bona fide dispute is not part of the compensation arrangement giving rise to the bona fide dispute. Thus, a settlement of a bona fide legal dispute under § 411.357(f) is a separate compensation arrangement from any compensation arrangement between the parties giving rise to the bona fide dispute, and settlement of a bona fide dispute under § 411.357(f) does not retroactively bring the compensation arrangement that gave rise to the dispute into compliance with the physician self-referral law. For the reasons explained above, we decline to omit from subparagraph (2) the phrase “but does not include a single payment for multiple or repeated services (such as payment for services previously provided but not yet compensated).” Parties may rely on the exception at § 411.357(f) to protect an isolated financial transaction that settles a bona fide dispute arising from an arrangement for multiple, repeated, or ongoing services, but the exception is not available to protect a single payment for multiple or repeated services. A single payment for multiple or repeated services is not an isolated financial transaction, but rather an ongoing, extended compensation arrangement that must satisfy the requirements of another applicable exception.

Comment. Several commenters maintained that our proposal to exclude a single payment for multiple services from the definition of “isolated financial transaction” is inconsistent with the Start Printed Page 77578statutory exception for isolated transactions at section 1877(e)(6) of the Act. According to the commenters' interpretation of section 1877(e)(6) of the Act, the statutory examples of isolated financial transactions, namely a one-time sale of property or a one-time sale of a practice, are illustrative only, and non-exhaustive. The commenters asserted that the exception may also be used for payments for services, noting that section 1877(e)(6) of the Act incorporates by reference certain requirements of the exception at section 1877(e)(2) of the Act for bona fide employment relationships, including the requirement that the remuneration is “consistent with the fair market value of the services” (emphasis added).

Another commenter asserted that it is reasonable to see a single payment for items or services already furnished as an isolated transaction. The commenter provided as an example a hospital's single payment to a physician for fulfilling an unanticipated need for call coverage over a weekend or holiday, where the physician performs no others services for the hospital for the previous or subsequent 6-month periods. Response. We agree with the commenters that the examples of isolated transactions in section 1877(e)(6) of the Act are illustrative only, not exhaustive.

Among other things, as noted above, we believe that a single transaction resolving a bona fide dispute is an example of an isolated transaction that may be protected under the exception, if all the requirements of the exception are met. What the statutory examples illustrate, however, are one-time transactions, where there is not only a single payment (or installment payments as permitted under the exception) but also a single exchange of value, typically occurring on a specific date, involving consideration that is usually not the subject of repeated or frequent exchange over an extended period of time. In a sale of property or a practice, for example, there is typically a closing date when value is exchanged, and the parties ordinarily do not repeatedly transact to buy and sell the same property or practice over an extended period. The Congress' inclusion of the term “one-time” underscores that the exception is not available for transactions that are repeated over an extended period of time.

In contrast to a one-time sale of property or a practice, if a physician repeatedly provides services to an entity over the course of months or years, then the physician has repeatedly provided remuneration to the entity in the form of an in-kind benefit during that timeframe. Even if the entity only makes one payment for the services, this is not a one-time transaction as contemplated by the statute, but rather an ongoing service arrangement. Because we interpret the exception for isolated transactions as protecting one-time transactions, as indicated at section 1877(e)(6) of the Act, we are modifying the definition of “isolated financial transaction” to include the term “one-time.” Under our interpretation of the statutory scheme, ongoing service arrangements, where a physician provides multiple services to an entity over an extended period of time, must satisfy all the requirements of another applicable exception, such as the exception for personal service arrangements at § 411.357(d)(1) or the exception for fair market value compensation at § 411.357(l). We do not believe that the Congress would have required ongoing service arrangements to meet all the requirements of section 1877(e)(3) of the Act, including writing, signature, 1-year term, and set in advance requirements, and then permit parties to sidestep these requirements by making a single, retrospective payment for multiple services relying on the exception for isolated transactions.

We agree with the commenters that not all service arrangements are per se excluded from protection under the exception for isolated transactions. In the proposed rule, we noted that the same services can be provided by one party and purchased by another on a repeated basis, whereas a party cannot repeatedly offer and sell the same property or medical practice to another party (84 FR 55808). We believe that the commenters may have inferred from this statement that our policy categorically excludes services from the isolated transaction exception. This is not our policy.

As noted above, the exception for isolated transactions protects one-time transactions. With respect to an arrangement for services, the exception is available to protect a single payment (or installment payments, as permitted by the exception) for a one-time service arrangement, as opposed to an arrangement where multiple or repeated services are provided over an extended period of time. Whether a one-time service arrangement constitutes an isolated financial transaction depends on the facts and circumstances of the arrangement, including whether the service (or bundle of integrally related services) is provided in its entirety during a discrete time-period of short duration, such as a 24-hour or weekend shift. We note that, under § 411.357(f)(3), if parties utilize the exception for isolated transactions for a one-time service arrangement that qualifies as an isolated financial transaction, the parties would not be barred from entering into an ongoing arrangement for the same or similar services during the 6 months after the isolated financial transaction, provided that the subsequent service arrangement satisfied all the requirements of a different exception applicable to the subsequent service arrangement.

The parties would, however, be barred from using the exception for isolated transactions for 6 months after the one-time service arrangement, regardless of the subject matter or consideration of the transaction. Comment. Some commenters maintained that, under the plain language of the exception for isolated transactions and our previous guidance, the exception may be relied on to protect a single payment for multiple services. The commenters noted that “transaction” is currently defined to mean an “instance or process” of two or more persons or entities doing business, and stated that a “process” suggests an ongoing relationship such as an arrangement for repeated or multiple services provided over an extended period of time.

The commenters further noted that the terms “isolated financial transaction” and “transaction” are defined together in the current regulations, and that “isolated financial transaction” is defined as a transaction involving a single payment. Another commenter objected to CMS' statement that the proposal is a clarification of longstanding policy and stated that there is nothing in the plain language of the exception to put parties on notice that the exception cannot be used to protect a single payment for multiple services. Response. We first introduced the concept of a “process” of two or more persons doing business in the 1995 final rule (60 FR 41979).

There is very little commentary in the 1995 final rule or subsequent rulemaking on the term “process” in the definition of “transaction,” though we did note in Phase II, when declining to adopt a policy allowing a certain number of transactions per year, that the concept of an isolated transaction is incompatible with parties routinely engaging in multiple transactions each year or more than one transaction during a short period of time (69 FR 16098). Moreover, in the FY 2009 IPPS final rule, we explained that all the requirements of an exception must be met at the time that a physician makes a referral, and that parties may not turn back the clock to retroactively “cure” noncompliant Start Printed Page 77579arrangements (73 FR 48703). Under the statute and our regulations, a compensation arrangement is formed when remuneration, including in-kind remuneration such as the provision of a service, is exchanged between a physician and an entity. Thus, once a physician begins providing services to an entity under an arrangement, a compensation arrangement is formed, and the compensation arrangement must satisfy all the requirements of an exception at that time if the physician makes referrals to the entity.

The statute and our previous policy statements in Phase II and the FY 2009 IPPS final rule are the basis for the policy articulated in the proposed rule and this final rule, namely that parties may not rely on the exception for isolated transactions to protect or retroactively “cure” a service arrangement involving the provision of multiple or repeated services over an extended period of time. We recognize, however, that stakeholders may have been under the impression, given the use of the word “process” in the definition of “transaction,” that the exception for isolated transactions was available to protect service arrangements involving multiple or repeated services provided over an extended period of time. We also acknowledge that, under the current regulations, the definition of “isolated financial transaction” is subsumed under the definition of “transaction,” and, although the definition of “isolated financial transaction” requires a single payment (or installment payments, if certain requirements are met), it does not explicitly state that a single payment cannot be made for repeated or multiple services. To clarify our policy, we are deleting the term “process” from the definition of “transaction” in § 411.351 and we are explicitly stating in subparagraph (2) of the definition of “isolated financial transaction” at § 411.351 that an isolated financial transaction does not include a single payment for multiple or repeated services.

We stress that these revisions are effective as of the date set forth in this final rule and apply prospectively only. Comment. Many commenters maintained that our policy reduces flexibility and increases the burden of compliance with the physician self-referral law. The commenters noted that the exception for isolated transactions includes core safeguards of the physician self-referral law, such as requirements pertaining to fair market value, the volume or value of a physician's referrals and other business generated by the physician, and commercial reasonableness, and asserted that a single payment for multiple services that meets these requirements and the other requirements of § 411.357(f) does not pose a risk of program or patient abuse.

One commenter stated that parties often seek to rely on the isolated transaction exception to make a single payment for items or service previously furnished, where the arrangement has not been documented before payment is made, and the documentation deficiencies are not discovered until after the items or services have been furnished (which may be for a period of more than 90 days). Several commenters asserted that the proposal, if finalized, would have an especially acute impact on hospitals located in states that prohibit the corporate practice of medicine. According to the commenters, hospitals in states without such restrictions may rely on the exception for bona fide employment relationships for instances in which fair market value compensation has been paid to a physician for services provided, but the arrangement is not set out in writing and the compensation was not set in advance. The commenters noted that, in states where the employment of physicians is prohibited, the exception for bona fide employment relationships is not available, and the only available exception to protect the arrangement may be the exception for isolated transactions.

A few commenters, using identical language, provided an example of an arrangement that the commenters claimed should be covered by the exception for isolated transactions. In the example, an arrangement with an anesthesiology group is expiring, and despite good faith efforts to agree to the terms of a renewal arrangement, the parties disagree over the amount of compensation to be paid under the renewal. The commenters explained that the compensation formula in such a case may be very complex and take significant time to negotiate. In the commenters' example, the anesthesiology group agrees to keep providing services to patients after the previous arrangement expires while the parties continue to negotiate the terms of the renewal.

The commenters contended that there is no harm to the Medicare program if, after the parties agree on compensation for the renewal, the entity relies on the exception for isolated transactions to compensate the physicians for services already furnished in the renewal term. The commenters suggested that no other exception would be available in this context, because the compensation for the renewal term was not set in advance of the services already provided, and the compensation would likely exceed the $3,500 limit under the proposed exception for limited remuneration to a physician. Response. Our policy that the exception for isolated transactions is not available to protect a single payment for multiple or repeated services is grounded in our interpretation of the statute and the mandate under sections 1877(b)(4) and 1877(e)(6)(B) of the Act to protect only those financial relationships that do not pose a risk of program or patient abuse.

We are not convinced that an ongoing service arrangement is an isolated financial transaction like a one-time sale of a property or a practice. Moreover, we do not believe that the Congress would have required an ongoing service arrangement to satisfy all the requirements of the exception for personal service arrangements at section 1877(e)(3) of the Act, including set in advance, writing, and 1-year term requirements, and allowed the same arrangement to be excepted under the exception for isolated transactions, which does not include these requirements. The commenters' example of the anesthesiology practice illustrates our concern with the use of the exception for isolated transactions to protect an ongoing service arrangement. As explained in section II.D.5 of this final rule, the “set in advance” requirement is an important safeguard to prevent parties from adjusting, including retrospectively adjusting, the compensation under an arrangement in a manner that takes into account the volume or value of a physician's referrals.

In the commenters' example, the parties would be permitted to rely on the exception for isolated transactions to compensate the physicians retroactively, thus sidestepping the “set in advance” requirement of other exceptions and opening the door to adjustments of compensation during the negotiation period that take into account the volume or value of the physicians' referrals or other business generated by the physicians. The special rule for writing and signature requirements at final § 411.354(e)(4) and the exception for limited remuneration to a physician at final § 411.357(z) provide significant flexibility under our regulations while providing sufficient safeguards, including an annual monetary limit of $5,000 (as adjusted for inflation) under § 411.357(z), a 90-day period for obtaining required writings under Start Printed Page 77580§ 411.354(e)(4), and the requirement under § 411.354(e)(4) that the arrangement satisfy all the requirements of an applicable exception (other than the writing and signature requirement), including the “set in advance” requirement, for the first 90 days of the arrangement and thereafter. In contrast, the exception for isolated transactions does not limit the amount of compensation permissible under the arrangement, does not require the compensation arrangement to ever be in writing, and does not require compensation to be set in advance. Given the limited requirements of the exception for isolated financial transactions, we believe that excepting ongoing service arrangements under § 411.357(f), which could last for years and be worth hundreds of thousands of dollars or more, would pose a risk of program or patient abuse.

We note that, depending on the facts and circumstances, the parties in the commenters' example of an anesthesiology services arrangement could rely on the indefinite holdover provision at § 411.357(d)(1)(vii) to continue the arrangement on the same terms and conditions of the original arrangement while the parties negotiate the compensation terms for the renewal arrangement. Once the parties finalize the negotiations, compensation under the arrangement could be amended under new § 411.354(d)(1)(ii) (as discussed in section II.D.5. Of this final rule) or the parties could enter into a new arrangement that satisfies the requirements of § 411.357(d)(1) or another applicable exception to the physician self-referral law. In either case, to meet the “set in advance” requirement, the newly negotiated compensation terms may only be applied prospectively.

Comment. A few commenters requested that, if CMS finalizes its proposed definition of “isolated financial transaction,” it should also finalize a new exception for isolated payments. The exception suggested by the commenters would permit an isolated, one-time payment for services already furnished, if. (1) The payment is consistent with fair market value and not determined in any manner that takes into account the volume or value of a physician's referrals or other business generated.

And (2) the remuneration is provided under an arrangement that would be commercially reasonable even if the physician made no referrals to the entity. Similar to the current exception at § 411.357(f) for isolated transactions, there could be no additional exchanges of remuneration between the parties for 6 months after the isolated payment, except for financial relationships that satisfy all the requirements of another exception in § 411.355 through § 411.357. The commenters contended that their proposal incorporates the three central requirements of other compensation exceptions—fair market value compensation, commercial reasonableness of the arrangement, and compensation that is not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician—but would not require a writing or compensation set in advance. Response.

The exception suggested by the commenters does not differ substantively from the exception for isolated financial transactions at § 411.357(f). For the reasons explained in response to the immediately previous comment, adopting the commenters' suggestions would pose a risk of program or patient abuse and, therefore, we cannot issue the suggested exception under the authority at section 1877(b)(4) of the Act. 3. Denial of Payment for Services Furnished Under a Prohibited Referral—Period of Disallowance (§ 411.353(c)(1)) In the CY 2008 PFS proposed rule, we solicited comments on how to determine the period of time during which a physician may not make referrals for designated health services to an entity and the entity may not bill Medicare for the referred designated health services when a financial relationship between the parties failed to satisfy the requirements of any applicable exception (72 FR 38183).

We referred to this timeframe as the “period of disallowance.” We stated that, as a general matter, the period of disallowance under the physician self-referral law should begin on the date when a financial relationship fails to satisfy the requirements of any applicable exception and end on the date that the financial relationship ends or is brought back into compliance (that is, satisfies all the requirements of an applicable exception). We noted, however, that it is not always clear when a financial relationship has ended. By way of example, we stated that, if a physician paid less than fair market value for the rental of office space, the below market rental payments may have been in exchange for future or anticipated referrals, so it is not clear if the financial relationship ended on the date that the lease expires. We sought comments on whether we should employ a case-by-case method for determining when a financial relationship ends or if we should, to the extent practicable, create a provision that would deem certain kinds of financial relationships to last a prescribed period of time for purposes of determining the period of disallowance.

Assuming we were to prescribe a determinate amount of time for the period of disallowance in certain circumstances, we sought comments on whether the period of disallowance could be terminated if parties returned or repaid the value of any problematic compensation under an arrangement. In the FY 2009 IPPS proposed rule, we proposed regulations at § 411.353(c)(1) pertaining to the period of disallowance (73 FR 23690 through 23692). Under that proposal, the period of disallowance would begin when the financial relationship failed to satisfy the requirements of any applicable exception. Where the noncompliance is unrelated to the payment of compensation, the period of disallowance would be deemed to end no later than the date that the financial relationship satisfies all the requirements of an applicable exception.

Correspondingly, where the noncompliance is related to the payment of excess or insufficient compensation, we proposed that the period of disallowance would be deemed to end no later than the date on which the excess compensation was repaid or the additional required compensation was paid, and the arrangement satisfied all the requirements of an applicable exception. We emphasized that the proposal only prescribed an outside limit on the period of disallowance. We acknowledged that, in certain cases, a financial relationship may end before the excess compensation has been returned or the insufficient compensation paid in full, and that the period of disallowance in such cases would end when the financial relationship ended. However, we did not issue any regulations or guidance on determining when a financial relationship has ended in such cases, and we stated that the period of disallowance would have to be determined in such instances on a case-by-case basis.

Lastly, we recognized that noncompliance may also arise for other reasons related to compensation, such as payments that take into account the volume or value of a physician's referrals, but we did not propose any regulations regarding how to determine the period of disallowance in such cases. In the FY 2009 IPPS final rule, we finalized § 411.353(c)(1) as proposed, without substantive modifications (73 FR 48700 through 48705). We Start Printed Page 77581emphasized again that the regulation only prescribed an outside date for the period of disallowance, and that parties could determine that the period of disallowance ended earlier than the outside date prescribed by the regulation on the theory that the financial relationship ended prior to this date. We made it clear in response to commenters that the period of disallowance established at § 411.353(c)(1) was not intended to extend the period of disallowance beyond the end of a financial relationship.

Rather, the regulation was merely intended to give parties clear guidance on steps that could be taken to ensure that the period of disallowance had ended. In addition, we explained the application of the provisions regarding excess and insufficient compensation at § 411.353(c)(1)(ii) and (iii). In the proposed rule, noting our experience administering the SRDP and stakeholder feedback that we have received over the years, we proposed to delete in their entirety the provisions setting forth the period of disallowance at § 411.353(c)(1) because we believe that, although the rules were initially intended merely to establish an outside, bright-line limit for the period of disallowance, in application, they appear to be overly prescriptive and impractical (84 FR 55809). We are finalizing this proposal.

We emphasize that our action in this final rule does not permit parties to a financial relationship to make referrals for designated health services or to bill Medicare for the services when their financial relationship does not satisfy all the requirements of an applicable exception. It is a fundamental principle of the physician self-referral law that a physician may not make a referral for designated health services to an entity with which he or she (or an immediate family member) has a financial relationship, and the entity may not bill Medicare for the services, if the financial relationship between the parties does not satisfy all the requirements of an applicable exception. Nothing in this final rule affects the billing and referral prohibitions at § 411.353(a) and (b). We stress that the analysis to determine when a financial relationship has ended is dependent in each case on the unique facts and circumstances of the financial relationship, including the operation of the financial relationship as negotiated between the parties, and it is not possible for us to provide definitive rules that would be valid in all cases.

We also emphasize that removing the period of disallowance regulations is in no way meant to undermine parties who relied on § 411.353(c)(1)(ii) or (iii) in the past to establish that the period of disallowance has ended. The general principle stated in the CY 2008 PFS proposed rule that the period of disallowance under the physician self-referral law should begin on the date when a financial relationship fails to satisfy all the requirements of any applicable exception and end on the date that the financial relationship ends or satisfies all the requirements of an applicable exception remains true. And, we continue to believe that one way to establish that the period of disallowance has ended in such circumstances is to recover any excess compensation and bring the financial relationship back into compliance with the requirements of an applicable exception. However, we are aware that the payment of excess or insufficient compensation may complicate the question of when a financial relationship has ended or been brought back into compliance with the requirements of an applicable exception for purposes of the physician self-referral law, and believe that removing the period of disallowance regulations is the best way to ensure that what was intended as an elective “safe harbor” is not mistaken for a compulsory action required to ensure that the period of disallowance has ended.

As we stated in the proposed rule, since the publication of the FY 2009 IPPS final rule, stakeholders have questioned whether our preamble guidance was intended to state that administrative or other operational failures during the course of an arrangement, such as the erroneous payment of excess compensation or the erroneous failure to pay the full amount of compensation due during the timeframes established under the terms of an arrangement, would necessarily result in noncompliance with the physician self-referral law (84 FR 55809). Through submissions to the SRDP and other interactions with stakeholders, we are aware of questions regarding whether administrative errors, such as invoicing for the wrong amount of rental charges (that is, an amount other than the amount specified in the written lease arrangement) or the payment of compensation above what is called for under a personal service arrangement due to a typographical error entered into an accounting system, create the type of “excess compensation” or “insufficient compensation” described in our preamble guidance and the period of disallowance rules. As we stated in the proposed rule and affirm here, this was never our intent (84 FR 55809 through 55810). However, the failure to remedy such operational inconsistencies (that is, payment discrepancies) could result in a distinct basis for noncompliance with the physician self-referral law.

In the proposed rule, endeavoring to clarify statements in the FY 2009 IPPS final rule regarding whether parties can “turn back the clock” or retroactively “cure” noncompliance, we stated that parties that detect and correct administrative or operational errors or payment discrepancies during the course of the arrangement are not necessarily “turning back the clock” to address past noncompliance (84 FR 55811). Rather, it is a normal business practice, and a key element of an effective compliance program, to actively monitor ongoing financial relationships, and to correct problems that such monitoring uncovers. An entity that detects a problem in an ongoing financial relationship and corrects the problem while the financial relationship is still ongoing is addressing a current problem and is not “turning back the clock” to fix past noncompliance. On the other hand, once a financial relationship has ended, parties cannot retroactively “cure” the previous noncompliance by recovering or repaying problematic compensation.

Of course, to the extent that the financial relationship has ended, the period of disallowance has ended as well. We believe this policy encourages active, regular review of arrangements for compliance with the physician self-referral law. We provided an example to illustrate our policy regarding payment discrepancies in the operation of a compensation arrangement (84 FR 55810 through 55811), and believe that it is useful to repeat the example from the proposed rule here. We have modified some of the language of the example for clarity.

Assume there is a 1-year arrangement between an entity and a physician beginning January 1 for the personal services of the physician. The arrangement is memorialized at the outset in a writing signed by the parties. The amount of compensation provided for in the writing does not exceed fair market value. And the arrangement otherwise fully complies with all the requirements of an applicable exception.

Assume further that the entity provides compensation to the physician in months 1 through 6 in an amount other than what is stipulated in the writing, and the parties discover the payment discrepancy early in month 7. For purposes of this illustration, assume that a hospital pays a physician $150 per hour for medical director services Start Printed Page 77582when the writing evidencing the arrangement between the parties identifies $140 per hour as the physician's rate of pay. If the $150 per hour payment is due to an administrative or other operational error—that is, the payment discrepancy was unintended—the parties may, while the arrangement is ongoing during the term initially anticipated (in this example, during the year of the arrangement), correct the error by collecting the overage (or making up the underpayment, if that is the case). We expect entities and the physicians who refer designated health services to them to operate effective compliance programs that identify administrative or operational errors and rectify them promptly.

We provided this example in the proposed rule and include it in this final rule to assure parties that unintended payment discrepancies that are corrected in a timely manner do not cause a compensation arrangement to fail to satisfy the requirements of an exception to the physician self-referral law during the timeframe of the erroneous operation of the arrangement. We did not state in the proposed rule, nor is it our view, that every error or mistake will cause a compensation arrangement to fail to satisfy the requirements of an exception or that every error or mistake must be corrected in order to maintain compliance with the physician self-referral law. However, if parties identify an error that would cause the compensation arrangement to fail to satisfy the requirements of an exception to the physician self-referral law, they cannot simply “unring the bell” by correcting it at some date after the termination of the arrangement. We discuss below the comments that we received regarding our statements in the proposed rule and this example.

In the proposed rule, we continued our analysis of the example provided, stating that, if the operational error—that is, payments of $150 per hour instead of the agreed upon $140 per hour—was not timely discovered and rectified, we would analyze the actual compensation arrangement between the parties as we would any financial relationship under the physician self-referral law. For purposes of explaining our policies in this final rule, assume also that the payments to the physician did not revert back to the intended $140 per hour for months 7 through 12, and the hospital did not recover any of the $10 per hour paid in excess of the intended $140 per hour. Therefore, the physician was, in fact, paid $150 per hour under the parties' arrangement for the provision of medical director services. In the proposed rule, we noted that the actual arrangement between parties does not always coincide with the terms described in the written documentation.

To properly ascertain potential noncompliance, it is important to determine whether the actual amount of compensation paid under the arrangement—that is, the amount the physician actually received, as opposed to the amount stipulated in the written agreement—exceeded fair market value for the services actually provided. Assuming that the actual amount paid ($150 per hour) did not exceed fair market value and was not determined in any manner that took into account the volume or value of the physician's referrals or other business generated for the hospital, then the potential noncompliance would relate primarily to the failure to properly document the actual arrangement (medical director services compensated at $150 per hour) in writing, provided that the arrangement satisfied the remaining requirements of an applicable exception. We emphasize again in this final rule that various provisions in our regulations, including those finalized in this final rule, may offer parties a means of limiting the scope of potential noncompliance when the actions of the parties differ from their documented arrangement such that they create a separate compensation arrangement that must be analyzed for compliance with the physician self-referral law. To illustrate, assume the actual arrangement between the parties is for the provision of medical director services compensated at $150 per hour and all the requirements of an applicable exception are satisfied except for the requirements that the compensation is set in advance, in writing, and signed by the parties.

The new exception finalized at § 411.357(z) for limited remuneration to a physician may be available to protect the first $5,000 paid to the physician (if the exception has not yet been utilized during the current calendar year). In addition, the parties could rely on the special rule for writing and signature requirements finalized at § 411.354(e)(3), coupled with the clarification of the writing requirement at § 411.354(e)(2), to establish that the actual amount of compensation provided under the arrangement was set forth in writing within 90 consecutive calendar days of the commencement of the arrangement via a collection of documents, including documents evidencing the course of conduct between the parties. The 90-day clock would begin when the parties could no longer use (or were no longer using) the exception at § 411.357(z). Thus, while the parties are relying on the exception at § 411.357(z) and for up to 90 consecutive calendar days after, they would likely be developing the documentation necessary to evidence their arrangement for medical director services under which the physician is paid $150 per hour.

Depending on the facts and circumstances, the parties may be able to establish that the arrangement complied with the physician self-referral law for its entire duration. Finally, as we stated in the proposed rule, in certain instances, the failure to collect money that is legally owed under an arrangement may potentially give rise to a secondary (separate) financial relationship between the parties (84 FR 55810). In such circumstances, because forgiveness of an obligation or debt may constitute remuneration for purposes of the physician self-referral law, the parties may conclude that the only means to avoid noncompliance with the physician self-referral law is to recoup the amount owed under the arrangement. Turning back to the previous example, and assuming that the hospital corrected the error beginning in month 7 but did not collect the excess compensation from the physician, the relevant inquiry is whether the uncorrected payment errors during months 1 through 6—that is, the additional $10 per hour paid to the physician—gave rise to a secondary financial relationship (for example, an interest free loan or the complete forgiveness of debt) that must satisfy the requirements of an applicable exception.

We received the following comments and our responses follow. Comment. Commenters generally supported the removal of the “period of disallowance” provisions from § 411.353(c). One commenter stated that these provisions were cumbersome to apply and raised questions for parties deciding whether the period of disallowance ended.

The commenter further stated that removal of the provisions will help parties to establish the end of the period of disallowance on a case-by-case basis without concern of having to defend why an arrangement is believed to have ended prior to the deeming provision in the regulations. One commenter agreed with our proposal, asserting that removing the period of disallowance regulations in their entirety would offer providers more flexibility to determine when a financial relationship has ended. In contrast, two commenters requested that we replace the period of disallowance regulation to provide for a date certain by which a compensation arrangement Start Printed Page 77583would be deemed to end. Specifically, the commenters (in identical phrasing) suggested that the arrangement and, thus, the period of disallowance, should be deemed to end on the date that is 90 days after the physician (or immediate family member) last receives remuneration from the entity under the arrangement.

Response. As we stated in the proposed rule, although the period of disallowance provisions were initially intended to establish an outside, bright-line limit for the period of disallowance, the rules, in application, were overly prescriptive and impractical (84 FR 55809). We are finalizing our proposal to delete the provisions from § 411.353(c) of our regulations. We are not persuaded to establish a rule under which the period of disallowance would end 90 days after the physician (or immediate family member) last receives remuneration from the entity under the specific arrangement.

Such a rule would be inappropriate in the case of remuneration to a physician that was substantially in excess of fair market value or that was determined in a manner that took into account the volume or value of the physician's referrals to the entity. In addition, the rule suggested by the commenters could extend the period of disallowance in many cases, for instance, in a case where a lease arrangement has ended and the noncompliance was related to the parties' failure to properly document it as required by our regulations. We believe that the determination of when the period of disallowance ends is best made on a case-by-case basis taking into consideration the facts and circumstances of the specific compensation arrangement between the parties. Comment.

Two commenters (in essentially identical comments) claimed that parties often have no way of knowing when certain types of compensation arrangements end. The commenters highlighted as particularly problematic one-time payments that are above or below fair market value and the provision of nonmonetary compensation in excess of the annual limit established in regulation. The commenter suggested that we adopt a rebuttable presumption that a compensation arrangement resulting from a one-time payment in excess or below fair market value or the payment of nonmonetary compensation above the annual limit in § 411.357(k)(1) ends the earlier of 6 months after the payment and the date the value causing the one-time payment or excess nonmonetary compensation is corrected (paid or repaid) by the physician (or the physician organization in whose shoes the physician stands under § 411.354(c)). Response.

One-time payments that are above or below fair market value may be an indication of a reward (that is, payment) for a physician's referrals. Referrals are not items or services (see section II.D.2.c. Of this final rule). Therefore, there is no exception available to protect the payment for referrals.

A compensation arrangement that involves a one-time payment that is above or below fair market value does not lend itself to a one-size-fits-all approach. We decline to adopt the commenter's suggestion with respect to one-time payments that are above or below fair market value. With respect to the provision of nonmonetary compensation in excess of the annual limit established in regulation, we offer the following observations. In Phase II, when explaining that the exception for temporary noncompliance does not apply to arrangements that previously complied with the exception for nonmonetary compensation at § 411.357(k), we noted that, in the case of nonmonetary compensation, it is possible to be compliant in the next year, since the exception permits nonmonetary compensation up to $300 annually (69 FR 16057).

In Phase III, we clarified that the aggregate limit in § 411.357(k)(1) is to be calculated on a calendar year basis (72 FR 51058). Thus, on January 1 of the next calendar year, the parties would no longer be over the limit for the current calendar year. Put another way, the period of disallowance for nonmonetary compensation overages that are not repaid in accordance with § 411.357(k)(1) in most cases will end on December 31st of the year in which the excess nonmonetary compensation is provided. However, in rare instances, the period of disallowance may continue if the nonmonetary compensation is so valuable that it cannot fairly be considered the type of token of appreciation anticipated by the exception (72 FR 51059).

For example, if a hospital gifts a physician an expensive new car on December 30th of a calendar year, the compensation arrangement that results from the transfer of the remuneration would not appropriately be considered to end the next day. Rather, the remuneration should be viewed as a likely exchange for the physician's future referrals. Under our final regulation at § 411.351, it is clear that referrals are not items or services for which an entity may provide remuneration. In essence, with respect to the provision of nonmonetary compensation that is not a fair market value exchange for items or services and the amount of which is over the annual limit at § 411.357(k)(1), there is a rebuttable presumption that the period of disallowance ends no later than December 31st of the year in which the excess nonmonetary compensation is provided.

There is no need to adopt the commenter's suggestion with respect to the period of disallowance for the payment of excess nonmonetary compensation. Comment. A large number of commenters expressed appreciation for our proposed rule guidance on remedying payment discrepancies that occur during the course of a compensation arrangement. Most of these commenters agreed that, if a party identifies an administrative or operational error or a payment discrepancy during the course of an arrangement, the parties do not fall out of compliance with the requirements of an applicable exception if the payment discrepancy is remedied prior to the end of the arrangement.

Response. As described more fully above and in our responses to other comments, an effective compliance program should enable parties to identify administrative and operational errors that result in payment discrepancies under a compensation arrangement. When payment discrepancies are identified and rectified in a timely manner, we do not believe that the discrepancies cause a compensation arrangement to be out of compliance with the requirements of the applicable exception during the time that they existed. We are codifying in regulation at new § 411.353(h) a special rule for reconciling compensation to confirm our policy view.

Comment. One commenter noted that, ideally, the impact of an effective compliance program will be the identification of payment discrepancies within the term of an arrangement, providing the parties an opportunity to cure the error. According to this commenter, however, even an effective compliance program may not identify all errors within the term of an arrangement. The commenter requested that CMS provide a grace period for correcting unintentional errors that would begin upon termination or expiration of an arrangement, expressing concern, along with other commenters, with a policy that does not allow for the correction of errors that are discovered after the termination or expiration of an arrangement.

Some of these commenters asserted that it is unfair that errors discovered after several years of an ongoing multi-year arrangement could be corrected to “right Start Printed Page 77584the ship,” while errors discovered even 1 week after the expiration of a 1-year arrangement could not. One commenter suggested that, provided that the parties to an arrangement correct any payment discrepancies within 1 year of the termination or expiration of an arrangement, we should consider the arrangement to have satisfied the requirements of the applicable exception for its entire duration. Other commenters asserted that “retroactive curing” of an arrangement (or “turning back the clock”) should be permitted at any time. Response.

In Phase II, when we finalized the exception for temporary noncompliance at § 411.353(f), we stated that it was applicable in those instances where an arrangement has fully satisfied the requirements of another exception for at least 180 consecutive calendar days, but has fallen out of compliance with that exception for reasons beyond the control of the entity. We also stated that parties must take steps to rectify their noncompliance or otherwise comply with the statute as expeditiously as possible under the circumstances (69 FR 16057). In regulation, we provided that the period of time in which an entity must rectify the noncompliance must not exceed 90 consecutive calendar days. By the end of the 90-day exception period, parties must either comply with another exception or have terminated their otherwise prohibited financial relationship.

We continue to believe in the importance of promptly rectifying noncompliance in those instances where the noncompliance occurs for reasons beyond the control of the entity. Our belief that parties should promptly reconcile known payment discrepancies that occur through their own administrative or operational errors in order to maintain compliance with the requirements of an exception is a logical extension of this policy. In Phase II, we also stated that the exception for temporary noncompliance is not intended to allow an entity to submit otherwise prohibited claims or bills when it purposefully takes or omits to take actions or engages in conduct that causes its financial relationship to be noncompliant with the requirements of an exception (69 FR 16057). It is our view that the knowing failure to comply with the terms of an arrangement negotiated by the parties is a purposeful or affirmative action or omission of the parties.

It does not qualify as a reason beyond the control of the entity, and we are not persuaded by the commenters that we should allow a period of time for reconciliation of known payment discrepancies that exceeds the period for resolving temporary noncompliance occurring for reasons beyond the control of the entity. Specifically, permitting parties to reconcile payment discrepancies for a period of 1 year following the expiration or termination of their compensation arrangement or for an unlimited period of time would present a risk of program or patient abuse. Allowing a lengthy or unlimited period of time to correct payment discrepancies, especially in the case of significant payment discrepancies, would serve as a disincentive for parties to monitor arrangements for compliance with the physician self-referral law through an effective compliance program. Therefore, we decline to adopt the commenters' suggestions regarding the length of the reconciliation period.

However, we are persuaded that a limited “grace period” to reconcile payment discrepancies following the expiration or termination of a compensation arrangement would not pose a risk of program or patient abuse. We believe that allowing the same period of time to reconcile payment discrepancies as the period to rectify noncompliance due to reasons beyond the control of the entity—but no longer—would not pose a risk of program or patient abuse. Therefore, we are finalizing at § 411.353(h) a special rule that permits an entity to submit claims or bills for designated health services and permits payment to be made to the entity for such designated health services if all payment discrepancies under the parties' arrangement (or the arrangement between the entity and the immediate family member of the physician) are reconciled within 90 consecutive calendar days of expiration or termination of the compensation arrangement, and following the reconciliation, the entire amount of remuneration for items or services has been paid as required under the terms and conditions of the arrangement. To maintain consistency with other regulations that require remedial action within certain timeframes, the regulation specifies that the reconciliation must occur within the specified number of consecutive calendar days.

Under the special rule for reconciling compensation at final § 411.353(h), if the parties to a compensation arrangement reconcile all payment discrepancies in the arrangement within this timeframe, the entity may submit a claim or bill and payment may be made to the entity for designated health services referred by the physician, assuming their arrangement satisfied all the requirements of an applicable exception during the entire duration of the arrangement, after considering the reconciliation. Comment. One commenter asserted that a result of our policy that payment discrepancies reconciled during the course of an arrangement will prevent the arrangement from being considered out of compliance with the requirements of an exception to the physician self-referral law is that parties will continue arrangements they would otherwise wish to terminate in order to keep the arrangement “live” or ongoing so that identified payment discrepancies may be reconciled. Response.

The flexibility provided under the final special rule for reconciling compensation at § 411.353(h) should provide parties sufficient time to reconcile identified payment discrepancies without requiring the continuation of arrangements the parties no longer wish to have. Comment. A few commenters asserted that it is unfair that parties could discover an error in the first few months of a long-term arrangement but not have to correct it until the end of the arrangement, yet parties that discover an error after the termination or expiration of an arrangement would be unable to take even immediate action to cure it in order to maintain compliance with the physician self-referral law. Response.

We believe the new special rule at § 411.353(h) addresses the latter part of the commenter's concern. However, the commenter's assumption that parties could discover an error in the first few months of a long-term arrangement and suffer no consequences under the physician self-referral law if they wait until the end of the arrangement to reconcile the discrepancies is incorrect. Although the new special rule for reconciling compensation at § 411.353(h) allows an entity to avoid violating the billing prohibition of the physician self-referral law if the parties reconcile all payment discrepancies under their arrangement within 90 consecutive calendar days following the expiration or termination of the arrangement, parties that fail to reconcile known payment discrepancies risk establishing a second financial relationship (for example, through the forgiveness of debt or the provision of an interest-free loan) that must satisfy the requirements of an applicable exception in order to avoid the prohibitions of the physician self-referral law. If the payment discrepancy or the failure to reconcile it (that is, recover excess compensation or collect Start Printed Page 77585compensation owed) is significant enough to give rise to a separate financial relationship, that financial relationship must satisfy the requirements of an applicable exception once it exists.

The commencement date of the second financial relationship depends on the facts and circumstances, such as the amount of excess compensation or unpaid compensation and how long the known overpayment or underpayment of the compensation has continued. For example, a large amount of excess compensation that is not recovered may give rise to a financial relationship in a shorter amount of time than a very small amount of unrecovered excess compensation or unpaid compensation. Thus, even if the entity is deemed not to have violated the physician self-referral law's billing prohibition once the original compensation arrangement is ultimately reconciled, the entity would be prohibited from submitting a claim or bill for a designated health service referred by the physician beginning at the point where the second financial relationship exists. Comment.

One commenter suggested that we allow parties an established amount of time after the end of a financial relationship to cure noncompliance with one or more requirements of an applicable exception. The commenter did not expressly limit its suggestions to payment discrepancies due to clerical errors or other unintentional deviation from the terms of a compensation arrangement. The commenter asserted that this approach would acknowledge the realities of the rhythms of compliance programs and recognize that it can take some time to identify, quantify, and cure defects in a financial relationship with a referring physician. The commenter claimed that this approach would not absolve an entity of its responsibility to structure its financial relationships with physicians to comply with the requirements of an applicable exception or to monitor its administration of those relationships.

Response. We are not adopting the commenter's suggestion to allow the correction of any aspect of a compensation arrangement that fails to satisfy the requirement of the exception upon which the parties rely. As we understand the commenter's suggested approach, parties would be able to retroactively restructure compensation arrangements that failed to satisfy the requirements of an applicable exception for any reason. This approach would allow parties to retroactively restructure compensation terms to comply with fair market value requirements or apply a different formula for the compensation so that it does not run afoul of the volume or value standard.

To the extent the commenter was suggesting this approach only with respect to the types of errors we discussed in the proposed rule, we believe our final policy addresses the commenter's concerns. Comment. One commenter requested clarification whether a hospital that has paid a physician excess compensation due to a technical error could “cure” the error by offsetting the amount to be recouped against future compensation over multiple years to alleviate hardship and navigate complex state employment laws related to wage recoupment and penalties charged to employees. Response.

The special rule for reconciling compensation at final § 411.353(h) requires that the reconciliation of payment discrepancies occurs no later than 90 consecutive calendar days following the expiration or termination of a compensation arrangement. The commenter's inquiry relates to an ongoing compensation arrangement between the hospital and the physician. In such circumstances, the payment discrepancy could be recovered through an offset against future compensation. However, if the parties wish to ensure that their compensation arrangement is deemed to satisfy the requirements of an applicable exception throughout its entire duration, if their compensation arrangement expires or terminates before the entire amount of the payment discrepancy is recouped, the remaining amounts must be recouped within 90 consecutive calendar days following the expiration or termination of a compensation arrangement.

Comment. One commenter expressed concern with what it interpreted as a mandate for a party to recover any excess payments it has made in order to achieve compliance with the physician self-referral law. The commenter discussed the difficulty entities face when trying to recover excess payments or collect unmade payments from physicians and physician practices. The commenter explained that disputes over whether excess payments have been made or are owed are common and contribute to the difficulty entities face recovering excess payments or underpayments in order to achieve compliance.

The commenter suggested that requiring the party to which money is owed to make a “reasonable effort” to be made whole would be sufficient, with the determination of “reasonable effort” dependent on the facts and circumstances of the arrangement, such as the amount of money at issue. The commenter asserted that, if a large amount of money is at issue, a reasonable effort might very well require a hospital, for example, to sue a physician or physician practice, but a lawsuit might not be reasonable for a dispute over a small amount of money or where the costs of the action would dwarf the amount owed. The commenter also asserted that a compromise of the amount owed may be justified if the physician or physician practice has equitable or legal defenses. Response.

As we explained in the proposed rule, the now-removed period of disallowance rules were never intended as anything more than deeming provisions so that parties could know the absolute latest date that the period of disallowance would end when the reason for the failure of their compensation arrangement to satisfy the requirements of an exception is the payment of excess compensation or the failure to pay all amounts due under the arrangement (84 FR 55809). The now-removed period of disallowance provisions never stated that a party must recover any excess payments it has made or recover any underpayment owed to it in order to achieve compliance with the physician self-referral law, nor do we adopt such a policy here. However, we reiterate the following points. First, the new special rule for reconciling compensation arrangements permits the submission of a claim or bill and the payment of the claim or bill for a designated health service even if a compensation arrangement does not operate as intended with respect to its compensation terms, provided that.

(1) No later than 90 consecutive calendar days following the expiration or termination of a compensation arrangement, the entity and the physician (or immediate family member of a physician) that are parties to the compensation arrangement reconcile all discrepancies in payments under the arrangement such that, following the reconciliation, all remuneration for items or services has been paid as required under the terms and conditions of the arrangement. And (2) except for the discrepancies in payments described in paragraph (h)(1), the compensation arrangement fully complies with an applicable exception. This regulation assures an entity that its claims were not prohibited under section 1877(a)(1) of the Act or our regulations at § 411.353(b). However, it is a deeming provision only and does not require the entity to reconcile payment discrepancies.

Second, if payment discrepancies are not reconciled within 90 consecutive calendar days following the expiration Start Printed Page 77586or termination of a compensation arrangement, the parties may not “unring the bell” on any noncompliance resulting from the payment discrepancies. In the event that the compensation arrangement failed to satisfy the requirements of an applicable exception due to discrepancies in payment as required under the terms and conditions of the arrangement, the period of noncompliance would begin at the time the payment discrepancies caused the arrangement to fail to satisfy the requirements of the exception. As described in response to other comments below, not all payment discrepancies necessarily result in noncompliance with the physician self-referral law. Third, although recoupment of amounts due to payment discrepancies is not required to show that the period of disallowance has ended, referrals are prohibited and claims may not be submitted during the period that a financial relationship fails to satisfy the requirements of an applicable exception.

If a physician was regularly paid more for services called for under an arrangement (due to an overpayment) or regularly paid less for items or services actually received (due to failure to pay all amounts owed), and the discrepancies were not reconciled during the course of the arrangement (or, under the policies finalized in this final rule, within 90 consecutive calendar days of the termination or expiration of the arrangement), from the point of the variance on, the arrangement would not satisfy the requirements of an applicable exception. Parties are free to demonstrate that a financial relationship has ended as they see fit. As always, in the absence of a financial relationship, the physician self-referral law is not implicated. Fourth, we do not believe that “reasonable efforts” to recover excess payments or collect amounts due are equivalent to the reconciliation of payment discrepancies.

A policy requiring that the parties make “reasonable efforts” would present compliance and enforcement challenges, and would not provide for the certainty that reduces burden on stakeholders. Moreover, we do not believe that the mere undertaking of “reasonable efforts” to recover excess payments or collect amounts due is sufficient to warrant a deeming provision allowing the submission of claims or bills for designated health services and the payment for such services where parties make “reasonable efforts” to recover excess payments or collect amounts due under their compensation arrangement. Finally, as discussed in section II.D.2.e. Of this final rule, parties to a legitimate dispute regarding a compensation arrangement may utilize the exception for isolated transactions at § 411.357(f) to protect the compensation arrangement that arises from the forgiveness of an obligation related to the settlement.

However, the settlement of a dispute over payment discrepancies that confers remuneration on the party that is relieved of some or all of its obligation to refund excess payments or pay amounts due under the original arrangement does not retroactively return the original arrangement to compliance with the requirements of an exception. Comment. A few commenters questioned our analysis that the actual activities and remuneration between parties constitutes the arrangement that must be analyzed for compliance with the physician self-referral law. These commenters argued that the “arrangement” is what the parties intended (as referenced in a written agreement or otherwise).

The commenters also stated a belief that this position is unsupported by the statute. Another commenter asserted that, once the parties have memorialized in writing an arrangement that would satisfy the requirements of an applicable exception, if the arrangement satisfied all the requirements of an applicable exception at its inception, the referral and billing prohibitions of the physician self-referral law will not and cannot attach during the course of the arrangement. Response. As we stated in Phase II and continue to believe, section 1877 of the Act is clearly intended to make entities responsible for monitoring their compensation arrangements with physicians (69 FR 16112).

Unless a compensation arrangement between a physician (or immediate family member of a physician) and an entity satisfies the requirements of an applicable exception, section 1877 of the Act and § 411.353(a) and (b) of our regulations prohibit a physician from making a referral for designated health services and prohibit an entity from submitting a claim to Medicare or bill any individual, third party payor, or other entity for the designated health services furnished pursuant to a prohibited referral. As set forth in section 1877(h)(1) of the Act, the term “compensation arrangement” means any arrangement involving remuneration between a physician (or an immediate family member of such physician) and an entity. The regulation at § 411.354(c) specifies that the arrangement involving remuneration may be direct or indirect, but otherwise essentially incorporates the statutory definition. Neither of these definitions limits a compensation arrangement to that described in written documentation.

Although many of the exceptions to the physician self-referral law require that the arrangement between the parties is documented in writing in order to avoid the law's prohibitions, the actions of the parties, regardless of what they have documented an arrangement to be, constitute the compensation arrangement between them. The commenters assert that, once a compensation arrangement is documented in writing and satisfies the remaining requirements of an applicable exception, the referral and billing prohibitions of the physician self-referral law will not and cannot attach from that point forward and during the course of the arrangement, even if the parties deviate from the terms and conditions—including the payment terms and conditions—of the documented arrangement. If this were the case, parties would only need to document an arrangement that, on its face, would satisfy the requirements of an applicable exception. As noted, the physician self-referral law requires that, where a compensation arrangement exists between a physician (or an immediate family member of the physician) and the entity to which the physician makes referrals for designated health services, unless the compensation arrangement satisfies all the requirements of an applicable exception, the physician is prohibited from making referrals and the entity from submitting claims for designated health services.

The physician self-referral law does not permit the physician to make referrals and the entity to submit claims for designated health services merely because an arrangement they documented would comply with the requirements of an applicable exception. The actions of the parties, regardless of what they have documented an arrangement to be, constitute the compensation arrangement between them. The commenter's assertion that the actual arrangement that exists between parties need not satisfy the requirements of an exception and the law's prohibitions would not apply as long as they have documentation of some arrangement they state they intended, if true, would reduce the statute to a paper tiger. To be clear, for purposes of determining compliance with the physician self-referral law, the Start Printed Page 77587arrangement under which the parties operate is analyzed to determine whether it satisfies all the requirements of an applicable exception.

As discussed in the responses to other commenters, a slight deviation from the terms set forth in the written documentation of an arrangement may not result in a different actual arrangement between the parties. Comment. Some commenters expressed concern with a policy under which—they assumed—even a single mistake, for instance if a check for single rental payment during an arrangement was written for the wrong amount, would turn the original arrangement into a different actual arrangement. One of these commenters stated its disagreement that a mere mistaken payment of remuneration creates a financial relationship within the meaning of the physician self-referral law, but conceded that, if an entity discovers that it has overpaid a physician or has been underpaid by a physician and fails to make reasonable efforts to recover the excess compensation or recover the shortfall, a new financial relationship in the form of a gift (that is, the forgiveness of debt) may arise, for which there would be no applicable exception under the physician self-referral law.

Response. We did not state in the proposed rule, nor is it our view, that every error or mistake will cause a compensation arrangement to fail to satisfy the requirements of an exception or that every error or mistake must be corrected in order to maintain compliance with the physician self-referral law. However, if parties identify an error that would cause the compensation arrangement to fail to satisfy the requirements of an exception to the physician self-referral law, they cannot simply “unring the bell” by correcting it at some date after the expiration or termination of the arrangement. Given the individual commenter's concession that the failure to make reasonable efforts to recover excess compensation or a shortfall in payment may establish a new financial relationship in the form of a gift (that is, forgiveness of debt) for which there would be no applicable exception under the physician self-referral law, we assume that commenter's assertion that a mere mistaken payment of remuneration under a compensation arrangement does not create a second, separate financial relationship within the meaning of the physician self-referral law refers to the situation in which the parties never identify the mistaken payment (or underpayment) and are, therefore, unaware of the need to reconcile any payment discrepancies.

We agree that not all transfers of remuneration create compensation arrangements. (See 66 FR 921 and 69 FR 16113.) In addition, theft generally does not create a compensation arrangement between the thief and the victim. For example, the theft of items, the use of office space that is not included in a lease, and the use of equipment during periods outside those included in a lease would not create a compensation arrangement between the party whose assets have been coopted and the party that took them or used them without permission or payment. Further, a slight deviation from the operation of the arrangement as anticipated and documented (where written documentation is required under the applicable exception) that results in the payment of too much or too little compensation under an arrangement—for example, in the case of a single rental payment over the course of an entire lease arrangement that was paid in the wrong amount—may not require reconciliation by the party receiving the overpayment or failing to make the full payment due, especially if the parties are not aware of the discrepancy.

However, where a party is aware of the mistakes (or payment discrepancies) in the operation of its arrangements, as the commenter stated, the failure to correct the mistake may indeed establish a second financial relationship between the parties, depending on the facts and circumstances. 4. Ownership or Investment Interests (§ 411.354(b)) a. Titular Ownership or Investment Interest (§ 411.354(b)(3)(vi)) In the FY 2009 IPPS final rule, we introduced the concept of titular ownership or investment interests in the context of our rulemaking pertaining to the “stand in the shoes” provisions at § 411.354(c) (73 FR 48693 through 48699).

Under the provisions finalized in the FY 2009 IPPS final rule, for purposes of determining whether a compensation arrangement between an entity and a physician organization is deemed to be a compensation arrangement between the entity and the physician owners, employees, and contractors of the organization, a physician whose ownership or investment interest in the physician organization is merely titular in nature is not required to stand in the shoes of the physician organization (73 FR 48694). We explained that an ownership or investment interest is considered to be “titular” if the physician is not able or entitled to receive any of the financial benefits of ownership or investment, including, but not limited to, the distribution of profits, dividends, proceeds of sale, or similar returns on investment (73 FR 48694). The concept of titular ownership or investment interests set forth in the FY 2009 IPPS final rule applied only to the stand in the shoes provisions at § 411.354(c) which pertain to compensation arrangements. Because we were responding to a comment on the 1998 proposed rule (and the Phase I comments thereafter) regarding the application of the exceptions for compensation arrangements, we did not propose to extend the concept of titular ownership or investment interests to the provisions at § 411.354(b) pertaining to ownership or investment interests.

Separately, we had previously concluded in a 2005 advisory opinion (CMS-AO-2005-08-01) that, for purposes of section 1877(a) of the Act, physician-shareholders of a group practice who did not receive any of the purchase and ownership rights or financial risks and benefits typically associated with stock ownership would not be considered to have an ownership or investment interest in the group practice. In the proposed rule, we proposed to extend the concept of titular ownership or investment interests to our rules governing ownership or investment interests at § 411.354(b). We explained that, under proposed § 411.354(b)(3)(vi), ownership and investment interests would not include titular ownership or investment interests. Consistent with the FY 2009 IPPS final rule, a “titular ownership or investment interest” would be an interest that excludes the ability or right to receive the financial benefits of ownership or investment, including, but not limited to, the distribution of profits, dividends, proceeds of sale, or similar returns on investment.

As noted in the FY 2009 IPPS final rule, whether an ownership or investment interest is titular is determined by whether the physician has any right to the financial benefits through ownership or investment (73 FR 48694). We are finalizing § 411.354(b)(3)(vi) as proposed. The new regulation at § 411.354(b)(3)(vi) should afford providers and suppliers with greater flexibility and certainty under our regulations, especially in states where the corporate practice of medicine is prohibited. For the reasons similar to those stated in our advisory opinion CMS-AO-2005-08-01, namely that a physician with a titular ownership in an entity does not have a Start Printed Page 77588right to the distribution of profits or the proceeds of sale and, therefore, does not have a financial incentive to make referrals to the entity in which the titular ownership or investment interest exists, our interpretation and revised definition of “ownership or investment interest” does not pose a risk of program or patient abuse.

We are finalizing § 411.354(b)(3)(vi) as proposed, without modification. We received the following comment and our response follows. Comment. Nearly all the commenters that addressed the proposal to revise § 411.354(b)(3) supported excluding titular ownership from qualifying as an ownership or investment interest under § 411.354(b).

One commenter emphasized that the proposal, if finalized, would afford physicians with greater flexibility, especially in States where the corporate practice of medicine is prohibited. Response. We have long recognized that an interest in an entity that excludes the ability or right to receive the financial benefits of ownership should not be considered to constitute an ownership or investment interest for purposes of the physician self-referral law. (See CMS advisory opinion CMS-AO-2005-08-01.) Our proposal at § 411.354(b)(3)(vi) codifies this policy.

The policy we are explicitly articulating in regulatory text at § 411.354(b)(3)(vi) will provide stakeholders greater certainty under our regulations. We caution that any compensation arrangement between a physician and an entity in which the physician or an immediate family member of the physician holds only a titular ownership or investment interest must nonetheless satisfy all the requirements of an applicable exception in § 411.355 or § 411.357. B. Employee Stock Ownership Program (§ 411.354(b)(3)(vii)) We stated in the 1998 proposed rule that an interest in an entity arising through a retirement fund constitutes an ownership or investment interest in the entity for purposes of section 1877 of the Act (63 FR 1708).

Our interpretation was based on the premise that a retirement interest in an entity creates a financial incentive to make referrals to the entity. In Phase I, we reconsidered the issue and withdrew the statement regarding retirement interests that we made in the 1998 proposed rule (66 FR 870). As finalized in Phase I, § 411.354(b)(3)(i) excluded an interest in a retirement plan from the definition of “ownership or investment interest.” We stated that retirement contributions, including contributions from an employer, would instead be considered to be part of an employee's overall compensation. We made no changes to § 411.354(b)(3)(i) in Phase II.

However, after publishing Phase II, we received a comment stating that, contrary to our intent, some physicians were using their retirement plans to purchase or invest in other entities (that is, entities other than the entity that sponsored the retirement plan) to which the physicians were making referrals for designated health services. We made no changes to § 411.354(b)(3)(i) in Phase III, but proposed in the CY 2008 PFS proposed rule to address the potential abuse described by the commenter on Phase II (72 FR 38183). After reviewing the comments received in response to that proposal, in the FY 2009 IPPS final rule, we finalized changes to § 411.354(b)(3)(i) that restricted the retirement interest carve-out to an interest in an entity that arises from a retirement plan offered by the entity to the physician (or an immediate family member) through the physician's (or immediate family member's) employment with that entity (73 FR 48737 through 48738). Under the current regulation at § 411.354(b)(3)(i), if, through his or her employment by Entity A, a physician has an interest in a retirement plan offered by Entity A, any interest the physician may have in Entity A by virtue of his or her interest in the retirement plan would not constitute an ownership or investment interest for purposes of section 1877 of the Act.

On the other hand, if the retirement plan sponsored by Entity A purchased or invested in Entity B, the physician would have an interest in Entity B that would not be excluded from the definition of “ownership or investment interest” for purposes of the physician self-referral law. For the physician to make referrals for designated health services to Entity B, the ownership or investment interest in Entity B would have to satisfy the requirements of an applicable exception. We explained in the FY 2009 IPPS final rule that it would pose a risk of program or patient abuse to permit a physician to own another entity that furnishes designated health services (other than the entity which employs the physician) through his or her retirement plan, because the physician could then use the retirement interest carve-out to skirt the prohibitions of the physician self-referral law (73 FR 48737 through 48738). Since we published the 2009 IPPS final rule, stakeholders have informed us that, in certain cases, employers seeking to offer retirement plans to physician employees may find it necessary or practical, for reasons of Federal law, State law, or taxation, to structure a retirement plan using a holding company.

By way of example, assume a home health agency desires to sponsor a retirement plan for its employees and elects to establish such plan using a holding company whose primary asset will be the home health agency. To effectuate the retirement plan, the home health agency's assets are transferred to or purchased by the holding company, which then employs the physicians and other staff of the home health agency. The holding company sponsors the retirement plan for its employees, offering the employees (including physician employees) an interest in the holding company. Under our current regulation at § 411.354(b)(3)(i), the physician's interest in the holding company would not be considered an ownership or investment interest, because the physician is employed by the holding company, the holding company sponsors the retirement plan, and the physician's ownership interest in the holding company arises through the retirement plan sponsored by the holding company.

However, because the physician has an interest in the retirement plan that owns the holding company, and the holding company owns the home health agency, the physician has an indirect ownership or investment interest in the home health agency that would not be excluded under § 411.354(b)(3)(i) and may not satisfy the requirements of an applicable exception at § 411.356. It is our understanding that a retirement plan structure involving ownership of a holding company and indirect ownership of a legally separate entity (as defined at § 411.351) may be particularly advantageous or necessary in certain circumstances for the establishment of an employee stock ownership plan (ESOP). An ESOP is an individually designed stock bonus plan, which is qualified under Internal Revenue Code (IRC) section 401(a), or a stock bonus and a money purchase plan, both of which are qualified under IRC section 401(a), and which are designed to invest primarily in qualifying employer securities. It is our understanding that ESOPs must be structured to comply with certain safeguards under the Employee Retirement Income Security Act of 1974 (ERISA) (Pub.

L. 93-406), including certain nondiscrimination rules and vesting rules that, among other things, do not allow an employee to receive the value of his or her employer stocks held Start Printed Page 77589through the retirement plan until at least 1 year after separation from the employer. Given the statutory and regulatory safeguards that exist for ESOPs, we believe that an interest in an entity arising through participation in an ESOP merits the same protection from the physician self-referral law's prohibitions as an interest in an entity that arises from a retirement plan offered by that entity to the physician through the physician's employment with the entity. We do not believe that excluding from the definition of “ownership or investment interest” an interest in an entity that arises through participation in an ESOP qualified under IRC section 401(a) poses a risk of program or patient abuse, and we are finalizing our proposal at § 411.354(b)(3)(vii) to remove such interests from the definition of “ownership or investment interest” for purposes of section 1877 of the Act.

To provide regulatory flexibility in structuring retirement plans, § 411.354(b)(3)(vii) is not restricted to an interest in an entity that both employs the physician and sponsors the retirement plan. To illustrate our policy, assume that a holding company is owned by its employees, including physician employees, through an ESOP, and that the holding company owns a separate legal entity that furnishes designated health services (an “entity” for purposes of section 1877 of the Act). Under § 411.354(b)(3)(vii), for purposes of the physician self-referral law, the physician's interest in the ESOP will not constitute an ownership or investment interest in the holding company or the legally separate entity the holding company owns. As with the current retirement interest exclusion at § 411.354(b)(3)(i), employer contributions to the ESOP on behalf of an employed physician will be considered part of the physician's overall compensation and will have to meet the requirements of an applicable exception for compensation arrangements at § 411.357 or the physician's individual referrals must satisfy the requirements of an applicable exception in § 411.355.

In the proposed rule, we sought comments on whether the safeguards that are imposed by ERISA are sufficient for purposes of the physician self-referral law to ensure that an ownership or investment interest in an ESOP does not pose a risk of program or patient abuse and, if not, what additional safeguards we should include to ensure that such interests do not pose a risk of program or patient abuse. To prevent the kind of abuses identified by the commenter on Phase II, we sought comment as to whether it is necessary to restrict the number or scope of entities owned by an ESOP that would not be considered an ownership or investment interest of its physician employees. It is our understanding that an ESOP is designed to invest primarily in “qualifying employer securities,” but the ESOP may also invest in other securities. We sought comment on whether the exclusion from the definition of “ownership or investment interest” should apply only to an interest in an entity arising from an interest in “qualifying employer securities” that are offered to a physician as part of an ESOP.

Finally, we sought comment on whether the revision to § 411.354(b)(3)(vii) is necessary. That is, whether existing § 411.354(b)(3)(i) affords entities furnishing designated health services sufficient regulatory flexibility to structure nonabusive retirement plans, including ESOPs or other plans that involve holding companies (84 FR 55812). We are finalizing § 411.354(b)(3)(vii) as proposed, without modification. We received the following comment and our response follows.

Comment. Nearly all the commenters that addressed the proposal at § 411.354(b)(3)(vii) favored excluding an interest in an entity that arises by virtue of a physician's participation in an ESOP from the regulation regarding what constitutes an ownership or investment interests under § 411.354(b). Commenters stated that no additional safeguards or requirements are necessary. Two commenters pointed to specific safeguards related to ESOPs that are imposed by ERISA, which they asserted are sufficient to protect against program or patient abuse.

One of the commenters highlighted that ERISA requires a fiduciary to act with care, skill, prudence, and diligence under the circumstances of a prudent person acting in a similar capacity, and ESOPs are required to have an independent appraiser to establish value for all securities which are not readily tradable on a market. The other commenter emphasized that ESOPs are also regulated by the U.S. Department of Treasury. This commenter highlighted anti-abuse rules for ESOPs in section 409(p) of the Internal Revenue Code, which mandate broad-based employee ownership and establish strict repercussions for violations.

According to this commenter, since their enactment, these rules have been highly effective in ensuring that ESOPs serve their intended purpose and are not subject to abuse. Response. We are convinced by the commenters that the legal and regulatory protections applicable to ESOPs are sufficient to prevent program or patient abuse, and we are finalizing § 411.354(b)(3)(vii) without any additional requirements. We remind parties that employer contributions to the ESOP are considered part of an employee's overall compensation arrangement with his or her employer (see 66 FR 870).

Thus, when determining whether a compensation arrangement satisfies all the requirements of an applicable exception, including the requirements pertaining to fair market value and the volume or value of the physician's referrals, employer contributions to the ESOP must be considered as part of the employee's compensation under the arrangement. 5. Special Rules on Compensation Arrangements (§ 411.354(e)) In the CY 2008 PFS proposed rule, we proposed an alternative method for satisfying certain requirements of some of the exceptions in §§ 411.355 through 411.357 (72 FR 38184 through 38186). We explained that, although we do not have the authority to waive violations of the physician self-referral law, we do have the authority under section 1877(b)(4) of the Act to implement an alternative method for satisfying the requirements of an exception.

The proposed method would have required, among other things, that an entity self-disclose the facts and circumstances of the arrangement at issue and that CMS make a determination that the arrangement satisfied all but the “procedural or `form' requirements” of an exception (72 FR 38185). We cited the signature requirement of the exception for personal service arrangements at § 411.357(d)(1) as an example of a procedural or “form” requirement, and explained that the alternative method would not be available for violations of requirements such as compensation that is fair market value, set in advance, and not determined in any manner that takes into account the volume or value of a physician's referrals. In the FY 2009 IPPS final rule, we did not finalize the alternative method proposed in the CY 2008 PFS proposed rule. Instead, relying on our authority under section 1877(b)(4) of the Act, we finalized a rule for temporary noncompliance with signature requirements at § 411.353(g) (73 FR 48705 through 48709).

As finalized in the FY 2009 IPPS final rule, § 411.353(g) applied only to the signature requirement of an applicable exception Start Printed Page 77590in § 411.357. We declined to extend the special rule for temporary noncompliance to any other procedural or “form” requirement of an exception (73 FR 48706) or to noncompliance arising from “minor payment errors” (73 FR 48703). The special rule at § 411.353(g) permitted an entity to submit a bill and receive payment for a designated health service if the compensation arrangement between the referring physician and the entity fully complied with the requirements of an applicable exception at § 411.357, except with respect to the signature requirement, and the parties obtained the required signatures within 90 consecutive calendar days if the failure to obtain the signatures was inadvertent, or within 30 consecutive calendar days if the failure to obtain the signatures was not inadvertent (73 FR 48706). Entities were allowed to use the special rule at § 411.353(g) only once every 3 years with respect to the same physician.

We stated that we would evaluate our experience with the special rule at § 411.353(g) and that we may propose modifications, either more or less restrictive, at a later date (73 FR 48707). Subsequently, in the CY 2016 PFS final rule, we removed the distinction between failures to obtain missing signatures that were inadvertent and not inadvertent, thereby allowing all parties up to 90 consecutive calendar days to obtain the missing signatures (80 FR 71333). As discussed in further detail in this section of the final rule, following a revision to section 1877 of the Act, in the CY 2019 PFS final rule, we removed the provision limiting the use of the special rule at § 411.353(g) to once every 3 years with respect to the same physician (83 FR 59715 through 59717). In the CY 2016 PFS final rule, we clarified that the writing requirement of various exceptions in § 411.357 can be satisfied with a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties (80 FR 71314 through 71317).[] In response to our proposals regarding satisfaction of the writing requirement, one commenter requested that CMS permit a 60- or 90-day grace period for satisfying the writing requirement of an applicable exception, stating that such a grace period is needed for last minute arrangements between physicians and entities to which they refer patients for designated health services (80 FR 71316 through 71317).

In response, we noted that the special rule at § 411.353(g) applied only to temporary noncompliance with the signature requirement of an applicable exception, and we declined to extend the special rule to the writing requirement of various exceptions at § 411.357. We stated that a “grace period” for satisfying the writing requirement could pose a risk of program or patient abuse. For example, if the rate of compensation is not documented before a physician provides services to an entity, the entity could adjust the rate of compensation during the grace period in a manner that takes into account the volume or value of the physician's referrals (80 FR 71317). We added that an entity could not satisfy the set in advance requirement at the outset of an arrangement if the only documents stating the compensation term of an arrangement were generated after the arrangement began.

Finally, we reminded parties that, even if an arrangement is not sufficiently documented at the outset, depending on the facts and circumstances, contemporaneous documents created during the course of an arrangement may allow parties to satisfy the writing requirement and the set in advance requirement for referrals made after the contemporaneous documents were created (80 FR 71317). Section 50404 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123, enacted February 9, 2018) (BiBA) added provisions to section 1877(h)(1) of the Act pertaining to the writing and signature requirements in certain exceptions applicable to compensation arrangements.

As amended, section 1877(h)(1)(D) of the Act provides that the writing requirement in various exceptions applicable to compensation arrangements “shall be satisfied by such means as determined by the Secretary,” including by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties. Section 1877(h)(1)(E) of the Act created a statutory special rule for temporary noncompliance with signature requirements, providing that the signature requirement of an applicable exception shall be satisfied if the arrangement otherwise complies with all the requirements of the exception and the parties obtain the required signatures no later than 90 consecutive calendar days immediately following the date on which the compensation arrangement became noncompliant. In the CY 2019 PFS final rule, we finalized at § 411.354(e) a special rule on compensation arrangements, which codified in our regulations the clarification of the writing requirement found at section 1877(h)(1)(D) of the Act (83 FR 59715 through 59717). In addition, we removed the 3-year limitation on the special rule on temporary noncompliance with signature requirements at § 411.353(g)(2) in order to align the regulatory provision at § 411.353(g) with section 1877(h)(1)(E) of the Act.

We proposed, in the alternative, to delete § 411.353(g) in its entirety and to codify section 1877(h)(1)(E) of the Act in the newly created special rules on compensation arrangements at § 411.354(e). However, we declined to finalize the alternative proposal in the CY 2019 PFS final rule, because we believed it would be less disruptive to stakeholder compliance efforts to amend already-existing § 411.353(g). As stated in our proposed rule, we have reconsidered our policy on temporary noncompliance with the signature and writing requirements of various compensation arrangement exceptions (84 FR 55813 through 55814). In our administration of the SRDP, we have reviewed numerous compensation arrangements that fully satisfied all the requirements of an applicable exception, including requirements pertaining to fair market value compensation and the volume or value of referrals, except for the writing or signature requirements.

In many cases, there are short periods of noncompliance with the physician self-referral law at the outset of a compensation arrangement, because the parties begin performance under the arrangement before reducing the key terms and conditions of the arrangement to writing. As long as the compensation arrangement otherwise meets all the requirements of an applicable exception, and the parties memorialize the arrangement in writing and sign the written documentation within 90 consecutive calendar days, we do not believe that the arrangement poses a risk of program or patient abuse. Therefore, it is appropriate to provide entities and physicians flexibility under our rules to satisfy the writing or signature requirement of an applicable exception within 90 consecutive calendar days of the inception of a compensation arrangement. Relying on our authority at section 1877(h)(1)(D) of the Act, which grants the Secretary the authority to determine the means by which the writing requirement of a compensation arrangement exception may be satisfied, and section 1877(h)(1)(E) of the Act, Start Printed Page 77591which establishes a statutory rule for temporary noncompliance with signature requirements, we proposed to create a special rule for noncompliance with the writing or signature requirement of an applicable exception for compensation arrangements.

Specifically, we proposed to delete § 411.353(g) in its entirety, codify the statutory rule for noncompliance with signature requirements at section 1877(h)(1)(E) of the Act in a special rule on compensation arrangements at § 411.354(e)(3), and incorporate a special rule for noncompliance with the writing requirement into the new special rule at § 411.354(e)(3). In this final rule, the special rule on writing and signature requirements is designated as § 411.354(e)(4) and a new rule on electronic signatures is included in our regulations at § 411.354(e)(3). Under the special rule for writing and signature requirements at § 411.354(e)(4), the writing requirement or the signature requirement is deemed to be satisfied if. (1) The compensation arrangement satisfies all the requirements of an applicable exception other than the writing or signature requirement(s).

And (2) the parties obtain the required writing or signature(s) within 90 consecutive calendar days immediately after the date on which the arrangement failed to satisfy the requirement(s) of the applicable exception. A party may rely on § 411.354(e)(4) if an arrangement is neither in writing nor signed at the outset, provided both the required writing and signature(s) are obtained within 90 consecutive calendar days and the arrangement otherwise satisfied all the requirements of an applicable exception. We remind readers that, as we explained in the CY 2016 PFS final rule and subsequently codified at § 411.354(e)(2), a single formal written contract is not necessary to satisfy the writing requirement in the exceptions to the physician self-referral law (80 FR 71314 through 71317). Depending on the facts and circumstances, the writing requirement may be satisfied by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties.

Thus, parties to an arrangement would have 90 consecutive calendar days to compile the collection of documents if the parties determine to show compliance with the writing requirement in this manner. We note that, because parties must compile the documents that evidence their arrangement within 90 consecutive calendar days of the commencement of the arrangement, if an arrangement expires or is terminated before the compilation is complete or the end of the “grace period,” whichever comes first, the parties may not rely on the special rule at § 411.354(e)(4) to establish compliance with the physician self-referral law for their arrangement. However, depending on the facts and circumstances, the new exception for limited remuneration to a physician at § 411.357(z), which does not include a writing or signature requirement, might be available to protect a short-term arrangement. We stressed in the proposed rule and reiterate here that our proposal to permit parties up to 90 consecutive calendar days to satisfy the writing requirement of an applicable exception does not amend, nor does it affect, the requirement under various exceptions in § 411.357 that compensation must be set in advance.

The amount of or formula for calculating the compensation must be set in advance and the arrangement must satisfy all other requirements of an applicable exception, other than the writing or signature requirements, in order for parties to an arrangement to establish compliance with the physician self-referral law by relying on § 411.354(e)(4). Section 1877(h)(1)(D) of the Act provides the Secretary with the authority to determine the means by which the writing requirement may be satisfied, but it does not provide the Secretary similar authority with respect to the set in advance requirement. Moreover, we believe that the set in advance requirement is necessary to prevent parties from retroactively adjusting the amount of compensation paid under an arrangement in any manner that takes into account the volume or value of a physician's referrals or the other business generated by the physician over the course of the arrangement, including the first 90 days of the arrangement. In the proposed rule, we did not propose to amend the special rule on compensation that is considered to be set in advance at § 411.354(d)(1), though we did clarify that § 411.354(d)(1) is a deeming provision, not a requirement (84 FR 55782).

As explained in more detail below, in response to comments, we are finalizing certain modifications to the special rule at § 411.354(d)(1), including codifying requirements at § 411.354(d)(1)(ii) for modifying the compensation (or formula for determining the compensation) during the course of an arrangement. The new regulation related to modifying compensation terms during the course of an arrangement requires that the modified compensation (or formula for determining compensation) is set out in writing before the furnishing of items or services for which the modified compensation is to be paid, and it specifically provides that parties do not have 90 days under § 411.354(e)(4) to reduce the modified compensation terms to writing. We emphasize that the requirements in new § 411.354(d)(1)(ii), including the writing requirement, apply only when the parties modify the compensation (or formula for determining compensation) during the course of an arrangement. In this final rule, the current special rule at § 411.354(d)(1) is redesignated as § 411.354(d)(1)(i).

To underscore that this rule is merely an optional “deeming provision” and not a requirement, we are replacing the phrase “is considered `set in advance' ” with “is deemed to be `set in advance'.” We are also deleting the phrase “and may not be changed or modified during the course of the arrangement in any manner that takes into account the volume or value of referrals or other business generated by the referring physician,” because the requirements for modifying the compensation are codified in this final rule at § 411.354(d)(1)(ii). Under § 411.354(d)(1)(i), compensation is deemed to be set in advance if the compensation is “set out in writing before the furnishing of items or services” and the other requirements of § 411.354(d)(1)(i) are met. In the proposed rule, we stated that, because the special rule on the set in advance requirement at § 411.354(d)(1) is an optional deeming provision and not a requirement, in order to satisfy the set in advance requirement included in various exceptions in § 411.357, it is not necessary that the parties reduce the compensation to writing before the furnishing of items or services. Given the writing requirement in the new rule at § 411.354(d)(1)(ii) on modifying compensation during the course of an arrangement, we are qualifying this statement in this final rule.

As finalized in this rule, compensation may be set in advance even if it is not set out in writing before the furnishing of items or services as long as the compensation is not modified at any time during the period the parties seek to show the compensation was set in advance. For example, assume that the parties to an arrangement agree on the rate of compensation before the furnishing of items or services, but do not reduce the compensation rate to writing at that point in time. Assume further that the first payment under the arrangement is documented and that, under § 411.354(e)(4), during the 90-day period after the items or services are Start Printed Page 77592initially furnished, the parties compile sufficient documentation of the arrangement to satisfy the writing requirement of an applicable exception. Finally, assume that the written documentation compiled during the 90-day period provides for a rate of compensation that is consistent with the documented amount of the first payment, that is, the rate of compensation was not modified during the 90-day period.

Under these specific circumstances, we would consider the compensation to be set in advance. More broadly speaking, records of a consistent rate of payment over the course of an arrangement, from the first payment to the last, typically support the inference that the rate of compensation was set in advance. On the other hand, under § 411.354(d)(1)(ii), if the parties modify the compensation (or formula for determining the compensation) during the 90-day period (or thereafter), the modified compensation (or formula for determining the compensation) must be set out in writing before the furnishing of items or services for which the modified compensation is to be paid. To the extent that our preamble discussion in the CY 2016 PFS final rule suggested that the rate of compensation must always be set out in writing before the furnishing of items or services in order to meet the set in advance requirement of an applicable exception, we are retracting that statement (80 FR 71317).

We noted in the proposed rule and reiterate here that there are many ways in which the amount of or a formula for calculating the compensation under an arrangement may be documented before the furnishing of items or services (84 FR 55815). It is not necessary that the document stating the amount of or a formula for calculating the compensation, taken by itself, satisfies the writing requirement of the applicable exception. The document stating the amount of or a formula for calculating the compensation may be one document among many which, taken together, constitute a collection of documents sufficient to satisfy the writing requirement of the applicable exception as interpreted at § 411.354(e)(2). For example, depending on the facts and circumstances, informal communications via email or text, internal notes to file, similar payments between the parties from prior arrangements, generally applicable fee schedules, or other documents recording similar payments to or from other similarly situated physicians for similar items or services, may be sufficient to establish that the amount of or a formula for calculating the compensation was set in advance before the furnishing of items or services.

Even if the amount of or a formula for calculating the compensation is not set in advance, depending on the facts and circumstances, the parties may be able to rely on the new exception for limited remuneration to a physician at § 411.357(z). Under § 411.357(z), if an entity initially pays a physician for services utilizing the exception for limited remuneration to a physician and the parties subsequently decide to continue the arrangement utilizing an exception that requires the compensation to be set in advance, such as the exception for personal service arrangements at § 411.357(d)(1), depending on the facts and circumstances, the parties may be able to use documentation of the initial payments made while utilizing § 411.357(z) to establish that the amount of or a formula for calculating the compensation was set in advance before the furnishing of services under the subsequent personal service arrangement. In the proposed rule, we clarified our longstanding policy that an electronic signature that is legally valid under Federal or State law is sufficient to satisfy the signature requirement of various exceptions in our regulations and sought comments on whether we should codify this policy in our regulations. We also noted that the collection of writings that parties may rely on under § 411.354(e)(2) to satisfy the writing requirement of our exceptions may include documents and records that are stored electronically (84 FR 55815).

In response to commenters, we are codifying a new special rule for electronic signatures at § 411.354(e)(3). The special rule on writing and signature requirements, which was proposed at § 411.354(e)(3), will be designated as § 411.354(e)(4). While we are not codifying our policy on electronic documents, we are reaffirming in this final rule our policy that the documents that may be used to satisfy the writing requirement under § 411.354(e)(2) include electronically stored documents. After reviewing the comments, we are finalizing the special rule for writing and signature requirements without modification at § 411.354(e)(4).

In addition, to clarify the set in advance requirement in various exceptions and to prevent program or patient abuse, we are finalizing requirements for modifying compensation (or the formula used to calculate compensation) during the course of an arrangement at § 411.354(d)(1)(ii). For modified compensation under an arrangement to be set in advance, it must satisfy these requirements. We are also finalizing a special rule for electronic signatures at § 411.354(e)(3), codifying our longstanding policy that an electronic signature that is valid under Federal or State law is sufficient to satisfy the signature requirement of various physician self-referral law exceptions. We received the following comments and our responses follow.

Comment. We received nearly unanimous support for our proposal to allow parties up to 90 consecutive calendar days to satisfy the writing and signature requirements of various physician self-referral law exceptions. Commenters stated that the proposal, if finalized, would reduce administrative burden associated with the documentation requirements of the exceptions to the physician self-referral law, provide flexibility in situations where an arrangement begins before key terms and conditions are reduced to writing, and allow entities to avoid so-called technical noncompliance that may lead to disclosures of nonabusive arrangements to the SRDP. Response.

We agree with the commenters that the policy as finalized affords greater flexibility and will reduce the administrative burden associated with the writing and signature requirements. We believe that, with the clarification of the set in advance requirement detailed below, the special rule on writing and signature requirements at § 411.354(e)(4) will not pose a risk of program or patient abuse, and we are finalizing it as proposed. Comment. Several commenters supported our proposal to allow parties additional time to obtain required writings and signatures, but encouraged us to adopt a 120- or 180-day period instead of the proposed 90-day period for obtaining required writings and signatures.

According to some commenters, if, as required under the proposed special rule, a compensation arrangement complies with all the requirements of an applicable exception except for the writing and signature requirements, a 180-day grace period for compliance with the writing and signature requirements poses a low risk of program or patient abuse. One commenter stated that a grace period of 120 days is necessary for a large health care system to obtain required writings and signatures, given the large number of contracts the system must review and the time it takes for staff to review the contracts. Another commenter stated that small practices may need up to 120 days to comply with the writing and signature requirements.Start Printed Page 77593 Response. We decline to extend the special rule to allow parties up to 120 or 180 days to comply with the writing and signature requirements.

With respect to the signature requirement, section 1877(h)(1)(E) of the Act currently provides for a period of 90 consecutive calendar days for parties to obtain missing signatures, and we are not persuaded that we could extend the period to 120 or 180 days under section 1877(b)(4) of the Act without posing a risk of program or patient abuse. Regarding the writing requirement, we believe that the requirement is important for ensuring transparency in potentially lucrative compensation arrangements, and we believe that extending the grace period to 120 or 180 days could pose a risk of program or patient abuse. We believe that allowing a period of 90 consecutive calendar days to satisfy the writing and signature requirements sufficiently addresses legitimate concerns regarding the administrative burden of the writing and signature requirements and inadvertent “technical” noncompliance, especially in light of the clarification of the writing requirement at § 411.354(e)(2) and the new exception for limited remuneration to a physician at § 411.357(z), which may be used to protect an arrangement at its inception while parties collect required documentation and signatures to satisfy the writing and signature requirements of other exceptions on a going-forward basis. Commenter.

One commenter objected on both legal and policy grounds (the policy objections are discussed in the next comment and response) to the proposal to allow parties up to 90 consecutive calendar days to document arrangements in writing, especially for personal service arrangements excepted under § 411.357(d). The commenter stated that CMS lacks the legal authority to permit parties up to 90 consecutive calendar days to document an arrangement in writing. The commenter maintained that the codification of the 90-day signature rule in the BiBA expressly provides that, except for the signature requirement, an arrangement must comply with all the other requirements of an exception, including the writing requirement. The commenter concluded that the Congress did not intend that the 90-day signature rule to be expanded to include the writing requirement.

Response. Our proposal to allow parties up to 90 consecutive calendar days to document arrangements in writing does not waive the writing requirement in various statutory and regulatory exceptions, including the exception for personal service arrangements at § 411.357(d). Rather, our proposal was made pursuant to section 1877(h)(1)(D) of the Act, which expressly grants the Secretary the authority to determine the means by which the writing requirement in various exceptions is satisfied. In this context, the special rule we are finalizing at § 411.354(e)(4) functions as a deeming provision.

As long as parties obtain the required writings and signatures within 90 consecutive calendar days (and the other requirements of an applicable exception are met), the arrangement is deemed to have met the writing and signature requirement, including for the first 90 days of the arrangement. Thus, with respect to the statutory special rule for signature requirements at section 1877(h)(1)(E) of the Act, if the parties obtain the required writing within 90 consecutive calendar days and the arrangement satisfies all the other requirements of an applicable exception, then the arrangement “otherwise complies with all criteria of the applicable exception” for the initial 90-day period, including the writing requirement. While it is true that the Congress did not explicitly extend the 90-day period for signature requirements in section 1877(h)(1)(E) of the Act to the writing requirement in various exceptions, we do not believe that section 1877(h)(1)(E) of the Act limits the grant of authority in section 1877(h)(1)(D) of the Act to determine the means by which the writing requirement may be satisfied. We note that, in addition to the authority granted to the Secretary under section 1877(h)(1)(D) of the Act, the Secretary has authority under section 1877(b)(4) of the Act to issue regulations excepting financial relationships that do not pose a risk of program or patient abuse.

In the FY 2009 IPPS final rule, we explained that, although the Secretary cannot grant immunity for violations or waive requirements of the physician self-referral law, the Secretary is authorized under section 1877(b)(4) of the Act to propose alternative methods for compliance with the physician self-referral law, including amendments to our regulations that keep within the exceptions certain financial relationships that would otherwise be out of compliance with the physician self-referral law (73 FR 48707 through 48709). Relying on this authority, in the FY 2009 IPPS final rule, we finalized the special rule for temporary noncompliance with signature requirements at § 411.353(g) (73 FR 48702 through 48703), which the Congress in the BiBA codified in the substantively identical special rule for signature requirements at section 1877(h)(1)(E) of the Act. As with the special rule for temporary noncompliance with signature requirements finalized in the FY 2009 IPPS final rule, the Secretary has the authority under section 1877(b)(4) of the Act to propose alternative methods for compliance with the writing requirement of various physician self-referral law exceptions, if the financial relationships ultimately protected under the exceptions do not pose a risk of program or patient abuse. Based on our administration of the SRDP and our experience working with our law enforcement partners, we conclude that an arrangement that satisfies all the requirements of an applicable exception for the duration of the arrangement, including the set in advance requirement as detailed below, but is not initially set out in writing or signed (or both) for a period of no longer than 90 consecutive calendar days, does not pose a risk of program or patient abuse.

Therefore, the Secretary also has authority under section 1877(b)(4) of the Act to issue the new special rule for writing and signature requirements at § 411.357(e)(4). Comment. In addition to the objection discussed above, one commenter objected strongly to the proposed policy to permit parties up to 90 consecutive calendar days to document personal service arrangements. According to the commenter, the proposal, if finalized, would allow parties to routinely, intentionally, and repeatedly enter into oral agreements worth thousands of dollars, without sufficient transparency to determine if the arrangements comply with all the other requirements of an exception.

Specifically, the commenter expressed concern that parties would use the “grace period” to adjust compensation upward or downward based on a physician's referrals, and these adjustments would be virtually impossible to detect, because the original arrangement would not be documented. The commenter doubted whether parties that do not timely document arrangements at their inception would assiduously comply with all the other requirements of an exception. Response. We believe that the set in advance requirement, as clarified and codified in this final rule, addresses the commenter's concern that parties will adjust the compensation under an arrangement upward or downward during the first 90 days of the arrangement in a manner that takes into account the volume or value of referrals Start Printed Page 77594or other business generated by the physician, and that these adjustments will be virtually impossible to detect.

In the proposed rule, we emphasized that, other than the writing and signature requirements, the special rule on writing and signature requirements requires an arrangement to satisfy all the requirements of an applicable exception, including the set in advance requirement, for the entire term of the arrangement, including the first 90 days (84 FR 55814). Under the current special rule for compensation that is considered set in advance at § 411.354(d)(1) (that is, the special rule in effect prior to the effective date of this final rule), the formula for determining compensation cannot be changed or modified during the course of an arrangement in any manner that takes into account the volume or value of referrals or other business generated by the referring physician. Thus, to the extent that compensation is adjusted upwards or downwards during the first 90 days of an arrangement in a manner that takes into account the volume or value of referrals or other business generated, as described by the commenter, the compensation would not be considered to be set in advance under current § 411.354(d)(1). However, as we explained in the proposed rule, the special rule at current § 411.354(d)(1) is merely a deeming provision, not a requirement (84 FR 55814).

We share the commenter's concern regarding inappropriate and potentially undetectable changes in compensation during the first 90 days of an arrangement and thereafter. Although modifications of the compensation terms of an arrangement are permissible under the physician self-referral law (see 73 FR 48697), such modifications may pose a risk of program or patient abuse, because the modifications could be made—either retroactively or prospectively—in a manner that takes into account the volume or value of a physician's referrals or other business generated by the physician. We believe that, in order to prevent program or patient abuse, including abuse of the 90-day “grace period” for documenting an arrangement in writing under final § 411.354(e)(4), it is necessary to codify in our regulations certain requirements, including a writing requirement, for modified compensation to meet the set in advance requirement of various exceptions. Unlike the deeming provision in current § 411.354(d)(1), which will be redesignated as § 411.354(d)(1)(i), compliance with the new set in advance rule at § 411.354(d)(1)(ii) will be required for any modification of the compensation terms of an arrangement.

The set in advance requirements at § 411.354(d)(1)(ii) are based on preamble guidance in the FY 2009 IPPS final rule on the requirements for amending compensation arrangements (73 FR 48696 through 48697). Under final § 411.354(d)(1)(ii), compensation (or a formula for determining the compensation) that is modified at any time during the course of a compensation arrangement, including the first 90 days of the arrangement, satisfies the set in advance requirement of various exceptions only if all of the following conditions are met. (1) All requirements of an applicable exception in §§ 411.355 through 411.357 are met on the effective date of the modified compensation (or the formula for determining the modified compensation). (2) the modified compensation (or the formula for determining the modified compensation) is determined before the furnishing of the items, services, office space, or equipment for which the modified compensation is to be paid.

And (3) before the furnishing of the items, services, office space, or equipment for which the modified compensation is to be paid, the formula for the modified compensation is set forth in writing in sufficient detail so that it can be objectively verified. Importantly, parties will not have 90 days under § 411.354(d)(1)(ii) to reduce the modified compensation (or the formula for determining the modified compensation) to writing. Rather, the modified compensation (or the formula for determining the modified compensation) must be set forth in writing in sufficient detail so that it can be objectively verified before the furnishing of items, services, office space, or equipment for which the modified compensation is to be paid. Given our program integrity concerns, as well as the concerns identified by the commenter with modifications to the compensation terms of an arrangement, we believe that the transparency afforded by a writing requirement is necessary for modifying compensation, including modifying compensation during the first 90 days of an arrangement.

Under § 411.354(d)(1)(ii)(A), the amended arrangement, including the modified rate of compensation, must satisfy the requirements of an applicable exception anew. For example, suppose that an arrangement for call coverage at the rate of $500 per 24-hour shift of coverage satisfies all the requirements of the exception for personal service arrangements at § 411.357(d)(1) on day 1. If, on day 70, the parties agree to modify the compensation to $600 per 24-hour shift, the arrangement as amended must satisfy all the requirements of the exception for personal service arrangements. Thus, the compensation under the amended arrangement (that is, $600 per 24-hour shift) may not exceed fair market value for the call coverage and may not be determined in any manner that takes into account the volume or value of referrals or other business generated by the physician, and the other requirements of the exception for personal service arrangements must also be satisfied.

In addition, as required by § 411.354(d)(1)(ii)(B), the amended compensation rate may not be retroactive (that is, the physician may not be paid at the rate of $600 per 24-hour shift for services provided from day 1 to day 69). Lastly, under § 411.354(d)(1)(ii)(C), the modified compensation (or formula for determining the compensation) must be set forth sufficiently in writing before the furnishing of the services for which the modified compensation is to be paid. Thus, if the physician provides the first shift of call coverage at the rate of $600 per 24-hour shift on day 75, the modified rate of compensation must be set forth in writing in sufficient detail so that it can be objectively verified before the services are furnished on day 75. Under § 411.354(e)(4), the parties will still have through day 90 to reduce the entire arrangement to writing and to obtain required signatures, but in order for the modified compensation (or formula for determining the compensation) to satisfy the set in advance requirement, it must be in writing before the furnishing of services on day 75.

If the parties again modify the compensation terms of the arrangement effective, for example, on day 180, all the conditions for modifying the compensation under § 411.354(d)(1)(ii) must be met again, and the modified compensation must be sufficiently set forth in writing before the furnishing of services on day 180. (There is no signature requirement under § 411.354(d)(1)(ii), so the writing that documents the modified compensation need not be signed by the parties.) As noted in Phase III, in certain instances, modifications to an arrangement may be material to the compensation terms of the arrangement, without directly modifying the amount of compensation under an arrangement (72 FR 51044). Returning to the example above, assume the parties modified the arrangement on day 70 to reduce the Start Printed Page 77595call coverage shift from 24 to 12 hours, but retained the compensation amount of $500 per shift. For purposes of the physician self-referral law, the modification is material to the compensation terms of the arrangement because it raises questions as to whether the compensation under the amended arrangement ($500 per 12-hour shift) satisfies requirements pertaining to fair market value and the volume or value of referrals or other business generated.

It is our view that such an amendment is a modification of the formula for determining compensation ($500 per 12-hour shift versus $500 per 24-hour shift), and this modification must meet all conditions of § 411.354(d)(1)(ii) in order to avoid the physician self-referral law's referral and billing prohibitions. On the other hand, modifications that do not affect the compensation terms of the arrangement need not meet the conditions of § 411.354(d)(1)(ii). For example, if the parties amend the schedule for the provision of call coverage from Tuesdays to Thursdays but there are no other changes to their arrangement, § 411.354(d)(1)(ii) would not be triggered. Lastly, reflecting our current policy, § 411.354(d)(1)(ii) does not require that the modified compensation remain in place for at least 1 year from the date of amendment and there is no prohibition on the number of times the parties may modify the compensation, provided that the conditions of § 411.354(d)(1)(ii) are met each time the compensation is modified.

We caution against a practice of frequently or repeatedly modifying the compensation terms over the course of an arrangement and remind readers that, under § 411.354(d)(1)(ii), each time the compensation is modified, the parties must establish anew that the arrangement—as modified—satisfies all the requirements of an applicable exception. Given our clarification and codification at § 411.354(d)(1)(ii) of the conditions that modified compensation must meet in order to be set in advance, we believe that our interpretation of writing and signature requirements as set forth at § 411.354(e)(4) does not pose a risk of program or patient abuse. To reiterate, with the exception of the writing and signature requirements, a compensation arrangement must satisfy all the requirements of an applicable exception, including the set in advance requirement, during the initial 90 days of the arrangement (and thereafter). Any modification of the compensation terms of an arrangement during the initial 90 days (or thereafter) must meet all the conditions of § 411.354(d)(1)(ii) in order for the compensation to be set in advance.

If parties modify the compensation terms of an arrangement during the first 90 days (or thereafter), the modified compensation arrangement will have to satisfy all the requirements of an applicable exception, including applicable requirements pertaining to fair market value and the volume or value of referrals or other business generated by the referring physician. In addition, under § 411.354(d)(1)(ii)(C), the modified compensation (or formula for determining the compensation) must be sufficiently set forth in writing before the furnishing of items, services, office space, or equipment for which the modified compensation is to be paid, even if the modification occurs during the first 90 days of the arrangement. Thus, notwithstanding the 90-day period for obtaining required writings and signatures under § 411.354(e)(4), parties will not be permitted to modify the compensation terms of an arrangement during the first 90 days without documenting the modification in writing, and modifications to the compensation (or formula for determining the compensation) may not be determined in any manner that takes into account the volume or value of referrals or other business generated by the physician. Lastly, the commenter doubted that parties that fail to document their arrangements during the first 90 days of the arrangement work diligently to ensure compliance with other requirements of applicable exceptions.

Our experience administering the SRDP suggests otherwise. We have reviewed a large number of arrangements that satisfied all the requirements of an applicable exception except the writing and signature requirements. We have learned that parties neglect to document arrangements in writing and sign the writings for a variety of reasons, such as administrative oversight or personnel changes. At the same time, we continue to believe that the writing requirement functions as an important safeguard to provide transparency and prevent program or patient abuse, and we reiterate that the best practice is to document compensation arrangements in writing from the outset.

We believe that § 411.354(e)(4) provides sufficient flexibility for nonabusive arrangements that fully satisfy all the requirements of an exception other than the writing or signature requirement, while incenting parties to act diligently to sign and document arrangements within 90 consecutive calendar days of the commencement of their arrangement. We also stress that arrangements that fail to satisfy all the requirements of an applicable exception other than the writing and signature requirement during the first 90 days (and thereafter) would not be protected under § 411.354(e)(4). Comment. Several commenters appreciated CMS' statement that the set in advance requirement does not require parties to set out the compensation in writing in advance of the furnishing of items or services, and that the special rule on the set in advance requirement at § 411.354(d)(1) is a deeming provision, not a requirement.

One commenter noted that the clarification would greatly benefit hospitals that inadvertently fail to document their compensation terms prior to starting performance. Another commenter found helpful our preamble guidance regarding the set in advance requirement and the use of practice patterns, including consistent payments patterns, to establish that the rate of compensation was set in advance. The commenter stated that a grace period of more than 90 days may be necessary in some circumstances to establish an identifiable pattern of payments. Response.

As explained above, under § 411.354(e)(4), other than the writing and signature requirements, a compensation arrangement must satisfy all the requirements of an applicable exception, including the set in advance requirement, for the entire duration of the arrangement, including the first 90 days of the arrangement. Thus, the compensation (or formula for calculating the compensation) must be determined before the furnishing of items or services for which compensation is to be paid. A party submitting a claim for payment for a designated health service retains the burden of proof under § 411.353(c)(2) to establish that all the requirements of an applicable exception, including the set in advance requirement, if applicable, are met. The surest and most straightforward way for a party to establish that the compensation under an arrangement is set in advance is to satisfy the deeming provision at § 411.354(d)(1)(i).

Under § 411.354(d)(1)(i), parties that document the compensation in writing prior to the furnishing of items, services, office space, or equipment in sufficient detail so that it can be verified are deemed to satisfy the set in advance requirement. However, we are reiterating in this final rule that the compensation (or the formula determining the compensation) does not need to be documented in writing and it does not need to be deemed to be set in advance under § 411.354(d)(1)(i) in order to satisfy the Start Printed Page 77596set in advance requirement during the first 90 days of the arrangement. In order for an arrangement to meet the writing requirement of an applicable exception on an ongoing basis, the compensation (or formula for calculating compensation) must be documented in writing by the time the 90-day period under § 411.354(e)(4) expires. As we explained in the CY 2016 PFS, to determine compliance with the writing requirement, the relevant inquiry is whether the available contemporaneous documents (that is, documents that are contemporaneous with the arrangement) would permit a reasonable person to verify compliance with the applicable exception at the time that a referral is made (80 FR 71315).

A reasonable person could not verify whether the compensation under an arrangement complies with an applicable fair market value requirement, for example, if the person could not determine from the documentation what the compensation was under the arrangement. Thus, by day 91, the compensation terms of the arrangement must be documented in writing in order to satisfy the writing requirement of an applicable exception. As explained above, we decline to extend the “grace period” for collecting required writings beyond the 90-day period. We believe that 90 consecutive calendar days provides sufficient time to document an arrangement to show compliance with the requirements of an applicable exception, including the set in advance requirement.

Comment. One commenter requested additional guidance from CMS on the interim systems and documents that may be relied upon to satisfy the requirement that rental rates are set in advance during the 90-day grace period. Specifically, the commenter asked whether a scheduling platform that tracks leasing arrangements and allocates leased square footage, scheduling actual space utilization and rent, would be sufficient to satisfy the set in advance requirement. Response.

The determination as to what constitutes sufficient documentation to establish that compensation under the arrangement is set in advance depends on the facts and circumstances in each case. Therefore, we cannot opine on whether the scheduling platform described by the commenter would be sufficient to establish that the set in advance requirement was met. We discussed in the proposed rule (and repeated above) the various documents that, depending on the facts and circumstances, may be used to establish that compensation is set in advance. We are clarifying the types of documents that, individually or taken together and depending on the facts and circumstances, may establish that compensation is set in advance.

These documents include informal communications via email or text, internal notes to file, similar payments between the same parties for similar items or services under prior arrangements, generally applicable fee schedules, or, where no formal generally applicable fee schedule exists, other documents showing a pattern of payments to or from other similarly situated physicians for the same or similar items or services. This list is illustrative only and is not exhaustive. To avoid being overly prescriptive, we are not providing more determinant rules for establishing that compensation is set in advance. Comment.

Several commenters stated that, even if the proposed special rule is finalized, there would be continuing uncertainty regarding how parties can establish that compensation is set in advance if there is no signed writing and no steady, consistent stream of payments. Commenters noted that informal writings between the parties may not be detailed enough to satisfy the set in advance requirement and that, in certain instances, the compensation may only have been determined through in-person conversations, with no paper trail. The commenters also noted that fee schedules and comparisons to other arrangements may not be useful for compensation arrangements where the payment methodology is more complicated or customized to the specific financial relationship. Given these difficulties, the commenters requested that compensation be deemed to comply with all the requirements of an applicable exception, except the writing and signature requirements, if the parties certify in the signed writing documenting the arrangement that the arrangement met all the elements of the exception as of the commencement date of the arrangement.

The commenters noted that this requirement would provide an additional safeguard, because a false certification could expose a person to potential liability under the False Claims Act, because it would be useful evidence of scienter. A second group of commenters suggested that, to provide additional flexibility, CMS should create another special rule on the set in advance requirement at § 411.354(d). Under the commenters' proposal, compensation would be considered set in advance if. (1) The parties agree in advance that compensation under the arrangement will be fair market value and not determined in any manner that takes into account the volume or value of the physician's referrals prior to the commencement of the arrangement.

(2) the parties work with reasonable diligence to establish the specific compensation amount or methodology. (3) the parties, in fact, establish the specific compensation amount or methodology within 90 days of the commencement of the arrangement. And (4) the resulting compensation is fair market value and commercially reasonable without taking into account the volume or value of referrals or other business generated by the physician. The commenters asserted that, as long as the compensation is ultimately fair market value and the arrangement is commercially reasonable, then there is no risk of program or patient abuse.

The commenters further asserted that their proposal would be helpful for practices located in States that prohibit the corporate practice of medicine, because providers in those States cannot rely on the exception for bona fide employment relationships, which does not include a set in advance requirement. One commenter stressed that the special rule is especially needed if CMS finalizes its proposed definition of “isolated financial transaction,” as parties may have relied on this exception in the past to compensate physicians for services furnished prior to the parties setting the compensation under the arrangement. Response. We decline to adopt the deeming provision suggested by the first commenters and the new special rule recommended by the second commenters.

The set in advance requirement is a statutory requirement and, in our view, both proposals are inconsistent with the statutory requirement that the compensation is set in advance. In addition, as explained above, the set in advance requirement is an important safeguard to prevent program or patient abuse, including abuse of the 90-day grace period under § 411.354(e)(4). We believe that both proposals would be subject to the kinds of abuses described by the commenter above, namely undocumented and potentially undetectable adjustments of the compensation during the first 90 days of the arrangement that take into account the volume or value of referrals or other business generated by the physician. Even with a requirement that compensation is, in fact, fair market value, we believe that the proposals could be subject to abuse.

Typically, fair market value is a range of values, and parties could use the 90-day period to adjust compensation upwards or downwards within this range. Therefore, we do not believe that we Start Printed Page 77597have the authority under section 1877(b)(4) of the Act to waive the set in advance requirement for 90 days. In addition, although the Secretary has authority under section 1877(h)(1)(D) of the Act to determine how the writing requirement of various exceptions may be satisfied, we do not believe that this authority does not extend to the set in advance requirement. With respect to the first commenters' proposal, parties documenting an arrangement after it has begun, as is permitted under § 411.354(e)(4), may choose to include memoranda or other notes describing earlier agreements, including verbal agreements or agreements made by informal communications that set the compensation (or formula for determining the compensation) in advance.

The memoranda would not be sufficient for the compensation to be deemed to be set in advance under § 411.354(d)(1)(i), but, depending on the facts and circumstances, the memoranda could be used as evidence to help establish that the compensation was set in advance. We emphasize that there is no requirement under the physician self-referral law that parties create or retain such memoranda. As illustrated by our earlier discussion in this section II.D.5., there are a variety of ways to establish that compensation is set in advance, and, other than the deeming provision in § 411.354(d)(1)(i), we are not prescribing or recommending any particular approach. With respect to the second commenters' proposed special rule, we note that the new rule for modifying compensation at § 411.354(d)(1)(ii) provides stakeholders certainty regarding the requirements that must be met in order for modified compensation to satisfy the set in advance requirement.

Parties to an arrangement are permitted to enter into an arrangement that satisfies all the requirements of an applicable exception, including the set in advance requirement, and later modify the compensation terms of the arrangement, provided that the modified compensation is not retroactive and all the other conditions of § 411.354(d)(1)(ii) are met. This policy, coupled with the new exception for limited remuneration to a physician at § 411.357(z), which does not require compensation to be set in advance, should provide sufficient flexibility for all providers, including providers located in States that prohibit the corporate practice of medicine. Comment. Some commenters stated that, if finalized, the proposed 90-day grace period and the clarification of the set in advance requirement, coupled with the newly proposed exception for limited remuneration to a physician, which does not require the compensation to be set in advance, would accommodate situations where a physician's services are needed on an urgent basis, and the compensation arrangement commences before the parties can set the compensation in advance or document the compensation.

Response. We agree with the commenters that, depending on the facts and circumstances, parties that do not have an opportunity to set compensation in advance may utilize the exception for limited remuneration to a physician at § 411.357(z) to protect an arrangement at its outset. If the parties decide to continue the arrangement on an ongoing basis, the parties may utilize another applicable exception without an annual limit, such as the exception for fair market value compensation at § 411.357(l). Depending on the facts and circumstances, records of payments made while utilizing the exception at § 411.357(z) may establish that the compensation under the ongoing arrangement satisfied the set in advance requirement of § 411.357(l).

Parties that utilize the exception at § 411.357(l) (or another exception that requires the arrangement to be in writing and signed by the parties) for the ongoing arrangement have 90 consecutive calendar days to satisfy the writing and signature requirements under § 411.354(e)(4) once the parties begin to utilize that exception (or another applicable exception that requires the arrangement to be in writing and signed by the parties). Comment. Several commenters urged us to finalize regulatory text, clearly stating CMS' policy that electronic signatures that are legally valid under Federal or State law are sufficient to satisfy the signature requirement of various exceptions. Some commenters also specifically asked that the regulatory text clarify that assent transmitted by email may satisfy the signature requirement.

Other commenters recognized that CMS has declined in the past to specify what qualifies as a signature for purposes of the physician self-referral law, because CMS does not wish to be overly prescriptive. Nevertheless, the commenters requested that we explicitly confirm that a signature includes a sender's typed or printed name on an email or letterhead stationary that is one of the contemporaneous writings documenting an arrangement under § 411.354(e)(2). Response. Our longstanding policy is that an electronic signature that is valid under applicable Federal or State law is sufficient to satisfy the signature requirement in various physician self-referral law exceptions.

To provide greater clarity and certainty to stakeholders, we are codifying this policy at § 411.354(e)(3). We believe that what constitutes a valid signature that is sufficient to satisfy the signature requirement of various exceptions to the physician self-referral law depends on the facts and circumstances. We decline to provide a general rule regarding whether a sender's typed or printed name on an email or letterhead stationary would satisfy the requirement that an arrangement is signed by the parties. However, we note that, if an individual's typed or printed name on an email sent by that individual constitutes an electronic signature for purposes of applicable Federal or State law, then it qualifies as a “signature” for purposes of the physician self-referral law.

Similarly, if the individual whose name is printed on the letterhead of the document being relied upon to satisfy the signature requirement of an applicable exception is also the sender of the document and the document would be considered signed by the individual under applicable Federal or State law, then it qualifies as a “signature” for purposes of the physician self-referral law. While a hand-written “wet” signature is the paradigmatic example of a signature, there is no requirement under the physician self-referral law that parties sign a document by hand, nor is there a requirement that electronic signatures be scanned copies of hand-written signatures. Any electronic signature that is valid under applicable Federal or State law is sufficient to satisfy the signature requirement under the physician self-referral law. 6.

Exceptions for Rental of Office Space and Rental of Equipment (§ 411.357(a) and (b)) Section 1877(e)(1) of the Act establishes an exception to the physician self-referral law's referral and billing prohibitions for certain arrangements involving the rental of office space or equipment. Among other things, sections 1877(e)(1)(A)(ii) and (e)(1)(B)(ii) of the Act require the office space or equipment to be used exclusively by the lessee when being used by the lessee. The exclusive use requirements are incorporated into our regulations at § 411.357(a)(3) and (b)(2). In the 1998 proposed rule, we stated our belief that the exclusive use requirement in the statute was meant to Start Printed Page 77598prevent “paper leases,” where payment passes from a lessee to a lessor, even though the lessee is not actually using the office space or equipment (63 FR 1714).

In Phase II, we further explained our interpretation of the exclusive use requirement (69 FR 16086). We stated that, after reviewing the statutory scheme, we believe that the purpose of the exclusive use requirement is to ensure that the rented office space or equipment cannot be shared with the lessor when it is being used or rented by the lessee (or any subsequent sublessee). In other words, a lessee (or sublessee) cannot “rent” office space or equipment that the lessor will be using concurrently with, or in lieu of, the lessee (or sublessee). We added that we were concerned that unscrupulous physicians or physician groups might attempt to skirt the exclusive use requirement by establishing holding companies to act as lessors.

To foreclose this possibility, we modified the exclusive use requirements at § 411.357(a)(3) and (b)(2), to stipulate that the rented office space or equipment may not be “shared with or used by the lessor or any person or entity related to the lessor” when the lessee is using the office space or equipment. Disclosures to the SRDP have included several arrangements where multiple lessees use the same rented office space or equipment either contemporaneously or in close succession to one another, while the lessor is excluded from using the premises or equipment. At least one entity disclosed that it had invited a physician who was not the lessor into its office space to treat a mutual patient for the patient's convenience. The disclosing parties assumed that the arrangements violated the physician self-referral law, because, based on their understanding of the exceptions at § 411.357(a) and (b), the arrangements did not satisfy the exclusive use requirement of the applicable exception.

As noted in the 1998 proposed rule and in Phase II, the purpose of the exclusive use rule is to prevent sham leases where a lessor “rents” space or equipment to a lessee, but continues to use the space or equipment during the period ostensibly reserved for the lessee. We do not interpret sections 1877(e)(1)(A)(ii) and (B)(ii) of the Act to prevent multiple lessees from using the rented space or equipment at the same time, so long as the lessor is excluded, nor do we interpret sections 1877(e)(1)(A)(ii) and (B)(ii) of the Act to prohibit a lessee from inviting a party other than the lessor (or any person or entity related to the lessor) to use the office space or equipment rented by the lessee. Moreover, we do not believe it would pose a risk of program or patient abuse for multiple lessees (and their invitees) to use the space or equipment to the exclusion of the lessor, provided that the arrangements satisfy all the requirements of the applicable exception for the rental of office space or equipment, and any financial relationships between the lessees (or their invitees) that implicate the physician self-referral law likewise satisfy the requirements of an applicable exception. Therefore, relying on the Secretary's authority under section 1877(b)(4) of the Act, we proposed to clarify our longstanding policy that the lessor (or any person or entity related to the lessor) is the only party that must be excluded from using the space or equipment under § 411.357(a)(3) and 411.357(b)(2).

Specifically, we proposed to add the following clarification to the regulation text. For purposes of this exception, exclusive use means that the lessee (and any other lessees of the same office space or equipment) uses the office space or equipment to the exclusion of the lessor (or any person or entity related to the lessor). The lessor (or any person or entity related to the lessor) may not be an invitee of the lessee to use the office space or the equipment. After reviewing the comments, we are finalizing the proposal without modification.

We received the following comments and our responses follows. Comment. Several commenters supported our clarification of the exclusive use requirement in § 411.357(a)(3) and (b)(2) as proposed. Commenters explained that as physician practices evolve to meet the rising costs of health care, the uncertainty regarding “exclusive use” is challenging when multiple physicians use the same space or equipment, a practice which the commenter stated is common.

For example, a physician may invite a guest physician into the premises in order to coordinate and jointly treat a mutual patient. Commenters stated it would not pose a risk of program or patient abuse to allow multiple parties to use space or equipment concurrently. Response. We agree with the commenters that the clarification of the exclusive use requirement in the exception for the rental of office space at § 411.357(a)(3) and the exception for the rental of equipment at § 411.357(b)(2) offers flexibility and certainty to providers, and that it does not pose a risk of program or patient abuse to permit multiple lessees (and their invitees) to use space or equipment concurrently, provided that all the other requirements of the exception are satisfied and that the lessor (or any person or entity related to the lessor) is excluded.

We remind readers that the exceptions for the rental of office space and equipment both require, among other things, that the rental charges are consistent with fair market value, that the space or equipment that is rented or leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement, and that the lease arrangement would be commercially reasonable even if no referrals were made between the lessee and lessor. If a lessor collects rental payments from multiple lessees for concurrent use of office space or equipment, these requirements and all the other requirements of § 411.357(a) or (b) must still be satisfied. Comment. Multiple commenters requested that CMS update the new proposed language to permit lessors to use their own space or equipment along with lessees, especially when the lease provides access to space or equipment on a part-time basis.

One commenter further explained that lessors should have the opportunity to utilize or lease such space to other lessees when it is not utilized as long as the leasing arrangements are properly administered and that any allocations of space, costs, or flow of funds can be audited, monitored and otherwise objectively verified to ensure accountability. Another commenter stated that, if a hospital leases space to a physician practice, the practice should be permitted to sublease back an exam room to the hospital for use by a hospital-employed physician or technician, in order to coordinate care. The commenter stated that if CMS is concerned about the risk of abuse, CMS could provide that space subleased back to the lessor must be at the same rate that the lessor leases the space to the tenant. Response.

Both the statute and our regulations require that leased office space or equipment is used exclusively by the lessee when it is being used by the lessee. We believe that the commenters' proposal would render this requirement meaningless. In addition, the exclusive use requirement is an important safeguard to prevent sham or “paper” leases, where a lessor collects rent from a lessee while continuing to use the leased office space or equipment during periods of time that are ostensibly reserved for the lessee. We also note that, under § 411.357(a)(3) and § 411.357(b)(2), rented office space or equipment may not exceed that which Start Printed Page 77599is reasonable and necessary for the legitimate business purposes of the lease arrangement.

We question if a lease arrangement satisfies this requirement if the lease includes space or equipment that is consistently not used by the lessee. For example, assume a physician owns a medical office building, a hospital leases the entire building from the physician, the hospital (sublessor) subleases an office suite to the physician (sublessee), and the remainder or a significant portion of the medical office building remains unused and unoccupied. On these facts, the amount of spaced leased by the hospital (that is, the entire medical office building) likely exceeds that which is reasonable and necessary for the legitimate business purposes of the lease arrangement. We note that, as amended in this final rule, the exception for fair market value compensation at § 411.357(l) may be used for office space and equipment lease arrangements.

The exception for fair market value does not include an exclusive use requirement. Rather, the exception includes as a substitute the requirement that the arrangement not violate the anti-kickback statute. Depending on the facts and circumstances, the arrangements described by the commenters may be permitted under the exception for fair market value compensation at § 411.357(l). We note, however, that the arrangements would have to satisfy the commercial reasonableness requirement at § 411.357(l)(4) and the remaining requirements of the exception for fair market value compensation.

7. Exception for Physician Recruitment (§ 411.357(e)) Section 1877(e)(5) of the Act established an exception for remuneration provided by a hospital to a physician to induce the physician to relocate to the geographic area served by the hospital in order to be a member of the hospital's medical staff. The exception at section 1877(e)(5) of the Act authorizes the Secretary to impose additional requirements on recruitment arrangements as needed to protect against program or patient abuse. The 1995 final rule incorporated the provisions of section 1877(e)(5) of the Act into our regulations at § 411.357(e).

As finalized in the 1995 final rule, § 411.357(e) requires the recruitment arrangement to be in writing and signed by both parties, that is, the recruited physician and the hospital. In Phase II, we substantially modified § 411.357(e). Relying on our authority under section 1877(b)(4) of the Act, we expanded the exception at § 411.357(e)(4) to address remuneration from a hospital (or a federally qualified health center (FQHC), which was added as a permissible recruiting entity under Phase II) to a physician who joins a physician practice. There, we established requirements for recruitment arrangements under which remuneration is provided by a hospital or FQHC indirectly to a physician through payments made to his or her physician practice as well as directly to the physician who joins a physician practice (69 FR 16094 through 16095).

When payment is made to a physician indirectly through a physician practice that the recruited physician joins, the practice is permitted to retain actual costs incurred by the practice in recruiting the physician under § 411.357(e)(4)(ii), and, in the case of an income guarantee made by the hospital or FQHC to the recruited physician, the practice may also retain the actual additional incremental costs attributable to the recruited physician under § 411.357(e)(4)(iii). Under the Phase II regulation, if a recruited physician joined a physician practice, § 411.357(e)(4)(i) required the party to whom the payments are directly made (that is, the physician practice that the recruited physician joins) to sign the written recruitment agreement (69 FR 16139). In Phase III, we responded to a commenter that requested clarification with respect to who must sign the writing documenting the physician recruitment arrangement (72 FR 51051). The commenter's concern was that § 411.357(e)(4)(i) could be interpreted to require that the recruiting entity (in the commenter's example, a hospital), the physician practice, and the recruited physician all had to sign one document.

The commenter asserted that this would be unnecessary and would add to the transaction costs of the recruitment. The commenter suggested that we require a written agreement between the hospital and either the recruited physician or the physician practice to which the payments would be made or, in the alternative, that we should permit the hospital and the physician practice receiving the payments to sign a written recruitment agreement and require the recruited physician to sign a one-page acknowledgment agreeing to be bound by the terms and conditions set forth in that agreement. We responded that the exception for physician recruitment requires a writing that is signed by all parties, including the recruiting hospital (or FQHC or rural health clinic, which was added as a permissible recruiting entity under Phase III), the recruited physician, and the physician practice that the physician will be joining, if any, and explained that nothing in the regulations precluded execution of the agreement in counterparts. We have reconsidered our position regarding the signature requirement at § 411.357(e)(4)(i).

In the SRDP, we have seen arrangements in which a physician practice that hired a physician who was recruited by a hospital (or FQHC or rural health clinic) did not receive any financial benefit as a result of the hospital and physician's recruitment arrangement. Examples of such arrangements include arrangements under which. (1) The recruited physician joined a physician practice but the hospital paid the recruitment remuneration to the recruited physician directly. (2) remuneration was transferred from the hospital to the physician practice, but the practice passed all of the remuneration from the hospital to the recruited physician (that is, the practice served merely as an intermediary for the hospital's payments to the recruited physician and did not retain any actual costs for recruitment, actual additional incremental costs attributable to the recruited physician, or any other remuneration).

And (3) the recruited physician joined the physician practice after the period of the income guarantee but before the physician's “community service” repayment obligation was completed. In each of the arrangements disclosed to the SRDP, the arrangement was determined by the disclosing party not to satisfy the requirements of the exception at § 411.357(e) solely because the physician practice that the recruited physician joined had not signed the writing evidencing the arrangement. We do not believe, however, that, under the circumstances described by parties disclosing to the SRDP, there exists a compensation arrangement between the physician practice and the hospital (or FQHC or rural health clinic) of the type against which the statute is intended to protect. That is, the type of financial self-interest that impacts a physician's medical decision making.

Because the physician practice is not receiving a financial benefit from the recruitment arrangement, we do not believe it is necessary for the physician practice to also sign the writing documenting the recruitment arrangement between the recruited physician and the hospital (or FQHC or rural health clinic) in order to protect against program or patient abuse. We also believe that eliminating the signature requirement for a physician practice that receives no financial benefit under the recruitment Start Printed Page 77600arrangement would reduce undue burden without posing a risk of program and patient abuse. For these reasons, we proposed to modify the signature requirement at § 411.357(e)(4)(i). We proposed to require the physician practice to sign the writing documenting the recruitment arrangement, if the remuneration is provided indirectly to the physician through payments made to the physician practice and the physician practice does not pass directly through to the physician all of the remuneration from the hospital.

After reviewing the comments, we are finalizing the proposal without modification. We received the following comment and our response follows. Comment. Several commenters supported our proposal to modify the signature requirement at § 411.357(e)(4)(i) to require a physician practice to sign the writing documenting a recruitment arrangement between a physician and a hospital only if remuneration is provided to the physician indirectly through payments made to the physician practice and the physician practice does not pass directly through to the physician all the remuneration from the hospital.

One commenter stated that eliminating the signature requirement for a physician practice would reduce burden without posing a risk of program and patient abuse. Response. We agree with the commenters that the proposal will reduce the burden of compliance with the physician self-referral law without posing a risk of program or patient abuse. Therefore, we are finalizing the modification of the exception as proposed.

We note in this context that a “physician practice” under § 411.357(e)(4) includes a sole practice consisting of only one physician. (See, for example, the definition of “entity” at § 411.351). Under the definition of “physician” at § 411.351, a physician and the professional corporation of which he or she is a sole owner are the same for purposes of the physician self-referral law. Thus, if a recruited physician joins an existing sole physician practice, and the recruited physician receives remuneration indirectly through payments made to the sole physician practice and the sole physician practice does not pass directly through to the recruited physician all the remuneration from the hospital, then the physician in the sole physician practice or someone authorized to sign on behalf of the physician's professional corporation must sign the writing documenting the arrangement.

8. Exception for Remuneration Unrelated to the Provision of Designated Health Services (§ 411.357(g)) Under section 1877(e)(4) of the Act, remuneration provided by a hospital to a physician does not create a compensation arrangement for purposes of the physician self-referral law, if the remuneration does not relate to the provision of designated health services. The statutory exception is codified in our regulations at § 411.357(g). Because our prior rulemaking regarding § 411.357(g) was based in part on an interpretation of legislative history, we reviewed the legislative history of section 1877(e)(4) of the Act and certain provisions that preceded it in the proposed rule.

As originally enacted by OBRA 1989, the referral and billing prohibitions of the physician self-referral law applied only to clinical laboratory services. OBRA 1989 created three general exceptions for both ownership and compensation arrangements at sections 1877(b)(1) through (3) of the Act, and granted the Secretary the authority at section 1877(b)(4) of the Act to create additional exceptions. Section 42017(e) of OBRA 1990 (Pub. L.

101-508) redesignated section 1877(b)(4) as 1877(b)(5) of the Act, and added an exception at section 1877(b)(4) of the Act for financial relationships with hospitals that are unrelated to the provision of clinical laboratory services. (To avoid confusion between the exception added by OBRA 1990 at section 1877(b)(4) of the Act and section 1877(b)(4) of the Act as it currently exists, the exception for financial relationships unrelated to the provision of clinical laboratory services enacted by OBRA 1990 is referred to herein as the “OBRA 1990 exception.”) The OBRA 1990 exception applied to both ownership or investment interests and compensation arrangements, and excepted financial relationships between physicians (or immediate family members of physicians) and hospitals that did not relate to the provision of clinical laboratory services. OBRA 1993 eliminated the OBRA 1990 exception, but the Social Security Act Amendments of 1994 (Pub. L.

103-432) (SSA 1994) reinstated the exception through January 1, 1995. In place of the OBRA 1990 exception, OBRA 1993 added a new exception at section 1877(e)(4) of the Act. Under section 1877(e)(4) of the Act, remuneration provided by a hospital to a physician that does not relate to the provision of designated health services is not considered a compensation arrangement for purposes of the referral and billing prohibitions. Although there are certain similarities between section 1877(e)(4) of the Act and the OBRA 1990 exception, the exception at section 1877(e)(4) of the Act is narrower than the OBRA 1990 exception in several important respects.

(1) The OBRA 1990 exception excepts both ownership interests and compensation arrangements between hospitals and physicians, whereas section 1877(e)(4) of the Act applies only to compensation arrangements under which remuneration passes from the hospital to the physician. (2) the OBRA 1990 exception protects a broad range of financial relationships that are unrelated to the provision of clinical laboratory services, whereas section 1877(e)(4) of the Act has a narrower application, applying only to remuneration unrelated to the provision of designated health services. And (3) the OBRA 1990 exception applies to financial relationships between entities and physicians or their immediate family members, whereas section 1877(e)(4) of the Act applies only to compensation arrangements with physicians. In the 1998 proposed rule, we proposed to revise our regulation at § 411.357(g) to reflect our interpretation of section 1877(e)(4) of the Act (63 FR 1702).

(The prior regulation at § 411.357(g) was based on former sections 1877(b)(4) and (e)(4) of the Act as they were effective on January 1, 1992 (63 FR 1669).) We stated that, for remuneration from a hospital to a physician to be excepted under § 411.357(g), the remuneration must be “completely unrelated” to the furnishing of designated health services. We clarified that the remuneration could not in any direct or indirect way involve designated health services, and further that the exception would not apply in any situation involving remuneration that might have a nexus with the provision of, or referrals for, a designated health service (63 FR 1702). We further stated that the remuneration could in no way reflect the volume or value of a physician's referrals, and that payments to physicians that were “inordinately high” or above fair market value would be presumed to be related to the furnishing of designated health services. We provided the following examples of remuneration that might be completely unrelated to the furnishing of designated health services and excepted under § 411.357(g).

(1) Fair market value rental payments made by a teaching hospital to a physician to rent his or her house in order to use the house as a residence for a visiting Start Printed Page 77601faculty member. And (2) compensation for teaching, general utilization review, or administrative services. In Phase II, we finalized the exception at § 411.357(g) with modifications (69 FR 16093 through 16094). As finalized, in addition to requiring that the remuneration does not in any way take into account the volume or value of the physician's referrals, § 411.357(g) requires that the remuneration is wholly unrelated (that is, neither directly nor indirectly related) to the furnishing of designated health services.

The regulation stipulates that remuneration relates to the furnishing of designated health services if it. (1) Is an item, service, or cost that could be allocated in whole or in part to Medicare or Medicaid under cost reporting principles. (2) is furnished, directly or indirectly, explicitly or implicitly, in a selective, targeted, preferential, or conditioned manner to medical staff or other persons in a position to make or influence referrals. Or (3) otherwise takes into account the volume or value of referrals or other business generated by the referring physician.

We stated that we incorporated cost reporting principles in the regulation in order to provide the industry with bright-line rules to determine whether remuneration is related to the furnishing of designated health services (69 FR 16093). At the same time, we retracted the statement from the 1998 proposed rule that general utilization review or administrative services might not be related to the furnishing of designated health services. We justified our narrow interpretation of section 1877(e)(4) of the Act on the legislative history of the exception, noting that, initially, under the original statute, the exception was necessary to insulate a hospital's relationships with physicians that were unrelated to the provision of clinical laboratory services, a very small element of a hospital's practice. We continued that, since 1995, however, all hospital services are designated health services and a narrower interpretation of the exception is required to prevent abuse (69 FR 16093).

We have made no changes to § 411.357(g) since Phase II. Commenters on Phase II stated that the Congress intended hospitals to be able to provide any amount of remuneration to physicians, provided that the remuneration did not directly relate to designated health services. In Phase III, based on our interpretation of the legislative history at that time, we reaffirmed our narrow interpretation of section 1877(e)(4) of the Act (72 FR 51056). Based on our review of the statutory history of the OBRA 1990 exception and section 1877(e)(4) of the Act, and comments we received on our CMS RFI, we proposed certain modifications to the exception at § 411.357(g) to broaden the application of the exception.

In the proposed rule, we stated that we continued to agree with the statement in Phase II that the exception at section 1877(e)(4) of the Act is significantly narrower than the OBRA 1990 exception. There are many financial relationships between hospitals and physicians that would be permissible under the OBRA 1990 exception because they do not relate, directly or indirectly, to the provision of clinical laboratory services. On the other hand, insofar as the exception at section 1877(e)(4) of the Act requires the remuneration to be unrelated to the provision of designated health services, and OBRA 1993 defines this term to include inpatient and outpatient services, the scope of protected compensation arrangements under section 1877(e)(4) of the Act is much narrower than that of the OBRA 1990 exception. Generally speaking, most financial relationships between hospitals and physicians relate to the furnishing of designated health services, in particular, inpatient or outpatient hospital services.

That being said, we also considered in the proposed rule that OBRA 1993 did not merely strike the term “clinical laboratory services” in the OBRA 1990 exception and substituted the term “designated health services.” Rather, OBRA 1993 eliminated the OBRA 1990 exception and created a new (albeit somewhat similar) exception at section 1877(e)(4) of the Act. In light of this statutory history, in the proposed rule we stated that the most accurate interpretation of section 1877(e)(4) of the Act is not as a carryover of the 1990 OBRA exception into the significantly revised statutory regime established by OBRA 1993, but rather as a new exception that was intentionally created by the Congress in OBRA 1993, the very same legislation in which the Congress expanded the referral and billing prohibition of the physician self-referral law to inpatient and outpatient hospital services. We stated in the proposed rule that, in creating a new exception for remuneration unrelated to the provision of designated health services and expanding the definition of “designated health services” to include inpatient and outpatient hospital services, we believe that the Congress intended the exception to apply to a narrow—but not empty—subset of compensation arrangements between hospitals and physicians. In the proposed rule, we reconsidered what remuneration, if any, is permissible under the exception if the exception does not apply to any item, cost, or service that could be allocated to Medicare or Medicaid under cost reporting principles, or to remuneration that is offered in any preferential or selective manner whatsoever based on comments received to the CMS RFI.

We stated that we agreed with the commenters that the current exception is too restrictive and that the current § 411.357(g) has an extremely limited application (84 FR 55818). To give appropriate meaning to the statutory exception at section 1877(e)(4) of the Act, we proposed to delete the current provisions at § 411.357(g)(1) and (2) in their entirety and to remove the phrase “directly or indirectly” from the regulation text. In place of existing § 411.357(g)(1) and (2), we proposed language that incorporates the concept of patient care services as the touchstone for determining when remuneration for an item or service is related to the provision of designated health services. In particular, we proposed regulation text to clarify that remuneration from a hospital to a physician does not relate to the provision of designated health services if the remuneration is for items or services that are not related to patient care services.

We noted that section 1877(e)(4) of the Act specifically excepts remuneration unrelated to the provision of designated health services. For purposes of applying the exception at section § 411.357(g), we interpreted section 1877(e)(4) of the Act to except remuneration unrelated to the act or process of providing designated health services, a concept which is not as all-encompassing as remuneration that is unrelated in any manner whatsoever to designated health services. We stated our belief that patient care services provided by a physician, when the physician is acting in his or her capacity as a medical professional, are integrally related to the act or process of providing designated health services, regardless of whether such services are provided to patients of the hospital. Thus, payment for such services relates to the provision of designated health services.

Likewise, we proposed that items that are used in the act or process of furnishing patient care services are integrally related to the provision of designated health services, and payments for such items relate to the provision of designated health services. On the other hand, we also stated our belief that remuneration from a hospital to a physician for services that are not patient care services or Start Printed Page 77602items that are not used in the act or process of providing designated health services does not relate to the provision of designated health services and would, therefore, not be prohibited under section 1877(e)(4) of the Act or our regulations at proposed § 411.357(g) (provided that the remuneration is not determined in any manner that takes into account the volume or value of the physician's referrals). In the proposed rule, we stated our belief that the concept of patient care services would provide a determinant and practicable principle for applying § 411.357(g) to compensation arrangements between hospitals and physicians. We also noted that the proposed regulation at § 411.357(g) retained the requirement that the remuneration is not determined in any manner that takes into account the volume or value of the physician's referrals.

Remuneration that is determined in any manner that takes into account the volume or value of a physician's referrals clearly relates to the provision of designated health services, regardless of the nature of the item or service for which the physician receives remuneration. Thus, the proposed provisions at § 411.357(g)(2) and (g)(3), which were intended to clarify when remuneration does not relate to the provision of designated health services, would not have applied to remuneration that is determined in any manner that takes into account the volume or value of a physician's referrals (84 FR 55816 through 55817). In the proposed rule, we stated that remuneration from a hospital to a physician that pertains to the physician's patient care services is the paradigm of remuneration that relates to the provision of designated health services. Most obviously, when a physician provides patient care services to hospital patients, the physician's patient care services are directly correlated with the provision of designated health services.

Thus, remuneration from the hospital to the physician for such services is clearly related to designated health services. However, we noted in the proposed rule that there does not have to be a direct one-to-one correlation between a physician's services and the provision of designated health services in order for payments for the service to be related to the provision of designated health services. For example, payment for emergency department call coverage relates to the furnishing of designated health services, even if the physician is not as a matter of fact called to the hospital to provide patient care services, because the hospital is paying the physician to be available to provide patient care services at the hospital. Similarly, medical director services typically include, among other things, establishing clinical pathways and overseeing the provision of designated health services in a hospital.

Under our proposal, payments for such services would relate to the furnishing of designated health services for purposes of applying the exception at proposed § 411.357(g). We also stated that utilization review services are closely related to patient care services, and for this reason, we considered remuneration for such services to be related to the furnishing of designated health services (84 FR 55818). In contrast to the services described above, in the proposed rule we stated that the administrative services of a physician pertaining solely to the business operations of a hospital are not related to patient care services. Thus, under our proposal, if a physician were a member of a governing board along with persons who were not licensed medical professionals, and the physician received stipends or meals that were available to the other board members, we would not have considered the remuneration provided to the physician to relate to the provision of designated health services, provided that the physician's compensation for the administrative services was not determined in a manner that takes into account the volume or value of his or her referrals.

In this instance, we stated that the dispositive factor in determining that a physician's services are not related to the provision of designated health services is that the services are also provided by persons who are not licensed medical professionals, and the physician is compensated on the same terms and conditions as the non-medical professionals. Because the services could be provided by persons who are not licensed medical professionals, we concluded that the services were not patient care services. To provide clarity for stakeholders, we proposed a general principle at § 411.357(g)(3) for determining when remuneration for a particular service, when provided by a physician, is related to the provision of designated health services. We stated that, if a service can be provided legally by a person who is not a licensed medical professional and the service is of the type that is typically provided by such persons, then payment for such a service is unrelated to the provision of designated health services and may be protected under proposed § 411.357(g), provided that it is not determined in a manner that takes into account the volume or value of the physician's referrals.

We noted in this context that “licensed medical professional” would include, but would not be limited to, a licensed physician. That is, if a service could be provided legally by both a physician and a medical professional who is not a physician, such as a registered nurse, but the service could not be provided by a person who is not a licensed medical professional, it would still be considered a patient care service under § 411.357(g)(3) as proposed. Thus, we proposed that remuneration provided by a hospital to a physician for the service would not be excepted under § 411.357(g), notwithstanding the fact that the service does not have to be performed by a physician (84 FR 55818 through 55819). In the proposed rule, we stated that with respect to remuneration from a hospital for items provided by a physician, typical examples of remuneration that is related to the provision of designated health services include the rental of medical equipment and purchasing of medical devices from physicians.

Because these items are used in the provision of patient care services, and patient care services may be designated health services or be directly correlated with the provision of designated health services, we concluded that remuneration for such items clearly relates to the provision of designated health services. We also stated that rental of office space where patient care services are provided, including patient care services that are not necessarily designated health services, is remuneration related to the provision of designated health services. In contrast, we stated that, if a physician who joins another practice sells the furniture from his or her medical office to a hospital, and the hospital places the furniture in the hospital's facilities, as long as the payment is not determined in a manner that takes into account the physician's referrals, the remuneration would not be considered to be related to the provision of designated health services under our proposal. Also, we stated our continued belief that, as first stated in the 1998 proposed rule, § 411.357(g) is available to except rental payments made by a teaching hospital to a physician to rent his or her house in order to use the house as a residence for a visiting faculty member.

To provide stakeholders with greater clarity, we proposed to stipulate in regulation that remuneration provided in exchange for any item, supply, device, equipment, or office space that Start Printed Page 77603is used in the diagnosis or treatment of patients, or any technology that is used to communicate with patients regarding patient care services, is presumed to be related to the provision of designated health services for purposes of § 411.357(g) (84 FR 55819). In the proposed rule, we stated our belief that § 411.357(g)(2) and (3) would provide clarity regarding when payments for items and services relate to the provision of designated health services, and also give the meaning to the statutory exception. We stated that the requirement pertaining to the volume or value of a physician's referrals at § 411.357(g)(1) would ensure that payments to a physician for items or services that are ostensibly not related to patient care services are not in fact disguised payments for the physician's referrals. We sought comments on our proposals, as well as other possible ways for distinguishing between remuneration that is related to the provision of designated health services and remuneration that is unrelated to the provision of designated health services.

Specifically, we sought comment as to whether we should limit what we consider to be “remuneration related to the provision of designated health services” to remuneration paid explicitly for a physician's provision of designated health services to a hospital's patients (84 FR 55819). We received the following comment and our response follows. Comment. Commenters on the proposal generally supported our efforts to restore utility to the statutory exception, but a few commenters expressed valid concerns that the expansion of the exception, especially without substantial guidance and examples of its application, would risk program or patient abuse.

One commenter noted that “patient care services” is a defined term under our regulations, and it is not clear whether the term “patient care services” as used in § 411.357(g) was intended to have the same meaning as “patient care services” as defined at § 411.351. Many commenters, citing uncertainty in applying the proposed exception, requested codification of specific remuneration that would be deemed not to relate to the provision of designated health services. Response. Given the concerns raised by commenters, we are not finalizing our proposed revision to § 411.357(g) at this time.

We are continuing to evaluate the best way to restore utility to the statutory exception, and we may finalize revisions to the exception for remuneration unrelated to the provision of designated health services in future rulemaking. 9. Exception for Payments by a Physician (§ 411.357(i)) Section 1877(e)(8) of the Act excepts payments made by a physician to a laboratory in exchange for the provision of clinical laboratory services, or to an entity as compensation for other items or services if the items or services are furnished at a price that is consistent with fair market value. The 1995 final rule (60 FR 41929) incorporated the provisions of section 1877(e)(8) of the Act into our regulations at § 411.357(i).

In the 1998 proposed rule, we proposed to interpret “other items and services” to mean any kind of item or service that a physician might purchase (that is, not limited to “services” for purposes of the Medicare program in § 400.202 of this Chapter), but not including clinical laboratory services or those items or services that are specifically excepted by another provision in §§ 411.355 through 411.357 (63 FR 1703). We stated that we did not believe that the Congress meant the exception for payments by a physician to protect financial relationships that were covered by more specific exceptions with specific requirements, such as the exceptions for rental arrangements at section 1877(e)(1) of the Act. In Phase II, we responded to commenters that disagreed with our position that the exception for payments by a physician is not available for arrangements involving any items or services excepted by another exception (69 FR 16099). We reiterated the statutory interpretation from the 1998 proposed rule, explaining that the determination that items and services addressed by another exception should not be covered in this exception is consistent with the overall statutory scheme and purpose and is necessary to prevent the exception for payments by a physician from negating the statute (69 FR 16099.

See also 72 FR 51057). As a result, we made no changes to the regulation at § 411.357(i) in Phase II. Thus, as finalized in Phase II, the exception for payments by a physician at § 411.357(i) stated that the exception could not be used for items or services that are specifically excepted by another exception in §§ 411.355 through 411.357, with a parenthetical clarifying that this included the exception for fair market value compensation at § 411.357(l). However, at that time, the exception for fair market value compensation applied only to the provision of items or services by physicians to entities.

The exception did not apply to items or services provided by entities to physicians. Following the publication of Phase II, commenters complained that neither § 411.357(i) nor § 411.357(l) were available to protect many arrangements wherein physicians purchased items and services from entities, because. (1) The exception for payments by a physician was limited to the purchase of items and services not specifically excepted by another exception in §§ 411.355 through 411.357 (including § 411.357(l)). And (2) the exception for fair market value compensation did not apply to items or services provided by an entity to a physician (72 FR 51057).

In response to the commenters, we expanded § 411.357(l) in Phase III to include both items and services furnished by physicians to entities and items and services furnished by entities to physicians (72 FR 51094 through 51095). However, Phase III did not modify the exception for payments by a physician,[] including the parenthetical indicating that § 411.357(i) could not be used for items or services specifically excepted under § 411.357(l). We acknowledged that the expansion of the exception for fair market value compensation to items or services furnished by entities to physicians would require parties in some instances to rely on § 411.357(l) instead of § 411.357(i). We concluded, however, that upon further consideration, we believe that the required application of the fair market value compensation exception, which contains conditions not found in the less transparent exception for payments by a physician to a hospital, further reduces the risk of program abuse (72 FR 51057).

We also emphasized in Phase III that the exception for payments by a physician could not be used to protect office space leases (72 FR 51044 through 51045). We explained that we did not believe that the lease of office space is an “item or service” and that parties seeking to protect arrangements for the rental of office space must rely on § 411.357(a) (72 FR 51059). In 2015, when we finalized the exception at § 411.357(y) for timeshare arrangements, we reaffirmed our position that the exception for payments by a physician Start Printed Page 77604is not available for arrangements involving the rental of office space (80 FR 71325 through 71327). Commenters on the CMS RFI stated that our interpretation of the exception for payments by a physician, especially our determination that the exception is not available if any other exception would apply to an arrangement, unreasonably narrowed the scope of the statutory exception.

Commenters also noted that compliance with other exceptions is generally more burdensome than compliance with the statutory exception for payments by a physician, and urged us to conform the language of the exception at § 411.357(i) to the statutory language at section 1877(e)(8) of the Act. As noted in the proposed rule, we found the CMS RFI comments regarding the narrowing of the statutory exception persuasive and, as a result, we reconsidered our position regarding the availability of the exception for payments by a physician for certain compensation arrangements (84 FR 55820). To explain our proposal and the policies we are setting forth in this final rule regarding the availability of the exception at § 411.357(i), it is important to distinguish between the statutory exceptions found at section 1877(e) of the Act (codified at § 411.357(a) through § 411.357(i) of our regulations) and the regulatory exceptions (codified at § 411.357(j) et seq.) issued using the Secretary's authority under section 1877(b)(4) of the Act.[] We continue to believe that the exception for payments by a physician at section 1877(e)(8) of the Act was not meant to apply to compensation arrangements that are specifically excepted by other statutory exceptions in section 1877 of the Act. Given the placement of the exception for payments by a physician as the final statutory exception at section 1877(e) of the Act, we believe that this exception functions as a catch-all to protect certain legitimate arrangements that are not covered by the exceptions at sections 1877(e)(1) through (7) of the Act.

As a matter of statutory construction, the catch-all exception at section 1877(e)(8) of the Act does not supersede the previous exceptions. With respect to arrangements for the rental of office space or the rental of equipment, in particular, we note that the statutory exceptions for such arrangements at section 1877(e)(1) of the Act include requirements that are specific to rental arrangements, as well as general requirements that the arrangements are commercially reasonable, that rental charges are fair market value, and that compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties. We do not believe that the Congress would have imposed these particularized requirements at section 1877(e)(1) of the Act, but also allowed parties to sidestep them by relying on the exception for payments by a physician to protect rental arrangements. Although we maintain our policy with respect to the statutory exceptions, we no longer believe that the regulatory exceptions should limit the scope of the exception for payments by a physician.

Thus, we proposed to remove from § 411.357(i)(2) the reference to the regulatory exceptions, including the parenthetical referencing the exception for fair market value compensation. We also proposed that the exception at § 411.357(i) would not be available to protect compensation arrangements specifically addressed by one of the statutory exceptions, codified in our regulations at § 411.357(a) through (h). Under the proposal, parties would generally be able to rely on the exception at § 411.357(i) to protect fair market value payments by a physician to an entity for items or services furnished by the entity, even if a regulatory exception at § 411.357(j) et seq. May be applicable.

However, for the reasons noted previously in this section II.D.9., § 411.357(i) would not be applicable to arrangements for the rental of office space or equipment.[] That is, we believe that, as a matter of statutory construction, the exception for payments by a physician is not available to protect any type of arrangement that is specifically addressed by another statutory exception at section 1877(e) of the Act, including arrangements for the rental of office space or the rental of equipment. We are retracting our prior statements that office space is neither an “item” nor a “service.” We made these statements, in significant part, to emphasize that we do not believe that the exception for payments by a physician should be available to protect the type of arrangement for which the Congress established a specific exception in statute. In this final rule, we have more clearly explained this position and no longer believe it is necessary to preclude office space from the categories of “items” and “services.” (We note that we have not made prior similar statements regarding equipment.) As such, and because the exception at § 411.357(i) is unavailable to protect an arrangement for the rental of office space or equipment, parties seeking to protect an arrangement for the rental of office space or equipment must structure the arrangement to satisfy the requirements of § 411.357(a), § 411.357(b), § 411.357(l) (for direct compensation arrangements), or § 411.357(p) (for indirect compensation arrangements). Although we are retracting our statement that office space is not an “item or service,” parties may not rely on the exception for personal service arrangements at § 411.357(d)(1) to protect arrangements for the rental of office space.

We noted that § 411.357(i) may be available to protect payments by a physician for the lease or use of space that is not office space, such as storage space or residential real estate. We also proposed to remove from § 411.357(i)(2) the reference to exceptions in §§ 411.355 and 411.356. As noted previously, we interpret the exception at section 1877(e)(8) of the Act for payments by a physician to function in the statutory scheme as a catch-all, to apply to compensation arrangements for the furnishing of other items or services by entities that are not specifically addressed at sections 1877(e)(1) through (7) of the Act. Therefore, we no longer believe that the exception should be limited by the exceptions at sections 1877(b) and (c) of the Act or the regulatory exceptions codified in §§ 411.355 and 411.356.

Lastly, “items or services” furnished by the entity under the exception for payments by a physician may not include cash or cash equivalents. That is, the physician may not make in-kind “payments” to the entity in exchange for cash from the entity. We believe that cash provided by an entity to a physician poses a risk of program or patient abuse, and that the Congress would have included additional safeguards at section 1877(e)(8) of the Start Printed Page 77605Act if the exception were designed to cover such arrangements. At the same time, we note that, if a physician pays an entity $10 in cash for a gift card worth $10, we do not believe that this would constitute a financial relationship for purposes of the physician self-referral law.

Likewise, in cases where a physician or an entity acts as a pure pass-through, taking money from one party and passing the exact same amount of money to another party, we do not believe that the pass-through arrangement is a financial relationship for purposes of the physician self-referral law. After reviewing the comments, we are finalizing our proposal at § 411.357(i) without modification. We received the following comments and our responses follow. Comment.

Most commenters that addressed this issue supported our proposed interpretation of the statutory payments by a physician exception and the proposed regulatory changes to implement the interpretation. One commenter asserted that our previous interpretation of the statute inappropriately narrowed the utility of the exception. Other commenters emphasized that finalizing our proposal would increase flexibility and reduce the cost and burden of compliance with the physician self-referral law. Commenters generally agreed that the exception should be available to protect an arrangement even if the arrangement is addressed by a regulatory exception, but not if another statutory exception, such as the exception for the rental of office space, is applicable to the arrangement.

One commenter agreed that the exception for payments by a physician functions in the statutory scheme as a “catch-all” exception that applies only to arrangements that are not otherwise addressed in a statutory exception. Response. We agree with the commenters and are finalizing our revisions to § 411.357(i) as proposed. Comment.

Several commenters supported our retraction of our previous policy that office space is neither an item nor a service. The commenters recognized that, under the regulatory scheme of the physician self-referral law, retraction of the policy is key to making the exception for fair market value compensation at § 411.357(l) applicable to arrangements for the rental of office space. Response. In this final rule, we are reiterating the retraction of our previous policy that office space is neither an item nor a service.

Given our interpretation of the exception for payments by a physician within the statutory scheme of exceptions applicable only to compensation arrangements, we no longer believe that it is necessary to distinguish office space from items or services in order to ensure that the exception at § 411.357(i) may not be used for rental of office space arrangements. As recognized by the commenters and explained in section II.D.10 of this final rule, parties may now use the exception for fair market value compensation at § 411.357(l) to except arrangements for the rental of office space. At the same time, we are taking this opportunity to clarify that office space is not a service, and therefore the exception for personal service arrangements at § 411.357(d)(1) is not available to protect arrangements for the rental of office space or timeshare arrangements. 10.

Exception for Fair Market Value Compensation (§ 411.357(l)) In the 1998 proposed rule, we proposed an exception at § 411.357(l) for fair market value compensation (63 FR 1699). We noted that the statutory exceptions at section 1877(e) of the Act apply to specific categories of financial relationships and do not address many common and legitimate compensation arrangements between physicians and the entities to which they refer designated health services. The exception for fair market value compensation was proposed as an open-ended exception to protect certain compensation arrangements that may not be specifically addressed in the statutory exceptions. Among other things, we stated that the exception might be used to protect arrangements for the sublease of office space (63 FR 1714).

We suggested that parties could use the exception for fair market value compensation if they had any doubts about whether they met the requirements of another exception in § 411.357. In Phase I, we finalized § 411.357(l), stating that parties could use the exception, even if another exception potentially applied to an arrangement (66 FR 919). We explained our belief that the safeguards incorporated into the exception for fair market value compensation were sufficient to cover various compensation arrangements, including arrangements covered by other exceptions. In Phase II, we responded to commenters that requested that the exception at § 411.357(l) be made available to protect arrangements for the rental of office space, including arrangements where space is rented by entities to physicians (69 FR 16111).

We declined to extend § 411.357(l) to arrangements for the rental of office space, and emphasized that § 411.357(l) applied only to payments from an entity to a physician for items and services furnished by the physician. We modified our policy in Phase III and extended the application of the exception at § 411.357(l) to payments from a physician to an entity for items or services provided by the entity, but continued to decline to make § 411.357(l) applicable to an arrangement for the rental of office space (72 FR 51059 through 51060). We explained our policy at that time that the rental of office space is not an “item or service.” We added that, because arrangements for the rental of office space had been subject to abuse, we believe that it could pose a risk of program or patient abuse to permit parties to protect such arrangements relying on § 411.357(l). In the CY 2016 PFS final rule, we reaffirmed our position that the exception for fair market value compensation does not apply to arrangements for the rental of office space (80 FR 71327).

We have reconsidered our policy regarding the application of § 411.357(l). Through our administration of the SRDP, we have seen legitimate, nonabusive arrangements for the rental of office space that could not satisfy the requirements of § 411.357(a) because the term of the arrangement was less than 1 year, and could not satisfy the requirements of § 411.357(y) because the arrangement conveyed a possessory leasehold interest in the office space. To provide flexibility to stakeholders to protect such nonabusive arrangements, we proposed and are now finalizing modifications to § 411.357(l) to permit parties to rely on the exception for fair market value compensation to protect arrangements for the rental or lease of office space. As discussed in many of our previous rulemakings and most recently in the CY 2017 PFS proposed rule (81 FR 46448 through 46453) and final rule (81 FR 80524 through 80534), we are concerned about potential abuse that may arise when rental charges for the lease of office space or equipment are determined using a formula based on.

(1) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space (a “percentage-based compensation formula”). Or (2) per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee (a “per-click compensation formula”). We continue to believe that arrangements based on percentage compensation or per-unit of service Start Printed Page 77606compensation formulas present a risk of program or patient abuse because they may incentivize overutilization and patient steering. To address this risk, in the FY 2009 IPPS final rule, we included in the exceptions for the rental of equipment, fair market value compensation, and indirect compensation arrangements restrictions on percentage-based compensation and per-click compensation formulas when determining the rental charges for the lease of equipment.

Because the exception at § 411.357(l), to date, has not been applicable to arrangements for the rental of office space, it does not include a prohibition on percentage-based compensation and per-click compensation formulas when determining the rental charges for the lease of office space. (The exceptions for the rental of office space and indirect compensation arrangements currently include the prohibitions as they relate to the determination of rental charges for the lease of office space.) We remain concerned about the potential abuse related to percentage-based compensation and per-click compensation formulas for determining the rental charges of both office space and equipment. Therefore, we proposed to incorporate into the exception at § 411.357(l) prohibitions on percentage-based compensation and per-unit of service compensation formulas with respect to the determination of rental charges for the lease of office space, similar to the restrictions found in § 411.357(a)(5)(ii) and § 411.357(p)(1)(ii). Unlike the exception for the rental of office space at § 411.357(a), the exception for fair market value compensation does not require a 1-year term.

Therefore, short-term arrangements for the rental of office space of less than 1 year will be permissible under the exception. However, as with other compensation arrangements permitted under § 411.357(l), the parties will be permitted to enter into only one arrangement for the rental of the same office space during the course of a year. The parties will be able to renew the arrangement on the same terms and conditions any number of times, provided that the terms of the arrangement and the compensation for the same office space do not change. Parties are not required to renew their arrangement in writing.

Renewals effectuated through course of conduct or by verbal agreement are permitted under the exception for fair market value compensation. However, parties retain the burden of proof under § 411.353(c)(2) to establish that the terms of the arrangement and the compensation for the same items, office space, or services did not change during the renewal arrangement. Although we believe that, in most cases, parties seeking to lease office space prefer leases with longer terms—for instance, to justify expenses spent on property improvements—as described by commenters, some parties, especially parties in rural areas, would prefer or find necessary the flexibility of a short-term rental of office space. Given the requirements of the exception for fair market value compensation, including the requirement that parties enter into only one arrangement for the leased office space over the course of a year and the requirement that the arrangement does not violate the anti-kickback statute, which, as explained below and in section II.D.1.

Of this final rule, is not being removed from § 411.357(l)(5) in the final rule, we do not believe that short-term arrangements for the rental of office space that satisfy all the requirements of § 411.357(l) pose a risk of program or patient abuse. We remind readers that, as explained in section II.D.9. Of this final rule, the exception for payments by a physician at § 411.357(i) is not available to protect any leases of office space, including short-term leases. In the proposed rule, we proposed to remove the requirement at § 411.357(l)(5) that the arrangement does not violate the anti-kickback statute or any Federal or State law or regulation governing billing or claims submissions.

As explained in section II.D.1. Of this final rule, with respect to the exception for fair market value compensation, we are finalizing this proposal with respect to Federal or State laws or regulations governing billing or claims submissions, but we are not finalizing the proposal with respect to the requirement that the arrangement does not violate the anti-kickback statute. We believe that the requirement that the arrangement does not violate the anti-kickback statute in § 411.357(l)(5) functions as an important safeguard that substitutes for certain requirements included in certain statutory exceptions but omitted from § 411.357(l), including the exclusive use requirement in the exceptions for the rental of office space and equipment. We did not propose to remove § 411.357(l)(6), which requires that any services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates a Federal or State law.

However, we solicited comments on whether this requirement is necessary to protect against program or patient abuse or should be removed from the exception, and whether substitute safeguards such as those included in many of the statutory or regulatory exceptions to the physician self-referral law would be appropriate. As explained below, in this final rule we are not removing or modifying § 411.357(l)(6). In this final rule, we are taking the opportunity to reorganize the exception at § 411.357(l) to distinguish the writing requirement of the exception for fair market value compensation from other requirements. As the exception is currently organized, § 411.357(l)(1) requires the arrangement to be in writing and requires the writing to specify the items or services covered by the arrangement.

§ 411.357(l)(2) requires the timeframe of the arrangement to be in writing, and also contains substantive requirements pertaining to timeframe of the arrangement and rules governing the frequency with which parties can enter into an arrangement for the same items or services. § 411.357(l)(3) requires the compensation of the arrangement to be in writing, and also contains substantive requirements pertaining to the compensation under the arrangement. We are placing the writing requirement from these various provisions in § 411.357(l)(1). Specifically, § 411.357(l)(1) will require the arrangement to be in writing and signed by the parties.

While § 411.357(l)(i) through § 411.357(l)(iii) will list the information that must be specified in writing, as follows. The items, services, office space, or equipment covered by the arrangement (§ 411.357(l)(1)(i)). The compensation that will be provided under the arrangement (§ 411.357(l)(1)(ii)). And timeframe of the arrangement (§ 411.357(l)(1)(iii)).

These organizational modifications are intended to clarify the exception and do not affect or modify the requirements of the exception in any way. In addition to the organizational changes explained above, after reviewing the comments, we are finalizing our proposal to permit arrangements for the lease of office space under § 411.357(l) with certain modifications to clarify the exception and to protect against program or patient abuse. First, we are clarifying in the introductory chapeau language that the exception may be used for the lease of office space and not only for the use of office space. Second, we are no longer requiring at § 411.357(l)(5) that the arrangement not violate any Federal or State law or regulation governing billing or claims submission, but we are not Start Printed Page 77607finalizing our proposal to remove the requirement for compliance with the anti-kickback statute.

Third, we are adding the phrase “even if no referrals were made between the parties” to the commercially reasonable requirement in § 411.357(l)(4). Fourth, as explained in section II.E.1. Of this final rule, we are modifying the requirement at § 411.357(l)(2) to permit parties to rely on § 411.357(l) and § 411.357(z) to protect an arrangement for the same items, services, office space, or equipment during the course of a year. Lastly, as explained in section II.B.4, we are requiring at § 411.357(l)(7) that any arrangement that includes a directed referral requirement must satisfy all the conditions of § 411.354(d)(4).

We received the following comments and our responses follow. Comment. Commenters generally supported our proposal to allow parties to rely on the exception for fair market value compensation at § 411.357(l) to protect arrangements for the rental of office space. Commenters recognized the flexibility afforded by the proposal, especially for office space leases with a term of less than one year.

One commenter noted that the proposal would be helpful for rural providers, where short-term rentals may be necessary to address community needs, such as the need to relocate a physician due to facility demands or renovations. Another commenter stated that the exception could be helpful for situations where a laboratory leases space from a physician for a temporary patient service center for specimen collections while a permanent space is renovated or constructed. Response. We agree with the commenters that the proposal, once finalized, will afford greater flexibility for short-term leases of office space.

Under the current regulations, an arrangement for the lease of office, which involves the transfer of dominion and control of the leased premises to the lessee, must have a term of at least 1 year. On the other hand, arrangements for the use of space, where dominion and control over the space are not transferred to the party making use of the space, are permitted for durations of less than 1 year under the exception for timeshare arrangements at § 411.357(y). (See 80 FR 71325 through 71326). However, the exception at § 411.357(y) includes several requirements not found in the exception for the rental of office space at § 411.357(a), such as a requirement at § 411.357(y)(2) that the arrangement is between a physician and a hospital or a physician organization and the requirement at § 411.357(y)(3)(i) that the premises covered by the arrangement is used predominantly for evaluation and management services to patients.

Given the latter restrictions, an arrangement such as that identified by the commenter, under which a laboratory compensates a physician for space used on a short-term basis for specimen collections, would not be permissible under either § 411.357(a) or § 411.357(y). As modified in this final rule, the exception for fair market value compensation at § 411.357(l) may be used to except such an arrangement, provided that all the requirements of the exception are satisfied. To clarify that the exception at § 411.357(l) may be used for leases of office space, where dominion and control are transferred to the lessee, we are modifying the chapeau language of the exception to include the phrase “lease of office space.” Comment. Commenters generally opposed inclusion of a requirement for compliance with the anti-kickback statute in regulatory exceptions, including the exception for fair market value compensation at § 411.357(l).

One commenter that addressed our request for comments on § 411.357(l)(6), which prohibits services furnished under an arrangement from involving the counseling or promotion of a business arrangement or other activity that violates a Federal or State law, specifically objected to including a requirement for compliance with the anti-kickback statute in the exception for fair market value compensation. Response. As explained in section II.D.1 of this final rule, we are not removing the requirement for compliance with the anti-kickback statute from the exception for fair market value compensation at § 411.357(l)(5). We believe that the requirement that the arrangement does not violate the anti-kickback statute in § 411.357(l)(5) functions as an important substitute safeguard for requirements that are included in certain statutory exceptions but omitted from § 411.357(l), including the exclusive use requirement in the exceptions for the rental of office space and equipment.

For similar reasons, we are also not removing the requirement at § 411.357(l)(6), which requires that the services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates a Federal or State law. This requirement applies to service arrangements and is carried over from the statutory exception for personal service arrangements, codified in our regulations at § 411.357(d)(1)(vi). We are concerned that, if we remove the requirement at § 411.357(l)(6), we would need to include additional safeguards to substitute for the statutory requirements in order to ensure that excepted service arrangements under § 411.357(l) do not pose a risk of program or patient abuse. Comment.

One commenter supported removing the phrase “and furthers the legitimate business purpose of the parties” from § 411.357(l)(4), but requested either that the term “commercially reasonable” be defined to include a requirement that the arrangement must be commercially reasonable even if no referrals were made between the parties or that § 411.357(l)(4) be modified to require an arrangement to be commercially reasonable “even if no referrals were made between the parties.” Response. As we discussed in section II.B.2, we are not including the “even if no referrals were made” requirement in the definition of “commercially reasonable” at final § 411.351. Most exceptions that include a commercial reasonableness requirement, including exceptions that apply to arrangements that could also be excepted by § 411.357(l), stipulate that the arrangement must be commercially reasonable “even if no referrals” were made between the parties. We are adopting the second approach advocated by the commenter and are revising the requirement at § 411.357(l)(4) to clarify that the arrangement must be commercially reasonable “even if no referrals were made between the parties.” Without this modification, some stakeholders may believe that the standard articulated at § 411.357(l) is a different and less demanding standard than the requirement in other exceptions.

Comment. One commenter supported our proposal at § 411.357(l)(3) to prohibit the use of percentage-based or per-unit-of service based compensation formulas for determining the compensation for the rental of office space under the exception for fair market value compensation. Response. We are finalizing this proposal.

We believe that it is a necessary safeguard for the reasons stated in the CY 2017 PFS proposed rule (81 FR 46448 through 46453) and final rule (81 FR 80524 through 80534). Comment. One commenter requested that CMS permit indefinite holdovers for arrangements under the exception for fair market value compensation, similar to the indefinite holdover provisions in the exceptions for rental of office space, rental of equipment, and personal service arrangements. The commenter noted that an arrangement may be for any period of time under Start Printed Page 77608§ 411.357(l), and the exception permits the arrangement to be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change.

The commenter interpreted the renewal provision under § 411.357(l) to require written documentation that the renewed arrangement was on the same terms and conditions, while there is no such requirement under the indefinite holdover provisions. Response. We believe that the commenter misunderstood the renewal provision in § 411.357(l)(2). Under § 411.357(l)(2), parties are permitted to renew an arrangement any number of times if the terms of the arrangement and the compensation for the same items, services, office space, or equipment do not change.

Likewise, the indefinite holdover provisions at § 411.357(a)(7), § 411.357(b)(6), and § 411.357(d)(1)(vii) require the holdover arrangement to continue on the same terms and conditions. Neither the indefinite holdover provisions in the latter exceptions nor the renewal provision in § 411.357(l)(2) require the holdover arrangement or renewal arrangement to be documented in a formal writing. To be sure, parties renewing an arrangement under § 411.357(l)(2) retain the burden of proof under § 411.353(c)(2) to establish that the renewal arrangement is on the same terms and conditions as the previous arrangement, but parties to a holdover arrangement under one of the indefinite holdover provisions have a similar burden. In sum, with respect to documentation and writing requirements, there is no substantive difference between the indefinite holdover provisions and the renewal provision in § 411.357(l)(2).

Therefore, we are not including an indefinite holdover provision in § 411.357(l). 11. Electronic Health Records Items and Services (§ 411.357(w)) Relying on our authority at section 1877(b)(4) of the Act, on August 8, 2006, we published a final rule (the 2006 EHR final rule) that, among other things, established an exception at § 411.357(w) for certain arrangements involving the donation of interoperable electronic health records software or information technology and training services (the EHR exception) (71 FR 45140). The EHR exception was initially set to expire on December 31, 2013.

On December 27, 2013, we published a final rule (the 2013 EHR final rule) modifying the EHR exception by, among other things, extending the expiration date of the exception to December 31, 2021, excluding laboratory companies from the types of entities that may donate electronic health records items and services under the exception, and updating the provision under which electronic health records software is deemed interoperable (78 FR 78751). Although we did not specifically request comments on the EHR exception in the CMS RFI, we received several comments related to the exception. In addition, in its August 27, 2018 request for information described in section I.B.1. Of this final rule, OIG requested comments on the safe harbor at 42 CFR 1001.952(y), which is substantively similar to the EHR exception at § 411.357(w) (see 83 FR 43607).

After reviewing comments related to the EHR exception and safe harbor submitted in response to the CMS RFI and the OIG's request for information, as well as recent statutory and regulatory developments arising from the 21st Century Cures Act (Pub. L. 114-255, enacted on December 13, 2016) (Cures Act), in the proposed rule, we proposed to update provisions in the EHR exception pertaining to interoperability (§ 411.357(w)(2)) and data lock-in (§ 411.357(w)(3)), clarify that donations of certain cybersecurity software and services are permitted under the EHR exception, remove the sunset provision at § 411.357(w)(13), and modify the definitions of “electronic health record” and “interoperable” at § 411.351 to ensure consistency with the Cures Act (84 FR 55822). We also proposed to modify the requirement at § 411.357(w)(4) that a physician contributes at least 15 percent of the cost of the donated electronic health records items and services and permit certain donations of replacement electronic health records items and services (84 FR 55822).

As discussed more fully below, in this final rule we are finalizing certain of our proposals to revise the EHR exception. Despite the fundamental differences in the statutory structure, operation, and penalties of the respective underlying statutes, we have worked closely with OIG to ensure consistency between our revised EHR exception and the policies finalized by OIG related to its safe harbor and discussed elsewhere in this issue of the Federal Register. A. Requirements Regarding Interoperability Currently, the requirements at § 411.357(w)(2) and (3) require donated software to be interoperable and prohibit the donor (or a person on the donor's behalf) from taking action to limit the interoperability of the donated items or services.

In the proposed rule (84 FR 55822), we proposed changes that would impact § 411.357(w)(2) and (3) based on the Cures Act and the Office of the National Coordinator for Health Information Technology (ONC), HHS Notice of Proposed Rulemaking, “21st Century Cures Act. Interoperability, Information Blocking, and the ONC Health IT Certification Program” (ONC NPRM), which proposed to implement key provisions in Title IV of the Cures Act.[] Among other things, the ONC NPRM proposed Conditions and Maintenance of Certification requirements for health IT developers under the ONC Health IT Certification Program (certification program) and proposed to define reasonable and necessary activities that do not constitute information blocking for purposes of section 3022(a)(1) of the Public Health Service Act (PHSA). We discuss our specific proposals and our final policies and regulations pertaining to § 411.357(w)(2) and (3) below in subsections (1) and (2), respectively. (1) The “Deeming Provision” (§ 411.357(w)(2)) The existing regulation at § 411.357(w)(2) requires that software donated under the EHR exception is interoperable.

The deeming provision at § 411.357(w)(2) provides certainty to parties that donated software satisfies the interoperability requirement at § 411.357(w)(2). Specifically, § 411.357(w)(2) currently provides that software is deemed to be interoperable if it has been certified under ONC's certification program to electronic health record certification criteria identified in the then-applicable version of 45 CFR part 170. In the 2013 EHR final rule, we modified the deeming provision to reflect developments in the ONC certification program and to track ONC's anticipated regulatory cycle. By relying on ONC's certification program and related updates of criteria and standards, we stated that the deeming provision would meet our objective of ensuring that software is certified to the current required standard of interoperability when it is donated (78 FR 78753).

In the proposed rule, we proposed to retain this general construct for the updated EHR exception, but proposed two clarifications to the deeming provision at § 411.357(w)(2) (84 FR 55823). Our current regulation at § 411.357(w)(2) specifies that the software is deemed to be interoperable if, on the date it is provided to the physician, it has been certified by a Start Printed Page 77609certifying body to an edition of the electronic health record certification criteria identified in the then-applicable version of 45 CFR part 170. We proposed to modify this language to replace the phrase “has been certified” with the phrase “is certified” (84 FR 55823). The proposed modification was intended to clarify that the certification must be current as of the date of the donation, as opposed to the software having been certified at some point in the past (and potentially no longer maintaining certification on the date of the donation).

We also proposed to remove the reference to “an edition” of certification criteria to align with changes to ONC's certification program (84 FR 55823). As we describe in more detail below, we proposed and are finalizing an updated definition of “interoperable” (84 FR 55824 through 55825). Although the revised definition would not require a change to the text of § 411.357(w)(2), the revision would impact the deeming provision, and we solicited comments regarding this update to the definition of “interoperable” (84 FR 55823). We emphasized in the proposed rule and reaffirm here that an arrangement for the donation of software that met the definition of interoperable and that satisfied the requirements of § 411.357(w) at the time the donation was made will not cease to be protected by the exception, even though we are finalizing certain changes to these provisions (84 FR 55823).

After reviewing comments on our proposal, we are finalizing our clarifying revisions to the deeming provision at § 411.357(w)(2) as proposed, with one modification to the regulation text. We are removing the phrase “electronic health record” preceding “certification criteria” because the phrase “electronic health records certification criteria” has been removed from 45 CFR part 170 as of June 30, 2020. We received the following comments and our responses follow. Comment.

Commenters generally agreed with our proposal to clarify that software would be deemed to be interoperable under § 411.357(w)(2) if, on the date it is donated, it “is” certified by a certifying body authorized by ONC, rather than “has been certified.” Some commenters had questions about our removal of the phrase “an edition” before “the electronic health record certification criteria” and inquired whether we should specify that the criteria are the “latest” or “current” certification criteria. One commenter recommended that we modify the deeming provision to state that the certification must be current as of the date that the donor has entered into a binding agreement with the recipient or the electronic health records vendor. This commenter stated that a reasonable time limit, such as 1 year, could be applied in order to prevent potential fraud or abuse. Response.

We are finalizing our proposal to modify § 411.357(w)(2) to specify that the donated software “is” certified on the date that it is donated, as opposed to “has been certified” on that date, and to delete the phrase “an edition.” We agree that the certification criteria should be the latest or current criteria. That is, current as of the date of donation. However, we believe that our proposal, which provides that the software must be certified to the “then-applicable” version of 45 CFR part 170, already includes this requirement, and we are finalizing the regulation text as proposed. As noted above, we are removing the phrase “electronic health record” before “certification criteria” in § 411.357(w)(2), because the phrase “electronic health records certification criteria” has been removed from 45 CFR part 170 as of June 30, 2020.

We note that the latter change does not alter the scope of the remuneration to which the EHR exception applies. The exception continues to apply only to donations of items or services that are necessary and used predominantly to create, maintain, transmit, receive, or protect electronic health records. We also decline to adopt the commenter's suggestion that the certification must be current on the date that the donor has entered into a binding agreement with the recipient. To help ensure that donations of health information technology will further the policy goal of fully interoperable health information systems (71 FR 45149), we believe that parties that enjoy the benefit of donated software being deemed to be interoperable must ensure that it is certified to the current certification criteria on the date it is donated.

However, depending on the facts and circumstances, donations that do not satisfy the requirements of the deeming provision may still satisfy the requirement at § 411.357(w)(2) that the donated software is interoperable. Comment. One commenter opposed the concept of an “optional” deeming provision, asserting that it is critical to require that software be certified by a certifying body authorized by ONC to further support the goal of value-based arrangements. In contrast, another commenter was concerned that the EHR exception applies only to donations of software that has been certified by ONC.

Response. Although we agree that the interoperability of software is a critical requirement of the EHR exception, we disagree with the first commenter that certification by a certifying body authorized by ONC should be the only way of meeting this requirement. This certification provides donors and recipients with assurance that the electronic health records software donated under their arrangement is interoperable for purposes of the EHR exception, but such certification is not required under the exception. We emphasize that the exception does not require that donated software is certified as interoperable by a certifying body authorized by ONC.

Rather, the exception requires that donated software is interoperable. We believe that requiring only that donated software is interoperable—allowing parties to demonstrate that donated software is interoperable even if it is not certified as interoperable by a certifying body authorized by ONC—coupled with the optional method for assuring that software is interoperable through satisfaction of the deeming provision at § 411.357(w)(2), affords parties sufficient flexibility under the exception for donations of electronic health records items or services. Comment. One commenter suggested that the proposed change to the deeming provision creates compliance uncertainty in the context of an ongoing software donation.

In particular, the commenter was concerned that the proposed wording change would mean that, if at any time after the initial software donation the electronic health records software loses its certification, the continued provision of the software, including maintenance, would implicate the fraud and abuse laws. Other commenters supported the proposal to require that software is certified at the time it is provided to a recipient, with one commenter noting that any updates to donated systems should also need to be certified to the most recent standards. Another commenter requested that we provide for a 5-year grace period under the interoperability deeming provision so that physicians not participating in the Quality Payment Program could continue to use donated electronic health records software certified to the 2015 edition. Response.

As we explained in response to the comment immediately above, the deeming provision is optional. Certification of donated electronic health records software by a certifying body authorized by ONC is not required to satisfy the requirement at § 411.357(w)(2) that the software is interoperable, as defined at § 411.351. The exception merely requires that the Start Printed Page 77610software is interoperable at the time it is provided to the recipient. Regardless of whether the physician recipient participates in the Quality Payment Program, electronic health records software is not required to satisfy the deeming provision at § 411.357(w)(2) in order to be “interoperable” as defined at § 411.351.

With respect to ongoing donations of maintenance, updates, or other items or services in connection with previously donated electronic health records software, we note the following. If the electronic health records software loses its certification, then new donations of that electronic health records software, including updates and patches of that software, will not be deemed to be interoperable under the deeming provision in § 411.357(w)(2). However, if the electronic health records software is still interoperable (as defined at § 411.351), then the EHR exception will remain available to protect ongoing donations of such electronic health records software, including updates and patches, provided that all other requirements of the exception are satisfied. If, on the other hand, software that loses its certification is no longer interoperable (as defined at § 411.351), then new donations of such electronic health records software, including updates and patches of the software, would not be protected under the EHR exception.

(2) Information Blocking and Data Lock-in (§ 411.357(w)(3)) The current requirement at § 411.357(w)(3) prohibits the donor (or any person on the donor's behalf) from taking any action to limit or restrict the use, compatibility, or interoperability of the donated items or services with other electronic prescribing or electronic health records systems (including, but not limited to, health IT applications, products, or services). Beginning with the 2006 EHR final rule and reaffirmed in the 2013 EHR final rule, § 411.357(w)(3) has been designed to. (1) Prevent the misuse of the exception that results in data and referral lock-in. And (2) encourage the free exchange of data (in accordance with protections for privacy) (78 FR 78762).

Since the publication of the 2006 EHR final rule and 2013 EHR final rule, significant legislative, regulatory, policy, and other Federal government action further defined the data lock-in problem (now commonly referred to as “information blocking”) and established penalties for certain types of individuals and entities that engage in information blocking. Most notably, the Cures Act added section 3022 of the PHSA, known as “the information blocking provision,” which defines conduct that constitutes information blocking by health care providers, health IT developers of certified health IT, health information exchanges, and health information networks. Section 3022(a)(1) of the PHSA defines “information blocking” in broad terms, while section 3022(a)(3) of the PHSA authorizes and charges the Secretary to identify reasonable and necessary activities that do not constitute information blocking for purposes of section 3022(a)(1) of the PHSA. The ONC NPRM included proposals to implement the statutory definition of “information blocking,” define certain terms related to the statutory definition of “information blocking,” and establish exceptions to the definition of “information blocking.” ONC published its final rule on May 1, 2020 (85 FR 25642).

In the proposed rule, we proposed modifications to § 411.357(w)(3) to recognize these significant updates since the 2013 EHR final rule (84 FR 55823). Specifically, we proposed at § 411.357(w)(3) to prohibit the donor (or any person on the donor's behalf) from engaging in a practice constituting information blocking, as defined in section 3022 of the PHSA, in connection with the donated items or services. We stated that, should ONC finalize its proposals to implement section 3022 of the PHSA at 45 CFR part 171, we would incorporate such regulations into the requirement at § 411.357(w)(3) for purposes of the physician self-referral law, if we finalized the proposals described in the proposed rule (84 FR 55823). We noted in the proposed rule that the current requirements of the EHR exception, while not using the term “information blocking,” already include concepts similar to those found in the Cures Act's prohibition on information blocking (84 FR 55823).

For example, in prior rulemaking, we stated our concern about donors (or those on the donor's behalf) taking steps to limit the interoperability of donated software to lock in or steer referrals (see, for example, 71 FR 45156 and 78 FR 78762 through 78763). We stated in the proposed rule that the proposed modifications of § 411.357(w)(3) were not intended to change the underlying purpose of this requirement, but instead further our longstanding goal of preventing abusive arrangements that lead to information blocking and referral lock-in through modern understandings of those concepts established in the Cures Act (84 FR 55823).[] We solicited comments on aligning the requirement at § 411.357(w)(3) with the PHSA information blocking provision and the information blocking definition in 45 CFR part 171. After reviewing comments on our proposal, we are not finalizing the proposed modification of § 411.357(w)(3). Rather, based on the comments and for the reasons explained below, we are removing § 411.357(w)(3) from our regulations.

We received the following comments and our responses follow. Comment. We received a number of comments about incorporating the “information blocking” prohibitions from the Cures Act or the ONC NPRM into the EHR exception at § 411.357(w)(3). Several commenters supported aligning the EHR exception with the concepts of interoperability and information blocking from the Cures Act and the ONC NPRM, including our proposal to expressly prohibit information blocking at § 411.357(w)(3).

One commenter agreed with CMS' assessment that the incorporation of the concept of information blocking into the regulation does not change the underlying purpose of the existing interoperability requirements. Another commenter that supported the prohibition on information blocking asserted that large health systems can control referrals and increase market share by limiting access to patients' records to specific providers on the same health information network, thereby shutting out independent providers and negatively impacting patient care. Other commenters did not disagree that information blocking should be prohibited, but raised a number of questions and concerns regarding how such a provision would work in the EHR exception. For example, a number of commenters expressed concern about relying on the ONC NPRM, which was not yet final at the time our proposed rule was published.

Some commenters were particularly concerned about the array of exceptions to the definition of “information blocking” and incorporation of the definition of “electronic health information” as proposed in the ONC NPRM. Some commenters asked that we clarify which party is responsible to ensure that information blocking does not occur, asserting that a donor cannot Start Printed Page 77611control what happens to software after it is donated. Several commenters recommended removing or revising the requirement in the EHR exception that a donor (or any person on a donor's behalf) does not engage in a practice constituting information blocking, explaining that a vendor may engage in information blocking without the donor's knowledge. Another commenter expressed concern that, if a determination of information blocking against either a donor or recipient occurs at some time after the donation, the recipient may be vulnerable to unexpected costs or loss of access to its health information technology if the arrangement suddenly ends.

Another commenter asserted that the incorporation of ONC's proposals into the exception at § 411.357(w)(3) would introduce an intent-based requirement into the strict-liability framework of the physician self-referral law. A few commenters suggested that, rather than including a prohibition on information blocking (as that term is defined in the Cures Act or in 45 CFR part 171) as a requirement of the EHR exception, CMS should assume that information blocking will not be tolerated and will be enforced through other authorities. One commenter explained that, when the EHR exception was first issued in 2006, interoperability was in its infancy, and there was no separate regulatory guidance on interoperability and information blocking, whereas now these concepts are separately addressed and regulated by ONC. Given these changes, the commenters maintained that incorporation of information blocking provisions into the EHR exception is duplicative and unnecessary.

Response. Based on the comments and after assessing the final rule published by ONC, “21st Century Cures Act. Interoperability, Information Blocking, and the ONC Health IT Certification Program” (ONC final rule),[] we are removing the requirement at § 411.357(w)(3) in its entirety. This requirement, when originally implemented in the 2006 EHR final rule, was intended to “help ensure that donations of health information technology will further the policy goal of fully interoperable health information systems and will not be misused to steer business to the donor.” (71 FR 45156).

The 2013 EHR final rule also explained that the Department was considering other policies to improve interoperability and noted that those policy efforts are “better suited than this exception to consider and respond to evolving functionality related to the interoperability of electronic health record technology” (78 FR 78763). At that time, the Department had few other authorities to directly address information blocking. However, there are now other enforcement authorities designed to address information blocking. For example, the Cures Act gave ONC and OIG more direct authority to address information blocking.

Additionally, CMS has separate authority to address providers that information block, and OCR has authorities related to patient access. The Cures Act and the ONC final rule recognize that certain practices likely to interfere with, prevent, or materially discourage access, exchange, or use of electronic health information may nonetheless be reasonable and necessary. That is why the Cures Act directed the Secretary to identify exceptions to the definition of information blocking. The ONC final rule implements eight exceptions that apply to practices likely to interfere with the access, exchange, or use of electronic health information provided that the practice meets the conditions of an exception.

However, § 411.357(w)(3), as implemented by the 2006 EHR final rule, required that a party not take “any action to limit or restrict the use, compatibility, or interoperability” of the donated electronic health records items or services. The requirement did not account for actions that may be reasonable and necessary, such as implementing privacy and security measures. Recognizing the developments since 2013, we agree with the commenter that newer and separate authorities are better suited than a requirement of an exception to the physician self-referral law to deter information blocking and hold individuals and entities that engage in information blocking appropriately accountable. We also agree with commenters that a recipient is unlikely to have the capabilities to determine if a donor (or someone on the donor's behalf) engaged in information blocking, which includes a level of intent set by statute, or met an exception to information blocking as set forth in the ONC final rule.

Given these potential issues with the proposed modifications to § 411.357(w)(3) and limitations of the original requirement at § 411.357(w)(3) discussed above, we no longer believe that the requirement is an effective way to achieve the policy goals that served as its original basis. Removing the requirement at § 411.357(w)(3) should sufficiently address the concerns of the commenters that had questions about the scope of information blocking practices, how CMS would determine the party responsible, and how the information blocking knowledge standards in the Cures Act and ONC final rule would be assessed in context of this exception and the strict-liability framework of the physician self-referral law. We emphasize that we are maintaining the interoperability requirement at § 411.357(w)(2). We believe that this requirement and the optional deeming provision at § 411.357(w)(2) will ensure that donations of items and services under § 411.357(w) that satisfy all the requirements of the EHR exception further the Department's policy goal of an interoperable health system and prevent donations of items and services intended to lock in referrals by limiting the flow of electronic health information.

Comment. One commenter requested that we include in the EHR exception a requirement that donors must also provide access to electronic health records to pharmacists. The commenter stated that some health information technology systems block pharmacists' visibility into relevant clinical information from other health care providers. Response.

The EHR exception does not limit the scope of permissible donors to those donors that grant access to electronic health records to a specified set of providers or suppliers. However, for a donation to be permissible under the EHR exception, among other things, the software must be interoperable and should not inappropriately interfere with, prevent, or materially discourage legally permissible access, exchange, or use of relevant clinical information. We encourage parties to report concerns regarding potential information blocking to https://healthit.gov/​report-info-blocking. B.

Cybersecurity We proposed to amend the EHR exception to clarify that the exception is applicable (and always has been applicable) to certain cybersecurity software and services,[] and to more broadly protect the donation of software and services related to cybersecurity (84 FR 55823). Currently, the exception at § 411.357(w) protects electronic health records software or information technology and training services necessary and used predominantly to create, maintain, transmit, or receive Start Printed Page 77612electronic health records. We proposed to modify this language to expressly include software that “protects” electronic health records, and to expressly include software and services related to cybersecurity. In the 2006 EHR final rule, we emphasized that software and information technology and training services donated under § 411.357(w) must create, maintain, transmit, or receive electronic health records, and those functions must predominate (71 FR 54151).

We stated that the core functionality of the items and services must be the creation, maintenance, transmission, or receipt of individual patients' electronic health records, but, recognizing that electronic health records software is commonly integrated with other features, we also stated that arrangements in which the software package included other functionality related to the care and treatment of individual patients would be protected (71 FR 45151). Under our proposal, the same criteria would apply to cybersecurity software and services, provided that the predominant use of the software or services is cybersecurity associated with the electronic health records. In section II.E.2. Of this final rule, we discuss the new exception at § 411.357(bb), which applies specifically to arrangements involving the donation of cybersecurity technology and related services (the cybersecurity exception), and the definition of “cybersecurity” at § 411.351 that will apply to both the EHR exception and the cybersecurity exception at § 411.357(bb).

As finalized, the cybersecurity exception at § 411.357(bb) is broader and includes fewer requirements than the EHR exception as applied to cybersecurity software and services that are necessary and used predominantly to protect electronic health records. Among other things, the cybersecurity exception at final § 411.357(bb) does not require recipients to contribute to the cost of the donated cybersecurity technology or services, while the EHR exception retains the cost contribution requirement at § 411.357(w)(4) for donations of electronic health records items or services. In the proposed rule, we solicited comments on whether it is necessary to modify the EHR exception to expressly include cybersecurity, given our proposed addition of a standalone exception for cybersecurity technology and related services at § 411.357(bb), and we stated that a party seeking to protect an arrangement involving the donation of cybersecurity software and services only needs to comply with the requirements of one applicable exception (84 FR 55824). After reviewing the comments on our proposed rule, we are finalizing our proposal to expand the EHR exception to expressly include cybersecurity software and services so that it is clear that an entity donating electronic health records software and providing training and other related services may also utilize the EHR exception to protect donations of related cybersecurity software and services to protect the electronic health records, provided that all the requirements of the EHR exception are satisfied.

In the final exception, we removed the word “certain” before “cybersecurity software and services” in the introductory chapeau language to avoid ambiguity regarding the scope of the EHR exception. We received the following comments and our responses follow. Comment. A number of commenters supported stating in regulation text that the EHR exception applies to donations of cybersecurity software and services that protect electronic health records.

These commenters stated that the proposal, if finalized, would clarify the regulations, and one of the commenters also noted that the revision would reduce administrative overhead by avoiding real or perceived disparities between donations of electronic health records items and services and cybersecurity donations. One commenter supported our proposal to include certain cybersecurity donations under the EHR exception, as well as in proposed § 411.357(bb). The commenter appreciated our statement that cybersecurity donations only need to satisfy one of the exceptions, and noted that having two exceptions available allows a donor to tailor its donation strategy. Response.

We are finalizing our proposal to expressly permit donations of cybersecurity software and services that protect electronic health records under the EHR exception. We agree with the commenter that having two exceptions available to protect donations of cybersecurity software and services increases flexibility under our regulations. Comment. A few commenters expressed concern that the proposal related to cybersecurity software and services with respect to the EHR exception and the separately proposed cybersecurity exception at § 411.357(bb) overlap significantly and could lead to confusion if both are finalized.

The commenters stated that, if CMS finalizes a separate cybersecurity exception at § 411.357(bb), the proposed cybersecurity-related clarifications to the EHR exception would not be necessary. One of the commenters questioned how the cost contribution requirement under the EHR exception at § 411.357(w)(4) would apply to donations of cybersecurity software under § 411.357(w), given that there is no cost contribution requirement in the cybersecurity exception at proposed § 411.357(bb), and also asked whether the electronic health records or cybersecurity function must predominate in software that includes both electronic health records and cybersecurity functions. A different commenter requested that, if we finalize protection for certain cybersecurity software and services under the EHR exception, we also clarify that the predominant purpose of the software or service must be cybersecurity associated with electronic health records. Another commenter suggested that creating separate exceptions for electronic health records items and services and cybersecurity technology and related services is taking a piecemeal approach to tools that must work together for care coordination.

Response. We recognize that there is a certain amount of overlap between the cybersecurity exception established in this final rule at § 411.357(bb) and the EHR exception, as amended by this final rule, although we do not agree that this overlap will result in the type of confusion suggested by the commenter. The revision to the introductory language of § 411.357(w) merely confirms in regulation text that the EHR exception has always been applicable to (and remains applicable to) arrangements that include the donation of cybersecurity software and services that have a predominant purpose of protecting electronic health records. In application, if a party is donating electronic health records items and services under the EHR exception, and the donation includes cybersecurity software or services that are necessary and used predominantly to protect electronic health records, the parties may structure their entire arrangement to satisfy the requirements of the EHR exception, instead of structuring the arrangement to satisfy two different exceptions.

We believe that having this option available will reduce administrative burden for some parties. Other parties may wish to structure such donations as two separate arrangements that each satisfy the requirements of the respective exception at § 411.357(w) and § 411.357(bb). As noted in the proposed rule and reiterated above, parties seeking to Start Printed Page 77613protect an arrangement involving the donation of cybersecurity software and services only need to satisfy the requirements of one applicable exception (84 FR 55824). Regarding the requirement in the EHR exception that a physician recipient must contribute 15 percent of the donor's cost of the donated items and services, under this final rule, the EHR exception retains the 15 percent cost contribution requirement at § 411.357(w)(4), but there is no cost contribution requirement under the standalone cybersecurity exception at § 411.357(bb).

Thus, if parties rely on the exception at § 411.357(w) to protect an arrangement for a donation that includes both electronic health records items and services and related cybersecurity software or services, the physician recipient must contribute 15 percent of the donor's cost for the cybersecurity software or services under § 411.357(w)(4). If parties structure such a donation to satisfy the requirements of § 411.357(w) and § 411.357(bb) respectively, then the physician does not have to pay the 15 percent cost contribution for the cybersecurity software and services if the arrangement related to the cybersecurity software and services satisfies all the requirements of § 411.357(bb). We reiterate here that, with respect to cybersecurity technology and related services, the scope of the EHR exception is more limited than the standalone cybersecurity exception at § 411.357(bb). Arrangements for the donation of standalone cybersecurity hardware or items or services that are not used predominantly to protect electronic health records (but are used predominantly to implement, maintain, or reestablish cybersecurity) are not excepted under the EHR exception, but may be protected under the cybersecurity exception if all the requirements of § 411.357(bb) are satisfied.

Comment. Some commenters requested that CMS broaden the application of the EHR exception to additional cybersecurity technology and services, for example, to cybersecurity hardware, such as network appliances. One commenter requested that we make the EHR exception applicable to donations of cybersecurity hardware, software, infrastructure and services, without exception and without a requirement that the recipient contribute 15 percent of the donor's cost for the items or services. Another commenter suggested that, if the expanded exception does not protect hardware, CMS should permit donors to place cybersecurity hardware at the recipient's location as long as the donor retains title to or a leasehold interest in the equipment.

Response. By including the word “protect” in the introductory chapeau language of § 411.357(w), we are clarifying that the scope of the EHR exception applies to cybersecurity software or other information technology and training services that are necessary and used predominantly to protect electronic health records. We decline to expand the EHR exception to apply to additional services or hardware, including hardware that is donated or loaned to a recipient. There is a separate, standalone exception at final § 411.357(bb) that applies to broader cybersecurity donations, including donations of cybersecurity hardware, and that exception does not include a contribution requirement.

C. The Sunset Provision The EHR exception originally was scheduled to expire on December 31, 2013. In the 2006 EHR final rule, we stated that the need for an exception for donations of electronic health records items and services should diminish substantially over time as the use of electronic health records technology becomes a standard and expected part of medical practice. In our 2013 proposal to revise the EHR exception (78 FR 21308), we recognized that, although the adoption of electronic health records had risen dramatically, its use was not yet universal nationwide.

Because continued adoption of electronic health records remained an important goal of the Department, we solicited comments regarding an extension of the EHR exception (78 FR 21311 through 21312). In response to those comments, in the 2013 EHR final rule, we extended the sunset date of the exception to December 31, 2021, a date that corresponds to the end of the electronic health records Medicaid incentives (78 FR 78755 through 78757). We stated our continued belief that, as progress on the goal of nationwide electronic health records adoption is achieved, the need for an exception for donations should continue to diminish over time. Nonetheless, commenters on the CMS RFI and on OIG's request for information requested that we make the EHR exception and safe harbor permanent.

Although widespread (though not universal) adoption of electronic health records largely has been achieved at this time, we no longer believe that the need for an exception for arrangements involving the donation of electronic health records items and services will diminish over time or completely disappear. The continued availability of the EHR exception provides certainty with respect to the contribution costs related to donations of electronic health records items and services for recipients, facilitates adoption by physicians who are new entrants into medical practice or have postponed adoption based on financial concerns regarding the ongoing costs of maintaining and supporting an electronic health records system, and helps preserve the gains already made in the adoption of interoperable electronic health records technology (84 FR 55824). Therefore, in the proposed rule, we proposed to eliminate the sunset provision at § 411.357(w)(13) (84 FR 55824). In the alternative, we considered an extension of the sunset date.

We sought comment on whether we should extend the sunset date instead of making the exception permanent, and if so, the duration of any such extension. Based on the comments we received on the proposed rule, we are finalizing our proposal to make the EHR exception permanent by removing the sunset provision at § 411.357(w)(13). We received the following comment and our response follows. Comment.

We received almost unanimous support to remove the sunset date in the EHR exception. Commenters asserted that the elimination of the sunset date would provide certainty regarding the availability of an exception to the physician self-referral law for ongoing donations of electronic health records items and services. Commenters also agreed with our statement in the proposed rule that the exception will remain necessary after 2021, given new entrants, aging electronic health records technology at existing practices, and emerging and improved technology. In contrast, one commenter suggested that, after 2021, the exception should only be available to rural providers and to physicians entering into solo practice in a health professional shortage area or medically underserved area.

According to the commenter, making the current exception permanent could incentivize entities to reward high referring physicians with new electronic health records systems or updates. Response. We are finalizing our proposal to make the EHR exception permanent by removing the sunset date. We note that, as finalized, the exception continues to require at § 411.357(w)(6) that neither the eligibility of a physician to receive items or services nor the amount or nature of the items or services may be determined in any manner that directly takes into account Start Printed Page 77614the volume or value of the physician's referrals or other business generated between the parties.

Given this requirement, as well as the other requirements of the exception, we do not believe that making the EHR exception permanent poses a risk of program or patient abuse. D. Definitions In the proposed rule, we proposed to modify the definitions of “electronic health record” and “interoperable” (84 FR 55824 through 55825). We adopted definitions for these terms in the 2006 EHR final rule based on contemporaneous terminology, the emerging standards for electronic health records, and other resources cited by commenters at that time.

Our proposed modifications to these definitions were largely based on terms and provisions in the Cures Act that update or supersede terminology we used in the 2006 EHR final rule (84 FR 55824 through 55825). We discuss our specific proposals and our final policies and regulations pertaining to definitions of “electronic health record” and “interoperable” below in subsections (1) and (2), respectively. (1) “Electronic Health Record” The term “electronic health record” is defined at § 411.351 as a repository of consumer health status information in computer processable form used for clinical diagnosis and treatment for a broad array of clinical conditions. We proposed to revise this definition so that “electronic health record” would mean a repository that includes electronic health information that.

(1) Is transmitted by or maintained in electronic media. And (2) relates to the past, present, or future health or condition of an individual or the provision of health care to an individual (84 FR 55824). We proposed the modifications to reflect the term “electronic health information” that is used throughout the Cures Act and that is central to the definition of interoperability at section 3000(9) of the PHSA and the information blocking provisions at section 3022 of the PHSA. We based our proposed modifications, in part, on ONC's proposed definition of “electronic health information” in the ONC NPRM (84 FR 7513), which reflects more modern terminology used to describe the type of information that is part of an electronic health record.

We solicited comments on this updated definition (84 FR 55824). After reviewing the comments on our proposed definition of “electronic health record,” we are not finalizing our proposal to modify the definition. Rather, we are retaining the current definition of “electronic health record” at § 411.351. We received the following comments and our responses follow.

Comment. Several commenters expressed general support for our proposed revision to the definition of “electronic health record,” particularly to the extent that the definition would align with the definition included in the Cures Act. Some commenters supported our proposal to incorporate the term “electronic health information,” which ONC proposed to define in the ONC NPRM. According to one commenter, the broad definition of “electronic health information” in the ONC NPRM would ensure that data related to medical imaging, such as electronic orders and referrals for radiology services, would be subject to the information blocking provisions.

The commenter suggested that, if ONC does not finalize a broad definition of “electronic health information,” CMS should retain the term “consumer health status information” in the definition of “electronic health record.” Another commenter maintained that, to further the agency's price transparency goals, CMS should explicitly define “electronic health record” to include electronic health information that relates to the past, present, or future payment for the provision of health care to an individual. In contrast, several other commenters objected to the inclusion of the term “electronic health information” in the definition of “electronic health record.” Noting that, at the time we issued our proposed rule, ONC had not finalized its definition of “electronic health information,” these commenters maintained that the definition proposed by ONC is overly broad. For example, one commenter asserted that, under the proposed definition, a patient's computer or mobile telephone could be considered an electronic health record if the patient obtained a copy of his or her health record through electronic transmittal. Some commenters specifically stated that the proposed definition of “electronic health record” was too broad because, as proposed, it would have included financial information pertaining to payment for the provision of health care to an individual.

Several commenters also made suggestions to limit the scope of “electronic health information.” Response. As stated in the proposed rule and reiterated above, our proposal to modify the definition of “electronic health information” was meant to update terminology that we adopted in the 2006 EHR final rule (84 FR 55824). We did not intend for our proposed modifications to the definition of “electronic health record” to make a substantive change to the scope of the exception at § 411.357(w). We agree with commenters that our proposed changes might have inadvertently introduced undesirable complexity.

To remain true to our intent, we are not finalizing any of the proposed changes to the definition of “electronic health record,” and we are retaining the existing definition in our regulations. We also note that ONC published its final definition of “electronic health information” in the Federal Register on May 1, 2020, well after the comment period for our proposed rule closed on December 31, 2019, and the final definition of “electronic health information” (85 FR 25955) differs from the definition that ONC proposed (84 FR 7601). Among other things, as ONC explained in its final rule, the definition of “electronic health information” in ONC's final rule does not expressly include or exclude price information (85 FR 25804). Given that ONC's final definition differs from the definition in the ONC NPRM, which we cited in our proposed rule, and that ONC's final rule was published after the comment period for our proposed rule closed, we are concerned that the public may have not had sufficient information to comment on our proposal to incorporate the concept of “electronic health information” in the definition of “electronic health record.” Finally, although CMS remains committed to the price transparency initiative, at this time, we do not believe that modifying the definition of “electronic health record” with the resulting impact on the scope and requirements of the EHR exception is the best means to achieve this goal.

(2) “Interoperable” The term “interoperable” is currently defined at § 411.351 to mean able to communicate and exchange data accurately, effectively, securely, and consistently with different information technology systems, software applications, and networks, in various settings. And exchange data such that the clinical or operational purposes and meaning of the data are preserved and unaltered. This definition of “interoperable” was based on 44 U.S.C. 3601(6) (pertaining to the management and promotion of electronic Government services) and several comments we received in response to our 2005 rulemaking proposing exceptions for certain electronic prescribing and electronic health records arrangements (70 FR 59182) that Start Printed Page 77615referenced emerging industry definitions and standards related to interoperability (71 FR 45155 through 45156).

In the proposed rule, we proposed to update the definition of “interoperable” to align with the statutory definition of “interoperability” added by the Cures Act to section 3000(9) of the PHSA (84 FR 55824 through 55825). Consistent with section 3000(9) of the PHSA, we proposed to define “interoperable” to mean. (i) Able to securely exchange data with and use data from other health information technology without special effort on the part of the user. (ii) allows for complete access, exchange, and use of all electronically accessible health information for authorized use under applicable State or Federal law.

And (iii) does not constitute information blocking as defined in section 3022 of the PHSA (84 FR 55824 through 55825). We stated that, should ONC finalize its proposals to implement section 3022 of the PHSA at 45 CFR part 171, and if we finalize our proposed definition of “interoperable,” we would incorporate the final ONC regulations into the definition of “interoperable” at § 411.351 by referencing 45 CFR part 171 instead of section 3022 of the PHSA (84 FR 55825). We also noted in the proposed rule that the statutory definition of “interoperability” includes concepts similar to the existing definition of “interoperable” at § 411.351 (for example, the ability to securely exchange data across different systems or technology) (84 FR 55825). Two new concepts in the statutory definition were included in our proposed modification of the definition.

(1) Interoperable means the ability to exchange electronic health information without special effort on the part of the user. And (2) interoperable expressly does not mean information blocking (Section 3000(9) of the PHSA. (42 U.S.C. 300jj(9)).

We stated that, as a practical matter, we believe that these two concepts are not substantively different from the existing definition and only reflect an updated understanding of interoperability and related terminology, and solicited comments on a definition that would align the definition of “interoperable” at § 411.351 (for purposes of the physician self-referral law) with the statutory definition “interoperability” at 3000(9) of the PHSA (84 FR 55825). As an alternative proposal, we considered revising our regulations to eliminate the term “interoperable” and instead define the term “interoperability” by reference to section 3000(9) of the PHSA and 45 CFR part 170 (if finalized) (84 FR 55825). In conjunction, we would revise the EHR exception to incorporate the term “interoperability” and remove the term “interoperable.” We sought comment regarding whether using terminology identical to the PHSA and ONC regulations would facilitate compliance with the requirements of the EHR exception and reduce any regulatory burden resulting from the differences in the agencies' varying terminology related to the singular concept of interoperability (84 FR 55825). We are not finalizing this alternative proposal.

After reviewing the comments on our proposals, we are revising the definition of “interoperable,” but omitting the provision related to information blocking and deleting the phrase “without special effort on the part of the user” from proposed subparagraph (1). Specifically, at revised § 411.351, “interoperable” means. (1) Able to securely exchange data with and use data from other health information technology. And (2) allows for complete access, exchange, and use of all electronically accessible health information for authorized use under applicable State or Federal law.

We received the following comments and our response follows. Comment. We received general support for our effort to align the definition of “interoperable” with the statutory definition of “interoperability” in the Cures Act. However, citing uncertainty regarding the proposals in the ONC NPRM, one commenter requested that CMS not define “interoperable” with reference to ONC's proposed definition.

The commenter also requested that CMS not replace the definition of “interoperable” with a definition of “interoperability” that cites ONC's proposed definition at 45 CFR 170.102. One commenter supported including a provision pertaining to information blocking in the definition, while several other commenters raised questions about the incorporation of information blocking in the definition of “interoperable.” For example, these commenters asked when the test for interoperability occurs and whether a prior donation of electronic health records items or services would cease to satisfy the requirements of the EHR exception if there was a finding of information blocking sometime after the donation. One commenter asked for further clarification of the phrase “without special effort on the part of the user.” Response. As we explain above in the discussion of our proposal to include the concept of “information blocking” in the exception at § 411.357(w)(3), we believe that newer and separate authorities are better suited than the EHR exception to deter information blocking and hold individuals and entities that engage in information blocking appropriately accountable.

We are concerned that, if we include the phrase “does not constitute information blocking” in the definition of “interoperable” at § 411.351, then § 411.357(w)(2), which requires that the donated software is interoperable, could be interpreted to prohibit parties from engaging in practices that constitute “information blocking” but that might not be prohibited under ONC rules. Therefore, we are not including the phrase “does not constitute information blocking” in the definition of “interoperable” at § 411.351. With respect to the phrase “without special effort on the part of the user,” we note that, the phrase is used in the definition of “interoperability” at section 4003(a)(2) of the Cures Act and the partial phrase “without special effort” is used in the conditions of certification at section 4002(a) of the Cures Act. As explained above, although software certified by ONC is deemed to be interoperable for purposes of the physician self-referral law, certification is not required for compliance with § 411.357(w)(2).

To avoid any implication that we are incorporating a certification requirement into the definition of “interoperable” at § 411.351, we are removing the phrase “without special effort on the part of the user” from the definition. E. Additional Proposals and Considerations (1) 15 Percent Recipient Contribution (§ 411.357(w)(4)) In the 2006 EHR final rule, we agreed with a number of commenters that suggested that cost sharing is an appropriate method to address some of the program integrity risks inherent in unlimited donations of electronic health records items and services (71 FR 45160 through 45161). Accordingly, we incorporated a requirement at § 411.357(w)(4) that, before the receipt of the items or services, the physician pays 15 percent of the donor's cost of the items or services.

We stated our belief that the 15 percent cost sharing requirement is high enough to encourage prudent and robust electronic health records arrangements without imposing a prohibitive financial burden on recipients. Moreover, we stated that this approach requires recipients to contribute toward the benefits they may experience from the adoption of interoperable electronic health records software (for example, a decrease in Start Printed Page 77616practice expenses or access to incentive payments related to the adoption of electronic health records technology). We received a number of comments in response to the CMS RFI, and OIG received similar comments in response to its request for information, asserting that the 15 percent contribution requirement of the EHR exception has been burdensome to some recipients and acts as a barrier to adoption of electronic health records. Some commenters on the requests for information asserted that this burden may be particularly acute for small and rural practices that cannot afford the contribution.

Other suggested that applying the 15 percent contribution requirement to upgrades and updates to electronic health records software is restrictive and cumbersome and similarly acts as a barrier. In the proposed rule, we considered and solicited comments on two alternatives to the existing requirement at § 411.357(w)(4) as outlined below, but did not propose specific regulation text along with the proposals (85 FR 55825). First, we considered eliminating the contribution requirement or reducing the percentage that small or rural physician organizations would be required to contribute. In conjunction with this proposal, we solicited comments on how we should define “small or rural physician organization.” We also solicited comments on whether “rural physician organization” should be defined as a physician organization located in a rural area, as that term is defined at § 411.351, or defined in line with the definition of “rural provider” at § 411.356(c)(1).

We also solicited comments on other subsets of potential physician recipients for which the 15 percent contribution is a particular burden. As an alternative, we proposed to reduce or eliminate the 15 percent contribution requirement in the EHR exception for all physician recipients. We solicited comments regarding the impact this might have on the use and adoption of electronic health records technology, as well as any attendant program integrity concerns. We solicited comments requesting specific examples of any prohibitive costs associated with the 15 percent contribution requirement, both for the initial donation of electronic health records items and services, and subsequent upgrades and updates to previously donated electronic health records items and services.

Finally, in the proposed rule, we also considered modifying or eliminating the contribution requirement for updates to previously donated electronic health records software or services, regardless of whether we determined to retain the 15 percent contribution requirement or reduce that contribution requirement for some or all physician recipients (85 FR 55825). We solicited comments on this approach as well as what such a modification should entail. For example, we considered requiring a contribution for the initial donation only, as well as any new electronic health records software modules, but not requiring a contribution for any update of the software already donated. We solicited comments on these alternatives, or another similar alternative that would still involve some contribution but could reduce the uncertainty and administrative burden associated with assessing a contribution for each update of the software already donated.

After reviewing the comments, we are retaining the 15 percent cost contribution requirement for all physician recipients. However, in response to comments, we are revising § 411.357(w)(4) as it pertains to the timing of payments. Under revised § 411.357(w)(4)(i), a physician must pay the required cost contribution amount before receiving an initial donation of electronic health records items and services or a donation of replacement items and services. However, with respect to items or services donated after the initial donation or the replacement donation, final § 411.357(w)(4)(ii) requires that the cost contribution amount must be paid at reasonable intervals.

Specifically, as finalized, § 411.357(w)(4)(i) and (ii) require that. (i) Before receipt of the initial donation of items and services or the donation of replacement items and services, the physician pays 15 percent of the donor's cost for the items and services. And (ii) except as provided in subparagraph (i), with respect to items or services received from the donor after the initial donation of items and services or the donation of replacement items and services, the physician pays 15 percent of the donor's cost for the items and services at reasonable intervals. We are not modifying § 411.357(w)(4)(iii), which requires that the donor (or any party related to the donor) does not finance the physician's payment or loan funds to be used by the physician to pay for the items and services.

We received the following comments and our responses follow. Comment. A large number of commenters recommended that we remove the 15 percent contribution requirement for all donations and for all recipients or, in the alternative, reduce the contribution requirement to 5 percent of the donor's cost for the items and services. Commenters provided a number of reasons in support of their request to remove the contribution requirement.

One commenter noted that the contribution requirement may pose a barrier to physicians who have not yet adopted electronic health records software, and added that, even if the contribution requirement is eliminated, physicians would still be required to bear other costs related to electronic health records implementation, such as hardware, staff time, and other resources. A few commenters stated that the contribution requirement may be an unreasonable constraint on how health systems and hospitals finance the needed infrastructure to implement new value-based payment models and promote coordination of care. One of these commenters asserted that a common electronic health records system across a network of hospitals and physicians fosters a higher degree of integrated care, better and more timely access to services through coordinated systems, alignment of quality standards across all participating providers, and a more structured approach to optimizing utilization, thus contributing to higher quality and more affordable care. However, according to the commenter, small and independent practices typically cannot afford the electronic health records systems used by a larger health care system, even at a discount, which leads to a network of disjointed care and service offerings.

Other commenters cited the added burden involved in setting the contribution amount in writing and the necessary, ongoing monitoring to ensure compliance. One of these commenters also highlighted that eliminating the requirement would align the EHR exception with the proposed cybersecurity exception at § 411.357(bb), which does not include a contribution requirement. Several commenters that supported eliminating the contribution requirement as a requirement of the EHR exception suggested that CMS should still allow the donor to require a contribution. One of the commenters suggested that any contribution requirement should be left up to market forces and negotiation between the parties, and another suggested that the contribution amount should be at the discretion of the donor, as long as the donor consistently and fairly applies its policy to all recipients.

In contrast, some commenters raised concerns about eliminating the contribution requirement. One of these commenters maintained that physician adoption and use of an electronic health Start Printed Page 77617records system is improved when physicians have a certain level of buy-in and share in the financial cost. Similarly, other commenters suggested that 15 percent represents a fair contribution amount, the contribution requirement serves as a reasonable safeguard to reduce wasteful spending, and it is important for recipients to have a stake in the purchased technology. Response.

After careful consideration, we continue to believe that the contribution requirement is an important safeguard to protect against program or patient abuse. When recipients of valuable remuneration have some responsibility to contribute to the cost of the items or services, they are more likely to make economically prudent decisions and accept only items and services that they need. As described below, we are revising the requirement at § 411.357(w)(4) to increase flexibility in connection with administering the contribution requirement. We note that, depending on the facts and circumstances, donations of electronic health records items and services may be permissible under the new exceptions for arrangements that facilitate value-based health care delivery and payment at § 411.357(aa).

There is no requirement in the exceptions at final § 411.357(aa)(1), (2), or (3) that recipients of the electronic health records items or services contribute to the donor's cost for the items or services. Comment. Many commenters suggested that, if CMS determines not to eliminate the 15 percent contribution requirement for all physician recipients, it should eliminate the requirement for at least a subset of recipients, such as small, rural, or tribal physician practices. Free and charitable clinics.

Physicians with demonstrable financial need. Or physician practices located in underserved areas, including urban practices serving low-income Medicaid populations. Several commenters stated that the contribution requirement presents a significant financial barrier for these physician practices that could negatively impact patient care, and one commenter maintained that the contribution requirement “prices out” physicians in small, rural, or underserved practices, while another stated that the 15 percent contribution requirement is “too steep” for many small practices. Another commenter believed that the contribution requirement could be lowered for small and rural physician organizations, provided that the donor is still permitted to decide the cost sharing amount required.

Some commenters that favored eliminating the contribution requirement for a subset of physician practices, such as small or rural practices and practices in underserved areas, provided a variety of definitions for small, rural, and underserved practices, including definitions based on the Quality Payment Program. The anti-kickback statute safe harbor for local transportation. The North American Industry Classification System for small businesses. And the Secretary's designation of medically underserved areas and primary health care geographic health professional shortage areas.

Some commenters expressed concern that different contribution requirements for different sets of physician practices may be difficult to administer and increase burden and, therefore, supported removing the contribution requirement for all physicians. Response. As we explained in response to the immediately previous comment, we are retaining the 15 percent contribution requirement for all recipients seeking to protect donations of electronic health records items and services under the EHR exception. We agree with the commenters that identified the challenges of defining subgroups of entities to exempt from this requirement.

Even if we were to adopt definitions for the categories of physician recipients who would be exempted from the contribution requirement—whether by adopting definitions existing in other regulations or definitions suggested by commenters—we are cognizant that qualification under a designation can change over time (for example, a physician practice may qualify as a “small practice” at some points in time but not at others, depending on staffing changes), resulting in significant compliance challenges when such a change occurs. In addition, the program integrity risks associated with donations of electronic health records items and services apply regardless of the geography or size of the donation recipient. Again, we note that, to the extent that the donation of electronic health records items and services is made under a value-based arrangement (as defined at § 411.351), no recipient contribution is required, provided that the arrangement satisfies all the requirements of an applicable exception at final § 411.357(aa). Comment.

A number of commenters asked that, if CMS retains a contribution requirement on the initial donation of electronic health records items and services, the contribution requirement be eliminated for updates to the original donation. Commenters noted that updates may ensure that an electronic health records donation continues to function as needed and to meet current Federal standards for data exchange. One commenter stated that it is not uncommon for a donor's electronic health records system to be linked to a recipient's system, and the two systems must be in sync if they share an “instance” of electronic health records software. According to the commenter, updates to the donor's system must also be passed on to the recipient's electronic health records system, even if the recipient does not need, want, or use the updates.

The commenter contended that, with respect to such updates, the 15 percent cost contribution requirement functions as a tax that damages the financial stability of small practices. Another commenter recommended that CMS consider retaining a contribution requirement only for the provision of replacement software while eliminating it for the initial donation and any updates to that initially donated system. Response. As explained in response to comments above, we are retaining the contribution requirement for all electronic health records donations, including updates.

We recognize that updates are crucial for the continuing functionality of an electronic health records system. However, we do not believe that it is appropriate to retain a contribution requirement for certain donations and eliminate it for others. We are concerned about gaming under such a regulatory scheme. For example, the parties could structure the “initial” donation to consist of a functionality with a low cost, and consequently, a small required contribution, with the most valuable functionality provided later as an “update” with no required contribution.

For this reason, we believe that a cost contribution requirement is appropriate for all donations, including updates. However, as explained in our response to comments below, for updates to previously donated electronic health records items or services, we are no longer requiring that the contribution be made before the receipt of items and services. Comment. Some commenters addressed other aspects of the contribution requirement at § 411.357(w)(4).

For example, one commenter expressed concern about the requirement that the physician recipient must pay the required contribution before the items or services are received. This commenter noted that recipients may unintentionally fail to satisfy this requirement due to inadvertent late payments and requested that CMS add Start Printed Page 77618a remedy period for mistakes to be corrected. Another commenter recommended eliminating the requirement that the physician make the required contribution payment prior to the receipt of services and recommended instead that CMS require that the parties have in place a commercially reasonable collections process. Response.

We are aware that assessing a contribution for each update could create compliance challenges and increase administrative burden. We recognize that updates may need to take place quickly to remedy security or other problems in an electronic health records system, and we understand the commenter's concern about inadvertent late payments under such circumstances. We do not believe that it would pose a risk of program or patient abuse to permit a physician to pay required contribution amounts after receipt of an update, provided that payments are made at reasonable intervals. In contrast, with respect to an initial donation of items or services, or a donation that will replace existing items or services, we believe that parties can effectively plan the donation, with all expenses known in advance.

Thus, there does not exist the same administrative burden or potential for inadvertent late payments that may exist with the timing of payments for periodic updates. In light of this, we are modifying the requirement at § 411.357(w)(4) to permit payments of the cost contribution for items and services received after the initial donation or replacement donation at reasonable intervals, rather than in advance of the receipt of the items and services. Of course, parties remain free to require advance payments under their electronic health records donation arrangement. The regulation continues to require that the physician recipient pays the cost contribution amount for the initial donation of items or services or the donation of replacement items or services before the items or services are received.

We note that the EHR exception does not require a specific billing method, but the contribution amounts must actually be paid by the physician and be paid at reasonable intervals. A donor could choose to bill a recipient separately for each update or could bill the recipient monthly or quarterly to combine the contribution payments for all updates during a select period of time. Given the modifications to § 411.357(w)(4) that we are finalizing here, we do not believe that it is necessary to add a remedy period for mistakes to be corrected, as suggested by the commenter. Comment.

One commenter recommended that we not require a 15 percent contribution for cybersecurity donations under the EHR exception. The commenter noted that some organizations will only permit practices to use their electronic health records systems if the practice has certain cybersecurity protections, and thus the commenter suggested that the party requiring the cybersecurity protection should pay any costs associated with it. Response. We are not finalizing separate requirements for different types of donations within this exception.

If a party seeks to protect a donation of cybersecurity software or services under the EHR exception, then a contribution toward the cost of the items and services is required. However, as explained in our response to comments above, a physician need not pay the 15 percent cost contribution for cybersecurity technology and services donated in conjunction with electronic health records items and services if the donation of the cybersecurity technology or services satisfies all the requirements of final § 411.357(bb). Comment. One commenter stated that donations of items and services under the EHR exception are typically made to a physician practice, as opposed to an individual physician.

However, the cost contribution requirement at § 411.357(w)(4) requires the physician to pay 15 percent of the donor's cost. The commenter stated that, given this language, it is unclear whether individual physicians or the physician practice must pay the cost contribution. The commenter requested that CMS clarify that donations may be made to a physician organization as the sole contracting party and as the sole contributor to the donor's cost. Response.

Because the physician self-referral law is implicated when a financial relationship exists between a physician (or an immediate family member of a physician) and an entity, the exception for electronic health records items or services at § 411.357(w) is structured to apply to remuneration from an entity to a physician. The commenter correctly notes that the cost contribution requirement at § 411.357(w)(4) requires the physician to pay 15 percent of the donor's cost. The required contribution amount may be paid by the physician or on behalf of the physician by his or her physician organization. With respect to donations to physicians in a physician organization consisting of more than one physician, we note the following.

We acknowledge, as the commenter stated, that donations of items and services under the EHR exception are often made to a physician organization, as opposed to an individual physician. When an arrangement for the donation of electronic health records items and services is between the donor entity and a physician organization, under our regulation at § 411.354(c)(1), each physician who stands in the shoes of the physician organization is deemed to have the same compensation arrangement as the physician organization. Thus, the donation of the electronic health records items and services to the physician organization is deemed to establish a direct compensation arrangement between each physician who stands in the shoes of the physician organization and the entity donating the electronic health records items and services. Each of those “deemed direct” compensation arrangements must satisfy the requirements of an applicable exception in order to avoid the physician self-referral law's referral and billing prohibitions.

However, unlike many other forms of nonmonetary compensation, the cost of electronic health records items and services is oftentimes capable of being allocated on a per-user basis. Thus, when a donor entity divides the cost of electronic health records items and services among physician recipients in an appropriate manner (for example, per capita or by estimated usage based on their portions of the physician organization's patient universe or visits), the donation of electronic health records items and services to the physicians in a physician organization is properly viewed as a direct compensation arrangement between the donor entity and each recipient physician, rather than “deemed direct” compensation arrangements that result from applying the “stand in the shoes” provisions at § 411.354(c)(1). In such circumstances, each physician recipient would be required to contribute 15 percent of the cost of the electronic health records items and services specifically allocated to him or her, rather than the cost of the entire suite of electronic health records items and services provided to the physician organization as a whole. The required contribution amount may be paid by each individual physician or on behalf of the physicians by the physician organization.

To illustrate, assume that a donor entity wishes to provide licenses for the physicians in a physician organization to access and utilize electronic health records items and services, and the cost Start Printed Page 77619of the license is $100,000 per year for 25 licenses. The donor entity may divide the cost of the 25 licenses among the potential licensees, and allocate $4,000 to each physician recipient. Thus, if the donor entity provided 10 licenses to a physician organization, it could allocate $4,000 per physician recipient, establishing a direct compensation arrangement with each physician recipient. In these circumstances, each physician recipient must pay 15 percent (or $600) of the cost of the license before receipt of the license in order to satisfy the requirement at § 411.357(w)(4).

In contrast, assume that a donor entity provides information technology and training services that are not readily or appropriately divisible by any particular number of licensees or users. If the cost of the items and services provided to a physician organization cannot readily and appropriately be divided among the individual physician recipients of the items and services, under the regulation at § 411.354(c)(1), the entirety of the items and services are deemed to be provided to each physician who stands in the shoes of the physician organization. (2) Equivalent Items and Services (§ 411.357(w)(8)) In the 2013 EHR final rule, we highlighted a commenter's assertion that the prohibition on donating equivalent items or services currently included in the exception at § 411.357(w)(8) locks physician practices into a vendor, even if they are dissatisfied with the donated items or services, because the recipient must choose between paying the full amount for a new electronic health records system and continuing to pay 15 percent of the cost of the substandard system (78 FR 78766). That commenter asserted that the cost differential between these two options is high enough to effectively locks physician practices into electronic health records technology vendors.

In the 2013 EHR final rule, we responded that we continued to believe that items and services are not necessary if the recipient already possesses the equivalent items or services. We noted that providing equivalent items and services confers independent value on the physician recipient and stated our expectation that physicians would not select or continue to use a substandard system if it posed a threat to patient safety. We appreciate that advancements in electronic health records technology are continuous and rapid. According to commenters on the CMS RFI and OIG's request for information, in some situations replacement electronic health records items or services are appropriate but prohibitively expensive.

In the proposed rule, we proposed to permit donations of replacement electronic health records items or services under the EHR exception (84 FR 55826). We specifically sought comment as to the types of situations in which the donation of replacement items and services would be appropriate. We further solicited comment as to how we might safeguard against donors inappropriately offering, or physician recipients inappropriately soliciting, unnecessary items and services instead of upgrading their existing technology for appropriate reasons. Based on our review of the comments, we are finalizing our proposal to permit donations of replacement items and services by removing the requirement at § 411.357(w)(8) that the donor does not have actual knowledge of, or and does not act in reckless disregard or deliberate ignorance of, the fact that the physician possesses or has obtained items or services equivalent to those provided by the donor, which we have historically interpreted as a prohibition on the donation of replacement technology.

We received the following comment and our response follows. Comment. Commenters broadly supported removing the requirement at § 411.357(w)(8) that effectively prohibits a donor from donating replacement items and services under the EHR exception. Commenters provided a number of reasons for their support of the elimination of this requirement, highlighting that, because they cannot afford the full cost to replace their electronic health records systems, some physician practices may work with an electronic health records system that no longer meets their needs, is outdated, or is otherwise substandard.

Similar to the commenter on the 2013 EHR proposed rule, a few commenters maintained that the prohibition on replacement items and services locks a physician recipient into a particular vendor, even if the physician is not satisfied with its current electronic health records system, because the cost for a new system is significantly higher than continued payment of a 15 percent contribution for updates to the physician's current electronic health records software. One commenter stated that one of its clinically integrated networks operates with more than two dozen electronic health records systems. The commenter explained that, although it has developed a system to aggregate all patient information, the diverse electronic health records systems made the solution less than optimal. The commenter explained that, if the restriction on donations of replacement items and services were lifted, it could achieve greater efficiency and care coordination by migrating the network to one unified electronic health records system.

A different commenter recommended that CMS eliminate the requirement at § 411.357(w)(8) but require a documented rationale for the need of replacement items and services, while another commenter suggested that donations of replacement items and services should be permitted only if the recipient contributes 15 percent of the cost of the replacement software and services and demonstrates in writing, accompanied by documentation from an objective third party, that the recipient's current electronic health records system is substandard such that it poses a threat to patient safety. Similarly, one commenter suggested that donations of replacement software should only be permitted if the software that the physician is currently using no longer meets certification criteria. Response. We are removing the requirement at § 411.357(w)(8) from the EHR exception.

We recognize that there may be valid business or clinical reasons for a physician recipient to replace an entire electronic health records system rather than update existing items and services, even if the existing software meets current certification criteria and does not pose a threat to patient safety. Under the revised EHR exception, replacement items and services are treated the same as a new donation and arrangements for the donation of replacement electronic health records items and services would need to satisfy all the requirements of the exception to avoid the referral and billing prohibitions of the physician self-referral law. For example, under § 411.357(w)(4)(i), a recipient of replacement items and services would be required to pay at least 15 percent of the donor's cost for the items and services before receiving them. We believe that treating a donation of replacement items and services the same as a new donation strikes an appropriate balance between making necessary replacements financially feasible for recipients and maintaining safeguards to protect against program or patient abuse, such as recipients inappropriately soliciting or accepting unnecessary electronic health records items and services.Start Printed Page 77620 12.

Exception for Assistance to Compensate a Nonphysician Practitioner (§ 411.357(x)) Section 1877(e)(5) of the Act sets forth an exception for remuneration provided by a hospital to a physician to induce the physician to relocate to the geographic area served by the hospital to be a member of the hospital's medical staff, subject to certain requirements. This exception is codified in our regulations at § 411.357(e). In Phase III, we declined one commenter's request to expand § 411.357(e) to cover the recruitment of nonphysician practitioners (NPPs) into a hospital's service area, including into an existing physician practice, stating that the exception for physician recruitment at § 411.357(e) applies only to payments made directly (or, in some circumstances, passed through) to a recruited physician (72 FR 51049). Recruitment payments made by a hospital directly to an NPP would not implicate the physician self-referral law, unless the NPP serves as a conduit for physician referrals or is an immediate family member of a referring physician.

We further stated that payments made by a hospital to subsidize a physician practice's costs of recruiting and employing NPPs would create a compensation arrangement between the hospital and the physician practice for which no exception would apply, and that these kinds of subsidy arrangements pose a substantial risk of fraud and abuse. Following the publication of Phase III, we reconsidered our position. There have been significant changes in our health care delivery and payment systems, as well as projected shortages in the primary care workforce. To address this changed landscape, in the CY 2016 PFS final rule, we finalized a limited exception at § 411.357(x) for hospitals, FQHCs, and rural health clinics (RHCs) to provide remuneration to a physician to assist with the employment of (or other compensation arrangement with) an NPP (80 FR 71301 through 71311).

The exception at § 411.357(x) applies to remuneration provided by a hospital to a physician to compensate an NPP to provide patient care services. As we noted in the proposed rule, we have received several inquiries regarding the meaning of the term “patient care services” as it relates to an NPP. The inquiries generally concentrate on the requirement at § 411.357(x)(1)(v)(B) that the NPP has not, within 1 year of the commencement of his or her compensation arrangement with the physician, been employed or otherwise engaged to provide patient care services by a physician or a physician organization that has a medical practice site located in the geographic area served by the hospital. Often, prior to becoming an NPP, an individual may have been a registered nurse (or some other health care professional) and may have provided services to patients that are similar to the services provided by an NPP.

For purposes of the exception at § 411.357(x), the question presented by stakeholders is whether the services provided by the individual before the individual became an NPP constitute “patient care services.” As we explained in the proposed rule, the definition of “patient care services” found at § 411.351 relates to tasks performed by a physician only (84 FR 55826). To clarify the meaning of “patient care services” for purposes of the exception for assistance to compensate an NPP, we proposed to revise § 411.357(x) to change the references to “patient care services” to “NPP patient care services” and include a definition of the term “NPP patient care services” in the exception at § 411.357(x)(4)(i). We proposed to define “NPP patient care services” to mean direct patient care services furnished by an NPP that address the medical needs of specific patients or any task performed by an NPP that promotes the care of patients of the physician or physician organization with which the NPP has a compensation arrangement. Under the definition of “NPP patient care services,” services provided by an individual who is not an NPP (as the term is defined at § 411.357(x)(3)) at the time the services are provided, are not NPP patient care services for purposes of § 411.357(x).

Thus, if an individual worked in the geographic area served by the hospital providing the assistance (for example, as a registered nurse) for some period immediately prior to the commencement of his or her compensation arrangement with the physician or physician organization in whose shoes the physician stands, but had not worked as an NPP in that area during that period, the exception at § 411.357(x) would be available to protect remuneration from the hospital to the physician to compensate the NPP to provide NPP patient care services, provided that all the requirements of the exception are satisfied. In this example, the registered nursing services would not be considered NPP patient care services when determining whether the arrangement satisfies the 1-year restriction at § 411.357(x)(1)(v) (84 FR 55826). We also proposed conforming changes to the term “referral” as defined at § 411.357(x)(4) for purposes of the exception. Specifically, we proposed to revise § 411.357(x) to change references to “referral” when describing the actions of an NPP to “NPP referral” and revise § 411.357(x)(4) accordingly.

We stated, and affirm here, that it is unnecessary to have a general definition of “referral” at § 411.351 that is applicable throughout our regulations and a different definition of the same term (“referral”) that applies only for purposes of the exception at § 411.357(x). We did not propose substantive changes to the definition itself. However, we proposed to move the definition to § 411.357(x)(4)(ii) in order to accommodate the inclusion of the related definition of “NPP patient care services” within section § 411.357(x)(4) (84 FR 55826). We also proposed a related change to § 411.357(x)(1)(v)(A).

As drafted, § 411.357(x)(1)(v)(A) requires the NPP to not have practiced in the geographical area served by the hospital within 1 year of the commencement of the compensation arrangement with the physician. According to stakeholders that requested guidance on the scope of the exception, the word “practiced” may be interpreted to include the provision of NPP patient care services (as we proposed to define the term here) and other services, for example, services provided by a health care professional who is not an NPP at the time the services are furnished. To resolve any potential stakeholder confusion, we proposed to replace the term “practiced” with “furnished NPP patient care services.” Under the proposal, a hospital would not run afoul of § 411.357(x)(1)(v)(A) if the hospital provided remuneration to a physician to compensate an NPP, and the individual receiving compensation from the physician furnished services in the hospital's geographic service area within 1 year of the commencement of his or her compensation arrangement with the physician, provided that the services furnished by the individual during the 1-year period were not NPP patient care services, as we proposed to define the term at § 411.357(x)(4)(i) (84 FR 55826 through 55827). In addition to the inquiries related to the meaning of the terms “patient care services” and “practice,” we noted our awareness of stakeholder uncertainty regarding the timing of arrangements that may be permissible under § 411.357(x).

Specifically, stakeholders have inquired whether an NPP must begin his or her compensation arrangement with the physician (or physician organization in whose shoes the physician stands) on or after the Start Printed Page 77621commencement of the compensation arrangement between the hospital, FQHC, or RHC and the physician, noting that the exception includes no explicit prohibition on an entity providing assistance to a physician to reimburse the physician for the compensation, signing bonus, or benefits paid to an NPP already employed or contracted by the physician prior to the date of the commencement of the physician's compensation arrangement with the hospital, FQHC, or RHC. As we stated when finalizing the exception at § 411.357(x), our underlying goal is to increase access to needed care (80 FR 71309). Permitting a hospital, FQHC, or RHC to simply reimburse a physician for overhead costs of current employees or contractors already serving patients in the geographic area served by the hospital, FQHC, or RHC does not support this goal. Nonetheless, as stakeholders pointed out, there is no express requirement regarding the timing of the compensation arrangement between the NPP and the physician (or physician organization in whose shoes the physician stands) in § 411.357(x).

To ensure that compensation arrangements protected under the exception do not pose a risk of program or patient abuse, we proposed to amend § 411.357(x)(1)(i) to expressly require that the compensation arrangement between the hospital, FQHC, or RHC and the physician commences before the physician (or the physician organization in whose shoes the physician stands under § 411.354(c)) enters into the compensation arrangement with the NPP (84 FR 55827). Put another way, the compensation arrangement between the NPP and the physician (or physician organization in whose shoes the physician stands) must commence on or after the commencement of the compensation arrangement between the hospital, FQHC, or RHC and the physician. We received a number of comments in support of our clarifying proposals. Although we received a few comments addressing issues outside the scope of our proposals, we did not receive any comments objecting to our proposals or suggesting alternatives for clarifying the requirements of the exception for assistance to compensate a nonphysician practitioner.

We are finalizing the proposed revisions to § 411.357(x) without modification. We received the following comments and our responses follow. Comment. Most commenters that commented on our proposal supported the proposed modifications to clarify the terminology used in the exception and that the exception cannot be used to reimburse physicians for compensation, signing bonus, and benefits expenses related to NPPs who were employed or contracted before the commencement of the compensation arrangement between the hospital and the physician.

Response. As discussed above, we are finalizing our clarifying revisions in the exception for assistance to compensate a nonphysician practitioner at § 411.357(x). We believe that the revisions finalized here will provide the clarity sought by stakeholders prior to the proposed rule. Comment.

Two commenters requested that CMS revise the exception at § 411.357(x) to remove any limits on the practice specialties of nonphysician practitioners for whom physicians may receive assistance. One of the commenters asserted that surgery, neurology, urology, and many other specialty services are areas of acute need for many communities. The commenter also recommended that we not limit the medical specialties of physicians who may receive assistance under the exception to physicians who provide “primary care services or mental health services.” The other commenter asserted that, although most nurse practitioners provide primary care or behavioral health services, nurse practitioners practice in nearly all practice specialties, and these medical practices are also in need of nurse practitioners, particularly in rural and underserved communities. This commenter suggested that CMS align the exception for assistance to compensate a nonphysician practitioner with the exception for physician recruitment, noting that the former exception is limited to nonphysician practitioners who, for the most part, provide primary care or behavioral health services, while no similar restriction applies to physician recruitment.

Response. The exception for assistance to compensate a nonphysician practitioner was proposed in the CY 2016 PFS proposed rule (80 FR 41686) and finalized in the CY 2016 PFS final rule (80 FR 70866). In the CY 2016 PFS proposed rule, we stated that our goal in proposing (and ultimately finalizing) the exception was to promote the expansion of access to primary care services, but sought comment regarding whether there was a compelling need to expand the scope of the exception to nonphysician practitioners who provide services that are not considered primary care services (80 FR 41911). In response, commenters requested that we broaden the scope of the exception.

Commenters that suggested an expansion to mental health services provided convincing evidence of the compelling need for access to mental health care services throughout the country (80 FR 71306). However, commenters that requested the expansion of the exception to any other specialty services provided no documentation or other evidence of the compelling need for such an expansion (80 FR 71306 through 71307). We did not propose to expand the scope of the exception for assistance to compensate a nonphysician practitioner in the proposed rule, and make no attempt to finalize such a regulatory modification in this final rule. However, we note that the commenters that made the requests for expansion of the scope of the exception, like those that commented on the CY 2016 PFS proposed rule, failed to provide any documentation or other evidence of the compelling need for such an expansion at this time.

With respect to the commenter that suggested the exception for assistance to compensate a nonphysician practitioner at § 411.357(x) should be aligned with the exception for physician recruitment at § 411.357(e), we note that the exception for physician recruitment is statutory and covers only remuneration from a hospital to a physician to induce the physician to relocate his or her medical practice to the geographic area served by the hospital to become a member of the hospital's medical staff. In contrast, the underlying purpose of the exception to assist a physician to compensate a nonphysician practitioner is to promote expansion of access to primary care and mental health care services. There is no reason for the two exceptions to have identical requirements and scope. 13.

Updating and Eliminating Out-of-Date References a. Medicare+Choice (§ 411.355(c)(5)) Section 1877(b)(3) of the Act and § 411.355(c) of the physician self-referral regulations set forth exceptions for designated health services furnished by various organizations to enrollees of certain prepaid health plans. When the Medicare+Choice program was established in the Balanced Budget Act of 1997 (Pub. L.

105-33) (BBA), the Congress failed to update section 1877(b)(3) of the Act to except the designated health services furnished under Medicare+Choice coordinated care plans. Based on our belief that this was an oversight, in the June 26, 1998 interim final rule with comment period (Medicare Program. Establishment of the Medicare+Choice Program (63 FR 34968)), we revised § 411.355(c) to Start Printed Page 77622accommodate the creation of the Medicare+Choice program and, relying on the Secretary's authority to create new exceptions under section 1877(b)(4) of the Act, we included Medicare+Choice coordinated care plans in § 411.355(c)(5) of our regulations (63 FR 35003 through 35004). (We declined to include Medicare+Choice medical savings account plans and Medicare+Choice private FFS plans due to the risk of patient abuse related to financial liability for premiums and cost sharing, which were not limited by the BBA.) We included Medicare+Choice coordinated care plans at § 411.355(c)(5), in part, to avoid contradiction with the BBA's establishment of provider-sponsored organization (PSO) plans as coordinated care plans.

PSOs are defined in the BBA as entities that must be organized and operated by a provider (which may be a physician) or a group of affiliated health care providers (which may include physicians). The BBA requires that the providers have at least a majority financial interest in the entity and share a substantial financial risk for the provision of items and services. If such ownership was not excepted, the physician owners of PSOs would not be permitted to refer enrollees for designated health services furnished by the coordinated care plan (or its contractors and subcontractors). Subsequently, in 1999, the Congress amended section 1877(b)(3) of the Act to create a similar statutory exception for Medicare+Choice at section 1877(b)(3)(E) of the Act (Pub.

L. 106-113). Section 201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L.

108-173, enacted on December 8, 2003) (MMA) renamed the Medicare+Choice program as the Medicare Advantage program and provided that any statutory reference to “Medicare+Choice” was deemed to be a reference to the Medicare Advantage program. In reviewing our regulations for out-of-date references, including references to Medicare+Choice, as part of this rulemaking, it came to our attention that the language of § 411.355(c)(5) may be inconsistent with other program regulations. Current § 411.355(c)(5) excepts designated health services furnished by an organization (or its subcontractors) to enrollees of a coordinated care plan (within the meaning of section 1851(a)(2)(A) of the Act) offered by an organization in accordance with a contract with CMS under section 1857 of the Act and Part 422 of Title 42, Chapter IV of the Code of Federal Regulations. For consistency with the MMA directive and to ensure the accuracy of our regulations, we proposed to revise § 411.355(c)(5) to more accurately reference Medicare Advantage plans.

Under this proposal, § 411.355(c)(5) would reference designated health services furnished by an organization (or its contractors or subcontractors) to enrollees of a coordinated care plan (within the meaning of section 1851(a)(2)(A) of the Act) offered by a Medicare Advantage organization in accordance with a contract with CMS under section 1857 of the Act and part 422 of this chapter. This proposal does not represent a change in our policy. The Medicare Advantage program varies from the Medicare+Choice program in ways other than its name and has matured in the years since passage of the MMA. More than 20 years have passed since we determined to protect designated health services furnished to enrollees of coordinated care plans and exclude medical savings account plans and private FFS plans from the scope of § 411.355(c)(5).

In light of this, we sought comments regarding whether § 411.355(c)(5) is broad enough to protect designated health services furnished to enrollees in the full range of Medicare Advantage plans that exist today and that do not pose a risk of program or patient abuse. Specifically, we were interested in commenters' views on which, if any, other Medicare Advantage plans we should include within the scope of § 411.355(c)(5). We received the following comment and our response follows. Comment.

Multiple commenters supported the proposed updates and elimination of references to “Medicare+Choice.” We did not receive any comments opposing these changes. Response. We are finalizing the changes as proposed. B.

Website We proposed to modernize the regulatory text by changing “Web site” to “website” throughout the physician self-referral regulations to conform to the spelling of the term in the Government Publishing Office's Style Manual and other current style guides. After reviewing the comments, we are finalizing our proposal to change “Web site” to “website” wherever the term appears in our regulations. We received the following comment and our response follows. Comment.

Multiple commenters supported the proposed updates and elimination of references to “Web site.” We did not receive any comments opposing these changes. Response. We are finalizing the changes as proposed. E.

Providing Flexibility for Nonabusive Business Practices 1. Limited Remuneration to a Physician (§ 411.357(z)) In the 1998 proposed rule, we proposed an exception for de minimis compensation in the form of noncash items or services (63 FR 1699). In Phase I, using the Secretary's authority at section 1877(b)(4) of the Act, we finalized the proposal at § 411.357(k) and changed the name of the exception to nonmonetary compensation, noting that, although free or discounted items and services such as free samples of certain drugs, chemicals from a laboratory, or free coffee mugs or note pads from a hospital fall within the definition of “compensation arrangement,” we believe that such compensation is unlikely to cause overutilization, if held within reasonable limits (66 FR 920). The exception for nonmonetary compensation at § 411.357(k) permits an entity to provide compensation to a physician in the form of items or services (other than cash or cash equivalents) up to an aggregate amount of $300 per calendar year, adjusted annually for inflation and currently $423 per calendar year, provided that the compensation is not solicited by the physician and is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.

The exception does not require that the physician provide anything to the entity in return for the nonmonetary compensation, nor does it require that the arrangement is set forth in writing and signed by the parties. We also recognized in Phase I that many of the incidental benefits that hospitals provide to medical staff members do not qualify for the exception at § 411.357(c) for bona fide employment relationships because most members of a hospital's medical staff are not hospital employees, nor would they qualify for the exception at § 411.357(l) for fair market value compensation because, to the extent that the medical staff membership is the only relationship between the hospital and the physician, there is no written agreement between the parties to which these incidental benefits could be added. We acknowledged that many medical staff incidental benefits are customary industry practices that are intended to benefit the hospital and its Start Printed Page 77623patients. For example, free computer and internet access benefits the hospital and its patients by facilitating the maintenance of up-to-date, accurate medical records and the availability of cutting edge medical information (66 FR 921).

To address this, using the Secretary's authority under section 1877(b)(4) of the Act, we finalized a second exception for noncash items or services provided to a physician. The exception at § 411.357(m) for medical staff incidental benefits permits a hospital to provide noncash items or services to members of its medical staff when the item or service is used on the hospital's campus and certain conditions are met, including that the compensation is reasonably related to the provision of (or designed to facilitate) the delivery of medical services at the hospital and the item or service is provided only during periods when the physician is making rounds or engaged in other services or activities that benefit the hospital or its patients (66 FR 921). In addition, the compensation may not be offered in a manner that takes into account the volume or value of referrals or other business generated between the parties. Under the exception, permissible noncash compensation is limited on a per-instance basis, and the current limit is $36 per instance.

Like the exception at § 411.357(k) for nonmonetary compensation, the exception at § 411.357(m) for medical staff incidental benefits does not impose any documentation or signature requirements. Through our administration of the SRDP, we have been made aware of numerous nonabusive arrangements under which a limited amount of remuneration was paid by an entity to a physician in exchange for the physician's provision of items and services to the entity. In some instances, the arrangements were ongoing service arrangements under which services were provided sporadically or for a low rate of compensation. In others, services were provided during a short period of time and the arrangement did not continue past the service period.

For example, one submission to the SRDP disclosed an arrangement with a physician for short-term medical director services while the hospital was finalizing the engagement of its new medical director following the unexpected resignation of its previous medical director. Despite the hospital's need for the services and compensation that was fair market value and not determined in any manner that took into account the volume or value of the referrals or other business generated by the physician, the arrangement could not satisfy all the requirements of any applicable exception because the compensation was not set in advance of the provision of the services and was not reduced to writing and signed by the parties. Under arrangements such as this, insofar as the hospital paid the physician in cash, the exception at § 411.357(k) for nonmonetary compensation would not apply to the arrangement. Similarly, the exception at § 411.357(l) for fair market value compensation would not protect the arrangement if it was not documented in contemporaneous signed writings and the amount of or formula for calculating the compensation was not set in advance of the provision of the items or services, even if the compensation did not exceed fair market value for actual items or services provided and was not determined in a manner that takes into account the volume or value of referrals or other business generated by the physician.

In the proposed rule, we stated that, based on our review of numerous arrangements in the SRDP, we believe that the provision of limited remuneration to a physician would not pose a risk of program or patient abuse, even in the absence of documentation regarding the arrangement and where the amount of or a formula for calculating the remuneration is not set in advance of the provision of items or services, if. (1) The arrangement is for items or services actually provided by the physician. (2) the amount of the remuneration to the physician is limited. (3) the arrangement is commercially reasonable (4) the remuneration is not determined in any manner that takes into account the volume or value of referrals or other business generated by the physician.

And (5) the remuneration does not exceed the fair market value for the items or services. We stated that, under these circumstances, remuneration that is held within reasonable limits is unlikely to cause overutilization or similar harms to the Medicare program. Therefore, relying on the Secretary's authority under section 1877(b)(4) of the Act, we proposed an exception for limited remuneration from an entity to a physician for items or services actually provided by the physician (84 FR 55828 through 55829). We proposed that the exception for limited remuneration to a physician would apply only when the remuneration does not exceed an aggregate of $3,500 per calendar year, which would be adjusted for inflation in the same manner as the annual limit on nonmonetary compensation and the per-instance limit on medical staff incidental benefits.

That is, adjusted to the nearest whole dollar by the increase in the Consumer Price Index—Urban All Items (CPI-U) for the 12-month period ending the preceding September 30. We stated our belief that an annual aggregate remuneration limit of $3,500 would be sufficient to cover the typical range of commercially reasonable arrangements for the provision of items and services that a physician might provide to an entity on an infrequent or short-term basis. We also proposed that the exception would not be applicable to payments from an entity to a physician's immediate family member or to payments for items or services provided by the physician's immediate family member. We sought public comment on whether the $3,500 annual aggregate remuneration limit is appropriate, too high, or too low to accommodate nonabusive compensation arrangements for the provision of items or services by a physician.

We also sought comments regarding whether it is necessary to limit the applicability of the exception to services that are personally performed by the physician and items provided by the physician in order to further safeguard against program or patient abuse. In keeping with our proposal to decouple exceptions issued under our authority at section 1877(b)(4) of the Act from the anti-kickback statute, we did not propose to include a requirement under § 411.357(z) that the arrangement must not violate the anti-kickback statute or other Federal or State law or regulation governing billing or claims submission. However, we solicited comment regarding whether such a safeguard is necessary here in light of the absence of requirements for set in advance compensation and written documentation of the arrangement. We also proposed that the remuneration may not be determined in any manner that takes into account the volume or value of referrals or other business generated by the physician or exceed fair market value for the items or services provided by the physician, and the compensation arrangement must be commercially reasonable.

Finally, we proposed limits on the percentage-based and per-unit compensation formulas for the lease of office space, the lease of equipment, and the use of premises, equipment, personnel, items, supplies, or services (84 FR 55829). After reviewing the comments, we are finalizing the exception for limited remuneration to a physician at § 411.357(z) with several modifications. Start Printed Page 77624First, we are setting the annual aggregate remuneration limit to the physician at $5,000 instead of at $3,500, adjusted annually for inflation and indexed to the CPI-U. Second, the exception permits the physician to provide items or services through employees whom the physician has hired for the purpose of performing the services.

Through a wholly-owned entity. Or through locum tenens physicians (as defined at § 411.351, except that the regular physician need not be a member of a group practice). Third, we are requiring that the arrangement is commercially reasonable even if no referrals were made between the parties. Fourth, to address our concerns regarding the preservation of patient choice, we are requiring compliance with the special rule at § 411.354(d)(4) if remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier.

Lastly, we are modifying the per-click and percentage-based compensation provisions at § 411.357(z)(1)(v), to clarify that these provisions only apply to timeshare arrangements for the use of premises or equipment. Given the relatively low annual aggregate remuneration limit of the exception and the other safeguards of the exception, we believe that the exception for limited remuneration to a physician, as finalized, does not pose a risk of program or patient abuse. However, when the remuneration a physician receives from an entity for items or services exceeds the annual aggregate remuneration limit of $5,000, as adjusted annually for inflation, the additional safeguards of other applicable exceptions are necessary to protect against program or patient abuse. For example, for long-term arrangements for items or services provided on a more routine or frequent basis, where the aggregate annual compensation exceeds the annual aggregate remuneration limit of the exception at new § 411.357(z), the requirement that compensation is set in advance before the provision of the items or services is necessary to ensure that various payments made over the term of the arrangement are not determined retrospectively to reward past referrals or encourage increased referrals from the physician.

We note that the annual aggregate remuneration limit for the exception at § 411.357(z) is higher than the annual limit for the exception for nonmonetary compensation at § 411.357(k) because the exception for limited remuneration to a physician would protect a fair market value exchange of remuneration for items or services actually provided by a physician, while the exception for nonmonetary compensation does not require a physician to provide actual items or services in exchange for the nonmonetary compensation. The final exception at § 411.357(z) for limited remuneration to a physician applies to the provision of both items and services by a physician. In the proposed rule, we retracted our prior statements that office space is neither an “item” nor a “service.” Thus, the exception for limited remuneration to a physician is available to protect compensation arrangements involving the lease of office space or equipment from a physician. For the reasons articulated in section II.D.10.

Of this final rule and the CY 2017 PFS proposed rule (81 FR 46448 through 46453) and final rule (81 FR 80524 through 80534), the exception at § 411.357(z) incorporates prohibitions on percentage-based and per-unit of service compensation to the extent the remuneration is for the use or lease of office space or equipment, similar to the provisions at existing § 411.357(p)(1)(ii) for indirect compensation arrangements and § 411.357(y)(6)(ii) for timeshare arrangements. We explained in the proposed rule and reaffirm here our policy that, in determining whether payments to a physician under the exception for limited remuneration to a physician exceed the annual aggregate remuneration limit in § 411.357(z), we will not count compensation to a physician for items or services provided outside of the arrangement, if the items or services provided are protected under an exception in § 411.355 or the arrangement for the other items or services fully complies with the requirements of another exception in § 411.357. To illustrate, assume an entity has an established call coverage arrangement with a physician that fully satisfies the requirements of § 411.357(d)(1) or § 411.357(l). Assume further that the entity later engages the physician to provide supervision services on a sporadic basis during the same year but fails to document the arrangement in a writing signed by the parties.

In determining whether the supervision arrangement satisfies the requirements of the exception for limited remuneration to a physician, we will not count the compensation provided under the call coverage arrangement towards the annual aggregate remuneration limit in § 411.357(z). However, if an entity has multiple undocumented, unsigned arrangements under which it provides compensation to a physician for items or services provided by the physician, we consider the parties to have a single compensation arrangement for various items and services, and the aggregate of all the compensation provided under the arrangement may not exceed the annual aggregate remuneration limit of § 411.357(z) during the calendar year in order for the exception to protect the remuneration to the physician. To illustrate, assume the entity in the previous example also engages the physician to provide occasional EKG interpretations during the course of the year, and that the aggregate annual compensation for the supervision services and the EKG interpretation services taken together exceeded the annual aggregate remuneration limit.[] Assuming neither arrangement satisfies the requirements of any other applicable exception, the exception for limited remuneration to a physician will not protect either arrangement (which, as noted, we treat as a single arrangement for multiple services) after the annual aggregate remuneration limit is exceeded during the calendar year. As we explained in the proposed rule, the exception for limited remuneration to a physician may be used in conjunction with other exceptions to protect an arrangement during the course of a calendar year in certain circumstances (84 FR 55830).

To illustrate, assume that an entity engages a physician to provide call coverage services, and that the arrangement is not documented or the rate of compensation has not been set in advance at the time the services are first provided. Further, assume that, after the services are provided and payment is made, the parties agree to continue the arrangement on a going forward basis and agree to a rate of compensation. Assume also that the parties have no other arrangements between them. Depending on the facts and circumstances, the parties may rely on the exception at § 411.357(z) to protect payments to the physician up to the $5,000 annual aggregate remuneration limit, provided that all the requirements of the exception are satisfied.

For the ongoing compensation arrangement, the parties could rely on another applicable exception, such as § 411.357(d)(1), to protect the arrangement once the compensation is set in advance and the other requirements of that exception are satisfied. (We remind readers that, under § 411.354(e)(4), the parties would Start Printed Page 77625have up to 90 consecutive calendar days to document and sign the arrangement.) In the proposed rule, we noted that § 411.357(d)(1)(ii) requires that the personal service arrangement covers all the services provided by the physician (or an immediate family member of the physician) to the entity (or incorporate other arrangements by reference or cross-reference a master list of contracts) and § 411.357(l)(2) requires that parties enter into only one arrangement for the same services in a year. As we stated in the proposed rule, for purposes of § 411.357(d)(1)(ii), we will not require an arrangement for items or services that satisfies all the requirements of the final exception for limited remuneration to a physician to be covered by a personal service arrangement protected under § 411.357(d)(1) or listed in a master list of contracts (84 FR 55830). Likewise, with respect to the restriction in the exception for fair market value compensation at § 411.357(l)(2), we will not consider an arrangement for items or services that is protected under the exception at § 411.357(z) to violate the prohibition on entering into an arrangement for the same items and services during a calendar year.

The vast majority of commenters supported our proposal, stating that the exception would increase flexibility under our regulations and reduce the burden of compliance without posing a risk of program or patient abuse. After reviewing the comments, we are finalizing the proposed exception for limited remuneration to a physician at § 411.357(z) with certain modifications, as noted above. We are also making certain modifications to the exception for personal service arrangements at § 411.357(d)(1) and the exception for fair market value compensation at § 411.357(l) to ensure that § 411.357(z) may be used in conjunction with these exceptions. We received the following comments and our response follows.

Comment. We received numerous comments regarding who may provide items and services and to whom the payments for items and services under the new exception at § 411.357(z) may be made. Many commenters requested that we not limit the exception at § 411.357(z) to items or services that are personally provided by physicians. One commenter suggested that the exception should be available for payments to a physician for items or services provided by someone at the direction of and under the control of the physician through a contract or employment arrangement.

In contrast, one commenter expressed concern that the exception, as proposed, is subject to abuse and urged CMS to limit the applicability of the exception to items or services that are personally provided by the physician. One commenter suggested that the exception should apply to payments to a group practice for the services of a midlevel practitioner employed by the group or to a physician's immediate family members for items or services provided by the immediate family members. Response. In the 1998 proposed rule, we interpreted the exception for personal service arrangements at § 411.357(d)(1) to permit physicians to provide services through employees (63 FR 1701).

In Phase II, we added that a physician may provide services under § 411.357(d)(1)(ii) through a wholly owned entity or a locum tenens physician, but we declined to permit physicians to provide services under the exception through independent contractors (69 FR 16090 through 16093). We explained that, if physicians were permitted to provide services through independent contractors, a physician could enter into a broad range of service arrangements and take a fee as a middleperson without performing any actual service. In contrast, when a physician provides services through an employee or a wholly owned entity, the relationship evidences a bona fide business operated by the physician to provide the services. We find this reasoning to be convincing and applicable to the exception for limited remuneration to a physician, and therefore we are clarifying at § 411.357(z)(2) that a physician may provide items or services through an employee, a wholly owned entity, or a locum tenens physician, but not through an independent contractor.

With respect to items, office space, or equipment provided by a physician through a physician's employee, wholly-owned entity, or locum tenens physician, we stress that the items, office space, or equipment provided must be the items, office space, or equipment of the physician. For purposes of determining whether payments comply with the annual aggregate remuneration limit, any payments for items, office space, equipment, or services provided through a physician's employee, wholly owned entity, or locum tenens physician would be counted towards the annual aggregate remuneration limit applicable to the physician. In other words, there are not separate limits for a physician and his or her employees. For example, if an entity pays a physician $1,000 for personally performed services, $400 for services provided through the physician's employee, and $150 for items provided through the physician's employee, assuming no other previous payments for the calendar year, the sum of $1,550 is counted towards the annual aggregate remuneration limit applicable to the physician.

(See below for a discussion of payments to a group practice or physician organization, and the application of the physician “stand in the shoes” rules at § 411.354(c) under the exception for limited remuneration to a physician.) Given our clarification that payments to a physician for items or services provided through a physician's employee, wholly owned entity, or locum tenens physician count towards the physician's annual aggregate remuneration limit and the other requirements of the exception, including the low annual compensation limit and requirements pertaining to fair market value, the volume or value of referrals and other business generated, and commercial reasonableness, we do not believe that our final policy poses a risk of program or patient abuse. We are not convinced that the exception at § 411.357(z) should be applicable to payments to a physician's immediate family member for items or services provided by the family member. As explained above, the limited remuneration to a physician exception is designed in part to allow entities to compensate physicians for short-term or infrequent arrangements, many of which commence under exigent circumstances, with little time to reduce the arrangement to writing or set the compensation in advance. We do not believe that such situations typically arise with respect to physicians' immediate family members.

In addition, if each immediate family member had a separate annual aggregate remuneration limit under the exception, the sum total of remuneration to a physician and his or her immediate family members could be substantial, depending on the number of immediate family members. We believe that such a policy may pose a risk of program or patient abuse. We note that an entity is permitted under the exception to compensate a physician for services provided through the physician's immediate family member if the family member is an employee of the physician acting at the direction of the physician, provided that all the requirements of the exception are met. However, as noted above, any payments to the physician for such services would be counted towards the physician's annual aggregate remuneration limit.

Comment. A significant number of commenters supported the proposed exception, but requested that the limit be higher than $3,500 per calendar year, Start Printed Page 77626as adjusted for inflation. Many commenters asserted that the proposed limit of $3,500 could be easily exceeded in a day or a weekend, for example, if a hospital has a sudden and immediate need to secure emergency on-call coverage in an area with high labor costs or a shortage of physicians. Other commenters suggested that a higher annual aggregate remuneration limit would better reflect what they consider the typical range of commercially reasonable arrangements that physicians might enter into with entities on a short-term or infrequent basis.

Most commenters requested an annual aggregate remuneration limit of either $5,000, $7,000, or $10,000. A few commenters requested limits over $10,000, such as $35,000 per calendar year or 10 percent of the physician's total cash compensation from an entity (or its affiliates) over the most recent fiscal year. One commenter stated that, as an alternative to raising the annual aggregate remuneration limit, CMS could cap the amount of remuneration per episode of service during a defined period of time, such as 2 or 3 months. In contrast, one commenter urged us to not raise the annual aggregate remuneration limit above $3,500.

Response. In establishing the appropriate annual aggregate remuneration limit in the final exception for limited remuneration to a physician at § 411.357(z), we relied on our experience administering the SRDP and working with law enforcement, as well as comments we received on our proposed rule. In light of the comments we received, we are convinced that the proposed limit of $3,500 per calendar year, as adjusted for inflation, is not high enough to accommodate the broad range of nonabusive infrequent or temporary arrangements that an entity and a physician might enter into over the course of a year. Given the other requirements of the finalized exception, an annual aggregate remuneration limit of $5,000 for items or services actually provided by a physician to an entity does not pose a risk of program or patient abuse.

We believe that an annual amount of remuneration greater than $5,000 per calendar year, as adjusted for inflation, may be high enough in certain instances to improperly incent physicians and affect medical decision-making. Without transparency safeguards that require an arrangement to be set forth in writing and signed by the parties and the safeguard of requiring that compensation is set in advance of the provision of items or services under the arrangement, we do not believe that an annual aggregate remuneration limit greater than $5,000 is appropriate. We believe that the per-episode methodology suggested by the commenter would increase burden, be difficult to administer and enforce, and could easily result in failure to comply with the requirements of the exception if parties do not meticulously track payments to the physician. For these reasons, we are finalizing a limit of $5,000 per calendar year, as adjusted for inflation.

Comment. One commenter requested clarification whether the annual aggregate remuneration limit on remuneration applies to an individual physician or a physician practice comprised of more than one physician. Another commenter suggested that the annual aggregate remuneration limit, when applied to physicians in physician organizations, should apply to physicians individually, as opposed to the entire physician organization. Response.

Because the physician self-referral law is implicated when a financial relationship exists between physicians and entities that furnish designated health services, the exception for limited remuneration to a physician at § 411.357(z) is structured to apply to remuneration from an entity to a physician. We did not propose, nor are we finalizing, an exception that permits a specific amount of remuneration from an entity to a physician organization under the conditions outlined in the new exception at § 411.357(z). Under our regulations at § 411.354(c), remuneration from an entity to a physician organization would be deemed to be a direct compensation arrangement between the entity and each physician who stands in the shoes of the physician organization. A “deemed” direct compensation arrangement must satisfy the requirements of an applicable exception if the physician makes referrals to the entity and the entity bills the Medicare program for designated health services furnished as a result of the physician's referrals.

The exception for limited remuneration to a physician is available to protect a direct compensation arrangement between an entity providing remuneration to an individual physician, as well as a “deemed” direct compensation arrangement between an entity and a physician who stands in the shoes of the physician organization to which the entity provides the remuneration. If an entity that makes payment to a physician organization relies on new § 411.357(z), under § 411.354(c)(1), the payment will create a “deemed” direct compensation arrangement with each physician who stands in the shoes of the organization. That is, each physician who stands in the shoes of the physician organization will be deemed to have the same compensation arrangement with the entity making the payment to the physician organization. Compensation received by the physician organization under such circumstances is counted towards the annual aggregate remuneration limit of each physician who stands in the shoes of the physician organization.

For example, if an entity pays a physician organization $1,000 under § 411.357(z) for lease of the physician organization's equipment, and the physician organization consists of two owners (Drs. A and B) who stand in the shoes of the organization, then $1,000 is counted towards the annual aggregate remuneration limit of both Drs. A and B. The $1,000 payment would not count toward the annual aggregate remuneration limit of other physicians in the physician organization who are not required to stand in the shoes of the physician organization and are not treated as permissibly standing in the shoes of the physician organization.

Remuneration from an entity to a physician under a direct compensation arrangement between the entity and the individual physician (as opposed to a “deemed direct” compensation arrangement under the stand in the shoes rules) is counted only towards the individual physician's annual aggregate remuneration limit under § 411.357(z). Returning to the example earlier in this response, if, in a direct compensation arrangement under § 411.354(c)(1)(i), the entity paid Dr. A $500 for her services relying on § 411.357(z), assuming no other payments during the calendar year relying on § 411.357(z), the amount counted towards Dr. A's annual aggregate remuneration limit for payments received from the entity under § 411.357(z) would be $1,500.

That is, $500 for the services provided under the direct compensation arrangement and $1,000 for the equipment rental arising from the “deemed” direct compensation arrangement with the physician organization. Importantly, the $500 paid under the direct compensation arrangement between the entity and Dr. A would not be counted towards the annual aggregate remuneration limit of Dr. B or any other physician in the physician organization.

Under certain circumstances, a payment from an entity to a physician organization may be considered to be a payment directly to the physician who provided the items or services to the entity, with the physician organization only passing the remuneration through Start Printed Page 77627from the entity to the physician. What constitutes a direct compensation arrangement with an individual physician under § 411.354(c)(1)(i), as opposed to an arrangement with a physician organization that creates a “deemed direct” compensation arrangement with a physician standing in the shoes of the organization under § 411.354(c)(ii) or (iii), depends on the facts and circumstances of each arrangement. Important factors include, but are not limited to, whether the physician (or the physician's employee, wholly owned entity, or locum tenens physician) provides the services under the arrangement, as opposed to the services being provided by another physician in the physician organization (or the physician organization's employee, wholly owned entity, or locum tenens physician). Whether any items, office space, or equipment provided by the physician under the arrangement are owned or leased by the individual physician (as opposed to being owned or leased by the physician organization).

And whether payment is made directly to the individual physician or, if payment is made to the physician organization, whether the physician organization acts as a pure go-between or middleman, transferring all of the compensation received from the entity under the arrangement to the physician who provided the items or services. (See section II.D.9. Of this final rule for a discussion of our policy on pure “pass-through” payments.) Payments made to and retained by a physician organization for services provided through an employee of the physician organization are permitted under § 411.357(z), but the payment amount would be counted toward the annual aggregate remuneration limit of each physician who stands in the shoes of the organization. Comment.

A number of commenters requested clarification whether, if compensation exceeds the proposed annual aggregate remuneration limit in a given calendar year (as adjusted for inflation), the entity can rely on the exception up to the point immediately prior to when the remuneration exceeded the limit. The commenters also requested clarification on how the exception would apply when remuneration straddles a calendar year. Specifically, the commenter asked if the remuneration limit resets at the beginning of each calendar year, or whether CMS would apply the exception for a different period, such as a 12-month period beginning with the commencement of the compensation arrangement. Response.

An entity may rely on the exception at § 411.357(z) up to the point in a calendar year immediately prior to when the annual aggregate remuneration limit is exceeded. After that point, if the arrangement does not fit into another applicable exception, the physician is not permitted to make referrals to the entity for designated health services, and the entity may not bill Medicare for such improperly referred services. For example, if the aggregate payments from an entity to a physician exceed the annual aggregate remuneration limit on April 1 of a given year, the exception is available to protect referrals from January 1 to March 31, but not for referrals from April 1 to December 31. We stress, however, that structuring arrangements to satisfy the requirements of an applicable exception that does not impose a cap on the amount of remuneration paid to the physician under the arrangement (other than the requirement that compensation is fair market value for the items and services provided by the physician) is a best practice and the best way to avoid exceeding the annual aggregate remuneration limit imposed at § 411.357(z)(1).

The annual aggregate remuneration limit on remuneration under § 411.357(z) resets each calendar year. As explained in section II.D.2.e. Of this rule, the provision of remuneration in the form of items or services commences a compensation arrangement at the time the items or services are provided, and the compensation arrangement must satisfy the requirements of an applicable exception at that time if the physician makes referrals for designated health services and the entity wishes to bill Medicare for such services. Thus, for arrangements that straddle a calendar year, remuneration should be allocated to the annual aggregate remuneration limit of a calendar year based on the date that the items or services are provided.

To illustrate, assume that an entity engages a physician to present at an educational program series held periodically throughout an academic year spanning September 2020 through May 2021. Assume also that, on December 15, 2020, the entity pays the physician $2,000 for services provided during the fall semester and, on May 15, 2021, the entity pays the physician $4,000 for services provided during the spring semester. The $2,000 paid under the arrangement for the fall semester is counted toward the annual aggregate remuneration limit for 2020 and the $4,000 paid for the spring semester is counted toward the annual aggregate remuneration limit for 2021. It is possible that the services for which the physician is paid will more directly straddle the change from one calendar year to the next.

For example, assume a physician is engaged to provide a single weekend of emergency call coverage and is paid $2,000 for coverage provided on December 31, 2021 and January 1, 2022, and the physician is paid for the services on January 31, 2022. Assuming no unusual circumstances that would require the payment to be weighted for one day over another, $1,000 would be counted towards the physician's 2021 annual aggregate remuneration limit and $1,000 would be counted towards the physician's 2022 annual aggregate remuneration limit. Comment. One commenter requested that CMS clarify whether the exception for limited remuneration to a physician can apply to multiple types of services or arrangements.

Response. During any given calendar year, the exception at § 411.357(z) may be applied to the provision of different types of items or services, including office space and equipment. The annual aggregate remuneration limit on remuneration from an entity to a physician is determined by adding compensation for all of the various items and services provided by the physician. For example, if, in a calendar year, a physician is paid $500 for one service, $350 for a separate service, $150 for certain items, and $400 for a short-term lease of equipment, the amount allocated to the annual aggregate remuneration limit under § 411.357(z) for that year is $1,400.

As explained above, if the parties had additional arrangements in the same calendar year that fully satisfied all the requirements of an applicable exception other than § 411.357(z), the remuneration under those arrangements would not be counted towards the physician's annual limit under § 411.357(z). Comment. One commenter expressed concern that the exception for limited remuneration to a physician may allow for business arrangements that the commenter deemed “questionable” and asserted are subject to abuse. This commenter urged CMS to include additional safeguards in the exception, including a requirement that the arrangement does not violate the anti-kickback statute or other Federal or State law or regulation governing billing or claims submission.

Other commenters objected to including any additional requirements pertaining to the anti-kickback statute or Federal or State laws or regulations governing Start Printed Page 77628billing or claims submissions. These commenters stressed that parties already have an independent obligation to not violate these other laws and expressed concern that the introduction of the intent-based anti-kickback statute into the strict liability framework of the physician self-referral law would increase the burden of compliance without affording any additional safeguards to protect against program or patient abuse. Response. As explained in sections II.D.1.

And II.D.10. Of this final rule, we generally believe that certain regulatory exceptions need not include requirements pertaining to the anti-kickback statute or other Federal or State laws or regulations governing billing or claims submissions in order to ensure that financial relationships to which the exceptions apply do not pose a risk of program or patient abuse. Even so, we believe that a requirement for compliance with the anti-kickback statute is appropriate in certain instances, particularly where both a regulatory and statutory exception could apply to an arrangement and the regulatory exception does not contain all of the requirements or safeguards that are included in the statutory exception. For example, as explained in section II.D.10, the requirement in the regulatory exception for fair market value compensation at § 411.357(l) that the arrangement does not violate the anti-kickback statute acts as a substitute safeguard for certain requirements that are included in the statutory exception for the rental of office space but omitted in the regulatory exception, such as the exclusive use requirement at section 1877(e)(1)(A)(ii) of the Act and § 411.357(a)(3) of our regulations.

With respect to the final exception for limited remuneration to a physician at § 411.357(z), the regulatory exception omits certain requirements that are found in many statutory exceptions that are potentially applicable to arrangements excepted under § 411.357(z), such as the set in advance, writing, and signature requirements. However, the low annual cap on aggregate remuneration under the exception provides a strong and sufficient substitute safeguard for the omitted requirements. Therefore, we are not requiring under § 411.357(z) that the arrangement not violate the anti-kickback statute or other Federal or State law or regulation governing billing or claims submissions. Nonetheless, we agree with the commenter that certain additional safeguards are necessary to prevent program or patient abuse, especially in light of our final policy to raise the annual aggregate remuneration limit under the exception from $3,500 to $5,000.

As proposed, the exception for limited remuneration to a physician required the compensation arrangement to be commercially reasonable. As explained elsewhere in this final rule, we believe that the requirement that an arrangement is commercially reasonable is uniformly interpreted wherever it appears. Most exceptions that include a commercial reasonableness requirement, including exceptions that apply to arrangements that could also be excepted by § 411.357(z), stipulate that the arrangement must be commercially reasonable “even if no referrals were made” between the parties. We are modifying the requirement at § 411.357(z)(1)(iii) to clarify that the arrangement must be commercially reasonable “even if no referrals were made between the parties.” We are concerned that, without this modification, some stakeholders may believe that the commercial reasonableness standard in § 411.357(z) is a different and less demanding standard than the commercial reasonableness requirement in other exceptions.

Because we do not have the same transparency into arrangements protected under the finalized exception at § 411.357(z) and, as explained elsewhere in this final rule, because we prioritize the protection of patient choice, we are also requiring at § 411.357(z)(1)(vi) that, if remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement must satisfy all the conditions of § 411.354(d)(4). As revised in this final rule, § 411.354(d)(4) provides that, if a physician's compensation under a bona fide employment relationship, personal service arrangement, or managed care contract is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, then certain conditions must be met, including that the compensation is set in advance for the duration of the arrangement. The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties. And neither the existence of the compensation arrangement nor the amount of the compensation is contingent on the volume or value of the physician's referrals to the particular provider, practitioner, or supplier.

As explained in section II.B.4. Of this final rule, the conditions in § 411.354(d)(4) play an important role in preserving patient choice, protecting the physician's professional medical judgment, and avoiding interference in the operations of a managed care organization. Furthermore, prior to our interpretation of the volume or value standard in this final rule, a service arrangement that included a directed referral requirement would have had to comply § 411.354(d)(4) in order to be deemed not to take into account the volume or value of a physician's referrals to the entity. Given our final rules interpreting the volume or value standard and other business generated standard, to ensure that arrangements excepted under § 411.357(z) protect patient choice and the physician's professional medical judgement and avoid interfering in the operation of a managed care organization, we are requiring compliance with § 411.354(d)(4) for arrangements that condition a physician's compensation on referrals to a particular provider, practitioner, or supplier.

We stress that, under § 411.357(z)(1)(vi), the conditions of § 411.354(d)(4), including the set in advance and writing requirement, must be satisfied only if the arrangement to be excepted under § 411.357(z) conditions a physician's compensation on referrals to a particular provider, practitioner, or supplier. To be excepted under § 411.357(z), an arrangement need not satisfy the conditions of § 411.354(d)(4) if compensation under the arrangement to be excepted is not conditioned in this manner, even if the parties have other, separate arrangements that condition a physician's compensation on referrals to a particular provider, practitioner, or supplier. Likewise, if the parties begin an arrangement relying on § 411.357(z) and the arrangement at its outset does not condition compensation on referrals to a particular provider, practitioner, or supplier, then the arrangement need not comply with § 411.354(d)(4) at its outset. However, if the entity later requires the physician to refer to a particular provider, practitioner, or supplier, the parties must set the compensation and document the referral requirement in writing in advance of the applicability of the requirement.

Although we are not including a requirement for compliance with the anti-kickback statute in § 411.357(z), we reiterate here that, to the extent that remuneration implicates the anti-kickback statute, nothing in our proposals or this final rule affects the parties' obligation to comply with the anti-kickback statute, and compliance with the exception for limited remuneration to a physician does not necessarily result in compliance with Start Printed Page 77629the anti-kickback statute. As we stated in Phase I, section 1877 of the Act is limited in its application and does not address every abuse in the health care industry. The fact that particular referrals and claims are not prohibited by section 1877 of the Act does not mean that the arrangement is not abusive (66 FR 879). Comment.

One commenter requested that we limit the applicability of the exception for limited remuneration to a physician to service arrangements and not permit use of the exception for the rental of office space or equipment or for timeshare arrangements. The commenter stated that such arrangements carry a heightened risk and, therefore, should be documented in writing so that they can be audited, monitored, and objectively verified. Response. Although we appreciate the importance of ensuring that an exception issued by the Secretary under his authority at section 1877(b)(4) of the Act does not undermine the integrity of the Medicare program, we believe that the safeguards incorporated in final § 411.357(z), including the annual aggregate remuneration limit capping the total remuneration permissible under the exception at a relatively low level and the requirement that the remuneration is for items or services actually provided by the physician, are sufficient to protect against program or patient abuse even with respect to arrangements for the rental of office space or equipment and timeshare arrangements.

Therefore, the final exception for limited remuneration to a physician at § 411.357(z) is not limited to arrangements for items and services that are not office space or equipment. The prohibitions on percentage-based compensation and per-unit of service (“per-click”) fees for the rental or use, as modified in this final rule, of office space and equipment serve to protect against certain abusive arrangements. Comment. Some commenters requested that CMS not finalize the proposed prohibition on certain percentage-based and per-unit of service compensation formulas for the use of premises, equipment, personnel, items, supplies, or services under a timeshare arrangement.

The commenter assumed that the proposed requirement is apparently intended to address timeshare arrangements and other arrangements similar to traditional lease of office space and equipment, but asserted that the requirement, as drafted, is so broad that its scope is unclear. Response. The commenter is correct that the requirement prohibiting a compensation formula under a timeshare arrangement that is based on percentage of revenue or per-unit of service fees that are not time-based relates to the use of premises (including office space), and equipment protected under final § 411.357(z). Under timeshare arrangements, where dominion and control are not transferred for the use of premises, equipment, personnel, items, supplies, or services, we believe that prohibitions on percentage-based compensation and per-unit of service fees are required to ensure that excepted timeshare arrangements do not pose a risk of program or patient abuse.

(See 80 FR 71331 through 71332.) Therefore, we are not convinced that § 411.357(z)(1)(v) should be removed. However, we agree that the requirement, as proposed, could have an unintended impact on arrangements other than timeshare arrangements, and we are revising the requirement to address our specific concern. Under final § 411.357(z)(1)(v), compensation for the use of premises (including office space) or equipment may not be determined using a formula based on. (1) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services provided while using the premises (including office space) or equipment.

Or (2) per-unit of service fees that are not time-based, to the extent that such fees reflect services provided to patients referred by the party granting permission to use the premises (including office space) or equipment. Comment. Several commenters supported our policy that the exception for limited remuneration to a physician be used in conjunction with other exceptions during the course of a calendar year, noting that the exception, if finalized, would provide relief for parties that begin an arrangement for items or services before the arrangement squarely fits in another exception. One commenter requested that we finalize certain modifications to the exceptions for personal service arrangements at § 411.357(d) and fair market value compensation at § 411.357(l) to ensure consistency with our policy regarding the application of § 411.357(z).

Specifically, the commenter requested that we revise § 411.357(d)(1)(ii) to explicitly provide that an arrangement that satisfies all the requirements of § 411.357(z) need not be covered by a personal service arrangement protected under § 411.357(d)(1) or be listed on a master list of contracts. Similarly, the commenter requested that we revise § 411.357(l)(2) to explicitly provide that, if an arrangement for items or services fully satisfied the requirements of § 411.357(z), the parties could also rely on § 411.357(l) to except an arrangement for the same items and services during a calendar year. Response. As explained in the proposed rule and in this final rule, the exception at § 411.357(z) may be used during the course of a calendar year in conjunction with other exceptions to the physician self-referral law.

The commenters are correct that the exception for limited remuneration to a physician may be used in succession with another applicable exception to protect an ongoing arrangement. For example, if parties do not initially document an arrangement or set the compensation in advance, the arrangement may be excepted under § 411.357(z) if all its requirements are satisfied, including that the remuneration does not exceed the annual aggregate remuneration limit established at final § 411.357(z)(1). If the parties continue the arrangement, they may rely on another applicable exception to protect the arrangement on a going forward basis, provided that all the requirements of the other applicable exception are met, including any writing, signature, and set in advance requirements. All the requirements of the other applicable exception, including the set in advance requirement, would have to be met beginning on the date that the parties rely on the other exception, except that the parties would have up to 90 consecutive calendar days to document and sign the arrangement under § 411.354(e)(4).

Remuneration provided to a physician for items or services provided prior to the date that the arrangement satisfies all the requirements of an applicable exception other than § 411.357(z) would be counted towards the annual aggregate remuneration limit in § 411.357(z)(1). The provision at § 411.357(d)(1)(ii) requires that the personal service arrangement covers all the services provided by the physician (or an immediate family member) to the entity, and states that this requirement is met if all the separate arrangements between the entity and the physician (or immediate family member) incorporate each other by reference or if they cross list a master list of contracts. We share the commenter's concern that this requirement could undermine the applicability and utility of the exception for personal service arrangements if the parties to an arrangement concurrently rely on the new exception at § 411.357(z) to protect a separate arrangement for the provision of personal services. Therefore, we are modifying § 411.357(d)(1)(ii) to state Start Printed Page 77630that a personal service arrangement excepted under § 411.357(d)(1) does not have to cover personal services that are provided by a physician under an arrangement that satisfies all the requirement of § 411.357(z).

Without this modification, there may be confusion as to whether the exception for limited remuneration to a physician may be used for one service arrangement while the parties concurrently use § 411.357(d)(1) for a separate personal service arrangement. Insofar as personal services provided under an arrangement that satisfies all the requirements at § 411.357(z) are excluded from the “covers all services” requirement in § 411.357(d)(1)(ii), it is not necessary to incorporate a personal service arrangement excepted under § 411.357(z) by reference or list it on a master list of contracts. The exception for fair market value compensation provides at § 411.357(l)(2) that the parties may enter into only one arrangement for the same items or services during the course of a year. We share the commenter's concern that this requirement could undermine the utility of the exception for fair market value compensation if parties first rely on the new exception at § 411.357(z) to protect an arrangement for the same items or services during a single year.

(We note that a “year” for purposes of the exception at § 411.357(l) is not defined as a “calendar year” and refers, instead, to any 365-day period.) We are modifying this provision to state that, other than an arrangement that satisfies all the requirements of § 411.357(z), the parties may not enter into more than one arrangement for the same items and services during the course of a year. With this modification, parties may use the exception for limited remuneration to a physician to protect an arrangement for the provision of items and services, and, during the course of a year, also rely on § 411.357(l) to protect an arrangement for the same items and services. Comment. One commenter asked for clarification as to whether the proposed exception for limited remuneration to a physician could be relied on by an entity to provide continuing medical education (CME) to physicians for free or at a reduced cost.

The commenter characterized our proposal as “increasing the limit from $300 to $3,500 per year.” Response. We believe that the commenter is confusing the new exception for limited remuneration to a physician at § 411.357(z) with the exception for nonmonetary compensation at § 411.357(k), which has an annual limit of $300, adjusted annually for inflation. There are significant differences between these exceptions. Among other things, the exception for limited remuneration to a physician protects compensation that does not exceed fair market value for items or services actually provided by the physician.

Unlike the exception for nonmonetary compensation at § 411.357(k), the new exception at § 411.357(z) does not permit entities to provide remuneration to a physician, including valuable in-kind remuneration such as free or reduced cost CME, without a fair market value exchange for items or services actually provided by the physician. The exception for nonmonetary compensation permits an entity to gift (or otherwise provide) a physician a limited amount of noncash remuneration during the course of a calendar year, not to exceed $300, as indexed to inflation and currently $423 per year, in the aggregate. No exchange of items or services from the physician is required. An entity may provide CME to a physician under the exception at § 411.357(k), provided that the value of the CME does not exceed the annual limit on nonmonetary compensation when aggregated with any other nonmonetary compensation provided to the physician during the same calendar year.

2. Cybersecurity Technology and Related Services (§ 411.357(bb)) Relying on our authority under section 1877(b)(4) of the Act, in the proposed rule, we proposed an exception at § 411.357(bb) (the cybersecurity exception) applicable to arrangements involving the donation of cybersecurity technology and related services (84 FR 55830). We believe that establishing such an exception will help improve the cybersecurity posture of the health care industry by removing a perceived barrier to donations of technology and services that address the growing threat of cyberattacks that infiltrate data systems and corrupt or prevent access to health records and other information essential to the delivery of health care. The OIG is establishing a similar safe harbor to the anti-kickback statute elsewhere in this issue of the Federal Register.

Despite the differences in the respective underlying statutes, we attempted to ensure as much consistency as possible between the exception to the physician self-referral law and the safe harbor to the anti-kickback statute. In recent years, both CMS and OIG have received numerous comments and suggestions urging the creation of an exception and a safe harbor, respectively, applicable to donations of cybersecurity technology and related services.[] The digitization of health care delivery and rules designed to increase interoperability and data sharing in the delivery of health care create abundant targets for cyberattacks. For instance, a large health system with over 400 locations was recently the victim of a system-wide cyberattack that took medication, medical record, and other patient care systems offline.[] The health care industry and the technology used in health care delivery have been described as an interconnected ecosystem where the weakest link in the system can compromise the entire system.[] Given the prevalence of electronic health record storage, as well as the processing and transit of health records and other critical protected health information (PHI) between and within the components of the health care ecosystem, the risks associated with cyberattacks that originate with “weak links” are borne by every component of the system. Although we did not specifically request comments on cybersecurity, numerous commenters on the CMS RFI requested that we establish an exception to protect the donation of cybersecurity technology and related services.

In response to its request for information specifically related to cybersecurity, OIG received overwhelming support for a safe harbor to protect the donation of cybersecurity technology and related services. Many commenters on both requests for information highlighted the increasing prevalence of cyberattacks and other threats. These commenters noted that cyberattacks pose a fundamental risk to the health care ecosystem and that data breaches result in high costs to the health care industry and may endanger patients. Moreover, disclosures of PHI through a data breach can result in identity fraud, among other things.

The Health Care Industry Cybersecurity (HCIC) Task Force, created by the Cybersecurity Information Sharing Act of 2015 Start Printed Page 77631(CISA),[] was established in March 2016 and is comprised of government and private sector experts. The HCIC Task Force produced its HCIC Task Force Report in June 2017.[] The HCIC Task Force recommended, among other things, that the Congress “evaluate an amendment to [the physician self-referral law and the anti-kickback statute] specifically for cybersecurity software that would allow health care organizations the ability to assist physicians in the acquisition of this technology, through either donation or subsidy,” and noted that the regulatory exception to the physician self-referral law for EHR items and services and the safe harbor to the anti-kickback statute for EHR items and services could serve as a template for a new statutory exception.[] Based on responses to OIG's request for information and our proposed rule, we understand that the cost of cybersecurity technology and related services has increased dramatically, to the point where many providers and suppliers are unable to invest in and, therefore, have not invested in, adequate cybersecurity measures. As previously noted, the risks associated with a cyberattack on a single provider or supplier in an interconnected system are ultimately borne by every component in the system. Therefore, an entity wishing to protect itself by preventing, detecting, and responding to cyberattacks has a vested interest in ensuring that the physicians with whom the entity exchanges data are also able to prevent, detect, and respond to cyberattacks, particularly where the connections allow the physicians to establish bidirectional interfaces with the entity, which inherently present higher risk than connections that permit physicians “read-only” access to the entity's data systems.

We believe that a primary reason that an entity would provide cybersecurity technology and related services to a physician is to protect itself from cyberattacks. However, we recognize that donated cybersecurity technology and services may have value for a physician recipient insomuch as the recipient would be able to use his or her resources for needs other than cybersecurity expenses. Even so, it is our position that allowing entities to donate cybersecurity technology and related services to physicians will lead to strengthening of the entire health care ecosystem. We believe that, with appropriate safeguards, arrangements for the donation of cybersecurity technology and related services will not pose a risk of program or patient abuse, provided that they satisfy all the requirements of the exception at final § 411.357(bb).

In addition, we believe that the exception established in this final rule will promote increased security for interconnected and interoperable health care IT systems without protecting potentially abusive arrangements. In the proposed rule, we proposed that the exception at § 411.357(bb) would be applicable to nonmonetary remuneration in the form of certain types of cybersecurity technology and related services (84 FR 55831). In an effort to foster beneficial cybersecurity donation arrangements without permitting arrangements that pose a risk of program or patient abuse, we proposed the following requirements for cybersecurity donations made under § 411.357(bb). The technology and services are necessary and used predominantly to implement, maintain, or reestablish cybersecurity.

Neither the eligibility of a physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties. Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor. And the arrangement is documented in writing. After reviewing comments on our proposed rule, we are finalizing the exception for cybersecurity donations and related services at § 411.357(bb) with certain modifications related to the types of nonmonetary remuneration permitted under the exception, as well as nonsubstantive modifications to the text of the regulation.

We received the following general comments and our responses follow. Comment. The majority of commenters generally supported the proposed exception for cybersecurity technology and related services. Commenters noted that cybersecurity is necessary to enable secure and effective exchange of health information and thus is crucial for care coordination and improved health outcomes.

One commenter explained that patient safety is the most critical concern when cyberattacks occur, especially when the cyberattacks impact the patient's electronic health records and medical devices. The commenter added that cyberattacks can result in disclosure of sensitive patient information and can alter the treatment a patient is prescribed, among other negative consequences. One commenter highlighted the trend in health care towards greater interconnectivity, even as costs for cybersecurity rise, and concluded that cybersecurity donations make sense from affordability, efficiency, and social responsibility standpoints. Another commenter stated its belief that health care providers are insufficiently prepared to meet cybersecurity challenges that arise in an increasingly digitized health care delivery system.

The commenter stated that the proposed cybersecurity exception would help address these challenges and be part of a national strategy to improve the safety, resilience, and security of the health care industry. Response. We believe that the exception as finalized at § 411.357(bb) will remove real and perceived barriers to beneficial cybersecurity technology donations, addressing an urgent need to improve cybersecurity hygiene in the health care industry and protect patients and the health care ecosystem overall. With respect to care coordination, we note that, depending on the facts and circumstances, an arrangement for the donation of cybersecurity technology and services may qualify as a value-based arrangement (as defined at final § 411.351) to which the new exceptions at § 411.357(aa)(1), (2), and (3) for arrangements that facilitate value-based health care delivery and payments may be applicable.

Comment. A few commenters generally objected to the proposed cybersecurity exception. One commenter expressed concern that the requirements of the proposed exception are inadequate because, according to the commenter, they are difficult to monitor and less stringent than the requirements of the EHR exception. Another commenter asked CMS to reconsider the exception and whether cybersecurity technology and arrangements involving the donation of such technology are understood sufficiently at this time to warrant an exception.

Some commenters expressed concern that the exception could be used to support anti-competitive behavior. One of the commenters maintained that, while health IT donations by large health care entities appear to advance interoperability, the actual result is that physician recipients lose their autonomy as independent providers, the lack of competition increases the costs of health care, and smaller providers are Start Printed Page 77632closed by the larger health system when they do not create a profit. Instead of finalizing the proposal, the commenter urged CMS to fund a program that would allow small or rural providers to gain access to cybersecurity technology. Another commenter expressed concern that the proposed cybersecurity exception could inadvertently bolster information blocking, as some providers cite cybersecurity as a reason for not sharing data or providing data access to physicians.

Response. We do not understand the basis for the commeners' assertions that the provision of cybersecurity items and services to protect information by preventing, detecting, and responding to cyberattacks would limit physician autonomy or lead to inappropriate information blocking. Although we are concerned, in general, about anti-competitive behavior, we believe that an exception for arrangements involving the donation of cybersecurity technology and related services is a necessary and critical tool to assist the health care industry in addressing the prevalent and increasing cybersecurity threats facing the industry, which, among other things, can negatively impact the quality of care delivered to beneficiaries.[] The cybersecurity exception incorporates many of the core requirements of the EHR exception, including the requirements that. (1) The remuneration is necessary and used predominantly for the purposes outlined in the exception.

(2) neither the eligibility of the physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties. (3) neither the physician recipient nor the physician's practice makes the receipt of the technology or services or the amount or nature of the technology or services a condition of doing business with the donor entity. And (4) the arrangement is documented in writing. In addition, as explained above, we believe that many donors will make cybersecurity donations as a self-protective measure.

Given these safeguards, we do not believe that the cybersecurity exception, as finalized, permits financial relationships that pose a risk of program or patient abuse. A. Covered Technology and Services In the proposed rule, we proposed to limit the applicability of the cybersecurity exception to nonmonetary remuneration consisting of technology or services that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity (84 FR 55832).[] We explained that our goal is to ensure that donations are made for the purposes of addressing legitimate cybersecurity needs of donors and recipients. Therefore, the core function of the donated technology or service must be to protect information by preventing, detecting, and responding to cyberattacks (84 FR 55832).

As proposed, the exception at § 411.357(bb) would apply to the provision of a wide range of technology and services that are predominantly used for the purpose of, and are necessary for, ensuring that donors and recipients have cybersecurity. We are taking a neutral position with respect to the types of technology to which the final cybersecurity exception is applicable, including the types and versions of software that an entity may provide to a physician recipient when all the requirements of the exception are satisfied. We did not propose to distinguish, and the cybersecurity exception as finalized here does not distinguish, between cloud-based software and software that must be installed locally (84 FR 55832). The types of technology to which the cybersecurity exception is applicable include, but are not limited to, software that provides malware prevention, software security measures to protect endpoints that allow for network access control, business continuity software, data protection and encryption, and email traffic filtering (84 FR 55832).

As we stated in the proposed rule, these examples are indicative of the types of technology that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity (84 FR 55832). In addition, as explained in section II.E.2.b. Below, the cybersecurity exception as finalized also applies to hardware that is necessary and used predominantly to implement, maintain, or reestablish cybersecurity. We solicited comments on the scope of the technology to which the cybersecurity exception should be applicable, as well as whether we should expressly include (or exclude) other technology or categories of technology in the exception.

We also proposed that the cybersecurity exception would apply to a broad range of services (84 FR 55832). We stated that such services could include— Services associated with developing, installing, and updating cybersecurity software. Cybersecurity training services, such as training recipients on how to use the cybersecurity technology, how to prevent, detect, and respond to cyber threats, and how to troubleshoot problems with the cybersecurity technology (for example, “help desk” services specific to cybersecurity). Cybersecurity services for business continuity and data recovery services to ensure the recipient's operations can continue during and after a cybersecurity attack.

€œCybersecurity as a service” models that rely on a third-party service provider to manage, monitor, or operate cybersecurity of a recipient. Services associated with performing a cybersecurity risk assessment or analysis, vulnerability analysis, or penetration test. Or Services associated with sharing information about known cyber threats, and assisting recipients responding to threats or attacks on their systems. We stated further that these types of services are indicative of the types of services that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity, and solicited comments on the scope of the services to which the cybersecurity exception should be applicable, as well as whether we should expressly include (or exclude) other services or categories of services (84 FR 55832).

We noted in the proposed rule and reiterate here that, in all cases, the technology and services provided by an entity must be nonmonetary. With respect to both technology and services, we emphasize that, although donated technology or services may have multiple uses, the cybersecurity exception only applies to technology and services that are necessary and used predominantly to implement, maintain, and reestablish cybersecurity. The exception does not apply to technology or services that are otherwise used predominantly in the normal course of the recipient's business (for example, general help desk services related to use of a practice's IT). We solicited comment on whether this limitation would prohibit the donation of cybersecurity technology and related services that are vital to improving the Start Printed Page 77633cybersecurity posture of the health care industry.

With respect to the requirement that the technology or services are necessary to implement, maintain, or reestablish cybersecurity, we considered, and sought comment on, whether to deem certain arrangements to satisfy this requirement (84 FR 55832). We explained in the proposed rule that such a deeming provision, if adopted, would not affect the requirement that the technology or services are used predominantly to implement, maintain, or reestablish cybersecurity. We emphasized that parties would have to show on a case-by-case basis that the “used predominantly” requirement is met (84 FR 55832). In the proposed rule, we stated that, if we adopted a deeming provision for the purpose of applying the “necessary” requirement at proposed § 411.357(bb)(1)(i), we would deem donors and recipients to satisfy the requirement if the parties demonstrated that the donation furthers a recipient's compliance with a written cybersecurity program that reasonably conforms to a widely-recognized cybersecurity framework or set of standards (84 FR 55832).

Examples of such frameworks and sets of standards include those developed or endorsed by the National Institute for Standards and Technology (NIST), another American National Standards Institute-accredited standards body, or an international voluntary standards body such as the International Organization for Standardization. As explained below in response to comments below, we are not adopting this proposed deeming provision. We are finalizing our proposal to limit the applicability of the cybersecurity exception to technology and services that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity. However, in the final cybersecurity exception as established here, we state the scope of the exception in the chapeau of the exception at § 411.357(bb)(1) instead of including a requirement in the exception that the technology and services are necessary and used predominantly to implement, maintain, or reestablish cybersecurity.

(The remaining requirements of the exception are redesignated to account for this organizational change. For example, proposed § 411.357(bb)(1)(ii) is finalized at § 411.357(bb)(1)(i), and so forth). We are also removing the phrase “certain types of” before “cybersecurity technology and services” from the chapeau to avoid ambiguity regarding the scope of the exception. Most exceptions to the physician self-referral law are structured such that the chapeau delineates the scope of remuneration that may be provided under the exception, provided that the requirements enumerated under the chapeau language are satisfied.

The chapeau of an exception contains specific pre-conditions that must be satisfied in order for the exception to be available to except a particular arrangement. The “necessary and used predominantly” condition in the cybersecurity exception serves this function. The remuneration that may be provided under the cybersecurity exception is limited to nonmonetary compensation, consisting of technology and services, that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity. In addition, the structural reorganization of the final cybersecurity exception creates greater consistency with the EHR exception.

As finalized, the chapeau of the cybersecurity exception mirrors the chapeau in the EHR exception at § 411.357(w)(1), which provides that donated items or services must be necessary and used predominantly to create, maintain, transmit, receive, or protect electronic health records. Inclusion of the “necessary and used predominantly” condition in the chapeau of the cybersecurity exception underscores that “necessary and used predominantly” has the same meaning in both the EHR and cybersecurity exceptions. We believe this consistency is especially important insofar as cybersecurity software may be donated under both exceptions. We received the following comments and our responses follow.

Comment. One commenter urged CMS to permit, with appropriate safeguards, the donation of both nonmonetary remuneration consisting of cybersecurity technology and services and monetary remuneration to be used for the purchase of cybersecurity technologies and services. The commenter asserted that permitting monetary remuneration in appropriate circumstances could help alleviate what the commenter characterized as the cybersecurity exception's unintended adverse effects on competition, such as a situation where a donor wished to supply cybersecurity technology to two competing small providers and one of the small providers had already purchased the technology but the other had not. The commenter asserted that protecting monetary reimbursement to the first provider and an in-kind donation to the second provider would be fairer than permitting a donation to one competitor and not the other.

Response. We decline to permit reimbursement of previously incurred cybersecurity expenses, as well as the provision of cash remuneration to a physician that is intended to be used for the future purchase of cybersecurity technology and services. We believe that this would pose a risk of program or patient abuse, as the former would simply be a subsidy of practice expenses that a physician—rather than the donor entity—determined to incur, and the latter involves the provision of cash, some or all of which could be used to offset other practice expenses without ultimately enhancing the cybersecurity posture of the donor entity or the health care ecosystem as a whole. We also highlight that the example provided by the commenter likely would not satisfy the other conditions of this exception even if the exception permitted an entity to provide monetary remuneration.

For instance, if a physician has already obtained cybersecurity technology or services, the provision of remuneration in the form of reimbursement would not be necessary to implement, maintain, or reestablish cybersecurity. Comment. A number of commenters supported the requirement at proposed § 411.357(bb)(1)(i) that the technology and related services must be necessary and used predominantly to implement, maintain, or reestablish cybersecurity. One of the commenters suggested that this provision would ensure the legitimacy of donations and help differentiate the technology and services that may be donated under the cybersecurity exception from technology and services that have multiple uses beyond cybersecurity.

Another commenter urged CMS to require a clear nexus between the cybersecurity donation and the business relationship between the donor and recipient. The commenter explained that the cybersecurity technology should be necessary for the provision of the services involved, such as where a hospital donates cybersecurity technology to a physician to ensure the secure transfer of personal health information and thus improve care coordination for shared patients. The commenter stated that the cybersecurity exception should not protect donations that are used as a way to entice new business. A different commenter suggested that, provided that donated cybersecurity technology and services substantially further the interests of strengthening cybersecurity for the end user, their donation should be permissible.

The commenter agreed with CMS that donors should have the Start Printed Page 77634discretion to choose the amount and nature of cybersecurity technology and services they donate to physicians based on a risk assessment of the potential recipient or based on the risks associated with the type of interface between the parties. Response. As explained above, the cybersecurity exception is limited to technology and services that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity. However, we are including this limitation in the chapeau of the final cybersecurity exception rather than as a separate requirement of the exception as we proposed.

The change in the organization of the exception does not affect or alter the meaning, scope, or application of the requirement that donated technology and services must be necessary and used predominantly to implement, maintain, or reestablish cybersecurity, as that requirement was explained in the proposed rule (84 FR 55831). The “necessary and used predominantly” language at final § 411.357(bb)(1) delineates the scope of the exception and will ensure that donations are made to address legitimate cybersecurity needs of donors and recipients. With respect to technology and services with multiple uses or functions other than cybersecurity, we note the following. In the 2006 EHR final rule, we acknowledged that electronic health records software is often integrated with other software and functionality, but we explained that such software may still be necessary and used predominantly to create, maintain, transmit, or receive electronic health records if the electronic health records functions predominate (71 FR 45151).

We added that the “core functionality” of the technology must be the creation, maintenance, transmission, or receipt of electronic health records. The same principle applies to technology (as defined at § 411.357(bb)(2)) and services donated under the cybersecurity exception. While donated technology and services may include functions other than cybersecurity, the core functionality of the technology and services must be implementing, maintaining, or reestablishing cybersecurity, and the cybersecurity use must predominate. Such technology and services must also be necessary for implementing, maintaining, or reestablishing cybersecurity.

Although we are not adopting the “clear nexus” standard suggested by the commenter, we question whether donated technology or services would be necessary for the donor or recipient to implement, maintain, or reestablish cybersecurity if the technology or services are not connected to the underlying services furnished by either party. We note also that we are finalizing a requirement that a donor may not directly take into account the volume or value of referrals or other business generated between the parties when determining the eligibility of a potential recipient for donated technology or services, or when determining the amount or nature of the donated technology or services. This requirement addresses the concern expressed by the commenters regarding parties that improperly use the exception for donations to entice new business. With respect to the last comment, we decline to adopt the commenter's proposal that donations should be permitted under the cybersecurity exception if the donated technology or services “substantially further the interests of strengthening cybersecurity for the end user.” We believe that stakeholders are familiar with the “necessary and used predominantly” condition from the EHR exception, and, insofar as the EHR exception applies to cybersecurity software and services, we believe that it reduces administrative burden to use a similar standard for both the EHR and cybersecurity exceptions.

Comment. Most commenters recommended that we finalize an exception that covers a broad range of cybersecurity technology and services, and some requested specific language or clarifications. In particular, several commenters asked CMS to consider how the proposed exception would apply to cloud-based and subscription-based products and services. One commenter supported many of the examples from the proposed rule of services that could be covered under the cybersecurity exception, while other commenters requested that CMS provide clarity related to the scope of potentially permissible donations through additional examples of the types and amounts of technology and services allowed.

Specifically, commenters asked CMS to clarify whether the exception is applicable to the following services. Assurance, assessment, and certification programs that allow physicians to assess their own cybersecurity and demonstrate that they are trusted participants in health care data exchange. Risk assessment and gap analysis services. Consulting services to work with a physician to develop and implement specific cybersecurity policies and procedures.

Subscription fees required by vendor security products that assist physicians in developing policies and procedures in support of a risk assessment. Implementation, management, and remediation services. And provision of a full-time cybersecurity officer. Some commenters noted that a cybersecurity-specific help desk may not be realistic and recommended that CMS permit donations of general help desk services, whether through the donor's IT department or the vendor's help desk services.

Although many commenters expressed concern about the utility of the exception if it does not apply to a broad enough scope of technology and services, other commenters recommended limiting the scope of cybersecurity technology and services that may be provided to a physician under the exception. One of these commenters cautioned against permitting donations of “cybersecurity as a service.” The commenter asserted that the “cybersecurity as a service” model, where a third-party manages, monitors, or operates the cybersecurity of a recipient, goes beyond what is reasonable for donated cybersecurity, but did not provide further detail as to how “cybersecurity as a service” would pose a risk of program or patient abuse. Response. As finalized, the exception protects donations of a broad range of technology and services.

Cybersecurity technology and services include both locally installed cybersecurity software and cloud-based cybersecurity software. As explained in section II.E.2.b. Below, the exception also applies to hardware that is necessary and used predominantly to implement, maintain, or reestablish cybersecurity. We provided multiple examples of items and services to which the cybersecurity exception would apply in the preamble to the proposed rule (84 FR 55832), which is repeated above in this final rule.

We continue to believe that the cybersecurity exception is applicable to the examples provided in the proposed rule. We also stated in the proposed rule and reiterate here that “cybersecurity as a service” may be protected, including third-party services managing and monitoring the cybersecurity of a recipient. Other than a general statement of caution, the commenter that addressed “cybersecurity as a service” did not provide any specific reasons why such a service presents a risk of program or patient abuse, and we see no reason why this cybersecurity format requires a different analysis than cybersecurity installed locally or should be excluded from the scope of the cybersecurity exception. All of the examples provided in the proposed rule Start Printed Page 77635are illustrative only, and the list of examples in the proposed rule is not exhaustive.

We intend the exception to be applicable to technology and services that are currently available, as well as technologies and services that will be developed in the future. Donated technology and services, however, must be necessary and used predominantly to implement, maintain, or reestablish cybersecurity. To the extent that the services described by commenters are necessary and used predominantly to implement, maintain, or reestablish cybersecurity, they may be donated under the cybersecurity exception (if all the remaining requirements of the exception are also satisfied). We recognize that cybersecurity functionality is often incorporated into software or other information technology whose primary use and functionality is not cybersecurity and, further, that certain services may be useful for implementing, maintaining, or reestablishing cybersecurity while also generally serving purposes other than cybersecurity (for example, general IT services that include a cybersecurity component).

However, in order for technology or services to be donated under the cybersecurity exception, the core functionality of the technology or services must be implementing, maintaining, or reestablishing cybersecurity, and the cybersecurity use must predominate. For instance, depending on the facts and circumstances of a particular arrangement, donating a virtual desktop that includes access to programs and services beyond cybersecurity software likely would not be protected because the technology would include functions not necessary and predominantly used to implement, maintain, or reestablish cybersecurity, such as, for example, word processing or claims and billing applications. Similarly, the exception is likely not applicable to general IT help desk services, because the services would not be used predominantly for cybersecurity. However, we are aware of cybersecurity-specific software and services that include customer service and help desk features for cybersecurity assistance.

The cybersecurity exception is applicable to such help desk services if all the requirements of the exception are satisfied. The cybersecurity exception could also be applicable to services provided through an entity's primary help desk, if the services are necessary and used predominantly for cybersecurity (for example, to report cybersecurity incidents). The provision of a full-time cybersecurity officer in a physician recipient's practice must be necessary, the cybersecurity officer's services must be used predominantly to implement, maintain, or reestablish cybersecurity, and all other requirements of the exception at final § 411.357(bb) must be satisfied in order to avoid violation of the physician self-referral law. Comment.

Several commenters interpreted our discussion in the proposed rule of the difficulty of collecting cost contribution amounts for patches and updates to mean that donations of patches or updates to previously donated technology would not fall within the scope of the cybersecurity exception. The commenters highlighted that patching and updates are critical to managing cybersecurity risks and prohibiting their donation could neutralize any benefits resulting from the cybersecurity exception. One of these commenters noted that, given the fast-paced nature of developments in cybersecurity, it is likely that new tools will need to be deployed on at least an annual basis. The commenters asked that we ensure that the cybersecurity exception, if finalized, applies to ongoing cybersecurity software updates and other patches.

Another commenter requested clarification regarding whether the provision to a physician of a routine or critical update would cause an arrangement to fail to satisfy all the requirements of the cybersecurity exception, noting that patching is sometimes given to physicians for free (because it is built into the contracts with vendors), and some patches may be focused on security while others may be more general. A different commenter asked CMS to provide greater clarity regarding donations of replacement technology in light of the rapid development of new cybersecurity technology. Response. Constant vigilance is required to maintain the cybersecurity of the health care ecosystem, and we agree with the commenters that patching and updates are critical to managing cybersecurity risks.

As we discussed in response to previous comments, we are not excluding any particular type of technology or services—including patches and updates—from the application of the final cybersecurity exception. The ongoing donation of cybersecurity patches and updates will not result in noncompliance with the physician self-referral law, provided that all the requirements of the cybersecurity exception (or another applicable exception) are satisfied at the time of their donation. We note that the written documentation evidencing the arrangement for the donation of cybersecurity technology or services may account for the future provision of patches and updates, relieving the parties from developing additional documentation each time a patch or update is issued. Also, as described below in section II.E.2.d., the exception at final § 411.357(bb) does not require a financial contribution from the recipient.

Therefore, routine patches and upgrades provided to recipients at no cost will not cause the arrangement between the parties to fall out of compliance with the physician self-referral law, provided that all the requirements of the exception are satisfied at the time of their issuance. Regarding donations of cybersecurity technology or services to physicians who already have some technology or services, the final exception at § 411.357(bb) does not prohibit the donation of replacement technology. However, an arrangement for the provision of cybersecurity technology and services must satisfy all the requirements of the exception. We note that donating replacement technology could satisfy the requirement that the technology or services are necessary to implement, maintain, or reestablish cybersecurity if, for example, the technology that is replaced is outdated or poses a cybersecurity risk.

Comment. One commenter recommended that CMS clarify the scope of the intended “object” to be protected by the cybersecurity technology and services. For example, cybersecurity to protect electronic health records, medical devices, or other IT that uses, captures, or maintains individually identifiable health information. The commenter noted that the proposed cybersecurity exception was silent as to the “object” of the cybersecurity protection, and asserted that an explicit statement setting broad parameters about the purpose of donated cybersecurity technology and services would provide guidance and potentially cover future technology advances.

Another commenter encouraged CMS to specifically permit donations of technology and services related to medical device cybersecurity. Response. We decline to set parameters or requirements for the intended “object” (or “subject”) of the cybersecurity protection because we are concerned that this could unintentionally limit the scope of the technology and services to which the cybersecurity exception is applicable. If all the requirements of the exception are satisfied, the exception is applicable to cybersecurity technology and services that, among other things, protect Start Printed Page 77636electronic health records, medical devices, or other IT that uses, captures, or maintains individually identifiable health information.

Comment. One commenter objected to what it considered to be CMS' “piecemeal” approach to health care technology, with different exceptions for different types of technology (for example, EHR and cybersecurity) that the commenter asserted must work together to drive care coordination. The commenter urged CMS to broaden the scope of the cybersecurity and EHR exceptions to ensure flexibility to protect technology that can help facilitate the transition to a value-based health care delivery and payment system. The commenter specifically recommended that we make any final cybersecurity exception applicable to data analytics and reporting functionalities.

The commenter provided as an example predictive data analytics tools that allow a hospital to identify and decrease the number of high-risk heart failure patients presenting for admission to the hospital or emergency room. Response. We are not extending the scope of the cybersecurity exception at final § 411.357(bb) to all data analytics and reporting functionality specifically designed to facilitate the transition to a value-based health care delivery and payment system, as requested by the commenter. As illustrated by the commenter's example, the use and purpose of data analytics and reporting functionality may differ significantly from those of cybersecurity technology and services.

The cybersecurity exception at § 411.357(bb) is limited to technology and services that are necessary and used predominantly to implement, maintain, and reestablish cybersecurity, and its requirements of the exception at § 411.357(bb) are not designed to adequately protect against Medicare program or patient abuse where data analytics and reporting functionality are provided at no cost (or reduced cost) to a physician. Other exceptions to the physician self-referral law address the items and services described by the commenter. We believe that the requirements of those exceptions are appropriate to protect the Medicare program and its patients from abuse when such remuneration is provided by an entity to a physician (or vice versa). With respect to the commenter's concern regarding a piecemeal approach to exceptions under the physician self-referral law, we note that parties seeking to except an arrangement for the donation of technology are not required to utilize multiple exceptions if the separate functions of the technology and the donation satisfy the requirements of a single exception.

Comment. One commenter that generally opposed the cybersecurity exception maintained that effective cybersecurity protection could require a whole suite of services, such as active management, monitoring, and developing an effective response system if an issue arises, and it may not be possible for an outside entity to provide such a broad range of services. The commenter asserted that more limited donations of cybersecurity technology or services, on the other hand, may not provide effective cybersecurity protection for the recipients and may expose the donor to liability in case of a cyberattack. Response.

As described in our responses to other comments, the final cybersecurity exception applies to a wide range of technology and services that implement, maintain, or reestablish cybersecurity (as defined at final § 411.351). Although we established the cybersecurity exception to address real or perceived barriers to improving the cybersecurity posture of the health care industry, the exception does not apply to all remuneration that may be relevant to cybersecurity needs. The final cybersecurity exception permits technology and services that are necessary and used predominantly to implement, maintain, or reestablish cybersecurity. The protection afforded under the exception is not limited to cybersecurity that is “effective.” In the strict liability context of the physician self-referral law, we are concerned that requiring “effective” cybersecurity at § 411.357(bb)(1) may chill otherwise beneficial cybersecurity donations, as donors and recipients may lack the expertise to understand and determine what constitutes “effective” cybersecurity or there may be disagreement as to whether cybersecurity measures are “effective.” Although donor liability is outside the scope of this rulemaking, we note that nothing in the cybersecurity exception prohibits donors and recipients from addressing such issues through contracts or other agreements.

Comment. A number of commenters supported the inclusion of a deeming provision that would allow donors or recipients to demonstrate that the compensation arrangement satisfies the requirement that the technology or services are “necessary” if the donation furthers a recipient's compliance with a written cybersecurity program that reasonably conforms to a widely-recognized cybersecurity framework, such as those developed by NIST, or guidelines developed by the Department of Health and Human Services Office for Civil Rights (OCR) in collaboration with ONC. One commenter recommended that, in cases where cybersecurity is built into software that gives physicians access to a hospital's computer system, the technology should be deemed to be necessary and used predominantly for cybersecurity. The commenter explained that such a deeming provision is warranted because, as noted in the proposed rule (84 FR 55831), a hospital that has granted physicians access to its system has a vested interest in ensuring that the physicians with whom it shares information are also protected from cyberattacks, particularly where the connections allow the physicians to establish bidirectional interfaces with the entity.

A different commenter recommended that any deeming provision remain voluntary, while another commenter supported a deeming provision when the cost of the donation of technology and services exceeds a specified monetary limit. One commenter supported the inclusion of a deeming provision but only if the parties to the donation arrangement, through an independent third party, demonstrate and certify that the donation ensures compliance with a written cybersecurity program or framework that conforms to NIST standards. In contrast, several commenters objected to the inclusion of any deeming provision, maintaining that it would add unnecessary burden without providing any meaningful protection against program and patient abuse. One of these commenters stated that physicians may struggle to understand what “reasonable conformance” looks like or when a cybersecurity framework or standard is considered “widely recognized.” Response.

We are not including a deeming provision for establishing compliance with the condition that donated technology and services are necessary for cybersecurity in the final rule. We are concerned that any deeming provision that is specific enough to address our program integrity concerns will be of limited or no utility for stakeholders. We also agree with the commenter that parties may struggle to understand what “reasonable conformance” looks like or when a framework or standard is considered “widely recognized.” Without selection of one or more specific frameworks, any deeming provision could be challenging to understand and difficult to enforce. Regarding the commenter's suggestion that software that grants access to a hospital's system should be deemed to Start Printed Page 77637be necessary and used predominantly for cybersecurity, we agree that the type of connection between a donor and a physician (bidirectional read-write connection versus unidirectional read-only access) is an important factor in determining whether particular technology or services are necessary for cybersecurity.

However, we do not believe that any software or other information technology should be deemed to be necessary for cybersecurity simply because the technology permits a physician to access a hospital's computer system. Moreover, the determination of whether technology or services are used predominantly to implement, maintain, or reestablish cybersecurity depends on how the donated technology or services are used in fact and, therefore, not appropriate for a deeming provision. Although technology or services donated under the cybersecurity exception may have uses or functions other than cybersecurity (for example, software that allows a physician to access a hospital's computer system), the cybersecurity use must in fact predominate. B.

Definitions of “Cybersecurity” and “Technology” In the proposed rule, we proposed to define the term “cybersecurity” to mean the process of protecting information by preventing, detecting, and responding to cyberattacks and to define the term “technology” to mean any software or other type of information technology, other than hardware (84 FR 55831). Because the term “cybersecurity” also appears in the EHR exception at § 411.357(w), which expressly applies to the donation of cybersecurity software and services, we proposed to include the definition of “cybersecurity” in our regulations at § 411.351. Because the term “technology,” as used in the new exception for cybersecurity technology and related services, would be defined solely for purposes of the exception at § 411.357(bb), we proposed to include its definition at § 411.357(bb)(2) (84 FR 55831). We note that the term “technology” is included in several instances in our regulations as part of the term “information technology” and at § 411.357(w)(6)(iv) to describe one of the ways in which the determination of the eligibility of a physician for a donation of EHR items or services, or the amount or nature of the items or services, would be deemed not to be determined in a manner that directly takes into account the volume or value of referrals or other business generated between the parties.

The proposed definition of “technology” was not intended to affect the meaning of the term “information technology” or the interpretation of § 411.357(w)(6)(iv). In the proposed rule, we proposed a broad definition of “cybersecurity” derived from the NIST Framework for Improving Critical Infrastructure,[] a framework that does not apply specifically to the health care industry, but applies generally to any United States critical infrastructure (84 FR 55831). We proposed a broad definition of “cybersecurity” to avoid unintentionally limiting donations by relying on a narrow definition or a definition that might become obsolete over time, although we solicited comments whether a definition tailored to the health care industry would be more appropriate (84 FR 55831). We proposed a similarly broad definition of “technology” that is neutral with respect to the types of cybersecurity technology to which the exception applies (84 FR 55831).

We explained in the proposed rule that the definition of “technology” is broad enough to include cybersecurity software and other IT, such as an Application Programming Interface (API)—which is neither software nor a service, as those terms are generally used—that is available now, as well as technology that may become available as the industry continues to develop. As proposed, “technology” would have excluded hardware. We explained our concern in the proposed rule that donations of valuable multiuse hardware could pose a risk of program or patient abuse (84 FR 55832). In the proposed rule, we also considered two alternative proposals that would allow for the donation of certain cybersecurity hardware (84 FR 55831 through 55832).

Under the first alternative proposal, the cybersecurity exception would cover certain hardware that is necessary for cybersecurity, provided that the hardware is stand-alone (that is, is not integrated within multifunctional equipment) and serves only cybersecurity purposes (for example, a two-factor authentication dongle). We solicited comments on what types of hardware might meet these criteria and whether such hardware should fall within the scope of the exception. Under the second alternative proposal, parties would be permitted to make more robust donations of cybersecurity hardware if the donor had a cybersecurity risk assessment that identifies the recipient as a risk to its cybersecurity, and the recipient had a cybersecurity risk assessment that provided a reasonable basis to determine that the donated cybersecurity hardware is needed to address a risk or threat identified by a risk assessment (84 FR 55834). We noted in the proposed rule and reiterate here that the exception at § 411.357(bb), both as proposed and finalized, covers only items and services that qualify as cybersecurity technology and services (84 FR 55832).

It does not extend to other types of cybersecurity measures outside of technology or services. For example, the exception does not apply to donations of installation, improvement, or repair of infrastructure related to physical safeguards, even if they could improve cybersecurity (for example, upgraded wiring or installing high security doors). Donations of infrastructure upgrades are extremely valuable and have multiple benefits in addition to cybersecurity, and, thus, permitting an entity to provide such services at no cost to the physician recipient would present a risk of program or patient abuse. As explained in more detail below, in response to comments we are finalizing the definition of “cybersecurity” as proposed, and finalizing the definition of “technology” without the phrase “other than hardware.” We received the following comments and our responses follow.

Comment. Several commenters agreed with the proposed industry-neutral definition of “cybersecurity,” derived from the NIST Cybersecurity Framework (NIST CSF), and most commenters generally agreed that the final rule should include a broad definition of “cybersecurity” to provide sufficient flexibility for future changes, adaptations, and variations in the dynamic world of cybersecurity. One commenter was generally supportive of the proposed definition of “cybersecurity” but believed it should include the process of protecting information through “identifying” and “recovering” from cyberattacks in order to account for the entire lifecycle of a cyberattack. The commenter presumed that the addition of “recovering” would protect “back-up services” that support reestablishing cybersecurity and reduce the impact of ransomware extortion.

Another commenter supported the definition of “cybersecurity” for being fairly broad and including donations of APIs, but requested that we modify the definition to account for what the commenter identified as the three pillars of information security. Confidentiality of information, integrity of information, and availability of information.Start Printed Page 77638 Response. We agree with the commenters that we should adopt a broad, industry-neutral definition of “cybersecurity.” Consequently, we are finalizing a definition derived from the NIST CSF. The NIST CSF is industry-neutral and widely accepted across public and private sectors and international organizations, and it applies to any critical infrastructure in the United States, which includes health care.

It provides a commonly understood language for donors and recipients seeking to use the cybersecurity exception to improve their cybersecurity posture. We are not adopting a definition of “cybersecurity” that would incorporate specific technology solutions for cyberattacks. We are concerned that, as new cybersecurity technologies are developed and implemented, a definition that incorporates specific technology solutions for cyberattacks could become obsolete. We believe that the final definition of “cybersecurity” at § 411.351 provides sufficient flexibility while also permitting parties a clear understanding of the technology to which the exception is applicable.

Although the cybersecurity exception does not require compliance with the NIST CSF, we encourage potential donors and recipients to ensure a comprehensive, systematic approach to identifying, assessing, and managing cybersecurity risks. We decline to add the terms “identifying” and “recovering” to the definition of “cybersecurity,” as suggested by the commenter, and we noted that these terms also appear in the NIST CSF. The NIST CSF organizes basic “cybersecurity activities” into five functions. Identify, protect, detect, respond, and recover.

The exception at final § 411.357(bb) applies to donations of cybersecurity technology and services that are necessary and used predominantly for one or more of these five functions and the related subfunctions and cybersecurity outcomes that are part of the NIST CSF. We are not persuaded to adopt a more specific definition of cybersecurity by incorporating additional terminology from the NIST CSF and are finalizing the definition of “cybersecurity” at § 411.351 as proposed. With respect to recovering from cyberattacks in particular, we stress that, although the cybersecurity exception applies to donations of nonmonetary remuneration consisting of technology and services that are necessary and used predominantly for reestablishing cybersecurity, “reestablishing” cybersecurity does not include payment by an entity of any ransom on behalf of a physician recipient in response to a cyberattack (or to reimburse a physician for a ransom paid by the physician). Moreover, the payment or reimbursement of a ransom would not be nonmonetary remuneration.

We also decline to modify the definition of “cybersecurity” to expressly include the three pillars of information security, as requested by the last commenter. We agree that the concepts described by the commenter as the “three pillars” of confidentiality, integrity, and availability of information are fundamental aspects of cybersecurity. The NIST CSF similarly recognizes these concepts. An outcome category under the “protect” function of cybersecurity includes management of data “consistent with the organization's risk strategy to protect the confidentiality, integrity, and availability of information.” Therefore, the final definition of “cybersecurity” at § 411.351, which includes “the process of protecting information,” accounts for these principles while also providing flexibility and certainty to donors as to the scope of the cybersecurity exception.

Comment. One commenter stated that the proposed definition of “cybersecurity” seems oversimplified and not comprehensive. The commenter suggested that the definition of “cybersecurity” should be inclusive of any unauthorized use, even without deliberate criminal activity or a specific cyberattack, and recommended broadening the definition accordingly. A different commenter maintained that the proposed definition of “cybersecurity” fails to capture all aspects of security controls relevant to patient information, systems processing, or retention of patient information.

The commenter recommended that we define “cybersecurity” to mean. (1) The prevention of damage to, protection of, and restoration of computers, electronic communications systems, electronic communications services, wire communication, and electronic communication, including information contained therein, to ensure its availability, integrity, authentication, confidentiality, and nonrepudiation. (2) the prevention of damage to, unauthorized use of, exploitation of, and—if needed—the restoration of electronic information and communications systems, and the information they contain, in order to strengthen the confidentiality, integrity and availability of these systems. Or (3) the process of protecting information by preventing, detecting, and responding to attacks.

Response. We decline to modify the definition of “cybersecurity” as suggested by the first commenter. We disagree with the commenter's characterization of the definition, and do not believe that the final definition of “cybersecurity” at § 411.351 has the effect of limiting donations of cybersecurity technology and services to only those that prevent criminal misconduct. The definition of “cybersecurity” adopted in this final rule is unrelated to the intent—criminal or otherwise—of an “unauthorized user.” We believe that the definition adopted in this final rule is broad enough to address the commenter's concerns about unauthorized users.

We are also not adopting the definition suggested by the second commenter. The principles underlying the commenter's definition, which the commenter stated are derived from NIST and other Federal government sources, are already generally included in the definition of “cybersecurity.” Moreover, we are concerned that some of the language suggested by the commenter would greatly expand the scope of the cybersecurity exception and the donation of such technology and services could pose a risk of program or patient abuse. For example, “restoration of computers, electronic communications systems, electronic communications services, wire communication, and electronic communication,” could be lead parties to mistakenly believe that the cybersecurity exception applies to donations of technology and services that are not necessary and used predominantly to implement, maintain, or reestablish cybersecurity, such as donations of entire communication systems. Comment.

Most commenters that commented on the proposed definition of “technology” generally agreed with using the NIST CSF as a basis for the definition. However, many of these commenters requested that we permit donations of certain cybersecurity hardware under the exception and delete the phrase “other than hardware” in the proposed definition of “technology.” In support, some commenters asserted that the lines between hardware, software, services, and other technology that is neither hardware, software, nor a service, are increasingly blurred, and noted that such technologies are often packaged together as a bundle. Other commenters suggested that hardware donations are a foundational requirement to operationalize cybersecurity best practices. These commenters asserted that including hardware within the Start Printed Page 77639definition of “technology” would allow for more aggressive data security and excluding hardware from the definition is shortsighted and could limit the use of effective cybersecurity measures.

A few commenters highlighted that certain cybersecurity software requires specific hardware and requested that we expand the scope of the exception to cover donations of such hardware. For example, a commenter noted that firewalls involve the use of both hardware and software, and suggested that many clinicians would not have the technical knowledge to configure the firewalls. This commenter recommended that we permit the donation of low-cost hardware, potentially up to a dollar threshold that could not be exceeded for the total donation. Other commenters that supported permitting the donation of hardware under the cybersecurity exception asserted that failing to extend the application of the exception to donations of multifunctional cybersecurity hardware (or software) would limit the utility of the exception because cybersecurity technology often is not standalone in nature.

Some of these commenters provided examples of multifunctional hardware they deemed beneficial to cybersecurity hygiene, such as encrypted servers, encrypted drives, network appliances, locks on server closet doors, upgraded wiring, physical security systems, fire retardant or warning technology, and high security doors. Some of these commenters stated that any program integrity concerns with hardware donations are adequately addressed by the requirement that donated technology and services must be necessary and used predominantly to implement, maintain, or reestablish cybersecurity. In contrast, a few commenters generally supported our proposal to exclude hardware from the definition of technology, citing program integrity concerns. Response.

We are modifying the definition of “technology” to remove the phrase “other than hardware.” Thus, the cybersecurity exception at final § 411.357(bb) is applicable to hardware that is necessary and used predominantly to implement, maintain, or reestablish cybersecurity. We agree with the commenters that our program integrity concerns regarding donations of valuable multifunctional hardware are adequately addressed by making the exception available only to donated technology and services are necessary and used predominantly to implement, maintain, or reestablish cybersecurity, and we do not believe that a monetary cap is necessary. As explained in section II.E.2.a. Above, donated technology, including hardware, may include other functionality or uses besides cybersecurity.

However, the cybersecurity use must predominate and the core functionality of the hardware must be implementing, maintaining, or reestablishing cybersecurity. The hardware must also be necessary for cybersecurity. Certain of the examples offered by commenters, including locks on doors, upgraded wiring, physical security systems, fire retardant or warning technology, and high security doors do not qualify as “technology” under § 411.357(bb)(2) because they are physical infrastructure improvements, not software or other information technology. Therefore, the cybersecurity exception is not applicable to these items.

The cybersecurity exception is applicable to hardware such as encrypted servers, encrypted drives, and network appliances, but only if the hardware is necessary and used predominantly to implement, maintain, or reestablish cybersecurity. If, for example, an encrypted server is used predominantly to host the computer infrastructure of a recipient, it would not satisfy the necessary and used predominantly requirement of § 411.357(bb)(1), even if the encrypted server has ancillary cybersecurity uses and functionality. Comment. A number of commenters suggested that CMS expand the proposed cybersecurity exception to apply to single-function hardware technologies that have limited or no functionality outside of cybersecurity, such as computer privacy screens, two-factor authentication dongles and security tokens, facial recognition cameras for secure access, biometric authentication, secure identification card and device readers, intrusion detection systems, data backup systems, and data recovery systems.

One commenter asserted that the sole purpose of most cybersecurity hardware is to maintain the security of patient data. Response. The final definition of “technology” does not preclude hardware and should address the commenters' concerns. We agree that certain hardware is limited to cybersecurity uses.

Provided that all the requirements of the exception are satisfied, including the requirement that the donated hardware is necessary and used predominantly to implement, maintain, or reestablish cybersecurity, the exception at § 411.357(bb) will permit the donation of single-use or standalone cybersecurity hardware, including the types described by the commenters. Comment. We received several comments on our alternative proposal to permit more robust donations of cybersecurity hardware, provided that both the donor and the recipient obtain risk assessments which provide a reasonable basis to determine that the donated cybersecurity hardware is necessary. A number of commenters generally favored the proposal.

Some of these commenters asserted that, because the donation is based on the results or recommendations of a risk assessment, there should be no cap or limit on the type or amount of hardware that may be donated and no requirement that a recipient contribute to the cost of donated hardware. Other commenters favored allowing robust donations of cybersecurity hardware, but opposed the requirement in the alternative proposal that both the donor and the recipient first obtain a risk assessment supporting the donation. One commenter stated that the alternative proposal could pose a risk of program abuse, while a different commenter found the alternative proposal to be too limiting, and suggested that hardware donations be permitted if the hardware is necessary and used predominantly to implement, maintain, or reestablish cybersecurity. Response.

We are not adopting a policy that permits the donation of cybersecurity hardware only when the donor has a cybersecurity risk assessment that identifies the recipient as a risk to its cybersecurity, and the recipient has a cybersecurity risk assessment that provides a reasonable basis to determine that the donated cybersecurity hardware is needed to address a risk or threat identified by a risk assessment. We believe that our expansion of the definition of “technology” to include hardware, coupled with the requirement that any donated hardware is necessary and used predominantly to implement, maintain, or reestablish cybersecurity, provides sufficient flexibility for cybersecurity hardware donations while protecting against program or patient abuse. Although we are not finalizing this alternative proposal, parties remain free, and are encouraged, to perform risk assessments to determine donor and recipient vulnerability to cyberattacks and to assist in creating their own cybersecurity programs. Comment.

One commenter explained that, typically, entities do not purchase the actual software that provides cybersecurity. Rather, entities purchase the right to use the software, which is accomplished through licensing, and Start Printed Page 77640donate a license to use the software to recipients. In these circumstances, the software itself is not donated. The commenter also recommended that we include installment and repairs among the types of technology and services that may be donated under the exception.

Response. We recognize that, in some instances, entities purchase the right to use cybersecurity software, which is accomplished through licensing, and donate that use or license rather than the software itself. The donation of a license to use cybersecurity software may be permissible under the final exception at § 411.357(bb) in the same way that donating software would be permissible, if all the requirements of the exception are satisfied. We agree with the commenter that installment and repairs should be included among the technology and services to which the cybersecurity exception is applicable, and the final cybersecurity exception is applicable to such services.

C. Requirement for Donors (§ 411.357(bb)(1)(i)) [] In the proposed rule, we proposed a requirement that neither the eligibility of a physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties (84 FR 55833). It is our understanding that the purpose of donating cybersecurity technology and related services is to guard against threats that come from interconnected systems, and we expect that a donor would provide the cybersecurity technology and related services only to physicians that connect to its systems, which includes physicians that refer to the donor. However, this requirement would prohibit the donor from directly taking into account the volume or value of a physician's referrals or the other business generated by the physician when determining.

(1) Whether to make a donation of cybersecurity technology or services. Or (2) how much or the nature of the donated technology or services. We are including this requirement as proposed. However, it is designated in the final regulation at § 411.357(bb)(1)(i).

Nothing in the requirements of the final cybersecurity exception is intended to require a donor to donate cybersecurity technology and related services to every physician that connects to its system. Donors are permitted to select recipients in a variety of ways, provided that neither a physician's eligibility, nor the amount or nature of the cybersecurity technology or related services donated, is determined in a manner that directly takes into account the volume or value of referrals or other business generated between the parties. For example, a donor could perform a risk assessment of a potential recipient (or require a potential recipient to provide the donor with a risk assessment) before determining whether to make a donation or the scope of a donation. If the donor is a hospital, it might choose to limit donations to physicians on the hospital's medical staff.

Or, the donor might select recipients based on the type of actual or proposed interface between them. For example, an entity may elect to provide a higher level of cybersecurity technology and services to a physician with whom it has a higher-risk, bi-directional read-write connection than the entity would provide to a physician with whom it has a read-only connection to a properly implemented, standards-based API that enables only the secure transmission of a copy of the patient's record to the physician. As discussed in the proposed rule, in contrast to the similar requirement in the EHR exception at § 411.357(w)(6), the cybersecurity exception does not include a list of selection criteria which, if met, would be deemed not to directly take into account the volume or value of referrals or other business generated by the physician (84 FR 55833). We solicited comments on whether we should include deeming provisions in the exception for cybersecurity donations that are similar to the provisions at § 411.357(w)(6), and any other requirements or permitted conduct that we should enumerate in the cybersecurity exception (84 FR 55833).

As explained below, we are not adopting deeming provisions for determining compliance with final § 411.357(bb)(1)(i). We did not propose to restrict the types of entities that may make cybersecurity donations under the cybersecurity exception (84 FR 55833). Although receiving donated cybersecurity technology and related services would relieve a physician of a cost that he or she otherwise would incur, the program integrity risks associated with arrangements for the donation of technology and related services intended to promote cybersecurity are different than those associated with arrangements for the donation of other valuable technology, such as EHR items and services. However, we solicited comments on whether we should narrow the scope of entities that may provide remuneration under the cybersecurity exception as we have done in other exceptions, such as the EHR exception.

As explained in section II.E.2.e. Below, we are not limiting the types of entities that are permitted to make donations under final § 411.357(bb). Based on the comments, we are finalizing the requirement that neither the eligibility of a physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties, although it is designated in the final exception at § 411.357(bb)(1)(i). Final § 411.357(bb)(1)(i) is identical to proposed § 411.357(bb)(1)(ii).

As noted above and explained more fully below in response to comments, we are not adopting deeming provisions that would allow parties to demonstrate compliance with final § 411.357(bb)(1)(i), and we are not restricting the types of entities that may make donations under the final cybersecurity exception at § 411.357(bb). We received the following comment and our response follows. Comment. Commenters generally supported the requirement at final § 411.357(bb)(1)(i) that neither the eligibility of a physician for cybersecurity technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties.

However, a number of these commenters opposed our proposal to establish a deeming provision, similar to the deeming provision in the EHR exception at § 411.357(w)(6), under which certain selection criteria would be deemed to satisfy the requirement at final § 411.357(bb)(1)(i). One commenter maintained that it would create a risk of program or patient abuse to permit a donor to choose recipients who will receive donations of cybersecurity through a deeming provision. In contrast, other commenters supported the establishment of a deeming provision to provide clarity and guidance with respect to how parties may determine the eligibility of a physician recipient for cybersecurity technology or services, or the nature and Start Printed Page 77641amount of such services, without violating the physician self-referral law. Response.

We are finalizing the requirement that neither the eligibility of a physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties, but are not including a list of selection criteria that, if utilized, would be deemed not to directly take into account the volume or value of referrals or other business generated between the parties. As we explained in the proposed rule, deeming provisions for selection criteria that pertain to a prohibition on taking into account the volume or value of referrals or other business generated between parties are sometimes interpreted as prescriptive requirements, especially in the context of a new exception that applies to emerging and rapidly evolving arrangements such as the cybersecurity exception (84 FR 55833). In this context, we are concerned that a deeming provision may cause the parties to an arrangement to forgo legitimate and acceptable selection criteria, thus limiting the scope and utility of the cybersecurity exception. Because we do not want to inhibit appropriate cybersecurity donations that are made using selection criteria that are not expressly deemed to be permissible under the cybersecurity exception, we are not finalizing any deeming provisions pertaining to the requirement at final § 411.357(bb)(1)(i).

D. Requirement for Recipients (§ 411.357(bb)(1)(ii)) [] In the proposed rule, we proposed to include in the cybersecurity exception a requirement that neither the physician, nor the physician's practice (including employees or staff members), makes the receipt of cybersecurity technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor (84 FR 55833). This requirement mirrors a requirement in the EHR exception at § 411.357(w)(5). At final § 411.357(bb)(1)(ii), we are finalizing the requirement as proposed.

We did not propose and, thus, are not including in the final cybersecurity exception a requirement that the physician recipient of cybersecurity technology or services must contribute to the cost of the technology or services. As explained earlier in this section II.E.2., with this exception, we seek to remove a barrier to donations that improve cybersecurity throughout the health care industry in response to the critical cybersecurity issues identified in the HCIC Task Force Report, by commenters to the CMS RFI and OIG request for information, and elsewhere. We proposed to include only those requirements under the exception that we believe are necessary to ensure that the arrangements do not pose a risk of program or patient abuse. In the case of cybersecurity technology and related services, we do not believe that requiring a minimum contribution to the cost by the recipient is necessary or, in some cases, practical.

We recognize that the level of services for each recipient might vary, and might be higher or lower each year, each month, or even each week, resulting in the inability of certain physician practices, especially solo practitioners or physician practices in rural areas, to make the required contribution, which, in turn, risks the overall cybersecurity of the health care ecosystem of which the practices are a part. Similarly, donors may aggregate the cost of certain services across all recipients, such as cybersecurity patches and updates, on a regular basis, which may result in a contribution requirement becoming a barrier to widespread, low-cost improvements in cybersecurity because of the amount allocated to each recipient. Moreover, if physicians are not required to utilize resources to contribute to the cost of cybersecurity that benefits both the donor and the physician, they will instead have the flexibility to contribute to the overall cybersecurity of the health care ecosystem by using available resources for otherwise unprotected cybersecurity-related hardware that is core to their business, including updates or replacements for outdated legacy hardware that may pose a cybersecurity risk. Importantly, although the final cybersecurity exception does not require a recipient to contribute to the cost of donated cybersecurity technology or related services, donors are free to structure donation arrangements under § 411.357(bb) to require that recipients contribute to the cost of cybersecurity technology and related services.

However, if a donor gave a full suite of cybersecurity technology and related services at no cost to a high-referring practice but required a low-referring practice to contribute 20 percent of the cost, then the donation could violate the requirement at § 411.357(bb)(1)(i). Based on the comments, we are finalizing the requirement that neither the physician, nor the physician's practice (including employees or staff members), makes the receipt of cybersecurity technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor as proposed. We received the following comments and our responses follow. Comment.

Several commenters supported the proposed requirement that neither the physician who receives the cybersecurity technology nor the physician's practice (including employees and staff members) makes the receipt of technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor. One of these commenters requested that CMS align its provision on conditioning business on the receipt of cybersecurity technology or services with OIG's safe harbor condition at proposed 42 CFR 1001.952(jj)(3), while another commenter requested that the requirement in the cybersecurity exception mirror the similar requirement in the EHR exception at § 411.357(w)(5). Response. As proposed and finalized, the prohibition on making the receipt of cybersecurity technology or services a condition of doing business with the donor at final § 411.357(bb)(1)(ii) is substantively identical to the OIG's safe harbor condition at proposed 42 CFR 1001.952(jj)(3) and the similar requirement in the EHR exception at § 411.357(w)(5).

Variation in the wording of the regulations reflect differences in the underlying statutes, with respect to the anti-kickback safe harbor, and differences in the application of the EHR and cybersecurity exceptions, with respect to the similar provision in the EHR exception at § 411.357(w)(5). Comment. Many commenters agreed that we should not require a recipient of cybersecurity technology and services to contribute to the overall cost of the technology and services. Commenters variously asserted that a contribution requirement in the context of cybersecurity may act as a barrier to donations of technology and services because calculations of the cost of technology and services may be imprecise, it may be administratively burdensome to calculate or track contributions, and contributing to the cost of cybersecurity technology and Start Printed Page 77642services may be impossible for some physician recipients.

In contrast, several commenters supported a contribution requirement, although one of these commenters suggested that a contribution requirement less than what is required under the EHR exception would be appropriate because, according to the commenter, a 15 percent contribution toward cybersecurity technology and services may be too high for some physicians. A few commenters that supported a contribution requirement suggested that small and rural providers, those in medically underserved areas, and federally qualified health centers should be exempt from any such requirement. A few other commenters suggested that entities should have the choice whether to require a contribution from recipients, with one of these commenters supporting a prohibition on determining the amount of the contribution from the physician recipient in any manner that takes into account the volume or value of the physician's referrals or the other business generated by the physician. Response.

We did not propose and, thus, are not including a contribution requirement in the final cybersecurity exception at § 411.357(bb). For the reasons stated in the proposed rule (84 FR 55833 through 55834), as well as those identified by commenters, we do not believe that it is necessary or advisable to require the physician recipient of cybersecurity technology or services to contribute to the cost of the technology or services. The exception, as finalized, includes sufficient safeguards against program or patient abuse, and it is not necessary to include a contribution requirement that might undermine our goal of facilitating improvement and maintenance of the cybersecurity of the health care ecosystem. As we stated in the proposed rule (84 FR 55834), donors are free to require recipients to contribute to the costs of donated cybersecurity technology and services.

However, we caution that the determination of the amount of the required contribution may not take into account the volume or value of the physician recipient's referrals or other business generated between the parties. E. Written Documentation (§ 411.357(bb)(1)(iii)) [] We proposed to require that the arrangement for the provision of cybersecurity technology and related services is documented in writing (84 FR 55834). We stated that, although we would not interpret this requirement to mean that every item of cybersecurity technology and every potential related cybersecurity service must be specified in the documentation evidencing the arrangement, we expect that the written documentation evidencing the arrangement identifies the recipient of the donation and includes the following.

A general description of the cybersecurity technology and related services provided to the recipient over the course of the arrangement, the timeframe of donations made under the arrangement, a reasonable estimate of the value of the donation(s), and, if applicable, the recipient's financial responsibility for some (or all) of the cost of the cybersecurity technology and related services that are provided by the donor (84 FR 55834). We did not propose and, thus, we are not including a requirement in the final cybersecurity exception at § 411.357(bb) that the parties sign the documentation that evidences the arrangement or that the parties document their arrangement in a formal signed contract, because we believe that this requirement may lead to inadvertent violation of the physician self-referral law, especially in situations where donors need to act quickly and decisively—prior to obtaining the signature of each physician who is considered a party to the arrangement—to provide needed cybersecurity technology or related services to physician recipients. In the proposed rule (84 FR 55834), we solicited comments on whether we should specify in regulation which terms are required to be in writing. We also sought comment regarding whether we should include a signature requirement in the cybersecurity exception.

Based on the comments, we are finalizing the writing requirement as proposed. It is designated at final § 411.357(bb)(1)(iii). We are not including regulatory text that specifies which terms of the arrangement must be in writing. Rather, we believe that the appropriate standard, as described in the CY 2016 PFS, is that the writing requirement of the exception is satisfied if contemporaneous documents would permit a reasonable person to verify compliance with the exception at the time that a referral is made (80 FR 71315).

We received the following comments and our responses follow. Comment. Most commenters supported a writing requirement that provides parties with flexibility in compiling the documentation necessary to satisfy the requirement. However, a few commenters supported the inclusion of a requirement to document the arrangement in a formal written agreement, noting that this would provide transparency with respect to the cybersecurity donation process, especially in the case of hardware donations.

Another commenter opined that requiring a formal written agreement between the donor and the recipient would be a reasonable safeguard, as long as the requirements for the written agreement are limited in scope. The commenter asked CMS to require documentation only of the technology or services to be donated, commercial terms as necessary to satisfy the requirements of the cybersecurity exception, and warranties by both parties to use the technology in compliance with applicable laws and regulations. The commenter also suggested that, if CMS requires a formal written agreement between the parties, to facilitate compliance, CMS should make available on the CMS website a template agreement with standard terms. In contrast, one commenter requested that CMS not impose “burdensome” writing requirements on the parties.

The commenter asserted that, although donors have a vested interest in more robust documentation, for example, requiring recipients to acknowledge applicable security rules, CMS should not mandate the documentation of specific information in order for parties to avail themselves of the cybersecurity exception. Response. We believe that the writing requirement at final § 411.357(bb)(1)(iii) is reasonable in scope, and provides for adequate transparency to protect against program or patient abuse without imposing undue burden. In the proposed rule (84 FR 55834), we stated that written documentation of the arrangement should include a general description of the cybersecurity technology and related services provided to the recipient over the course of the arrangement, the timeframe of donations made under the arrangement, a reasonable estimate of the value of the donation(s), and, if applicable, the recipient's financial responsibility for some (or all) of the cost of the cybersecurity technology and related services that are provided by the donor (84 FR 55834).

We are not persuaded to specify which terms of a cybersecurity donation arrangement must be in writing, and we decline to provide a template cybersecurity donation agreement or standard cybersecurity donation terms, as suggested by the commenter. We remind Start Printed Page 77643stakeholders that the relevant inquiry for determining compliance with the writing requirement at final § 411.357(bb)(iii) is whether contemporaneous documents pertaining to the arrangement would permit a reasonable person to verify compliance with the cybersecurity exception at the time that a referral is made (80 FR 71315). We believe that providing parties with the flexibility to document their arrangements in any manner that meets this standard is preferable to detailed mandates that could result in noncompliance with the physician self-referral law due to even a slight departure from the documentation requirement. Of course, parties are free to include additional terms in a written agreement related to a cybersecurity donation beyond those required under the exception at § 411.357(bb).

Comment. One commenter requested that CMS address the differences between the documentation and signature requirements in the cybersecurity exception and OIG's cybersecurity safe harbor. The commenter highlighted that the writing requirement in the exception requires that the arrangement is documented in writing but does not require a formal written agreement that is signed by the parties, whereas the corresponding requirement in the OIG's proposed cybersecurity safe harbor requires that the arrangement is set forth in a written agreement that is signed by the parties and describes the technology and services being provided and the amount of the recipient's contribution, if any (84 FR 55765). Another commenter suggested that a signed agreement should be a necessary requirement of the exception, as it would ensure that both the donor and recipient understand what is being donated and the terms of the donation.

A different commenter asserted that it is rare that the need for cybersecurity is so pressing that there is not time for parties to prepare and sign an agreement, and supported the inclusion of a signature requirement in the cybersecurity exception. Response. We are not persuaded to add a requirement that the arrangement is set forth in a single written agreement that is signed by the parties. Although it is a best practice to reduce the key terms of an arrangement to a writing that is signed by the parties, we are concerned that a signature requirement, in particular, could delay an entity's ability to provide necessary and beneficial cybersecurity technology and services to a physician.

The physician self-referral law is a strict liability statute, which requires all the requirements of an exception to be satisfied at the time a referral is made. The failure to fully satisfy even a single requirement of an exception triggers the physician self-referral law's referral and billing prohibitions where a financial relationship exists between a physician and an entity that furnishes designated health services. We are concerned that a detailed writing requirement or a signature requirement may result in inadvertent violations. We believe that our current standard for written documentation, which requires contemporaneous documents that would permit a reasonable person to verify compliance with the exception at the time a referral is made, provides sufficient transparency and facilitates compliance (80 FR 71315).

For the same reasons, we are not persuaded to include a signature requirement in the cybersecurity exception. E. Miscellaneous Comments In addition to the comments discussed above, we received several comments unrelated to our specific proposals and our responses follow. Comment.

One commenter generally supported the proposed cybersecurity exception, but suggested that CMS adopt the same prohibition on cost-shifting that was proposed in the cybersecurity safe harbor. The commenter stated that, although a hospital's own cybersecurity costs could be an administrative expense on its cost report, hospitals should not be permitted to include donations of cybersecurity technology or services to physicians as an administrative expense on the hospital's cost report. Response. We do not believe that a prohibition on cost-shifting is necessary in the cybersecurity exception.

As explained above, we believe that cybersecurity donations are often self-protective in nature, and thus do not pose the same level of risk as donations of EHR items and services. There is no prohibition on cost-shifting in the EHR exception, and we do not believe that such a prohibition is necessary in the cybersecurity exception. We note also that Medicare payment rules and regulations that apply to claims for reimbursement address inappropriate cost-shifting by hospitals through other mechanisms. We believe that, as with the EHR exception, the requirements of the cybersecurity exception, coupled with other Medicare rules and regulations pertaining to cost reports, are sufficient to protect against abusive donations of cybersecurity technology and related services.

Comment. One commenter worried that cybersecurity donations could be used as a gift or financial incentive and maintained that cybersecurity donations should be based on risk assessments of the donor's own software, systems, or networks. In addition, the commenter suggested that cybersecurity donations should be made available to all recipients with similar risk assessments and without regard to business relationships or affiliations. For example, the commenter stated that a donation would be appropriate if the level of connectivity between the donor and recipient created a vulnerability that could be targeted and exploited by malicious actors.

Response. Although donors are permitted under the cybersecurity exception to perform a risk assessment of a potential recipient (or require a potential recipient to provide the donor with a risk assessment) before determining whether to make a donation or the scope of a donation, we decline to require donors to base cybersecurity donations on a risk assessment of either the donor or the recipient. We believe that this requirement would be impractical, and it may lead potential donors to not make otherwise beneficial cybersecurity donations. We also believe it is impracticable that donors would make donations available to all similar recipients with similar risk assessments, independent of the specific cybersecurity needs inherent in connecting to the specific systems with which the donor interacts.

Comment. Several organizations representing individuals and entities in the laboratory industry recommended excluding laboratories from utilizing the cybersecurity exception to provide cybersecurity technology and services to physicians. One commenter opined that the concerns CMS discussed in the 2013 EHR final rule regarding the provision of EHR items and services by laboratory companies similarly apply to cybersecurity donations by these entities. According to another commenter, during the period when laboratories were permitted to donate EHR items and services under the exception at § 411.357(w), physicians implicitly or explicitly conditioned referrals on EHR donations, and EHR vendors encouraged physicians to request costlier EHR software and services from laboratories, putting laboratories in an untenable position.

This commenter expressed concern that the same could happen with cybersecurity donations if laboratories are permitted to make donations under the cybersecurity exception, if finalized as proposed. The commenters stated that the proposed requirements of the exception, including both the Start Printed Page 77644requirements at § 411.357(bb)(1)(i) and § 411.357(bb)(1)(ii), would not be sufficient to curb the risk of program or patient abuse. Response. Although we acknowledge the unique perspective and concerns of the commenters representing the laboratory industry, particularly in light of the laboratory industry's experience with the EHR exception, the final cybersecurity exception does not exclude any type of entity from utilizing the exception.

All individuals and entities, including laboratories, play a role in protecting the health care ecosystem from cybersecurity threats. As described in section II.E.2.d., we are finalizing a requirement at § 411.357(bb)(1)(ii) that prohibits a physician (and the physician's practice, including employees and staff members) from making the receipt of technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor. This requirement is similar to the requirement in the EHR exception at § 411.357(w)(5) and operates in the same manner. We believe that the requirements of the final cybersecurity exception are sufficient to ensure against program or patient abuse.

Therefore, we are not categorically excluding laboratory companies from the cybersecurity exception. Comment. Several commenters requested that CMS permit cybersecurity donations to physicians from organizations that do not furnish designated health services, such as clinical data registries, manufacturers of medical products, and medical technology companies. The commenters stated that medical technology companies play a central role in the delivery of health care, and that such entities should be permitted to make donations that directly relate to the safe and effective use of the registry or the product the entity manufactures.

Another commenter requested confirmation that donations made to physicians by organizations that do not furnish designated health services, such as technology firms, do not implicate the physician self-referral law, and that donations made by entities that do furnish designated health services to individuals other than physicians (or immediate family members of physicians) similarly do not implicate the physician self-referral law. Response. The physician self-referral law's referral and billing prohibitions apply when there is a financial relationship between a physician (or an immediate family member of a physician) and an entity that furnishes designated health services. Financial relationships include direct compensation arrangements between an entity that furnishes designated health services and a physician (or an immediate family member of a physician), as well as indirect compensation arrangements between such parties.

Indirect compensation arrangements exist where, among other things, between an entity furnishing designated health services and a physician (or an immediate family member of a physician) there is an unbroken chain of any number (but not fewer than one) of persons or entities that have financial relationships between them. An organization that does not furnish designated services, such as a technology firm, or an individual who is not a physician may be a “link” in such an unbroken chain of financial relationships. If all the conditions of § 411.354(c)(2), as revised in this final rule, exist, there would be an indirect compensation arrangement that implicates the physician self-referral law. If an organization that does not furnish designated health services donates cybersecurity technology or services to a physician (or an immediate family member of a physician), but the donation does not result in an indirect compensation arrangement between that physician (or immediate family member) and an entity that does furnish designated health services, the donation does not implicate the physician self-referral law.

However, the provision of such remuneration may implicate the anti-kickback statute. Similarly, donations by an entity that furnishes designated health services directly to a person or organization that is not a physician (or the immediate family member of a physician), such as a nonprofit organization or free or charitable clinic, would not create a direct compensation arrangement that implicates the physician self-referral law. However, if the recipient of the cybersecurity technology or services has a financial relationship with a physician, there would exist an unbroken chain of financial relationships that must be analyzed to determine whether there exists an indirect compensation arrangement that implicates the physician self-referral law. F.

Nonsubstantive Changes and Out-of-Scope Comments 1. Nonsubstantive Changes We are making some nonsubstantive revisions to our regulation text for consistency with longstanding stated policy and to ensure conformity between the text of similar regulations (for example, changing “can” to “may” at § 411.357(d)(1)(ii) for conformity between the exceptions for personal service arrangements and limited remuneration to a physician). We are also updating language to reflect the agency's current lexicon (for example, changing “through” to “under” in paragraph (2) of the definition of “designated health services” at § 411.351). Finally, we made revisions to improve the grammar and clarity of certain regulations (for example, changing “not including any designated health services” to “does not include any designated health services” in the exception for assistance to compensate a nonphysician practitioner at § 411.357(x)(4)(ii)).

From time to time, changes in the conventions for regulations published in the Code of Federal Regulations necessitate nonsubstantive revisions of existing regulations. In this final rule, we are providing the entire text of §§ 411.351 through 411.357 to aid the regulated industry with compliance efforts. Because of this, we are taking the opportunity to update or include new citations to chapters, section, and paragraphs that are referenced in certain of our regulations in these sections. For example, we included precise paragraph references in § 411.357(t).

In addition, we are including headers for certain paragraphs within our regulations, for example, § 411.354(d)(1) through (6). 2. Out-of-Scope Comments We received several comments that are outside the scope of this rulemaking, for example, comments requesting revisions to the exception for in-office ancillary services, suggesting policy changes related to physician-owned hospitals, and making recommendations for statutory changes to section 1877 of the Act. In addition, some of the commenters described their interpretations of various physician self-referral issues or asked questions about existing regulations that are not included in this rulemaking.

We appreciate these commenters taking the time to present these issues. However, these comments are beyond the scope of this rulemaking and are not addressed in this final rule. The out-of-scope issues raised by these commenters may be addressed in future rulemaking. We express no view on these issues, and our silence should not be viewed as an affirmation of any commenter's interpretations or views.

III. Collection of Information Requirements Under the Paperwork Reduction Act of 1995, we are required to provide 30-Start Printed Page 77645day 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, the Paperwork Reduction Act of 1995 (44 U.S.C. 3506(c)(2)(A)) requires that we solicited comment on the following issues.

The need for the information collection and its usefulness in carrying out the proper functions of our agency. The accuracy of our estimate of the information collection burden. The quality, utility, and clarity of the information to be collected. Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.

We solicited public comment on each of these issues for the following sections of this document that contain information collection requirements (ICRs). A. ICRs Regarding Exceptions to the Physician Self-Referral Law Related to Compensation (§ 411.357) We are finalizing new exceptions for compensation arrangements that facilitate value-based health care delivery and payment in a value-based enterprise (§ 411.357(aa)). A value-based enterprise is required to have a governing document that describes the enterprise and how its VBE participants intend to achieve the value-based purposes of that enterprise (see the definition of “value-based enterprise” at § 411.351).

The exception for value-based arrangements with meaningful downside financial risk to the physician at § 411.357(aa)(2) requires a description of the nature and extent of the physician's downside financial risk to be set forth in writing. The exception for value-based arrangements at § 411.357(aa)(3) requires the arrangement to be set forth in writing and signed by the parties. All exceptions at § 411.357(aa) require records of the methodology for determining and the actual amount of remuneration paid under the arrangement to be maintained for a period of at least 6 years. We also added a new exception for cybersecurity technology and related services (§ 411.357(bb)), and arrangements under this new exception have to be documented in writing.

Finally, we have streamlined the parties that must sign the writing in the exception for physician recruitment (§ 411.357(e)). The burden associated with writing and signature requirements is the time and effort necessary to prepare written documents and obtain signatures of the parties. The burden associated with record retention requirements is the time and effort necessary to compile and store the records. While the writing, signature, and record retention requirements are subject to the PRA, we believe the associated burden is exempt under 5 CFR 1320.3(b)(2).

We believe that the time, effort, and financial resources necessary to comply with these requirements would be incurred by persons without federal regulation during the normal course of their activities. Specifically, we believe that, for normal business operations purposes, health care providers and suppliers document their financial arrangements with physicians and others and retain these documents in order to identify and be able to enforce the legal obligations of the parties. Therefore, we believe that the writing, signature and record retention requirements should be considered usual and customary business practices. We did not receive any public comments regarding our position that the burden associated with these requirements is a usual and customary business practice that is exempt from the PRA.

IV. Regulatory Impact Statement (or Analysis) (RIA) A. Statement of Need This final rule aims to remove potential regulatory barriers to care coordination and value-based care created by the physician self-referral law. Currently, certain beneficial arrangements that would advance the transition to value-based care and the coordination of care among providers in both the Federal and commercial sectors may be impermissible under the physician self-referral law.

Industry stakeholders have informed us that, because the consequences of noncompliance with the physician self-referral law are so dire, providers, suppliers, and physicians may be discouraged from entering into innovative arrangements that would improve quality outcomes, produce global health system efficiencies, and lower costs (or slow their rate of growth). This final rule addresses this issue by establishing three new exceptions that protect certain arrangements for value-based activities between physicians and entities that furnish designated health services in a value-based enterprise. These exceptions provide enhanced flexibility for physicians and entities to innovate and work together while continuing to protect the integrity of the Medicare program. Commenters on the CMS RFI told us that they currently invest sizeable resources to comply with the physician self-referral law's referral and billing prohibitions and avoid substantial penalties related to noncompliance with this and related laws, including the Federal False Claims Act.

Commenters on the proposed rule echoed the significant cost burden of complying with the physician self-referral law. The proposals finalized in this final rule that do not directly address value-based arrangements seek to balance program integrity concerns against the stated considerable burden faced by the regulated industry. These finalized provisions reassess our regulations to ensure that they appropriately reflect the scope of the statute's reach, establish exceptions for common nonabusive compensation arrangements between physicians and the entities to which they refer Medicare beneficiaries for designated health services, and provide guidance for physicians and health care providers and suppliers whose financial relationships are governed by the physician self-referral law. We believe that these reforms will significantly reduce compliance burden by providing additional flexibility to enable parties to enter into nonabusive arrangements and by making physician self-referral law compliance more straightforward.

B. Overall Impact 1. Executive Orders and the Regulatory Flexibility Act We have examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L.

96-354), section 1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995. Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C.

804(2)), and Executive Order 13771 on Reducing Regulation and Controlling Regulatory Costs (January 30, 2017). Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety Start Printed Page 77646effects, distributive impacts, and equity). An RIA must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). This rule is considered to be economically significant.

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the Office of Information and Regulatory Affairs designated this rule as a major rule, as defined by 5 U.S.C. 804(2). The RFA requires agencies to analyze options for regulatory relief of small entities.

For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. For purposes of the RFA, most hospitals and most other providers and suppliers are considered small entities, either by nonprofit status or by having revenues of less than $7.5 million to $38.5 million in any 1 year. We anticipate that a large portion of affected entities are small based on these standards. The specific affected entities are discussed later in this section.

Individuals and states are not included in the definition of a “small entity.” HHS considers a rule to have a significant impact on a substantial number of small entities if it has an impact of at least three percent of revenue on at least five percent of small entities. We are not preparing an analysis for the RFA because we have determined, and the Secretary certifies, that this final rule will not have a significant economic impact on a substantial number of small entities. We determined that this final rule does not have a significant impact on small businesses because it will likely reduce, not increase, regulatory burden. This final rule will not require existing compliant financial relationships to be restructured.

Instead, it will provide important new flexibilities to enable parties to create new arrangements that advance the transition to a value-based health care system and remove regulatory barriers to certain beneficial and nonabusive arrangements, such as the donation of cybersecurity technology and services. It will also reduce burden by clarifying certain key provisions found in current regulations. Also, although we expect entities to incur costs, these costs are estimated to be less than $1,000 per entity. These costs are unlikely to have an impact of three percent of revenue, and we expect they will be offset by savings resulting from this rule.

Overall, this final rule is accommodating to legitimate financial relationships while reducing regulatory burden and continuing to protect against program and patient abuse. 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 603 of the RFA. 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 for Medicare payment regulations and has fewer than 100 beds.

The impact of this rule on small rural hospitals is minimal. In fact, several provisions of the rule benefit small rural hospitals by giving them more flexibility to maintain operations and participate in innovative arrangements that enhance care coordination and advance the transition to a value-based health care system. Therefore, we are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that this final rule will not have a significant impact on the operations of a substantial number of small rural hospitals. Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation.

In 2019, that threshold is approximately $156 million. This rule imposes no mandates on state, local, or tribal governments, or on the private sector, and reduces regulatory burden on health care providers and suppliers. Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has Federalism implications. Since this regulation does not impose any costs on state or local governments, the requirements of Executive Order 13132 are not applicable.

Executive Order 13771, titled Reducing Regulation and Controlling Regulatory Costs, was issued on January 30, 2017 and requires that the costs associated with significant new regulations “shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.” This final rule is a deregulatory action. 2. Expected Outcomes and Benefits a. Value-Based Health Care Delivery and Payment A 2019 study of 70 participants—including 62 health plans, seven Medicaid FFS states, and Traditional Medicare—accounting for nearly 226.5 million Americans, or 77 percent of the covered U.S.

Population, highlighted the continued move away from a FFS system that pays only on volume and towards value-based health care delivery and payment models.[] The study showed that, in calendar year 2018, 39.1 percent of health care dollars were traditional FFS or other legacy payments not linked to quality, 25.1 percent of health care dollars were FFS payment linked to quality and value (described as pay-for-performance or care coordination fees), 30.7 percent of health care dollars were a composite of shared savings, shared risk, and bundled payments in alternative payment models built on a FFS architecture, and 5.1 percent of health care dollars were population-based payments (that is, capitation, global budget, or percent of premium payments).[] Although the study showed that payors made the majority of 2018 payments on a FFS basis (or in models built on a FFS architecture), the 2018 payments represent a 4.6 percent decline in FFS payments not linked to quality from such payments in 2017 (from 41 percent in 2017 to 39.1 percent in 2018), and a 34.2 percent increase in population-based payments over such payments in 2017 (from 3.8 percent in 2017 to 5.1 percent in 2018).[] In sections I.B. And II.A.1. Of this final rule, we described the current landscape of health care delivery and payment both within and outside the Medicare program. We explained that the application of the physician self-referral law to all financial relationships between entities and the physicians who refer to them (or the immediate family members of such physicians) has inhibited a more rapid advancement toward a health care system that pays for outcomes rather than procedures.

Based on stakeholder responses to numerous CMS requests for information, including the CMS RFI that is part of the Department's Regulatory Sprint, we proposed regulatory revisions to address barriers to innovative care coordination and value-based health care delivery and payment (84 FR 55766). After considering the comments on the proposed rule, we are finalizing policies intended to facilitate the transition to value-based health care delivery and payment by permitting appropriate compensation arrangements Start Printed Page 77647that further the goals of a value-based system without posing a risk of program or patient abuse. Specifically, as described in section II.A. Of this final rule, we designed and are finalizing new exceptions for value-based arrangements at final § 411.357(aa)—with safeguards intended to.

(1) Protect against program or patient abuse that could lead to increased expenditures. And (2) maximize the potential of value-based care delivery and improved care coordination in reducing waste and program expenditures. The new exceptions are also applicable to those indirect compensation arrangements between an entity and a physician that involve a value-based arrangement to which the physician (or the physician organization in whose shoes the physician stands) is a direct party. Although existing exceptions utilized by parties to protect financial relationships that exist outside of value-based health care delivery and payment systems also include safeguards designed to protect against program or patient abuse, they do not promote the potential for improvements in quality and reductions in expenditures the way that that the new exceptions set forth in this final rule may.

By making available the new exceptions for value-based arrangements established in this final rule, we expect to achieve significant progress in reducing program expenditures without sacrificing program integrity. However, we are unable to quantify with certainty the overall net costs, including net expenditures of the Medicare program, related to changes in industry behavior that we can reasonably expect following the effective date of this final rule. Even so, we believe that our final policies are reasonably likely to permit, if not encourage, behavior that will reduce waste in the U.S. Health care system, including Medicare and other Federal health programs, and that these changes will result in lower costs for both patients and payors, and generate other benefits, such as improved quality of patient care and lower compliance costs for providers and suppliers.

(1) Expectation of Value-Based Arrangements As discussed in section II.A. Of this final rule, compensation arrangements that qualify as value-based arrangements may take a variety of forms. Those that implicate the physician self-referral law will be directly or indirectly between an entity that furnishes designated health services and a physician who refers to that entity (or the immediate family member of a physician who refers to that entity). Although some compensation arrangements that qualify as value-based arrangements may satisfy the requirements of a “traditional” exception to the physician self-referral law, most do not.

These include arrangements that. (1) Involve the provision of free or reduced cost items and services. (2) tie compensation to the ordering or furnishing of designated health services. (3) tie compensation to the refraining from ordering, delaying the order of, or furnishing designated health services.

Or (4) involve the sharing of profits or losses such that compensation does not directly relate to the items or services actually provided by a physician. Based on our experience administering the Shared Savings Program and Innovation Center models, information provided by commenters on the CMS RFI and the proposed rule (including payors that supported the establishment of the exceptions at final § 411.357(aa)), and information shared publicly by providers, suppliers, practitioners, health plans, and others, following the issuance of this final rule—and, specifically, once the exceptions at final § 411.357(aa) for value-based arrangements are available—we reasonably expect parties to enter into arrangements such as the following. Providing staff and other resources to physicians at below fair market value to help with patient education, pre-admission evaluations, and post-procedure follow-up and monitoring. Shared savings and shared loss arrangements under which the entity and the physician share financial risk for achievement of the value-based purpose(s) of the value-based enterprise or the outcome measures against which the recipient of the remuneration is assessed.

Arrangements that enhance patient care by providing items at no cost to physicians. We note that an important piece of ensuring good outcomes and fewer complications is patient education. Hospitals are often better-positioned or willing to develop video or print materials to prepare surgical patients for what to expect pre- and post-surgery, but are not in direct contact with patients until the day of surgery. Under the new exceptions, hospitals could provide those materials at no charge to physicians for use in their practices, benefiting both hospitals and physicians, as well as surgical patients.

Providing free telehealth equipment to physicians for use while treating patients in their office locations. The technology could be utilized for consults with a donor hospital to avoid unnecessary ambulance transports, ER visits, and exposing the patient to greater risk when emergencies or complications occur in the physician office, or could be used by primary care physicians to obtain immediate input from specialists while a patient is present in the primary care physician's office. Provision of data analytics services. A specialty physician practice (or other entity) may wish to provide free data analytic services to a primary care physician practice with which it works closely.

The data analytics could, for example, identify practice patterns that deviate from evidence-based protocols or determine whether follow-up care recommended by the specialty physician practice is being sought by patients. In turn, the identification of deviant practice patterns and when follow up care is recommended could lead to better, more effective care for patients and reduced costs to Federal health care programs. We cannot, however, predict the form of all potential value-based arrangements or which entities and physicians will enter into value-based arrangements and what form their specific arrangements will take. More specifically, based on comments submitted by stakeholders, our understanding of currently existing value-based arrangements and care coordination arrangements, and our assumption that there will be continued innovation, we expect significant heterogeneity in the arrangements for which the new exceptions at final § 411.357(aa) will be utilized.

(2) Potential Outcomes and Benefits of Value-Based Arrangements As described above, we can reasonably predict that our final policies and the exceptions at final § 411.357(aa) will result in changes in stakeholder behavior. Entities and physicians may increase their participation in beneficial nonabusive value-based arrangements, including care coordination arrangements, that implicate the physician self-referral law. In this regard, and with respect to the intended outcomes and benefits related to this final rule, we anticipate that the policies in this final rule may. (1) Remove barriers to robust participation in value-based health care delivery and payment systems, including those administered by CMS and non-Federal payors.

(2) facilitate arrangements for patient care coordination among affiliated and unaffiliated health care providers, practitioners, and suppliers. (3) provide certainty for participants in the Shared Savings Program that wish to establish compensation arrangements outside of Start Printed Page 77648the Shared Savings Program similar to those among providers and suppliers in Shared Savings Program ACOs. And (4) provide certainty for participants in Innovation Center models that wish to continue compensation arrangements established while participating in an Innovation Center model following the model's conclusion or establish similar arrangements outside of the model. Associated benefits that we anticipate will arise from these intended outcomes are.

(1) Better care coordination for patients, including Medicare beneficiaries, resulting in the reduction in costs to payors and patients from poorly coordinated, duplicative care. (2) improved quality of care and outcomes for patients, including Medicare beneficiaries. (3) substantial reduction in compliance costs to providers and suppliers to which the physician self-referral law's prohibitions apply. And (4) reduction in administrative complexity and related waste from continued progress toward interoperability of data and electronic health records.

(3) Cost Impact of Value-Based Arrangements A. General As noted above, we are unable to quantify with certainty the overall net costs, including net expenditures of the Medicare program, related to the changes in industry behavior that we can reasonably expect following the effective date of this final rule. However, based on the studies and reported experiences of payors, providers, suppliers, and patients that we discuss in this section IV.B. Of this final rule, we believe that value-based arrangements such as those described in section IV.B.2.a.(1).

Of this final rule have great potential to reduce waste in the U.S. Health care system, lower costs for both patients and payors, and generate other benefits such as improved quality of patient care and lower compliance costs for providers and suppliers. A recent review of literature from January 2012 to May 2019 focusing on unnecessary spending, or waste, in the U.S. Health care system (2019 Waste in U.S.

Health Care Study) indicates that waste related to the failure of care coordination alone results in annual costs of $27 billion to $78 billion.[] Much of the research on waste and improvement reviewed in the 2019 Waste in U.S. Health Care Study was conducted in Medicare populations. The 2019 Waste in U.S. Health Care Study noted compelling empirical evidence that interventions, such as aligning payment models with value or supporting delivery reform to enhance care coordination, safety, and value, can produce meaningful savings and reduce waste by as much as half.

The 2019 Waste in U.S. Health Care Study also identified waste from administrative complexity (resulting from fragmentation in the health care system) as the greatest contributor to waste in the U.S. Health care system at an estimated $266 billion annually, and highlighted the opportunity to reduce waste in this category from enhanced payor collaboration with health care providers and clinicians in the form of value-based payment models. According to the 2019 Waste in U.S.

Health Care Study, as value-based care continues to evolve, there is reason to believe that such interventions can be coordinated and scaled to produce better care at lower cost for all U.S. Residents. Moreover, in value-based arrangements, improvements could reduce waste related to overtreatment and low-value care, a separate category of waste in the U.S. Health care system.

Other recently published peer-reviewed articles also suggest that value-based arrangements can reduce costs.[] A case study targeted at determining the specific factors that reduce Medicare payments and lead to hospital savings in bundled payment models for lower extremity joint replacement surgeries (which provide a lump sum payment to be shared among providers for an episode of care instead of payment for every service performed) in one Texas health system found that, between July 2008 and June 2015, the system's five hospitals were able to reduce total Medicare spending per episode of care by $5,577, or 20.8 percent, in cases without complications, and by $5,321, or 13.8 percent, in cases with complications.[] The hospitals also recognized $6.1 million in internal cost savings, along with slight decreases in emergency room visits and readmission rates, and a decrease in cases with a prolonged length-of-stay admission. Over half of the internal cost savings were attributable to reduced implant costs.[] We note that the product standardization incentive programs that contribute to such internal cost savings involve compensation arrangements between hospitals and physicians which, depending on their structure, may not satisfy the requirements of any current exceptions to the physician self-referral law, but to which the new exceptions for value-based arrangements apply. Relatedly, in 2018, a large health plan announced that it was expanding a bundled payment program for spinal surgeries and hip/knee replacements to new markets, after finding savings of $18,000 per procedure,[] and a health network reported over $10 million in savings in 2017 with more anticipated savings in 2018.[] B. Medicare Expenditures We cannot predict with certainty how many and which parties will avail themselves of the new and revised exceptions or the changes in provider and supplier behaviors that could result.

Influence on provider and supplier behavior could either reduce or increase overall program spending, although the literature described in this section IV.B.2. Of this final rule indicates great potential for waste reduction and cost savings across the U.S. Health care system, including the Medicare program. We note that any short-term increase in expenditures could result Start Printed Page 77649from appropriate utilization of services as patients seek and accept medically indicated care that they may have forgone in the absence of care coordination efforts and value-based arrangements for which exceptions were previously unavailable, and that appropriate utilization could prevent greater expenditures and other negative results to life over the longer term.

Because of this uncertainty, we cannot quantify any impact on Medicare expenditures. We are confident that the regulations established or revised in this final rule include sufficient and appropriate safeguards to protect against program or patient abuse, including inappropriate utilization due to a physician's financial self-interest. We believe that our final policies fall squarely within the Secretary's authority under section 1877(b)(4) of the Act to establish exceptions for financial relationships that do not pose a risk of program or patient abuse and, therefore, anticipate no increased spending due to inappropriate utilization. We will continue to assess the impact of our final policies on program expenditures.

As noted in more detail later in this RIA, our view of the beneficial anticipated effects that will result from the policies in this final rule remains largely unchanged from the proposed rule. As noted above, we are not able to provide quantitative estimates of overall savings to or expenditures of the Medicare program that will result from this final rule. However, with respect to parties currently participating in the Shared Savings Program and Innovation Center models, we have determined that this final rule would not significantly alter the conditions upon which such providers and suppliers operate. Although we do not know which new value-based models or programs will be implemented in the future, such programs and models will be associated with an estimated impact at the time they are implemented.

Thus, we have determined that the policies set forth in this final rule will have no impact with regard to Medicare expenditures under the Shared Savings Program and Innovation Center models. C. Commercial Sector and Other Federal Payors A recent survey of over 100 commercial payors showed that, in 2018, “pure FFS” payment—where each medical service is billed and paid for separately—accounts for only 37.2 percent of commercial payor reimbursement, and is expected to drop to 26 percent by 2021.[] According to the payors surveyed, payors that adopted value-based health care delivery and payment models reduced health care costs by an average of 5.6 percent, improved provider collaboration, and created more impactful member engagement. Although we cannot make any quantitative estimates regarding cost savings or expenditures that may result from this final rule, we are aware of the success of certain innovative value-based arrangements that resulted in cost savings for third-party payors, improvements in quality of care, or both.

The reported success of some of these programs exemplifies the promising nature of value-based health care delivery and payment. There are numerous reported examples of successful value-based health care delivery and payment programs developed and implemented by commercial health plans. For example, one health plan recently reported that it saved $1 billion through avoided costs in 3 years of its recent primary care pay-for-value program that offers primary care practices rewards for their performance on quality, cost, and utilization measures, while also improving outcomes for its members.[] According to this health plan, members treated by a primary care provider in the program had 11 percent fewer emergency room visits in 2017 than members treated by a primary care physician not in the program. The health plan also stated that members with a primary care physician in the program experienced 16 percent fewer inpatient admissions in 2017 compared to members seeing a primary care physician not in the program, potentially saving the health plan $224 million in inpatient care costs.[] A collaboration between a physician-led ACO and a health plan in North Carolina similarly reduced costs while improving quality of care.[] Specifically, a June 2020 study concluded that the 47 primary care practices that participated in the collaboration.

(1) Reduced the total cost of care by 4.7 percent for commercial patients. (2) reduced the total cost of care by 6.1 percent for Medicare Advantage patients. And (3) improved their Medicare star ratings, on average, from 3 to 4.5 stars. Another study, in 2020, by a different health plan analyzed the plan's Medicare Advantage enrollees and network primary care physician practices.

This health plan determined that primary care physicians paid under global capitation improved certain patient outcomes related to preventive care and chronic conditions, such as higher screening rates for colorectal and breast cancer, higher rates of medication review, and higher controlled blood sugar levels.[] There are also studies that suggest that improved care coordination may decrease costs and enhance health outcomes. One randomized, controlled trial evaluated the cost‐effectiveness of a home‐based care coordination program that targeted older adults with problems self‐managing their chronic illnesses.[] Study participants in the test group received care coordination services from a nurse. They also received a pill organizer. The results of this study showed that, for those beneficiaries who participated in the study for more than 3 months, total Medicare costs were $491 lower per month than in the control group.

Another study conducted by the Centers for Disease Control demonstrated that certain interventions, such as team-based or coordinated care, increase patient medication adherence rates.47 Start Printed Page 77650Specifically, in a 2015 study, patients assigned to team-based care—including pharmacist-led medication reconciliation and tailoring, pharmacist-led patient education, collaborative care between pharmacist and primary care provider or cardiologist, and two types of voice messaging—were significantly more adherent with their medication regimen 12 months after hospital discharge (89 percent) compared with patients not receiving team-based care (74 percent). D. Conclusion We believe that the experience of the payors and organizations described in this section IV.B.2. Of this final rule highlight the potential for eliminating a significant amount of unnecessary expenditures (waste) in the U.S.

Health care system, including in the Medicare program. As noted earlier, the 2019 Waste in U.S. Health Care Study indicates annual costs of $27 billion to $78 billion from the failure of care coordination alone.[] This study identified $266 billion in annual costs from administrative complexity in the furnishing of care and compliance with laws and regulations. We cannot predict with absolute certainty whether value-based arrangements that parties enter into as a result of our final policies will reduce these annual costs, but we believe that it is likely that innovative value-based arrangements and payment for value-based health care delivery will continue to achieve the results described above in this section IV.B.2.

We are also unable to provide quantitative estimates of the impact on costs that such arrangements will have. However, we believe there is great potential for reducing the expense of waste in the U.S. Health care system through improved care coordination and reduced administrative complexity. B.

Clarifying Revisions and New Exceptions for Nonabusive Financial Relationships (1) Key Terminology, the Application and Scope of the Physician Self-Referral Law, and New Exception for Limited Remuneration to a Physician A. Summary of the Final Regulations In addition to the final regulations discussed in subsections 2.a. And 2.b.(2). Of this section IV.B., this final rule revises numerous current regulations and establishes new regulations, including a new exception at final § 411.357(z) for limited remuneration to a physician, intended to clarify the scope of the prohibitions of the physician self-referral law and simplify compliance with the exceptions to the law's referral and billing prohibitions.

To this end, this final rule. (1) Establishes a definition of the term “commercially reasonable” at § 411.351. (2) establishes special rules at § 411.354(d)(5) and (6) that identify the universe of compensation formulas that are considered to be determined in a manner that takes into account the volume or value of a physician's referrals or the other business generated by a physician. (3) revises the definition of “fair market value” at § 411.351.

(4) clarifies CMS policy regarding the permissible methodologies for distributing profits from designated health services within a group practice. (5) clarifies CMS policy regarding compensation formulas that will be deemed not to directly take into account the referrals of a physician in a group practice. (6) recognizes the independent obligation to comply with the anti-kickback statute and governmental billing and claims submission rules by removing from most exceptions to the physician self-referral law the requirements that the financial relationship between the entity and the physician (or immediate family member of the physician) does not violate the anti-kickback statute and does not violate any Federal or state law or regulation governing billing or claims submission. (7) revises the definition of “designated health services” at § 411.351 to, in effect, remove inpatient hospital services ordered after a patient's admission to the hospital when such services are ordered by a physician who is not the physician who made the referral for the inpatient admission.

(8) revises the definition of “physician” at § 411.351 to limit the physician referrals to which the law's prohibitions apply to only those physicians who qualify as a “physician” under section 1861(r) of the Act. (9) revises the definition of “remuneration” at § 411.351 to clarify that the provision of certain items, devices, and supplies from an entity to a referring physician does not establish a compensation arrangement when those items, devices, or supplies are, in fact, used solely by the physician for the purpose(s) established in the statute and regulation. (10) revises the definition of “transaction” and establishes a new definition of “isolated financial transaction” at § 411.351 to clarify CMS policy regarding the types of compensation arrangements to which the exception at § 411.357(f) is applicable. (11) alleviates confusion reported by stakeholders regarding the period of disallowance for referrals and billing following a violation of the physician self-referral law.

(12) permits parties to reconcile payment discrepancies in compensation arrangements without running afoul of the physician self-referral law. (13) removes certain interests held by a physician from qualifying as an ownership or investment interest that implicates the physician self-referral law. (14) clarifies when compensation is considered to be “set in advance” for purposes of satisfying the requirements of the exceptions to the physician self-referral law. (15) revises CMS policy regarding modifications to the financial terms of a compensation arrangement to eliminate specific timeframe limitations for such modifications.

(16) clarifies CMS policy regarding the circumstances under which an entity may direct a physician's referrals to a particular provider, practitioner, or supplier. (17) expressly prohibits an entity from conditioning the existence of a compensation arrangement or the amount of a physician's compensation on the number or value of the physician's referrals to a particular provider, practitioner, or supplier. (18) clarifies that required signatures may be electronic or in any other form that is valid under applicable Federal or state law. (19) allows parties 90 consecutive calendar days to obtain documentation necessary to satisfy the writing requirement of an applicable exception.

(20) clarifies the requirement for exclusive use of office space or equipment under the exceptions at § 411.357(a) and (b). (21) clarifies the circumstances under which a physician practice must sign the documentation of a recruitment arrangement between a hospital and a physician. (22) clarifies and expands the application of the exception at § 411.357(i) for payments by a physician (or immediate family member of a physician) to an entity. (23) expands the application of the exception at § 411.357(l) to fair market value payments for the rental of office space, even where the duration of the arrangement is less than 1 year.

(24) makes permanent the EHR exception. (25) clarifies the scope of the EHR exception to permit donations of cybersecurity software and services that are necessary and used predominantly to create, maintain, transmit, receive, or protect electronic health records. (26) allows for flexible scheduling of physician contribution payments for electronic health records items and services following the initial donation of Start Printed Page 77651such items and services. (27) permits donations of replacement electronic health records items and services, even if the physician already possesses equivalent items or services.

(28) clarifies timing issues related to arrangements between a physician and NPP where the physician receives assistance from a hospital to compensate the NPP. (29) updates and eliminates out-of-date references to bolster clarity of the scope and application of the physician self-referral regulations. (30) establishes a new exception for limited remuneration to a physician that does not require contemporaneous documentation of the terms of the arrangement or that the compensation is set in advance of the provision of the physician's services. And (31) modifies other exceptions that apply to arrangements for the personal services of physicians to ensure applicability on a going-forward basis following the commencement of an arrangement that satisfies the requirements of the new exception for limited remuneration to a physician.

B. Expectation of Industry Behavior Following the effective date of our final policies, we anticipate a reduction in disclosures to the SRDP of potential or actual violations of the physician self-referral law because stakeholders will have a clearer understanding of the scope and application of the physician self-referral law, as well as CMS' interpretation of the law's provisions. We anticipate that entities will continue to provide electronic health records items and services to physicians with the same scope and frequency as the industry has observed since the issuance of the EHR exception in 2006. We also anticipate that parties that made submissions to the SRDP that have not yet been settled may withdraw all or portions of their disclosures, similar to what occurred following clarifications of physician self-referral policies in the CY 2016 PFS final rule.

Although we expect that entities will utilize the new exception at § 411.357(z) for limited remuneration to a physician, as explained in section II.E.1. Of this final rule, we anticipate that the exception's greatest utility will come during retrospective review of compliance with the physician self-referral law. As we noted in section III.A. Of this final rule, we believe that, for normal business operations purposes, entities document their financial arrangements with physicians and others in order to identify and be able to enforce the legal obligations of the parties.

Thus, we believe that the exception will be utilized more often by parties that did not fully document an arrangement in writing or set compensation in advance than by parties that affirmatively choose not to document their arrangement in writing or set physician compensation in advance when developing a new arrangement for physician services. Finally, we anticipate that some physician practices will revise their compensation methodologies with respect to the distribution of profits from designated health services furnished by the group in order to ensure compliance with the clarifying regulations at § 411.352(i) that become effective January 1, 2022 and continued qualification as a “group practice” under the regulations at § 411.352. C. Potential Outcomes, Benefits, and Costs of Final Policies Related to Key Terminology, the Application and Scope of the Physician Self-Referral Law, and New Exception for Limited Remuneration to a Physician According to commenters, one of the most significant benefits of this final rule is the establishing of clear boundaries for parties in setting the financial terms of compensation arrangements that do not qualify as value-based arrangements.

We are unable to quantify with certainty the impact of our clarifications, expanded flexibilities, and the new exception at final § 411.357(z) on costs to the regulated industry. However, we believe that most entities that have financial relationships with physicians to which the physician self-referral law applies will see some level of reduced expenditures. Many of the entities whose financial relationships with physicians are subject to the requirements of the physician self-referral law are hospitals and physician groups. An October 2017 study of 190 hospitals in 31 states across the United States revealed that an average community hospital (defined as 161 beds) annually dedicates 2.3 full-time equivalent employees to, and spends almost $350,000 on, compliance with Federal fraud and abuse laws, defined in the study as including the physician self-referral law, the anti-kickback statute, and laws and protocols requiring returning overpayments.[] This study affirms commenter statements included in a 2015 Senate Finance Committee report that noted the high cost and difficulty of complying with the physician self-referral law.[] We expect that the clarifications and regulatory revisions of this final rule will significantly reduce the costs to the regulated industry.

(See section IV.C. Of this final rule for further discussion of this study and the anticipated effects of this final rule on the burden identified in the study.) CMS publishes aggregate SRDP settlement data on its website at https://www.cms.gov/​Medicare/​Fraud-and-Abuse/​PhysicianSelfReferral/​Self-Referral-Disclosure-Protocol-Settlements. To date, we have received over 1200 disclosures to the SRDP. As of December 31, 2019, we have settled 335 disclosures by collecting an aggregate of $31.8 million from disclosing parties.

Although we cannot estimate the number of compensation arrangements included in the pending disclosures that would be affected by the clarifications in this final rule, it is our observation that a substantial portion of the conduct already settled through the SRDP involved the failure of a compensation arrangement to satisfy the writing or signature requirements of an applicable exception, with many of those failures lasting for only a short period of time. Many disclosures involved the disclosing party's incorrect interpretation or misapplication of the physician self-referral law or CMS policy. Therefore, we believe that the clarifications in this final rule will reduce the perceived need for disclosure to the SRDP and allow parties to avoid the costs—including costs of compliance professionals, attorneys, market valuation experts, and accountants—of preparing and submitting a disclosure to the SRDP. As noted above, we also expect that some entities may withdraw a portion of or their entire SRDP disclosures following the issuance of this final rule.

However, we are unable to quantify the avoidance of costs to the industry related to refraining from or withdrawing disclosures. We note that recoveries from SRDP settlements may also diminish, but this does not represent a cost to the Medicare program or trust fund. Where there is no violation of the physician self-referral law's referral and billing prohibitions, there is no refund due to the government under section 1877(g) of the Act for Medicare payments made to the entity.Start Printed Page 77652 Finally, we believe that the clarifications and revisions to the EHR exception, and the permanency of the exception, will facilitate the continued adoption and use of electronic health records, especially in small physician practices, by making permanent the exception for the donation of such items and services. (2) New Exception for Cybersecurity Items and Services The average breached health care organization faces $8 million dollars in costs as a result of the breach, or $400 per patient record involved.[] One hospital reported spending $10 million to recover from a cyberattack, instead of paying a $30,000 ransom demanded by hackers,[] while another hospital paid a $55,000 ransom to hackers, despite having backup copies of the affected files.[] A cyberattack on a hospital in Germany is the suspected cause of the death of at least one patient.[] A September 2020 cyberattack on a large health care system in the United States affected nearly 400 facilities, causing hospitals to divert ambulances during the initial stages of the attack.[] In addition, staff reported that some lab test results were delayed.

The system responded by suspending user access to its information technology applications related to operations across the United States, requiring the use of back-up processes, including paper medical record charting and labeling medications by hand, for nearly three weeks. According to the Health Sector Cybersecurity Coordination Center (HC3), health care organizations should consider implementing strong risk management practices to help prevent data breaches and minimize any disruptions or loss if a breach occurs.[] HC3 highlights that adequate prevention and preparation for data breaches will protect patients, minimize direct and indirect costs, and allow for more efficient operations of a health care organization.[] Separately, the HCIC Task Force's 2017 report, among other things, highlighted its review of many concerns related to potential constraints imposed by the physician self-referral law and the Federal anti-kickback Statute. The report encouraged the Congress to evaluate an amendment to these laws specifically for cybersecurity software that would allow health care organizations the ability to assist physicians in the acquisition of this technology, through either donation or subsidy.[] The HCIC Task Force noted that the existing regulatory exception to the physician self-referral law (§ 411.357(w)) and the safe harbor to the Federal anti-kickback statute (42 CFR 1001.952(y)) applicable to certain donations of EHR items and services could serve as a perfect template for an analogous cybersecurity provision.[] In 2018, the American Medical Association surveyed over 1,300 physicians in a cybersecurity-related survey. Approximately 83 percent of the participants reported having experienced some sort of cybersecurity attack.[] The study also highlighted that 50 percent of the surveyed physicians wished they could receive donations of security-related hardware and software from other providers, and recommended that we develop an exception to permit it.

As described in section II.E.2 of this final rule, we received overwhelming support from across the health care industry in response to our proposal to establish the new exception for cybersecurity items and services, and we anticipate significant expansion of cybersecurity efforts through donations following the effective date of this final rule, similar to the expanded adoption of EHR items and services reported by stakeholders following the establishment of the EHR exception in 2006. Support for the new cybersecurity exception came from many well-resourced organizations that are potential future donors of cybersecurity technology, such as health plans and large health systems, as well as from likely recipients of donations and trade groups representing practitioners. (We note that not all of the potential donors and recipients are entities and physicians to which the physician self-referral law applies.) Because of the cost of cybersecurity attacks to organizations that wish to donate or receive cybersecurity technology and services, and the general support among donors and recipients for the new cybersecurity exception, we anticipate significant investment in improvements to the cybersecurity hygiene of the health care industry. An organization's cybersecurity posture is only as strong as its weakest link, including weaknesses of downstream providers, suppliers, and practitioners that wish to receive donations.

Thus, donors are incented to protect themselves by donating cybersecurity technology and services that improves their cybersecurity. We expect that the flexibilities afforded by the cybersecurity exception will facilitate the enhancement of protection against the corruption of or access to health records and other information essential to the safe and effective delivery of health care, as well as reduce the impacts of cybersecurity attacks, including the improper disclosure of PHI. This could ultimately reduce overall costs associated with cybersecurity attacks, including ransom payments, costs to patients whose PHI is improperly disclosed, and costs to providers and suppliers to reestablish cybersecurity. However, there are a variety of factors integral to determining the extent of the impact of the cybersecurity exception on the cybersecurity hygiene of the health care industry that remain too speculative to support a quantitative estimate of the impact of this final rule.

For example, we cannot predict with certainty. (1) How many entities or physicians will Start Printed Page 77653donate cybersecurity technology or services for which the parties may seek protection under the cybersecurity exception. (2) how such donations will improve the cybersecurity hygiene of recipients, donors, and the health care ecosystem as a whole. Or (3) external factors—such as other policies promoting cybersecurity within the health care industry, how hackers will proliferate and develop new hacking strategies, or how cyberattack recovery costs and ransom costs will change—that could enable or hinder improved cybersecurity hygiene and potentially result in increased or decreased costs associated with cyberattacks.

Thus, we cannot predict the specific quantitative impact of the flexibility afforded by the new cybersecurity exception on the costs or benefits to the Medicare program, or other Federal health care programs, beneficiaries, or the health care industry as a whole. Nonetheless, we expect that the flexibility to donate cybersecurity technology and services will benefit the health care ecosystem as a whole, improve cybersecurity across the industry, and reduce costs associated with cyberattacks (by reducing successful cyberattacks, and consequently, ransom fees and recovery costs). 3. Comment and Response We sought comment on the economic impact of this final rule, including any potential increase or decrease in utilization, any potential effects due to behavioral changes, or any other potential cost savings or expenses to the Government as a result of this rule.

We received the following comment and our response follows. Comment. One commenter requested that we provide detailed estimates of changes in Medicare program spending that CMS expects to result from the proposed new exceptions and other regulatory changes. The commenter asserted that certain successful value-based programs produce limited savings and many value-based programs produce no savings or even increase spending.

Response. We are unable to provide the detailed estimates requested by the commenter. It is impossible for CMS to provide quantitative estimates of savings to or expenditures of the Medicare program that will result from the establishment of the new exceptions at § 411.357(z), (aa), or (bb), or from clarification of key terms integral to the physician self-referral law and other regulatory revisions. However, we emphasize that we engaged in the Regulatory Sprint to facilitate the transition to value-based health care delivery and payment and realize the potential cost savings that come from improved quality and care coordination.

Although we cannot estimate the precise dollar amount of impact, as described throughout this section IV.B.2. Of this final rule, the potential for reduced program expenditures is significant, and the policies set forth in this final rule are intended to maximize this potential. C. Anticipated Effects This final rule will affect entities that furnish designated health services payable by Medicare and the physicians with whom they have financial relationships.

The following items or services are designated health services. (1) Clinical laboratory services. (2) physical therapy services. (3) occupational therapy services.

(4) outpatient speech-language pathology services. (5) radiology and certain other imaging services. (6) radiation therapy services and supplies. (7) durable medical equipment and supplies.

(8) parenteral and enteral nutrients, equipment, and supplies. (9) prosthetics, orthotics, and prosthetic devices and supplies. (10) home health services. (11) outpatient prescription drugs.

And (12) inpatient and outpatient hospital services. We do not have data on the number of entities and physicians that have financial relationships, but we believe a substantial fraction of Medicare-enrolled physicians, group practices, hospitals, clinical laboratories, and home health agencies are affected by the physician self-referral law. We anticipate that this final rule will have significant, ongoing benefits for the affected physicians and entities and the entire health care system. To estimate the number of entities directly affected by this rule, we use Medicare enrollment data.

According to this data, there were 2,265 single or multispecialty clinics or group practices, 3,159 clinical laboratories (billing independently), 2,016 outpatient physical therapy/speech pathology providers, 2,739 independent diagnostic testing facilities, 11,317 home health agencies, 6,072 inpatient hospitals, 4,402 rural health clinics, 172 comprehensive outpatient rehabilitation facilities, 8,836 federally qualified health centers, and 9,403 medical supply companies enrolled in Medicare in 2018.[] In addition, we estimate that 400 physician practices unassociated with single or multispecialty clinics or group practices will independently review this final rule. We requested public comment on the entities affected by the rule. We anticipate that directly affected entities will review this final rule in order to determine whether to explore newly permissible value-based arrangements and to take advantage of burden-reducing clarifications provided by the rule. We estimate that all directly affected entities described above that will be eligible to use the final rule will review the rule.

In the proposed rule, we estimated that reviewing the final rule would require an average of 3 hours of time each from the equivalent of a compliance officer and a lawyer (84 FR 55837). The final rule responds to numerous comments received on the proposals discussed in the proposed rule, and includes significantly more information than the proposed rule. Although we did not receive any comments on our proposed estimate of three hours, in light of the increase in length from the proposed rule to the final rule, we have adjusted our estimate for the time required to review the final rule. We estimate that reviewing the final rule will require an average of 6 hours of time each from the equivalent of a compliance officer and a lawyer, and note that parties may review only the portions of the final rule that are applicable to their specific circumstances and needs.

For example, parties that do not wish to participate in value-based health care and delivery at this time may not review sections I.B. And II.A. Of this final rule. To estimate the costs associated with this review, we use a 2019 wage rate of $35.03 for compliance officers and $69.86 for lawyers from the Bureau of Labor Statistics,[] and we double those wages to account for overhead and benefits.

As a result, we estimate total regulatory review costs of $64 million in the first year following publication of the final rule. We sought public comment on these assumptions. In developing this final rule, we took great care to ensure that the safeguards against program and patient abuse in our new exceptions impose the minimum burden possible while providing robust protection against improper utilization and other harms against which the physician self-referral law is designed to protect. For example, we believe a value-based enterprise would ordinarily develop a governing document that describes the value-based Start Printed Page 77654enterprise and how the VBE participants intend to achieve its value-based purpose(s), so our requirement does not impose any additional burden beyond what we anticipate parties would ordinarily develop.

We also believe that parties to an arrangement under which remuneration is paid already keep business records necessary for a variety of purposes, such as income tax filings, records of compliance with state laws (including fee splitting laws), and, for nonprofit entities, justification of tax-exempt status. Therefore, we do not believe the requirement to maintain records of the methodology for determining and the actual amount of remuneration paid under a value-based arrangement for a period of at least 6 years imposes additional burden. In addition, we believe that physicians and entities routinely document their financial arrangements in writing as a common good business practice so that arrangements can be enforced. For example, we believe that an entity would ordinarily ensure that the details of a shared loss repayment agreement are documented in writing to ensure that the arrangement can be enforced under state law.

Similarly, we believe that entities working together to achieve a purpose would routinely monitor their operations to confirm that their plans are working as intended. We sought comments on these assumptions. The new exceptions for arrangements intended to facilitate the transition to value-based health care delivery and payment have numerous potential benefits that will reduce costs and improve quality, not only for Medicare and its beneficiaries, but for patients and the health care system in general. For example, the final exceptions provide important new flexibility for physicians and entities to work together to improve patient care and reduce costs.

This increased flexibility will provide new opportunities for the private sector to develop and implement cost-saving, quality-improving programs that previously may have been impermissible. We anticipate that implementation of improvements and efficiencies, such as care redesign protocols resulting from private sector innovation, could have a beneficial effect on the care provided to Medicare beneficiaries and thereby result in savings for beneficiaries and the Trust Funds. We believe that these new exceptions will also increase participation in Innovation Center models because, unlike the fraud and abuse waivers that have been issued for certain Innovation Models, the exceptions will not expire and are not narrowly designed to apply solely to one specific model, allowing parties to enter into value-based arrangements of their own design and to continue such arrangements beyond expiration of fraud and abuse waivers. We also believe that applying the new exceptions will make compliance more straightforward for physicians and entities participating in Innovation Center models, thus resulting in cost savings for these parties.

In addition, we believe that the new exceptions for arrangements intended to facilitate the transition to value-based health care delivery and payment will ensure that the physician self-referral law continues to provide meaningful protection against overutilization and other harms, thus preventing increased Medicare expenditures and associated beneficiary liability. We lack data to quantify these effects and sought public comment on these impacts. We believe that the clarifications and regulatory revisions of key terminology (specifically, the terms “commercially reasonable” and “fair market value,” the volume or value standard, and the other business generated standard) discussed in section II.B. Of this final rule will have significant, ongoing benefits to all physicians and entities affected by the physician self-referral law.

These terms are used throughout the physician self-referral regulations. Commenters on the proposed rule indicated that additional guidance on these terms is necessary to reduce the complexity of structuring financial arrangements to comply with the physician self-referral law. We anticipate that the changes to decouple the physician self-referral law regulations from the anti-kickback statute and federal and state laws or regulations governing billing or claims submission will reduce burden by making compliance more straightforward for physicians and entities. We stress that the anti-kickback statute and billing laws remain in full force and effect, so those laws will continue to protect against program and patient abuse.

We anticipate that our changes to the definitions of “designated health services,” “physician,” and “remuneration” and the changes to the ownership and investment interest provisions in § 411.354(b) will reduce compliance burden by appropriately applying the physician self-referral law's prohibitions and providing protection for nonabusive financial relationships. Our changes for the exceptions for fair market value payments by a physician and fair market value compensation will make these exceptions available to protect financial arrangements that must currently meet more complicated and burdensome requirements of other exceptions. We anticipate that this added flexibility will provide substantial burden reduction through reduced compliance costs. We have also finalized numerous other changes that, while relatively minor in scope, are intended to collectively reduce burden.

For example, the new special rules on the set in advance requirement clarifies the requirements for modifying compensation terms during the course of an arrangement and correct a common misperception among stakeholders that parties may only modify the compensation terms of an arrangement once during the course of a year. We anticipate that our changes relating to isolated transactions, the period of disallowance, the special rules on compensation arrangements, the exceptions for rental of office space and rental of office equipment, the exception for physician recruitment, and the exception for assistance to compensate a nonphysician practitioner will also have a beneficial impact by reducing the existing burden on physicians and entities through the provision of additional guidance and clarifications. We lack data to quantify these effects and sought public comment on these impacts. As we stated in the proposed rule, the American Hospital Association estimated compliance costs faced by hospitals.[] It estimated $350,000 [] in annual costs for an average hospital to comply with fraud and abuse regulations, which include the physician self-referral law.

To estimate aggregate fraud and abuse compliance costs, we multiply this figure by the number of Medicare enrolled hospitals, which implies $2.1 billion in total annual costs across these hospitals. Based on CMS RFI comments, compliance with the physician self-referral regulations comprises a substantial fraction of these costs. We anticipate that clarifications provided in this final rule may substantially reduce the complexity of compliance for affected entities. As a result, we expect this rule will substantially reduce net fraud and abuse compliance burden for affected entities, although we lack data to quantify these estimates.

We note that hospitals represent a fraction of entities affected by this final rule, and burden is likely to decline substantially for other categories of entities affected by this rule. We sought public comment on the Start Printed Page 77655extent to which this rule will reduce compliance burden for hospitals and entities other than hospitals. Our final modifications to the EHR exception are modest and clarify that the exception applies to certain cybersecurity technology that is included as part of an electronic health records arrangement, make the exception permanent, and clarify that contribution requirements collected from physicians for updates to previously donated technology need only be collected at reasonable intervals. The EHR exception will continue to be available to physicians and entities other than laboratories.

We expect that the same entities that currently use the EHR exception will continue to use the exception. We anticipate that our final policies will result in an incremental reduction in compliance burden. In section II.E. Of this final rule, we discuss new exceptions for limited remuneration to a physician and the provision of cybersecurity technology and related services.

We anticipate that the new exception for limited remuneration to a physician will ease compliance burden because it allows entities to compensate a physician for items or services provided by the physician without being subject to all the documentation and certain other requirements of existing exceptions to the physician self-referral law. We believe that this new exception will also provide additional flexibility where these arrangements are not covered by an existing exception. We anticipate that the cybersecurity exception will be widely used by physicians, group practices, and hospitals. We believe that this exception will help to address the growing threat of cyberattacks that infiltrate data systems and corrupt or prevent access to health records and other information essential to the safe and effective delivery of health care.

We lack data to quantify these effects and sought public comment on these impacts. We received the following comments and our responses follow. Comment. The vast majority of commenters supported our proposals, noting generally that the proposed provisions will facilitate compliance with the physician self-referral law and achieve the reduced burden CMS anticipates, although no commenters provided data or other detail that would allow us to quantify the anticipated effects.

Response. We appreciate commenters' feedback confirming our assessment that this final rule will ease compliance with the physician self-referral law and reduce burden on hospitals and other entities. Comment. A few commenters asserted that the establishment of the accountable body or person and the development of the governing document would require the expenditure of significant resources, including legal expenses, and questioned whether adding this burden was necessary.

Response. As discussed in detail in section II.A.2.a. Of this final rule, we continue to believe that a value-based enterprise would ordinarily develop a governing document and that this final rule will not result in additional burden in that regard. In addition, we have provided additional guidance about these requirements, including that we are not dictating the format or content of the governing document or the structure or composition of the accountable body.

Each value-based enterprise has the flexibility to develop and implement the necessary infrastructure to effectively oversee its financial and operational activities commensurate with the size and structure of the value-based enterprise. Comment. One commenter expressed concern that the revised definition of “remuneration” would increase the burden on parties to monitor the use of items, devices, or services to ensure that physicians are in fact using the items, devices, or services for one or more of the permitted purposes under the statute. Response.

As we mentioned in section II.D.2.d. Of this final rule, we believe that it would be impossible for an entity to monitor how a physician “in fact” uses a multi-use item, device, or supply whose primary purpose is not one or more of the permitted purposes to ensure that the physician in fact uses the item, device, or supply exclusively for one or more of the permitted purposes. However, we believe that the final definition of “remuneration” will not increase the burden of monitoring, because the provision of multi-use items, devices, or supplies whose primary purpose is not one or more of the permitted purposes will not be carved out of the definition of “remuneration.” Comment. Many commenters maintained that the proposed amendment to clarify the definition of “transaction” at § 411.351 would reduce flexibility and increase the burden of compliance.

Response. We discussed this policy in section II.D.2.e. Of this final rule and explained that the revision simply clarifies an existing policy that the exception for isolated transactions is not available to protect a single payment for multiple or repeated services. This longstanding policy is based on our interpretation of the statute and our mandate under sections 1877(b)(4) and 1877(e)(6)(B) of the Act to permit only those financial relationships that do not pose a risk of program or patient abuse.

We do not believe that clarifying existing policy will result in additional burden, particularly in light of new flexibilities included in this final rule. D. Alternatives Considered This final rule contains a range of policies. The preceding preamble presents rationale for our policies and, where relevant, alternatives that were considered.

We carefully considered the alternative of maintaining the status quo and not pursuing regulatory action. However, we believe that the transition to a value-based health care delivery and payment system is urgently needed due to unsustainable costs inherent in the current volume-based system. We believe this final rule addresses the critical need for additional flexibility that is necessary to advance the transition to value-based health care and improve the coordination of care among providers in both the Federal and commercial sectors. We also considered proposing to limit the new exceptions for arrangements that facilitate the transition to value-based health care delivery and payment to CMS-sponsored models or establishing separate exceptions with different criteria for arrangements that exist outside CMS-sponsored models.

However, we believe that, in their current state, the physician self-referral regulations impede the development and adoption of innovative approaches to delivering health care, across all patient populations and payor types, and over indefinite periods of time. In addition, we considered establishing an exception to protect care coordination activities performed outside of a value-based enterprise. We rejected this alternative due to program integrity concerns that could exist without the incentives and protections inherent in a value-based enterprise and value-based arrangement, as defined at final § 411.351. We considered including provisions in the exceptions for value-based arrangements that would require compensation to be set in advance, fair market value, and not determined in any manner that takes into account the volume or value of a physician's referrals or the other business generated between the parties.

We are concerned, however, that the inclusion of such requirements would conflict with our goal of dismantling and addressing Start Printed Page 77656regulatory barriers to value-based care transformation. We further believe that the disincentives for overutilization, stinting on patient care, and other harms the physician self-referral law was intended to address that are built into the value-based definitions will operate in tandem with the requirements included in the exceptions and be sufficient to protect against program and patient abuse. We also considered whether to exclude laboratories and DMEPOS suppliers from the definition of “VBE participant.” We stated in the proposed rule that it was not clear to us that laboratories and DMEPOS suppliers have the direct patient contacts that would justify their inclusion as parties working under a protected value-based arrangement to achieve the type of patient-centered care that is a core tenet of care coordination and a value-based health care system. As discussed in Section II.A.2.a.

Of this final rule, we have not excluded any entities from the final definition of “VBE participant.” Through our own experience administering the physician self-referral regulations and our thorough analysis of comments, we recognize the urgent and compelling need for additional guidance on the physician self-referral law. In preparing this rule, we conducted an in-depth review of our existing regulations to identify those matters that might benefit from additional guidance. We took great care to provide this guidance in the clearest, most straightforward manner possible. For example, we considered addressing the need for guidance on the applicability of the physician self-referral law to referrals for inpatient hospital services after admission through modifying the definition of “referral” rather than the definition of “designated health services.” We are concerned that modifying the definition of “referral” could have a broader effect and would not be as clear, and declined to adopt that approach.

We have also carefully weighed each proposal to ensure that it does not pose a risk of program or patient abuse. For example, we considered whether to eliminate the requirement that a physician must pay 15 percent of the cost of donated electronic health records items and service, but are concerned that doing so would pose a risk of program or patient abuse. We sought comments on these regulatory alternatives. As discussed in section II.D.11.e.

Of this final rule, the EHR exception maintains the 15 percent contribution requirement. We received no comments specific to the alternatives considered section of the proposed rule. E. Accounting Statement As required by OMB Circular A-4 (available at http://www.whitehouse.gov/​omb/​circulars/​a004/​a-4.pdf), we have prepared an accounting statement.

The following table provides estimated annualized costs through 2029. Accounting Statement—Estimated Annualized CostsCategoryPrimary estimateLow estimateHigh estimateYear dollarDiscount rate (percent)Period coveredCostsAnnualized Monetized ($millions/year)4.30.00.020187%2020-2029 3.60.00.0201832020-2029Annualized Quantified0.00.00.07 0.00.00.03Qualitative In accordance with the provisions of Executive Order 12866, this final rule was reviewed by the Office of Management and Budget. Based on the tight time constraints and the need to expedite the clearance process to ensure timely publication, OSORA will continue to work with CM to ensure that regulations text is in compliance with the Office of the Federal Register standards and guidance. Start List of Subjects DiseasesMedicareReporting and recordkeeping requirements End List of Subjects For the reasons set forth in the preamble, the Centers for Medicare &.

Medicaid Services amends 42 CFR part 411 as set forth below. Start Part End Part Start Amendment Part1. The authority citation for part 411 continues to read as follows. End Amendment Part Start Authority 42 U.S.C.

1302, 1395w-101 through 1395w-152, 1395hh, and 1395nn. End Authority Start Amendment Part2. Subpart J is amended by revising §§ 411.350 through 411.357 to read as follows. End Amendment Part * * * * * 411.350 Scope of subpart.

411.351 Definitions. 411.352 Group practice. 411.353 Prohibition on certain referrals by physicians and limitations on billing. 411.354 Financial relationship, compensation, and ownership or investment interest.

411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. 411.356 Exceptions to the referral prohibition related to ownership or investment interests. 411.357 Exceptions to the referral prohibition related to compensation arrangements. Scope of subpart.

(a) This subpart implements section 1877 of the Act, which generally prohibits a physician from making a referral under Medicare for designated health services to an entity with which the physician or a member of the physician's immediate family has a financial relationship. (b) This subpart does not provide for exceptions or immunity from civil or criminal prosecution or other sanctions applicable under any State laws or under Federal law other than section 1877 of the Act. For example, although a particular arrangement involving a physician's financial relationship with an entity may not prohibit the physician from making referrals to the entity under this subpart, the arrangement may nevertheless violate another provision of the Act or other laws administered by HHS, the Federal Trade Commission, the Securities and Exchange Commission, the Internal Revenue Service, or any other Federal or State agency. (c) This subpart requires, with some exceptions, that certain entities furnishing covered services under Medicare report information concerning Start Printed Page 77657ownership, investment, or compensation arrangements in the form, in the manner, and at the times specified by CMS.

(d) This subpart does not alter an individual's or entity's obligations under— (1) The rules regarding reassignment of claims (§ 424.80 of this chapter). (2) The rules regarding purchased diagnostic tests (§ 414.50 of this chapter). (3) The rules regarding payment for services and supplies incident to a physician's professional services (§ 410.26 of this chapter). Or (4) Any other applicable Medicare laws, rules, or regulations.

Definitions. The definitions in this subpart apply only for purposes of section 1877 of the Act and this subpart. As used in this subpart, unless the context indicates otherwise. Centralized building means all or part of a building, including, for purposes of this subpart only, a mobile vehicle, van, or trailer that is owned or leased on a full-time basis (that is, 24 hours per day, 7 days per week, for a term of not less than 6 months) by a group practice and that is used exclusively by the group practice.

Space in a building or a mobile vehicle, van, or trailer that is shared by more than one group practice, by a group practice and one or more solo practitioners, or by a group practice and another provider or supplier (for example, a diagnostic imaging facility) is not a centralized building for purposes of this subpart. This provision does not preclude a group practice from providing services to other providers or suppliers (for example, purchased diagnostic tests) in the group practice's centralized building. A group practice may have more than one centralized building. Clinical laboratory services means the biological, microbiological, serological, chemical, immunohematological, hematological, biophysical, cytological, pathological, or other examination of materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings, including procedures to determine, measure, or otherwise describe the presence or absence of various substances or organisms in the body, as specifically identified by the List of CPT/HCPCS Codes.

All services so identified on the List of CPT/HCPCS Codes are clinical laboratory services for purposes of this subpart. Any service not specifically identified as a clinical laboratory service on the List of CPT/HCPCS Codes is not a clinical laboratory service for purposes of this subpart. Commercially reasonable means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty. An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.

Consultation means a professional service furnished to a patient by a physician if the following conditions are satisfied. (1) The physician's opinion or advice regarding evaluation or management or both of a specific medical problem is requested by another physician. (2) The request and need for the consultation are documented in the patient's medical record. (3) After the consultation is provided, the physician prepares a written report of his or her findings, which is provided to the physician who requested the consultation.

(4) With respect to radiation therapy services provided by a radiation oncologist, a course of radiation treatments over a period of time will be considered to be pursuant to a consultation, provided that the radiation oncologist communicates with the referring physician on a regular basis about the patient's course of treatment and progress. Cybersecurity means the process of protecting information by preventing, detecting, and responding to cyberattacks. Designated health services (DHS) means any of the following services (other than those provided as emergency physician services furnished outside of the U.S.), as they are defined in this section. (1)(i) Clinical laboratory services.

(ii) Physical therapy, occupational therapy, and outpatient speech-language pathology services. (iii) Radiology and certain other imaging services. (iv) Radiation therapy services and supplies. (v) Durable medical equipment and supplies.

(vi) Parenteral and enteral nutrients, equipment, and supplies. (vii) Prosthetics, orthotics, and prosthetic devices and supplies. (viii) Home health services. (ix) Outpatient prescription drugs.

(x) Inpatient and outpatient hospital services. (2) Except as otherwise noted in this subpart, the term “designated health services” or DHS means only DHS payable, in whole or in part, by Medicare. DHS do not include services that are paid by Medicare as part of a composite rate (for example, SNF Part A payments or ASC services identified at § 416.164(a)), except to the extent that services listed in paragraphs (1)(i) through (1)(x) of this definition are themselves payable under a composite rate (for example, all services provided as home health services or inpatient and outpatient hospital services are DHS). For services furnished to inpatients by a hospital, a service is not a designated health service payable, in whole or in part, by Medicare if the furnishing of the service does not increase the amount of Medicare's payment to the hospital under any of the following prospective payment systems (PPS).

(i) Acute Care Hospital Inpatient (IPPS). (ii) Inpatient Rehabilitation Facility (IRF PPS). (iii) Inpatient Psychiatric Facility (IPF PPS). Or (iv) Long-Term Care Hospital (LTCH PPS).

Does not violate the anti-kickback statute, as used in this subpart only, means that the particular arrangement— (1)(i) Meets a safe harbor under the anti-kickback statute, as set forth at § 1001.952 of this title, “Exceptions”. (ii) Has been specifically approved by the OIG in a favorable advisory opinion issued to a party to the particular arrangement (for example, the entity furnishing DHS) with respect to the particular arrangement (and not a similar arrangement), provided that the arrangement is conducted in accordance with the facts certified by the requesting party and the opinion is otherwise issued in accordance with part 1008 of this title, “Advisory Opinions by the OIG”. Or (iii) Does not violate the anti-kickback provisions in section 1128B(b) of the Act. (2) For purposes of this definition, a favorable advisory opinion means an opinion in which the OIG opines that— (i) The party's specific arrangement does not implicate the anti-kickback statute, does not constitute prohibited remuneration, or fits in a safe harbor under § 1001.952 of this title.

Or (ii) The party will not be subject to any OIG sanctions arising under the anti-kickback statute (for example, under sections 1128A(a)(7) and 1128(b)(7) of the Act) in connection with the party's specific arrangement. Downstream contractor means a “first tier contractor” as defined at § 1001.952(t)(2)(iii) of this title or a Start Printed Page 77658“downstream contractor” as defined at § 1001.952(t)(2)(i) of this title. Durable medical equipment (DME) and supplies has the meaning given in section 1861(n) of the Act and § 414.202 of this chapter. Electronic health record means a repository of consumer health status information in computer processable form used for clinical diagnosis and treatment for a broad array of clinical conditions.

Employee means any individual who, under the common law rules that apply in determining the employer-employee relationship (as applied for purposes of section 3121(d)(2) of the Internal Revenue Code of 1986), is considered to be employed by, or an employee of, an entity. (Application of these common law rules is discussed in 20 CFR 404.1007 and 26 CFR 31.3121(d)-1(c).) Entity means— (1) A physician's sole practice or a practice of multiple physicians or any other person, sole proprietorship, public or private agency or trust, corporation, partnership, limited liability company, foundation, nonprofit corporation, or unincorporated association that furnishes DHS. An entity does not include the referring physician himself or herself, but does include his or her medical practice. A person or entity is considered to be furnishing DHS if it— (i) Is the person or entity that has performed services that are billed as DHS.

Or (ii) Is the person or entity that has presented a claim to Medicare for the DHS, including the person or entity to which the right to payment for the DHS has been reassigned in accordance with § 424.80(b)(1) (employer) or (b)(2) (payment under a contractual arrangement) of this chapter (other than a health care delivery system that is a health plan (as defined at § 1001.952(l) of this title), and other than any managed care organization (MCO), provider-sponsored organization (PSO), or independent practice association (IPA) with which a health plan contracts for services provided to plan enrollees). (2) A health plan, MCO, PSO, or IPA that employs a supplier or operates a facility that could accept reassignment from a supplier under § 424.80(b)(1) and (b)(2) of this chapter, with respect to any DHS provided by that supplier. (3) For purposes of this subpart, “entity” does not include a physician's practice when it bills Medicare for the technical component or professional component of a diagnostic test for which the anti-markup provision is applicable in accordance with § 414.50 of this chapter and Pub. 100-04, Medicare Claims Processing Manual, Chapter 1, Section 30.2.9.

Fair market value means— (1) General. The value in an arm's-length transaction, consistent with the general market value of the subject transaction. (2) Rental of equipment. With respect to the rental of equipment, the value in an arm's-length transaction of rental property for general commercial purposes (not taking into account its intended use), consistent with the general market value of the subject transaction.

(3) Rental of office space. With respect to the rental of office space, the value in an arm's-length transaction of rental property for general commercial purposes (not taking into account its intended use), without adjustment to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee, and consistent with the general market value of the subject transaction. General market value means— (1) Assets. With respect to the purchase of an asset, the price that an asset would bring on the date of acquisition of the asset as the result of bona fide bargaining between a well-informed buyer and seller that are not otherwise in a position to generate business for each other.

(2) Compensation. With respect to compensation for services, the compensation that would be paid at the time the parties enter into the service arrangement as the result of bona fide bargaining between well-informed parties that are not otherwise in a position to generate business for each other. (3) Rental of equipment or office space. With respect to the rental of equipment or the rental of office space, the price that rental property would bring at the time the parties enter into the rental arrangement as the result of bona fide bargaining between a well-informed lessor and lessee that are not otherwise in a position to generate business for each other.

Home health services means the services described in section 1861(m) of the Act and part 409, subpart E of this chapter. Hospital means any entity that qualifies as a “hospital” under section 1861(e) of the Act, as a “psychiatric hospital” under section 1861(f) of the Act, or as a “critical access hospital” under section 1861(mm)(1) of the Act, and refers to any separate legally organized operating entity plus any subsidiary, related entity, or other entities that perform services for the hospital's patients and for which the hospital bills. However, a “hospital” does not include entities that perform services for hospital patients “under arrangements” with the hospital. HPSA means, for purposes of this subpart, an area designated as a health professional shortage area under section 332(a)(1)(A) of the Public Health Service Act for primary medical care professionals (in accordance with the criteria specified in part 5 of this title).

Immediate family member or member of a physician's immediate family means husband or wife. Birth or adoptive parent, child, or sibling. Stepparent, stepchild, stepbrother, or stepsister. Father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law.

Grandparent or grandchild. And spouse of a grandparent or grandchild. €œIncident to” services or services “incident to” means those services and supplies that meet the requirements of section 1861(s)(2)(A) of the Act, § 410.26 of this chapter, and Pub. 100-02, Medicare Benefit Policy Manual, Chapter 15, Sections 60, 60.1, 60.2, 60.3, and 60.4.

Inpatient hospital services means those services defined in section 1861(b) of the Act and § 409.10(a) and (b) of this chapter and include inpatient psychiatric hospital services listed in section 1861(c) of the Act and inpatient critical access hospital services, as defined in section 1861(mm)(2) of the Act. €œInpatient hospital services” do not include emergency inpatient services provided by a hospital located outside of the U.S. And covered under the authority in section 1814(f)(2) of the Act and part 424, subpart H of this chapter, or emergency inpatient services provided by a nonparticipating hospital within the U.S., as authorized by section 1814(d) of the Act and described in part 424, subpart G of this chapter. €œInpatient hospital services” also do not include dialysis furnished by a hospital that is not certified to provide end-stage renal dialysis (ESRD) services under subpart U of part 405 of this chapter.

€œInpatient hospital services” include services that are furnished either by the hospital directly or under arrangements made by the hospital with others. €œInpatient hospital services” do not include professional services performed by physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse midwives, and certified registered nurse anesthetists and qualified psychologists if Medicare reimburses the services independently and not as part of the Start Printed Page 77659inpatient hospital service (even if they are billed by a hospital under an assignment or reassignment). Interoperable means— (1) Able to securely exchange data with and use data from other health information technology. And (2) Allows for complete access, exchange, and use of all electronically accessible health information for authorized use under applicable State or Federal law.

Isolated financial transaction—(1) Isolated financial transaction means a one-time transaction involving a single payment between two or more persons or a one-time transaction that involves integrally related installment payments, provided that— (i) The total aggregate payment is fixed before the first payment is made and does not take into account the volume or value of referrals or other business generated by the physician. And (ii) The payments are immediately negotiable, guaranteed by a third party, secured by a negotiable promissory note, or subject to a similar mechanism to ensure payment even in the event of default by the purchaser or obligated party. (2) An isolated financial transaction includes a one-time sale of property or a practice, single instance of forgiveness of an amount owed in settlement of a bona fide dispute, or similar one-time transaction, but does not include a single payment for multiple or repeated services (such as payment for services previously provided but not yet compensated). Laboratory means an entity furnishing biological, microbiological, serological, chemical, immunohematological, hematological, biophysical, cytological, pathological, or other examination of materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings.

These examinations also include procedures to determine, measure, or otherwise describe the presence or absence of various substances or organisms in the body. Entities only collecting or preparing specimens (or both) or only serving as a mailing service and not performing testing are not considered laboratories. List of CPT/HCPCS Codes means the list of CPT and HCPCS codes that identifies those items and services that are DHS under section 1877 of the Act or that may qualify for certain exceptions under section 1877 of the Act. It is updated annually, as published in the Federal Register, and is posted on the CMS website at http://www.cms.hhs.gov/​PhysicianSelfReferral/​11_​_​List_​_​of_​_​Codes.asp#TopOfPage.

Locum tenens physician (or substitute physician) means a physician who substitutes in exigent circumstances for another physician, in accordance with section 1842(b)(6)(D) of the Act and Pub. 100-04, Medicare Claims Processing Manual, Chapter 1, Section 30.2.11. Member of the group or member of a group practice means, for purposes of this subpart, a direct or indirect physician owner of a group practice (including a physician whose interest is held by his or her individual professional corporation or by another entity), a physician employee of the group practice (including a physician employed by his or her individual professional corporation that has an equity interest in the group practice), a locum tenens physician (as defined in this section), or an on-call physician while the physician is providing on-call services for members of the group practice. A physician is a member of the group during the time he or she furnishes “patient care services” to the group as defined in this section.

An independent contractor or a leased employee is not a member of the group (unless the leased employee meets the definition of an “employee” under this section). Outpatient hospital services means the therapeutic, diagnostic, and partial hospitalization services listed under sections 1861(s)(2)(B) and (s)(2)(C) of the Act. Outpatient services furnished by a psychiatric hospital, as defined in section 1861(f) of the Act. And outpatient critical access hospital services, as defined in section 1861(mm)(3) of the Act.

€œOutpatient hospital services” do not include emergency services furnished by nonparticipating hospitals and covered under the conditions described in section 1835(b) of the Act and subpart G of part 424 of this chapter. €œOutpatient hospital services” include services that are furnished either by the hospital directly or under arrangements made by the hospital with others. €œOutpatient hospital services” do not include professional services performed by physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse midwives, certified registered nurse anesthetists, and qualified psychologists if Medicare reimburses the services independently and not as part of the outpatient hospital service (even if they are billed by a hospital under an assignment or reassignment). Outpatient prescription drugs means all drugs covered by Medicare Part B or D, except for those drugs that are “covered ancillary services,” as defined at § 416.164(b) of this chapter, for which separate payment is made to an ambulatory surgical center.

Parenteral and enteral nutrients, equipment, and supplies means the following services (including all HCPCS level 2 codes for these services). (1) Parenteral nutrients, equipment, and supplies, meaning those items and supplies needed to provide nutriment to a patient with permanent, severe pathology of the alimentary tract that does not allow absorption of sufficient nutrients to maintain strength commensurate with the patient's general condition, as described in Pub. 100-03, Medicare National Coverage Determinations Manual, Chapter 1, Section 180.2, as amended or replaced from time to time. And (2) Enteral nutrients, equipment, and supplies, meaning items and supplies needed to provide enteral nutrition to a patient with a functioning gastrointestinal tract who, due to pathology to or nonfunction of the structures that normally permit food to reach the digestive tract, cannot maintain weight and strength commensurate with his or her general condition, as described in Pub.

100-03, Medicare National Coverage Determinations Manual, Chapter 1, Section 180.2. Patient care services means any task(s) performed by a physician in the group practice that address the medical needs of specific patients or patients in general, regardless of whether they involve direct patient encounters or generally benefit a particular practice. Patient care services can include, for example, the services of physicians who do not directly treat patients, such as time spent by a physician consulting with other physicians or reviewing laboratory tests, or time spent training staff members, arranging for equipment, or performing administrative or management tasks. Physical therapy, occupational therapy, and outpatient speech-language pathology services means those particular services so identified on the List of CPT/HCPCS Codes.

All services so identified on the List of CPT/HCPCS Codes are physical therapy, occupational therapy, and outpatient speech-language pathology services for purposes of this subpart. Any service not specifically identified as physical therapy, occupational therapy or outpatient speech-language pathology on the List of CPT/HCPCS Codes is not a physical therapy, occupational Start Printed Page 77660therapy, or outpatient speech-language pathology service for purposes of this subpart. The list of codes identifying physical therapy, occupational therapy, and outpatient speech-language pathology services for purposes of this regulation includes the following. (1) Physical therapy services, meaning those outpatient physical therapy services described in section 1861(p) of the Act that are covered under Medicare Part A or Part B, regardless of who provides them, if the services include— (i) Assessments, function tests, and measurements of strength, balance, endurance, range of motion, and activities of daily living.

(ii) Therapeutic exercises, massage, and use of physical medicine modalities, assistive devices, and adaptive equipment. Or (iii) Establishment of a maintenance therapy program for an individual whose restoration potential has been reached. However, maintenance therapy itself is not covered as part of these services. (2) Occupational therapy services, meaning those services described in section 1861(g) of the Act that are covered under Medicare Part A or Part B, regardless of who provides them, if the services include— (i) Teaching of compensatory techniques to permit an individual with a physical or cognitive impairment or limitation to engage in daily activities.

(ii) Evaluation of an individual's level of independent functioning. (iii) Selection and teaching of task-oriented therapeutic activities to restore sensory-integrative function. Or (iv) Assessment of an individual's vocational potential, except when the assessment is related solely to vocational rehabilitation. (3) Outpatient speech-language pathology services, meaning those services as described in section 1861(ll)(2) of the Act that are for the diagnosis and treatment of speech, language, and cognitive disorders that include swallowing and other oral-motor dysfunctions.

Physician has the meaning set forth in section 1861(r) of the Act. A physician and the professional corporation of which he or she is a sole owner are the same for purposes of this subpart. Physician in the group practice means a member of the group practice, as well as an independent contractor physician during the time the independent contractor is furnishing patient care services (as defined in this section) for the group practice under a contractual arrangement directly with the group practice to provide services to the group practice's patients in the group practice's facilities. The contract must contain the same restrictions on compensation that apply to members of the group practice under § 411.352(g) (or the contract must satisfy the requirements of the personal service arrangements exception in § 411.357(d)), and the independent contractor's arrangement with the group practice must comply with the reassignment rules in § 424.80(b)(2) of this chapter (see also Pub.

L. 100-04, Medicare Claims Processing Manual, Chapter 1, Section 30.2.7, as amended or replaced from time to time). Referrals from an independent contractor who is a physician in the group practice are subject to the prohibition on referrals in § 411.353(a), and the group practice is subject to the limitation on billing for those referrals in § 411.353(b). Physician incentive plan means any compensation arrangement between an entity (or downstream contractor) and a physician or physician group that may directly or indirectly have the effect of reducing or limiting services furnished with respect to individuals enrolled with the entity.

Physician organization means a physician, a physician practice, or a group practice that complies with the requirements of § 411.352. Plan of care means the establishment by a physician of a course of diagnosis or treatment (or both) for a particular patient, including the ordering of services. Professional courtesy means the provision of free or discounted health care items or services to a physician or his or her immediate family members or office staff. Prosthetics, Orthotics, and Prosthetic Devices and Supplies means the following services (including all HCPCS level 2 codes for these items and services that are covered by Medicare).

(1) Orthotics, meaning leg, arm, back, and neck braces, as listed in section 1861(s)(9) of the Act. (2) Prosthetics, meaning artificial legs, arms, and eyes, as described in section 1861(s)(9) of the Act. (3) Prosthetic devices, meaning devices (other than a dental device) listed in section 1861(s)(8) of the Act that replace all or part of an internal body organ, including colostomy bags, and one pair of conventional eyeglasses or contact lenses furnished subsequent to each cataract surgery with insertion of an intraocular lens. (4) Prosthetic supplies, meaning supplies that are necessary for the effective use of a prosthetic device (including supplies directly related to colostomy care).

Radiation therapy services and supplies means those particular services and supplies, including (effective January 1, 2007) therapeutic nuclear medicine services and supplies, so identified on the List of CPT/HCPCS Codes. All services and supplies so identified on the List of CPT/HCPCS Codes are radiation therapy services and supplies for purposes of this subpart. Any service or supply not specifically identified as radiation therapy services or supplies on the List of CPT/HCPCS Codes is not a radiation therapy service or supply for purposes of this subpart. The list of codes identifying radiation therapy services and supplies is based on section 1861(s)(4) of the Act and § 410.35 of this chapter.

Radiology and certain other imaging services means those particular services so identified on the List of CPT/HCPCS Codes. All services identified on the List of CPT/HCPCS Codes are radiology and certain other imaging services for purposes of this subpart. Any service not specifically identified as radiology and certain other imaging services on the List of CPT/HCPCS Codes is not a radiology or certain other imaging service for purposes of this subpart. The list of codes identifying radiology and certain other imaging services includes the professional and technical components of any diagnostic test or procedure using x-rays, ultrasound, computerized axial tomography, magnetic resonance imaging, nuclear medicine (effective January 1, 2007), or other imaging services.

All codes identified as radiology and certain other imaging services are covered under section 1861(s)(3) of the Act and §§ 410.32 and 410.34 of this chapter, but do not include— (1) X-ray, fluoroscopy, or ultrasound procedures that require the insertion of a needle, catheter, tube, or probe through the skin or into a body orifice. (2) Radiology or certain other imaging services that are integral to the performance of a medical procedure that is not identified on the list of CPT/HCPCS codes as a radiology or certain other imaging service and is performed— (i) Immediately prior to or during the medical procedure. Or (ii) Immediately following the medical procedure when necessary to confirm placement of an item placed during the medical procedure. (3) Radiology and certain other imaging services that are “covered ancillary services,” as defined at § 416.164(b), for which separate payment is made to an ASC.

Referral— (1) Means either of the following:Start Printed Page 77661 (i) Except as provided in paragraph (2) of this definition, the request by a physician for, or ordering of, or the certifying or recertifying of the need for, any designated health service for which payment may be made under Medicare Part B, including a request for a consultation with another physician and any test or procedure ordered by or to be performed by (or under the supervision of) that other physician, but not including any designated health service personally performed or provided by the referring physician. A designated health service is not personally performed or provided by the referring physician if it is performed or provided by any other person, including, but not limited to, the referring physician's employees, independent contractors, or group practice members. (ii) Except as provided in paragraph (2) of this definition, a request by a physician that includes the provision of any designated health service for which payment may be made under Medicare, the establishment of a plan of care by a physician that includes the provision of such a designated health service, or the certifying or recertifying of the need for such a designated health service, but not including any designated health service personally performed or provided by the referring physician. A designated health service is not personally performed or provided by the referring physician if it is performed or provided by any other person including, but not limited to, the referring physician's employees, independent contractors, or group practice members.

(2) Does not include a request by a pathologist for clinical diagnostic laboratory tests and pathological examination services, by a radiologist for diagnostic radiology services, and by a radiation oncologist for radiation therapy or ancillary services necessary for, and integral to, the provision of radiation therapy, if— (i) The request results from a consultation initiated by another physician (whether the request for a consultation was made to a particular physician or to an entity with which the physician is affiliated). And (ii) The tests or services are furnished by or under the supervision of the pathologist, radiologist, or radiation oncologist, or under the supervision of a pathologist, radiologist, or radiation oncologist, respectively, in the same group practice as the pathologist, radiologist, or radiation oncologist. (3) Can be in any form, including, but not limited to, written, oral, or electronic. (4) A referral is not an item or service for purposes of section 1877 of the Act and this subpart.

Referring physician means a physician who makes a referral as defined in this section or who directs another person or entity to make a referral or who controls referrals made by another person or entity. A referring physician and the professional corporation of which he or she is a sole owner are the same for purposes of this subpart. Remuneration means any payment or other benefit made directly or indirectly, overtly or covertly, in cash or in kind, except that the following are not considered remuneration for purposes of this section. (1) The forgiveness of amounts owed for inaccurate tests or procedures, mistakenly performed tests or procedures, or the correction of minor billing errors.

(2) The furnishing of items, devices, or supplies that are, in fact, used solely for one or more of the following purposes. (i) Collecting specimens for the entity furnishing the items, devices or supplies. (ii) Transporting specimens for the entity furnishing the items, devices or supplies. (iii) Processing specimens for the entity furnishing the items, devices or supplies.

(iv) Storing specimens for the entity furnishing the items, devices or supplies. (v) Ordering tests or procedures for the entity furnishing the items, devices or supplies. Or (vi) Communicating the results of tests or procedures for the entity furnishing the items, devices or supplies. (3) A payment made by an insurer or a self-insured plan (or a subcontractor of the insurer or self-insured plan) to a physician to satisfy a claim, submitted on a fee-for-service basis, for the furnishing of health services by that physician to an individual who is covered by a policy with the insurer or by the self-insured plan, if— (i) The health services are not furnished, and the payment is not made, under a contract or other arrangement between the insurer or the self-insured plan (or a subcontractor of the insurer or self-insured plan) and the physician.

(ii) The payment is made to the physician on behalf of the covered individual and would otherwise be made directly to the individual. And (iii) The amount of the payment is set in advance, does not exceed fair market value, and is not determined in any manner that takes into account the volume or value of referrals. Rural area means an area that is not an urban area as defined at § 412.62(f)(1)(ii) of this chapter. Same building means a structure with, or combination of structures that share, a single street address as assigned by the U.S.

Postal Service, excluding all exterior spaces (for example, lawns, courtyards, driveways, parking lots) and interior loading docks or parking garages. For purposes of this section, the “same building” does not include a mobile vehicle, van, or trailer. Specialty hospital means. (1) A subsection (d) hospital (as defined in section 1886(d)(1)(B) of the Act) that is primarily or exclusively engaged in the care and treatment of one of the following.

(i) Patients with a cardiac condition. (ii) Patients with an orthopedic condition. (iii) Patients receiving a surgical procedure. Or (iv) Any other specialized category of services that the Secretary designates as inconsistent with the purpose of permitting physician ownership and investment interests in a hospital.

(2) A “specialty hospital” does not include any hospital— (i) Determined by the Secretary to be in operation before or under development as of November 18, 2003. (ii) For which the number of physician investors at any time on or after such date is no greater than the number of such investors as of such date. (iii) For which the type of categories described above is no different at any time on or after such date than the type of such categories as of such date. (iv) For which any increase in the number of beds occurs only in the facilities on the main campus of the hospital and does not exceed 50 percent of the number of beds in the hospital as of November 18, 2003, or 5 beds, whichever is greater.

And (v) That meets such other requirements as the Secretary may specify. Target patient population means an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that— (1) Are set out in writing in advance of the commencement of the value-based arrangement. And (2) Further the value-based enterprise's value-based purpose(s). Transaction means an instance of two or more persons or entities doing business.

Value-based activity means any of the following activities, provided that the Start Printed Page 77662activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise. (1) The provision of an item or service. (2) The taking of an action. Or (3) The refraining from taking an action.

Value-based arrangement means an arrangement for the provision of at least one value-based activity for a target patient population to which the only parties are— (1) The value-based enterprise and one or more of its VBE participants. Or (2) VBE participants in the same value-based enterprise. Value-based enterprise (VBE) means two or more VBE participants— (1) Collaborating to achieve at least one value-based purpose. (2) Each of which is a party to a value-based arrangement with the other or at least one other VBE participant in the value-based enterprise.

(3) That have an accountable body or person responsible for the financial and operational oversight of the value-based enterprise. And (4) That have a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s). Value-based purpose means any of the following. (1) Coordinating and managing the care of a target patient population.

(2) Improving the quality of care for a target patient population. (3) Appropriately reducing the costs to or growth in expenditures of payors without reducing the quality of care for a target patient population. Or (4) Transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population. VBE participant means a person or entity that engages in at least one value-based activity as part of a value-based enterprise.

Group practice. For purposes of this subpart, a group practice is a physician practice that meets the following conditions. (a) Single legal entity. The group practice must consist of a single legal entity operating primarily for the purpose of being a physician group practice in any organizational form recognized by the State in which the group practice achieves its legal status, including, but not limited to, a partnership, professional corporation, limited liability company, foundation, nonprofit corporation, faculty practice plan, or similar association.

The single legal entity may be organized by any party or parties, including, but not limited to, physicians, health care facilities, or other persons or entities (including, but not limited to, physicians individually incorporated as professional corporations). The single legal entity may be organized or owned (in whole or in part) by another medical practice, provided that the other medical practice is not an operating physician practice (and regardless of whether the medical practice meets the conditions for a group practice under this section). For purposes of this subpart, a single legal entity does not include informal affiliations of physicians formed substantially to share profits from referrals, or separate group practices under common ownership or control through a physician practice management company, hospital, health system, or other entity or organization. A group practice that is otherwise a single legal entity may itself own subsidiary entities.

A group practice operating in more than one State will be considered to be a single legal entity notwithstanding that it is composed of multiple legal entities, provided that— (1) The States in which the group practice is operating are contiguous (although each State need not be contiguous to every other State). (2) The legal entities are absolutely identical as to ownership, governance, and operation. And (3) Organization of the group practice into multiple entities is necessary to comply with jurisdictional licensing laws of the States in which the group practice operates. (b) Physicians.

The group practice must have at least two physicians who are members of the group (whether employees or direct or indirect owners), as defined at § 411.351. (c) Range of care. Each physician who is a member of the group, as defined at § 411.351, must furnish substantially the full range of patient care services that the physician routinely furnishes, including medical care, consultation, diagnosis, and treatment, through the joint use of shared office space, facilities, equipment, and personnel. (d) Services furnished by group practice members.

(1) Except as otherwise provided in paragraphs (d)(3) through (6) of this section, substantially all of the patient care services of the physicians who are members of the group (that is, at least 75 percent of the total patient care services of the group practice members) must be furnished through the group and billed under a billing number assigned to the group, and the amounts received must be treated as receipts of the group. Patient care services must be measured by one of the following. (i) The total time each member spends on patient care services documented by any reasonable means (including, but not limited to, time cards, appointment schedules, or personal diaries). (For example, if a physician practices 40 hours a week and spends 30 hours a week on patient care services for a group practice, the physician has spent 75 percent of his or her time providing patient care services for the group.) (ii) Any alternative measure that is reasonable, fixed in advance of the performance of the services being measured, uniformly applied over time, verifiable, and documented.

(2) The data used to calculate compliance with this substantially all test and related supportive documentation must be made available to the Secretary upon request. (3) The substantially all test set forth in paragraph (d)(1) of this section does not apply to any group practice that is located solely in a HPSA, as defined at § 411.351. (4) For a group practice located outside of a HPSA (as defined at § 411.351), any time spent by a group practice member providing services in a HPSA should not be used to calculate whether the group practice has met the substantially all test, regardless of whether the member's time in the HPSA is spent in a group practice, clinic, or office setting. (5) During the start up period (not to exceed 12 months) that begins on the date of the initial formation of a new group practice, a group practice must make a reasonable, good faith effort to ensure that the group practice complies with the substantially all test requirement set forth in paragraph (d)(1) of this section as soon as practicable, but no later than 12 months from the date of the initial formation of the group practice.

This paragraph (d)(5) does not apply when an existing group practice admits a new member or reorganizes. (6)(i) If the addition to an existing group practice of a new member who would be considered to have relocated his or her medical practice under § 411.357(e)(2) would result in the existing group practice not meeting the substantially all test set forth in paragraph (d)(1) of this section, the group practice will have 12 months following the addition of the new member to come back into full compliance, provided that— (A) For the 12-month period the group practice is fully compliant with the substantially all test if the new member Start Printed Page 77663is not counted as a member of the group for purposes of § 411.352. And (B) The new member's employment with, or ownership interest in, the group practice is documented in writing no later than the beginning of his or her new employment, ownership, or investment. (ii) This paragraph (d)(6) does not apply when an existing group practice reorganizes or admits a new member who is not relocating his or her medical practice.

(e) Distribution of expenses and income. The overhead expenses of, and income from, the practice must be distributed according to methods that are determined before the receipt of payment for the services giving rise to the overhead expense or producing the income. Nothing in this section prevents a group practice from adjusting its compensation methodology prospectively, subject to restrictions on the distribution of revenue from DHS under paragraph (i) of this section. (f) Unified business.

(1) The group practice must be a unified business having at least the following features. (i) Centralized decision-making by a body representative of the group practice that maintains effective control over the group's assets and liabilities (including, but not limited to, budgets, compensation, and salaries). And (ii) Consolidated billing, accounting, and financial reporting. (2) Location and specialty-based compensation practices are permitted with respect to revenues derived from services that are not DHS and may be permitted with respect to revenues derived from DHS under paragraph (i) of this section.

(g) Volume or value of referrals. No physician who is a member of the group practice directly or indirectly receives compensation based on the volume or value of his or her referrals, except as provided in paragraph (i) of this section. (h) Physician-patient encounters. Members of the group must personally conduct no less than 75 percent of the physician-patient encounters of the group practice.

(i) Special rule for productivity bonuses and profit shares. (1) A physician in the group practice may be paid a share of overall profits of the group, provided that the share is not determined in any manner that is directly related to the volume or value of referrals of DHS by the physician. A physician in the group practice may be paid a productivity bonus based on services that he or she has personally performed, or services “incident to” such personally performed services, or both, provided that the bonus is not determined in any manner that is directly related to the volume or value of referrals of DHS by the physician (except that the bonus may directly relate to the volume or value of DHS referrals by the physician if the referrals are for services “incident to” the physician's personally performed services). (2) Overall profits means the group's entire profits derived from DHS payable by Medicare or Medicaid or the profits derived from DHS payable by Medicare or Medicaid of any component of the group practice that consists of at least five physicians.

Overall profits should be divided in a reasonable and verifiable manner that is not directly related to the volume or value of the physician's referrals of DHS. The share of overall profits will be deemed not to relate directly to the volume or value of referrals if one of the following conditions is met. (i) The group's profits are divided per capita (for example, per member of the group or per physician in the group). (ii) Revenues derived from DHS are distributed based on the distribution of the group practice's revenues attributed to services that are not DHS payable by any Federal health care program or private payer.

(iii) Revenues derived from DHS constitute less than 5 percent of the group practice's total revenues, and the allocated portion of those revenues to each physician in the group practice constitutes 5 percent or less of his or her total compensation from the group. (3) A productivity bonus must be calculated in a reasonable and verifiable manner that is not directly related to the volume or value of the physician's referrals of DHS. A productivity bonus will be deemed not to relate directly to the volume or value of referrals of DHS if one of the following conditions is met. (i) The bonus is based on the physician's total patient encounters or relative value units (RVUs).

(The methodology for establishing RVUs is set forth in § 414.22 of this chapter.) (ii) The bonus is based on the allocation of the physician's compensation attributable to services that are not DHS payable by any Federal health care program or private payer. (iii) Revenues derived from DHS are less than 5 percent of the group practice's total revenues, and the allocated portion of those revenues to each physician in the group practice constitutes 5 percent or less of his or her total compensation from the group practice. (4) Supporting documentation verifying the method used to calculate the profit share or productivity bonus under paragraphs (i)(2) and (3) of this section, and the resulting amount of compensation, must be made available to the Secretary upon request. Prohibition on certain referrals by physicians and limitations on billing.

(a) Prohibition on referrals. Except as provided in this subpart, a physician who has a direct or indirect financial relationship with an entity, or who has an immediate family member who has a direct or indirect financial relationship with the entity, may not make a referral to that entity for the furnishing of DHS for which payment otherwise may be made under Medicare. A physician's prohibited financial relationship with an entity that furnishes DHS is not imputed to his or her group practice or its members or its staff. However, a referral made by a physician's group practice, its members, or its staff may be imputed to the physician if the physician directs the group practice, its members, or its staff to make the referral or if the physician controls referrals made by his or her group practice, its members, or its staff.

(b) Limitations on billing. An entity that furnishes DHS pursuant to a referral that is prohibited by paragraph (a) of this section may not present or cause to be presented a claim or bill to the Medicare program or to any individual, third party payer, or other entity for the DHS performed pursuant to the prohibited referral. (c) Denial of payment for services furnished under a prohibited referral. (1) Except as provided in paragraph (e) of this section, no Medicare payment may be made for a designated health service that is furnished pursuant to a prohibited referral.

(2) When payment for a designated health service is denied on the basis that the service was furnished pursuant to a prohibited referral, and such payment denial is appealed— (i) The ultimate burden of proof (burden of persuasion) at each level of appeal is on the entity submitting the claim for payment to establish that the service was not furnished pursuant to a prohibited referral (and not on CMS or its contractors to establish that the service was furnished pursuant to a prohibited referral). And (ii) The burden of production on each issue at each level of appeal is initially on the claimant, but may shift to CMS or its contractors during the course of the appellate proceeding, depending on the evidence presented by the claimant. (d) Refunds. An entity that collects payment for a designated health service that was performed pursuant to a prohibited referral must refund all Start Printed Page 77664collected amounts on a timely basis, as defined at § 1003.101 of this title.

(e) Exception for certain entities. Payment may be made to an entity that submits a claim for a designated health service if— (1) The entity did not have actual knowledge of, and did not act in reckless disregard or deliberate ignorance of, the identity of the physician who made the referral of the designated health service to the entity. And (2) The claim otherwise complies with all applicable Federal and State laws, rules, and regulations. (f) Exception for certain arrangements involving temporary noncompliance.

(1) Except as provided in paragraphs (f)(2) through (4) of this section, an entity may submit a claim or bill and payment may be made to an entity that submits a claim or bill for a designated health service if— (i) The financial relationship between the entity and the referring physician fully complied with an applicable exception under § 411.355, 411.356, or 411.357 for at least 180 consecutive calendar days immediately preceding the date on which the financial relationship became noncompliant with the exception. And (ii) The financial relationship has fallen out of compliance with the exception for reasons beyond the control of the entity, and the entity promptly takes steps to rectify the noncompliance. (2) Paragraph (f)(1) of this section applies only to DHS furnished during the period of time it takes the entity to rectify the noncompliance, which must not exceed 90 consecutive calendar days following the date on which the financial relationship became noncompliant with an exception. (3) Paragraph (f)(1) may be used by an entity only once every 3 years with respect to the same referring physician.

(4) Paragraph (f)(1) does not apply if the exception with which the financial relationship previously complied was § 411.357(k) or (m). (g) [Reserved] (h) Special rule for reconciling compensation. An entity may submit a claim or bill and payment may be made to an entity that submits a claim or bill for a designated health service if— (1) No later than 90 consecutive calendar days following the expiration or termination of a compensation arrangement, the entity and the physician (or immediate family member of a physician) that are parties to the compensation arrangement reconcile all discrepancies in payments under the arrangement such that, following the reconciliation, the entire amount of remuneration for items or services has been paid as required under the terms and conditions of the arrangement. And (2) Except for the discrepancies in payments described in paragraph (h)(1) of this section, the compensation arrangement fully complies with an applicable exception in this subpart.

Financial relationship, compensation, and ownership or investment interest. (a) Financial relationships—(1) Financial relationship means— (i) A direct or indirect ownership or investment interest (as defined in paragraph (b) of this section) in any entity that furnishes DHS. Or (ii) A direct or indirect compensation arrangement (as defined in paragraph (c) of this section) with an entity that furnishes DHS. (2) Types of financial relationships.

(i) A direct financial relationship exists if remuneration passes between the referring physician (or a member of his or her immediate family) and the entity furnishing DHS without any intervening persons or entities between the entity furnishing DHS and the referring physician (or a member of his or her immediate family). (ii) An indirect financial relationship exists under the conditions described in paragraphs (b)(5) and (c)(2) of this section. (b) Ownership or investment interest. An ownership or investment interest in the entity may be through equity, debt, or other means, and includes an interest in an entity that holds an ownership or investment interest in any entity that furnishes DHS.

(1) An ownership or investment interest includes, but is not limited to, stock, stock options other than those described in paragraph (b)(3)(ii) of this section, partnership shares, limited liability company memberships, as well as loans, bonds, or other financial instruments that are secured with an entity's property or revenue or a portion of that property or revenue. (2) An ownership or investment interest in a subsidiary company is neither an ownership or investment interest in the parent company, nor in any other subsidiary of the parent, unless the subsidiary company itself has an ownership or investment interest in the parent or such other subsidiaries. It may, however, be part of an indirect financial relationship. (3) Ownership and investment interests do not include, among other things— (i) An interest in an entity that arises from a retirement plan offered by that entity to the physician (or a member of his or her immediate family) through the physician's (or immediate family member's) employment with that entity.

(ii) Stock options and convertible securities received as compensation until the stock options are exercised or the convertible securities are converted to equity (before this time the stock options or convertible securities are compensation arrangements as defined in paragraph (c) of this section). (iii) An unsecured loan subordinated to a credit facility (which is a compensation arrangement as defined in paragraph (c) of this section). (iv) An “under arrangements” contract between a hospital and an entity owned by one or more physicians (or a group of physicians) providing DHS “under arrangements” with the hospital (such a contract is a compensation arrangement as defined in paragraph (c) of this section). (v) A security interest held by a physician in equipment sold by the physician to a hospital and financed through a loan from the physician to the hospital (such an interest is a compensation arrangement as defined in paragraph (c) of this section).

(vi) A titular ownership or investment interest that excludes the ability or right to receive the financial benefits of ownership or investment, including, but not limited to, the distribution of profits, dividends, proceeds of sale, or similar returns on investment. Or (vii) An interest in an entity that arises from an employee stock ownership plan (ESOP) that is qualified under Internal Revenue Code section 401(a). (4) An ownership or investment interest that meets an exception set forth in § 411.355 or § 411.356 need not also meet an exception for compensation arrangements set forth in § 411.357 with respect to profit distributions, dividends, or interest payments on secured obligations. (5)(i) An indirect ownership or investment interest exists if— (A) Between the referring physician (or immediate family member) and the entity furnishing DHS there exists an unbroken chain of any number (but no fewer than one) of persons or entities having ownership or investment interests.

And (B) The entity furnishing DHS has actual knowledge of, or acts in reckless disregard or deliberate ignorance of, the fact that the referring physician (or immediate family member) has some ownership or investment interest (through any number of intermediary ownership or investment interests) in the entity furnishing the DHS.Start Printed Page 77665 (ii) An indirect ownership or investment interest exists even though the entity furnishing DHS does not know, or acts in reckless disregard or deliberate ignorance of, the precise composition of the unbroken chain or the specific terms of the ownership or investment interests that form the links in the chain. (iii) Notwithstanding anything in this paragraph (b)(5), common ownership or investment in an entity does not, in and of itself, establish an indirect ownership or investment interest by one common owner or investor in another common owner or investor. (iv) An indirect ownership or investment interest requires an unbroken chain of ownership interests between the referring physician and the entity furnishing DHS such that the referring physician has an indirect ownership or investment interest in the entity furnishing DHS. (c) Compensation arrangement.

A compensation arrangement is any arrangement involving remuneration, direct or indirect, between a physician (or a member of a physician's immediate family) and an entity. An “under arrangements” contract between a hospital and an entity providing DHS “under arrangements” to the hospital creates a compensation arrangement for purposes of these regulations. A compensation arrangement does not include the portion of any business arrangement that consists solely of the remuneration described in section 1877(h)(1)(C) of the Act and in paragraphs (1) through (3) of the definition of the term “remuneration” at § 411.351. (However, any other portion of the arrangement may still constitute a compensation arrangement.) (1)(i) A direct compensation arrangement exists if remuneration passes between the referring physician (or a member of his or her immediate family) and the entity furnishing DHS without any intervening persons or entities.

(ii) Except as provided in paragraph (c)(3)(ii)(C) of this section, a physician is deemed to “stand in the shoes” of his or her physician organization and have a direct compensation arrangement with an entity furnishing DHS if— (A) The only intervening entity between the physician and the entity furnishing DHS is his or her physician organization. And (B) The physician has an ownership or investment interest in the physician organization. (iii) A physician (other than a physician described in paragraph (c)(1)(ii)(B) of this section) is permitted to “stand in the shoes” of his or her physician organization and have a direct compensation arrangement with an entity furnishing DHS if the only intervening entity between the physician and the entity furnishing DHS is his or her physician organization. (2) An indirect compensation arrangement exists if all of the conditions of paragraphs (c)(2)(i) through (iii) of this section exist.

(i) Between the referring physician (or a member of his or her immediate family) and the entity furnishing DHS there exists an unbroken chain of any number (but not fewer than one) of persons or entities that have financial relationships (as defined in paragraph (a) of this section) between them (that is, each link in the chain has either an ownership or investment interest or a compensation arrangement with the preceding link). (ii)(A) The referring physician (or immediate family member) receives aggregate compensation from the person or entity in the chain with which the physician (or immediate family member) has a direct financial relationship that varies with the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS and the individual unit of compensation received by the physician (or immediate family member)— (1) Is not fair market value for items or services actually provided. (2) Includes the physician's referrals to the entity furnishing DHS as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the number or value of the physician's referrals to the entity. Or (3) Includes other business generated by the physician for the entity furnishing DHS as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the physician's generation of other business for the entity.

(B) For purposes of applying paragraph (c)(2)(ii)(A) of this section, a positive correlation between two variables exists when one variable decreases as the other variable decreases, or one variable increases as the other variable increases. (C) If the financial relationship between the physician (or immediate family member) and the person or entity in the chain with which the referring physician (or immediate family member) has a direct financial relationship is an ownership or investment interest, the determination whether the aggregate compensation varies with the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS will be measured by the nonownership or noninvestment interest closest to the referring physician (or immediate family member). (For example, if a referring physician has an ownership interest in company A, which owns company B, which has a compensation arrangement with company C, which has a compensation arrangement with entity D that furnishes DHS, we would look to the aggregate compensation between company B and company C for purposes of this paragraph (c)(2)(ii)). (iii) The entity furnishing DHS has actual knowledge of, or acts in reckless disregard or deliberate ignorance of, the fact that the referring physician (or immediate family member) receives aggregate compensation that varies with the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS.

(iv)(A) For purposes of paragraph (c)(2)(i) of this section, except as provided in paragraph (c)(3)(ii)(C) of this section, a physician is deemed to “stand in the shoes” of his or her physician organization if the physician has an ownership or investment interest in the physician organization. (B) For purposes of paragraph (c)(2)(i) of this section, a physician (other than a physician described in paragraph (c)(2)(iv)(A) of this section) is permitted to “stand in the shoes” of his or her physician organization. (3)(i) For purposes of paragraphs (c)(1)(ii) and (c)(2)(iv) of this section, a physician who “stands in the shoes” of his or her physician organization is deemed to have the same compensation arrangements (with the same parties and on the same terms) as the physician organization. When applying the exceptions in §§ 411.355 and 411.357 to arrangements in which a physician stands in the shoes of his or her physician organization, the “parties to the arrangements” are considered to be— (A) With respect to a signature requirement, the physician organization and any physician who “stands in the shoes” of the physician organization as required under paragraph (c)(1)(ii) or (c)(2)(iv)(A) of this section.

And (B) With respect to all other requirements of the exception, including the relevant referrals and other business generated between the parties, the entity furnishing DHS and the physician organization (including Start Printed Page 77666all members, employees, and independent contractor physicians). (ii) The provisions of paragraphs (c)(1)(ii) and (c)(2)(iv)(A) of this section— (A) Need not apply during the original term or current renewal term of an arrangement that satisfied the requirements of § 411.357(p) as of September 5, 2007 (see 42 CFR parts 400-413, revised as of October 1, 2007). (B) Do not apply to an arrangement that satisfies the requirements of § 411.355(e). And (C) Do not apply to a physician whose ownership or investment interest is titular only.

A titular ownership or investment interest is an ownership or investment interest that excludes the ability or right to receive the financial benefits of ownership or investment, including, but not limited to, the distribution of profits, dividends, proceeds of sale, or similar returns on investment. (iii) An arrangement structured to comply with an exception in § 411.357 (other than § 411.357(p)), but which would otherwise qualify as an indirect compensation arrangement under this paragraph as of August 19, 2008, need not be restructured to satisfy the requirements of § 411.357(p) until the expiration of the original term or current renewal term of the arrangement. (4)(i) Exceptions applicable to indirect compensation arrangements—General. Except as provided in this paragraph (c)(4) of this section, only the exceptions at §§ 411.355 and 411.357(p) are applicable to indirect compensation arrangements.

(ii) Special rule for indirect compensation arrangements involving a MCO or IPA and a referring physician. Only the exceptions at §§ 411.355, 411.357(n), and 411.357(p) are applicable in the case of an indirect compensation arrangement in which the entity furnishing DHS described in paragraph (c)(2)(i) of this section is a MCO or IPA. (iii) Special rule for indirect compensation arrangements involving value-based arrangements. When an unbroken chain described in paragraph (c)(2)(i) of this section includes a value-based arrangement (as defined at § 411.351) to which the physician (or the physician organization in whose shoes the physician stands under this paragraph) is a direct party— (A) Only the exceptions at §§ 411.355, 411.357(p), and 411.357(aa) are applicable to the indirect compensation arrangement if the entity furnishing DHS is not a MCO or IPA.

And (B) Only the exceptions at §§ 411.355, 411.357(n), 411.357(p), and 411.357(aa) are applicable to the indirect compensation arrangement if the entity furnishing DHS is a MCO or IPA. (d) Special rules on compensation. The following special rules apply only to compensation under section 1877 of the Act and subpart J of this part. (1) Set in advance.

(i) Compensation is deemed to be “set in advance” if the aggregate compensation, a time-based or per-unit of service-based (whether per-use or per-service) amount, or a specific formula for calculating the compensation is set out in writing before the furnishing of the items, services, office space, or equipment for which the compensation is to be paid. The formula for determining the compensation must be set forth in sufficient detail so that it can be objectively verified. (ii) Notwithstanding paragraph (d)(1)(i) of this section, compensation (or a formula for determining the compensation) may be modified at any time during the course of a compensation arrangement and satisfy the requirement that it is “set in advance” if all of the following conditions are met. (A) All requirements of an applicable exception in §§ 411.355 through 411.357 are met on the effective date of the modified compensation (or the formula for determining the modified compensation).

(B) The modified compensation (or the formula for determining the modified compensation) is determined before the furnishing of the items, services, office space, or equipment for which the modified compensation is to be paid. (C) Before the furnishing of the items, services, office space, or equipment for which the modified compensation is to be paid, the formula for the modified compensation is set forth in writing in sufficient detail so that it can be objectively verified. Paragraph (e)(4) of this section does not apply for purposes of this paragraph (d)(1)(ii)(C). (2) Unit-based compensation and the volume or value standard.

Unit-based compensation (including time-based or per-unit of service-based compensation) is deemed not to take into account the volume or value of referrals if the compensation is fair market value for items or services actually provided and does not vary during the course of the compensation arrangement in any manner that takes into account referrals of designated health services. This paragraph (d)(2) does not apply for purposes of paragraphs (d)(5)(i) and (6)(i) of this section. (3) Unit-based compensation and the other business generated standard. Unit-based compensation (including time-based or per-unit of service-based compensation) is deemed not to take into account other business generated between the parties or other business generated by the referring physician if the compensation is fair market value for items and services actually provided and does not vary during the course of the compensation arrangement in any manner that takes into account referrals or other business generated by the referring physician, including private pay health care business (except for services personally performed by the referring physician, which are not considered “other business generated” by the referring physician).

This paragraph (d)(3) does not apply for purposes of paragraphs (d)(5)(ii) and (d)(6)(ii) of this section. (4) Directed referral requirement. If a physician's compensation under a bona fide employment relationship, personal service arrangement, or managed care contract is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, all of the following conditions must be met. (i) The compensation, or a formula for determining the compensation, is set in advance for the duration of the arrangement.

Any changes to the compensation (or the formula for determining the compensation) must be made prospectively. (ii) The compensation is consistent with the fair market value of the physician's services. (iii) The compensation arrangement otherwise satisfies the requirements of an applicable exception at § 411.355 or § 411.357. (iv) The compensation arrangement complies with both of the following conditions.

(A) The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties. (B) The requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment.

(v) The required referrals relate solely to the physician's services covered by the scope of the employment, personal service arrangement, or managed care contract, and the referral requirement is reasonably necessary to effectuate the legitimate business purposes of the compensation arrangement. In no event may the physician be required to make Start Printed Page 77667referrals that relate to services that are not provided by the physician under the scope of his or her employment, personal service arrangement, or managed care contract. (vi) Regardless of whether the physician's compensation takes into account the volume or value of referrals by the physician as set forth at paragraph (d)(5)(i) of this section, neither the existence of the compensation arrangement nor the amount of the compensation is contingent on the number or value of the physician's referrals to the particular provider, practitioner, or supplier. The requirement to make referrals to a particular provider, practitioner, or supplier may require that the physician refer an established percentage or ratio of the physician's referrals to a particular provider, practitioner, or supplier.

(5) Compensation to a physician. (i) Compensation from an entity furnishing designated health services to a physician (or immediate family member of the physician) takes into account the volume or value of referrals only if the formula used to calculate the physician's (or immediate family member's) compensation includes the physician's referrals to the entity as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the number or value of the physician's referrals to the entity. (ii) Compensation from an entity furnishing designated health services to a physician (or immediate family member of the physician) takes into account the volume or value of other business generated only if the formula used to calculate the physician's (or immediate family member's) compensation includes other business generated by the physician for the entity as a variable, resulting in an increase or decrease in the physician's (or immediate family member's) compensation that positively correlates with the physician's generation of other business for the entity. (iii) For purposes of applying this paragraph (d)(5), a positive correlation between two variables exists when one variable decreases as the other variable decreases, or one variable increases as the other variable increases.

(iv) This paragraph (d)(5) does not apply for purposes of applying the special rules in paragraphs (d)(2) and (3) of this section or the exceptions at § 411.357(m), (s), (u), (v), (w), and (bb). (6) Compensation from a physician. (i) Compensation from a physician (or immediate family member of the physician) to an entity furnishing designated health services takes into account the volume or value of referrals only if the formula used to calculate the entity's compensation includes the physician's referrals to the entity as a variable, resulting in an increase or decrease in the entity's compensation that negatively correlates with the number or value of the physician's referrals to the entity. (ii) Compensation from a physician (or immediate family member of the physician) to an entity furnishing designated health services takes into account the volume or value of other business generated only if the formula used to calculate the entity's compensation includes other business generated by the physician for the entity as a variable, resulting in an increase or decrease in the entity's compensation that negatively correlates with the physician's generation of other business for the entity.

(iii) For purposes of applying this paragraph (d)(6), a negative correlation between two variables exists when one variable increases as the other variable decreases, or when one variable decreases as the other variable increases. (iv) This paragraph (d)(6) does not apply for purposes of applying the special rules in paragraphs (d)(2) and (3) of this section or the exceptions at § 411.357(m), (s), (u), (v), (w), and (bb). (e) Special rule on compensation arrangements—(1) Application. This paragraph (e) applies only to compensation arrangements as defined in section 1877 of the Act and this subpart.

(2) Writing requirement. In the case of any requirement in this subpart for a compensation arrangement to be in writing, such requirement may be satisfied by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties. (3) Signature requirement. In the case of any signature requirement in this subpart, such requirement may be satisfied by an electronic or other signature that is valid under applicable Federal or State law.

(4) Special rule on writing and signature requirements. In the case of any requirement in this subpart for a compensation arrangement to be in writing and signed by the parties, the writing requirement or the signature requirement is satisfied if— (i) The compensation arrangement between the entity and the physician fully complies with an applicable exception in this subpart except with respect to the writing or signature requirement of the exception. And (ii) The parties obtain the required writing(s) or signature(s) within 90 consecutive calendar days immediately following the date on which the compensation arrangement became noncompliant with the requirements of the applicable exception (that is, the date on which the writing(s) or signature(s) were required under the applicable exception but the parties had not yet obtained them). General exceptions to the referral prohibition related to both ownership/investment and compensation.

The prohibition on referrals set forth in § 411.353 does not apply to the following types of services. (a) Physician services. (1) Physician services as defined at § 410.20(a) of this chapter that are furnished— (i) Personally by another physician who is a member of the referring physician's group practice or is a physician in the same group practice (as defined at § 411.351) as the referring physician. Or (ii) Under the supervision of another physician who is a member of the referring physician's group practice or is a physician in the same group practice (as defined at § 411.351) as the referring physician, provided that the supervision complies with all other applicable Medicare payment and coverage rules for the physician services.

(2) For purposes of this paragraph (a), “physician services” include only those “incident to” services (as defined at § 411.351) that are physician services under § 410.20(a) of this chapter. (b) In-office ancillary services. Services (including certain items of durable medical equipment (DME), as defined in paragraph (b)(4) of this section, and infusion pumps that are DME (including external ambulatory infusion pumps), but excluding all other DME and parenteral and enteral nutrients, equipment, and supplies (such as infusion pumps used for PEN)), that meet the following conditions. (1) Individual who furnishes the service.

They are furnished personally by one of the following individuals. (i) The referring physician. (ii) A physician who is a member of the same group practice as the referring physician. (iii) An individual who is supervised by the referring physician or, if the referring physician is in a group practice, by another physician in the group practice, provided that the supervision complies with all other applicable Medicare payment and coverage rules for the services.Start Printed Page 77668 (2) Location where service is furnished.

They are furnished in one of the following locations. (i) The same building (as defined at § 411.351), but not necessarily in the same space or part of the building, in which all of the conditions of paragraph (b)(2)(i)(A), (b)(2)(i)(B), or (b)(2)(i)(C) of this section are satisfied. (A)(1) The referring physician or his or her group practice (if any) has an office that is normally open to the physician's or group's patients for medical services at least 35 hours per week. And (2) The referring physician or one or more members of the referring physician's group practice regularly practices medicine and furnishes physician services to patients at least 30 hours per week.

The 30 hours must include some physician services that are unrelated to the furnishing of DHS payable by Medicare, any other Federal health care payer, or a private payer, even though the physician services may lead to the ordering of DHS. Or (B)(1) The patient receiving the DHS usually receives physician services from the referring physician or members of the referring physician's group practice (if any). (2) The referring physician or the referring physician's group practice owns or rents an office that is normally open to the physician's or group's patients for medical services at least 8 hours per week. And (3) The referring physician regularly practices medicine and furnishes physician services to patients at least 6 hours per week.

The 6 hours must include some physician services that are unrelated to the furnishing of DHS payable by Medicare, any other Federal health care payer, or a private payer, even though the physician services may lead to the ordering of DHS. Or (C)(1) The referring physician is present and orders the DHS during a patient visit on the premises as set forth in paragraph (b)(2)(i)(C)(2) of this section or the referring physician or a member of the referring physician's group practice (if any) is present while the DHS is furnished during occupancy of the premises as set forth in paragraph (b)(2)(i)(C)(2) of this section. (2) The referring physician or the referring physician's group practice owns or rents an office that is normally open to the physician's or group's patients for medical services at least 8 hours per week. And (3) The referring physician or one or more members of the referring physician's group practice regularly practices medicine and furnishes physician services to patients at least 6 hours per week.

The 6 hours must include some physician services that are unrelated to the furnishing of DHS payable by Medicare, any other Federal health care payer, or a private payer, even though the physician services may lead to the ordering of DHS. (ii) A centralized building (as defined at § 411.351) that is used by the group practice for the provision of some or all of the group practice's clinical laboratory services. (iii) A centralized building (as defined at § 411.351) that is used by the group practice for the provision of some or all of the group practice's DHS (other than clinical laboratory services). (3) Billing of the service.

They are billed by one of the following. (i) The physician performing or supervising the service. (ii) The group practice of which the performing or supervising physician is a member under a billing number assigned to the group practice. (iii) The group practice if the supervising physician is a “physician in the group practice” (as defined at § 411.351) under a billing number assigned to the group practice.

(iv) An entity that is wholly owned by the performing or supervising physician or by that physician's group practice under the entity's own billing number or under a billing number assigned to the physician or group practice. (v) An independent third party billing company acting as an agent of the physician, group practice, or entity specified in paragraphs (b)(3)(i) through (iv) of this section under a billing number assigned to the physician, group practice, or entity, provided that the billing arrangement meets the requirements of § 424.80(b)(5) of this chapter. For purposes of this paragraph (b)(3), a group practice may have, and bill under, more than one Medicare billing number, subject to any applicable Medicare program restrictions. (4) Durable Medical Equipment.

For purposes of this paragraph (b), DME covered by the in-office ancillary services exception means canes, crutches, walkers and folding manual wheelchairs, and blood glucose monitors, that meet the following conditions. (i) The item is one that a patient requires for the purpose of ambulating, a patient uses in order to depart from the physician's office, or is a blood glucose monitor (including one starter set of test strips and lancets, consisting of no more than 100 of each). A blood glucose monitor may be furnished only by a physician or employee of a physician or group practice that also furnishes outpatient diabetes self-management training to the patient. (ii) The item is furnished in a building that meets the “same building” requirements in the in-office ancillary services exception as part of the treatment for the specific condition for which the patient-physician encounter occurred.

(iii) The item is furnished personally by the physician who ordered the DME, by another physician in the group practice, or by an employee of the physician or the group practice. (iv) A physician or group practice that furnishes the DME meets all DME supplier standards set forth in § 424.57(c) of this chapter. (v) [Reserved] (vi) All other requirements of the in-office ancillary services exception in this paragraph (b) are met. (5) Furnishing a service.

A designated health service is “furnished” for purposes of this paragraph (b) in the location where the service is actually performed upon a patient or where an item is dispensed to a patient in a manner that is sufficient to meet the applicable Medicare payment and coverage rules. (6) Special rule for home care physicians. In the case of a referring physician whose principal medical practice consists of treating patients in their private homes, the “same building” requirements of paragraph (b)(2)(i) of this section are met if the referring physician (or a qualified person accompanying the physician, such as a nurse or technician) provides the DHS contemporaneously with a physician service that is not a designated health service provided by the referring physician to the patient in the patient's private home. For purposes of paragraph (b)(5) of this section only, a private home does not include a nursing, long-term care, or other facility or institution, except that a patient may have a private home in an assisted living or independent living facility.

(7) Disclosure requirement for certain imaging services. (i) With respect to magnetic resonance imaging, computed tomography, and positron emission tomography services identified as “radiology and certain other imaging services” on the List of CPT/HCPCS Codes, the referring physician must provide written notice to the patient at the time of the referral that the patient may receive the same services from a person other than one described in paragraph (b)(1) of this section. Except as set forth in paragraph (b)(7)(ii) of this section, the written notice must include a list of at least 5 other suppliers (as defined at § 400.202 of this chapter) that Start Printed Page 77669provide the services for which the individual is being referred and which are located within a 25-mile radius of the referring physician's office location at the time of the referral. The notice should be written in a manner sufficient to be reasonably understood by all patients and should include for each supplier on the list, at a minimum, the supplier's name, address, and telephone number.

(ii) If there are fewer than 5 other suppliers located within a 25-mile radius of the physician's office location at the time of the referral, the physician must list all of the other suppliers of the imaging service that are present within a 25-mile radius of the referring physician's office location. Provision of the written list of alternate suppliers will not be required if no other suppliers provide the services for which the individual is being referred within the 25-mile radius. (c) Services furnished by an organization (or its contractors or subcontractors) to enrollees. Services furnished by an organization (or its contractors or subcontractors) to enrollees of one of the following prepaid health plans (not including services provided to enrollees in any other plan or line of business offered or administered by the same organization).

(1) An HMO or a CMP in accordance with a contract with CMS under section 1876 of the Act and part 417, subparts J through M of this chapter. (2) A health care prepayment plan in accordance with an agreement with CMS under section 1833(a)(1)(A) of the Act and part 417, subpart U of this chapter. (3) An organization that is receiving payments on a prepaid basis for Medicare enrollees through a demonstration project under section 402(a) of the Social Security Amendments of 1967 (42 U.S.C. 1395b-1) or under section 222(a) of the Social Security Amendments of 1972 (42 U.S.C.

1395b-1 note). (4) A qualified HMO (within the meaning of section 1310(d) of the Public Health Service Act). (5) A coordinated care plan (within the meaning of section 1851(a)(2)(A) of the Act) offered by a Medicare Advantage organization in accordance with a contract with CMS under section 1857 of the Act and part 422 of this chapter. (6) A MCO contracting with a State under section 1903(m) of the Act.

(7) A prepaid inpatient health plan (PIHP) or prepaid ambulance health plan (PAHP) contracting with a State under part 438 of this chapter. (8) A health insuring organization (HIO) contracting with a State under part 438, subpart D of this chapter. (9) An entity operating under a demonstration project under sections 1115(a), 1915(a), 1915(b), or 1932(a) of the Act. (d) [Reserved] (e) Academic medical centers.

(1) Services provided by an academic medical center if all of the following conditions are met. (i) The referring physician— (A) Is a bona fide employee of a component of the academic medical center on a full-time or substantial part-time basis. (A “component” of an academic medical center means an affiliated medical school, faculty practice plan, hospital, teaching facility, institution of higher education, departmental professional corporation, or nonprofit support organization whose primary purpose is supporting the teaching mission of the academic medical center.) The components need not be separate legal entities. (B) Is licensed to practice medicine in the State(s) in which he or she practices medicine.

(C) Has a bona fide faculty appointment at the affiliated medical school or at one or more of the educational programs at the accredited academic hospital (as defined at § 411.355(e)(3)). And (D) Provides either substantial academic services or substantial clinical teaching services (or a combination of academic services and clinical teaching services) for which the faculty member receives compensation as part of his or her employment relationship with the academic medical center. Parties should use a reasonable and consistent method for calculating a physician's academic services and clinical teaching services. A physician will be deemed to meet this requirement if he or she spends at least 20 percent of his or her professional time or 8 hours per week providing academic services or clinical teaching services (or a combination of academic services or clinical teaching services).

A physician who does not spend at least 20 percent of his or her professional time or 8 hours per week providing academic services or clinical teaching services (or a combination of academic services or clinical teaching services) is not precluded from qualifying under this paragraph (e)(1)(i)(D). (ii) The compensation paid to the referring physician must meet all of the following conditions. (A) The total compensation paid by each academic medical center component to the referring physician is set in advance. (B) In the aggregate, the compensation paid by all academic medical center components to the referring physician does not exceed fair market value for the services provided.

(C) The total compensation paid by each academic medical center component is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician within the academic medical center. (D) If any compensation paid to the referring physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4). (iii) The academic medical center must meet all of the following conditions. (A) All transfers of money between components of the academic medical center must directly or indirectly support the missions of teaching, indigent care, research, or community service.

(B) The relationship of the components of the academic medical center must be set forth in one or more written agreements or other written documents that have been adopted by the governing body of each component. If the academic medical center is one legal entity, this requirement will be satisfied if transfers of funds between components of the academic medical center are reflected in the routine financial reports covering the components. (C) All money paid to a referring physician for research must be used solely to support bona fide research or teaching and must be consistent with the terms and conditions of the grant. (2) The “academic medical center” for purposes of this section consists of— (i) An accredited medical school (including a university, when appropriate) or an accredited academic hospital (as defined at paragraph (e)(3) of this section).

(ii) One or more faculty practice plans affiliated with the medical school, the affiliated hospital(s), or the accredited academic hospital. And (iii) One or more affiliated hospitals in which a majority of the physicians on the medical staff consists of physicians who are faculty members and a majority of all hospital admissions is made by physicians who are faculty members. The hospital for purposes of this paragraph (e)(2)(iii) may be the same hospital that satisfies the requirement of paragraph (e)(2)(i) of this section. For purposes of this paragraph (e)(2)(iii), a faculty member is a physician who is Start Printed Page 77670either on the faculty of the affiliated medical school or on the faculty of one or more of the educational programs at the accredited academic hospital.

In meeting this paragraph (e)(2)(iii), faculty from any affiliated medical school or accredited academic hospital education program may be aggregated, and residents and non-physician professionals need not be counted. Any faculty member may be counted, including courtesy and volunteer faculty. For purposes of determining whether the majority of physicians on the medical staff consists of faculty members, the affiliated hospital must include or exclude all individual physicians with the same class of privileges at the affiliated hospital (for example, physicians holding courtesy privileges). (3) An accredited academic hospital for purposes of this section means a hospital or a health system that sponsors four or more approved medical education programs.

(f) Implants furnished by an ASC. Implants furnished by an ASC, including, but not limited to, cochlear implants, intraocular lenses, and other implanted prosthetics, implanted prosthetic devices, and implanted DME that meet the following conditions. (1) The implant is implanted by the referring physician or a member of the referring physician's group practice in an ASC that is certified by Medicare under part 416 of this chapter and with which the referring physician has a financial relationship. (2) The implant is implanted in the patient during a surgical procedure paid by Medicare to the ASC as an ASC procedure under § 416.65 of this chapter.

(3) [Reserved] (4) [Reserved] (5) The exception set forth in this paragraph (f) does not apply to any financial relationships between the referring physician and any entity other than the ASC in which the implant is furnished to, and implanted in, the patient. (g) EPO and other dialysis-related drugs. EPO and other dialysis-related drugs that meet the following conditions. (1) The EPO and other dialysis-related drugs are furnished in or by an ESRD facility.

For purposes of this paragraph (g)(1), “EPO and other dialysis-related drugs” means certain outpatient prescription drugs that are required for the efficacy of dialysis and identified as eligible for this exception on the List of CPT/HCPCS Codes. And “furnished” means that the EPO or dialysis-related drugs are administered to a patient in the ESRD facility or, in the case of EPO or Aranesp (or equivalent drug identified on the List of CPT/HCPCS Codes) only, are dispensed by the ESRD facility for use at home. (2) [Reserved] (3) [Reserved] (4) The exception set forth in this paragraph (g) does not apply to any financial relationship between the referring physician and any entity other than the ESRD facility that furnishes the EPO and other dialysis-related drugs to the patient. (h) Preventive screening tests, immunizations, and treatments.

Preventive screening tests, immunizations, and treatments that meet the following conditions. (1) The preventive screening tests, immunizations, and treatments are subject to CMS-mandated frequency limits. (2) [Reserved] (3) [Reserved] (4) The preventive screening tests, immunizations, and treatments must be covered by Medicare and must be listed as eligible for this exception on the List of CPT/HCPCS Codes. (i) Eyeglasses and contact lenses following cataract surgery.

Eyeglasses and contact lenses that are covered by Medicare when furnished to patients following cataract surgery that meet the following conditions. (1) The eyeglasses or contact lenses are provided in accordance with the coverage and payment provisions set forth in §§ 410.36(a)(2)(ii) and 414.228 of this chapter, respectively. (2) [Reserved] (j) Intra-family rural referrals. (1) Services provided pursuant to a referral from a referring physician to his or her immediate family member or to an entity furnishing DHS with which the immediate family member has a financial relationship, if all of the following conditions are met.

(i) The patient who is referred resides in a rural area as defined at § 411.351 of this subpart. (ii) Except as provided in paragraph (j)(1)(iii) of this section, in light of the patient's condition, no other person or entity is available to furnish the services in a timely manner within 25 miles of or 45 minutes transportation time from the patient's residence. (iii) In the case of services furnished to patients where they reside (for example, home health services or DME), no other person or entity is available to furnish the services in a timely manner in light of the patient's condition. And (2) The referring physician or the immediate family member must make reasonable inquiries as to the availability of other persons or entities to furnish the DHS.

However, neither the referring physician nor the immediate family member has any obligation to inquire as to the availability of persons or entities located farther than 25 miles of or 45 minutes transportation time from (whichever test the referring physician utilized for purposes of paragraph (j)(1)(ii)) the patient's residence. Exceptions to the referral prohibition related to ownership or investment interests. For purposes of § 411.353, the following ownership or investment interests do not constitute a financial relationship. (a) Publicly traded securities.

Ownership of investment securities (including shares or bonds, debentures, notes, or other debt instruments) that at the time the DHS referral was made could be purchased on the open market and that meet the requirements of paragraphs (a)(1) and (2) of this section. (1) They are either— (i) Listed for trading on the New York Stock Exchange, the American Stock Exchange, or any regional exchange in which quotations are published on a daily basis, or foreign securities listed on a recognized foreign, national, or regional exchange in which quotations are published on a daily basis. (ii) Traded under an automated interdealer quotation system operated by the National Association of Securities Dealers. Or (iii) Listed for trading on an electronic stock market or over-the-counter quotation system in which quotations are published on a daily basis and trades are standardized and publicly transparent.

(2) They are in a corporation that had stockholder equity exceeding $75 million at the end of the corporation's most recent fiscal year or on average during the previous 3 fiscal years. €œStockholder equity” is the difference in value between a corporation's total assets and total liabilities. (b) Mutual funds. Ownership of shares in a regulated investment company as defined in section 851(a) of the Internal Revenue Code of 1986, if the company had, at the end of its most recent fiscal year, or on average during the previous 3 fiscal years, total assets exceeding $75 million.

(c) Specific providers. Ownership or investment interest in the following entities, for purposes of the services specified. (1) A rural provider, in the case of DHS furnished in a rural area (as defined at § 411.351 of this part) by the provider. A “rural provider” is an entity Start Printed Page 77671that furnishes substantially all (not less than 75 percent) of the DHS that it furnishes to residents of a rural area and, for the 18-month period beginning on December 8, 2003 (or such other period as Congress may specify), is not a specialty hospital, and in the case where the entity is a hospital, the hospital meets the requirements of § 411.362 no later than September 23, 2011.

(2) A hospital that is located in Puerto Rico, in the case of DHS furnished by such a hospital. (3) A hospital that is located outside of Puerto Rico, in the case of DHS furnished by such a hospital, if— (i) The referring physician is authorized to perform services at the hospital. (ii) Effective for the 18-month period beginning on December 8, 2003 (or such other period as Congress may specify), the hospital is not a specialty hospital. (iii) The ownership or investment interest is in the entire hospital and not merely in a distinct part or department of the hospital.

And (iv) The hospital meets the requirements described in § 411.362 not later than September 23, 2011. Exceptions to the referral prohibition related to compensation arrangements. For purposes of § 411.353, the following compensation arrangements do not constitute a financial relationship. (a) Rental of office space.

Payments for the use of office space made by a lessee to a lessor if the arrangement meets the following requirements. (1) The lease arrangement is set out in writing, is signed by the parties, and specifies the premises it covers. (2) The duration of the lease arrangement is at least 1 year. To meet this requirement, if the lease arrangement is terminated with or without cause, the parties may not enter into a new lease arrangement for the same space during the first year of the original lease arrangement.

(3) The space rented or leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement and is used exclusively by the lessee when being used by the lessee (and is not shared with or used by the lessor or any person or entity related to the lessor), except that the lessee may make payments for the use of space consisting of common areas if the payments do not exceed the lessee's pro rata share of expenses for the space based upon the ratio of the space used exclusively by the lessee to the total amount of space (other than common areas) occupied by all persons using the common areas. For purposes of this paragraph (a), exclusive use means that the lessee (and any other lessees of the same office space) uses the office space to the exclusion of the lessor (or any person or entity related to the lessor). The lessor (or any person or entity related to the lessor) may not be an invitee of the lessee to use the office space. (4) The rental charges over the term of the lease arrangement are set in advance and are consistent with fair market value.

(5) The rental charges over the term of the lease arrangement are not determined— (i) In any manner that takes into account the volume or value of referrals or other business generated between the parties. Or (ii) Using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space. Or (B) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee. (6) The lease arrangement would be commercially reasonable even if no referrals were made between the lessee and the lessor.

(7) If the lease arrangement expires after a term of at least 1 year, a holdover lease arrangement immediately following the expiration of the lease arrangement satisfies the requirements of paragraph (a) of this section if the following conditions are met. (i) The lease arrangement met the conditions of paragraphs (a)(1) through (6) of this section when the arrangement expired. (ii) The holdover lease arrangement is on the same terms and conditions as the immediately preceding arrangement. And (iii) The holdover lease arrangement continues to satisfy the conditions of paragraphs (a)(1) through (6) of this section.

(b) Rental of equipment. Payments made by a lessee to a lessor for the use of equipment under the following conditions. (1) The lease arrangement is set out in writing, is signed by the parties, and specifies the equipment it covers. (2) The equipment leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement and is used exclusively by the lessee when being used by the lessee (and is not shared with or used by the lessor or any person or entity related to the lessor).

For purposes of this paragraph (b), exclusive use means that the lessee (and any other lessees of the same equipment) uses the equipment to the exclusion of the lessor (or any person or entity related to the lessor). The lessor (or any person or entity related to the lessor) may not be an invitee of the lessee to use the equipment. (3) The duration of the lease arrangement is at least 1 year. To meet this requirement, if the lease arrangement is terminated with or without cause, the parties may not enter into a new lease arrangement for the same equipment during the first year of the original lease arrangement.

(4) The rental charges over the term of the lease arrangement are set in advance, are consistent with fair market value, and are not determined— (i) In any manner that takes into account the volume or value of referrals or other business generated between the parties. Or (ii) Using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed on or business generated through the use of the equipment. Or (B) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee. (5) The lease arrangement would be commercially reasonable even if no referrals were made between the parties.

(6) If the lease arrangement expires after a term of at least 1 year, a holdover lease arrangement immediately following the expiration of the lease arrangement satisfies the requirements of this paragraph (b) if the following conditions are met. (i) The lease arrangement met the conditions of paragraphs (b)(1) through (5) of this section when the arrangement expired. (ii) The holdover lease arrangement is on the same terms and conditions as the immediately preceding lease arrangement. And (iii) The holdover lease arrangement continues to satisfy the conditions of paragraphs (b)(1) through (5) of this section.

(c) Bona fide employment relationships. Any amount paid by an employer to a physician (or immediate family member) who has a bona fide employment relationship with the employer for the provision of services if the following conditions are met. (1) The employment is for identifiable services. (2) The amount of the remuneration under the employment is—Start Printed Page 77672 (i) Consistent with the fair market value of the services.

And (ii) Except as provided in paragraph (c)(4) of this section, is not determined in any manner that takes into account the volume or value of referrals by the referring physician. (3) The remuneration is provided under an arrangement that would be commercially reasonable even if no referrals were made to the employer. (4) Paragraph (c)(2)(ii) of this section does not prohibit payment of remuneration in the form of a productivity bonus based on services performed personally by the physician (or immediate family member of the physician). (5) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4).

(d) Personal service arrangements—(1) General. Remuneration from an entity under an arrangement or multiple arrangements to a physician or his or her immediate family member, or to a group practice, including remuneration for specific physician services furnished to a nonprofit blood center, if the following conditions are met. (i) Each arrangement is set out in writing, is signed by the parties, and specifies the services covered by the arrangement. (ii) Except for services provided under an arrangement that satisfies all of the conditions of paragraph (z) of this section, the arrangement(s) covers all of the services to be furnished by the physician (or an immediate family member of the physician) to the entity.

This requirement is met if all separate arrangements between the entity and the physician and the entity and any family members incorporate each other by reference or if they cross-reference a master list of contracts that is maintained and updated centrally and is available for review by the Secretary upon request. The master list must be maintained in a manner that preserves the historical record of contracts. A physician or family member may “furnish” services through employees whom they have hired for the purpose of performing the services. Through a wholly-owned entity.

Or through locum tenens physicians (as defined at § 411.351, except that the regular physician need not be a member of a group practice). (iii) The aggregate services covered by the arrangement do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement(s). (iv) The duration of each arrangement is at least 1 year. To meet this requirement, if an arrangement is terminated with or without cause, the parties may not enter into the same or substantially the same arrangement during the first year of the original arrangement.

(v) The compensation to be paid over the term of each arrangement is set in advance, does not exceed fair market value, and, except in the case of a physician incentive plan (as defined at § 411.351), is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties. (vi) The services to be furnished under each arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates any Federal or State law. (vii) If the arrangement expires after a term of at least 1 year, a holdover arrangement immediately following the expiration of the arrangement satisfies the requirements of paragraph (d) of this section if the following conditions are met. (A) The arrangement met the conditions of paragraphs (d)(1)(i) through (vi) of this section when the arrangement expired.

(B) The holdover arrangement is on the same terms and conditions as the immediately preceding arrangement. And (C) The holdover arrangement continues to satisfy the conditions of paragraphs (d)(1)(i) through (vi) of this section. (viii) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4). (2) Physician incentive plan exception.

In the case of a physician incentive plan (as defined at § 411.351) between a physician and an entity (or downstream contractor), the compensation may be determined in any manner (through a withhold, capitation, bonus, or otherwise) that takes into account the volume or value of referrals or other business generated between the parties, if the plan meets the following requirements. (i) No specific payment is made directly or indirectly under the plan to a physician or a physician group as an inducement to reduce or limit medically necessary services furnished with respect to a specific individual enrolled with the entity. (ii) Upon request of the Secretary, the entity provides the Secretary with access to information regarding the plan (including any downstream contractor plans), in order to permit the Secretary to determine whether the plan is in compliance with paragraph (d)(2) of this section. (iii) In the case of a plan that places a physician or a physician group at substantial financial risk as defined at § 422.208, the entity or any downstream contractor (or both) complies with the requirements concerning physician incentive plans set forth in §§ 422.208 and 422.210 of this chapter.

(iv) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4). (e) Physician recruitment. (1) Remuneration provided by a hospital to recruit a physician that is paid directly to the physician and that is intended to induce the physician to relocate his or her medical practice to the geographic area served by the hospital in order to become a member of the hospital's medical staff, if all of the following conditions are met. (i) The arrangement is set out in writing and signed by both parties.

(ii) The arrangement is not conditioned on the physician's referral of patients to the hospital. (iii) The amount of remuneration under the arrangement is not determined in any manner that takes into account the volume or value of actual or anticipated referrals by the physician or other business generated between the parties. And (iv) The physician is allowed to establish staff privileges at any other hospital(s) and to refer business to any other entities (except as referrals may be restricted under an employment or services arrangement that complies with § 411.354(d)(4)). (2)(i) Geographic area served by the hospital—defined.

The “geographic area served by the hospital” is the area composed of the lowest number of contiguous zip codes from which the hospital draws at least 75 percent of its inpatients. The geographic area served by the hospital may include one or more zip codes from which the hospital draws no inpatients, provided that such zip codes are entirely surrounded by zip codes in the geographic area described above from which the hospital draws at least 75 percent of its inpatients. (ii) Noncontiguous zip codes. With respect to a hospital that draws fewer than 75 percent of its inpatients from all of the contiguous zip codes from which it draws inpatients, the “geographic area served by the hospital” will be deemed to be the area composed of all of the Start Printed Page 77673contiguous zip codes from which the hospital draws its inpatients.

(iii) Special optional rule for rural hospitals. In the case of a hospital located in a rural area (as defined at § 411.351), the “geographic area served by the hospital” may also be the area composed of the lowest number of contiguous zip codes from which the hospital draws at least 90 percent of its inpatients. If the hospital draws fewer than 90 percent of its inpatients from all of the contiguous zip codes from which it draws inpatients, the “geographic area served by the hospital” may include noncontiguous zip codes, beginning with the noncontiguous zip code in which the highest percentage of the hospital's inpatients resides, and continuing to add noncontiguous zip codes in decreasing order of percentage of inpatients. (iv) Relocation of medical practice.

A physician will be considered to have relocated his or her medical practice if the medical practice was located outside the geographic area served by the hospital and— (A) The physician moves his or her medical practice at least 25 miles and into the geographic area served by the hospital. Or (B) The physician moves his medical practice into the geographic area served by the hospital, and the physician's new medical practice derives at least 75 percent of its revenues from professional services furnished to patients (including hospital inpatients) not seen or treated by the physician at his or her prior medical practice site during the preceding 3 years, measured on an annual basis (fiscal or calendar year). For the initial “start up” year of the recruited physician's practice, the 75 percent test in the preceding sentence will be satisfied if there is a reasonable expectation that the recruited physician's medical practice for the year will derive at least 75 percent of its revenues from professional services furnished to patients not seen or treated by the physician at his or her prior medical practice site during the preceding 3 years. (3) The recruited physician will not be subject to the relocation requirement of this paragraph (e), provided that he or she establishes his or her medical practice in the geographic area served by the recruiting hospital, if— (i) He or she is a resident or physician who has been in practice 1 year or less.

(ii) He or she was employed on a full-time basis for at least 2 years immediately prior to the recruitment arrangement by one of the following (and did not maintain a private practice in addition to such full-time employment). (A) A Federal or State bureau of prisons (or similar entity operating one or more correctional facilities) to serve a prison population. (B) The Department of Defense or Department of Veterans Affairs to serve active or veteran military personnel and their families. Or (C) A facility of the Indian Health Service to serve patients who receive medical care exclusively through the Indian Health Service.

Or (iii) The Secretary has deemed in an advisory opinion issued under section 1877(g) of the Act that the physician does not have an established medical practice that serves or could serve a significant number of patients who are or could become patients of the recruiting hospital. (4) In the case of remuneration provided by a hospital to a physician either indirectly through payments made to another physician practice, or directly to a physician who joins a physician practice, the following additional conditions must be met. (i) The writing in paragraph (e)(1) of this section is also signed by the physician practice if the remuneration is provided indirectly to the physician through payments made to the physician practice and the physician practice does not pass directly through to the physician all of the remuneration from the hospital. (ii) Except for actual costs incurred by the physician practice in recruiting the new physician, the remuneration is passed directly through to or remains with the recruited physician.

(iii) In the case of an income guarantee of any type made by the hospital to a recruited physician who joins a physician practice, the costs allocated by the physician practice to the recruited physician do not exceed the actual additional incremental costs attributable to the recruited physician. With respect to a physician recruited to join a physician practice located in a rural area or HPSA, if the physician is recruited to replace a physician who, within the previous 12-month period, retired, relocated outside of the geographic area served by the hospital, or died, the costs allocated by the physician practice to the recruited physician do not exceed either— (A) The actual additional incremental costs attributable to the recruited physician. Or (B) The lower of a per capita allocation or 20 percent of the practice's aggregate costs. (iv) Records of the actual costs and the passed-through amounts are maintained for a period of at least 6 years and made available to the Secretary upon request.

(v) The remuneration from the hospital under the arrangement is not determined in any manner that takes into account the volume or value of actual or anticipated referrals by the recruited physician or the physician practice (or any physician affiliated with the physician practice) receiving the direct payments from the hospital. (vi) The physician practice may not impose on the recruited physician practice restrictions that unreasonably restrict the recruited physician's ability to practice medicine in the geographic area served by the hospital. (5) Recruitment of a physician by a hospital located in a rural area (as defined at § 411.351) to an area outside the geographic area served by the hospital is permitted under this exception if the Secretary determines in an advisory opinion issued under section 1877(g) of the Act that the area has a demonstrated need for the recruited physician and all other requirements of this paragraph (e) are met. (6)(i) This paragraph (e) applies to remuneration provided by a federally qualified health center or a rural health clinic in the same manner as it applies to remuneration provided by a hospital.

(ii) The “geographic area served” by a federally qualified health center or a rural health clinic is the area composed of the lowest number of contiguous or noncontiguous zip codes from which the federally qualified health center or rural health clinic draws at least 90 percent of its patients, as determined on an encounter basis. The geographic area served by the federally qualified health center or rural health clinic may include one or more zip codes from which the federally qualified health center or rural health clinic draws no patients, provided that such zip codes are entirely surrounded by zip codes in the geographic area described above from which the federally qualified health center or rural health clinic draws at least 90 percent of its patients. (f) Isolated transactions. Isolated financial transactions, such as a one-time sale of property or a practice, or a single instance of forgiveness of an amount owed in settlement of a bona fide dispute, if all of the following conditions are met.

(1) The amount of remuneration under the isolated financial transaction is— (i) Consistent with the fair market value of the isolated financial transaction. AndStart Printed Page 77674 (ii) Not determined in any manner that takes into account the volume or value of referrals by the referring physician or other business generated between the parties. (2) The remuneration is provided under an arrangement that would be commercially reasonable even if the physician made no referrals to the entity. (3) There are no additional transactions between the parties for 6 months after the isolated transaction, except for transactions that are specifically excepted under the other provisions in §§ 411.355 through 411.357 and except for commercially reasonable post-closing adjustments that do not take into account the volume or value of referrals or other business generated by the referring physician.

(4) An isolated financial transaction that is an instance of forgiveness of an amount owed in settlement of a bona fide dispute is not part of the compensation arrangement giving rise to the bona fide dispute. (g) Certain arrangements with hospitals. Remuneration provided by a hospital to a physician if the remuneration does not relate, directly or indirectly, to the furnishing of DHS. To qualify as “unrelated,” remuneration must be wholly unrelated to the furnishing of DHS and must not in any way take into account the volume or value of a physician's referrals.

Remuneration relates to the furnishing of DHS if it— (1) Is an item, service, or cost that could be allocated in whole or in part to Medicare or Medicaid under cost reporting principles. (2) Is furnished, directly or indirectly, explicitly or implicitly, in a selective, targeted, preferential, or conditioned manner to medical staff or other persons in a position to make or influence referrals. Or (3) Otherwise takes into account the volume or value of referrals or other business generated by the referring physician. (h) Group practice arrangements with a hospital.

An arrangement between a hospital and a group practice under which DHS are furnished by the group but are billed by the hospital if the following conditions are met. (1) With respect to services furnished to an inpatient of the hospital, the arrangement is pursuant to the provision of inpatient hospital services under section 1861(b)(3) of the Act. (2) The arrangement began before, and has continued in effect without interruption since, December 19, 1989. (3) With respect to the DHS covered under the arrangement, at least 75 percent of these services furnished to patients of the hospital are furnished by the group under the arrangement.

(4) The arrangement is in accordance with a written agreement that specifies the services to be furnished by the parties and the compensation for services furnished under the agreement. (5) The compensation paid over the term of the agreement is consistent with fair market value, and the compensation per unit of service is fixed in advance and is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties. (6) The compensation is provided in accordance with an agreement that would be commercially reasonable even if no referrals were made to the entity. (7) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4).

(i) Payments by a physician. Payments made by a physician (or his or her immediate family member)— (1) To a laboratory in exchange for the provision of clinical laboratory services. Or (2) To an entity as compensation for any other items or services— (i) That are furnished at a price that is consistent with fair market value. And (ii) To which the exceptions in paragraphs (a) through (h) of this section are not applicable.

(3) For purposes of this paragraph (i), “services” means services of any kind (not merely those defined as “services” for purposes of the Medicare program in § 400.202 of this chapter). (j) Charitable donations by a physician. Bona fide charitable donations made by a physician (or immediate family member) to an entity if all of the following conditions are satisfied. (1) The charitable donation is made to an organization exempt from taxation under the Internal Revenue Code (or to a supporting organization).

(2) The donation is neither solicited, nor offered, in any manner that takes into account the volume or value of referrals or other business generated between the physician and the entity. And (k) Nonmonetary compensation. (1) Compensation from an entity in the form of items or services (not including cash or cash equivalents) that does not exceed an aggregate of $300 per calendar year, as adjusted for inflation in accordance with paragraph (k)(2) of this section, if all of the following conditions are satisfied. (i) The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.

(ii) The compensation may not be solicited by the physician or the physician's practice (including employees and staff members). (2) The annual aggregate nonmonetary compensation limit in this paragraph (k) is adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index—Urban All Items (CPI-U) for the 12-month period ending the preceding September 30. CMS displays after September 30 each year both the increase in the CPI-U for the 12-month period and the new nonmonetary compensation limit on the physician self-referral website at http://www.cms.hhs.gov/​PhysicianSelfReferral/​10_​CPI-U_​Updates.asp. (3) Where an entity has inadvertently provided nonmonetary compensation to a physician in excess of the limit (as set forth in paragraph (k)(1) of this section), such compensation is deemed to be within the limit if— (i) The value of the excess nonmonetary compensation is no more than 50 percent of the limit.

And (ii) The physician returns to the entity the excess nonmonetary compensation (or an amount equal to the value of the excess nonmonetary compensation) by the end of the calendar year in which the excess nonmonetary compensation was received or within 180 consecutive calendar days following the date the excess nonmonetary compensation was received by the physician, whichever is earlier. (iii) This paragraph (k)(3) may be used by an entity only once every 3 years with respect to the same referring physician. (4) In addition to nonmonetary compensation up to the limit described in paragraph (k)(1) of this section, an entity that has a formal medical staff may provide one local medical staff appreciation event per year for the entire medical staff. Any gifts or gratuities provided in connection with the medical staff appreciation event are subject to the limit in paragraph (k)(1).

(l) Fair market value compensation. Compensation resulting from an arrangement between an entity and a physician (or an immediate family member) or any group of physicians (regardless of whether the group meets the definition of a group practice set forth in § 411.352) for the provision of items or services or for the lease of office space or equipment by the physician (or an immediate family Start Printed Page 77675member) or group of physicians to the entity, or by the entity to the physician (or an immediate family member) or a group of physicians, if the arrangement meets the following conditions. (1) The arrangement is in writing, signed by the parties, and covers only identifiable items, services, office space, or equipment. The writing specifies— (i) The items, services, office space, or equipment covered under the arrangement.

(ii) The compensation that will be provided under the arrangement. And (iii) The timeframe for the arrangement. (2) An arrangement may be for any period of time and contain a termination clause. An arrangement may be renewed any number of times if the terms of the arrangement and the compensation for the same items, services, office space, or equipment do not change.

Other than an arrangement that satisfies all of the conditions of paragraph (z) of this section, the parties may not enter into more than one arrangement for the same items, services, office space, or equipment during the course of a year. (3) The compensation must be set in advance, consistent with fair market value, and not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician. Compensation for the rental of office space or equipment may not be determined using a formula based on— (i) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space or to the services performed on or business generated through the use of the equipment. Or (ii) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee.

(4) The arrangement would be commercially reasonable even if no referrals were made between the parties. (5) The arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act). (6) The services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates a Federal or State law. (7) The arrangement satisfies the requirements of § 411.354(d)(4) in the case of— (i) Remuneration to the physician that is conditioned on the physician's referrals to a particular provider, practitioner, or supplier.

Or (ii) Remuneration paid to the group of physicians that is conditioned on one or more of the group's physicians' referrals to a particular provider, practitioner, or supplier. (m) Medical staff incidental benefits. Compensation in the form of items or services (not including cash or cash equivalents) from a hospital to a member of its medical staff when the item or service is used on the hospital's campus, if all of the following conditions are met. (1) The compensation is offered to all members of the medical staff practicing in the same specialty (but not necessarily accepted by every member to whom it is offered) and is not offered in any manner that takes into account the volume or value of referrals or other business generated between the parties.

(2) Except with respect to identification of medical staff on a hospital website or in hospital advertising, the compensation is provided only during periods when the medical staff members are making rounds or are engaged in other services or activities that benefit the hospital or its patients. (3) The compensation is provided by the hospital and used by the medical staff members only on the hospital's campus. Compensation, including, but not limited to, internet access, pagers, or two-way radios, used away from the campus only to access hospital medical records or information or to access patients or personnel who are on the hospital campus, as well as the identification of the medical staff on a hospital website or in hospital advertising, meets the “on campus” requirement of this paragraph (m). (4) The compensation is reasonably related to the provision of, or designed to facilitate directly or indirectly the delivery of, medical services at the hospital.

(5) The compensation is of low value (that is, less than $25) with respect to each occurrence of the benefit (for example, each meal given to a physician while he or she is serving patients who are hospitalized must be of low value). The $25 limit in this paragraph (m)(5) is adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index—Urban All Items (CPI-I) for the 12 month period ending the preceding September 30. CMS displays after September 30 each year both the increase in the CPI-I for the 12 month period and the new limits on the physician self-referral website at http://www.cms.hhs.gov/​PhysicianSelfReferral/​10_​CPI-U_​Updates.asp. (6) The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties.

(7) [Reserved] (8) Other facilities and health care clinics (including, but not limited to, federally qualified health centers) that have bona fide medical staffs may provide compensation under this paragraph (m) on the same terms and conditions applied to hospitals under this paragraph (m). (n) Risk-sharing arrangements. Compensation paid directly or indirectly by a MCO or an IPA to a physician pursuant to a risk-sharing arrangement (including, but not limited to, withholds, bonuses, and risk pools) for services provided by the physician to enrollees of a health plan. For purposes of this paragraph (n), “health plan” and “enrollees” have the meanings set forth in § 1001.952(l) of this title.

(o) Compliance training. Compliance training provided by an entity to a physician (or to the physician's immediate family member or office staff) who practices in the entity's local community or service area, provided that the training is held in the local community or service area. For purposes of this paragraph (o), “compliance training” means training regarding the basic elements of a compliance program (for example, establishing policies and procedures, training of staff, internal monitoring, or reporting). Specific training regarding the requirements of Federal and State health care programs (for example, billing, coding, reasonable and necessary services, documentation, or unlawful referral arrangements).

Or training regarding other Federal, State, or local laws, regulations, or rules governing the conduct of the party for whom the training is provided. For purposes of this paragraph, “compliance training” includes programs that offer continuing medical education credit, provided that compliance training is the primary purpose of the program. (p) Indirect compensation arrangements. Indirect compensation arrangements, as defined at § 411.354(c)(2), if all of the following conditions are satisfied.

(1)(i) The compensation received by the referring physician (or immediate family member) described in § 411.354(c)(2)(ii) is fair market value for services and items actually provided and not determined in any manner that takes into account the volume or value of referrals or other business generated Start Printed Page 77676by the referring physician for the entity furnishing DHS. (ii) Compensation for the rental of office space or equipment may not be determined using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space or to the services performed on or business generated through the use of the equipment. Or (B) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee. (2) The compensation arrangement described in § 411.354(c)(2)(ii) is set out in writing, signed by the parties, and specifies the services covered by the arrangement, except in the case of a bona fide employment relationship between an employer and an employee, in which case the arrangement need not be set out in writing, but must be for identifiable services and be commercially reasonable even if no referrals are made to the employer.

(3) [Reserved] (4) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the compensation arrangement described in § 411.354(c)(2)(ii) satisfies the conditions of § 411.354(d)(4). (q) Referral services. Remuneration that meets all of the conditions set forth in § 1001.952(f) of this title. (r) Obstetrical malpractice insurance subsidies.

Remuneration that meets all of the conditions of paragraph (r)(1) or (2) of this section. (1) Remuneration that meets all of the conditions set forth in § 1001.952(o) of this title. (2) A payment from a hospital, federally qualified health center, or rural health clinic that is used to pay for some or all of the costs of malpractice insurance premiums for a physician who engages in obstetrical practice as a routine part of his or her medical practice, if all of the following conditions are met. (i)(A) The physician's medical practice is located in a rural area, a primary care HPSA, or an area with demonstrated need for the physician's obstetrical services as determined by the Secretary in an advisory opinion issued in accordance with section 1877(g)(6) of the Act.

Or (B) At least 75 percent of the physician's obstetrical patients reside in a medically underserved area or are members of a medically underserved population. (ii) The arrangement is set out in writing, is signed by the physician and the hospital, federally qualified health center, or rural health clinic providing the payment, and specifies the payment to be made by the hospital, federally qualified health center, or rural health clinic and the terms under which the payment is to be provided. (iii) The arrangement is not conditioned on the physician's referral of patients to the hospital, federally qualified health center, or rural health clinic providing the payment. (iv) The hospital, federally qualified health center, or rural health clinic does not determine the amount of the payment in any manner that takes into account the volume or value of referrals by the physician or any other business generated between the parties.

(v) The physician is allowed to establish staff privileges at any hospital(s), federally qualified health center(s), or rural health clinic(s) and to refer business to any other entities (except as referrals may be restricted under an employment arrangement or services arrangement that complies with § 411.354(d)(4)). (vi) The payment is made to a person or organization (other than the physician) that is providing malpractice insurance (including a self-funded organization). (vii) The physician treats obstetrical patients who receive medical benefits or assistance under any Federal health care program in a nondiscriminatory manner. (viii) The insurance is a bona fide malpractice insurance policy or program, and the premium, if any, is calculated based on a bona fide assessment of the liability risk covered under the insurance.

(ix)(A) For each coverage period (not to exceed 1 year), at least 75 percent of the physician's obstetrical patients treated under the coverage of the obstetrical malpractice insurance during the prior period (not to exceed 1 year)— (1) Resided in a rural area, HPSA, medically underserved area, or an area with a demonstrated need for the physician's obstetrical services as determined by the Secretary in an advisory opinion issued in accordance with section 1877(g)(6) of the Act. Or (2) Were part of a medically underserved population. (B) For the initial coverage period (not to exceed 1 year), the requirements of paragraph (r)(2)(ix)(A) of this section will be satisfied if the physician certifies that he or she has a reasonable expectation that at least 75 percent of the physician's obstetrical patients treated under the coverage of the malpractice insurance will— (1) Reside in a rural area, HPSA, medically underserved area, or an area with a demonstrated need for the physician's obstetrical services as determined by the Secretary in an advisory opinion issued in accordance with section 1877(g)(6) of the Act. Or (2) Be part of a medically underserved population.

(3) For purposes of paragraph (r)(2) of this section, costs of malpractice insurance premiums means. (i) For physicians who engage in obstetrical practice on a full-time basis, any costs attributable to malpractice insurance. Or (ii) For physicians who engage in obstetrical practice on a part-time or sporadic basis, the costs attributable exclusively to the obstetrical portion of the physician's malpractice insurance, and related exclusively to obstetrical services provided— (A) In a rural area, primary care HPSA, or an area with demonstrated need for the physician's obstetrical services, as determined by the Secretary in an advisory opinion issued in accordance with section 1877(g)(6) of the Act. Or (B) In any area, provided that at least 75 percent of the physician's obstetrical patients treated in the coverage period (not to exceed 1 year) resided in a medically underserved area or were part of a medically underserved population.

(s) Professional courtesy. Professional courtesy (as defined at § 411.351) offered by an entity with a formal medical staff to a physician or a physician's immediate family member or office staff if all of the following conditions are met. (1) The professional courtesy is offered to all physicians on the entity's bona fide medical staff or in such entity's local community or service area, and the offer does not take into account the volume or value of referrals or other business generated between the parties. (2) The health care items and services provided are of a type routinely provided by the entity.

(3) The entity has a professional courtesy policy that is set out in writing and approved in advance by the entity's governing body. (4) The professional courtesy is not offered to a physician (or immediate family member) who is a Federal health care program beneficiary, unless there has been a good faith showing of financial need. And (t) Retention payments in underserved areas—(1) Bona fide written offer. Remuneration provided by a hospital directly to a physician on the hospital's medical staff to retain the physician's medical practice in the geographic area Start Printed Page 77677served by the hospital (as defined in paragraph (e)(2) of this section), if all of the following conditions are met.

(i) The physician has a bona fide firm, written recruitment offer or offer of employment from a hospital, academic medical center (as defined at § 411.355(e)), or physician organization (as defined at § 411.351) that is not related to the hospital making the payment, and the offer specifies the remuneration being offered and requires the physician to move the location of his or her medical practice at least 25 miles and outside of the geographic area served by the hospital making the retention payment. (ii) The requirements of paragraphs (e)(1)(i) through (iv) of this section are satisfied. (iii) Any retention payment is subject to the same obligations and restrictions, if any, on repayment or forgiveness of indebtedness as the written recruitment offer or offer of employment. (iv) The retention payment does not exceed the lower of— (A) The amount obtained by subtracting the physician's current income from physician and related services from the income the physician would receive from comparable physician and related services in the written recruitment or employment offer, provided that the respective incomes are determined using a reasonable and consistent methodology, and that they are calculated uniformly over no more than a 24-month period.

Or (B) The reasonable costs the hospital would otherwise have to expend to recruit a new physician to the geographic area served by the hospital to join the medical staff of the hospital to replace the retained physician. (v) The requirements of paragraph (t)(3) of this setion are satisfied. (2) Written certification from physician. Remuneration provided by a hospital directly to a physician on the hospital's medical staff to retain the physician's medical practice in the geographic area served by the hospital (as defined in paragraph (e)(2) of this section), if all of the following conditions are met.

(i) The physician furnishes to the hospital before the retention payment is made a written certification that the physician has a bona fide opportunity for future employment by a hospital, academic medical center (as defined at § 411.355(e)), or physician organization (as defined at § 411.351) that requires the physician to move the location of his or her medical practice at least 25 miles and outside the geographic area served by the hospital. The certification contains at least the following— (A) Details regarding the steps taken by the physician to effectuate the employment opportunity. (B) Details of the physician's employment opportunity, including the identity and location of the physician's future employer or employment location or both, and the anticipated income and benefits (or a range for income and benefits). (C) A statement that the future employer is not related to the hospital making the payment.

(D) The date on which the physician anticipates relocating his or her medical practice outside of the geographic area served by the hospital. And (E) Information sufficient for the hospital to verify the information included in the written certification. (ii) The hospital takes reasonable steps to verify that the physician has a bona fide opportunity for future employment that requires the physician to relocate outside the geographic area served by the hospital. (iii) The requirements of paragraphs (e)(1)(i) through (iv) of this section are satisfied.

(iv) The retention payment does not exceed the lower of— (A) An amount equal to 25 percent of the physician's current annual income (averaged over the previous 24 months), using a reasonable and consistent methodology that is calculated uniformly. Or (B) The reasonable costs the hospital would otherwise have to expend to recruit a new physician to the geographic area served by the hospital to join the medical staff of the hospital to replace the retained physician. (v) The requirements of paragraph (t)(3) of this section are satisfied. (3) Additional requirements.

Remuneration provided under paragraph (t)(1) or (2) of this section must meet the following additional requirements. (i)(A) The physician's current medical practice is located in a rural area or HPSA (regardless of the physician's specialty) or is located in an area with demonstrated need for the physician as determined by the Secretary in an advisory opinion issued in accordance with section 1877(g)(6) of the Act. Or (B) At least 75 percent of the physician's patients reside in a medically underserved area or are members of a medically underserved population. (ii) The hospital does not enter into a retention arrangement with a particular referring physician more frequently than once every 5 years.

(iii) The amount and terms of the retention payment are not altered during the term of the arrangement in any manner that takes into account the volume or value of referrals or other business generated by the physician. (4) Waiver of relocation requirement. The Secretary may waive the relocation requirement of paragraphs (t)(1) and (t)(2) of this section for payments made to physicians practicing in a HPSA or an area with demonstrated need for the physician through an advisory opinion issued in accordance with section 1877(g)(6) of the Act, if the retention payment arrangement otherwise complies with all of the conditions of this paragraph (t). (5) Application to other entities.

This paragraph (t) applies to remuneration provided by a federally qualified health center or a rural health clinic in the same manner as it applies to remuneration provided by a hospital. (u) Community-wide health information systems. Items or services of information technology provided by an entity to a physician that allow access to, and sharing of, electronic health care records and any complementary drug information systems, general health information, medical alerts, and related information for patients served by community providers and practitioners, in order to enhance the community's overall health, provided that— (1) The items or services are available as necessary to enable the physician to participate in a community-wide health information system, are principally used by the physician as part of the community-wide health information system, and are not provided to the physician in any manner that takes into account the volume or value of referrals or other business generated by the physician. (2) The community-wide health information systems are available to all providers, practitioners, and residents of the community who desire to participate.

And (v) Electronic prescribing items and services. Nonmonetary remuneration (consisting of items and services in the form of hardware, software, or information technology and training services) necessary and used solely to receive and transmit electronic prescription information, if all of the following conditions are met. (1) The items and services are provided by a— (i) Hospital to a physician who is a member of its medical staff. (ii) Group practice (as defined at § 411.352) to a physician who is a Start Printed Page 77678member of the group (as defined at § 411.351).

Or (iii) PDP sponsor or MA organization to a prescribing physician. (2) The items and services are provided as part of, or are used to access, an electronic prescription drug program that meets the applicable standards under Medicare Part D at the time the items and services are provided. (3) The donor (or any person on the donor's behalf) does not take any action to limit or restrict the use or compatibility of the items or services with other electronic prescribing or electronic health records systems. (4) For items or services that are of the type that can be used for any patient without regard to payer status, the donor does not restrict, or take any action to limit, the physician's right or ability to use the items or services for any patient.

(5) Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of items or services, or the amount or nature of the items or services, a condition of doing business with the donor. (6) Neither the eligibility of a physician for the items or services, nor the amount or nature of the items or services, is determined in a manner that takes into account the volume or value of referrals or other business generated between the parties. (7) The arrangement is set forth in a written agreement that— (i) Is signed by the parties. (ii) Specifies the items and services being provided and the donor's cost of the items and services.

And (iii) Covers all of the electronic prescribing items and services to be provided by the donor. This requirement is met if all separate agreements between the donor and the physician (and the donor and any family members of the physician) incorporate each other by reference or if they cross-reference a master list of agreements that is maintained and updated centrally and is available for review by the Secretary upon request. The master list must be maintained in a manner that preserves the historical record of agreements. (8) The donor does not have actual knowledge of, and does not act in reckless disregard or deliberate ignorance of, the fact that the physician possesses or has obtained items or services equivalent to those provided by the donor.

(w) Electronic health records items and services. Nonmonetary remuneration (consisting of items and services in the form of software or information technology and training services, including cybersecurity software and services) necessary and used predominantly to create, maintain, transmit, receive, or protect electronic health records, if all of the following conditions are met. (1) The items and services are provided to a physician by an entity (as defined at § 411.351) that is not a laboratory company. (2) The software is interoperable (as defined at § 411.351) at the time it is provided to the physician.

For purposes of this paragraph (w), software is deemed to be interoperable if, on the date it is provided to the physician, it is certified by a certifying body authorized by the National Coordinator for Health Information Technology to certification criteria identified in the then-applicable version of 45 CFR part 170. (3) [Reserved] (4)(i) Before receipt of the initial donation of items and services or the donation of replacement items and services, the physician pays 15 percent of the donor's cost for the items and services. (ii) Except as provided in paragraph (w)(4)(i) of this section, with respect to items and services received from the donor after the initial donation of items and services or the donation of replacement items and services, the physician pays 15 percent of the donor's cost for the items and services at reasonable intervals. (iii) The donor (or any party related to the donor) does not finance the physician's payment or loan funds to be used by the physician to pay for the items and services.

(5) Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of items or services, or the amount or nature of the items or services, a condition of doing business with the donor. (6) Neither the eligibility of a physician for the items or services, nor the amount or nature of the items or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties. For purposes of this paragraph (w), the determination is deemed not to directly take into account the volume or value of referrals or other business generated between the parties if any one of the following conditions is met. (i) The determination is based on the total number of prescriptions written by the physician (but not the volume or value of prescriptions dispensed or paid by the donor or billed to the program).

(ii) The determination is based on the size of the physician's medical practice (for example, total patients, total patient encounters, or total relative value units). (iii) The determination is based on the total number of hours that the physician practices medicine. (iv) The determination is based on the physician's overall use of automated technology in his or her medical practice (without specific reference to the use of technology in connection with referrals made to the donor). (v) The determination is based on whether the physician is a member of the donor's medical staff, if the donor has a formal medical staff.

(vi) The determination is based on the level of uncompensated care provided by the physician. Or (vii) The determination is made in any reasonable and verifiable manner that does not directly take into account the volume or value of referrals or other business generated between the parties. (7) The arrangement is set forth in a written agreement that— (i) Is signed by the parties. (ii) Specifies the items and services being provided, the donor's cost of the items and services, and the amount of the physician's contribution.

And (iii) Covers all of the electronic health records items and services to be provided by the donor. This requirement is met if all separate agreements between the donor and the physician (and the donor and any family members of the physician) incorporate each other by reference or if they cross-reference a master list of agreements that is maintained and updated centrally and is available for review by the Secretary upon request. The master list must be maintained in a manner that preserves the historical record of agreements. (8) [Reserved] (9) For items or services that are of the type that can be used for any patient without regard to payer status, the donor does not restrict, or take any action to limit, the physician's right or ability to use the items or services for any patient.

(10) The items and services do not include staffing of physician offices and are not used primarily to conduct personal business or business unrelated to the physician's medical practice. (x) Assistance to compensate a nonphysician practitioner. (1) Remuneration provided by a hospital to a physician to compensate a nonphysician practitioner to provide NPP patient care services, if all of the following conditions are met:Start Printed Page 77679 (i) The arrangement— (A) Is set out in writing and signed by the hospital, the physician, and the nonphysician practitioner. And (B) Commences before the physician (or the physician organization in whose shoes the physician stands under § 411.354(c)) enters into the compensation arrangement described in paragraph (x)(1)(vi)(A) of this section.

(ii) The arrangement is not conditioned on— (A) The physician's referrals to the hospital. Or (B) The nonphysician practitioner's NPP referrals to the hospital. (iii) The remuneration from the hospital— (A) Does not exceed 50 percent of the actual compensation, signing bonus, and benefits paid by the physician to the nonphysician practitioner during a period not to exceed the first 2 consecutive years of the compensation arrangement between the nonphysician practitioner and the physician (or the physician organization in whose shoes the physician stands). And (B) Is not determined in any manner that takes into account the volume or value of actual or anticipated referrals by— (1) Referrals by the physician (or any physician in the physician's practice) or other business generated between the parties.

Or (2) NPP referrals by the nonphysician practitioner (or any nonphysician practitioner in the physician's practice) or other business generated between the parties. (iv) The compensation, signing bonus, and benefits paid to the nonphysician practitioner by the physician does not exceed fair market value for the NPP patient care services furnished by the nonphysician practitioner to patients of the physician's practice. (v) The nonphysician practitioner has not, within 1 year of the commencement of his or her compensation arrangement with the physician (or the physician organization in whose shoes the physician stands under § 411.354(c))— (A) Furnished NPP patient care services in the geographic area served by the hospital. Or (B) Been employed or otherwise engaged to provide NPP patient care services by a physician or a physician organization that has a medical practice site located in the geographic area served by the hospital, regardless of whether the nonphysician practitioner furnished NPP patient care services at the medical practice site located in the geographic area served by the hospital.

(vi)(A) The nonphysician practitioner has a compensation arrangement directly with the physician or the physician organization in whose shoes the physician stands under § 411.354(c). And (B) Substantially all of the NPP patient care services that the nonphysician practitioner furnishes to patients of the physician's practice are primary care services or mental health care services. (vii) The physician does not impose practice restrictions on the nonphysician practitioner that unreasonably restrict the nonphysician practitioner's ability to provide NPP patient care services in the geographic area served by the hospital. (2) Records of the actual amount of remuneration provided under paragraph (x)(1) of this section by the hospital to the physician, and by the physician to the nonphysician practitioner, must be maintained for a period of at least 6 years and made available to the Secretary upon request.

(3) For purposes of this paragraph (x), “nonphysician practitioner” means a physician assistant as defined in section 1861(aa)(5) of the Act, a nurse practitioner or clinical nurse specialist as defined in section 1861(aa)(5) of the Act, a certified nurse-midwife as defined in section 1861(gg) of the Act, a clinical social worker as defined in section 1861(hh) of the Act, or a clinical psychologist as defined at § 410.71(d) of this subchapter. (4) For purposes of this paragraph (x), the following terms have the meanings indicated. (i) “NPP patient care services” means direct patient care services furnished by a nonphysician practitioner that address the medical needs of specific patients or any task performed by a nonphysician practitioner that promotes the care of patients of the physician or physician organization with which the nonphysician practitioner has a compensation arrangement. (ii) “NPP referral” means a request by a nonphysician practitioner that includes the provision of any designated health service for which payment may be made under Medicare, the establishment of any plan of care by a nonphysician practitioner that includes the provision of such a designated health service, or the certifying or recertifying of the need for such a designated health service, but does not include any designated health service personally performed or provided by the nonphysician practitioner.

(5) For purposes of paragraph (x)(1) of this section, “geographic area served by the hospital” has the meaning set forth in paragraph (e)(2) of this section. (6) For purposes of paragraph (x)(1) of this section, a “compensation arrangement” between a physician (or the physician organization in whose shoes the physician stands under § 411.354(c)) and a nonphysician practitioner— (i) Means an employment, contractual, or other arrangement under which remuneration passes between the parties. And (ii) Does not include a nonphysician practitioner's ownership or investment interest in a physician organization. (7)(i) This paragraph (x) may be used by a hospital, federally qualified health center, or rural health clinic only once every 3 years with respect to the same referring physician.

(ii) Paragraph (x)(7)(i) of this section does not apply to remuneration provided by a hospital, federally qualified health center, or rural health clinic to a physician to compensate a nonphysician practitioner to provide NPP patient care services if— (A) The nonphysician practitioner is replacing a nonphysician practitioner who terminated his or her employment or contractual arrangement to provide NPP patient care services with the physician (or the physician organization in whose shoes the physician stands) within 1 year of the commencement of the employment or contractual arrangement. And (B) The remuneration provided to the physician is provided during a period that does not exceed 2 consecutive years as measured from the commencement of the compensation arrangement between the nonphysician practitioner who is being replaced and the physician (or the physician organization in whose shoes the physician stands). (8)(i) This paragraph (x) applies to remuneration provided by a federally qualified health center or a rural health clinic in the same manner as it applies to remuneration provided by a hospital. (ii) The “geographic area served” by a federally qualified health center or a rural health clinic has the meaning set forth in paragraph (e)(6)(ii) of this section.

(y) Timeshare arrangements. Remuneration provided under an arrangement for the use of premises, equipment, personnel, items, supplies, or services if the following conditions are met. (1) The arrangement is set out in writing, signed by the parties, and specifies the premises, equipment, personnel, items, supplies, and services covered by the arrangement. (2) The arrangement is between a physician (or the physician organization Start Printed Page 77680in whose shoes the physician stands under § 411.354(c)) and— (i) A hospital.

Or (ii) Physician organization of which the physician is not an owner, employee, or contractor. (3) The premises, equipment, personnel, items, supplies, and services covered by the arrangement are used— (i) Predominantly for the provision of evaluation and management services to patients. And (ii) On the same schedule. (4) The equipment covered by the arrangement is— (i) Located in the same building where the evaluation and management services are furnished.

(ii) Not used to furnish designated health services other than those incidental to the evaluation and management services furnished at the time of the patient's evaluation and management visit. And (iii) Not advanced imaging equipment, radiation therapy equipment, or clinical or pathology laboratory equipment (other than equipment used to perform CLIA-waived laboratory tests). (5) The arrangement is not conditioned on the referral of patients by the physician who is a party to the arrangement to the hospital or physician organization of which the physician is not an owner, employee, or contractor. (6) The compensation over the term of the arrangement is set in advance, consistent with fair market value, and not determined— (i) In any manner that takes into account the volume or value of referrals or other business generated between the parties.

Or (ii) Using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services provided while using the premises, equipment, personnel, items, supplies, or services covered by the arrangement. Or (B) Per-unit of service fees that are not time-based, to the extent that such fees reflect services provided to patients referred by the party granting permission to use the premises, equipment, personnel, items, supplies, or services covered by the arrangement to the party to which the permission is granted. (7) The arrangement would be commercially reasonable even if no referrals were made between the parties. (8) [Reserved] (9) The arrangement does not convey a possessory leasehold interest in the office space that is the subject of the arrangement.

(z) Limited remuneration to a physician. (1) Remuneration from an entity to a physician for the provision of items or services provided by the physician to the entity that does not exceed an aggregate of $5,000 per calendar year, as adjusted for inflation in accordance with paragraph (z)(3) of this section, if all of the following conditions are satisfied. (i) The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the physician. (ii) The compensation does not exceed the fair market value of the items or services.

(iii) The arrangement would be commercially reasonable even if no referrals were made between the parties. (iv) Compensation for the lease of office space or equipment is not determined using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space or to the services performed on or business generated through the use of the equipment. Or (B) Per-unit of service rental charges, to the extent that such charges reflect services provided to patients referred by the lessor to the lessee. (v) Compensation for the use of premises or equipment is not determined using a formula based on— (A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services provided while using the premises or equipment covered by the arrangement.

Or (B) Per-unit of service fees that are not time-based, to the extent that such fees reflect services provided to patients referred by the party granting permission to use the premises or equipment covered by the arrangement to the party to which the permission is granted. (vi) If remuneration to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the arrangement satisfies the conditions of § 411.354(d)(4). (2) A physician may provide items or services through employees whom the physician has hired for the purpose of performing the services. Through a wholly-owned entity.

Or through locum tenens physicians (as defined at § 411.351, except that the regular physician need not be a member of a group practice). (3) The annual aggregate remuneration limit in this paragraph (z) is adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index—Urban All Items (CPI-U) for the 12-month period ending the preceding September 30. CMS displays after September 30 each year both the increase in the CPI-U for the 12-month period and the new remuneration limit on the physician self-referral website at http://www.cms.hhs.gov/​PhysicianSelfReferral/​10_​CPI-U_​Updates.asp. (aa) Arrangements that facilitate value-based health care delivery and payment—(1) Full financial risk—Remuneration paid under a value-based arrangement, as defined at § 411.351, if the following conditions are met.

(i) The value-based enterprise is at full financial risk (or is contractually obligated to be at full financial risk within the 12 months following the commencement of the value-based arrangement) during the entire duration of the value-based arrangement. (ii) The remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population. (iii) The remuneration is not an inducement to reduce or limit medically necessary items or services to any patient. (iv) The remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement.

(v) If remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions. (A) The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties. (B) The requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier.

Or the referral is not in the patient's best medical interests in the physician's judgment. (vi) Records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Secretary upon request. (vii) For purposes of this paragraph (aa), “full financial risk” means that the value-based enterprise is financially responsible on a prospective basis for Start Printed Page 77681the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time. For purposes of this paragraph (aa), “prospective basis” means that the value-based enterprise has assumed financial responsibility for the cost of all patient care items and services covered by the applicable payor prior to providing patient care items and services to patients in the target patient population.

(2) Value-based arrangements with meaningful downside financial risk to the physician—Remuneration paid under a value-based arrangement, as defined at § 411.351, if the following conditions are met. (i) The physician is at meaningful downside financial risk for failure to achieve the value-based purpose(s) of the value-based enterprise during the entire duration of the value-based arrangement. (ii) A description of the nature and extent of the physician's downside financial risk is set forth in writing. (iii) The methodology used to determine the amount of the remuneration is set in advance of the undertaking of value-based activities for which the remuneration is paid.

(iv) The remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population. (v) The remuneration is not an inducement to reduce or limit medically necessary items or services to any patient. (vi) The remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement. (vii) If remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions.

(A) The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties. (B) The requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment.

(viii) Records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Secretary upon request. (ix) For purposes of this paragraph (aa), “meaningful downside financial risk” means that the physician is responsible to repay or forgo no less than 10 percent of the total value of the remuneration the physician receives under the value-based arrangement. (3) Value-based arrangements. Remuneration paid under a value-based arrangement, as defined at § 411.351, if the following conditions are met.

(i) The arrangement is set forth in writing and signed by the parties. The writing includes a description of— (A) The value-based activities to be undertaken under the arrangement. (B) How the value-based activities are expected to further the value-based purpose(s) of the value-based enterprise. (C) The target patient population for the arrangement.

(D) The type or nature of the remuneration. (E) The methodology used to determine the remuneration. And (F) The outcome measures against which the recipient of the remuneration is assessed, if any. (ii) The outcome measures against which the recipient of the remuneration is assessed, if any, are objective, measurable, and selected based on clinical evidence or credible medical support.

(iii) Any changes to the outcome measures against which the recipient of the remuneration will be assessed are made prospectively and set forth in writing. (iv) The methodology used to determine the amount of the remuneration is set in advance of the undertaking of value-based activities for which the remuneration is paid. (v) The remuneration is for or results from value-based activities undertaken by the recipient of the remuneration for patients in the target patient population. (vi) The arrangement is commercially reasonable.

(vii)(A) No less frequently than annually, or at least once during the term of the arrangement if the arrangement has a duration of less than 1 year, the value-based enterprise or one or more of the parties monitor. (1) Whether the parties have furnished the value-based activities required under the arrangement. (2) Whether and how continuation of the value-based activities is expected to further the value-based purpose(s) of the value-based enterprise. And (3) Progress toward attainment of the outcome measure(s), if any, against which the recipient of the remuneration is assessed.

(B) If the monitoring indicates that a value-based activity is not expected to further the value-based purpose(s) of the value-based enterprise, the parties must terminate the ineffective value-based activity. Following completion of monitoring that identifies an ineffective value-based activity, the value-based activity is deemed to be reasonably designed to achieve at least one value-based purpose of the value-based enterprise— (1) For 30 consecutive calendar days after completion of the monitoring, if the parties terminate the arrangement. Or (2) For 90 consecutive calendar days after completion of the monitoring, if the parties modify the arrangement to terminate the ineffective value-based activity. (C) If the monitoring indicates that an outcome measure is unattainable during the remaining term of the arrangement, the parties must terminate or replace the unattainable outcome measure within 90 consecutive calendar days after completion of the monitoring.

(viii) The remuneration is not an inducement to reduce or limit medically necessary items or services to any patient. (ix) The remuneration is not conditioned on referrals of patients who are not part of the target patient population or business not covered under the value-based arrangement. (x) If the remuneration paid to the physician is conditioned on the physician's referrals to a particular provider, practitioner, or supplier, the value-based arrangement complies with both of the following conditions. (A) The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties.

(B) The requirement to make referrals to a particular provider, practitioner, or supplier does not apply if the patient expresses a preference for a different provider, practitioner, or supplier. The patient's insurer determines the provider, practitioner, or supplier. Or the referral is not in the patient's best medical interests in the physician's judgment. (xi) Records of the methodology for determining and the actual amount of remuneration paid under the value-based arrangement must be maintained for a period of at least 6 years and made available to the Secretary upon request.

(xii) For purposes of this paragraph (aa)(3), “outcome measure” means a benchmark that quantifies. (A) Improvements in or maintenance of the quality of patient care. OrStart Printed Page 77682 (B) Reductions in the costs to or reductions in growth in expenditures of payors while maintaining or improving the quality of patient care. (bb) Cybersecurity technology and related services.

(1) Nonmonetary remuneration (consisting of technology and services) necessary and used predominantly to implement, maintain, or reestablish cybersecurity, if all of the following conditions are met. (i) Neither the eligibility of a physician for the technology or services, nor the amount or nature of the technology or services, is determined in any manner that directly takes into account the volume or value of referrals or other business generated between the parties. (ii) Neither the physician nor the physician's practice (including employees and staff members) makes the receipt of technology or services, or the amount or nature of the technology or services, a condition of doing business with the donor. (iii) The arrangement is documented in writing.

(2) For purposes of this paragraph (bb), “technology” means any software or other types of information technology. Start Amendment Part3. Effective January 1, 2022, § 411.352 is further amended by revising paragraph (i) to read as follows. End Amendment Part Group practice.

* * * * * (i) Special rules for profit shares and productivity bonuses—(1) Overall profits. (i) Notwithstanding paragraph (g) of this section, a physician in the group may be paid a share of overall profits that is not directly related to the volume or value of the physician's referrals. (ii) Overall profits means the profits derived from all the designated health services of any component of the group that consists of at least five physicians, which may include all physicians in the group. If there are fewer than five physicians in the group, overall profits means the profits derived from all the designated health services of the group.

(iii) Overall profits must be divided in a reasonable and verifiable manner. The share of overall profits will be deemed not to directly relate to the volume or value of referrals if one of the following conditions is met. (A) Overall profits are divided per capita (for example, per member of the group or per physician in the group). (B) Overall profits are distributed based on the distribution of the group's revenues attributed to services that are not designated health services and would not be considered designated health services if they were payable by Medicare.

(C) Revenues derived from designated health services constitute less than 5 percent of the group's total revenues, and the portion of those revenues distributed to each physician in the group constitutes 5 percent or less of his or her total compensation from the group. (2) Productivity bonuses. (i) Notwithstanding paragraph (g) of this section, a physician in the group may be paid a productivity bonus based on services that he or she has personally performed, or services “incident to” such personally performed services, that is not directly related to the volume or value of the physician's referrals (except that the bonus may directly relate to the volume or value of the physician's referrals if the referrals are for services “incident to” the physician's personally performed services). (ii) A productivity bonus must be calculated in a reasonable and verifiable manner.

A productivity bonus will be deemed not to relate directly to the volume or value of referrals if one of the following conditions is met. (A) The productivity bonus is based on the physician's total patient encounters or the relative value units (RVUs) personally performed by the physician. (B) The services on which the productivity bonus is based are not designated health services and would not be considered designated health services if they were payable by Medicare. (C) Revenues derived from designated health services constitute less than 5 percent of the group's total revenues, and the portion of those revenues distributed to each physician in the group constitutes 5 percent or less of his or her total compensation from the group.

(3) Value-based enterprise participation. Notwithstanding paragraph (g) of this section, profits from designated health services that are directly attributable to a physician's participation in a value-based enterprise, as defined at § 411.351, may be distributed to the participating physician. (4) Supporting documentation. Supporting documentation verifying the method used to calculate the profit share or productivity bonus under paragraphs (i)(1), (2), and (3) of this section, and the resulting amount of compensation, must be made available to the Secretary upon request.

Start Signature Dated. Novemeber 19, 2020. Seema Verma, Administrator, Centers for Medicare &. Medicaid Services.

Alex M. Azar II, Secretary, Department of Health and Human Services. End Signature End Supplemental Information [FR Doc. 2020-26140 Filed 11-20-20.

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Start Preamble Centers for Where to buy levitra in singapore Disease flagyl paste Control and Prevention (CDC), Department of Health and Human Services (HHS). Notice of meeting and request for comment. In accordance with the Federal Advisory Committee Act, the Centers for Disease Control and Prevention flagyl paste (CDC) announces the following meeting of the Advisory Committee on Immunization Practices (ACIP). This meeting is open to the public. Time will be available for flagyl paste public comment.

The meeting will be webcast live via the World Wide Web. The meeting will be held on November 19, 2021, from 12:00 p.m. To 3:00 flagyl paste p.m., EST (times subject to change). The public may submit written comments from November 19, 2021 through November 22, 2021. You may submit comments flagyl paste identified by Docket No.

CDC-2021-0125 by any of the following methods. • Federal eRulemaking Portal. Https://www.regulations.gov. Follow the instructions for submitting comments. • Mail.

Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H24-8, Atlanta, Georgia 30329-4027, Attn. ACIP Meeting. Instructions. All submissions received must include the Agency name and Docket Number. All relevant comments received in conformance with the https://www.regulations.gov suitability policy will be posted without change to https://www.regulations.gov, including any personal information provided.

For access to the docket to read background documents or comments received, go to https://www.regulations.gov. Written public comments submitted up to 72 hours prior to the ACIP meeting will be provided to ACIP members before the meeting. Start Further Info Stephanie Thomas, ACIP Committee Management Specialist, Centers for Disease Control and Prevention, National Center for Immunization and Respiratory Diseases, 1600 Clifton Road NE, MS-H24-8, Atlanta, Georgia 30329-4027. Telephone. (404) 639-8367.

Email. ACIP@cdc.gov. End Further Info End Preamble Start Supplemental Information In accordance with 41 CFR 102-3.150(b), less than 15 calendar days' notice is being given for this meeting due to the exceptional circumstances of the buy antibiotics flagyl and rapidly evolving buy antibiotics treatment development and regulatory processes. The Secretary of Health and Human Services has determined that buy antibiotics is a Public Health Emergency. A notice of this ACIP meeting has also been posted on CDC's ACIP website at.

Http://www.cdc.gov/​treatments/​acip/​index.html. In addition, CDC has sent notice of this ACIP meeting by email to those who subscribe to receive email updates about ACIP. Purpose. The committee is charged with advising the Director, CDC, on the use of immunizing agents. In addition, under 42 U.S.C.

1396s, the committee is mandated to establish and periodically review and, as appropriate, revise the list of treatments for administration to treatment-eligible children through the treatments for Children program, along with schedules regarding dosing interval, dosage, and contraindications to administration of treatments. Further, under provisions of the Affordable Care Act, section 2713 of the Public Health Service Act, immunization recommendations of the ACIP that have been approved by the CDC Director and appear on CDC immunization schedules must be covered by applicable health plans. Matters to be Considered. The agenda will include discussions on buy antibiotics treatment booster doses. A vote on buy antibiotics booster doses is scheduled.

Agenda items are subject to change as priorities dictate. For more information on the meeting agenda visit https://www.cdc.gov/​treatments/​acip/​meetings/​meetings-info.html. Public Participation Interested persons or organizations are invited to participate by submitting written views, recommendations, and data. Please note that comments received, including attachments and other supporting materials, are part of the public record and are subject to public disclosure. Comments will be posted on https://www.regulations.gov.

Therefore, do not include any information in your comment or Start Printed Page 64939 supporting materials that you consider confidential or inappropriate for public disclosure. If you include your name, contact information, or other information that identifies you in the body of your comments, that information will be on public display. CDC will review all submissions and may choose to redact, or withhold, submissions containing private or proprietary information such as Social Security numbers, medical information, inappropriate language, or duplicate/near duplicate examples of a mass-mail campaign. CDC will carefully consider all comments submitted into the docket. Written Public Comment.

The docket will be opened to receive written comments on November 19, 2021. Written comments must be received on or before November 22, 2021. Oral Public Comment. This meeting will include time for members of the public to make an oral comment. Oral public comment will occur before any scheduled votes including all votes relevant to the ACIP's Affordable Care Act and treatments for Children Program roles.

Priority will be given to individuals who submit a request to make an oral public comment before the meeting according to the procedures below. Procedure for Oral Public Comment. All persons interested in making an oral public comment at the November 19, 2021 ACIP meeting must submit a request at http://www.cdc.gov/​treatments/​acip/​meetings/​ no later than 11:59 p.m., EST, November 18, 2021, according to the instructions provided. If the number of persons requesting to speak is greater than can be reasonably accommodated during the scheduled time, CDC will conduct a lottery to determine the speakers for the scheduled public comment session. CDC staff will notify individuals regarding their request to speak by email by 9:00 a.m., EST, on November 19, 2021.

To accommodate the significant interest in participation in the oral public comment session of ACIP meetings, each speaker will be limited to 3 minutes, and each speaker may only speak once per meeting. The Director, Strategic Business Initiatives Unit, Office of the Chief Operating Officer, Centers for Disease Control and Prevention, has been delegated the authority to sign Federal Register notices pertaining to announcements of meetings and other committee management activities, for both the Centers for Disease Control and Prevention and the Agency for Toxic Substances and Disease Registry. Start Signature Kalwant Smagh, Director, Strategic Business Initiatives Unit, Office of the Chief Operating Officer, Centers for Disease Control and Prevention. End Signature End Supplemental Information [FR Doc. 2021-25387 Filed 11-17-21.

11:15 am]BILLING CODE 4163-18-PStart Preamble Start Printed Page 65524 (iv) MIPS Reweighting Based on Extreme and Uncontrollable Circumstances (A) MIPS Applications for Reweighting for the CY 2021 Performance Period/2023 MIPS Payment Year Based on Extreme and Uncontrollable Circumstances We anticipate that the national PHE for buy antibiotics will continue through CY 2021. Therefore, we remind clinicians that the application-based extreme and uncontrollable circumstances policy, as described in § 414.1380(c)(2)(i)(A)( 6 ) and (c)(2)(i)(C)( 2 ), will be available for the CY 2021 performance period/2023 MIPS payment year (85 FR 84916 through 84917). Please refer to https://qpp.cms.gov/​about/​buy antibiotics19?. €‹py=​2021 for details. The application allows clinicians, groups, and virtual groups significantly impacted by the PHE for buy antibiotics to request reweighting for any or all MIPS performance categories.

Under this policy, if a clinician, group, or virtual group submits a reweighting application and also submits data for a performance category for which an application was submitted, the data submission will override the application, and the clinician, group, or virtual group will be scored on the data submitted. Additionally, if an application is submitted for one performance category only, and data is submitted for the other 2 performance categories, only the performance category for which the application was submitted will be reweighted and the other performance categories will be scored. We believe this approach maintains a balance of encouraging participation in the Quality Payment Program while still providing for flexibility in weighting the performance categories for those who have been affected by the national PHE for buy antibiotics. Please refer to https://qpp.cms.gov/​about/​buy antibiotics19?. €‹py=​2021 for more information.

(B) MIPS Reweighting Based on Extreme and Uncontrollable Circumstances. Automatic and Application-Based Policies Clarification Under the application-based extreme and uncontrollable circumstances policy codified at §  414.1380(c)(2)(i)(A)( 6 ) for the quality, cost, and improvement activities performance categories and at § 414.1380(c)(2)(i)(C)( 2 ) for the promoting interoperability performance category, clinicians who are subject to extreme and uncontrollable circumstances may submit an application to CMS to request reweighting of a performance category or categories. We also established an automatic extreme and uncontrollable circumstances policy at § 414.1380(c)(2)(i)(A)( 8 ) for the quality, cost, and improvement activities performance categories and at § 414.1380(c)(2)(i)(C)( 3 ) for the promoting interoperability performance category, under which we automatically reweight the performance categories for clinicians who are located in an area affected by extreme and uncontrollable circumstances as identified by us. Based on stakeholder inquiries, we recognize not all stakeholders understand how individual MIPS eligible clinicians who are eligible for reweighting under the automatic extreme and uncontrollable circumstances policy and who also submit an application for reweighting based on extreme and uncontrollable circumstances are affected by the intersection of these policies. Currently, under both the application-based and automatic extreme and uncontrollable circumstances policies, if a MIPS eligible clinician who is located in an area affected by extreme and uncontrollable circumstances as identified by CMS submits data for any of the MIPS performance categories by the applicable submission deadline for the MIPS performance period, they will be scored on each performance category for which they submit data, and the performance category will not be reweighted to zero percent in the final score.

Under the automatic extreme and uncontrollable circumstances policy, the other performance categories for which data was not submitted will remain reweighted to zero percent (82 FR 53898, 83 FR 59874). Additionally, as described in the CY 2019 PFS final rule (83 FR 59874), under the automatic extreme and uncontrollable circumstances policy, a MIPS eligible clinician who is located in an area affected by extreme and uncontrollable circumstances as identified by CMS will Start Printed Page 65525 not be scored on the cost performance category. As we stated in the CY 2019 PFS final rule (83 FR 59874), if a MIPS eligible clinician is located in an affected area, we would assume the clinician does not have sufficient cost measures applicable to him or her and assign a weight of zero percent to that category in the final score, even if we receive administrative claims data that will enable us to calculate the cost measures for that clinician. The following example is intended to illustrate the intersection of the automatic and application-based extreme and uncontrollable circumstances policies. A MIPS eligible clinician who is located in an area affected by extreme and uncontrollable circumstances as identified by CMS and eligible for the automatic extreme and uncontrollable circumstances policy submits an application for reweighting based on extreme and uncontrollable circumstances.

The application requests reweighting for the Promoting Interoperability performance category, and the clinician submits data for the quality and improvement activities performance categories. The clinician will be scored on the quality and improvement activities performance categories because they submitted data for those categories. The cost performance category is reweighted to zero percent under the automatic extreme and uncontrollable circumstances policy, as discussed above. And the Promoting Interoperability performance category is also reweighted to zero percent under the automatic extreme and uncontrollable circumstances policy. The application for reweighting was not needed in this example to reweight the Promoting Interoperability performance category.

Please refer to https://qpp.cms.gov/​about/​buy antibiotics19?. €‹py=​2021 for more information. (v) Redistributing Performance Category Weights for Facility-Based Measurement (A) Background In the CY 2018 Quality Payment Program final rule, we established facility-based measurement under section 1848(q)(2)(C)(ii) of the Act which provides that the Secretary may use measures used for payment systems other than for physicians, such as measures for inpatient hospitals, for purposes of the quality and cost performance categories (82 FR 53752 through 53767). Scoring under facility-based measurement was available for clinicians beginning with the CY 2019 performance period/2021 MIPS payment year. We established facility-based measurement to better align incentives between facilities and the MIPS eligible clinicians who provide services there (82 FR 53753).

For more background on facility-based measurement, we refer readers to both the CY 2018 Quality Payment Program final rule (82 FR 53752 through 53767) and the CY 2019 PFS final rule (83 FR 59856 through 59867). (B) Redistribution of Performance Category Weights Under Facility-Based Measurement In the CY 2019 PFS final rule, we established that clinicians and groups would not need to elect or opt-in to facility-based measurement, but instead we would automatically apply facility-based measurement to MIPS eligible clinicians and groups who are eligible for facility-based measurement and who would benefit by having a higher combined quality and cost performance category score (83 FR 59863). In this same final rule, we finalized policies for redistributing weight among the performance categories for the CY 2019 performance period/2021 MIPS payment year under § 414.1380(c)(2)(ii)(C). Under those redistribution policies, if the cost performance category is reweighted to zero percent of the final score, its weight is redistributed entirely to the quality performance category, unless the quality performance category is reweighted to zero percent, in which case the quality and cost performance category weights would be redistributed to the improvement activities and Promoting Interoperability performance categories. A clinician or group could have the weight of the cost performance category redistributed because they did not meet the case minimum for any of the measures in the cost performance category.

Because facility-based measurement always includes both the quality and cost performance categories, it is possible a clinician or group would be scored on the cost performance category under facility-based measurement but not outside of facility-based measurement. There are two common scenarios for a facility-based clinician or group which could occur in the CY 2019 performance period/2021 MIPS payment year. In the first scenario, a facility-based clinician or group meets the case minimum for at least one cost performance category measure and receives a cost performance category percent score as defined at § 414.1380(b)(2). The respective quality and cost scores will be multiplied by the available points in the quality performance category (45 points) and the available points in the cost performance category (15 points) to determine the combined contribution of the quality performance category and the cost performance category to the final score out of the available 60 points. In the second scenario, a facility-based clinician or group does not meet the case minimum for any cost performance category measure and the cost performance category weight is redistributed to the quality performance category so the quality performance category score alone determines the score out of the available 60 points.

Table 65 shows these two scenarios. Start Printed Page 65526 In the CY 2020 PFS final rule, we established a redistribution policy for the CY 2020 performance period/2022 MIPS payment year at § 414.1380(c)(2)(ii)(D), for scenarios when the cost performance category weight is redistributed to the Promoting Interoperability performance category, as well as to the quality performance category (84 FR 63028). Under this policy, the weights of the combined quality and cost performance categories could be different for a clinician or group under facility-based measurement and outside of facility-based measurement in circumstances in which the clinician or group was not scored on the cost performance category outside of facility-based measurement but was scored on all other performance categories. Table 66 shows the scenario in which the combined weights of the quality and cost performance categories differ if cost is included, which occurs when the cost performance category is redistributed, and all other categories are scored. We established similar redistribution policies for CY 2021 performance period/2023 MIPS payment year and CY 2022 performance period/2024 MIPS payment year at § 414.1380(c)(2)(ii)(E) and (F) in that same rule (84 FR 63029 through 63031), which also described situations where the combined weight of the cost and quality performance categories was not always consistent.

For more on the background and proposed policies related to redistribution of performance categories, please see section IV.A.3.e.(2)(b)(iii) of this final rule. Based on inquires we received from clinicians who were eligible for facility-based measurement, we believe our policy for determining the combined quality and cost performance category scores via facility-based measurement and outside of facility-based measurement is not ideal because it could result in a facility-based clinician or group receiving a lower final score than they would otherwise receive outside of facility-based measurement. We considered whether this more complex consideration of the scores and the weights in the performance categories necessitated a reconsideration of an opt-in requirement for facility-based measurement. However, we believe that establishing such a requirement would create administrative burden for clinicians and groups. Instead of adding an opt-in requirement, we proposed a new policy to determine the MIPS final score for clinicians and groups who are eligible for facility-based measurement.

We proposed at § 414.1380(e)(6)(vi)(B) that beginning with the CY 2022 performance period/2024 MIPS payment year, the MIPS quality and cost performance category scores will be based on the facility-based measurement scoring methodology unless a clinician or group receives a higher MIPS final score through another MIPS submission. Under this proposed policy, we will calculate two final scores for clinicians and groups who are facility-based. One score will be based on the clinician or group's performance and the weights of the performance categories if facility-based measurement did not apply, and the other will be based on the application of facility-based measurement. The example below shows how this proposed policy will apply for a facility-based group that did not meet the case minimum for any of the cost measures but was scored on all other performance categories. As a result of this policy, the group in this example will receive a final score on the basis of their performance outside of facility-based measurement because they have obtained a higher final score through the combination of their submitted quality measures, submitted improvement activities and submitted promoting interoperability measures.

We solicited comments on this proposal. We received public comments on the redistribution of performance category weights under facility-based measurement. The following is a summary of the comments we received and our responses. Comment. A few commenters supported CMS' proposal to take the higher of the two scores when Start Printed Page 65527 determining the final score for facility-based eligible clinicians and groups.

One commenter suggested that CMS adopt this policy starting from CY 2021 performance period/2023 MIPS payment year. Response. We thank the commenters for their support and feedback and note that, as mentioned in the 2021 Facility-Based Measurement Quick Start Guide, because the FY 2022 total performance score from the Hospital Value-Based Purchasing Program will be unavailable, we will not be able to calculate MIPS facility-based scores for the CY 2021 MIPS performance period/2023 MIPS payment year.[] Please refer to https://qpp-cm-prod-content.s3.amazonaws.com/​uploads/​1293/​2021%20MIPS%20Facility%20Based%20Quick%20Start%20Guide.pdf for more information. After consideration of public comments, we finalize the proposal at § 414.1380(e)(6)(vi)(B) that beginning with the CY 2022 performance period/2024 MIPS payment year, the MIPS quality and cost performance category scores will be based on the facility-based measurement scoring methodology unless a clinician or group receives a higher MIPS final score through another MIPS submission. F.

MIPS Payment Adjustments (1) Background For our previously established policies regarding the final score used to determine MIPS payment adjustments we refer readers to the CY 2021 PFS final rule (85 FR 84917 through 84926), CY 2020 PFS final rule (84 FR 63031 through 63045), CY 2019 PFS final rule (83 FR 59878 through 59894), CY 2018 Quality Payment Program final rule (82 FR 53785 through 53799) and CY 2017 Quality Payment Program final rule (81 FR 77329 through 77343). In the CY 2022 PFS proposed rule (86 FR 39453 through 39458), we proposed. (1) To select the mean as our methodology for calculating the performance threshold. (2) to establish the performance threshold for the 2024 MIPS payment year using 2019 MIPS payment year data. (3) to establish the additional performance threshold for exceptional performance for the 2024 MIPS payment year.

And (4) to update the scoring hierarchy to include subgroups. In addition, we are including information about our timing for providing MIPS performance feedback to clinicians for the performance period in 2020. (2) Establishing the Performance Threshold Under section 1848(q)(6)(D)(i) of the Act, for each year of MIPS, the Secretary shall compute a performance threshold with respect to which the final scores of MIPS eligible clinicians are compared for purposes of determining the MIPS payment adjustment factors under section 1848(q)(6)(A) of the Act for a year. The performance threshold for a year must be either the mean or median (as selected by the Secretary, and which may be reassessed every 3 years) of the final scores for all MIPS eligible clinicians for a prior period specified by the Secretary. Section 1848(q)(6)(D)(iii) of the Act included a special rule for the initial 2 years of MIPS, which requires the Secretary, prior to the performance period for such years, to establish a performance threshold for purposes of determining the MIPS payment adjustment factors under section 1848(q)(6)(A) of the Act and an additional performance threshold for purposes of determining the additional MIPS payment adjustment factors under section 1848(q)(6)(C) of the Act, each of which shall be based on a period prior to the performance period and take into account data available for performance on measures and activities that may be used under the performance categories and other factors determined appropriate by the Secretary.

Section 51003(a)(1)(D) of the Bipartisan Budget Act of 2018 (Pub. L. 115-123, February 9, 2018) amended section 1848(q)(6)(D)(iii) of the Act to extend the special rule to apply for the initial 5 years of MIPS instead of only the initial 2 years of MIPS. In addition, section 51003(a)(1)(D) of the Bipartisan Budget Act of 2018 added a new clause (iv) to section 1848(q)(6)(D) of the Act, which includes an additional special rule for the third, fourth, and fifth years of MIPS (the 2021 through 2023 MIPS payment years). This additional special rule provides, for purposes of determining the MIPS payment adjustment factors under section 1848(q)(6)(A) of the Act, in addition to the requirements specified in section 1848(q)(6)(D)(iii) of the Act, the Secretary shall increase the performance threshold for each of the third, fourth, and fifth years to ensure a gradual and incremental transition to the performance threshold described in section 1848(q)(6)(D)(i) of the Act (as estimated by the Secretary) with respect to the sixth year (the 2024 MIPS payment year) to which the MIPS applies.

We have applied these special rules for the past 5 years to provide for a gradual and incremental transition to the year 6 performance threshold. For further information on established performance threshold policies we refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77333 through 77338), CY 2018 Quality Payment Program (82 FR 53787 through 53794), CY 2019 PFS final rule (83 FR 59880 through 59883), the CY 2020 PFS final rule (84 FR 63031 through 63037), and the CY 2021 PFS final rule (85 FR 84919 through 84923). We codified the performance thresholds for each of the first 5 years of MIPS at § 414.1405(b)(4), (5), (6), (7), and (8) as presented in Table 68. Start Printed Page 65528 In the CY 2020 PFS final rule (84 FR 63031 through 63037) at § 414.1405(b)(7) and (8), we finalized the performance thresholds for the 2022 and 2023 MIPS payment years at 45 and 60 points, respectively, an increase of 15 points each year until the 2024 MIPS payment year, for which we estimated that the performance threshold would be 74.01 points. We believe that this approach effectively provided for a gradual and incremental transition to the performance threshold we had estimated for the 2024 MIPS payment year, as required by the statute.

Beginning with the 2024 MIPS payment year, section 1848(q)(6)(D)(i) of the Act requires the performance threshold to be the mean or median (as selected by the Secretary) of the final scores for all MIPS eligible clinicians with respect to a prior period specified by the Secretary. That section also provides that the Secretary may reassess the selection of the mean or median every 3 years. Thus, we considered whether to use the mean or median as the methodology for determining the performance threshold. We will use this methodology to determine a performance threshold for each of the following 3 years. The 2024 MIPS payment year, 2025 MIPS payment year, and 2026 MIPS payment year.

We would then reassess and establish the methodology (mean or median) that we will use for each of the next 3 years (2027 MIPS payment year, 2028 MIPS payment year, and 2029 MIPS payment year). At the time of drafting of this final rule, we have final score data from the CY 2017 performance period/2019 MIPS payment year through the CY 2020 performance period/2022 MIPS payment year available to use in our assessment of whether to use the mean or median as our methodology for the next 3 years. At this time, however, the targeted review process (see § 414.1385) for the CY 2020 performance period/2022 MIPS payment year has not yet concluded, and the data for the CY 2020 performance period/2022 MIPS payment year may be subject to change as a result of targeted review which began on August 2, 2021, and will conclude on November 29, 2021, at 8:00 p.m., eastern standard time. For more information on the targeted review process, see our announcement sent to our list serve on September 27th, 2021 available at https://qpp-cm-prod-content.s3.amazonaws.com/​uploads/​1631/​2020%20Scoring%20Updates_​EUC%20Reweighting%20Requests%20Extension_​Listserv.pdf. We do not believe it would be appropriate to consider mean and median final scores from the CY 2020 performance period/2022 MIPS payment year for purposes of establishing the performance threshold for the 2024 MIPS payment year in this final rule when those scores may be subject to change as a result of the targeted review process.

Furthermore, we are not utilizing final scores from the CY 2020 performance period/2022 MIPS payment for the creation of our regulatory impact analysis model. For a detailed discussion of the RIA methodology, including the basis of our decision to not use CY 2020 performance period/2022 MIPS payment year data, please see section VI.F.18.a of this final rule. From our review of the data available to us, we have identified the mean and median final scores for each of the 2019 through 2021 MIPS payment years, as shown in Table 69. These six values represent the prior year mean and median final scores that we considered for the 2024 MIPS payment year performance threshold. As shown in Table 69, using the median final score gives a possible range of performance thresholds from 89.71 points to 99.63 points.

Given our performance threshold of 60 points in year 5, these values would result in an increase of 29.71 points to 39.63 points for year 6. Selecting the median of final scores as our methodology would, at a minimum, nearly double the annual increase in the performance threshold of 15 points that we had from year 2 to year 5 of the program. Section 1848(q)(6)(D)(iv) of the Act required that we increase the performance threshold for each of the third, fourth, and fifth years of MIPS to ensure a gradual and incremental transition to the performance threshold we estimated with respect to the sixth year of MIPS. In prior rules we estimated the year six Start Printed Page 65529 performance threshold to be 74.01 points and used this estimate to determine how to gradually raise the performance threshold (83 FR 59881, 84 FR 63032, 84 FR 40802). Although section 1848(q)(6)(D)(iv) of the Act does not require this approach for the sixth year and subsequent years of MIPS, we believe that it is appropriate to set the performance threshold at a level that is in line with our previous estimates for year 6.

We believe that continuing the gradual and incremental increase into year 6 would provide consistency to our stakeholders. After evaluating the possible values shown in Table 69, we believe that using the mean as our methodology would continue this approach. Using the mean final score as the methodology would yield a possible range of performance thresholds from 74.65 points to 85.61 points (rounded to 75 points and 86 points respectively). Given our performance threshold of 60 points in year 5, these values would result in an increase of 15 points to 26 points for year 6. Given these values and our annual performance threshold increases of 15 points for years 2 to 5 of the program, 75 is the value that is most consistent with the gradual and incremental approach that we have elected to continue.

Therefore, we proposed at § 414.1405(g) that for each of the 2024, 2025, and 2026 MIPS payment years, the performance threshold is the mean of the final scores for all MIPS eligible clinicians from a prior period as specified under § 414.1405(b). This methodology will be used for MIPS payment years 2024 through 2026 of the program after which we will reassess the methodology for MIPS payment years 2027 through 2029. In addition to selecting the methodology (mean or median), section 1848(q)(6)(D)(i) of the Act also requires us to specify a prior period from which we will use the final scores for all MIPS eligible clinicians to calculate the mean or median. As shown in Table 69, the mean final scores are 74.65, 87, and 85.61 points for MIPS payment years 2019 through 2021 respectively. In previous rules (83 FR 59881, 84 FR 63032), we used the MIPS payment year 2019 mean final score to estimate a performance threshold of 74.01 points for year 6 of the program.

Our data have been updated to reflect completed targeted reviews since the time we made this estimate, and the mean final score for the 2019 MIPS payment year is now 74.65 points (see Table 69). This value would be an increase of almost exactly 15 points from the MIPS payment year 2023 performance threshold of 60 points, which is identical to the increases of the previous 3 years and consistent with our intention to continue the gradual and incremental approach that has been utilized in prior years. After reviewing the available final score data, we proposed at § 414.1405(b)(9) to use the MIPS payment year 2019 as the prior period and the rounded mean final score of 75 points as the year 6 performance threshold. When we establish the performance threshold for future MIPS payment years in future rulemaking, we will reassess using the mean final score for MIPS payment year 2019 as mean final scores for subsequent years become available. We solicited comments on these proposals, as well as the alternative methodology of the median that we considered but did not propose.

Additionally, we solicited comments on calculating the performance threshold using an alternative year's final scores that we considered but did not propose. We received public comments on establishing the performance threshold. The following is a summary of the comments we received and our responses. Comment. One commenter requested that CMS not roll back or reduce the performance threshold from its current value with the transition to MVPs in future years.

The commenter believes that the extended phase in of the performance threshold under traditional MIPS was not necessary and had the unintended consequence of clinicians not taking MIPS as seriously as they should have. The commenter also stated that any phase-in does not advance the goals of transitioning to value-based care. Response. In future years of the program we will evaluate the data available to us and select a performance threshold in accordance with the requirements of the statute. The gradual and incremental increase in the performance threshold gave clinicians time to anticipate the transition to the statutorily mandated methodology for the performance threshold beginning in year six.

The CY 2022 performance period/2024 MIPS payment year is the first year of the program where CMS does not have additional flexibilities and must set the performance threshold at the mean or median of a prior year's final scores, thus ending the performance threshold transition period. While we agree with the commenter that further phase in of the performance threshold is not needed, it is possible the performance threshold numerical value for a future year could be lower than the numerical value for the CY 2022 performance period/2024 MIPS payment year, depending on the final score data available. Comment. One commenter believes that data from the CY 2019 performance period/2021 MIPS payment year is a better basis for creating performance thresholds than the CY 2017 performance period/2019 MIPS payment year. The commenter believes that the entire structure of the program as far as scoring was very different in 2017 and that 2019 offers a more accurate picture compared to 2017.

Response. We understand that the program has undergone modifications since the CY 2017 performance period/2019 MIPS payment year. However, we have previously stated our intent to use a gradual and incremental approach to raising the performance threshold. For reference, the mean and median final scores for CY 2019 performance period/2021 MIPS payment year are 85.61 and 92.30 respectively and would represent an increase in the performance threshold of 25.61 or 32.3 points. We raised the performance threshold 12 points from CY 2017 performance period/2019 MIPS payment year to CY 2018 performance period/2020 MIPS payment year and raised the performance threshold 15 points in each subsequent year.

We believe that raising the performance threshold 15 points in CY 2022 performance period/2024 MIPS payment year is consistent with our gradual and incremental approach. We recognize that clinicians are facing ongoing difficulties due to the PHE, and we believe that choosing the lowest performance threshold value available to us would gradually increase the performance threshold while minimizing disruption to clinicians during this emergency. Comment. Several commenters supported setting the performance threshold at 75 and using the mean from a prior performance period. Some commenters stated the 15-point increase aligns with the gradual increase over the last 4 years.

One commenter stated it was an attainable goal. A few commenters stated this meant having a larger budget neutral pool to redistribute funds, but one commenter requested more information about impact to their specialty. One commenter supported that it was the lowest of the possible options. Response. We thank the commenters for their support for setting the performance threshold for the CY 2022 performance period/2024 MIPS payment year at 75 points, for noting that the 15-point increase is the same magnitude as the change in prior years, and for noting that the performance threshold selected was the lowest of the Start Printed Page 65530 possible options.

Overall information on prior year's final scores can be found in the corresponding Quality Payment Program Experience Report and specialty specific information can be found in the Public Use File in the QPP resource library ( https://qpp.cms.gov/​resources/​resource-library ). Comment. A few commenters expressed concern with the proposed performance threshold, specifically for small practices. A few commenters requested setting a separate performance threshold for small practices at a value such as 60, or setting the performance threshold for other practices higher at 85 points. Response.

We appreciate this feedback from commenters. However, as we previously discussed, the statute requires us to set the performance threshold at the mean or median of a prior period's final scores, and we do not have the statutory authority to establish a separate performance threshold for small practices. We also note that CMS does not have the authority to waive the statutory requirements for setting the performance threshold using our extreme and uncontrollable circumstances policies or section 1135 of the Act. We encourage the commenters to look at our estimates of how our proposed policies will affect the payment adjustments, broken down by practice size, for the MIPS 2024 payment year in our regulatory impact analysis (see section VI.F.18.e of this final rule). As shown in the impact analysis, we project the discrepancy in payment adjustments between large and small practices to shrink as a cumulative result of our policies, including raising the performance threshold.

Comment. Many commenters opposed the proposed performance threshold and recommended that CMS lower the performance threshold. Most of these commenters requested that CMS explore ways to use its authority to adjust the performance threshold beginning with the CY 2022 performance period/2024 MIPS payment year. Commenters specifically requested that CMS consider emergency authorities under the PHE such as the section 1135 waiver authority or its Extreme and Uncontrollable Circumstances policy. Commenters noted the stress of the continuing flagyl on practices.

That the proposed performance threshold of 75 points represents a significant increase from the 30 points in 2019 or 45 points for 2020. A few commenters acknowledged that CMS has chosen the lowest value possible (75 points), but the commenters believe that positive payment adjustments will become more difficult to obtain, especially as the buy antibiotics flagyl continues. One commenter expressed concern that clinicians may become frustrated and lose motivation to engage with the MIPS program. Another commenter stated that the steep increases in the performance threshold assumes that practices will not only perform, as well as they did before buy antibiotics but that they will be able to perform better than before. Some commenters stated that CMS should establish a transitional policy that recognizes the impact of the buy antibiotics PHE.

One commenter appreciated the flexibilities that CMS has put in place during the flagyl and urges CMS not to flip a switch in 2022 as if the past 3 years have been business as usual. A few commenters suggested lower performance threshold levels, including 60, 50 and 45. One commenter requested that CMS delay the increase to the performance threshold until the implementation of MVPs. Response. We understand the commenters concern about the stress the PHE is putting on practices.

However, we do not have the authority to set the performance threshold for MIPS payment year 2024 at a value other than the mean or median of the final scores with respect to a prior period, as required by section 1848(q)(6)(D)(i) of the Act. We agree that positive payment adjustments could be more difficult to obtain with a higher performance threshold and are actively working to keep clinicians engaged with the introduction of MVPs which provide a streamlined way for clinicians to participate in the program with a set of measures that are relevant to their practice. We understand that the performance threshold of 75 represents a steep increase from the pre-flagyl performance threshold of 45 points, which was applicable for the CY 2019 performance period/2021 MIPS payment year. For the past 4 years we have finalized increases of 15 points. We increased the performance threshold from 15 to 30 between the CY 2018 and 2019 performance periods/2020 and 2021 MIPS payment years, from 30 to 45 between the CY 2019 and 2020 performance periods/2021 and 2022 MIPS payment years, and from 45 to 60 between the CY 2020 and 2021 performance periods/2022 and 2023 MIPS payment years.

We acknowledge the commenter's concern that this increase assumes that clinicians will not only perform, as well as they did before buy antibiotics but that they will be able to perform better than before. We note that the proposed increase of 15 points is the same as the increase in the previous 3 years and was based on a gradual and incremental approach to setting the performance threshold. As discussed previously, we are statutorily required to set the performance threshold for the 2024 MIPS payment year at the mean or median of the final scores with respect to a prior period, and we do not have the flexibility to choose other values. We appreciate the commenter's suggestion to adopt a transitional policy for the performance threshold due to the PHE but reiterate that we do not have the flexibility to do so due to the statutory requirements discussed previously. We also note that CMS does not have the authority to waive the statutory requirements for setting the performance threshold under section 1135 of the Act.

Comment. A few commenters opposed the proposed performance threshold for specialty related or practice related reasons. A few commenters were specifically concerned about groups or specialties that can only be measured on two performance categories. One commenter expressed their opinion that setting the performance threshold at the mean or median of prior final scores of all MIPS eligible clinicians in a prior period was an unfair standard for their specialty because they are limited in their ability to report under the Promoting Interoperability performance category. They stated this limitation gives them fewer opportunities to amass points.

Another commenter stated that their group was unable to report Promoting Interoperability performance category measures and would be reweighted in a manner that would increase their cost category weight. A different commenter stated that they have a limited number of quality measures that they can report. As a result, they stated that for groups such as theirs that have limited measures and a high-weighted quality category, CMS now requires 100 percent quality to meet the performance threshold or otherwise they would receive a negative MIPS payment adjustment. One commenter expressed concern that CRNAs cannot report 6 of the measures in the MIPS Anesthesia Measure set because they do not provide relevant services. The commenter suggested CMS should address how specialties such as anesthesia can meet the performance threshold, perhaps through the use of CAHPS data or by allowing them to report additional Improvement Activities.

Response. We understand that different specialties sometimes face challenges with not being able to report Start Printed Page 65531 measures and activities for every performance category. We agree that the final scores of these clinicians may be based on fewer categories than they would be for a clinician reporting all 4 performance categories. However, we remind clinicians that even if their final score is based on fewer than 4 performance categories they still have the ability to score anywhere from 0 to 100 points for their final score, just as a clinician reporting all 4 performance categories would. In this way, we do not believe that a performance threshold of 75 points is disadvantageous to clinicians reporting fewer than 4 performance categories.

As stated below, we also encourage clinicians that do not have enough quality measures relevant to their scope of practice to work with their specialty societies to provide recommendations during the specialty measure set solicitation process and to consider reporting a relevant MVP when one becomes available. We note, for the commenter who stated that not being able to report Promoting Interoperability would cause their group to be reweighted in a manner that would increase their cost category weight, that the cost category weight would only increase if a group was reweighted for the Promoting Interoperability and Quality performance categories. If a group is reweighted for the Promoting Interoperability performance category only, the cost category weight remains at 30 percent. We believe the commenter who stated that they have a limited number of quality measures that they can report is referring to the possibility that if the weight of other performance categories is redistributed to the quality category, a clinician may need to achieve a high score in quality in order to exceed the proposed performance threshold of 75 points. We understand that some clinicians may not have 6 measures in the Quality performance category that are relevant to their practice.

To address this, we have our eligible measure applicability policy within the quality performance category to reduce the denominator of required measures for the MIPS CQM and Medicare Part B claims collection types, in the event that a clinician has less than 6 applicable measures to report. In this way, clinicians can be scored on the quality measures that are relevant to their scope of practice. For more information on the eligible measure applicability policy please see the CY 2017 through CY 2019 PFS final rules (81 FR 77290 through 77291, 82 FR 53750 through 53732). For the commenter's concerns on the specialty measures available, we solicit stakeholder recommendations for new specialty measure sets and revisions to existing specialty sets on an annual basis. We urge stakeholders to work with their specialty societies to provide recommendations during the specialty measure set solicitation process (for more information please see the QPP resource library at http://www.qpp.cms.gov ).

We are also developing MIPS Value Pathways (MVPs) to provide clinicians with a simplified method to report measures that are relevant to their practice and we encourage them to report an MVP when one that is relevant to their scope of practice is available. We thank the commenter for their suggestion to expand the use of CAHPS or to allow clinicians to report additional improvement activities if they cannot report 6 quality measures. Comment. Many commenters expressed concern that the proposal to increase the performance threshold to 75 points would increase the number of clinicians receiving a negative payment adjustment and decrease the number of clinicians with positive or neutral adjustments. Many commenters also stated their concern that the increase in the performance threshold comes with several proposed policies to remove bonuses and floors for quality measures and proposals to change quality data completeness which may lower the MIPS final score.

A few commenters requested that CMS reconsider the reporting and scoring policies, delay the scoring policies, or gradually phase in the scoring changes, especially if CMS finalized the proposed performance threshold. One commenter specifically requested continuing current scoring for an additional year. A few commenters noted the difficulty of achieving the performance threshold now compared to a few years ago because of the scoring changes. A few commenters noted the cost of participating in MIPS versus the potential incentive. One commenter cited a study on the cost to participate in MIPS and expressed concern that clinicians would still get negative MIPS payment adjustment after these costs due to a premature increase in the performance threshold following 3 years of flexibilities due to the buy antibiotics PHE.

Response. We acknowledge the commenters concerns regarding the increased burden on clinicians due to the buy antibiotics PHE and agree that the statutory formula for determining the performance threshold beginning with the 2024 MIPS payment year could lead to additional clinicians receiving a negative payment adjustment. The MIPS is a budget neutral program and is designed in the statute to balance the positive payment adjustments of clinicians who score above the performance threshold against the negative payment adjustments of clinicians whose scores are below the performance threshold. We encourage the commenter to look at our estimates of how our proposed policies will affect the payment adjustments for the MIPS 2024 payment year in our regulatory impact analysis (see section VI.F.18.e of this final rule). In light of the continuing burden of the PHE we are making changes to some scoring flexibility proposals including postponing the removal of the 3-point scoring floor on quality measures and keeping the data completeness threshold at 70 percent (see section IV.A.3.e.(1)(c)(iii)(B) of this final rule).

We are also introducing some new flexibilities including a 7-point floor for scoring new measures in their first year and a 5-point floor in their second year (see section IV.A.3.e.(1)(c)(iii)(B) of this final rule). Comment. A few commenters discussed refinements for the performance threshold methodology. One commenter suggested CMS determine what the mean or median of “raw” or “achievement” final performance scores would be and use that figure to set the 2022 threshold. The commenter stated that CMS only uses the base quality measure score, absent any bonus points, to determine improvement scoring in the Quality category.

Therefore, the commenter stated that method could be used in setting the performance threshold as well. Another commenter recommended that CMS evaluate balancing the reported data from 2019, 2020, and 2021 to control for self-selection bias since the commenter believed MIPS reporting has been fundamentally voluntary for these performance periods. One commenter asked what the agency's intent is with respect to performance thresholds and quality benchmark data going forward given that CY 2022 performance period/2024 MIPS payment year benchmarks will be based on CY 2022 performance period data while CY 2024 performance period/2026 MIPS payment year benchmarks appear to revert to performance period 2017 data. The commenter noted the performance threshold is based on CY 2017 performance period data while benchmarks are proposed to be based on CY 2022 performance period data. Response.

We appreciate the commenter's suggestion to use a “raw” or “achievement” score to set the performance threshold. We interpret the Start Printed Page 65532 suggestion of “raw” or “achievement” scores to mean removing any performance category bonuses, final score bonuses or improvement scoring. We note section 1848(q)(6)(D)(i) of the Act requires us to set the performance threshold using composite performance scores, which we refer to as the final score as defined under § 414.1305 (81 FR 77319 through 77320). We do not believe that the statute allows us to use “raw” or “achievement” scores when setting the performance threshold. We thank the commenter for the suggestion of balancing the scores from 2019, 2020, and 2021 but reiterate that the statute requires us to choose the mean or median from a prior period and does not allow us to balance scores from multiple years.

We refer the commenter to section IV.A.3.e(1)(c)(ii) of this final rule, where we are not finalizing our proposal to use performance period benchmarks and instead we will continue to use historic quality benchmarks for the CY 2022 performance period/2024 MIPS payment year will be based on CY 2020 performance period data. In regards to the comment on using 2017 data for purposes of the CY 2024 performance period/2026 MIPS payment year benchmarks, we note that we have not yet made any proposals on quality benchmarks for the CY 2024 performance period/2026 MIPS payment year. Comment. One commenter supported the larger size of positive payment adjustments that a higher performance threshold would cause due to a greater quantity of money being redistributed through BN, but requested more information on the impact to specialties and practices. The commenter stated that this information will give societies a stronger argument for their membership as to why clinicians should continue to participate in MIPS.

Response. We encourage the commenter to read our projections of the impact of the Quality Payment Program Finalized policies on payment adjustments for MIPS payment year 2024 in our Regulatory Impact Analysis (see section VI.F.18.e of this final rule). We also note that CMS publishes a Quality Payment Program Experience Report and Public Use File at https://qpp.cms.gov/​resources/​resource-library. A detailed breakdown of a prior year's scores can be found in the QPP Experience Report and specialty specific information can be found in the Public Use File. After consideration of public comments, we are finalizing our proposal at § 414.1405(g) that for each of the 2024, 2025, and 2026 MIPS payment years, the performance threshold is the mean of the final scores for all MIPS eligible clinicians from a prior period as specified under § 414.1405(b).

We are also finalizing our proposal at § 414.1405(b)(9) to use the MIPS payment year 2019 as the prior period and the rounded mean final score of 75 points as the year 6 performance threshold. (3) Additional Performance Threshold for Exceptional Performance Section 1848(q)(6)(D)(ii) of the Act requires the Secretary to compute, for each year of the MIPS (beginning with the 2019 MIPS payment year and ending with the 2024 MIPS payment year), an additional performance threshold for purposes of determining the additional MIPS payment adjustment factors for exceptional performance under section 1848(q)(6)(C) of the Act. For each such year, the Secretary shall apply either of the following methods for computing the additional performance threshold. (1) The threshold shall be the score that is equal to the 25th percentile of the range of possible final scores above the performance threshold determined under section 1848(q)(6)(D)(i) of the Act. Or (2) the threshold shall be the score that is equal to the 25th percentile of the actual final scores for MIPS eligible clinicians with final scores at or above the performance threshold with respect to the prior period described in section 1848(q)(6)(D)(i) of the Act.

Under section 1848(q)(6)(C) of the Act, a MIPS eligible clinician with a final score at or above the additional performance threshold will receive an additional MIPS payment adjustment factor and may share in the $500 million of funding available for the year under section 1848(q)(6)(F)(iv) of the Act. We note that under section 1848(q)(6)(F)(iv) of the Act, funding is available for additional MIPS payment adjustment factors under section 1848(q)(6)(C) of the Act only through the 2024 MIPS payment year, which is the sixth year of the MIPS program. In the CY 2020 PFS final rule (84 FR 63037 through 63040), we used the special rule under section 1848(q)(6)(D)(iii) of the Act to set the additional performance threshold at 85 points for the 2022 and 2023 MIPS payment years. We note that the special rule under section 1848(q)(6)(D)(iii) of the Act applies only to the initial 5 years of MIPS, so we cannot use that rule to establish the additional performance threshold for the 2024 MIPS payment year. As noted above, under section 1848(q)(6)(D)(ii) of the Act, we may set the additional performance threshold at either.

(1) The 25th percentile of the range of possible final scores above the performance threshold, or (2) the 25th percentile of the actual final scores for MIPS eligible clinicians with final scores at or above the performance threshold with respect to the prior period described in section 1848(q)(6)(D)(i) of the Act. In the CY 2022 PFS proposed rule (86 FR 39453), for illustrative purposes, we referenced the possible additional performance thresholds shown in Table 70. Note that mean or median refers to the methodology for calculation of the performance threshold. As can be seen in Table 70, the potential values for the additional performance threshold range from a low of 81.26 to a high of 100. However, to remain consistent with our gradual and incremental approach, we proposed to use the mean as our methodology for setting the performance threshold during the next 3 years and Start Printed Page 65533 we proposed to use the final score data from MIPS payment year 2019.

We are finalizing these proposals in section IV.A.3.f.2 of this final rule. The selection of the mean for the methodology and final score data from the 2019 MIPS payment year leaves us with the options in the first column of Table 70 for where we can set the additional performance threshold. With a performance threshold of 75 points for the 2024 MIPS payment year based on final scores for the 2019 MIPS payment year, the calculation methods in section 1848(q)(6)(D)(ii) of the Act give us two possible options for where we can set the additional performance threshold for MIPS payment year 2024. The first calculation method (described in section 1848(q)(6)(D)(ii)(I) of the Act), using the range of possible final scores above the proposed performance threshold for the 2024 MIPS payment year, yields a value of 81.26 points (the 25th percentile of the range of 75.01 to 100). The calculation is as follows.

75.01 + [(100−75.01) * 0.25] = 81.26. The second calculation method (described in section 1848(q)(6)(D)(ii)(II) of the Act), the 25th percentile of the actual final scores for the 2019 MIPS payment year at or above the proposed performance threshold for the 2024 MIPS payment year, yields a value of 88.94. For the second calculation method, we will apply the 25th percentile calculation of (n+1)p/100 to the 2019 MIPS payment year final score data that are at or above 75. We considered using each of these methods, but we do not believe that it would be appropriate to lower the additional performance threshold to 81.26 points from its present value of 85 points. Maintaining or increasing the additional performance threshold will serve as a greater incentive to clinicians to continue to improve their performance on the MIPS measures and activities and to achieve exceptional performance.

We believe that an additional performance threshold of 88.94 points rounded to 89 points is appropriate. This is an increase of 4 points from the prior year, which we believe is a gradual increase. Therefore, using the second calculation method described above, we proposed at § 414.1405(d)(7) to set the additional performance threshold for the 2024 MIPS payment year at 89 points. We solicited comments on these proposals, as well as the alternative additional performance thresholds listed that we considered but did not propose. We received public comments on the additional performance threshold for exceptional performance.

The following is a summary of the comments we received and our responses. Comment. A few commenters expressed concern about the exceptional performance funding under section 1848(q)(6)(F)(iv) of the Act ending after the CY 2022 performance period/2024 MIPS payment year. One commenter believes that eliminating this funding is contradictory to the mission of the Quality Payment Program as it provides an additional incentive for improving performance. A few commenters expressed concerns about the cost of participating in MIPS and that the majority of the MIPS adjustment has been funded from the exceptional performance funding under section 1848(q)(6)(F)(iv) of the Act rather than from negative payment adjustments.

Some commenters requested that CMS work with Congress to extend the funding. Response. We acknowledge the commenters' concern about the exceptional performance funding under section 1848(q)(6)(F)(iv) of the Act ending after the CY 2022 performance period/2024 MIPS payment year. We acknowledge that in previous years the additional performance threshold has funded a large portion of positive MIPS payment adjustments. However, we point the commenter to our Regulatory Impact Analysis (see section VI.F.18.e of this final rule) where we estimate that positive MIPS payment adjustments funded by BN will be much higher than in previous years.

Comment. A few commenters suggested that CMS should consider using the section 1135 waiver authority it has under the PHE or its Extreme and Uncontrollable Circumstances policy to waive the statutory requirement to set the additional performance threshold at either. (1) The 25th percentile of the range of possible final scores above the performance threshold, or (2) the 25th percentile of the actual final scores for MIPS eligible clinicians with final scores at or above the performance threshold with respect to the prior period described in section 1848(q)(6)(D)(i) of the Act, and instead keep the additional performance threshold at 85 points in 2022. Response. We note that CMS does not have the authority to waive the statutory requirements for setting the additional performance threshold using our extreme and uncontrollable circumstances policies or section 1135 of the Act.

Comment. One commenter acknowledged the two statutory options CMS presented for the additional performance threshold (81.26 and 88.94), but urged CMS to use PHE authorities to maintain the additional performance threshold at 85 points instead of 89 points. The commenter stated that it gives clinicians a final opportunity to qualify for this funding and takes into account the unusual operational and clinical circumstances present during the buy antibiotics flagyl. Response. We agree with the commenter that there have been unusual operational and clinical circumstances for clinicians during the buy antibiotics flagyl.

However, we are not aware of any PHE authorities available to CMS that would allow us to set the additional performance threshold for the 2024 MIPS payment year at any value other than those resulting from the calculation methods described in section 1848(q)(6)(D)(ii) of the Act. Comment. A few commenters supported the additional performance threshold. One commenter stated that the increase to the additional performance threshold increases the difficulty but still makes the additional positive payment adjustment an attainable goal. Response.

We thank the commenters for their support. Comment. A few commenters supported a lower additional performance threshold. Some commenters requested that CMS select the option of 81 points rather than the proposed 89 points to account for loss of score potential due to removal of bonus points in the quality performance category and the increased weight of the cost performance category. One commenter noted that CMS has the latitude to select 81 points as it meets the 25th percentile of possible scores and believes that the lower additional performance threshold will incentivize a greater number of clinicians.

The commenter also noted that choosing a lower additional performance threshold will allow CMS to both reward top performers in MIPS and incentivize more of them by setting reasonable thresholds to reward them for their performance. Other commenters requested keeping the additional performance threshold at 85 points. Response. We established the additional performance threshold at 85 points for the 2022 and 2023 MIPS payment years in the CY 2020 PFS final rule (84 FR 63037 through 63040). We do not believe that it is appropriate to set the additional performance threshold at a lower value (81 points) than it was set at for the CY 2020 performance period/2022 MIPS payment year nor do we have the authority to keep the additional Start Printed Page 65534 performance threshold at 85 points as was requested by the commenter.

We believe that 89 points is an appropriate value to incentivize the highest performing clinicians, given that the threshold has been 85 points for the past 2 years. After consideration of public comments, we are finalizing the proposal at § 414.1405(d)(7) to set the additional performance threshold for the 2024 MIPS payment year at 89 points. (4) Example of Adjustment Factors Figure A provides an illustrative example of how various final scores will be converted to a MIPS payment adjustment factor and potentially an additional MIPS payment adjustment factor, using the statutory formula and based on our finalized policies for the 2024 MIPS payment year. In Figure A, the performance threshold is set at 75 points. The applicable percentage is 9 percent for the 2024 MIPS payment year.

The MIPS payment adjustment factor is determined on a linear sliding scale from zero to 100, with zero being the lowest possible score which receives the negative applicable percentage (negative 9 percent for the 2024 MIPS payment year) and resulting in the lowest payment adjustment, and 100 being the highest possible score which receives the highest positive applicable percentage and resulting in the highest payment adjustment. However, there are two modifications to this linear sliding scale. First there is an exception for a final score between zero and one-fourth of the performance threshold (zero and 18.75 points based on the performance threshold of 75 points for the 2024 MIPS payment year). All MIPS eligible clinicians with a final score in this range will receive the lowest negative applicable percentage (negative 9 percent for the 2024 MIPS payment year). Second, the linear sliding scale line for the positive MIPS payment adjustment factor is adjusted by the scaling factor, which cannot be higher than 3.0.

If the scaling factor is greater than zero and less than or equal to 1.0, then the MIPS payment adjustment factor for a final score of 100 will be less than or equal to 9 percent. If the scaling factor is above 1.0 but is less than or equal to 3.0, then the MIPS payment adjustment factor for a final score of 100 will be greater than 9 percent. Only those MIPS eligible clinicians with a final score equal to 75 points (which is the finalized performance threshold) will receive a neutral MIPS payment adjustment. Because the performance threshold is 75 points, we anticipate that more clinicians will receive a positive adjustment than a negative adjustment and that the scaling factor will be less than 1 and the MIPS payment adjustment factor for each MIPS eligible clinician with a final score of 100 points will be less than 9 percent. Start Printed Page 65535 Table 71 illustrates the changes in payment adjustment based on the final policies from the CY 2021 PFS final rule (85 FR 84923 through 84925) for the 2023 MIPS payment year and the final policies for the 2024 MIPS payment year, as well as the applicable percent required by section 1848(q)(6)(B) of the Act.

Start Printed Page 65536 (5) Final Score Hierarchy Used in Payment Adjustment Calculation In the CY 2021 PFS final rule (85 FR 84917 through 84919), we modified the final score hierarchy that applies when more than one final score is associated with a TIN/NPI, as displayed in Table 72. Beginning with the CY 2021 performance period/2023 MIPS payment year, if a TIN/NPI has a virtual group final score associated with it, we use the virtual group final score to determine the MIPS payment adjustment. If a TIN/NPI does not have a virtual group final score associated with it, we use the highest available final score associated with the TIN/NPI to determine the MIPS payment adjustment. Start Printed Page 65537 In the CY 2022 PFS proposed rule (86 FR 39457), we proposed policies applicable to subgroups, including a definition of a subgroup at § 414.1305 as a subset of a group which contains at least one MIPS eligible clinician and is identified by a combination of the group TIN, subgroup identifier, and each eligible clinician's NPI. Each clinician in a subgroup would be identifiable by a unique TIN/NPI combination just as in any MIPS group or APM Entity.

In addition, a clinician, group, subgroup, or APM Entity could choose more than one MIPS reporting option for a performance period. A clinician, group, subgroup, or APM Entity could choose to report through MVPs, traditional MIPS, and/or the APP (assuming they are eligible for each of these reporting options) for a performance period. As a result, there could be more than one final score for a clinician, group, subgroup, or APM Entity for a performance period from MVPs, traditional MIPS, and/or the APP. Therefore, we proposed to update the scoring hierarchy to include subgroups and to specify that the scoring hierarchy would apply with respect to any available final score that is associated with a TIN/NPI from MVPs, traditional MIPS, and/or the APP. The proposed updated scoring hierarchy can be seen in Table 73.

We solicited comments on this proposal. We received public comments on the proposed updated scoring hierarchy. The following is a summary of the comments we received and our responses. Comment. A few commenters requested clarification on the scoring hierarchy.

One commenter expressed concerns with the modified hierarchy, citing the complexity of adding subgroups to MIPS and concerns about allowing ACO clinicians to report outside the ACO. The commenter recommended that to reduce complexity, ACO performance should be evaluated at the ACO level for MIPS evaluations. Another commenter noted confusion about how payment adjustments would be calculated and applied for clinicians reporting an MVP as part of a subgroup. Response. We acknowledge the commenters concern about the complexity of the scoring hierarchy for ACO reporters.

However, we disagree with the recommendation that ACOs only be evaluated at the ACO level. CMS is introducing subgroups to collect data at a more granular level that will be more useful for beneficiaries to use to make informed healthcare decisions. Having data at the subgroup level will allow beneficiaries to evaluate performance data, especially performance data about specialists, that is more closely related to the actual clinicians the beneficiaries may see for their medical care. We also note that subgroup scores will not be rolled up to the ACO level. If a TIN reports as a subgroup, the subgroup score would only be applicable to the NPIs in the subgroup.

Comment. A few commenters supported the proposed scoring hierarchy. Commenters appreciated CMS' intent to select the highest final score achieved for a TIN/NPI across the QPP pathways for individual, group subgroup or APM entity. Response. We thank the commenter for their support.

Comment. One commenter asked CMS to confirm that a MIPS eligible clinician that participates in MVPs via multiple subgroups would receive the highest final score that can be attributed to their TIN/NPI combination from any reporting option (traditional MIPS, APP reporting, or any MVP subgroup reporting) and participation option (as an individual, group, subgroup, or APM Entity (with the exception of virtual groups). Response. The commenter is correct that, with the exception of virtual groups, a MIPS eligible clinician will receive the highest final score that can be attributed to their TIN/NPI combination from the listed reporting options (traditional MIPS, APP, or MVPs) and participation options (individual, group, subgroup, or APM entity). After consideration of public comments, we are finalizing the proposed updated scoring hierarchy as proposed.

G. Review and Correction of MIPS Final Score (1) Feedback and Information To Improve Performance Under section 1848(q)(12)(A)(i) of the Act, we are at a minimum required to provide MIPS eligible clinicians with timely (such as quarterly) confidential feedback on their performance under the quality and cost performance categories beginning July 1, 2017, and we have discretion to provide such feedback regarding the improvement activities and Promoting Interoperability performance categories. In the CY 2018 Quality Payment Program final rule (82 FR 53799 through 53801), we finalized that on an annual basis, beginning July 1, 2018, performance feedback will be provided to MIPS eligible clinicians and groups for the quality and cost performance categories, and if technically feasible, for the improvement activities and advancing care information (now called the Promoting Interoperability) performance categories. On July 1, 2018, we provided the first performance feedback for the Quality Payment Program. The second performance feedback was provided on July 1, 2019.

In the CY 2021 PFS proposed rule (85 FR 50321), we noted that we aim to provide performance feedback on or around July 1 of each year, but due to the PHE and buy antibiotics, we estimated that we would provide performance feedback for the performance period in 2019 in late July Start Printed Page 65538 or early August of 2020. The third performance feedback (for the CY 2019 performance period) was provided on August 5, 2020. In the proposed rule, we noted that similar to the CY 2019 performance period, due to the PHE for buy antibiotics, we may provide performance feedback for the CY 2020 performance period after July 1, 2021. Although we aim to provide performance feedback on or around July 1 of each year, it is possible that the release date could be later than July 1 depending on the circumstances. We provided performance feedback for the CY 2020 performance period on August 2 and September 27, 2021.

We direct readers to qpp.cms.gov for more information. h. Third Party Intermediaries We refer readers to §§ 414.1305 and 414.1400, the CY 2017 Quality Payment Program final rule (81 FR 77362 through 77390), the CY 2018 Quality Payment Program final rule (82 FR 53806 through 53819), the CY 2019 PFS final rule (83 FR 59894 through 59910), the CY 2020 PFS final rule (84 FR 63049 through 63080), the May 8th buy antibiotics IFC (85 FR 27594 through 27595), and the CY 2021 PFS final rule (85 FR 84926 through 84947) for our previously established policies regarding third party intermediaries. As discussed in the CY 2022 PFS proposed rule (86 FR 39458), we proposed to make several changes. (1) Reorganization and consolidation of § 414.1400 generally.

(2) new third party intermediaries general requirements. (3) new requirements specific to both QCDRs and qualified registries. (4) new requirements specific to only QCDRs. And (5) remedial action and termination of third parties. (1) Reorganization and Consolidation of § 414.1400 Generally We recognize that many of our policies for third party intermediaries are similar or verbatim, and yet in prior rules, we have described them separately.

To minimize the lengthiness and burden of reading our policies, we proposed to consolidate our regulatory text under § 414.1400. To be clear, our proposed updates would not change previously finalized requirements for third party intermediaries, but would bring more clarity and simplicity to the regulatory text. These changes are discussed by topic in more detail below. We also note that in several places at § 414.1400 the regulation text was only updated to reflect both the applicable MIPS performance period/MIPS payment year. (a) Reorganization for Requirements Related to MIPS Performance Categories That Must Be Supported by Third Party Intermediaries We previously established in the CY 2017 Quality Payment Program final rule (81 FR 77363 through 77364), further revised in the Quality Payment Program provisions in the CY 2019 and CY 2020 PFS final rules ((83 FR 60088 and 84 FR 63049 through 63052, respectively), and further clarified our requirements for QCDRs, qualified registries, and health IT vendors with regards to submitting data for the purposes of the MIPS program in the Quality Payment Program provisions in the CY 2021 PFS final rule.

Our current policy, codified at § 414.1400(a)(2), states that, beginning with the CY 2021 performance period/2023 MIPS payment year, QCDRs and qualified registries must be able to submit data for all of the following MIPS performance categories, and Health IT vendors must be able to submit data for at least one of the following MIPS performance categories. Except as provided under paragraph (a)(2)(ii), QCDRs, qualified registries, and health IT vendors must be able to submit data for all of the following MIPS performance categories. Quality, except. ++ The CAHPS for MIPS survey. And ++ For qualified registries and Health IT vendors, QCDR measures.

Improvement activities. And • Promoting Interoperability, if the eligible clinician, group, or virtual group is using CEHRT. However, a third party intermediary may be excepted from this requirement if its MIPS eligible clinicians, groups or virtual groups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)( 4 ) or ( 5 ) or (c)(2)(i)(C)( 1 ) through ( 7 ) or (c)(2)(i)(C)(9)). ++ Health IT vendors that do not support MIPS Value Pathways must be able to submit data for at least one of the MIPS performance categories described in paragraphs (a)(2)(i)(A) through (C) of this section. ++ Promoting Interoperability, if the eligible clinician, group, or virtual group is using CEHRT.

However, a third party intermediary may be excepted from this requirement if its MIPS eligible clinicians, groups or virtual groups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)( 4 ) or ( 5 ) or § 414.1380(c)(2)(i)(C)( 1 ) through ( 7 ) or § 414.1380(c)(2)(i)(C)( 9 )). In an effort to simplify, we proposed reorganizing the existing language at § 414.1400(a)(2). Specifically, we proposed providing updates to separately identify and provide clarity to data submission requirements since data requirements vary based on third party intermediary type and to provide clarification to exceptions to Promoting Interoperability for virtual groups and subgroups. We proposed the following updates. To revise and redesignate existing paragraph at § 414.1400(a)(2) through (a)(2)(i) to proposed paragraphs § 414.1400(b)(1)(i) and (c)(1) through (c)(1)(i) to state the following.

To state at proposed § 414.1400(b)(1)(i), beginning with the CY 2021 performance period/2023 MIPS payment year, QCDRs and qualified registries must be able to submit data for all of the following MIPS performance categories. Quality, except. ++ The CAHPS for MIPS survey. And ++ For qualified registries, QCDR measures. Improvement activities.

And Promoting Interoperability, if the eligible clinician, group, virtual group, or subgroup is using CEHRT, unless. ++ The third party intermediary's MIPS eligible clinicians, groups, virtual groups, or subgroups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)( 4 )( i ) through ( iii ) or (c)(2)(i)(C)( 1 ) through (7) or (c)(2)(i)(C)( 9 )). To state at proposed § 414.1400(c)(1), beginning with the CY 2021 performance period/2023 MIPS payment year, health IT vendors must be able to submit data for the MIPS performance categories as follows. To state at proposed § 414.1400(c)(1)(i) through (c)(1)(i)(B), health IT vendors that support MVPs must be able to submit data for all of the MIPS performance categories. Quality, except.

++ The CAHPS for MIPS survey. And ++ QCDR measures. Improvement activities. And To revise and redesignate existing paragraph at § 414.1400(a)(2)(iii) to proposed paragraph § 414.1400(c)(1)(i)(C) state, Promoting Interoperability, if the eligible clinician, group, virtual group, or subgroup is using CEHRT, unless. ++ The third party intermediary's MIPS eligible clinicians, groups, virtual groups, or subgroups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)( 4 )( i ) through ( iii ) or (c)(2)(i)(C)( 1 ) through ( 7 ) or (c)(2)(i)(C)( 9 ).

• To revise and redesignate existing paragraph at § 414.1400(a)(2)(ii) to proposed paragraph § 414.1400(c)(1)(ii) to state, health IT vendors that do not support MVPs must be able to submit data for at least one of the MIPS Start Printed Page 65539 performance categories described in paragraphs (c)(1)(i) through (iii) of this section. We proposed to create a new requirement at § 414.1400(c)(1)(iii) for health IT vendors to support MVPs. For more information on this proposal, please refer to section “proposed new requirement for third party intermediaries to support MVPs and the APP” at section IV.A.3.h.(2)(b)(i) of this final rule. To move the current Health IT vendor requirements from paragraphs §§ 414.1400(a)(2)(ii) through (iii) and (d) to a new paragraph applicable to Health IT vendor requirements at § 414.1400(c). This will separately identify and provide clarity to data submission requirements specific to Health IT vendors.

To move the current CMS-approved survey vendor requirements from paragraphs (a)(3) and (e) to a new paragraph applicable to CMS-approved survey vendor requirements at § 414.1400(d). We proposed to the redesignate paragraph (a)(3) current requirements to paragraph (d)(1) CMS-approved survey vendors may submit data on the CAHPS for MIPS survey for the MIPS quality performance category. For the current requirements at paragraph (e), we proposed to move up those requirements to paragraph (d)(2). To redesignate paragraph (a)(4) as paragraph (a)(2). To redesignate paragraph (a)(5) as paragraph (a)(3).

We solicited public comments on our proposals. We did not receive public comments on these proposals, and therefore, we are finalizing them as proposed. (b) Reorganization for Requirements Related QCDR and Qualified Registries Self-Nomination We proposed to consolidate and redesignate the existing language at § 414.1400(b)(1) and (c)(1) to proposed § 414.1400(b)(2) to reference both QCDR and qualified registries. We proposed this consolidation to provide clarity and alignment with the aforementioned proposals and consolidate the duplicative criteria of QCDRs and qualified registries. As discussed below, we also proposed to consolidate and redesignate the performance feedback requirements previously at existing § 414.1400(b)(1) and (c)(1) to § 414.1400(b)(3)(iii).

We proposed to state at § 414.1400(b)(2), Self-nomination. For the CY 2018 and 2019 performance periods/2020 and 2021 MIPS payment years, entities seeking to qualify as a QCDR or qualified registry must self-nominate September 1 until November 1 of the CY preceding the applicable performance period. For the CY 2020 performance period/2022 MIPS payment year and future years, entities seeking to qualify as a QCDR or qualified registry must self-nominate during a 60-day period during the CY preceding the applicable performance period (beginning no earlier than July 1 and ending no later than September 1). Entities seeking to qualify as a QCDR or qualified registry for a performance period must provide all information required by CMS at the time of self-nomination and must provide any additional information requested by CMS during the review process. For the CY 2019 performance period/2021 MIPS payment year and future years, existing QCDRs and qualified registries that are in good standing may attest that certain aspects of their previous year's approved self-nomination have not changed and will be used for the applicable performance period.

We also proposed removing the last two sentences of existing § 414.1400(b)(1), which are duplicative with existing § 414.1400(b)(3)(iii). We proposed consolidating this language with existing paragraph (b)(3)(iii). We solicited public comments on our proposals. The following is a summary of the comments we received and our responses. Comment.

One commenter suggested that we refine the QCDR option under MIPS to streamline the self-nomination process, and to provide better incentives for organizations, including medical associations, to continue to invest in their QCDRs and develop new, meaningful measures for specialists to use for MIPS reporting and other clinical and research purposes. Response. We thank the commenter for their suggestion. We may consider it for future rulemaking. Comment.

One commenter expressed support for the updates that CMS has made to the QCDR and qualified registry self-nomination process, including the development of the measure submission portal at QualityPaymentProgram.cms.gov. Response. We thank the commenter for their support. After consideration of public comments, we are finalizing these policies as proposed. (c) Reorganization for Requirements Related to QCDR and Qualified Registries Conditions for Approval We refer readers to existing § 414.1400(b)(2) for QCDR conditions for approval and existing § 414.1400(c)(2) for qualified registries conditions for approval.

In this final rule, we proposed the following in order to better organize, consolidate the duplicative criteria of QCDRs and qualified registries, and refer to both “QCDR and qualified registry” instead of one or the other. • We proposed to redesignate existing paragraph (b)(2) to proposed paragraph (b)(3) and to revise the paragraph heading as, Conditions for approval. We also proposed to update the reference to both QCDR and qualified registry in proposed paragraph (b)(3). We proposed to revise to include both QCDR and qualified registry and redesignate existing paragraph (b)(2)(i) to proposed paragraph (b)(3)(i). We proposed to revise and redesignate existing paragraph (b)(2)(ii) to paragraph (b)(3)(ii).

We also proposed to extend our policy for collaboration. For more information on this proposal, please refer to section “collaboration of entities to become a QCDR and proposal to extend policy for collaboration of entities to become a qualified registry” at section IV.A.3.h.(3)(a)(ii) of this final rule. As discussed above, we proposed to consolidate and redesignate the performance feedback requirements previously at existing § 414.1400(b)(1) and (c)(1) to § 414.1400(b)(3)(iii). Furthermore, to consolidate similar performance feedback requirements, we also proposed to revise and redesignate existing paragraph (b)(2)(iii) to paragraph (b)(3)(iii) to state, beginning with the CY 2021 performance period/2023 MIPS payment year, require the QCDR or qualified registry must to provide performance feedback to their clinicians and groups at least 4 times a year, and provide specific feedback to their clinicians and groups on how they compare to other clinicians who have submitted data on a given measure within the QCDR or qualified registry. Exceptions to this requirement may occur if the QCDR or qualified registry submits notification to CMS within the reporting period promptly within the month of realization of the impending deficiency and provides sufficient rationale as to why they do not believe they would be able to meet this requirement (for example, if the QCDR does not receive the data from their clinician until the end of the performance period).

• We proposed to consolidate and redesignate paragraphs (b)(2)(iv) and (c)(2)(iii) in their entirety, into a new paragraph (b)(3)(v), and to correct a typographical error in which the word “MIPS” was omitted in the first sentence. Start Printed Page 65540 We proposed to consolidate and redesignate paragraphs (b)(2)(v) and (c)(3)(iv), in their entirety, into a new paragraph (b)(3)(vi). We solicited public comments on our proposals. We did not receive public comments on these proposals, and therefore, we are finalizing them as proposed. (d) Reorganization for Requirements Related to QCDR Measures (i) Reorganization for Requirements Related to QCDR Measures for the Quality Performance Category We refer readers to existing language at § 414.1400(b)(3) for QCDR measures for the quality performance category.

We currently define “QCDR measure” at existing § 414.1400(b)(3). We recognize that the QCDR measure definition is referred to throughout our policies and that it is not specific to § 414.1400(b)(3) or third party intermediaries. Therefore, to provide further clarity and to better align with the current policy, we proposed moving the QCDR measure definition to the definitions section at § 414.1305. We also proposed the following revisions to better organize regulation text at § 414.1400(b)(4) and to update cross-references to correspond to the new section numbers as reflected in this final rule. We proposed to redesignate paragraphs (b)(3)(i), (b)(3)(i)(A), and (b)(3)(i)(B) to definitions at § 414.1305.

We proposed to revise and redesignate existing paragraph (b)(3)(ii) to proposed paragraph (b)(4)(i) to state, for the CY 2018 performance period/2020 MIPS payment year and future years, at the time of self-nomination an entity seeking to become a QCDR must submit the following information for any measure it intends to submit for the payment year. ++ For MIPS quality measures, the entity must submit specifications including the MIPS measure IDs and specialty-specific measure sets, as applicable. + For QCDR measures, the entity must submit for CMS-approval measure specifications including. Name/title of measures, NQF number (if NQF- endorsed), descriptions of the denominator, numerator, and when applicable, denominator exceptions, denominator exclusions, risk adjustment variables, and risk adjustment algorithms. In addition, no later than 15 calendar days following CMS approval of any QCDR measure specifications, the entity must publicly post the measure specifications for that QCDR measure (including the CMS- assigned QCDR measure ID) and provide CMS with a link to where this information is posted.

We also proposed adding a header to state, “QCDR measure self-nomination requirements”. We believe adding a heading will help readers clearly distinguish QCDR measure self-nomination requirements. We proposed moving existing paragraph (b)(3)(iii) in its entirety to proposed paragraph (b)(4)(ii) and adding a header to state, “QCDR measure submission requirements”. We believe adding a heading will help readers clearly distinguish QCDR measure submission requirements. • We proposed moving existing paragraphs (b)(3)(v) through (v)(C)( 1 ) in its entirety, to proposed paragraphs (b)(4)(iii) through (b)(4)(iii)(A)( 3 ).

• We proposed to revise and redesignate existing paragraph at (b)(3)(v)(C)( 2 ) to paragraph (b)(4)(iii)(A)( 3 )( i ) to state, to be included in an MVP for the CY 2022 performance period/2024 MIPS payment year and future years, a QCDR measure must be fully tested. We proposed moving existing paragraph (b)(3)(vii) in its entirety, to paragraph (b)(4)(iv). (ii) Reorganization for Requirements Related to QCDR Measure Approval Criteria We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77374 through 77375) and the Quality Payment Program provisions in the CY 2020 PFS final rule (84 FR 63059), where we finalized existing § 414.1400(b)(3)(v). At § 414.1400, we proposed to reorganize and make minor updates to the existing requirements at paragraph (b)(3)(v) to proposed paragraph (b)(4)(iii). We proposed to reorganize the existing requirements so that QCDR measure approval at paragraph (b)(3)(v) is discussed before QCDR measure considerations at paragraph (b)(3)(iv).

Therefore, we proposed the following revisions. To revise and redesignate existing paragraph (b)(3)(v) “QCDR measure requirement for approval include” to proposed paragraph (b)(4)(iii) and add a heading to state, “QCDR measure approval criteria”. We believe adding a heading will help readers clearly distinguish QCDR measure approval criteria. We also proposed to include the following updates. ++ Move existing paragraph (b)(3)(v) to proposed revised paragraph (b)(4)(iii)(A) to state, QCDR measure requirements for approval are.

++ Move existing paragraph (b)(3)(v)(A) in its entirety to proposed paragraph (b)(4)(iii)(A)( 1 ). ++ Move existing paragraph (b)(3)(v)(B) in its entirety to proposed paragraph (b)(4)(iii)(A)( 2 ). ++ Revise existing paragraphs (b)(3)(v)(C) and (b)(3)(v)(C)( 1 ) to proposed paragraph (b)(4)(iii)(A)( 3 ) to state, beginning with the CY 2022 performance period/2024 MIPS payment year, all QCDR measures must meet face validity. To be approved for the CY 2023 performance period/2025 MIPS payment year, all QCDR measures must be must meet face validity for the initial MIPS payment year for which it is approved. For subsequent years after being initially approved, all QCDR measures must be fully developed and tested, with complete testing results at the clinician level, prior to submitting the QCDR measure at the time of self-nomination.

++ Move existing paragraph (b)(3)(v)(C)( 2 ) in its entirety to proposed paragraph (b)(4)(iii)(A)( 3 )( i ). ++ Move existing paragraph (b)(3)(v)(D) in its entirety to proposed paragraph (b)(4)(iii)(A)( 4 ). ++ Move existing paragraph (b)(3)(v)(E) in its entirety to proposed paragraph (b)(4)(iii)(A)( 5 ). We solicited public comment on our proposals. The following is a summary of the comments we received and our responses.

Comment. A few commenters supported the measure requirement for face validity testing of measures and stated it should be extended for future years. One commenter noted particular concern for the face validity testing requirement, as the testing process is arduous and funding, staff, and other resources have been significantly reduced due to the PHE for buy antibiotics. A few commenters suggested that CMS delay the deadline for full QCDR measure testing to 2023 or later due to the impact of buy antibiotics on providers and registries. Another commenter suggested that CMS limit the face validity testing requirement, stating that because the buy antibiotics extreme and uncontrollable circumstances exception decreased the number of groups reporting to MIPS through QCDRs, the face validity testing requirement should be limited to the first 2 years for which measures are approved or until 2 years after the end of the buy antibiotics PHE.

Several commenters expressed concerns with QCDR measure testing requirements and pointed to the significant burden of these requirements. One commenter expressed the belief that a barrier to use of QCDR measures is the requirement that they be fully tested, which is Start Printed Page 65541 extremely burdensome for QCDR measure owners. Another commenter asked for clarification as to what constitutes acceptable measure testing. Commenters requested that CMS develop a transparent and consistent process for evaluating QCDR testing approaches and results. Commenters noted that failure to ease the QCDR requirements may result in interested parties opting to not participate in the QCDR program.

Response. We note that we did not propose to substantively modify the measure requirement for face validity and testing in the proposed rule, such as to delay these requirements. The existing requirement (85 FR 84939) at § 414.1400(b)(3)(v)(C)( 1 ) states that, for a QCDR measure to approved for the CY 2022 performance period/2024 MIPS payment year it must meet face validity. To be approved for the CY 2023 performance period/2025 MIPS payment year and for each subsequent year, a QCDR measure must meet face validity for the initial MIPS payment year for which it is approved. Separately, paragraph (b)(3)(v)(C) provides that, beginning with the CY 2022 performance period/2024 MIPS payment year, a QCDR measure must be fully developed and tested, with complete testing results at the clinician level, prior to submitting the QCDR measure at the time of self-nomination.

In addition, paragraph (b)(3)(v)(C)( 1 ) requires that, for each subsequent year, for which a QCDR measure is approved, it must be fully tested. We intended our proposed reorganization of these standards at paragraph (b)(4)(B)(iii)( 3 ) to track these existing requirements. In regards to what constitutes acceptable testing and the burden associated with, and possible delay of such testing, we refer readers to our discussion of this and related issues in past rules (85 FR 27594 through 27595. 85 FR 84940. 85 FR 84926.

85 FR 84936. 84 FR 63066. 84 FR 63065 through 63067. 83 FR 59901 through 59902. 82 FR 53805 through 53806) and guidance documents, including the current CMS Measures Management System Blueprint for additional guidance in measure testing at https://www.cms.gov/​Medicare/​Quality-Initiatives-Patient-Assessment-Instruments/​MMS/​Downloads/​Blueprint.pdf.

Although we did not address any changes to the QCDR measure testing requirement at § 414.1400(b)(3)(v)(C)( 1 ) in the CY 2022 PFS proposed rule, based on public comments received on our proposals, we are considering proposing in next year's rulemaking to further delay this requirement for traditional MIPS until the CY 2024 performance period/2026 MIPS payment year, instead of the CY 2023 performance period/2025 MIPS payment year as previously finalized. We clarify that this delay would not modify the existing requirement at paragraph (b)(3)(v)(C)( 2 ), to be included in an MIPS Value Pathway for the 2024 MIPS payment year and future years, a QCDR measure must be fully tested. Comment. One commenter suggested that CMS provide more meaningful credit/incentivization for measure testing participation given the difficulty to motivate practices to engage in measure testing. The commenter suggested an improvement activity credit for measure testing given the difficulty to motivate practices to engage in measure testing.

Response. We thank the commenter for their suggestion. We may consider it for future rulemaking. We encourage the commenter to visit the 2021 Improvement Activities Inventory for additional guidance on improvement activities that focus on QCDR participation at https://qpp-cm-prodcontent.s3.amazonaws.com/​uploads/​1189/​2021%20Improvement%20Activities%20List.zip. After consideration of public comments, we are finalizing these policies as proposed.

(iii) Reorganization for Requirements Related to QCDR Measure Considerations for Approval We refer readers to the Quality Payment Program provisions in the CY 2019 PFS final rule (84 FR 63198 through 63199), where we finalized existing § 414.1400(b)(3)(iv) “QCDR measure considerations for approval.” We proposed to reorganize and make minor updates to the language at existing paragraph (b)(3)(iv) to paragraph (b)(4)(iii)(B). We proposed to reorganize the existing requirements so that QCDR measure approval at paragraph (b)(3)(v) is discussed before QCDR measure considerations at paragraph (b)(3)(iv). We also proposed to redesignate existing paragraph (b)(3)(vi) to paragraph (b)(4)(iii)(C). Specifically, we proposed the following revisions. To revise and redesignate existing paragraph (b)(3)(iv) “QCDR measure considerations for approval include” to paragraph (b)(4)(iii)(B) “QCDR measure considerations for approval include, but are not limited to”.

• Move existing paragraphs (b)(3)(iv)(A) in its entirety to paragraph (b)(4)(iii)(B)( 1 ). • Move existing paragraph (b)(3)(iv)(B) in its entirety to paragraph (b)(4)(iii)(B)( 2 ). • Move existing paragraph (b)(3)(iv)(C) in its entirety to paragraph (b)(4)(iii)(B)( 3 ). • Move existing paragraph (b)(3)(iv)(D) in its entirety to paragraph (b)(4)(iii)(B)( 4 ). • Move existing paragraph (b)(3)(iv)(E) in its entirety to paragraph (b)(4)(iii)(B)( 5 ).

• Move existing paragraph (b)(3)(iv)(F) in its entirety to paragraph (b)(4)(iii)(B)( 6 ). • Move existing paragraph (b)(3)(iv)(G) in its entirety to paragraph (b)(4)(iii)(B)( 7 ). • Revise and consolidate existing paragraph (b)(3)(iv)(G)( 1 ) to paragraph (b)(4)(iii)(B)( 7 )( i ) to state that QCDR link their QCDR measures as feasible to at least one cost measure, improvement activity, or an MVP at the time of self-nomination. • Revise and redesignate existing paragraph (b)(3)(iv)(G)( 2 ) to paragraph (b)(4)(iii)(B)( 7 )( ii ) to state that in cases where a QCDR measure does not have a clear link to a cost measure, improvement activity, or an MVP, CMS would consider exceptions if the potential QCDR measure otherwise meets the QCDR measure requirements and considerations. • Move existing paragraph (b)(3)(iv)(H) in its entirety to paragraph (b)(4)(iii)(B)( 8 ).

• Move existing paragraph (b)(3)(iv)(I) in its entirety to paragraph (b)(4)(iii)(B)( 9 ). • Revise and redesignate existing paragraph (b)(3)(iv)(J) to paragraph (b)(4)(iii)(B)( 10 ) to state beginning with the CY 2020 performance period/2022 MIPS payment year, CMS places greater preference on QCDR measures that meet case minimum and reporting volumes required for benchmarking after being in the program for 2 consecutive CY performance periods. Those that do not, may not continue to be approved. • Move existing paragraph (b)(3)(iv)(J)( 1 ) in its entirety to paragraph (b)(4)(iii)(B)( 10 )( i ). • Move existing paragraph (b)(3)(iv)(J)( 2 ) to paragraph reserve (b)(4)(iii)(B)( 10 )( ii ).

Move existing paragraph (b)(3)(vi) in its entirety to paragraph (b)(4)(iii)(C). We solicited public comments on our proposals. The following is a summary of the comments we received and our responses. Comment. The commenter suggested that we assess whether the limit on the number of QCDR measures available (30 measures) should be revised.

Response. We thank the commenter for their suggestion. We may consider it for future rulemaking. Start Printed Page 65542 After consideration of public comments, we are finalizing these policies as proposed. (iv) QCDR Measure Rejection Criteria We refer readers to the existing requirements at § 414.1400(b)(3)(vii).

We proposed reorganizing existing requirements at paragraph (b)(3)(vii) to proposed paragraph (b)(4)(iv). Therefore, we proposed the following revisions. • To revise and redesignate existing paragraph (b)(3)(vii) “QCDR measure rejection criteria” to paragraph (b)(4)(iv) and add a heading to state, QCDR measure rejection criteria. We believe adding a heading will help readers clearly distinguish measure rejection criteria. We also proposed to include the following updates.

• To move existing paragraph (b)(3)(vii) to proposed paragraph (b)(4)(iv) to state, QCDR measure rejection criteria. Beginning with the CY 2020 performance period/2022 MIPS payment year, QCDR measure rejection considerations include, but are not limited to. Move existing paragraphs (b)(3)(vii)(A) through (L) in their entirety to (b)(4)(iv)(A) through (L). We solicited public comments on our proposals. We did not receive public comments on these proposals, and therefore, we are finalizing them as proposed.

(e) Reorganization for Requirements Related to Remedial Action and Termination of Third Party Intermediaries We refer readers to § 414.1400(f), the CY 2017 Quality Payment Program final rule (81 FR 77548), CY 2019 PFS final rule (83 FR 59908 through 59910), the CY 2020 PFS final rule (84 FR 63077 through 63080), and the CY 2021 PFS final rule (85 FR 84930 through 84937) for previously finalized policies for remedial action and termination of third party intermediaries. With the proposed updates being made at § 414.1400, we proposed to redesignate the following sections. We proposed to redesignate current paragraph (f) as paragraph (e) and to update cross-references to correspond to the new section numbers as reflected in this final rule. We also proposed to redesignate current paragraph (g) as paragraph (f) and to update cross-references to correspond to the new section numbers as reflected in this final rule. We solicited public comments on these proposals.

We did not receive public comments on these proposals, and therefore, we are finalizing them as proposed. (2) Third Party Intermediaries General Requirements We refer readers to previously established § 414.1400(a) and the CY 2017 Quality Payment Program final rule (81 FR 77363 through 77364), and as further revised in the CY 2019 PFS final rule (83 FR 60088), CY 2020 PFS final rule (84 FR 63049 through 63052), CY 2021 PFS final rule (85 FR 84926 through 84947) for our established policy regarding third party intermediaries general requirements. In the CY 2022 PFS proposed rule, we proposed two changes for third party intermediaries. (1) Third party intermediary submissions for APM Entities. And (2) MIPS performance categories that must be supported by third party intermediaries.

We also solicited comment on third party intermediaries that derive data from CEHRT. These proposals and the request for comments are discussed in more detail below. (a) Third Party Intermediary Submissions for APM Entities As finalized in the Quality Payment Program provisions in the CY 2021 PFS final rule (85 FR 84895), APM Entities now have the option of reporting to MIPS on behalf of the MIPS eligible clinicians participating in their APM Entity. They have the option of reporting to traditional MIPS or via the APP (85 FR 84859). APM Entities have historically used Third Party Intermediaries for submitting their quality measures to their APMs, rather than to MIPS, however, these third party intermediaries now have the opportunity to submit these data for purposes of MIPS.

In the CY 2022 PFS proposed rule, we proposed to add APM Entities to § 414.1400(a)(1), expanding the general participation requirements of third party intermediaries to third party intermediaries reporting to MIPS on behalf of APM Entities in order to align reporting requirements for all participants in MIPS. We note that the Promoting Interoperability performance category is scored for APM Entities based on data submitted by the participant MIPS eligible clinicians and groups as described at § 414.1317(b)(1), and therefore, would not be required to be submitted by the third party intermediary on behalf of the APM Entity. We solicited comments on this proposal. We did not receive public comments on this proposal, and therefore, we are finalizing it as proposed. (b) MIPS Performance Categories That Must Be Supported by Third Party Intermediaries We refer readers to previously established § 414.1400(a)(2) and the CY 2017 Quality Payment Program final rule (81 FR 77363 through 77364), and as further revised in the CY 2019 PFS final rule (83 FR 60088), CY 2020 PFS final rule (84 FR 63049 through 63052), CY 2021 PFS final rule (85 FR 84926 through 84947) for our established policy regarding the types of MIPS data that third party intermediaries may submit.

In the CY 2022 PFS proposed rule, we proposed new requirements in alignment with our proposals in sections IV.A.3.b.(2)(c), IV.A.3.b.(4)(e) and IV.A.3.b.(3)(e) of this final rule to adopt MVPs and subgroups. (i) New Requirement for Third Party Intermediaries To Support MVPs and the APP As described in the Quality Payment Program provisions finalized in the CY 2021 PFS final rule (85 FR 84849), MVPs should include measures and activities from the quality, cost, improvement activities, and Promoting Interoperability performance categories. As described in section IV.A.3.b.(2)(c)(i) of this final rule, we discussed our proposals related to furthering our transition to MIPS Value Pathways (MVPs). As MVPs are implemented, proposed beginning with the CY 2023 performance period/2025 MIPS payment year, we also proposed the methods in which an MVP participant may report on an MVP or the APP. Since QCDRs, qualified registries, and health IT vendors are required under existing § 414.1400(a)(1) to submit data for quality, improvement activities, and promoting interoperability, we believe they would have the experience needed to support MVP and APP reporting.

Therefore, we proposed to create a new requirement at § 414.1400(b)(1)(ii) to state that, beginning with the CY 2023 performance period/2025 MIPS payment year, QCDRs and qualified registries must support MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. QCDRs and qualified registries may also support the APP. Additionally, we proposed to create a new requirement at paragraph § 414.1400(c)(1)(iii) to state that beginning with the CY 2023 performance period/2025 MIPS payment year, Health IT vendors must support MVPs that are applicable to the Start Printed Page 65543 MVP participants on whose behalf they submit MIPS data. Health IT vendors may also support the APP. Based off historical participation, we are aware that some third party intermediaries (QCDRs and qualified registries) support a single specialty or subspecialty, while others support multiple specialties.

Therefore, we believe that it is not appropriate to expect that all third party intermediaries are able to support all MVPs that are implemented in the program. Rather, the third party intermediaries should identify and support MVPs that are relevant to the clinicians and groups they support. We do not believe that CMS-approved survey vendors will be able to support MVP reporting, because they are historically limited, in that they only support the CAHPS for MIPS Survey Measure. As discussed in section IV.A.3.b.(2)(c) of this final rule, MVPs will start with the CY 2023 performance period/2025 MIPS payment year. We believe this delay in implementation will allow third party intermediaries sufficient time for programming and system preparation for MVP reporting success.

We solicited comments on our proposals. The following is a summary of the comments we received and our responses. Comment. One commenter supported third party intermediaries only reporting on the MVPs that reflect their participant needs but suggested third-party intermediaries be able to choose which MVPs they wish to support. The commenter expressed concerns about MVPs being arbitrarily assigned to third-party intermediaries.

One commenter noted that supporting an entire MVP is very different from supporting the inclusion of specific QCDR measures in an MVP and could carry much more burden for the registry and sought clarification of whether CMS will assign specific MVPs to a QCDR or qualified registry. Response. We thank the commenter for their support. At this time, CMS does not intend on assigning specific MVPs to a third party intermediary. As described in the CY 2022 PFS proposed rule (86 FR 39462), we proposed at § 414.1400(b)(1)(ii) and (c)(1)(iii) that QCDRs, qualified registries, and Health IT vendors must support MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data.

We refer readers to Appendix 3 of this final rule, where discuss the MVPs being finalized beginning with the CY 2023 performance period/CY 2025 MIPS payment year, around the clinical topics of stroke care, heart disease, rheumatology, chronic conditions, emergency medicine, anesthesia, and lower extremity joint repair. QCDRs, qualified registries, and Health IT vendors that support MVP participants, who work in the aforementioned clinical areas will be required to support these MVPs, as applicable. Furthermore, we expect that QCDRs, qualified registries, and Health IT vendors who support MVPs would support all measures and activities, across the quality, PI, and improvement activities performance category that are included in the MVP (cost measures and population health measures are calculated by CMS and do not require data submission by a third party intermediary or a clinician). The expectation that the QCDR and qualified registry support measures and activities across all three performance categories is not new, as these third party intermediaries are currently required to do so. We believe allowing QCDRs to only support specific QCDR measures in an MVP creates undue burden on the MVP Participant who would need to find other means to complete MVP reporting requirements.

This may deter clinicians from utilizing a third party intermediary. For the time being, CMS does not intend on assigning specific MVPs to a third party intermediary. It is required for QCDRs, qualified registries, and Health IT vendors to identify (CMS approved) MVPs that are relevant to the clinicians they support and report on those. Comment. One commenter supported third party intermediaries supporting MVPs but requested clarification on whether a QCDR would be responsible for validating an MVP participant's performance on population health measures and/or providing “enhanced” performance feedback, including performance data comparing the performance of similar clinicians who report on the same MVP.

Response. Third party intermediaries will not be expected to validate the performance on the current population health measures, since they are administrative claims-based and do not require external data submission. The responsibility of identifying the population health measure that should be calculated will fall to the MVP participant to determine at the time of MVP registration. CMS calculates these measures based on administrative claims data. In the CY 2022 PFS proposed rule (86 FR 39383), we describe our proposal to include comparative performance feedback within the annual performance feedback that CMS currently provides under traditional MIPS.

While CMS intends to provide this enhanced feedback through our existing performance feedback processes, QCDRs and qualified registries will still be required to provide clinicians they support with performance feedback as described at § 414.1400(b)(iii) and (c)(ii), regardless of whether the clinician chooses to report through traditional MIPS or an MVP. Comment. One commenter suggested that CMS mandate that EHR vendors support the quality measures in MVPs, otherwise clinicians would be forced to join multiple registries with the cost exceeding the maximum penalty. Response. To clarify, health IT vendors (such as EHRs), QCDRs, and qualified registries who support MVPs are required to support all measures and activities available in the MVP across the quality, improvement activities, and promoting interoperability performance categories.

The exceptions to this requirement are the cost measures and population health measures, which do not require external data submission to be calculated. In addition, some MVPs may include QCDR measures, which are only reportable through a QCDR. In instances where QCDR measures are included in an MVP, a qualified registry or health IT vendor will be expected to support all other quality measures included within the MVP. Comment. One commenter expressed concerns about layering another auditing requirement on QCDRs and qualified registries when MVPs are finalized as this could increase regulatory complexity and result in added work and burden without making a significant difference in the quality of data submitted.

One commenter requested that CMS add more detail in future requirements for third-party intermediaries to validate data submitted by MVP participants. Response. We disagree with the commenter. QCDRs and qualified registries are currently required to conduct data validation on data that is submitted to CMS for purposes of the MIPS program, to ensure the data is true, accurate, and complete. We refer readers to section IV.A.3.h.(3)(a)(iii) of this final rule for a detailed discussion of those requirements.

The current data validation requirements that are utilized in traditional MIPS, will also be applied to MVP submissions. MVPs are considered a method of reporting under MIPS, but is nonetheless a part of the program. Therefore, the requirements and expectations remain the same— QCDRs and qualified registries must conduct data validation on data submitted to CMS for purposes of the MIPS program, regardless of whether Start Printed Page 65544 the data is submitted under traditional MIPS or through an MVP. In the future, data validation information that is covered in the Self-Nomination Toolkit for QCDRs and qualified registries available at https://qpp-cm-prod-content.s3.amazonaws.com/​uploads/​1083/​2021%20Self-Nomination%20Toolkit%20for%20QCDRs%20and%20Qualified%20Registries.zip will also include MVPs. Comment.

One commenter requested clarification on whether QCDRs and qualified registries are required or permitted to support the APP, stating that the preamble states this is a requirement while the regulatory text says that QCDRs and qualified registries may support the APP. The commenter opposed a requirement for QCDRs and qualified registries to support the APP. Response. In the CY 2021 PFS final rule (85 FR 84859), we discussed that APM Entities have the option of reporting to MIPS on behalf of the MIPS eligible clinicians participating in their APM Entity. Additionally, there is an option of reporting to traditional MIPS or via the APP.

Furthermore, in the proposed rule (86 FR 39462), we proposed to add APM Entities to § 414.1400(a)(1), expanding the general participation requirements of third party intermediaries to third party intermediaries reporting to MIPS on behalf of APM Entities in order to align reporting requirements for all. We want to note that QCDRs and qualified registries would not be required to support the APP, but may do so. If QCDRs and qualified registries would like to support the APP, they would need to meet all of the other requirements of being a QCDR or qualified registry reporting to MIPS (with the exception of PI reporting, which has some exceptions) as described above. After consideration of public comments, we are finalizing these policies as proposed. (ii) Requirements for All Third Party Intermediaries To Support Subgroup Reporting As proposed in section IV.A.3.b.(3) of this final rule, subgroup reporting would allow clinicians in multispecialty practices to participate in MIPS more meaningfully.

Since subgroups would be implemented concurrently with MVPs, it is important that third party intermediaries have the capability to support subgroup reporting of MVPs. As described above, we believe QCDRs, qualified registries, and health IT vendors would have the capacity to support MVP and APP reporting. In the CY 2022 PFS proposed rule, we proposed to require QCDRs, qualified registries, health IT vendors, and CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. Therefore, we proposed to revise § 414.1400(a)(1) to state that MIPS data may be submitted on behalf of a MIPS eligible clinician, group, virtual group, subgroup or APM Entity by any of the following third party intermediaries. QCDR.

Qualified registry. Health IT vendor. Or CMS-approved survey vendor. We believe it is imperative for all third party intermediaries to be able to support subgroup reporting as we envision that to be the future of the program. While the CAHPS for MIPS survey vendors cannot support MVPs or the APP, we believe they can support the reporting of the CAHPS for MIPS measure within an MVP and the APP, if a subgroup decides to report on that measure.

Due to the limited experience, CAHPS for MIPS survey vendors have in quality reporting, we do not believe it is feasible for them to support MVP reporting since MVP reporting would require experience with reporting across the performance categories and the use of several collection types for quality reporting. However, there may be instances where the CAHPS for MIPS survey measure may be included in an MVP. For example, in the Optimizing Chronic Conditions Management MVP, as described in Appendix 3. MVP Inventory, of this final rule. In such instances, if groups or subgroups would like to report this measure, they should be able to utilize a CAHPS for MIPS survey vendor to do so.

We believe it is important that all third party intermediaries support subgroup reporting in order to support meaningful quality reporting. We understand that there may be a level of burden to third party intermediaries that are required in supporting subgroup reporting by requiring them to support another clinician type. However, we believe that requiring third party intermediaries to support subgroup reporting will allow for clinicians to participate in a manner that is more meaningful. We noted in section IV.A.3.b.(4)(f)(ii)(D) of this final rule, subgroups would have to register through the MVP participant registration process. Third party intermediaries would need to be able to track the subgroup identifiers and support the data submission process accordingly.

We solicited comments on our proposal. The following is a summary of the comments we received and our responses. Comment. A few commenters expressed concern regarding the burden for registries to identify and validate subgroup reporting. Response.

To clarify, as discussed in section IV.A.3.b.(4)(f)(ii)(D) of this final rule, subgroups must self-identify and register through a registration process in order to be considered a subgroup. The subgroup would need to register directly through the MVP registration process, that is done separately and not through a third party intermediary. Therefore, we believe there is no burden to registries to identify the subgroups. As MVP participants such as subgroups enroll to use the services of a registry, the subgroup will share with the registry their CMS-assigned identifier and a list of participants within that subgroup. The registry will need to submit the subgroup identifier information with the subgroup's data at the time of submission.

We understand there may be concerns in scenarios in which subgroups inadvertently provide an incorrect subgroup identifier to the registry. We will take that into consideration for future rulemaking, as we determine whether there are additional system safeguards, such as a system rejection of an incorrect identifier can be implemented to limit the occurrence of such issues. With regards to data validation, all QCDRs and qualified registries will continue to be held to the data validation requirements that currently exist, regardless of whether a clinician or group decides to participate in MVP reporting or traditional MIPS reporting. While we understand there is a level of burden associated with data validation, we believe the benefit outweighs the burden to ensure that all data submitted to CMS is true, accurate, and complete. Comment.

One commenter suggested that CMS delay its proposal requiring third party intermediaries to support subgroup reporting to allow more time for registries to implement reporting processes. Several commenters expressed concern that subgroup reporting will impose a large increase in burden on registries, particularly with respect to how registries validate NPIs. A few commenters expressed concern that QCDRs may lack the capacity to support subgroup reporting. Response. We disagree with the need for further delay.

We intentionally proposed MVPs and subgroup reporting with a delayed implementation to account for the time that clinicians, third party intermediaries, and healthcare organizations would need to prepare to operationalize MVP and subgroup reporting. We believe the availability of subgroup reporting Start Printed Page 65545 should go hand-in-hand with the implementation of MVPs, and therefore, should be jointly available beginning with the CY 2023 performance period/2025 MIPS payment year. The delayed implementation should provide third party intermediaries sufficient time for system and operation preparations for subgroup reporting. In addition, we do not believe that subgroup reporting will impose a large increase in burden to registries. We refer readers to section IV.A.3.b.(3) of this final rule, for further discussion of validation requirements.

Subgroups are derived from their affiliated TINs who would have otherwise reported traditional MIPS through a registry. After consideration of public comments, we are finalizing this policy as proposed. (c) Request for Comment on Third Party Intermediaries That Derive Data From CEHRT For third party intermediaries that will be submitting quality measure data on behalf of MIPS eligible clinicians, we believe that EHR systems will be able to provide measure results for a set of providers that are part of a subgroup where required for subgroup reporting. We note that the existing CEHRT definition for eligible clinicians at § 414.1305 includes the 45 CFR 170.315(c)(4) “Clinical quality measures—filter” as an optional element. This criterion requires health IT to be able to filter CQM results at both patient and aggregate levels.

Moreover, a Health IT Module must be able to filter by a single proposed data element (for example, provider type) or a combination of any of the data elements). Historically, the “Clinical quality measures—filter” at 45 CFR 170.315(c)(4)” (CQM-filter) criterion has been applicable for certified health IT modules supporting quality measurement for participants in certain APMs. We believe technology certified to this optional criterion could support subgroup reporting via third party intermediaries that derive data from CEHRT by ensuring that an EHR can produce CQM results filtered for a specific group of provider NPIs that are part of a subgroup. These filtered CQM results could then be shared with a third party intermediary, which provides this data for reporting to CMS. However, we also believe health IT developers are offering non-certified functionality that can effectively support reporting of measure results for a subgroup.

As a result, we did not propose any changes at this time to the language in the CEHRT definition for eligible clinicians regarding the “optional” status of technology certified to the CQM-filter criterion. We are interested in general feedback from stakeholders on the current capabilities of third party intermediaries that derive data from CEHRT to successfully receive and transmit data to CMS for CQMs based on subgroups. Capabilities of EHR systems to support subgroup reporting, including reporting facilitated by third party intermediaries, and whether requiring the adoption of technology certified to the CQM-filter criterion would help to support subgroup reporting. And challenges which entities may face in meeting requirements to report on subgroups when deriving data from CEHRT. We solicited feedback on this topic.

Comment. A few commenters responded to CMS' request for information regarding CEHRT and third party intermediaries. One commenter urged CMS to establish clear expectations and guidelines to ensure data security and to define roles and responsibilities for data validation and data cleaning. Another commenter recommended that CMS consider making the CQM filter criterion mandatory for CEHRT because, otherwise, organizations would likely be required to contract with qualified registries/QCDRs to submit MIPS data. Another commenter disagreed, stating that as a developer of CEHRT that provides CQM functionality, they do not believe that the CQM-filer criterion is necessary.

Response. We thank commenters for the feedback received through this request for information. We may consider this information to inform future rulemaking. (3) New Requirements for Both Qualified Clinical Data Registries (QCDRs) and Qualified Registries (a) Background We refer readers to §§ 414.1305 and 414.1400, the CY 2017 Quality Payment Program final rule (81 FR 77362 through 77390), the CY 2018 Quality Payment Program final rule (82 FR 53806 through 53819), the CY 2019 PFS final rule (83 FR 59894 through 59910), the CY 2020 PFS final rule (84 FR 63049 through 63080), the May 8th buy antibiotics IFC (85 FR 27594 through 27595), and the CY 2021 PFS final rule (85 FR 84926 through 84947) for our previously established policies regarding QCDRs and qualified registries. In the CY 2022 PFS proposed rule, we proposed several changes for both QCDRs and qualified registries.

(1) New requirement for approved QCDRs and qualified registries that have not submitted performance data. (2) collaboration of entities to become a QCDR and qualified registry. And (3) data validation audit and targeted audit requirements. These proposals are discussed in more detail below. (i) New Requirement for Approved QCDRs and Qualified Registries That Have Not Submitted Performance Data We require that both QCDRs and qualified registries must have a minimum of 25 participants signed up by the prior performance period at existing § 414.1400(b)(2) and (c)(2).

We refer readers to CY 2017 Quality Payment Program final rule (81 FR 77362 through 77390), the CY 2018 Quality Payment Program final rule (82 FR 53806 through 53819), the CY 2019 PFS final rule (83 FR 59894 through 59910), the CY 2020 PFS final rule (84 FR 63049 through 63080), the May 8th buy antibiotics IFC (85 FR 27594 through 27595), and the CY 2021 PFS final rule (85 FR 84926 through 84947). We identified a number of QCDRs and qualified registries that have continued to self-nominate to become a third party intermediary for the MIPS program, but have not submitted clinician, group or virtual group data to CMS. As the MIPS program continues to mature, we wish to reduce the number of vendors that self-nominate to become a qualified vendor, but do not actively participate in the MIPS program. We believe that maintaining these vendors who do not actively participate does not provide a benefit to the MIPS program, rather it creates stakeholder confusion by including these vendors in our qualified postings. We proposed a two-tiered approach to solve this issue.

First, we proposed to create a new requirement at § 414.1400(b)(3)(vii) to require QCDRs and qualified registries that have never submitted data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year) through the CY 2020 performance period/2022 MIPS payment year, to submit a participation plan as part of their self-nomination for CY 2023. Exceptions to this requirement may occur if data is received for the CY 2021 performance period/2023 MIPS payment year. Under this scenario, QCDRs and qualified registries would not need to submit a participation plan for CY 2023 of the self-nomination period. If they do not submit data, their participation plan must be submitted as part of self-nomination for CY 2023 and must be accepted by CMS to continue to be an approved QCDR or qualified registry. Start Printed Page 65546 Secondly, we proposed to codify a new requirement at paragraph (b)(3)(viii) to state, beginning with the CY 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval.

For example, for the CY 2024 performance period/2026 MIPS payment year, vendors will be required to have submitted performance data for the CY 2021 and 2022 performance periods/2023 and 2024 MIPS payment years. Under this proposal, the participation plan must explain the QCDR's or qualified registry's detailed plans about how the vendor intends to encourage clinicians to submit MIPS data to CMS through the third party intermediary on behalf of clinicians or groups. The vendor must also explain why they should still be allowed to participate as a qualified vendor. We note that this proposed participation plan was modeled off of the current requirement for QCDR measure participation at existing § 414.1400(b)(3)(iv)(J)( 1 ) (redesignated to proposed paragraph (b)(4)(iii)(B)(10)( i )). We solicited comments on this proposal.

The following is a summary of the comments we received and our responses. Comment. A few commenters disagreed with the proposal to require a participation plan for approved QCDRs that did not submit data for 2 years preceding the applicable self-nomination period. One commenter stated that the buy antibiotics PHE reduced reporting by eligible clinicians to QCDRs. Response.

While we are sympathetic and acknowledge that the impact the PHE may have had on reduced reporting, we note that we are proposing an incremental approach to assess QCDR data reporting. This includes the first proposal which would apply to any QCDR or qualified registry that has not submitted data to CMS since the inception of MIPS (CY 2017). We believe a QCDR should have been able to report data to CMS for years preceding CY 2021. Specifically, we believe a QCDR should have been able to report data to CMS for CY 2019. If a QCDR was new in CY 2020 and did not submit data to CMS, the QCDR still has CY 2021 to report for clinicians which in turn, satisfies this requirement.

Furthermore, the proposal provides QCDRs and qualified registries the opportunity to submit participation plans, which could support the decision to allow a QCDR or qualified registry to continue their MIPS participation. This plan would outline possible reasons for low/no reporting to CMS and the efforts the QCDR plans to take to further encourage their clinicians to submit data to CMS. Some examples include but are not limited to. A reduction in associated fees, improvement of an EHR interface to reduce data extraction burden, expansion of the numbers/types of measures the QCDR chooses to report, etc. As such, this proposal would not immediately remove a QCDR or qualified registry from participating as a third party intermediary.

As discussed above, we want to reduce the number of vendors that self-nominate to become a qualified vendor, but do not actively participate in the MIPS program. We believe that maintaining these vendors who do not actively participate does not provide a benefit to the MIPS program. We note that our goal is to decrease the operational burden on CMS and those vendors who do not submit MIPS data to CMS. CMS would decrease its operational burden by not having to go through the vetting process of these entities or monitor program compliance during the year. Additionally, we believe that we can better utilize the resources used for vendors that do not submit MIPS data elsewhere to improve the MIPS program.

Furthermore, vendors who choose not to submit MIPS data to CMS are depriving CMS of data that would benefit the MIPS program. Lastly, vendors who do not submit data will decrease their burden in the long-term by not self-nominating year after year. Comment. One commenter disagreed with the proposal for QCDRs and qualified registries who do not submit data 2 years preceding the applicable self-nomination period to submit a participation plan at the time of self-nomination. The commenter noted that CMS would also require the participation plan to include moving users over to submit their MIPS data through the qualified registry.

The commenter expressed concern that this policy would create significant demand on QCDRs specifically, due to the already cumbersome Eligible Measure Applicability (EMA) process required for qualified registries. The commenter currently uses both the qualified registry and QCDR to collect data, however, the commenter only submits the data to CMS through the QCDR. Response. We disagree with the commenter's interpretation of this policy. The intention of the participation plan requirement is to explain the QCDR's or qualified registry's detailed plans about how the vendor intends to encourage clinicians to submit MIPS data to CMS through the third party intermediary on behalf of clinicians or group and to explain why they should still be allowed to participate as a qualified vendor.

The participation plan will not require moving users over to submit their MIPS data through the qualified registry and that this policy would create significant demand on QCDRs. We note that during the CY 2019 MIPS performance period, the Eligible Measure Applicability (EMA) process was updated to be applicable to collection types (that is, EMA applies to Part B Claims measures and MIPS clinical quality measures (CQMs) but does not apply to electronic clinical quality measures (eCQMs), QCDR measures, or Web Interface) rather than third party intermediaries. As such, EMA does not apply to QCDRs and qualified registries as an entity, rather it could apply to MIPS CQMs that the QCDR or qualified registry is approved to support. We encourage third party intermediaries to participate as a QCDR if they intend to self-nominate their own QCDR measures or use another QCDR's measures (with permission from the QCDR who owns the measure) or as a qualified registry if they plan to support their clients through the reporting of CQMs or eCQMs only. After consideration of public comments, we are finalizing these policies as proposed.

(ii) Collaboration of Entities To Become a QCDR and Proposal To Extend Policy for Collaboration of Entities To Become a Qualified Registry (A) Background In the CY 2017 Quality Payment Program final rule (81 FR 77377), we finalized to allow collaboration of entities to become a QCDR based on our experience with the qualifying entities wishing to become QCDRs for performance periods. We stated that we believed our previously finalized policy supporting entity collaboration should be continued under MIPS. Therefore, we discussed that an entity that may not meet the criteria of a QCDR solely on its own, but could do so in conjunction with another entity and would be eligible for qualification through collaboration with another entity. Additionally, we finalized at § 414.1400(b)(2)(ii), specifically for QCDRs, that if the entity uses an external organization for purposes of data collection, calculation, or transmission, it must have a signed, written agreement with the external organization that specifically details the Start Printed Page 65547 responsibilities of the entity and the external organization. The written agreement must be effective as of September 1 of the year preceding the applicable performance period.

For example, an entity, such as a specialty society, that needs technical support may partner with an outside entity such as a health IT vendor to qualify as a QCDR. While entities, such as QCDRs, Health IT vendors, and qualified registries, can collaborate with external organizations, those entities could only do so to meet requirements to be a QCDR. We did not explicitly create a policy for entities to collaborate to meet the requirements to be a qualified registry. (B) Proposal To Extend to Qualified Registries We believe we should extend the previously finalized policy to apply to entities that wish to collaborate to become a qualified registry as well because extending this policy to qualified registries would also help smaller specialty societies that may not have the resources on their own to become a qualified registry. This will allow those societies to be able to partner with other entities to meet the definition of a qualified registry.

Therefore, in the CY 2022 PFS proposed rule, we proposed to revise and redesignate existing paragraph (b)(2)(ii) to new paragraph (b)(3)(ii) to state, if the entity seeking to qualify as a QCDR or qualified registry uses an external organization for purposes of data collection, calculation, or transmission, it must have a signed, written agreement with the external organization that specifically details the responsibilities of the entity and the external organization. The written agreement must be effective as of September 1 of the year preceding the applicable performance period. For example, an entity, such as a specialty society, that needs technical support may partner with an outside entity such as a health IT vendor to qualify as a qualified registry. We solicited comments on this proposal. We did not receive public comments on this proposal, and therefore, we are finalizing it as proposed.

(iii) Data Validation Audit and Targeted Audit Requirements (A) Information Required at the Time of Self-Nomination In the CY 2017 Quality Payment Program final rule (81 FR 77366 through 77367. 81 FR 77383 through 77384) we discussed our expectation for QCDRs and qualified registries to conduct validation on the data they intend to submit for the MIPS performance period. We also discussed that the full self-nomination process would require the following. A submission of basic information, a description of the process the QCDR and qualified registry will use for completion of a targeted audit of a subset of data prior to submission, the provision of a data validation plan along with the results of the executed data validation plan by May 31 of the year following the performance period. Additionally, in the Quality Payment Program provisions in the CY 2021 PFS final rule (85 FR 84930 through 84937.

85 FR 84944 through 84947) at existing § 414.1400(b)(2)(iv) and (v), and (c)(2)(iii) and (iv), we finalized the data validation audit requirements as condition for approval. While we did finalize the requirements for the data validation audits as condition for approval, we did not codify the requirements for QCDR and qualified registries to submit data validation plan during self-nomination along with the results of the executed data validation plan by May 31 of the year following the performance period. In order to provide clarification and to better align with the previously finalized policy (81 FR 77366 through 77367. 81 FR 77383 through 77384), we proposed to codify the following revisions. As stated in previous polices (81 FR 77366 through 77367;81 FR 77383 through 77384), QCDRs and qualified registries are required to submit the results of their data validation plan to CMS by May 31 of the year following the performance period.

Therefore, we proposed to codify at § 414.1400(b)(3)(v)(G)( 1 ) to state that QCDRs and qualified registries must conduct validation on the data they intend to submit for the applicable MIPS performance period, and provide the results of the executed data validation plan by May 31st of the year following the performance period. Furthermore, QCDRs and qualified registries are required to submit their data validation plan explaining their process of data validation submission annually during self-nomination, and it must be approved by CMS for before use. To provide further clarity and to better align with the existing policy (81 FR 77366 through 77367. 81 FR 77383 through 77384), we also proposed to codify a new requirement at § 414.1400(b)(3)(iv) to state that, beginning with the CY 2023 performance period/2025 MIPS payment year, the QCDR or qualified registry must submit a data validation plan annually, at the time of self-nomination, for CMS' approval, and may not change the plan once approved, without the prior approval of the agency. As discussed above we proposed to codify at § 414.1400(b)(3)(iv) to provide further clarity to better align with previous policies.

Therefore, we proposed to reorganize at § 414.1400(b)(2)(iv) though (viii) to better align with the above changes. We proposed with the following revisions. We proposed to revise and redesignate existing paragraph (b)(2)(iv) to paragraph (b)(3)(v) to state, that beginning with the CY 2021 performance period/2023 MIPS payment year, the QCDR or qualified registry must conduct annual data validation audits in accordance with this paragraph (b)(3)(v). We proposed to revise and redesignate existing paragraph (b)(2)(iv)(A) to paragraph (b)(3)(vi)(A) to state that, if a data validation audit under paragraph (b)(3)(v) identifies one or more deficiency or data error, the QCDR or qualified registry must conduct a targeted audit into the impact and root cause of each such deficiency or data error for that MIPS payment year. We proposed to revise and redesignate existing paragraph (b)(2)(v) to paragraph (b)(3)(vi) to state that beginning with the CY 2021 performance period/2023 MIPS payment year, the QCDR or qualified registry must conduct targeted audits in accordance with this paragraph (b)(3)(vi).

We proposed to revise and redesignate paragraph (b)(2)(vi) to paragraph (b)(3)(vii), to state for the CY 2023 performance period/2025 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for any of the CY 2017 through 2021 performance periods/2019 through 2023 MIPS payment years must submit a participation plan for CMS' approval. This participation plan must include the QCDR's detailed plans and changes to encourage eligible clinicians and groups to submit data on the low-reported QCDR measure for purposes of the MIPS program. • We proposed to revise and redesignate existing paragraph (b)(2)(vii) to paragraph (b)(4)(viii) to state that beginning with the CY 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval. Start Printed Page 65548 The following is a summary of the comments we received and our responses. Comment.

Several commenters expressed concerns about the “overly burdensome” nature and significant cost of the CMS data validation audit requirements for third party intermediaries. One commenter expressed concerns with the randomized auditing resulting in an unintended consequence of increasing burden on small and mid-sized group practices because of the low number of participants reporting via the qualified registry as individuals. One commenter stated that the audit requirements are duplicative, unnecessary, and do not enhance data quality and validity because QCDRs already have rigorous internal data and quality standards. A few commenters stated that clinicians and registries were impacted by the buy antibiotics flagyl, specifically that dozens of audits were conducted and QCDRs and qualified registries have encountered practices struggling to collect and report data while a majority of their time and effort has been spent on responding to the buy antibiotics flagyl. Response.

While we understand that data validation requires a level of effort, time, and cost by the QCDRs and qualified registries, we disagree that this causes undue burden. While we acknowledge and appreciate the efforts and participation of all group practices of varying sizes including small and mid-sized groups, we believe it is important to hold all practices to the same standards for data validation audits to ensure that all data submitted is true, accurate, and complete. As discussed in the CY 2017 Quality Payment Program final rule (81 FR 77366 through 77367. 81 FR 77383 through 77384), we expect that QCDRs and qualified registries would conduct validation on the data they intend on submitting for the MIPS performance period and provide the results of the data validation to CMS in the form of a data validation execution report by May 31st of the year following the performance period. As noted in the CY 2017 PFS final rule (81 FR 77366 through 77367), we believe it is necessary to establish a requirement that QCDRs conduct data validation to ensure they are actively monitoring the data they submit to CMS for purposes of a pay-for-performance program.

We also believe it is important for QCDRs to validate the data that they intend to submit to us for purposes of the MIPS program to ensure that the data submitted is true, accurate, and complete (85 FR 84936). We disagree that audit requirements are duplicative, unnecessary, and do not enhance data quality and validity because QCDRs already have rigorous internal data and quality standards. While we appreciate that many QCDRs already have rigorous internal data and quality standards, we are not asking QCDRs to duplicate work. If QCDRs have their own auditing requirements, they can use the same auditing process or combine the efforts to reduce duplication as long as they meet the data validation requirements specified by the regulation at a minimum (81 FR 77366 through 77367. 81 FR 77383 through 77384).

For example, if a QCDR already audits 10 percent of their data prior to submission for all performance categories, this would meet the 3 percent portion of the data validation requirement. Additionally, despite our requirements to have validation audits, each year there are still some QCDRs that submit inaccurate data. As payment adjustments increase, this could adversely affect a practice with respect to their payment because these payment calculations were based on inaccurate data submitted to CMS. Furthermore, while we do acknowledge that the impact of the PHE for buy antibiotics may have affected some providers and registries ability to conduct audits due to practices struggling to collect and report data due to majority of their time and effort being spent on responding to the buy antibiotics flagyl, as stated above, we believe it is important to enforce the requirements for data validation audits to ensure all data submitted is true, accurate, and complete. We will continue to assess the implications of the PHE for buy antibiotics and will consider whether to make any policy changes in future rulemaking.

Comment. One commenter expressed that NCQA data validation alleviates the burden on health plans having to perform their own audit of data received from an HIE and on providers from having to respond to data requests from health plans. This commenter suggested that CMS leverage NCQA processes for data validation. Response. We thank the commenter for their suggestion.

We may consider it for future rulemaking. After consideration of public comments, we are finalizing these policies as proposed. (4) New Requirements Specific to QCDRs (a) Background We refer readers to § 414.1400(b), the CY 2017 Quality Payment Program final rule (81 FR 77374 through 77375), the CY 2018 Quality Payment Program final rule (82 FR 53813 through 53814), the CY 2019 PFS final rule (83 FR 59900 through 59906), the CY 2020 PFS final rule (84 FR 63058 through 63074), the May 8th buy antibiotics IFC (85 FR 27594 through 27595), and the CY 2021 PFS final rule (84937 through 84944) for where we previously finalized standards and criteria for QCDRs, specifically QCDR measure requirements. In this section, we proposed to update policies related to QCDR measure rejections. (b) QCDR Measures (i) QCDR Measure Rejections (A) New QCDR Measure Rejection Criteria We refer readers to the Quality Payment Program provisions in the CY 2020 PFS final rule (84 FR 63070 through 63073) at § 414.1400(b)(3)(vii) where we have previously adopted QCDR measure rejection criteria.

In the CY 2022 PFS proposed rule, we proposed to add two new criteria. (1) QCDR does not have permission to use a QCDR measure. And (2) QCDR not approved or not in good standing. These are discussed in more detail below in this section. (aa) QCDR Does Not Have Permission To Use a QCDR Measure In the CY 2018 Quality Payment Program final rule (82 FR 53813 through 53814), we discussed that beginning with the 2018 performance period and for future program years, QCDR vendors may seek permission from another QCDR to use an existing measure that is owned by the other QCDR.

We noted that the QCDR measure owner (QCDR vendor) would still own and maintain the QCDR measure, but would allow other QCDRs to utilize their measure with proper notification. We intended for this policy to help reduce the number of QCDR measures that are similar in concept or clinical topic, or duplicative of other QCDR measures that are being approved. Additionally, in the Quality Payment Program provisions in the CY 2020 PFS final rule (84 FR 63070 through 63073) at § 414.1400(b)(3)(vii), we finalized the QCDR measure rejection criteria considerations. We noted that these considerations would help to ensure that QCDR measures are meaningful and measurable. Although we finalized the QCDR measure rejection criteria, we did not codify that QCDRs may seek permission from another QCDR to use an existing measure that is owned by another QCDR.

In order to provide further clarity to the existing policies (82 FR 53813 through 53814. 84 FR Start Printed Page 65549 63070 through 63073), we proposed to codify a new requirement and add a rejection criterion at § 414.1400(b)(4)(iv)(M) to state, a QCDR does not have permission to use a QCDR measure owned by another QCDR for the applicable performance period. We solicited comments on this proposal. The following is a summary of the comments we received and our responses. Comment.

A few commenters supported the proposal to add the rejection criterion that “A QCDR does not have permission to use QCDR measure owned by another QCDR for the applicable performance period” because CMS currently allows QCDRs to seek permission from another QCDR to report on an existing measure that is owned by the other QCDR, and because if a QCDR would like to use an existing QCDR measure that is owned by another QCDR, it must obtain permission from the QCDR measure owner that it can use the measure for the performance period and include proof of such permission in its self-nomination application. Response. We thank the commenters for their support. After consideration of public comments, we are finalizing this policy as proposed. (bb) QCDR Not Approved or Not in Good Standing Additionally, if a QCDR measure owner is not approved or is not in good standing, any QCDR measures associated with that QCDR would also not be approved.

We believe it is important to have an approved QCDR measure owner for all approved QCDR measures. This would ensure that there is active involvement by the QCDR measure owner so that any potential measure issues can be mitigated during the specified MIPS performance period. For example, any mid-year guideline changes or measure questions would need to be immediately clarified to avoid negative impacts to clinicians such as the inability to construct a benchmark due to an error in the measure specifications. Therefore, we proposed to codify another rejection criterion at § 414.1400(b)(4)(iv)(N) to state that, if a QCDR measure owner is not approved during a given self-nomination period, any associated QCDR measures with that QCDR would also not be approved. We solicited comments on this proposal.

We have received inquiries from stakeholders on what can be done in circumstances when an active QCDR wishes to use an inactive QCDR's measure. We are interested in feedback from stakeholders on what should be done in such circumstances. For example, what should happen if “QCDR A” is using “QCDR B's” measures in a given performance period and “QCDR B” is terminated mid performance period?. Alternatively, what if “QCDR A” is using a measure from “QCDR B” and “QCDR B” decides not to self-nominate for the subsequent performance period?. While “QCDR A” could partner with “QCDR B” as described at § 414.1400(b)(3)(ii), are there other policy options we should consider to minimize impact to the MIPS eligible clinician who has selected the QCDR measure for reporting?.

We solicited comments on the above circumstances. The following is a summary of the comments we received and our responses. Comment. A few commenters disagreed with the proposal to add a rejection criterion requiring permission to use an inactive QCDR's measures. One commenter stated that there is no evidence that inactive QCDRs are withholding access to these measures.

The commenter noted the ability of QCDRs to license measures allows QCDRs to ensure the appropriate use of their measures and incentivizes organizations to invest in developing new and improved measures. The commenter suggested that CMS should continue its policy that allows active or inactive QCDR measure owners to choose to license their measures only to QCDRs that have the experience and expertise to properly implement a measure in a particular specialty. Therefore, there is no reason to change CMS' current policy under which an active QCDR that wishes to use an inactive QCDR's measure can approach the inactive QCDR and the two QCDRs can negotiate an agreement regarding the transfer of ownership if the active QCDR has the appropriate experience and expertise in QCDR measure development. In the event that such agreement cannot be reached between the two parties, the inactive QCDR can decline to license rights to the QCDR measure. One commenter suggested that CMS require that either there be an agreement between the two QCDRs to transfer ownership of the measure or that the initial QCDR should maintain their measures and license it to other QCDRs.

Response. We thank the commenters for their comments and suggestions. We clarify that if a QCDR measure owner is not approved or is not in good standing, any QCDR measures owned or maintained with that QCDR would also not be approved. We disagree that the proposal to add a rejection criterion requiring permission to use an inactive QCDR's measures is not supported by evidence that inactive QCDRs are withholding access to these measures. We note that there have been instances where active QCDRs have inquired about using QCDR measures of inactive QCDR measure stewards.

We also disagree that this policy is not needed. We believe it is imperative that all QCDR measures in the MIPS program have an active QCDR measure steward to provide ongoing maintenance and updates to QCDR measures. For example, recently, a QCDR who shares their measures with several other QCDRs discovered multiples discrepancies, including risk adjustment calculation issues. If they had not been an active QCDR and performing quality assurance on these QCDR measures, this issue would likely not have been discovered and resolved. We do agree that the ability of QCDRs to license measures allows QCDRs to ensure the appropriate use of their measures and incentivizes organizations to invest in developing new and improved measures.

We also agree that active or inactive QCDR measure owners may choose to license their measures only to QCDRs that have the experience and expertise to properly implement a measure in a particular specialty. Furthermore, this process is consistent with what CMS requires for all other measures available for all clinicians to report in the MIPS program (the non-QCDR measures). That is, every measure in the program needs an active measure steward that agrees to support and maintain the measure. A non-active QCDR cannot be compelled to meet this requirement. In this context, we interpret the commenter's reference to a “policy under which an active QCDR that wishes to use an inactive QCDR's measure can approach the inactive QCDR and the two QCDRs can negotiate an agreement regarding the transfer of ownership”, to apply to our statements regarding QCDR licensing as discussed in the CY 2018 PFS final rule (82 FR 53813).

There we noted that, beginning with the 2018 performance period and for future program years, a QCDR vendor may seek permission from another QCDR to use an existing measure that is owned by the other QCDR. While we thank the commenter for the suggestion to require the transfer of ownership of a measure from an inactive QCDR to an active QCDR or that the inactive QCDR should maintain the measure and license it to active QCDRs, we note that such approaches are beyond the scope of our regulations, which in this case is limited to approval and disapproval criteria for QCDRs and Start Printed Page 65550 QCDR measures. We are considering building out additional policies to ensure that all QCDR measures that are used/owned are properly maintained throughout the performance period. After consideration of public comments, we are finalizing this policy as proposed. (5) Remedial Action and Termination of Third Party Intermediaries We refer readers to § 414.1400(f), the CY 2017 Quality Payment Program final rule (81 FR 77548), CY 2019 PFS final rule (83 FR 59908 through 59910), the CY 2020 PFS final rule (84 FR 63077 through 63080), and the CY 2021 PFS final rule (85 FR 84930 through 84937) for previously finalized policies for remedial action and termination of third party intermediaries.

In the Quality Payment Program provisions in the CY 2019 PFS final rule (83 FR 59908 through 59910), we discussed that the threshold for “inaccurate, unusable or otherwise compromised” may be met if the submitted data includes TIN/NPI mismatches, formatting issues, calculation errors, or data audit discrepancies that affect more 3 percent of the total number of MIPS eligible clinicians or groups for which data was submitted by the third party intermediary. We proposed to update the existing language at § 414.1400(f)(3)(ii) to broadly explain that it is up CMS' discretion on whether third party intermediaries' inaccuracies may lead to possible remedial action or termination. As discussed earlier, we proposed consolidating and redesignating the existing language at § 414.1400(f) as paragraph (e) and § 414.1400(g) as paragraph (f) to provide clarity and alignment with the aforementioned proposals to consolidate the duplicative criteria of QCDRs and qualified registries. Therefore, we proposed to revise and redesignate existing language at § 414.1400(f)(3)(ii) to paragraph (e)(3) to state, contains data inaccuracies affecting the third party intermediary's total clinicians may lead to remedial action/termination of the third party intermediary for future program year(s) based on CMS discretion. We did not receive public comments on this policy, and therefore, we are finalizing it as proposed.

I. Public Reporting on the Compare Tools Hosted by the U.S. Department of Health &. Human Services (HHS) In the CY 2022 PFS proposed rule, we proposed to amend § 414.1395(c) to add a 1-year delay of publicly reporting new improvement activities and Promoting Interoperability measures and attestations reported via MVP. We also proposed a one-time, 1-year delay to subgroup-level public reporting, such that subgroup-level public reporting will begin with CY 2024 performance information available in 2025, and each year thereafter, on the Compare Tools hosted by the U.S.

Department of Health and Human Services (HHS), referred to as “compare tool” throughout this final rule, available at https://www.medicare.gov/​care-compare/​ and data.medicare.gov, as technically feasible. We proposed to add facility affiliations, beyond the hospital affiliations currently displayed on individual profile pages. Additional facility affiliations would include. Inpatient rehabilitation facilities (IRFs). Long-term care hospitals (LTCHs).

Skilled nursing facilities (SNFs). Inpatient psychiatric facilities (IPFs). Home health agencies (HHAs). Hospices. And dialysis facilities.

Finally, we solicited comments on publicly reporting utilization data on clinician and group profile pages (86 FR 39466 through 39469). For previous discussions on public reporting, we refer readers to the CY 2016 PFS final rule (80 FR 71116 through 71123), the CY 2017 Quality Payment Program final rule (81 FR 77390 through 77399), the CY 2018 Quality Payment Program final rule (82 FR 53819 through 53832), the CY 2019 PFS final rule (83 FR 59910 through 59915), the CY 2020 PFS final rule (84 FR 63080 through 63083), the CY 2021 PFS final rule (85 FR 84947 through 85 FR 84948) and the Care Compare. Doctors and Clinicians Initiative Page at https://www.cms.gov/​Medicare/​Quality-Initiatives-Patient-Assessment-Instruments/​Compare-DAC. (1) MVP and Subgroup Public Reporting The introduction of MVPs and subgroup reporting provides for new types of performance information that are available for public reporting, provided they meet the established public reporting standards at § 414.1395(b). In consideration of our MVP and subgroup performance information public reporting proposals, we wish to remind readers that all submitted MIPS performance information is available for public reporting (81 FR 77395 through 77397).

Additionally, we previously finalized at § 414.1395(c) that, for each program year, CMS does not publicly report any first-year measures for the first 2 years, meaning any measure in its first 2 years of use in the quality and cost performance categories. We also note that MIPS performance category and composite final scores for MIPS eligible clinicians participating in MVPs will continue to be publicly reported as required under section 1848(q)(A)(i)(I) of the Act and finalized at § 414.1395(a)(1)(i). We believe delaying public reporting of certain MVP and subgroup performance information provides a catalyst to encourage clinician participation in MVPs and subgroups while they familiarize themselves with these options. For this reason, we proposed, for individuals, groups, and subgroups reporting via MVP, to add a 1-year delay for publicly reporting new improvement activities and Promoting Interoperability measures and attestations, as technically feasible. This means that new improvement activities and Promoting Interoperability measures and attestations would be available for public reporting at their inception in traditional MIPS, but we would delay public reporting of new improvement activities and Promoting Interoperability measures and attestations by 1 year after inception for those reporting via MVP.

We note that improvement activities and Promoting Interoperability measures and attestations that have already been in MIPS for more than 1 year and become newly available as part of an MVP would be available for public reporting in the first year the MVP is in the program. That is, non-first year improvement activities and Promoting Interoperability measures and attestations that are newly part of an MVP would be available for public reporting in the first year the MVP is in the program (86 FR 39466 through 39467). Table 74 further clarifies when this 1-year delay would apply. Start Printed Page 65551 We recognized that under this proposal, we would be further delaying the release of performance information for improvement activities and Promoting Interoperability measures and attestations reported via MVP. Because of this, as a potential incentive, we also considered whether to delay public reporting of quality and cost measure information reported via MVP by 1 additional year, for a total of 3 years.

We solicited comments on our proposal to delay public reporting of new improvement activities and Promoting Interoperability measures and attestations reported via MVP by 1 year, as well as any feedback on alternate approaches we should consider spurring clinicians to report performance data on MVPs while making performance data available for patients on the compare tool. We proposed to amend this MVP public reporting policy at § 414.1395(c)(2) to state CMS does not publicly report any MVP data on new improvement activities or Promoting Interoperability measure, objective, or activity included in an MVP for the first year in which it is included in the MVP. We also proposed to amend § 414.1395(c)(1) to state that CMS does not publicly report any data on new quality or cost measure for the first 2 years in which it is in the program, after which CMS evaluates the measure to determine whether it is suitable for public reporting under § 414.1395(b). Currently, § 414.1395(c) refers to these quality and cost measures as “first year measures”. We proposed to change “first year measures” to “new measures” (86 FR 39467).

The introduction of MVPs and subgroup reporting in MIPS provides for new types of performance information that are available for public reporting, provided they meet the public reporting standards. Currently, we display information on profile pages at the individual clinician and group level, since this is the level of information we provide for and at which patients and caregivers search for on the compare tool. To ensure that patients and caregivers have access to subgroup performance information, we proposed creating a separate workflow from the established ones for individuals and groups, since we only display information at the level at which it was publicly reported (86 FR 39467). That is, we only publicly report individual-level performance information on individual clinician profile pages and group-level performance information on group profile pages. We do not publicly report group-level performance information on individual profile pages or individual-level information on group profile pages, as doing so would not be truly representative of either the group's or individual's own performance, and we do not want to mislead website users.

Instead, we would link from the individual or group profile page to the corresponding subgroup performance information. That is, we proposed to create a subgroup public reporting workflow, in which we would indicate with plain language on an individual profile page that the clinician reports performance information as part of a subgroup or on a group profile page that the group has subgroups for purposes of performance information and then link to that subgroup's performance information. Future user testing would determine how to best display and put in plain language subgroup performance information. Subgroup performance information will also be available on http://data.medicare.gov/​. Subgroups represent a new type of reporting for MIPS, that is available for clinicians reporting on MVPs or via the APP.

For this reason, we also proposed to delay all subgroup-level public reporting for 1 year, including measures, activities and attestations across the quality, cost, improvement activities, and Promoting Interoperability performance categories in order to encourage clinician participation in subgroups without the risk of displaying subgroup performance information as clinicians familiarize themselves with the option of subgroup reporting. This would only be a one-time delay in public reporting of subgroup-level information. That is, we would not publicly report any CY 2023 subgroup-level measure, attestation, or activity performance information. This information would be available for public reporting beginning with CY 2024 performance period/2026 MIPS payment year. We would publicly report CY 2024 performance period/2026 MIPS payment year subgroup information and for each performance period thereafter if the information meets our established public reporting standards.

Since we are moving toward more granular level performance information, we believe delaying subgroup public reporting by 1 year provides an incentive for subgroup participation and experience. As an alternative, we also considered a 1-year public reporting delay of performance information for all new subgroups each performance year, as technically feasible. For example, subgroups that begin in CY 2023 are not eligible for public reporting until CY 2024, subgroups that begin in CY 2024 are not eligible for public reporting until CY 2025, and so on for each subsequent year. Another alternative we considered was to publicly report all subgroup performance information without delay and provide new subgroups the opportunity to opt-out, during the preview period, of having their performance information publicly reported for their first year. Some subgroups may want to have their performance information publicly reported and having an overall 1-year delay may be a disincentive to subgroup participation.

We solicited comments on these considerations. We noted that MIPS performance category and composite final scores for MIPS eligible clinicians participating in MVPs will continue to be publicly reported for those participating in subgroups, as required under section 1848(q)(A)(i)(I) of the Act and finalized at § 414.1395(a)(1)(i), and will not be delayed by 1 year for public reporting. We also solicited comments on additional factors that we should consider as we look to expand the availability of MVP and subgroup data on the compare tools. For example, Start Printed Page 65552 should there be a certain threshold of MVPs available, or clinicians participating in MVPs prior to public reporting?. For public reporting of subgroups, are there factors we should consider to make this information usable to the patient but reflective of the subgroups characteristics and composition?.

Should we test an indicator of MVP participation for compare tool profile pages to see if this is useful information for patients making healthcare decisions?. We solicited comments on this proposal and additional ways public reporting may encourage MVP participation. The following is a summary of the comments we received and our responses. Comments. Several commenters supported the proposal to delay, by 1 year, the public reporting of new improvement activities and Promoting Interoperability measures attestations reported through MVPs.

One commenter requested clarification as to why new Promoting Interoperability measures and attestations would be delayed only for MVP participants. While some commenters supported the delay, they recommended extending the delay beyond 1 year. Two commenters stated a concern that delaying public reporting for MVPs and not traditional MIPS may be confusing for patients. One of the commenters recommended adding a note to profile pages explaining why there may not be performance information. The same commenter also recommended that instead of delaying public reporting for MVPs, CMS should allow MVP participants to opt-out of public reporting for their first year.

Another commenter recommended beginning public reporting MVP performance information only once MVP reporting becomes mandatory. Response. We agree with most commenters that a 1-year delay of new improvement activities and Promoting Interoperability measures and attestations is an appropriate way to incentivize participation in MVPs. We also want to clarify that we proposed this 1-year delay as an incentive because new quality and cost measures already have a delay in public reporting for the first 2 years of use for clinicians in traditional MIPS. This delay is for new improvement activities and Promoting Interoperability measures, objectives, and activities in all MVPs whether they are new or existing MVPs.

We appreciate the recommendations to extend the delay beyond 1 year, to allow MVP participants to opt-out of public reporting in their first year, and to only publicly report performance information reported via MVPs once MVP reporting becomes mandatory. We do believe that a 1-year delay is enough time to allow clinicians to familiarize themselves with MVPs as we do not want to further delay valid performance information that consumers can use to make informed healthcare decisions. It is for this same reason that we do not want to have MVP participants opt-out of public reporting or to delay public reporting of performance information reported via MVPs until MVP reporting becomes mandatory. We also want to clarify that performance information available via MVPs is the same as the performance information available in traditional MIPS and that we are required to publicly report performance information submitted by MIPS eligible clinicians. We do not believe that a delay for MVP participants and not traditional MIPS will be confusing to website users.

Under traditional MIPS, we delay public reporting of new quality and cost measures by 2 years, and this has not caused any confusion to date. We also clarify that improvement activities and Promoting Interoperability measures and attestations that are already in traditional MIPS will be available for public reporting without any 1-year delay. After consideration of public comments, we are finalizing this policy as proposed. Comment. Several commenters supported the one time, 1-year delay of subgroup public reporting, such that subgroup public reporting will begin with the availability of CY 2024 performance period/2026 MIPS payment year performance information.

One commenter recommended extending the delay to 3 years. Response. We agree that a one-time 1-year delay is enough time for participants to familiarize themselves with this subgroup-level reporting. We also clarify that CY 2023 performance period/2025 MIPS payment year subgroup-level measure, attestation, or activity performance information across all MIPS performance categories would not be available for public reporting. We would begin publicly reporting subgroup-level performance information with CY 2024 performance period/2026 MIPS payment year, which would be available for public reporting in CY 2025.

After consideration of the public comments, we are finalizing this policy as proposed. After consideration of all of the public comments received on MVP and subgroup public reporting, we are finalizing all policies in this section as proposed. We did not receive any public comments on the proposal to create a separate subgroup workflow, and therefore, are finalizing it as proposed. (2) Publicly Reporting APM Performance Pathway Information In the CY 2021 Quality Payment Program final rule, we finalized to establish an APM performance pathway (APP) beginning in the 2021 MIPS performance year. This is an optional MIPS reporting and scoring pathway for MIPS eligible clinicians who participate in MIPS APMs.

We also note that since APP participants are MIPS eligible clinicians, their MIPS performance category and composite final scores will be publicly reported as required under section 1848(q)(A)(i)(I) of the Act and finalized at § 414.1395(a)(1)(i). In the CY 2017 Quality Payment Program final rule, we finalized, as technically feasible, to use ACO profile pages as a guide to publicly reporting more APM data (81 FR 77398). Currently, groups who participate in an ACO have an indicator showing their participation, as well as a link to the ACO profile page with available performance information. User testing has shown that website users find the ACO information meaningful and displayed in a user-friendly way. For this reason, we plan to continue this approach for APM performance information, including that which comes in via the APP, as technically feasible.

We also solicited comments on alternative ways to publicly report performance information reporting via APPs and additional considerations to publicly reporting this information (86 FR 39467). We did not receive public comments on alternative ways to publicly report performance information reported via APPs or any additional considerations to publicly reporting this information. (3) Facility Affiliations Compare tool profile pages for clinicians currently provide demographic information, including names, addresses, phone numbers, medical specialties, APM affiliations, Medicare assignment status, board certifications, education and residency, gender, and group and hospital affiliations. User testing consistently shows that Medicare patients and caregivers find value in these types of information. For hospital affiliations, website users have consistently noted the importance of understanding up front the relationships clinicians may have with facilities where they perform services when searching for a clinician.

Specifically, patients and caregivers have noted during user testing that hospital affiliation is important to them, Start Printed Page 65553 since they may be looking for a clinician to perform a procedure at a hospital or want to know the hospitals a clinician could potentially admit them if needed. Linking from the clinician profile page to their affiliated hospital page has provided a seamless experience for patients and caregivers, as they do not need to separately search for clinicians and hospitals. Rather, they can navigate to a hospital profile page directly from the clinician's profile page. With these user testing findings in mind, and because the Compare Tools include information on a number of other types of facilities beyond hospitals, we believe it would benefit patients and caregivers to also be able to navigate from clinician profile pages to profile pages for other types of facilities such as. IRFs.

And dialysis facilities (86 FR 39468). Expanding the types of clinician-facility affiliations, beyond hospital affiliation, publicly reported would allow us to provide additional information about clinicians with or without any hospital affiliation but who are affiliated with other types of facilities. User testing with patients and caregivers has shown that facility affiliations not only for hospitals but also for IRFs, LTCHs, SNFs, IPFs, HHAs, hospices, and dialysis facilities would be helpful to their healthcare decision-making. Specifically, we proposed adding affiliations to clinician profile pages for each of the following types of facilities, pending the results of user testing, as applicable and technically feasible. IRFs.

And dialysis facilities. User testing will determine how to best display these affiliations on compare tool clinician profile pages. To determine clinician affiliations to these facilities, we would use claims data the same way we do to display the hospital affiliations currently available on clinician profile pages (77 FR 69165). We build the clinician-hospital affiliations based on observing a clinician practicing at a given hospital caring for at least three different Medicare patients on three different dates of service in the preceding 6 months, as documented in Medicare claims. We would use similar criteria for determining additional facility affiliations.

Clinicians can email the Quality Payment Program Service Center at http://www.QPP@cms.hhs.gov if they believe their facility affiliations are displayed incorrectly. We solicited comments on the proposal to add affiliations to clinician profile pages for each of the following types of facilities and link to the specific facility's page on the compare tool. IRFs. LTCHs. SNFs.

IPFs. HHAs. Hospices. And dialysis facilities. Further, we also solicited comment on whether there should be a limit on the number of procedures done or conditions treated at a given facility to determine clinician-facility affiliations.

The following is a summary of the comments we received and our responses. Comments. Several commenters supported adding facility affiliations beyond hospital affiliations to clinician profile pages on the compare tools. Specifically, these commenters supported the addition of affiliations for all facilities proposed, including IRFs, LTCHs, SNFs, IPFs, HHAs, hospices, and dialysis facilities. One commenter also recommended including clinicians' role as SNF medical directors on their profile pages.

A few commenters noted concern, with two of these commenters opposing the proposal, related to the threshold for determining facility affiliations and how CMS would handle a clinician with multiple affiliations. These commenters believed that the three different Medicare patients on three different dates of service in the preceding 6 months threshold may be too low for determining facility affiliations. One of the commenters recommended CMS conduct user testing to determine how consumers react when a clinician is affiliated with multiple facilities or with a facility that has poor quality ratings. Another commenter requested clarification on how we plan to obtain and verify facility affiliation and noted concern about location and specialty accuracy. Response.

We agree with commenters that adding affiliations to facilities beyond hospitals, on clinician profile pages, will aid patients in making healthcare decisions. We currently do not have a mechanism or source of data for verifying medical director or other healthcare administrative roles in SNFs or other types of care settings. Rather, if the clinician has filed a claim, it is because that clinician is actively treating patients and furnishing healthcare services, even if they also have an administrative role. We would not have information to report for a medical director or other healthcare administrator unless they have filed a claim. We understand the commenters concern and will explore alternative data sources that are found to be reliable.

Regarding the concern about a clinician having multiple affiliations, we have user tested clinician profile pages that display multiple facility affiliations and have found that if a clinician has multiple affiliations, beneficiaries and their caregivers consider it important for them to know when making healthcare decisions. We also want to note that the threshold for determining facility affiliations has been reliable for determining the hospital affiliations that are currently on clinician profile pages, which is why we proposed using this threshold for the additional facility affiliations. We will continue to monitor this process as we expand using our currently methodology to affiliate other settings of care to clinicians. In response to questions regarding how we plan to obtain and verify facility affiliation, we plan to determine additional facility affiliations by using claims data in the same way we determine the hospital affiliations currently on clinician profile pages. This analysis includes reviewing claims for clinicians practicing at a given facility caring for at least three different Medicare patients on three different dates of service in the preceding 6 months, as documented in Medicare claims.

Clinicians can email the Quality Payment Program Service Center at http://www.QPP@cms.hhs.gov with the correct information if they believe their facility affiliations are displayed incorrectly, as they do today for hospital affiliation. We would then manually edit the affiliation on the website. This manual edit would remain in effect for 6 months only. To ensure a more permanent change, clinicians must update their information in the Medicare Provider Enrollment, Chain, and Ownership System (PECOS). For more information, clinicians can visit the Care Compare.

Doctors and Clinicians Initiative Page at https://www.cms.gov/​Medicare/​Quality-Initiatives-Patient-Assessment-Instruments/​Compare-DAC. Regarding the accuracy of clinician specialty and location, we note that this information is obtained from the PECOS. We rely on clinicians to ensure that their information in PECOS is up to date to ensure the most accurate information is publicly reported. After consideration of public comments, we are finalizing this policy as proposed. (4) Utilization Data Request for Information Under section 104(e) of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), beginning with 2016, the Secretary is required to integrate utilization data information on Start Printed Page 65554 Physician Compare.[] To satisfy section 104(e) of the MACRA, we previously implemented a policy to begin to include utilization data in a downloadable format in late 2017 using the most currently available data, and previously finalized that the specific codes to be included will be determined via data analysis and reported at the eligible clinician level (80 FR 71130).

We finalized to continue to include utilization data in the downloadable database (81 FR 77398). This information continues to be available today on www.data.cms.gov/​provider-data. To date, we have gathered utilization data for procedures from physician/supplier Medicare Part B non-institutional claims on certain services and procedures and published it in the public use file (PUF) file entitled “Physician and Other Supplier Data.” These data are useful to the healthcare industry, healthcare researchers, and other stakeholders who can accurately interpret these data and use them in meaningful analyses. However, this information is presented in a technical way that is not easily accessible or usable by patients, who do not frequently visit data.cms.gov or understand medical procedure coding. This information also does not provide detail on the specific conditions clinicians treat, though in select cases it may be inferred by the clinicians and researchers reviewing this information.

Section 10331(b)(3) of the Affordable Care Act requires that for public reporting, to the extent practicable, to include processes to assure that the data made available provides a robust and accurate portrayal of a clinician's performance. In our efforts to continue to provide patients and caregivers with meaningful information to make informed healthcare decisions, we believe utilization data may also have a place on clinician and group profile pages, if presented in a consumer-friendly way. We envision utilization data on patient-facing profile pages providing two main areas of benefit. The first is allowing for more granular clinician searches, so that patients not only find specific types of clinicians but also those clinicians experienced in performing specific types of procedures and/or treating specific conditions. The second is providing categories of utilization data in a more plain language display that is usable to patients and their caregivers.

In summary, utilization data could provide information to Medicare patients and their caregivers on the specific diagnoses clinicians treat and the frequency with which certain services or procedures are performed by a clinician or group and/or which types of clinicians do not provide certain services. For example, someone with severe arthritis of the knee may want to search for an orthopedic surgeon who specifically does knee replacements. The way the clinician search works currently would only show results for “orthopedic surgeons” generally. That is, the patient would not see which of these clinicians specialize in this procedure, and likely would need to spend time calling clinicians to ascertain more detail. This could similarly be the case for finding a clinician who focuses on treatment of a certain condition.

We believe indicating which clinicians focus on certain procedures or conditions would relieve some of this patient burden, as it would yield more specific search results. There are a number of factors that could influence how procedure- and condition-specific information is determined, which is why we solicited comments on this topic in several areas. For display purposes, we may wish to apply a minimum experience level, such as the number of times a clinician performed a procedure or treated a condition, before a clinician profile is annotated to indicate experience with the condition or procedure. Regarding the methods in which we would identify clinician volume of procedures conducted or treat specific conditions, we would need to set a threshold for making these assertions. We have considered several options.

The threshold could be based on the number of times a clinician has performed a procedure or treated a condition within a certain time-period, or the proportion of the clinician's practice that is represented by the procedure or condition. Alternatively, thresholds may be devised based on ranking clinicians compared to their peers (specialty and geography may be considered when defining peers) in volume of procedures performed or frequency with which they treat each condition. We note also that these approaches utilize Medicare claims data only. That is, these data would not include procedures performed or conditions treated for patients who have other types of insurance, since this information is not available. We also acknowledge that this utilization data only represents the care provided to Medicare beneficiaries and clinicians offer care to those with other forms of insurance.

This disclaimer could be added to any data that may be publicly reported. We solicited comments on these approaches and whether there are any additional ones we should consider. Additionally, because the Compare Tools utilize a location-based search, national or local thresholds may be appropriate. For example, clinicians in urban centers may specialize in a small number of procedures that they perform on a weekly basis, while a clinician in a rural area might be the most experienced at a given procedure, but not have comparable volume to the urban clinician who practices a very narrow scope. We solicited comments on these considerations, as well as if there are others.

We also solicited comments on the potential types of utilization data that, if publicly reported, could help Medicare patients and their caregivers make informed healthcare decisions, as well as on technical considerations for presenting a specific affiliation between clinicians and diagnoses and/or procedures. Specifically, we solicited comments on. The types of conditions and procedures that would most benefit patients' clinician searches. Important features and considerations for clinician searches by conditions or procedures. The lookback period for Medicare claims in order to identify a clinician's volume of procedures balancing frequency with recent experience (for example, 6 months, 1 year, 2 years).

Clinician specialties or conditions with special considerations (for example, non-patient facing clinicians). The maximum number of conditions treated or procedures performed to display on a given clinicians profile page. And Methods to set a threshold of treatment volume to display that a clinician commonly performs a procedure or treats a condition. For example, the threshold could be. (1) The number of times a clinician treated a condition or performed a procedure.

(2) the total scope that a condition or treatment represents in a clinician's practice. Or (3) the clinician's rank—either overall among all clinicians or among a subset of clinicians—in the number of times that clinician treated a condition or performed a procedure. Any other factors or considerations not listed above. We received public comments on considerations for publicly reporting utilization data. We thank the commenters' feedback and will take these comments into consideration in future years.

Start Printed Page 65555 4. Overview of the APM Incentive (a) Overview Under the Quality Payment Program, eligible clinicians who are Qualifying APM Participants (QPs) for a year are eligible to receive an APM Incentive Payment in the corresponding payment year for payment years 2019 through 2024. In the CY 2017 Quality Payment Program final rule (81 FR 77480 through 77489), we finalized at § 414.1450(d) that this payment is made based on the clinician's QP status in the QP Performance Period that is 2 years prior (for example, the 2021 payment will correspond to the 2019 performance year), and at § 414.1450(b)(1) that the payment is equal to 5 percent of the estimated aggregate payments for covered professional services in the base period (the year between the QP performance and payment years). We also finalized at § 414.1450(c)(1) (82 FR 31729) that the APM Incentive Payment will go to the TIN associated with the Advanced APM Entity through which an eligible clinician becomes a QP during the QP Performance Period. In 2019, our first year of making APM Incentive Payments, we learned that the amount of time between the QP Performance Period (during which QP status is attained) and the QP payment year (during which APM Incentive Payments are issued) creates challenges to disbursing the payment for some QPs in a routine and efficient manner, for example for QPs who may have changed practices in the interim.

Consistent with section 1833(z) of the Act, QP status is determined for, and connected to, an eligible clinician (identified by their NPI) for the QP payment year based on their Advanced APM participation during the QP Performance Period. In the proposed rule, we stated that we do not believe that changes in a QP's practice or TIN in the interim year between the QP determination and the QP payment year should affect a QP's ability to receive the APM Incentive Payment. To address some of the unanticipated challenges we encountered in disbursing the APM Incentive Payments, in the CY 2021 PFS final rule, we finalized a hierarchy, codified at § 414.1450, that, based on our experience and lessons learned in making payments in 2019, provides more ways to identify an appropriate TIN to which we can make the APM Incentive Payment when a QP has experienced changes in their practice or TIN since the performance year in which they attained QP status. (c) APM Incentive Payment Recipient In the 2021 PFS final rule (85 FR 84472), we revised our approach to identifying the TIN or TINs to which we make the APM Incentive Payment and established a process that enables QPs to provide CMS with updated enrollment information that could be used to complete the payment in the event our approach does not yield an appropriate TIN or TINs to which to send their APM Incentive Payments. The process for those QPs to update their information, as well as a preliminary list of NPIs to whom it may be applicable, is included in a public notice published annually in the Federal Register.

We explained in the CY 2021 PFS final rule that the revised approach would involve looking at a QP's relationship with TINs at different, specified periods in time, as well as considering the relationships such TINs have with certain APM Entities and Advanced APMs. We stated that we believe this revised approach enables us to more appropriately identify TINs with which QPs currently have relationships to receive other Medicare payments, and through which the QPs likely would anticipate receiving their APM Incentive Payments. We noted that, when the QP is no longer affiliated with the TIN through which they achieved QP status, this approach will prioritize identifying an alternate TIN with which the QP is affiliated at the time the APM Incentive Payment is made, and to which it is appropriate to make the payment. The approach we adopted also serves to reduce uncertainty for QPs as they anticipate the APM Incentive Payments, as well as potential delays in our ability to make their payments. To improve and expand the ways we identify the TIN(s) to which we make the APM Incentive Payment for a QP in a timely and efficient manner, we finalized a policy to sequentially apply a decision hierarchy and codified the hierarchy in § 414.1450(c).

We apply the hierarchy by beginning at the first step, and if we are unable to identify one or more TINs with which the QP has a current affiliation at this step, we move to the next and successive steps of the hierarchy until we do identify one or more TINs with which the QP is affiliated. As discussed in the CY 2021 PFS final rule, if we identify more than one TIN at the applicable step in the hierarchy, we divide the APM Incentive Payment proportionally between the QP's TINs based on the relative paid amount for Part B covered professional services that are billed through each of the TINs. We proposed to clarify that, when we divide the APM Incentive Payment between two or more TINs, we apportion the APM Incentive Payment among TINs based on the share of total payments for covered professional services made to each TIN in the same base year that we use to calculate the APM Incentive Payment for the year. To calculate the APM Incentive Payment, we sum the total estimated aggregate payments for covered professional services for a QP for the base year, which is based on claims submitted for covered professional services, as codified at § 414.1450(b)(1) through (3). We proposed to codify this policy at § 414.1450(c).

In the course of making APM Incentive Payments during CY 2020 PFS final rule, we explored the possibility of expanding our search at each step of the hierarchy at § 414.450(c) to identify potential payee TINs that are associated with the QP during the QP payment year. Based on our findings, we stated we believe expanding our search in this way would enable us to make payments earlier in the calendar year and reduce the number of QP NPIs for whom we cannot identify a payee TIN using our hierarchy, and thus, rely on our public notice to request additional information. Therefore, we proposed to revise the hierarchy at § 414.1450(c) so that, using the criterion described in each step of our current regulation, we would first seek to identify a TIN associated with the QP during the base year, and if no such TIN is identified in the base year, we would then seek to identify a TIN associated with the QP during the payment year. We have found in many instances that there are changes in enrollment information in PECOS for a QP over the span of 2 years between the QP performance period and payment year. By using enrollment information for the QP during the payment year, we are more likely to identify an appropriate TIN to which to make the APM Incentive Payment hierarchy.

Under the proposal, applying the steps in the APM Incentive Payment hierarchy, we would make the APM Incentive Payment to one or more solvent TINs associated with the QP, identified by paid Medicare Part B claims for covered professional services and associated PECOS enrollment information during the base period. And if no such TIN is identified, we will make the payment to such TINs associated with the QP during the payment year. We proposed to codify this policy in the regulation at § 414.1450(c). If no such TIN or TINs can be identified at a particular step, we will Start Printed Page 65556 move to the next and successive steps listed in § 414.1450(c)(1) through (8) until we identify one or more solvent TINs with which the QP is associated, and then would make the APM Incentive Payment to any such TIN(s). If more than one TIN is identified at a step based on paid claims during the applicable year either the base year or payment year, as we explain earlier and proposed to codify in the regulation under § 414.1450(c), would divide the APM Incentive Payment proportionately among such TINs according to the relative total paid amounts for Part B covered professional services to each TIN in same the base year we use to calculate the APM Incentive Payment.

We proposed, for each step in the APM Incentive Payment decision hierarchy, we would first search for a payment TIN or TINs associated with the QP during the base period. If no such TIN is found during the base year, we would search for any TIN or TINs that are similarly situated with respect to the criterion at that step in the hierarchy and associated with the QP during the payment year. If such a TIN or TINs are found, we would make the APM Incentive Payment to such TIN or TINs. We will continue at each step in the hierarchy to first attempt to identify the relevant base year TIN or TINs associated with the QP because, as noted in the proposed rule, we believe such TINs are more likely to be associated with the APM Entity through which the QP attained their QP status during the QP performance period. However, if no such TIN is found in the base year, we would proceed at that step to search for a TIN or TINs with which the QP is associated in the payment year.

We explained that we believe this approach creates the greatest opportunity to identify and pay an appropriate TIN as efficiently and early as possible during the payment year. The proposed change would maintain the current hierarchy while adding a sub-step at each level in which we would conduct our search based on more current enrollment information. The proposed change would allow for the identification of an appropriate TIN or TINs at each step by first checking the base year, and then checking the payment year before moving on to the next step in the process. We stated we believe that by maintaining the current hierarchy we would continue to incent Advanced APM participation by prioritizing making payments to TINs affiliated with Advanced APMs, even if they are not in the same Advanced APM Entity through which QP status originally was achieved. For example, we stated that we anticipate that many eligible clinicians who earned QP status in 2020 through a practice participating in the CPC+ model will join the new Primary Care First (PCF) model in 2022.

In the event the eligible clinician's CPC+ participant TIN is no longer active, our proposed modification to the hierarchy would enable us to pay the APM Incentive Payment to a TIN participating in the PCF model in 2022. We stated that we continue to believe it would be appropriate to first identify the relevant base year TIN or TINs at each step in of the hierarchy because we believe those TINs are more likely to be associated with the APM Entity through which the QP attained their QP status during the QPs performance period. However, if no TIN is found in the base year, we would proceed to identify any TINs associated with the QP in the payment year, and then use the same process for the subsequent steps in the hierarchy until we identify one or more TINs associated with the QP at a particular step for a particular year (base year or payment year). We explained that we believe this approach will be a more efficient and expeditious way to identify a TIN or TINs to which to make the APM Incentive Payment for QPs. We solicited comments on this proposal to amend our APM Incentive Payment decision hierarchy to include an additional attempt to identify and pay, at each step, one or more solvent TINs associated with the QP during the payment year when no such TIN is identified for the QP in the base year.

We received several comments on this proposal. Comment. We received many public comments in support of this approach to identifying payee TINs during the payment year. Response. We thank commenters for their support of this policy.

Comment. We received two public comments advocating that the APM Incentive Payment should be paid directly to the ACO or APM Entity. Response. We disagree with this comment for several reasons. First, the APM Incentive Payment is not earned by the APM Entity in the way a shared savings payment may be earned by the ACO under the Shared Savings Program.

Although QP determinations are in some cases are made at the APM Entity group level, QP status is conferred on an individual eligible clinician. As a result, the individual QP is excluded from the MIPS reporting and payment adjustment requirements, and it is the QP who earns the APM incentive payment. Therefore, the payment is disbursed for the eligible clinician who is a QP to a TIN that is affiliated with the QP, even in instances where the QP is no longer affiliated with the APM Entity. The payment is designed as an incentive in lieu of the pursuance of a MIPS payment adjustment. CMS makes the APM Incentive Payment to one or more TINs to which the QP has reassigned their billing rights.

Thus, the QP and TIN may resolve between themselves the handling of the APM Incentive Payment. Some APM Entities are the same as the Medicare enrolled TIN to which QPs have reassigned their Medicare payment rights, and to which we would make the APM Incentive Payment. Other APM Entities, such as ACOs, are not. For these reasons, we do not make the APM Incentive Payment directly to an ACO, and we do not believe it would be appropriate to do so. Comment.

One commenter suggested that we should allow QPs to individually identify their preferred payee TIN to receive the APM Incentive Payment. Response. It would not be practically feasible for every QP to individually identify a recipient TIN for the QP incentive payment. Our experience working with PECOS and other voluntary systems, including our annual public notice, indicate that requiring individual eligible clinicians to elect a recipient TIN for the incentive payment could cause significant delays in completing the payments. These delays would be of such duration that CMS would likely miss the statutory deadline of December 31 of the payment year in which we are required to have completed these payments.

Further, some QPs might never complete the prerequisite step, which would make it difficult if not impossible to disburse APM Incentive Payments for them. Moreover, eligible clinicians are not without an opportunity to indicate to CMS the TINs with which they have current billing arrangements. In fact, all Medicare enrolled eligible clinicians are required to update their billing information, including reassignments within the PECOS system within a specified timeframe. By ensuring PECOS is updated at all times, eligible clinicians have an opportunity to ensure that if they become QPs for a year, the APM Incentive Payment will be received by a TIN to which they have reassigned their billing rights. We believe it is both appropriate and efficient for clinicians to use the longstanding and required processes that are in place to update their billing information, which enables us to identify one or more appropriate TINs to which to make the APM Incentive Payment.

Finally, we have established in regulations a payment decision Start Printed Page 65557 hierarchy that specifies how we will identify the TIN or TINs to which we will distribute the APM Incentive Payment. One of the main purposes for establishing this hierarchy and for updating it this year is to provide predictability for eligible clinicians regarding the APM Incentive Payment disbursements. After consideration of the public comments, we are finalizing our proposed update to the APM Incentive Payment decision hierarchy, and amending our regulation at § 415.1415(c), as proposed. C. Advanced APMs 1.

Qualifying APM Participant Determination a. General Overview In the CY 2017 Quality Payment Program final rule (81 FR 77439 through 77445), we finalized our policy at § 414.1425(b) for Qualifying APM Participant (QP) determinations. For the purposes of making QP determinations, an eligible clinician must be present on the Participation List of an APM Entity in an Advanced APM on one of the “snapshot dates” (March 31, June 30, or August 31) for the QP Performance Period. An eligible clinician included on a Participation List on any one of such dates is included in the APM Entity group even if that eligible clinician is not included on that Participation List at one of the prior- or later-listed dates. We perform QP determinations for the eligible clinicians in an APM entity group three times during the QP Performance Period using claims data for services furnished from January 1 through each of the respective QP snapshot dates.

An eligible clinician can be determined to be a QP only if the eligible clinician appears on the Participation List on a snapshot date that we use to determine the APM Entity group and to make QP determinations at the APM Entity group level based on participation in the Advanced APM. For eligible clinicians who appear on a Participation List in more than one APM Entity, but do not to achieve QP status based on any APM Entity level determinations, we make QP determinations at the individual level as described in § 414.1425(c)(4). Likewise, for eligible clinicians on an Affiliated Practitioner list for an Advanced APM we make QP determinations at the individual level three times during the QP Performance Period using claims data for services furnished from January 1 through each of the respective QP determination snapshot dates as described in § 414.1425(b)(2). B. QP Thresholds and Partial QP Thresholds Section 1833(z)(2)(B) of the Act describes the thresholds for the level of participation in Advanced APMs required for an eligible clinician to become a QP for a year.

The Medicare Option, based on Part B payments for covered professional services or counts of patients furnished covered professional services under Part B, has been applicable since payment year 2019. The All-Payer Combination Option, which uses the Medicare Option, as well as an eligible clinician's participation in Other Payer Advanced APMs, is applicable beginning in the payment year 2021. In the CY 2017 Quality Payment Program final rule (81 FR 77433 through 77439) we finalized our policy for the Medicare Option as codified at § 414.1430(a) and for the All-Payer Option at § 414.1430(b). Section 114 of Division CC of the CCA amended section 1833(z)(2)(B) of the Act with regard to payment years 2023 and 2024 (which correspond respectively to performance years 2021 and 2022), by freezing for such years the applicable payment amount and patient count thresholds for an eligible clinician to achieve QP status. Specifically, the CAA amended section 1833(z)(2)(B) of the Act to continue the QP payment amount thresholds that apply in payment years 2021 and 2022 to payment years 2023 and 2024.

Additionally, the CAA amended section 1833(z)(2)(D) of the Act to require that, for payment years 2023 and 2024, the Secretary use the same percentage criteria for the QP patient count threshold that are applied in payment year 2022. As such, the Medicare Option QP thresholds for payment years 2023 and 2024 (performance years 2021 and 2022) will remain at 50 percent for the payment amount method and 35 percent for the patient count method. The CAA also amended section 1848(q)(1)(C)(iii) of the Act to extend through payment year 2024 the Partial QP thresholds that are established for payment years 2021 and 2022. Therefore, the Partial QP thresholds for payment years 2023 and 2024 (performance years 2021 and 2022) will remain at 40 percent for the payment amount method and 25 percent for the patient count method. For performance years beginning with 2023 (corresponding to payment years beginning with 2025) the statute prescribes the QP thresholds for the payment amount method, and the QP thresholds we established for the patient count method at § 414.1430 will take effect.

Specifically, for performance years beginning with 2023, the Medicare Option QP thresholds will be 75 percent for the payment amount method and 50 percent for the patient count method. The Partial QP thresholds under the Medicare Option will be 50 percent for the payment amount method and 35 percent for the patient count method. Under the All-Payer Combination Option, the QP thresholds for performance years 2021 and 2022 (corresponding to payment years 2023 and 2024) will be 50 percent for the payment amount method and 35 percent for the patient count method. The Partial QP thresholds for performance years 2021 and 2022 will be 40 percent for the payment amount method and 25 percent for the patient count method. In order to become a QP through the All-Payer Combination Option, eligible clinicians must first meet certain threshold percentages under the Medicare Option.

For performance years 2021 and later (corresponding to payment year 2023 and later), the minimum Medicare Option threshold an eligible clinician must meet for the All-Payer Combination Option is 25 percent for the payment amount method or 20 percent under the patient count method. Start Printed Page 65558 Although we included proposed amendments to our regulation at § 414.1430(a)(1) and (2) in the CY 2022 PFS proposed rule to reflect the changes made by the CAA to the QP and Partial QP Thresholds under the Medicare Option payment amount method, we inadvertently neglected to discuss those proposed amendments in the preamble. Additionally, we inadvertenly did not include proposed regulation text at § 414.1430(a)(3) or (4) to reflect the amendments made by the CAA to the QP and Partial QP thresholds under the Medicare Option patient count method. Or to the regulation text at § 414.1430(b) to reflect amendments to the All Payer Option payment amount and patient count QP and Partial QP thresholds. However, we believe it is preferable to revise the regulation text to consistently and accurately reflect the statutory threshold percentages for each year in accordance with the CAA amendments for both the Medicare Option and All Payer Option and for both the payment amount and patient count methods for each of the options.

Therefore, we are finalizing the proposed amendments to § 414.1430(a)(1) and (2) and making amendments to § 414.1430(a)(3) and (4). And § 414.1430(b)(1) through (4) to reflect the applicable statutory threshold percentages as amended by the CAA. We received four public comments, all in support of the statutory changes to the QP and Partial QP threshold levels. We thank the commenters for their input and will implement the amendments made by the CAA as discussed and revise the regulation at § 414.1430 as proposed. V.

Collection of Information Requirements Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq. ), we are required to publish 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. For the purposes of the PRA and this section of the preamble, collection of information is defined under 5 CFR 1320.3(c) of OMB's implementing regulations. To fairly evaluate whether an information collection should be approved by OMB, PRA section 3506(c)(2)(A) requires that we solicit comment on the following issues.

The need for the information collection and its usefulness in carrying out the proper functions of our agency. The accuracy of our burden estimates. The quality, utility, and clarity of the information to be collected. Our effort to minimize the information collection burden on the affected public, including the use of automated collection techniques. We solicited public comment on each of the required issues under section 3506(c)(2)(A) of the PRA for the following information collection requirements.

A. Wage Estimates To derive average costs, we used data from the U.S. Bureau of Labor Statistics' May 2020 National Occupational Employment and Wage Estimates for all salary estimates ( http://www.bls.gov/​oes/​current/​oes_​nat.htm ). In this regard, Table 76 presents the mean hourly wage, the cost of fringe benefits and overhead (calculated at 100 percent of salary), and the adjusted hourly wage. Start Printed Page 65559 For the CY 2019 and CY 2020 PFS final rules, we used the BLS wage for “Physicians and Surgeons” (occupation code 29-1060) to estimate the cost for Physicians.

In BLS' most recent set of occupational wage rates (dated May 2020) they have discontinued this occupation in their wage data. As a result, in order to estimate the burden for Physicians, similar to the estimates in the CY 2021 PFS final rule (85 FR 84958), we are using a rate of $217.32/hr which is the average of the following BLS occupations and adjusted wage estimates. As indicated, we adjusted BLS' hourly wage estimates by a factor of 100 percent to obtain the adjusted hourly wage estimate. This is necessarily a rough adjustment, both because fringe benefits and overhead costs vary significantly from employer to employer, and because methods of Start Printed Page 65560 estimating these costs vary widely from study to study. Nonetheless, we believe that doubling the hourly wage to estimate total cost is a reasonably accurate estimation method.

B. Information Collection Requirements (ICRs) 1. ICRs Requiring Certain Manufacturers To Report Drug Pricing Information for Part B (§§ 414.802 and 414.806) The following provisions will be subject to the standard PRA process under OMB control number 0938-0921 (CMS-10110). The standard PRA process includes the publication of 60- and 30-day Federal Register notices that will provide the public with opportunities for public review and comment. We expect to publish the 60-day notice shortly after the publication of this final rule.

The new provisions at §§ 414.802 and 414.806 will implement new statutory requirements under sections 1847A and 1927 of the Act, as amended by section 401 of Division CC, Title IV of the CAA, 2021 (for the purposes of this section of this final rule, hereinafter is referred to as “section 401”), which requires manufacturers without a Medicaid drug rebate agreement to report ASP information to CMS for calendar quarters beginning on January 1, 2022, for drugs or biologicals payable under Medicare Part B and described in sections 1842(o)(1)(C), (E), or (G) or 1881(b)(14)(B) of the Act, including items, services, supplies, and products that are payable under Part B as a drug or biological. Specifically, to implement the new reporting requirements for manufacturers without Medicaid drug rebate agreements, we proposed to modify. (1) The definition of drug at § 414.802. And (2) the regulations describing civil money penalties at § 414.806. The new requirements will improve the accuracy of reported payment limits and limit the use of WAC-based pricing.

For the purposes of section 401's new reporting requirements, for manufacturers without Medicaid drug rebate agreements, confidentiality requirements appear in section 1847A(f)(2)(D) of the Act which states that the ASP data are confidential and shall not be disclosed by the Secretary in a form which discloses the identity of a specific manufacturer or wholesaler or prices charged for drugs or biologicals by such manufacturer or wholesaler, except—as the Secretary determines to be necessary to carry out section 1847A of the Act (including the determination and implementation of the payment amount), or to carry out section 1847B of the Act. To permit the Comptroller General of the United States to review the information provided. To permit the Director of the Congressional Budget Office to review the information provided. To permit the MedPAC to review the information provided. And to permit the Medicaid and CHIP Payment and Access Commission to review the information provided.

For manufacturers with Medicaid drug rebate agreements, confidentiality requirements appear in section 1927(b)(3)(D) of the Act which states that the ASP data are confidential and shall not be disclosed by the Secretary in a form which discloses the identity of a specific manufacturer or wholesaler, prices charged for drugs by such manufacturer or wholesaler, except—in relevant part, as the Secretary determines to be necessary to carry out section 1847A of the Act (including the determination of the payment amount), or to carry our section 1847B of the Act, to permit the Comptroller General to review the information provided, to permit the Director of the Congressional Budget Office to review the information provided, and to permit the Executive Director of the Medicare Payment Advisory Commission (MedPAC) and the Executive Director of the Medicaid and CHIP Payment and Access Commission to review the information provided. The burden associated with these requirements is the time and effort required by manufacturers of drugs and biologicals payable under Medicare Part B to prepare and submit the required ASP data to CMS. We have previously estimated the burden associated with ASP reporting requirements for manufacturers with Medicaid drug rebate agreements. Because section 401 extends the ASP reporting requirements to manufacturers without Medicaid drug rebate agreements, we are updating our burden estimates to account for the additional manufacturers who will now be required to report ASP data to us. As described in section III.D.1.

Of this final rule, in considering whether to exclude repackagers from the reporting requirements at section 1847A(f)(2) of the Act, we conducted analyses to estimate. (1) The proportion of repackaged products in our existing ASP data. (2) the number of new ASP submissions we can expect as a result of the new reporting requirements under section 401. And (3) the proportion of those (new) submissions that involve repackaged products. Based on our existing ASP data, 547 manufacturers (respondents) report ASP data to us.

Of these, 331 respondents have products for which they are required to submit ASP data, and 216 respondents have products for which they currently submit ASP data voluntarily, but will now be required to do so under section 1847A(f)(2) of the Act. (331 + 216 = 547) We also estimate that under the new reporting requirements of section 401, a total of 568 respondents have products for which they will now be required to report ASP data to us. The 568 includes the 216 respondents (above) and 361 respondents who have products (identified by us) for which they will now be required to submit ASP data under section 1847A(f)(2) of the Act and did not previously voluntarily submit these data to us. There were 9 respondents who voluntarily submitted ASP data for some, but not all, of their products identified in our analysis. (216 + 361−9 overlap = 568) We estimate a total of 740 respondents will report ASP data to us.

This includes the 547 respondents who currently submit ASP data to us (voluntarily, or as currently required), and the 361 respondents who have products (identified by us) for which they will now be required to submit ASP data under section 1847A(f)(2) of the Act and did not previously voluntarily submit these data to us. However, there were 168 respondents who currently are required to submit ASP data to us, or who voluntarily submit ASP data to us, for whom we identified additional products that they did not previously submit ASP data, and will now be required to submit ASP data for these additional products under the new reporting requirements of section 401. (547 + 361−168 overlap = 740) These respondents submit ASP data four times per year for a total of 2,960 submissions (740 respondents × 4 submissions/year). Based on our experience with ASP data reporting, we continue to estimate that the time associated with reporting, record keeping, and third-party disclosure for ASP data reporting is 13 hours. 10 hours to review instructions and search existing data resources and 3 hours to gather the data, compile the data, submit via electronic media and upload to the automated system.

This estimate includes labor costs for respondents to extract data from their information systems and to compile and submit the ASP data, including signature, to CMS via the internet-based automated system and electronic media. This estimate also includes the cost of the compact disc (CD) and overnight mail service used to report the data, Start Printed Page 65561 time to review instructions, search existing data resources, gather the data needed, and complete and review the information collection. Based on these analyses and assumptions, we estimate an annual burden of 38,480 hours (2,960 submissions/yr × 13 hours per response) at a cost of $1,495,332.80 (38,480 hr × $38.86/hr), rounding to $1,495,333. We solicited comment on the likely costs or savings manufacturers from this provision. We did not receive public comments on the analyses or the estimates.

We are finalizing the definition of the term “drug” at § 414.802 as proposed. 2. ICRs Regarding the Medicare Shared Savings Program (Sections VI.F.8.a. And b.) Section 1899(e) of the Act provides that chapter 35 of title 44 U.S.C., which includes such provisions as the PRA, shall not apply to the Shared Savings Program. Accordingly, we are not setting out burden under the authority of the PRA.

Please refer to sections VI.F.8.a. And b. Of this final rule for a discussion of the impacts associated with this rule's changes to the Shared Savings Program's quality reporting requirements, quality performance standard, beneficiary assignment methodology, repayment mechanism requirements, requirements for disclosure of prior participation in the Shared Savings Program by the ACO, ACO participants, and ACO providers/suppliers, requirements for ACOs to submit sample ACO participant agreements and executed ACO participant agreements to CMS, and beneficiary notification requirements. 3. ICRs Regarding the Medicare Ground Ambulance Data Collection System (§ 414.626) Section 1834(l)(17) of the Act requires that the Secretary develop a ground ambulance data collection system that collects cost, revenue, utilization, and other information determined appropriate by the Secretary with respect to providers of services and suppliers of ground ambulance services (ground ambulance organizations).

Section 1834(l)(17)(I) of the Act states that the PRA does not apply to the collection of information required under section 1834(l)(17) of the Act. Accordingly, this collection of information section does not set out any burden for the proposed provisions that we are finalizing in this final rule. Please see section VI. Of this final rule for a discussion of the estimated impacts. We received no public comments on the collection of information requirements for the Medicare Ground Ambulance Data Collection System.

We are finalizing as proposed. 4. ICRs Regarding the Medicare Diabetes Prevention Program (MDPP) Expanded Model (§§ 410.79, 414.84, 424.205, and 424.502) In section III.L. Of this final rule, we finalize policies necessary to shorten the Medicare Diabetes Prevention Program (MDPP) services period to one (1) year on a prospective basis, amend and update the amount of the performance payments for the Core Sessions and Core Maintenance Sessions, and make changes to eliminate the ongoing maintenance phase for MDPP beneficiaries who start MDPP set of services on or after January 1, 2022. In addition, we are finalizing a provision to waive the provider enrollment Medicare application fee for all organizations enrolling in Medicare as MDPP suppliers during the MDPP expanded model on or after January 1, 2022.

We expect the finalized policies will increase the number of eligible organizations willing to enroll as MDPP suppliers. We also anticipate that the shortened service period will make MDPP more marketable to beneficiaries in that their time commitment is reduced and less intimidating with a 12-month vs. 24-month service period. We anticipate the shortened MDPP services period will reduce the recordkeeping burden for suppliers. Section 1115A(d)(3) of the Act exempts Innovation Center model tests and expansions, which include the MDPP expanded model, from the provisions of the PRA.

Accordingly, this collection of information section does not set out any burden for the provisions. Please see section VI. Of this final rule for a discussion of the estimated impacts. 5. ICRs for Prepayment and Post-Payment Definitions, Documentation Request Timeframes, and Payment Denials for Noncompliance With Documentation Requests (§§ 405.902, 405.903, 405.929, and 405.930) In section III.N.2.

Of this final rule, we proposed to. (1) Define key terms including “additional documentation,” “additional documentation request,” “post-payment medical review,” and “prepayment medical review;” (2) codify contractors' authority to request additional documentation for prepayment and post-payment review within established timeframes. (3) codify timeframes for response to requests for documentation. (4) codify result of a failure to comply with prepayment or post-payment documentation request(s) by a provider or supplier, specifically denial of payment. The codification of contractor authority to request additional documentation for post-payment reviews, associated timeframes, and resulting denials for failure to comply with these requests is not subject to the PRA per 5 CFR 1320.3(h)(9).

The request for additional documentation will be on a case-by-case basis using non-standardized follow-up questions. With regard to the (1) definitions for “additional documentation” and “additional documentation request,” “post-payment medical review,” and “prepayment medical review;” (2) the codification of contractor authority to Start Printed Page 65562 request additional documentation for pre-payment reviews. (3) the associated provider and supplier timeframes for providing additional documentation from the pre-payment reviews. And (4) possible denials for failure to comply with these requests, we do not expect that these proposals will affect our information collection burden estimates because these policies do not require providers or suppliers to submit any more documentation to CMS than what is already approved by OMB under control number 0938-0969 (CMS-10417). The regulations simply codify certain requirements by clarifying definitions, timeframes, and results for noncompliance.

We did not receive public comments on this provision, and therefore, we are finalizing as proposed. 6. ICRs Regarding the Requirement for Electronic Prescribing for Controlled Substances for a Covered Part D Drug Under a Prescription Drug Plan or an MA-PD Plan (§ 423.160(a)) Pending our finalization of the following provisions, the changes will be subject to the standard PRA process under OMB control number 0938-1396 (CMS-10755) to give stakeholders optimal opportunity to comment on our burden for this provision, given how dynamic the burden for EPCS is. The standard PRA process includes the publication of 60- and 30-day Federal Register notices that will provide the public with opportunities for public review and comment. We expect to publish the 60-day notice shortly after the publication of the final rule.

The purpose of this provision is to continue to implement section 2003 of the SUPPORT for Patients and Communities Act, which requires that the prescribing of a Schedule II, III, IV, or V controlled substance under Medicare Part D be done electronically in accordance with an electronic prescription drug program beginning January 1, 2021, subject to any exceptions, which HHS may specify. We refer readers to the CY 2021 PFS final rule (85 FR 84472) for our previously finalized requirements and burden for the first phase of implementing this statutory mandate, which required prescribers to use the NCPDP SCRIPT 2017071 standard for Electronic Prescription for Controlled Substances (EPCS) prescription transmissions. The purpose of this final rule is to delay the date for CMS to begin taking compliance actions, implement certain exceptions to the mandate, and implement a compliance threshold. In the CY 2021 PFS final rule, we estimated that the one-time burden to implement this provision would be 828,750 hours (165,750 prescribers * 6 hr) at a cost of $36,418,590 (994,500 hr * $36.62/hr). We arrived at the estimate of 165,750 prescribers having to implement EPCS based on taking the 425,000 Part D prescriber practices, and decreasing that amount by 60 percent to account for the 60 percent of prescriber practices that likely already had EPCS in place by January 1, 2021.

Based on our current PDE data, we estimate that 70 percent of Part D prescribers already conduct EPCS,[] which would leave 30 percent of Part D prescribers that would have to implement EPCS, if we did not propose any exceptions to this mandate. We also proposed that prescribers writing prescriptions for beneficiaries in long term care facilities will have an extension for those prescriptions until January 1, 2025 along with the following exceptions to the EPCS mandate. (1) For prescriptions issued when the prescriber and dispensing pharmacy are the same entity. (2) cases where prescribers issue only a small number of Part D. (3) cases where a prescriber's NCPDP database address is in a geographic service area of an emergency or disaster declared by a Federal, State or local government entity.

And (4) cases where a prescriber has received a CMS-approved waiver. These exceptions will result in fewer prescribers being required to conduct EPCS. Based on our PDE data, we believe that these exceptions will substantially decrease the number of prescribers having to implement EPCS as a result of this regulation. We have listed the exceptions and the estimated number of prescribers falling under each exception in Table 79.[] We do not anticipate that our proposal to include a compliance threshold of 70 percent will have any material effect on the impact of this provision. The reason for this is that based on our PDE data and conversations with prescribers, we believe that the 30 percent or less of the time that prescribers are not e-prescribing is because they are unable to e-prescribe, so they would have applied for a waiver.

Although there are sometimes scenarios where beneficiaries may request that their prescriptions not be transmitted electronically, it appears as though those circumstances are not enough to make a material impact, since beneficiaries often change their views when they are given countervailing reasons that the prescriptions should be transmitted via EPCS. Start Printed Page 65563 Table 79 gives our estimate of the number of prescribers affected by our exceptions broken down by the type of exception. As shown in Table 79, we estimate that our exceptions will exempt approximately 582,664 prescribers from the EPCS requirement, which consistutes approximately 38 percent of prescribers, since there are an estimated 1,548,221 Part D prescribers [] (582,664/1,548,221). Since the number of exempted prescribers from this mandate far exceeds the number of prescribers who currently do not e-prescribe controlled substances in Part D, we do not expect that the total number of Part D prescribers who electronically prescribe controlled substances will increase following our implementation of this mandate. As a result, we do not believe there will be a measurable impact to the prescriber community as a whole, once this provision is finalized.

However, for individual prescribers who have to implement this mandate, we expect that the implementation costs will be the same amounts that we finalized in the CY 2021 PFS final rule. Based on the modeling that we have seen, we have found that EHR companies provide the initial set-up of e-prescribing software free of charge, provided the prescribers pay the per transaction cost of $1.88 mentioned in the CY 2021 PFS final rule. Based on the comments received on our CY 2021 PFS proposed rule, we understand that implementing EPCS can lead to technological glitches, and then fixing those issues. We understand that the EHR companies remedy the issues free of charge. However, we also understand that such fixes take time away from the medical office staff.

We estimate that such fixes would take the staff approximately 1 extra hour from the estimate given in our CY 2020 PFS proposed rule, when averaged across all prescribers. As a result, we have changed our one-time burden estimate of e-prescribing set-up from 5 hours to 6 hours per provider, which means a total of 994,500 hours (165,750 prescribers * 6 hr) at a cost of $36,617,490 (994,500 hr * $36.82/hr), since we anticipate that this work will be completed by an Administrative Support Worker. In this regard, the impact of this rule is plus 1 hour per response, plus 165,750 hours (165,750 prescribers × 1 hr/response), and $6,102,915 (165,750 hr × $36.82/hr). We proposed that prescribers have the ability to apply for a waiver from the EPCS requirement, should they be facing circumstances beyond their control that prevent them from e-prescribing, and these circumstances are not the result of a natural disaster or emergency. Due to the high prevalence of EPCS, the miniscule compliance actions that we proposed for non-compliance, and the number of prescribers that we expect to exempt from the mandate, we only expect to receive about 100 attestations per year.

Although we proposed certain fields be in this attestation, these were minimal, and there was no accompanying documentation required. (Note, as outlined in section II.Q. Of this final rule, to meet the standard for a waiver, prescribers must provide documentation showing the existence of a circumstance beyond their control and that such a circumstance prevents them from conducting EPCS.) We expect that each attestation will take 10 minutes (0.1667 hr) for a prescriber at $217.32/hr to complete. In aggregate, CMS estimates an annual burden for filling out attestations of 16.67 hours (100 attestations × 0.1667 hr) at a cost of $3,622.72 (16.67 hr × $217.32/hr). In addition, we solicit comment on any other potential information collection implications.

We received no comments on our proposed burden estimates and assumptions, and have finalized our provision as proposed. As a result, we are finalizing our burden estimates and assumptions as proposed. Start Printed Page 65564 7. ICRs Regarding Open Payments Provisions Included in the CY 2022 PFS (42 CFR Part 403) The following requirement and burden changes will be submitted to OMB for approval under control number 0938-1237 (CMS-10495). The following estimates burden changes to the Open Payments final rule at §§ 403.900 through 403.914 in this final rule.

A. Payment Context Field for Teaching Hospitals The mandatory context field is a new requirement for reporting entities submitting and attesting to records that are attributed to teaching hospitals only. The field will be freeform text entry. We estimate that for each applicable manufacturer and applicable group purchasing organization (GPO), the inclusion of this field for collection and reporting activities will average an additional 6 total hours. The applicable instrument for these activities in the current PRA package is the “General-Research-Ownership Submission Data Elements”.

At the support staff cost per FTE of $42.40/hr, this will increase costs by $254.40 (6 hr × $42.40/hr) per applicable manufacturer or applicable GPO submitting teaching hospital records. However, because we anticipate fewer disputes due to this field, we believe it will decrease dispute resolution by 2 total hours for support staff at $42.40/hr respectively, reducing costs by $84.80 (2 hr × $42.40/hr) per applicable manufacturer and applicable GPO. This results in a net increase in burden for each applicable manufacturer and applicable GPO submitting teaching hospital records of $169.60 ($254.40−$84.80). In Program Year (PY) 2019, 794 applicable manufacturers and applicable GPOs submitted at least one teaching hospital record, meaning the increase in burden will be a total of 3,176 hours (4 hours × 794 reporting entities) at a cost of $42./40/hr or a total of $134,662.40 (3,176 × $42.40). In addition, we estimate this will reduce teaching hospital dispute resolution estimates by 2 hours per support staff FTE at $37.82/hr or $75.64 (2 hr × $37.82/hr) per teaching hospital with records attributed to them.

In PY 2019, 1,202 hospitals had record attributed to them, so for teaching hospitals we estimate a total burden reduction of 2,404 hours at a cost of $90,919.28 (2,404 × $75.64). In aggregate, we estimate an annual burden of 772 hours (3,176−2,404) at a cost of $43,743.12 ($134,662.40−$90,919.28). B. Optional Annual Recertification The annual recertification is voluntary for applicable manufacturers or applicable group purchasing organizations. We approximate that 15 percent of applicable manufacturers and group purchasing organizations, or 240 reporting entities (0.15 [1,595 applicable manufacturers and applicable GPOs]) will complete and submit the proposed optional annual recertification.

We anticipate that it will be a simple check box form to be included in the AM (Attestation) and GPO (Attestation) Annual IC Requirement and the “Attestation and Assumptions Screen Shots” Instrument in the existing PRA package. We estimate that it will take 0.5 hours at $42.40/hr for support staff to complete and submit the recertification. In aggregate, we estimate an added annual burden of 120 hours (240 entities × 0.5 hr/response) at a cost of $5,088 (120 hr × $42.40/hr). C. Defining a Physician-Owned Distributorship (42 CFR 403.902) The new definition is not subject to the PRA since it will not revise, add, or remove any collection of information requirements or burden.

D. Disallowing Record Deletion Without Reason (§ 403.904(a)(3)) This provision clarifies that entities are not permitted to delete records without reason once their timeliness, completeness, and accuracy has been attested to. In order to ensure compliance with this requirement, a freeform text dialogue box will be added to the system when records are deleted that asks the applicable manufacturer or GPO to input a reason for the deletion. This will be included in the AM (Data collection and submission) and Applicable GPO (Data Collection and Submission) IC requirements and the “Open Payments User Guide” Instrument in the existing PRA package. We anticipate that this will take an average of 2 hours at $42.40/hr to input a reason for the deletion.

In aggregate, we estimate an added annual burden of 80 hours (40 applicable manufacturers or GPOs deleting records annually × 2 hr/response) at a cost of $3,392 (80 hr × $42.40/hr). E. Disallow Publication Delays of General Payments A very small number of general payments are delayed from publication by reporting entities every year, and these records will simply either be reported as research records instead, or not delayed at all. Therefore, we anticipate a negligible burden for this provision. F.

Short Term Loans (§ 403.902) This provision is merely a clarification of an existing requirement in regulation text. The purpose of this language is to clarify that the exemption for short-term loans from reporting requirements only applies for loans of less than 91 cumulative days per calendar year. In other words, multiple short-term loans in a calendar year will still meet reporting requirements if they add up to 91 days or greater. We do not believe this provision will change reporting behavior, and therefore do not anticipate an increase in burden. G.

Remove General Ownership Records Currently the Open Payments system allows for a reporting entity to submit either a general record with a nature of payment category of ownership, or an ownership and investment interest record. For Program Years 2015-2019, approximately 92 applicable Start Printed Page 65565 manufacturers and GPOs reported records with the nature of payment category of ownership. Since reporting these general records as ownership records will require the addition of two additional pieces of information, we anticipate that it will take these 92 entities an additional 3 hours at $42.40/hr to report the two extra fields. In aggregate, we estimate an added annual burden of 276 hours (92 entities × 3 hr/response) at a cost of $11,702 (276 hr × $42.40/hr). This will be included in the AM (Data collection and submission) and Applicable GPO (Data Collection and Submission) IC requirements and the “Open Payments User Guide” Instrument in the existing PRA package.

h. Updated Contact Information (§ 403.908(c)(3)) This provision creates a requirement for reporting entities to keep their contact information up to date with CMS. The ability to communicate with a reporting entity is important because CMS may need to contact the entity in the case of perceived issues with the records. Applicable manufacturers and applicable GPOs will only be required to update their contact information if the two contacts provided become obsolete due to a change in the organization. This will also only apply to entities that do not have records to report for 2 years after a program year in which they reported.

Therefore, we anticipate that it will only affect approximately 30 applicable manufacturers and applicable group purchasing organizations. We estimate that it will take 0.5 hours at $42.40/hr to update the contact information. In aggregate, we estimate an added annual burden of 15 hours (30 entities × 0.5 hr/response) at a cost of $636 (15 hr × $42.40/hr). This will be included in the AM (Data collection and submission) and Applicable GPO (Data Collection and Submission) IC requirements and the “Open Payments User Guide” Instrument in the existing PRA package. I.

Summary 8. The Quality Payment Program (QPP) (42 CFR Part 414 and Section IV. Of This Final Rule) The following QPP-specific ICRs reflect this final rule's policy changes as well as adjustments to the policies that have been finalized in the CY 2017 and 2018 Quality Payment Program final rules (81 FR 77008 and 82 FR 53568, respectively), the CY 2019, CY 2020, and CY 2021 PFS final rules (83 FR 59452, 84 FR 62568 and 85 FR 84472, respectively). A. Background (1) ICRs Associated With MIPS and Advanced APMs There is a series of ICRs associated with the Quality Payment Program, including for MIPS and Advanced APMs.

The MIPS ICRs consist of. Registration for virtual groups (see section V.B.8.b of this final rule). QCDR self-nomination applications and other requirements (see section V.B.8.c.(2) of this final rule). Qualified registry self-nomination applications and other requirements (see section V.B.8.c.(3) of this final rule). CAHPS survey vendor applications (see section V.B.8.c.(4) of this final rule).

Health IT vendors (see section V.B.8.c.(5) of this final rule). Open Authorization credentialing and token request process (see section V.B.8.d of this final rule). Quality Payment Program Identity Management Application Process (see section V.B.8.e.(3) of this final rule). Quality performance category data submission by Medicare Part B claims collection type (see section V.B.8.e.(4) of this final rule), QCDR and MIPS CQM collection type (see section V.B.8.e.(5) of this final rule), eCQM collection type (see section V.B.8.e.(6) of this final rule), MVP Quality submission (see section V.B.8.e.(7)(a)(iii) of this final rule), and CMS Web Interface collection type (see section V.B.8.e.(8) of this final rule). CAHPS for MIPS survey beneficiary participation (see section V.B.8.e.(9) of this final rule).

Group registration for CMS Web Interface (see section V.B.8.e.(10) of this final rule). Group registration for CAHPS for MIPS survey (see section V.B.8.e.(11) of this final rule). MVP registration (see section V.B.8.e.(7)(a)(i) of this final rule). Subgroups registration (see section V.B.8.e.(7)(a)(ii) of this final rule). All for quality measures (see section V.B.8.f of this final rule).

Reweighting applications for Promoting Interoperability and other performance categories (see section V.B.8.g.(2) of this final rule). Promoting Interoperability performance category data submission (see section V.B.8.g.(3) of this final rule). Call for Promoting Interoperability measures (see section V.B.8.h of this final rule). Improvement activities performance category data submission (see section V.B.8.i of this final rule). Nomination of improvement activities (see section V.B.8.j of this final rule).

Nomination of MVPs (see section Start Printed Page 65566 V.B.8.k of this final rule). And opt-out of Physician Compare for voluntary participants (see section V.B.8.o of this final rule). The ICRs for Advanced APMs consist of. Partial Qualifying APM Participant (QP) election (section V.B.8.m of this final rule). Other Payer Advanced APM identification.

Payer Initiated and Eligible Clinician Initiated Processes (sections V.B.8.n.(1) and V.B.8.n.(2) of this final rule). And submission of data for QP determinations under the All-Payer Combination Option (section V.B.8.n.(3) of this final rule). (2) Summary of Quality Payment Program Changes. MIPS We have included the change in estimated burden for the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years due to the finalized policies and information collections in this final rule. The finalized policies in this rule impact the burden estimates for the CY 2022 and CY 2023 MIPS performance periods/2024 and 2025 MIPS payment years.

However, our currently approved burden estimates for the CY 2021 performance period (85 FR 84958 through 84998) approved by OMB on May 28, 2021, included estimated burden due to finalized policies and assumptions for the CY 2021 and CY 2022 performance periods/2023 and 2024 MIPS payment years. The currently approved estimated burden for the package does not include the CY 2023 performance period/2025 MIPS payment year. To understand the burden implications of the policies finalized in this final rule relative to the current package that was approved by OMB on May 28, 2021. We have subtracted the burden for the policies and information collections set forth for the CY 2021 performance period/2023 MIPS payment year in the CY 2021 PFS final rule (see Table 128). We have revised our burden estimates for the CY 2022 performance period/2024 MIPS payment year due to the finalized policies in this rule and changes for continuing the policies and information collections set forth in the CY 2021 PFS final rule into the CY 2022 performance period/2024 MIPS payment year (see Table 129).

We are setting forth new burden for the CY 2023 performance period/2025 MIPS payment year (see Table 130), meaning that there will be no currently approved figures for these estimates. In the CY 2022 PFS proposed rule (86 FR 39479 through 39528), we compared our proposed burden estimates for the CY 2022 and 2023 performance periods/2024 and 2025 MIPS payment years to the CY 2022 performance period/2024 MIPS payment year in the CY 2021 PFS final rule (85 FR 84994). We believe that using the approach described above for the final rule will help readers easily understand and follow the changes in the estimated burden due to the policies and assumptions in the CY 2022 PFS final rule relative to the currently approved burden. The following nine MIPS ICRs show changes in burden due to the finalized policies in this rule. (1) QCDR self-nomination applications.

(2) Qualified Registry self-nomination applications. (3) Quality performance category data submission by QCDR and MIPS CQM collection type. (4) Quality performance category data submission by eCQM collection type. (5) Group registration for CMS Web Interface. (6) CMS Web Interface submission burden.

(7) Reweighting applications for Promoting Interoperability and other performance categories. (8) Promoting Interoperability performance category data submission. And (9) Nomination of improvement activities. In aggregate, we estimate the finalized policies will result in a net increase in burden of 3,805 hours and $358,305 for the CY 2022 performance period/2024 MIPS payment year. The remaining changes to our currently approved burden estimates are adjustments due to the revised burden assumptions based on the updated data available at the time of publication of this final rule.

We have also added 3 new ICRs (MVP Registration, MVP Quality Submissions, and Subgroups Registration) for the associated burden related to the policies for implementation of MVPs and subgroups beginning with the CY 2023 performance period/2025 MIPS payment year. The MVP and subgroup registration ICRs reflect the burden associated with the MVP and subgroup registration requirements described in section IV.A.3.b(4)(f) of this rule. The MVP quality submission ICR reflects the change in burden associated with the requirements for the quality performance category of MVPs described in section IV.A.3.b(4)(d)(ii) of this rule. With these new ICRs and the other policy changes discussed for the CY 2022 performance period/2024 MIPS payment year, we estimate the finalized policies will result in a net increase in burden of 1,383,049 hours and $139,501,770 for the CY 2023 performance period/2025 MIPS payment year. As discussed above, we are setting forth our estimates for the CY 2023 performance period/2025 MIPS payment year as new burden with no currently approved estimates for comparison.

We are not making any changes or adjustments to the following ICRs. Registration for virtual groups. CAHPS survey vendor applications. Quality Payment Program Identity Management Application Process. Group registration for CAHPS for MIPS survey.

CAHPS for MIPS survey beneficiary participation. Open Authorization (OAuth) Credentialing and Token Request Process. Nomination of MVPs and call for Promoting Interoperability measures. See section V.B.8. Of this final rule for a summary of the ICRs, the overall burden estimates, and a summary of the assumption and data changes affecting each ICR.

The accuracy of our estimates of the total burden for data submission under the quality, Promoting Interoperability, and improvement activities performance categories may be impacted by two primary factors. First, we are unable to predict with absolute certainty who will be a QP for the CY 2022 performance period/2024 MIPS payment year. New eligible clinician participants in Advanced APMs who become QPs will be excluded from MIPS reporting requirements and payment adjustments, and as such, are unlikely to report under MIPS. While some current Advanced APM participants may end participation such that the APM Entity's eligible clinicians may not be QPs for a year based on § 414.1425(c)(5), and thus be required to report under MIPS. Second, it is difficult to predict what Partial QPs, who can elect whether to report to MIPS, will do in the CY 2022 performance period/2024 MIPS payment year compared to the CY 2019 performance period/2021 MIPS payment year, and therefore, the actual number of Advanced APM participants and how they elect to submit data may be different than our estimates.

However, we believe our estimates are the most appropriate given the available data. Additionally, we will continue to update our estimates annually as data becomes available. In the 2022 PFS proposed rule (86 FR 39480), we discussed a recent JAMA article (Khullar, et al., 2021) [] which included new data on the burden involved in submitting data for the Quality Payment Program. We have chosen not to include this data in our estimates because of the small sample size included (30 TINs, half of which are APM participants, which we do not include in our estimates). In addition, the article did not indicate the time Start Printed Page 65567 spent per activity involved in submissions for MIPS, so we are unable to determine if the totals in the article represent only the activities relevant for regulatory burden or separate the totals for the individual ICRs.

We solicited comment on our assumptions for estimating the burden for clinicians submitting data for the Quality Payment Program. We did not receive public comments regarding our burden estimates for clinicians submitting data in the Quality Payment Program. We are finalizing to not include the data from the above referenced article in our assumptions. We made updates to our figures to correct a few technical errors that we observed in the CY 2022 PFS proposed rule. (3) Summary of Quality Payment Program Changes.

Advanced APMs For these ICRs (identified above under, “ICRs Associated with MIPS and Advanced APMs”), the changes to currently approved burden estimates are adjustments based on updated projections for the CY 2022 performance period/2024 MIPS payment year. We did not implement any changes to the Other Payer Advanced APM identification. Eligible Clinician Initiated Process and submission of Data for QP determinations under the All-Payer Combination Option ICRs. (4) Framework for Understanding the Burden of MIPS Data Submission Because of the wide range of information collection requirements under MIPS, Table 82 presents a framework for understanding how the organizations permitted or required to submit data on behalf of clinicians vary across the types of data, and whether the clinician is a MIPS eligible clinician or other eligible clinician voluntarily submitting data, MIPS APM participant, or an Advanced APM participant. As shown in the first row of Table 82, MIPS eligible clinicians and other clinicians voluntarily submitting data will submit data either as individuals, groups, or virtual groups for the quality, Promoting Interoperability, and improvement activities performance categories.

Note that virtual groups are subject to the same data submission requirements as groups, and therefore, we will refer only to groups for the remainder of this section unless otherwise noted. We want to note that we have included subgroups to Table 82 due to the introduction of subgroups for clinicians choosing to report MVPs or the APP in the CY 2023 performance period/2025 MIPS payment year described in section IV.A.3.b.(2)(d)(ii) of this final rule. Because MIPS eligible clinicians are not required to submit any additional information for assessment under the cost performance category, the administrative claims data used for the cost performance category is not represented in Table 82. For MIPS eligible clinicians participating in MIPS APMs, the organizations submitting data on behalf of MIPS eligible clinicians will vary between performance categories and, in some instances, between MIPS APMs. As discussed in section IV.A.3.c.

Of this final rule, for clinicians in APM Entities, the APM Performance Pathway is available for both ACO and non-ACOs to submit quality data. Due to data limitations and our inability to determine who will use the APM Performance Pathway versus the traditional MIPS submission mechanism for the CY 2022 performance period/2024 MIPS payment year, we assume ACO APM Entities will submit data through the APM Performance Pathway, using the CMS Web Interface option, and non-ACO APM Entities will participate through traditional MIPS, thereby submitting as an individual or group rather than as an entity. We also want to note that as finalized in section IV.A.3.d.(1)(d) of this final rule, we are finalizing to extend the CMS Web Interface as a collection type beyond the CY 2022 performance period/2024 MIPS payment year for clinicians participating in the Shared Savings Program. Per section 1899 of the Act (42 U.S.C. 1395jjj), submissions received from eligible clinicians in ACOs are not included in burden estimates for this final rule because quality data submissions to fulfill requirements of the Shared Savings Program are not subject to the PRA.

For the Promoting Interoperability performance category, group TINs may submit data on behalf of eligible clinicians in MIPS APMs, or eligible clinicians in MIPS APMs may submit data individually. For the improvement activities performance category, we will assume no reporting burden for MIPS APM participants. In the CY 2017 PFS final rule, we described that for MIPS APMs, we compare the requirements of the specific MIPS APM with the list of activities in the improvement activities Inventory and score those activities in the same manner that they are otherwise scored for MIPS eligible clinicians (81 FR 77185). Although the policy allows for the submission of additional improvement activities if a MIPS APM receives less than the maximum improvement activities performance category score, to date all MIPS APM have qualified for the maximum improvement activities score. Therefore, we assume that no additional submission will be needed.

Eligible clinicians who attain Partial QP status may incur additional burden if they elect to participate in MIPS, which is discussed in more detail in the CY 2018 PFS final rule (82 FR 53841 through 53844). Start Printed Page 65568 The policies finalized in the CY 2017 and CY 2018 Quality Payment Program final rules, the CY 2019, CY 2020, and CY 2021 PFS final rules, and continued in this final rule create some additional data collection requirements not listed in Table 82. These additional data collections, some of which are currently approved by OMB under the control numbers 0938-1314 (Quality Payment Program, CMS-10621) and 0938-1222 (CAHPS for MIPS, CMS-10450), are as follows. Additional ICRs Related to MIPS Third-Party Intermediaries (See Section V.B.8.c) • Self-nomination of new and returning QCDRs (81 FR 77507 through 77508, 82 FR 53906 through 53908, and Start Printed Page 65569 83 FR 59998 through 60000) (OMB 0938-1314). Self-nomination of new and returning registries (81 FR 77507 through 77508, 82 FR 53906 through 53908, and 83 FR 59997 through 59998) (OMB 0938-1314).

Approval process for new and returning CAHPS for MIPS survey vendors (82 FR 53908) (OMB 0938-1222). Open Authorization Credentialing and Token Request Process (New) (OMB 0938-1314) (see section V.B.8.d). Additional ICRs Related to the Data Submission and the Quality Performance Category (See Section V.B.8.e) Additional ICRs Related to the Promoting Interoperability Performance Category (See Section V.B.8.g) Reweighting Applications for Promoting Interoperability and other performance categories (82 FR 53918 and 83 FR 60011 through 60012) (OMB 0938-1314). Additional ICRs Related to Call for New MIPS Measures and Activities (See Sections V.B.8.f, V.B.8.h, V.B.8.j. And V.B.8.k) Nomination of improvement activities (82 FR 53922 and 83 FR 60017 through 60018) (OMB 0938-1314).

Call for new Promoting Interoperability measures (83 FR 60014 through 60015) (OMB 0938-1314). Call for MIPS quality measures (83 FR 60010 through 60011) (OMB 0938-1314). Nomination of MVPs (OMB 0938-1314). Additional ICRs Related to MIPS (See Section V.B.8.o) Opt out of performance data display on Physician Compare for voluntary reporters under MIPS (82 FR 53924 through 53925 and 83 FR 60022) (OMB 0938-1314). Additional ICRs Related to APMs (See Sections V.B.8.m and V.B.8.n) Partial QP Election (81 FR 77512 through 77513, 82 FR 53922 through 53923, and 83 FR 60018 through 60019) (OMB 0938-1314).

Other Payer Advanced APM determinations. Payer Initiated Process (82 FR 53923 through 53924 and 83 FR 60019 through 60020) (OMB 0938-1314). Other Payer Advanced APM determinations. Eligible Clinician Initiated Process (82 FR 53924 and 83 FR 60020) (OMB 0938-1314). Submission of Data for All-Payer QP Determinations (83 FR 60021) (OMB 0938-1314).

b. ICRs Regarding the Virtual Group Election (§ 414.1315) This rule is not implementing any new or revised collection of information requirements or burden related to the virtual group election. The virtual group election requirements and burden are currently approved by OMB under control number 0938-1343 (CMS-10652). Consequently, we are not making any changes to the virtual group election process under that control number. C.

ICRs Regarding Third-Party Intermediaries (§ 414.1400) The finalized requirements and burden associated with this rule's data submission changes related to qualified registries and QCDRs will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). In section IV.A.3.h. Of this rule, we are finalizing policies related to the third-party intermediary regulations at § 414.1400. Specifically, we are finalizing. (1) Requirement for third-party intermediaries to submit MIPS data for APM Entities.

(2) requirement for QCDRs and qualified registries to support MVPs, QCDRs and qualified registries may also support the APP. (3) requirement for all QCDRs and qualified registries to support subgroup reporting. (4) requirements for approved QCDRs and qualified registries that have not submitted performance data. And (5) new QCDR measure rejection criteria. The burden associated with each of these topics is discussed separately below for qualified registries, QCDRs, and survey vendors.

(1) Background Under MIPS, the quality, Promoting Interoperability, and improvement activities performance category data may be submitted via relevant third-party intermediaries, such as qualified registries, QCDRs, and health IT vendors. Data on the CAHPS for MIPS survey, which counts as either one quality performance category measure, or towards an improvement activity, can be submitted via CMS-approved survey vendors. Entities seeking approval to submit data on behalf of clinicians as a qualified registry, QCDR, or survey vendor must complete a self-nomination process annually.[] The processes for self-nomination for entities seeking approval as qualified registries and QCDRs are similar with the exception that QCDRs have the option to nominate QCDR measures for approval for the reporting of quality performance category data. Therefore, differences between QCDRs and qualified registry self-nomination are associated with the preparation of QCDR measures for approval. (2) QCDR Self-Nomination Applications As described below, in this rule we are adjusting the number of self-nomination applications based on current data (from 82 to 84), change the number of QCDR measures submitted for consideration by each QCDR at the time of self-nomination (from 2 to 12), and adjust the average time required to submit information for each QCDR measure (from 2.5 hours to 0.75 hours).

(a) Self-Nomination Process and Other Requirements In section IV.A.3.h.(1) of this rule, we are reorganizing and consolidating § 414.1400 generally. We assume that this provision does not change the existing requirements for third-party intermediaries during the self-nomination process. Therefore, we are not revising our burden estimates related to these provisions. We refer readers to § 414.1400 which states that QCDRs interested in submitting MIPS data to us on behalf of a MIPS eligible clinician, group, or virtual group will need to complete a self-nomination process to be considered for approval to do so. We also refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77507 through 77508), CY 2018 Quality Payment Program final rule (82 FR 53906 through 53908), CY 2019 PFS final rule (83 FR 59998 through 60000), the CY 2020 PFS final rule (84 FR 63116 through 63121) and the CY 2021 PFS final rule (85 FR 84964 through 84969) for our previously finalized requirements and burden for self-nomination of QCDRs and nomination of QCDR measures.

In section IV.A.3.h.(2)(a) of this rule, we are finalizing to add APM Entities to § 414.1400(a)(1), and expand the general participation requirements of third-party intermediaries, to third-party intermediaries reporting to MIPS on behalf of APM Entities reporting to MIPS in order to align reporting requirements for all participants in Start Printed Page 65570 MIPS. We are also finalizing that beginning with the CY 2023 performance period/2025 MIPS payment year, QCDRs and qualified registries must support the APP, and MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. As finalized in the CY 2017 PFS final rule, third-party intermediaries currently support MIPS data submission on behalf of eligible clinicians (81 FR 77016). APM Entities have historically used third party intermediaries for submitting their quality measures to their APMs. Additionally, QCDRs, qualified registries and health IT vendors are required under existing § 414.1400(a)(1) to submit data for the quality, improvement activities, and Promoting Interoperability performance categories in MIPS.

Therefore, we anticipate no additional steps being added to the self-nomination process as a result of this provision for third-party intermediaries to submit MIPS data on behalf of APM Entities, and to support measures and activities in MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. For this final rule, we assume that there will be no impact on the time required for QCDRs to complete either the simplified or full self-nomination process because of the above provisions. Additionally, we are finalizing to require QCDRs, qualified registries, health IT vendors, and CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. We anticipate that at the time of self-nomination, QCDRs would be using a checkbox to indicate their compliance for the requirement to support data submission for subgroups beginning with the CY 2023 performance period/2025 MIPS payment year. We assume that this will not impact the overall time estimated for QCDRs to submit their information at the time of self-nomination.

Therefore, as discussed in the CY 2022 PFS proposed rule (86 FR 84965) we did not make any adjustments in the time required for QCDRs during the simplified or full self-nomination process because of this provision. However, we anticipate that third-party intermediaries will need to make administrative changes to their existing workflows for submission of MVPs and APP data for clinicians participating as subgroups beginning with the CY 2023 performance period/2025 MIPS payment year. We refer readers to section VI.F.18.g(2)(f) of this final rule where we discuss our impact analysis. In section IV.A.3.h.(3)(a)(iii) of this rule, to provide further clarity and to better align with the existing policy (81 FR 77366 through 77367. 81 FR 77383 through 77384), we are finalizing to codify that QCDRs, and qualified registries must conduct validation on the data they intend to submit for the applicable MIPS performance period and provide the results of the executed data validation plan by May 31st of the year following the performance period.

Additionally, we are finalizing to codify a new requirement at § 414.1400(b)(3)(iv) to state that, beginning with the CY 2023 performance period/2025 MIPS payment year, the QCDR or qualified registry must submit a data validation plan annually, at the time of self-nomination, for CMS' approval, and may not change the plan once approved, without the prior approval of the agency. We anticipate that this provision does not make any changes to the existing data validation requirements for QCDRs and qualified registries. Through this provision, we are codifying the finalized policies related to data validation for QCDRs and qualified registries in previous rules. In the CY 2022 PFS proposed rule (86 FR 39483), we did not revise our burden estimates as a result of the above provision because the associated burden was captured in the CY 2017 PFS final rule (81 FR 77383 through 77384) and the CY 2019 PFS final rule (83 FR 59998 through 59999) and submitted to OMB for approval under control number 0938-1314 (CMS-10621). In section IV.A.3.h(3)(a)(i) of this final rule, we are finalizing new requirements for approved QCDRs and qualified registries that have not submitted performance data.

First, we are finalizing to create a new requirement at § 414.1400(b)(3)(vii) to require QCDRs and qualified registries that have never submitted data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year) through the CY 2020 performance period/2022 MIPS payment year, to submit a participation plan as part of their self-nomination for CY 2023. If the QCDRs and qualified registries did not submit data, their participation plan must be submitted as part of self-nomination for the 2023 self-nomination period and must be accepted by CMS to continue to be an approved QCDR or qualified registry. We are also finalizing to codify a new requirement at paragraph § 414.1400(b)(3)(viii) to state that, beginning with the CY 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval. Under this provision, the participation plan must explain the QCDR and/or qualified registry's detailed plans about how the vendor intends to encourage clinicians to submit MIPS data to CMS through the third-party intermediary on behalf of clinicians or groups. The vendor must also explain why they should still be allowed to participate as a qualified vendor.

Based on our review of the existing list of approved QCDRs that did not submit performance data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year), we estimate that approximately 10 QCDRs will submit participation plans for the CY 2022 and the CY 2023 self-nomination periods. Similar to our assumptions for submission of a Corrective Action Plan (CAP) in the CY 2021 PFS final rule (85 FR 84968), we anticipate that the effort involved in developing a participation plan including the policies specified in this rule and submitting it to CMS is likely to be no more than 3 hours for a computer systems analyst at a rate of $95.22/hr. For the CY 2022 performance period/2024 MIPS payment year, we estimate an annual burden of 30 hours (3 hr × 10 participation plans) at a cost of $2,857 (30 hr × $95.22/hr) for QCDRs that will need to develop and submit a participation plan. In section IV.A.3.h.(4) of this rule, we are finalizing to codify new requirements that if a QCDR measure owner is not an approved active QCDR for a given self-nomination period, that QCDR measure will not be available for use. Additionally, we are finalizing to codify a new requirement in section IV.A.3.h.(4)(a)(i)(A) of this rule and add a rejection criterion at § 414.1400(b)(4)(iv)(M) to state, a QCDR does not have permission to use a QCDR measure owned by another QCDR for the applicable performance period.

It was finalized in the CY 2018 PFS final rule (82 FR 53813) that beginning with the CY 2018 performance period/2020 MIPS payment year, QCDR vendors may seek permission from another QCDR to use an existing measure that is owned by the other QCDR. Additionally, in the CY 2020 PFS final rule (84 FR 63070 through 63073), we finalized the QCDR measure rejection criteria considerations. Specifically, we stated that all previously approved QCDR measures and new QCDR measures would be reviewed on an annual basis (as a part of the QCDR measure review Start Printed Page 65571 process that occurs after the self-nomination period closes on September 1st) to determine whether they are appropriate for the program. In the CY 2020 PFS final rule, we indicated to stakeholders that as information becomes available in future years, we will revisit our assumptions to better reflect the impact of these requirements on QCDRs and the quantity of measures annually (84 FR 63118 through 63119). As discussed in the CY 2019 PFS final rule (83 FR 60000) and CY 2020 PFS final rule (84 FR 63118), we are not accounting for QCDR measure licensing costs as part of our burden estimate.

Based on the number of QCDR measures submitted at the time of self-nomination for the CY 2021 performance period/2023 MIPS payment year, we assume that 82 QCDRs will submit 984 measures for consideration in the CY 2022 performance period/2024 MIPS payment year, approximately 12 measures per QCDR, on average. We anticipate that out of the 984 measures, 820 measures will be existing or borrowed measures, approximately 10 measures submitted per QCDR self-nomination application. The remaining 104 measures will be new measures, approximately 2 measures on average per QCDR. Using the above assumption that each QCDR submitting measures for approval during the self-nomination process will submit approximately 12 measures (10 existing or borrowed measures + 2 new measures), we estimate an increase of 10 measures from the currently approved estimate of 2 measures per QCDR. The estimated increase in the total number of measures submitted by a QCDR at the time of self-nomination is due to the inclusion of the existing or borrowed QCDR measures in our assumptions.

Additionally, we anticipate that less information is needed for a QCDR to submit an existing or borrowed measure for approval, therefore, we estimate that the time needed for a QCDR to submit an existing or borrowed measure is 0.5 hours, independent of the selection of the simplified or full self-nomination process. Consistent with our assumption in the CY 2020 PFS final rule (84 FR 63119), we continue to estimate that each QCDR will require 2 hours to submit a new QCDR measures for approval, independent of the selection of the simplified or full self-nomination process. To account for the difference in the time for submission of new vs existing QCDR measures for approval, we are using the weighted average to estimate the time required for QCDR measure submission at the time of self-nomination. Therefore, we assume that the weighted average of the time required for each QCDR to submit a new or existing or borrowed measure for approval during the self-nomination process is 0.75 hours [((2 new measures × 2 hours) + (10 existing or borrowed measures × 0.5 hours))/total # of measures (12)]. Based on the above assumptions, we are finalizing to revise our estimates in the amount of time required for a QCDR to submit measures during the self-nomination process from a total of 2 hours to approximately 0.75 hours, a decrease of 1.75 hours from the currently approved estimated burden per QCDR measure submission.

In the CY 2019 PFS final rule, we estimated that it would take 0.5 hours and 3 hours for a QCDR to submit all the required information during the simplified and full self-nomination process, respectively (83 FR 59999). Based on our experience with the amount of time needed for QCDRs during the 2020 self-nomination period, we assume that the estimated time of 3 hours per QCDR for a full self-nomination process is an overestimate and therefore, are adjusting our estimated time required for the QCDR full-self-nomination process to 2.5 hours, a decrease of 0.5 hours. We are not making any adjustments in the amount of time needed for simplified self-nomination process. For this final rule, we are adjusting the number of QCDRs that submitted applications for self-nomination from 90 to 84 based on the actual number of applications received during the CY 2021 self-nomination period for the CY 2022 performance period/2024 MIPS payment year, an increase of two applications from the currently approved estimate of 82. This is a decrease of 6 from the estimate of 90 provided in the CY 2022 PFS proposed rule (86 FR 39484).

For QCDRs that submit measures as part of their self-nomination process, while simultaneously accounting for the estimated increase in the number of existing or borrowed QCDR measures submitted with the self-nomination application and the decrease in the estimated time for the QCDR full-nomination process, we are finalizing to revise our estimated time for the QCDR self-nomination process to a minimum of 9.5 hours [0.5 hours for the simplified self-nomination process + (12 measures × 0.75 hr/measure for QCDR measure submission)] and a maximum of 11.5 hours [2.5 hours for the full self-nomination process + (12 measures × 0.75 hr/measure for QCDR measure submission)], an increase of 4 hours at a cost of $ 380.88 (4 hr × $95.22/hr) and 3.5 hours at a cost of $333.27 (3.5 hr × $95.22/hr) from the currently approved burden per respondent estimate in the CY 2021 PFS final rule (85 FR 84965). Consistent with our assumptions in the CY 2021 PFS final rule (85 FR 84967), based on updated data for the number of QCDR applications submitted during the CY 2020 self-nomination period, we are adjusting our estimate that 18 QCDRs will submit targeted audits for the CY 2022 performance period/2024 MIPS payment year, an increase of 1 from the currently approved estimate of 17 targeted audits in the CY 2021 PFS final rule (85 FR 84965). This is a decrease of 2 compared to our estimate of 20 targeted audits in the CY 2022 PFS proposed rule (86 FR 39484). Using the currently approved unchanged burden per respondent estimate, the estimated burden associated with QCDRs completing targeted audits will range from 90 hours (18 audits × 5 hr/audit) at a cost of $8,570 (18 audits × $476.10/audit) for the simplified self-nomination process to 180 hours (18 audits × 10 hr/audit) at a cost of $17,140 (18 audits × $952.20/audit) for the full self-nomination process (see Table 68 for the cost per audit). We assume that this would adjust our burden estimates for targeted audits by +5 hours (+1 respondents × 5 hr/audit) at a cost of $476 (5 hrs × $95.22/hr) and +10 hours (+1 respondents × 10 hr/audit) at a cost of $952 (10 hrs × $95.22/hr) for the simplified and full self-nomination process, respectively.

Based on the assumptions discussed in this section, we provide an estimate of the total annual burden associated with a QCDR self-nominating to be considered “qualified” to submit quality measures results and numerator and denominator data on behalf of MIPS eligible clinicians. As shown in Table 83, we assume that the staff involved in the QCDR self-nomination process will continue to be computer systems analysts or their equivalent, who have an average labor rate of $95.22/hr. Using the change in the number of respondents and the estimated time per respondent for QCDRs that submit measures for approval during the self-nomination process, the annual burden for the simplified and full-self nomination process will range from 798 hours (84 QCDRs × 9.5 hr) to 966 hours (84 QCDRs × 11.5 hr) at a cost ranging from $75,986 (798 hr × $95.22/hr) and $91,983 (966 hr × $95.22/hr), respectively. As shown in Table 83, combined with our adjusted estimate of annual burden for targeted audits and the burden for submission of participation plans, we are finalizing to revise our estimated Start Printed Page 65572 burden for the QCDR self-nomination process, ranging from 918 hours [798 hr (84 QCDRs × 9.5 hr) + 90 hr (18 audits × 5 hr) + 30 hr (10 participation plans × 3 hr)] at a cost of $87,413 [$75,986 (798 hr × $95.22/hr) + $8,570 (18 audits × $476.10/audit) + $2,857 (30 hr × $95.22/hr)] for a simplified self-nomination process to 1,176 hours [966 hr (84 QCDRs × 11.5 hr) + 180 hr (18 audits × 10 hr) + 30 hr (10 participation plans × 3 hr)] at a cost of $111,980 [$91,983 (966 hr × $95.22/hr) + $17,140 (18 audits × $952.20/audit) + $2,857 (30 hr × $95.22/hr)] for the full self-nomination process. As shown in Table 84, for the CY 2022 performance period/2024 MIPS payment year, independent of the change to our per response time estimate, the estimated increase in 2 respondents from the currently approved 82 respondents to 84 results in an increase of between +19 hours (+2 respondents × 9.5 hrs/respondent for the simplified self-nomination process) and +23 hours (+ 2 respondents × 11.5 hrs/respondent for the full self-nomination process) at a cost of between +$1,809 (+2 respondents × $904.60/respondent for the simplified self-nomination process) and +$2,190 (+2 respondents × $1,095.03/respondent for the full self-nomination process) (see Table 83 for the cost per QCDR).

Accounting for the change in time required for the QCDR self-nomination process results in an adjustment of between +328 hours (82 respondents × +4 hr for the simplified self-nomination process or also referred to as minimum burden) at a cost + $31,232 [82 respondents × $380.88 (+4 hr × $95.22/hr)/respondent) and +287 hours (82 respondents × 3.5 hr for the full self-nomination process or also referred to as maximum burden) at a cost of and +$27,328 (82 respondents × $333.27 (+3.5 hr × $95.22/hr)/respondent). The reason for the increase in minimum burden compared to the maximum burden is due to an increase in the change in the number of hours required for the simplified self-nomination process compared to the increase in the number of hours for the full self-nomination process. In aggregate, when these impacts are combined with the estimate for targeted audits and participation plans discussed above, the net impact ranges between + 382 hours [19 hr (+2 respondents × 9.5 hrs/respondent) + 5 hr (+1 targeted audit × 5 hrs/audit) + 30 hr (10 participation plans × 3 hr/plan) + 328 hr (82 respondents × 4 hr)] at a cost of $36,374 ($1,809 + $476 + $2,857 + $31,232) for the simplified self-nomination process (also referred to as minimum burden) and +350 hours [23 hr (+2 respondents × 11.5 hrs/respondent) + 10 hr (+1 targeted audits × 10 hrs/audit) + 30 hr (10 participation plans × 3 hr/plan) + 287 hr (+82 respondents × 3.5 hr)] at a cost of $33,328 [$2,190 (+2 respondents × $1,095.03/respondent + $952 (10 hr × $95.22/hr) + $2,857 (30 hr × $95.22/hr) + $27,328 (82 respondents × $333.27/respondent)] for the full self-nomination process (also referred to as maximum burden) for the CY 2022 performance period/2024 MIPS payment year. As discussed above in this section of the rule, we are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year. Therefore, we estimate the total change in burden for the QCDR self-nomination process would be 918 hours at a cost of $87,413 for the simplified self-nomination process (also referred to as minimum burden) and 1,176 hours at a cost of $111,980 for the full self-nomination process (also referred to as maximum burden).

For the purposes of calculating estimated change in burden in Tables 128, 129, and 130 of this final rule, we use only the maximum burden estimate. Start Printed Page 65573 (b) QCDR Measure Requirements In the CY 2018 Quality Payment Program final rule (82 FR 53813 through 53814), we discussed that beginning with the CY 2018 performance period/2020 MIPS payment year and for future program years, QCDR vendors may seek permission from another QCDR to use an existing measure that is owned by the other QCDR. Additionally, in the CY 2020 Quality Payment Program rule (84 FR 63070 through 63073) we finalized the QCDR measure rejection criteria considerations. In section IV.A.3.h.(4)(a)(i)(A)(aa) of this rule, we are finalizing to codify a new requirement and add a rejection criterion that a QCDR does not have permission to use a QCDR measure owned by another QCDR for the applicable performance period. Additionally, we are finalizing to codify new requirements that if a QCDR measure owner is not an approved active QCDR for a given self-nomination period, that QCDR measure will not be available for use.

The inactive QCDR measure owner has the option to transfer ownership of the QCDR measure to an active QCDR or agree upon terms set forth with the active QCDR allowing co-ownership of the QCDR measure. We refer readers to section IV.A.3.h.(4)(a)(i)(A) of this rule for additional details on the finalized policies for transfer of ownership of QCDR measures. This provision is to codify the existing requirements for the QCDR self-nomination process. We are not adjusting our burden estimates as result of this provision because we assume that this does not change the requirements, or the time required for a QCDR to submit information for a QCDR measure at the time of self-nomination. Additionally, we are finalizing to codify another rejection criterion at § 414.1400(b)(4)(iv)(N) to state that, if a QCDR measure owner is not approved during a given self-nomination period, any associated QCDR measures with that QCDR will also not be approved.

We are not revising our burden estimates as a result of the above provision because we assume that there will not be additional requirements for QCDRs to submit at the time of self-nomination. This is part of the measure specification requirements for QCDRs which submit measures for approval during the self-nomination process. (3) Qualified Registry Self-Nomination Process and Other Requirements The requirements and burden associated with this rule's data submission changes related to qualified registries will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to § 414.1400 which states that qualified registries interested in submitting MIPS data to us on behalf of MIPS eligible clinicians, groups, or virtual groups need to complete a self-nomination process to be considered for approval to do so. We also refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77507 through 77508), CY 2018 Quality Payment Program final rule (82 FR 53906 through 53908), CY 2019 PFS final rule (83 FR 59997 through 59998), CY 2020 PFS final rule (84 FR 63114 through 63116) and the CY 2021 PFS final rule (85 FR 84967 through 85 FR 84969) for our previously finalized requirements and burden for self-nomination of qualified registries.

In section IV.A.3.h.(1) of this rule, we are finalizing reorganization and consolidation of § 414.1400 generally. We assume that this provision does not change the existing requirements for third-party intermediaries during the self-nomination process. Therefore, we did not revise our burden estimates related to these provisions. In section IV.A.3.h.(2)(a) of this rule, we are finalizing to add APM Entities to § 414.1400(a)(1), expanding the general participation requirements of third-party intermediaries, to third party intermediaries reporting to MIPS on behalf of APM Entities reporting to MIPS to align reporting requirements for all participants in MIPS. We are also finalizing that beginning with the CY 2023 performance period/2025 MIPS payment year, QCDRs and qualified registries must support APP, and MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data.

As finalized in the CY 2017 PFS final rule, third-party intermediaries currently support MIPS data submission on behalf of eligible clinicians (81 FR 77016). APM Entities have historically used third party intermediaries for submitting their quality measures to their APMs. Additionally, QCDRs, qualified registries and health IT vendors are required under existing § 414.1400(a)(1) to submit data for the quality, improvement activities, and promoting interoperability performance categories in MIPS. Similar to our discussion for QCDRs above, we anticipate no additional steps being added to the qualified registry self-nomination process as a result of this provision for third-party intermediaries to submit MIPS data on behalf of APM Entities, and to support measures and activities in MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. For this final rule, we assume that there will be no impact on the time required for qualified registries to complete either the simplified or full Start Printed Page 65574 self-nomination process because of the above provisions.

Additionally, we are finalizing to require QCDRs, qualified registries, health IT vendors, and CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. We anticipate that at the time of self-nomination, qualified registries would be using a checkbox to indicate their compliance for the requirement to support data submission for subgroups beginning with the CY 2023 performance period/2025 MIPS payment year. We assume that this would not impact the overall time estimated for qualified registries to submit their information at the time of self-nomination. Therefore, we are not making any adjustments in the time required for qualified registries during the simplified or full self-nomination process because of this provision. However, we anticipate that third-party intermediaries would need to make administrative changes to their existing workflows for submission of MVPs and APP data for clinicians participating as subgroups beginning with the CY 2023 performance period/2025 MIPS payment year.

We refer readers to section VI.F.18.g.(2)(f) of this rule where we discuss our impact analysis. For this final rule, we are adjusting the number of qualified registries that submitted applications for self-nomination from 210 to 147 based on the number of applications received during the CY 2021 self-nomination period for the CY 2022 performance period/2024 MIPS payment year, a decrease of 36 applications from the currently approved estimate of 183. This is also a decrease of 63 from the estimate of 210 provided in the CY 2022 PFS proposed rule (86 FR 39487). Therefore, we are revising our estimates for this information collection related to the qualified registry self-nomination process. We are not making any new adjustments to the estimated burden per respondent as a result of this updated data.

Based on our estimates in the CY 2021 PFS final rule (85 FR 84967) and the updated data received for the number of qualified registries that submitted self-nomination applications, we are adjusting the estimated number of qualified registries that will submit targeted audits for the CY 2022 performance period/2024 MIPS payment year. Similar to our assumptions in the CY 2021 PFS final rule (85 FR 84967) and based on the updated data received from the CY 2021 self-nomination period, we are adjusting our estimate that 46 qualified registries will be required to conduct targeted audits, a decrease of 10 from the currently approved estimate of 56 in the CY 2021 PFS final rule (85 FR 84965). Therefore, we estimate the total impact associated with qualified registries completing targeted audits will range from 230 hours (46 registries × 5 hours/audit) at a cost of $21,901 (46 registries × $476.10/audit) to 460 hours (46 registries × 10 hours/audit) at a cost of $43,801 (46 registries × $952.20/audit) for the simplified and full self-nomination process, respectively (see Table 83 for the cost per audit). We assume that this would adjust our burden estimates for targeted audits by −50 hours (−10 respondents × 5 hr/audit) at a cost of −$4,761 (−50 hrs × $95.22/hr) and + −100 hours (−10 respondents × 10 hr/audit) at a cost of −$9,522 (−100 hrs × $95.22/hr) for the simplified and full self-nomination process, respectively. Using our currently approved time per response estimate of 3 hours, the resulting adjustment in burden for QCDRs and qualified registries to submit CAPs is 30 hours (10 respondents × 3 hrs/respondent) at a cost of $2,857 (30 hours × $95.22/hr).

In section IV.A.3.h.(3)(a)(i) of this final rule, we are finalizing new requirements for approved QCDRs and qualified registries that have not submitted performance data. First, we are finalizing to create a new requirement at paragraph at § 414.1400(b)(3)(vii) to require QCDRs and qualified registries that have never submitted data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year) through the CY 2020 performance period/2022 MIPS payment year, to submit a participation plan as part of their self-nomination for CY 2023. Exceptions to this requirement may occur if data is received for the CY 2021 performance period/2023 MIPS payment year. Under this scenario, QCDRs and qualified registries will not need to submit a participation plan for the CY 2023 self-nomination process. If the QCDRs and qualified registries did not submit data, their participation plan must be submitted as part of self-nomination for the CY 2023 MIPS self-nomination period and must be accepted by CMS to continue to be an approved QCDR or qualified registry.

We are also finalizing to codify a new requirement that, beginning with the CY 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval. Under this provision, the participation plan must explain the QCDR and/or qualified registry's detailed plans about how the vendor intends to encourage clinicians to submit MIPS data to CMS through the third-party intermediary on behalf of clinicians or groups. The vendor must also explain why they should still be allowed to participate as a qualified vendor. Based on our review of the existing list of approved qualified registries that did not submit performance data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year), we estimate that 19 qualified registries would submit participation plans for the CY 2023 self-nomination period. Similar to our assumptions used for submission of a CAP in the CY 2021 PFS final rule (85 FR 84968), we anticipate that the effort involved in developing a participation plan including the policies specified in this rule and submitting it to CMS is likely to be no more than 3 hours for a computer systems analyst at a rate of $95.22/hr.

For the CY 2023 performance period/2025 MIPS payment year, we estimate an annual burden of 57 hours (3 hr × 19 participation plans) at a cost of $5,428 (57 hr × $95.22/hr) for qualified registries to develop and submit a participation plan. As stated above, based on the number of self-nominations received for the CY 2022 performance period/2024 MIPS payment year, we are finalizing to adjust the estimated number of qualified registries that will self-nominate for the CY 2022 self-nomination period to 147, a decrease of 36 from the currently approved estimate of 183 in the CY 2021 PFS final rule (85 FR 84969). In the CY 2019 PFS final rule, we estimated that it would take 3 hours for a qualified registry to submit all the required information during the full self-nomination process (83 FR 59998). Based on our experience with the self-nomination process, we believe that the number of fields needed to be submitted for a qualified registry are fewer than those needed for a QCDR. We assume that our previous assumption of 3 hours is an overestimate.

Therefore, we are adjusting the estimated time required for a qualified registry submitting a full-self-nomination process to 2 hours, a decrease of 1 hour. We assume that the staff involved in the qualified registry self-nomination process will continue to be computer systems analysts or their equivalent, who have an average labor rate of $95.22/hr. Using the change in estimated burden per respondent time, associated with the self-nomination process range from a minimum of 0.5 hours to a maximum of 2 hours, we Start Printed Page 65575 estimate that the annual burden would range from 74 hours (147 qualified registries × 0.5 hr) to 294 hours (147 qualified registries × 2 hr) at a cost ranging from $7,046 (74 hr × $95.22/hr) and $27,995 (294 hr × $95.22/hr), respectively (see Table 85). Both the minimum and maximum burden shown in Table 85 reflect the adjustments to the number of respondents due to availability of more recent data. Combined with our estimates of burden associated with completing targeted audits and developing and submitting participation plans and corrective action plans, our total burden estimate ranges from 391 hours [74 hr (147 qualified registries × 0.5 hr) + 57 hr (+19 participation plans × 3 hr/plan) + 230 hr (46 targeted audits × 5 hours/audit) + 30 hr (10 CAPs × 3 hr) at a cost of $37,232 [$7,046 (74 hr × $95.22/hr) + $5,428 (57 hr × $95.22/hr) + $21,901 (46 registries × $476.10/audit) + $2,857 (30 hours × $95.22/hr)] to 841 hours [294 hr (147 qualified registries × 2 hr) + 57 hr (+19 participation plans × 3 hr/plan) + 460 hr (46 targeted audits × 10 hours/audit) + 30 hr (10 CAPs × 3 hr)] at a cost of $80,081 [$27,995 (294 hr × $95.22/hr) + $5,428 (57 hr × $95.22/hr) + $43,801 (46 registries × $952.20/audit) + $2,857 (30 hours × $95.22/hr) for the simple self-nomination process (see minimum burden in Table 85) and full self-nomination process (see maximum burden in Table 85) respectively.

Based on the assumptions discussed in this section, we provide an estimate of the total annual burden associated with a qualified registry self-nominating to be considered “qualified” to submit quality measures results and numerator and denominator data on MIPS eligible clinicians. As shown in Table 86, for the CY 2022 performance period/2024 MIPS payment year, independent of the change to our per response time estimate, the estimated decrease in 36 respondents from the currently approved 183 respondents to 147 results in a change of −18 hours (−36 respondents × 0.5 hrs/respondent) at a cost of −$1,714 (−18 hours × $95.22/hr) for the simplified self-nomination process and a change of −72 hours (−36 respondents × 2 hrs/respondent) at a cost of −$6,856 (−72 hours × $95.22/hr). Accounting for the change in time required for the qualified registry self-nomination process results in an adjustment of 0 hours for the simplified self-nomination process and −183 hours (183 respondents × −1 hours) at a cost of −$17,425 (−183 hours × $95.22/hr) for the full self-nomination process. When the above impacts are combined with the estimates for targeted audits, participation plans and corrective action plans discussed above, the net impact ranges between −11 hours [−18 hr (−36 respondents × 0.5 hrs/respondent) + 0 hr +−50 hr (−10 audits × 5 hr/audit) + 57 hr (+19 participation plans × 3 hr/plan) + 0 hr)] at a cost of −$1,046 [(−$1,713 (−18 hours × $95.22/hr) + $0 +−$4,761 (−50 hrs × $95.22/hr) + $5,428 (+57 hr × $95.22/hr) + $0)] for the simplified self-nomination process and −298 hours [(−72 hr (−36 respondents × 2 hrs/respondent) + −183 hr (183 respondents × −1 hours) + −100 hr (−10 audits × 10 hr/audit) + 57 hr (+19 participation plans × 3 hr) + 0 hr)] at a cost of −$28,375 [(−$6,856 (−72 hours × $95.22/hr)−$17,425 (−183 hours × $95.22/hr)−$9,522 (−100 hrs × $95.22/hr) + $5,428 (+57 hr × $95.22/hr) + $0)] for the full self-nomination process for the CY 2022 performance period/2024 MIPS payment year. As discussed above in this section of the rule, we are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year.

Therefore, we estimate the total change in burden for the qualified registry self-nomination process would be 391 hours at a cost of $37,232 for the simplified self-nomination process and 841 hours at a cost of $80,081 for the full self-nomination process. For the purposes of calculating estimated change in burden in Tables 128, 129, and 130 of this final Start Printed Page 65576 rule, we use only the maximum burden estimate. We received public comments for our burden estimates related to QCDRs and qualified registries. The following is a summary of the public comments received for the Quality Payment Program ICRs regarding the burden estimates for QCDR and qualified registries. Comment.

One commenter did not agree with CMS burden estimates for audits conducted by QCDRs and qualified registries and shared their belief that the time required for a QCDR was two to three-fold more than CMS estimates. The commenter shared their concern that our estimate does not accurately represent the total amount of time it takes for a QCDR or qualified registry to conduct data audits. Response. We would like to clarify that our burden estimates provided for the QCDR and qualified registry self-nomination process are not intended to capture the holistic total annual time for a QCDR or a qualified registry to participate in MIPS. Our burden estimate of 9.5 hours to 11.5 hours for the QCDR and 0.5 hours to 2 hours for the qualified registry self-nomination process specifically includes the estimated time it takes for a QCDR or qualified registry to populate and submit a self-nomination form and QCDR measures, if applicable.

These burden estimates do not include any time needed to comply with third-party intermediary requirements outside of the self-nomination process. We believe our burden estimate is a reasonable average across all respondents based on our review of the nomination process, the information required to complete the nomination form, and the criteria required to self-nominate as a QCDR or registry. After consideration of public comments, we are not making any changes to our estimates of the time required for the QCDR and qualified registry self-nomination process. (4) Survey Vendor Requirements In section IV.A.3.h(2)(b)(ii) of this rule, we are finalizing to require CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. Because of this provision, we anticipate no additional steps being added to the requirements for CAHPS for MIPS survey vendors to submit a participation form and assume there would be no impact on the time required for the survey vendors.

Therefore, we are not making any adjustments in the time required for CAHPS survey vendors to submit their information because of this provision. The requirements and burden for CAHPS survey vendors to submit data for eligible clinicians are currently approved by OMB under control number 0938-1222 (CMS-10450). Consequently, we are not making any changes to the CAHPS for MIPS Survey vendor information collection request under that control number. (5) Health IT Vendors In section IV.A.3.h.(2)(b) of this rule, we are finalizing to create a new requirement at paragraph § 414.1400(c)(1)(iii) to state that, beginning with the CY 2023 performance period/2025 MIPS payment year, health IT vendors must support MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. Health IT vendors may also support the APP.

Additionally, we are finalizing to require health IT vendors to support subgroup reporting beginning with the CY 2023 performance period/2025 MIPS payment year. We do not anticipate any requirement or burden changes as it relates to the support of reporting data. As stated in the CY 2019 PFS final rule (83 FR 59998), health IT vendors are not included in the burden estimates for MIPS. D. ICR Regarding Open Authorization (OAuth) Credentialing and Token Request Process This rule is not implementing new or revised collection of information requirements or burden related to the identity management application process.

The requirements and burden are currently approved by OMB under control number 0938-1314 (CMS-10621). Consequently, we are not making any changes to the identity management application process under that control number. E. ICRs Regarding Quality Data Submission (§§ 414.1318, 414.1325, 414.1335, and 414.1365) (1) Background We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77502 through 77503), CY 2018 Quality Payment Program final rule (82 FR 53908 through 53912), CY 2019 PFS final rule (83 FR 60000 through 60003), CY 2020 PFS final rule (84 FR 63121 through 63124), and the CY 2021 PFS final rule (85 FR 84970 through 84974) for our previously finalized requirements for data submission for the quality performance category. Under our current policies, two groups of clinicians must submit quality data under MIPS.

Those who submit as MIPS eligible clinicians and those who submit data voluntarily but are not subject to MIPS payment adjustments. Clinicians are ineligible for MIPS payment adjustments if they are newly Start Printed Page 65577 enrolled to Medicare. Are QPs. Are partial QPs who elect to not participate in MIPS. Are not one of the clinician types included in the definition for MIPS eligible clinician.

Or do not exceed the low-volume threshold as an individual or as a group. (2) Changes and Adjustments to Quality Performance Category Respondents To determine which QPs should be excluded from MIPS, we used the Advanced APM payment and patient percentages from the APM Participant List for the final snapshot date for the 2019 QP performance period. From this data, we calculated the QP determinations as described in the Qualifying APM Participant (QP) definition at § 414.1305 for the CY 2022 performance period/2024 MIPS payment year. Due to data limitations, we could not identify specific clinicians who have not yet enrolled in APMs, but who may become QPs in the future CY 2022 performance period/2024 MIPS payment year (and therefore will no longer need to submit data to MIPS). Hence, our model may underestimate or overestimate the number of respondents.

In the CY 2019 PFS final rule, we finalized limiting the Medicare Part B claims collection type to small practices beginning with the CY 2019 performance period/2021 MIPS payment year and allowing clinicians in small practices to report Medicare Part B claims as a group or as individuals (83 FR 59752). As in the CY 2021 PFS final rule, we continue to use CY 2019 performance period/2021 MIPS payment year data to estimate the number of respondents in the CY 2022 PFS final rule. There may be an undercount in submissions due to the PHE for buy antibiotics, because of the automatic extreme and uncontrollable circumstances policy, and application-based policy that allowed clinicians to elect not to submit during the submission period for the CY 2019 performance period/2021 MIPS payment year that we are using to inform our burden estimates. Despite this limitation, we believe the data from the CY 2019 performance period/2021 MIPS payment year is still the best data source available as it most accurately reflects the impacts of policies finalized in previous rules and trends toward increased group reporting. In section IV.A.3.d.(1)(d) of this rule, we are finalizing to continue the CMS Web Interface measures as a collection type for the CY 2022 performance period/2024 MIPS payment year.

Additionally, we are finalizing to sunset the CMS Web Interface measures as a collection type/submission type starting with the CY 2023 performance period/2025 MIPS payment year. In the CY 2021 PFS final rule (85 FR 84981), we finalized the sunset of CMS Web Interface as a collection type for the CY 2022 performance period/2024 MIPS payment year. We refer readers to the CY 2021 PFS final rule for discussion on our assumptions for the CY 2022 performance period/2024 MIPS payment year, where we estimated a burden of zero due to our assumption that all Web Interface respondents will alternately utilize either the MIPS CQM and QCDR or eCQM collection types. Based on the number of groups that submitted quality performance data via the CMS Web Interface in the CY 2019 performance period/2021 MIPS payment year, we are not able to ascertain what alternative collection type(s) the groups would elect. In order to estimate the number of groups that will select each of these collection types, we first clustered the number of groups which submitted data via the CMS Web Interface collection type during the CY 2019 performance period/2021 MIPS payment year by practice size (between 25 and 49 clinicians, between 50 and 99 clinicians, etc.).

Then, for each cluster, we allocated these groups to each of the MIPS CQM and QCDR and eCQM collection types based on the percent of TINs that submitted MIPS data via these two collection types. For example, of the 1,629 TINs with a practice size of 25 to 49 clinicians which submitted data for the CY 2019 performance period/2021 MIPS payment year, 1,066 (65 percent) submitted data via the MIPS CQM and QCDR collection type and 563 (35 percent) submitted data via the eCQM collection type. We applied these percentages to the 7 TINs with a practice size of 25 to 49 clinicians which submitted data via the CMS Web Interface collection type for the CY 2019 performance period/2021 MIPS payment year to estimate that 4 (7 TINs × 0.56) would elect to submit data via the MIPS CQM and QCDR collection type and the remaining 3 (7 TINs × 0.44) would elect to submit data via the eCQM collection type. In total, beginning with the CY 2023 performance period/2025 MIPS payment year, we estimate that 64 of the 114 groups that submitted data via the CMS Web Interface collection type for the CY 2019 performance period/2021 MIPS payment year will submit quality data via the MIPS CQM and QCDR collection type and 50 groups will now submit quality data via the eCQM collection type. We note that 114 groups are an increase of 114 from our currently approved estimate of 0 groups in the CY 2022 performance period/2024 MIPS payment year.

We also performed this analysis to determine the number of clinicians that will be affected and will need to submit quality data via an alternate collection type beginning with the CY 2023 performance period/2025 MIPS payment year. In total, of the estimated 45,599 individual clinicians affected by this provision, we estimate that 11,432 will submit quality data as part of a group via the MIPS CQM and QCDR collection type and 34,167 will submit quality data as part of a group via the eCQM collection type. These estimates are reflected in Tables 90 and 92 and the associated changes in burden are reflected in Tables 91 and 93. In aggregate, as discussed in section V.B.8.p. Of this final rule, we estimate the provision to sunset the CMS Web Interface measures as a collection type/submission type will result in a net decrease in quality performance data reporting burden while acknowledging the additional financial impacts on clinicians as discussed in section VI.F.18.g.(2)(a) of the Regulatory Impact Analysis.

We assume that 100 percent of ACO APM Entities will submit quality data to CMS as required under their models. While we do not believe there is additional reporting for ACO APM entities, consistent with assumptions used in the CY 2020 and CY 2021 PFS final rules (84 FR 63122 and 85 FR 84972), we include all quality data voluntarily submitted by MIPS APM participants at the individual or TIN-level in our respondent estimates. As stated in section V.B.8.e.(2) of this final rule, we assume non-ACO APM Entities will participate through traditional MIPS and submit as an individual or group rather than as an entity. To estimate who will be a MIPS APM participant in the CY 2022 performance period/2024 MIPS payment year, we used the Advanced APM payment and patient percentages from the APM Participant List for the final snapshot date for the 2019 QP performance period. We elected to use this data source because the overlap with the data submissions for the CY 2019 performance period/2021 MIPS payment year enabled the exclusion of Partial QPs that elected to not participate in MIPS and required fewer assumptions as to who is a QP or not.

Based on this information, if we determine that a MIPS eligible clinician will not be scored as a MIPS APM, then their reporting assumption is based on their reporting as a group or individual Start Printed Page 65578 for the CY 2019 performance period/2021 MIPS payment year. Our burden estimates for the quality performance category do not include the burden for the quality data that APM Entities submit to fulfill the requirements of their APMs. The burden is excluded from this collection of information section but is discussed in the regulatory impact analysis section of this final rule because sections 1899(e) and 1115A(d)(3) of the Act (42 U.S.C. 1395jjj(e) and 1315a(d)(3), respectively) state that the Shared Savings Program and the testing, evaluation, and expansion of Innovation Center models tested under section 1115A of the Act (or section 3021 of the Affordable Care Act) are not subject to the PRA.[] Tables 84, 85, and 86 explain our revised estimates of the number of organizations (including groups, virtual groups, and individual MIPS eligible clinicians) submitting data on behalf of clinicians segregated by collection type. Table 87 provides our estimated counts of clinicians that will submit quality performance category data as MIPS individual clinicians or groups in the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years based on data from the CY 2019 performance period/2021 MIPS payment year.

For the CY 2022 performance period/2024 MIPS payment year, respondents will have the option to submit quality performance category data via Medicare Part B claims, direct, and log in and upload submission types, and Web Interface. For the CY 2023 performance period/2025 MIPS payment year, respondents will no longer have the option to submit quality performance category data via the Web Interface. We estimate the burden for collecting data via collection type. Medicare Part B claims, QCDR and MIPS CQMs, eCQMs, and the CMS Web Interface. We believe that, while estimating burden by submission type may be better aligned with the way clinicians participate with the Quality Payment Program, it is more important to reduce confusion and enable greater transparency by maintaining consistency with previous rulemaking.

For the CY 2023 performance period/2025 MIPS payment year, we are finalizing in section IV.A.3.b.(2)(c) of this rule that clinicians in MIPS will have the option to submit measures and activities in MVPs. We refer readers to section IV.A.3.b.(4)(d) of this rule for additional details on the reporting requirements for MVPs. For the quality performance category of MVPs, we assume that MVP Participants will choose to report via the Medicare Part B claims, QCDR, MIPS CQMs, and eCQMs collection type. Table 99 of this rule includes the estimated burden for collecting data for the quality performance category of MVPs. As shown in Table 87, using participation data from the CY 2019 performance period/2021 MIPS payment year, combined with the estimate of QPs for the CY 2022 performance period/2024 MIPS payment year, we estimate a total of 625,703 clinicians will submit quality data as individuals or groups in each of the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years, a decrease of 25,811 clinicians when compared to our estimate of 651,514 clinicians in the CY 2021 PFS final rule (85 FR 84972).

For the CY 2022 performance period/2024 payment year, we estimate 28,252 clinicians will submit data as individuals for the Medicare Part B claims collection type. 279,247 clinicians will submit data as individuals or as part of groups for the MIPS CQM and QCDR collection type. 273,819 clinicians will submit data as individuals or as part of groups via eCQM collection types. And 44,385 clinicians will submit as part of groups via the CMS Web Interface. Compared to the CY 2022 performance period/2024 MIPS payment year burden estimated in the CY 2021 PFS final rule (85 FR 84972), these are decreases from the estimates of 29,273, 295,941, and 326,300 for Medicare Part B claims, MIPS CQM and QCDR, eCQM, and an increase of 44,385 for the CMS Web Interface collection types, respectively.

These adjustments are due to the availability of updated data from the CY 2019 performance period/2021 MIPS payment year and the delay in sunsetting the CMS Web Interface from the CY 2022 performance period/2024 MIPS payment year to the CY 2023 performance period/2025 MIPS payment year. For the CY 2023 performance period/2025 MIPS payment year, we estimate 25,427 clinicians will submit data as individuals for the Medicare Part B claims collection type. 288,637 clinicians will submit data as individuals or as part of groups for the MIPS CQM and QCDR collection type. 311,326 clinicians will submit data as individuals or as part of groups via the eCQM collection type. Table 87 provides estimates of the number of clinicians to collect quality measures data via each collection type, regardless of whether they decide to submit as individual clinicians or as part of groups.

Because our burden estimates for quality data submission assume that burden is reduced when clinicians elect to submit as part of a group, we also separately estimate the expected number of clinicians to submit as individuals or part of groups. Start Printed Page 65579 Because MIPS eligible clinicians may submit data for multiple collection types for a single performance category, the estimated numbers of individual clinicians and groups to collect via the various collection types are not mutually exclusive and reflect the occurrence of individual clinicians or groups that collected data via multiple collection types during the CY 2019 performance period/2021 MIPS payment year. We captured the burden of any eligible clinician that may have historically collected via multiple collection types, as we assume they will continue to collect via multiple collection types and that our MIPS scoring methodology will take the highest score where the same measure is submitted via multiple collection types. Table 88 uses methods similar to those described to estimate the number of clinicians that will submit data as individual clinicians via each collection type in the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years. For the CY 2022 performance period/2024 MIPS payment year, we estimate that approximately 28,252 clinicians will submit data as individuals using the Medicare Part B claims collection type.

Approximately 40,507 clinicians will submit data as individuals using MIPS CQM and QCDR collection type. And approximately 40,446 clinicians will submit data as individuals using eCQMs collection type. Based on performance data from the CY 2019 performance period/2021 MIPS payment year, these are decreases of −1,021, −833, and −1,809 respondents from the currently approved estimates of 29,273, 41,340, and 42,255 for the Medicare Part B claims, MIPS CQM and QCDR, and eCQM collection types, respectively. As shown in Table 88, for the CY 2023 performance period/2025 MIPS payment year, we estimate that approximately 25,427 clinicians will submit data as individuals using the Medicare Part B claims collection type. Approximately 36,456 clinicians will submit data as individuals using MIPS CQM and QCDR collection type.

And approximately 36,401 clinicians will submit data as individuals using eCQMs collection type. As stated above, we are setting forth our estimates for the CY 2023 performance period/2025 MIPS payment year as new burden with no currently approved estimate. Start Printed Page 65580 Consistent with the policy finalized in the CY 2018 Quality Payment Program final rule that for MIPS eligible clinicians who collect measures via Medicare Part B claims, MIPS CQM, eCQM, or QCDR collection types and submit more than the required number of measures (82 FR 53735 through 54736), we will score the clinician on the required measures with the highest assigned measure achievement points and thus, the same clinician may be counted as a respondent for more than one collection type. Therefore, our columns in Table 88 are not mutually exclusive. Table 89 provides our estimated counts of groups or virtual groups that will submit quality data on behalf of clinicians for each collection type in the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years.

We assume that clinicians that submitted quality data as groups in the CY 2019 performance period/2021 MIPS payment year will continue to submit quality data either as groups or virtual groups for the same collection types as they did as a group or TIN within a virtual group for the CY 2022 and 2023 performance periods/2024 and 2025 MIPS payment years. Specifically, for the CY 2022 performance period/2024 MIPS payment year we estimate that 11,529 groups and virtual groups will submit data for the MIPS CQM and QCDR collection type on behalf of 243,169 clinicians. 8,127 groups and virtual groups will submit for eCQM collection types on behalf of 249,878 eligible clinicians. And 114 groups will submit data via the CMS Web Interface on behalf of 44,385 clinicians. These are decreases of −75 and −93 respondents from the currently approved estimates of 11,604, and 8,220 groups and virtual groups for the MIPS CQM and QCDR and eCQM collection types, and an increase of +114 groups from the currently approved estimates of 0 groups for the CMS Web Interface collection types, respectively.

As shown in Table 89, for the CY 2023 performance period/2025 MIPS payment year we estimate that 10,434 groups and virtual groups will submit data for the MIPS CQM and QCDR collection type on behalf of 313,038 clinicians and 7,359 groups and virtual groups will submit for eCQM collection types on behalf of 339,109 eligible clinicians. As stated above, we are setting forth our estimates for the CY 2023 performance period/2025 MIPS payment year as new burden with no currently approved estimate. The reason for the difference in estimated number of respondents from the estimates for the CY 2022 performance period/2024 MIPS payment year described above, is due to the sunset of the CMS Web Interface as a collection type and the implementation of MVPs beginning with the CY 2023 performance period/2025 MIPS payment year. As the data does not exist for APM performance pathway or MIPS quality measures for non-ACO APM entities, we assume non-ACO APM Entities will participate through traditional MIPS and base our estimates on submissions received in the CY 2019 performance period/2021 MIPS payment year. Start Printed Page 65581 The burden associated with the submission of quality performance category data have some limitations.

We believe it is difficult to quantify the burden accurately because clinicians and groups may have different processes for integrating quality data submission into their practices' workflows. Moreover, the time needed for a clinician to review quality measures and other information, select measures applicable to their patients and the services they furnish, and incorporate the use of quality measures into the practice workflows is expected to vary along with the number of measures that are potentially applicable to a given clinician's practice and by the collection type. For example, clinicians submitting data via the Medicare Part B claims collection type need to integrate the capture of quality data codes for each encounter whereas clinicians submitting via the eCQM collection types may have quality measures automated as part of their EHR implementation. We believe the burden associated with submitting quality measures data will vary depending on the collection type selected by the clinician, group, or third-party. As such, we separately estimated the burden for clinicians, groups, and third parties to submit quality measures data by the collection type used.

For the purposes of our burden estimates for the Medicare Part B claims, MIPS CQM and QCDR, and eCQM collection types, we also assume that, on average, each clinician or group will submit 6 quality measures. For the CY 2023 performance period/2025 MIPS payment year we refer readers to section IV.A.3.b.(4)(d) of the rule for the changes related to MVP and subgroup reporting requirements. In terms of the quality measures available for clinicians and groups to report for the CY 2022 performance period/2024 MIPS payment year, we are finalizing that the total number of quality measures will be 200. The new MIPS quality measures finalized for inclusion in MIPS for the CY 2022 performance period/2024 MIPS payment year and future years are found in Table Group A of Appendix 1. MIPS quality measures with substantive changes can be found in Table Group D of Appendix 1.

And MIPS quality measures finalized for removal can be found in Table Group C of Appendix 1. These measures are stratified by collection type in Table 90, as well as counts of new, removed, and substantively changed measures. Start Printed Page 65582 For the CY 2022 performance period/2024 MIPS payment year, we are finalizing a net reduction of 9 quality measures across all collection types compared to the 209 measures finalized for the CY 2021 performance period/2023 MIPS payment year (85 FR 84974). Specifically, as discussed in section IV.A.3.d.(1)(e) of this rule, we are finalizing to add 1 new administrative claims outcome measure, remove 13 quality measures, and make substantive updates to 87 quality measures. We do not anticipate that our provision to remove these measures will increase or decrease the reporting burden on clinicians and groups as respondents generally are still required to submit quality data for 6 measures.

For the change in associated burden related to the provisions introducing MVP and subgroup reporting beginning in the CY 2023 performance period/2025 MIPS payment year, we refer readers to Table 99 of this section. (3) Quality Payment Program Identity Management Application Process This rule is not implementing any new or revised collection of information requirements or burden related to the identity management application process. The requirements and burden are currently approved by OMB under control number 0938-1314 (CMS-10621). Consequently, we are not making any changes to the identity management application process under that control number. (4) Quality Data Submission by Clinicians.

Medicare Part B Claims-Based Collection Type This rule is not implementing any new or revised collection of information requirements related to the submission of Medicare Part B claims data for the quality performance category. However, we are adjusting our currently approved burden estimates based on more recent data. For the change in associated burden related to the provisions introducing MVP and subgroup reporting beginning in the CY 2023 performance period/2025 MIPS payment year, we refer readers to Table 99 of this section. The following burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77501 through 77504), CY 2018 Quality Payment Program final rule (82 FR 53912), CY 2019 PFS final rule (83 FR 60004 through 60005), CY 2020 PFS final rule (84 FR 63124 through 63126) and the CY 2021 PFS final rule (85 FR 84975 through 84976) for our previously finalized requirements and burden for quality data submission via the Medicare Part B claims collection type.

As noted in Table 88, based on data from the CY 2019 performance period/2021 MIPS payment year, we assume that 28,252 individual clinicians will collect and submit quality data via the Medicare Part B claims collection type. In this rule, we are finalizing to adjust the number of Medicare Part B claims respondents from the currently approved estimate of 29,273 to 28,252 (a decrease of 1,021) based on more recent data and our methodology of accounting only for clinicians in small practices who submitted such claims data in the CY 2019 performance period/2021 MIPS payment year rather than all clinicians who submitted quality data codes to us for the Medicare Part B claims collection type. As shown in Table 91, consistent with our currently approved per response time figures, we estimate that the burden of quality data submission using Medicare Part B claims will range from 0.15 hours (9 minutes) for a computer systems analyst at a cost of $14.28 (0.15 hr × $95.22/hr) to 7.2 hours for a computer systems analyst at a cost of $685.58 (7.2 hr × $95.22/hr). The burden will involve becoming familiar with MIPS quality measure specifications. Consistent with our currently approved per response time figures, we believe that the start-up cost for a clinician's practice to review measure specifications is 7 hours, consisting of 3 hours at $114.24/hr for a medical and health services manager, 1 hour at $217.32/hr for a physician, 1 hour at $48.16/hr for an LPN, 1 hour at $95.22/hr for a computer systems analyst, and 1 hour at $40.02/hr for a billing and posting clerk.

We are not revising our currently approved per response time estimates. As shown in Table 91, considering both data submission and start-up requirements for our adjusted number of clinicians, the estimated time (per clinician) ranges from a minimum of 7.15 hours (0.15 hr + 7 hr) to a maximum of 14.2 hours (7.2 hr + 7 hr). In this regard the total annual time for the CY 2022 performance period/2024 MIPS payment year ranges from 202,002 hours (7.15 hr × 28,252 clinicians) to 401,178 hours (14.2 hr × 28,252 clinicians). The estimated annual cost (per clinician) ranges from $758 [(0.15 hr × $95.22/hr) + (3 hr × $114.24/hr) + (1 hr × $95.22/hr) + (1 hr × $48.16/hr) + (1 hr × $40.02/hr) + (1 hr × $217.32/hr)] to a maximum of $1,429.02 [(7.2 hr × $95.22/hr) + (3 hr × $114.24/hr) + (1 hr × $95.22/hr) + (1 hr × $48.16/hr) + (1 hr × $40.02/hr) + (1 hr × $217.32/hr)]. The total annual cost for the CY 2022 performance period/2024 MIPS payment year ranges from a minimum of $21,407,105 (28,252 clinicians × $758) Start Printed Page 65583 to a maximum of $40,372,673 (28,252 clinicians × $1,429.02).

As shown in Table 91, for purposes of calculating total burden associated with the Claims collection type for the CY 2023 performance period/2025 MIPS payment year only the maximum burden is used. The decrease in the number of annual respondents results in an estimated total annual time of 361,063 hours (14.2 hr × 25,427 clinicians) for the CY 2023 performance period/2025 MIPS payment year. Using the currently approved unchanged estimate for cost per respondent, the total annual cost for the CY 2023 performance period/2025 MIPS payment year is $36,335,692 (25,427 clinicians × $1,429.02 per respondent). Table 91 summarizes our estimated range of total annual burden associated with clinicians submitting quality data via Medicare Part B claims for both the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years. As shown in Table 91, using the unchanged currently approved hours per respondent, we estimate that the burden per respondent for quality data submission using the Medicare Part B Claims collection type will range from $758 to $1,429.02.

The decrease in number of respondents from 29,273 to 28,252 results in a total adjustment of between −7,300 hours (−1,021 respondents × 7.15 hr/respondent) at a cost of −$773,918 (−1,021 respondents × $758/respondent) and −14,498 hours (−1,021 respondents × 14.2 hr/respondent) at a cost of −$1,459,029 (−1,021 respondents × $1,429.02/respondent). For purposes of calculating total burden associated with this final rule as shown in Tables 125, 126, 127, and 128, only the maximum burden is used. As shown in Table 92, for purposes of calculating total burden associated the CY 2023 performance period/2025 MIPS payment year only the maximum burden is used. We are setting forth our CY 2023 performance period/2025 MIPS payment year estimate as new burden, which results in an increase of 361,063 hours (25,427 respondents × 14.2 hr/respondent) at a cost of $36,355,692 (25,427 respondents × $1,429/respondent). Start Printed Page 65584 (5) Quality Data Submission by Individuals and Groups Using MIPS CQM and QCDR Collection Types The following requirement and burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621).

We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77504 through 77505), CY 2018 Quality Payment Program final rule (82 FR 53912 through 53914), CY 2019 PFS final rule (83 FR 60005 through 60006), CY 2020 PFS final rule (84 FR 63127 through 63128), CY 2021 PFS final rule (85 FR 84977 through 84979) for our previously finalized requirements and burden for quality data submission via the MIPS CQM and QCDR collection types. For the change in associated burden for quality data submission related to the provisions introducing MVP and subgroup reporting beginning in the CY 2023 performance period/2025 MIPS payment year, we refer readers to Table 99. As noted in Tables 84, 85, and 86, and based on data from the CY 2019 performance period/2021 MIPS payment year, for the CY 2022 performance period/2024 MIPS payment year, we assume that 279,247 clinicians will submit quality data as individuals or groups using MIPS CQM or QCDR collection types. 52,036 clinicians will submit as individuals and the remaining 279,223 clinicians will submit as members of 11,527 groups and virtual groups. This is an increase of 10,696 individuals and a decrease of 32 groups from the estimates of 41,340 individuals and the 11,559 groups provided in the CY 2021 PFS final rule (85 FR 84977).

Given that the number of measures required for clinicians and groups is the same, we expect the burden to be the same for each respondent collecting data via MIPS CQM or QCDR, whether the clinician is participating in MIPS as an individual or group. Under the MIPS CQM and QCDR collection types, the individual clinician or group may either submit the quality measures data directly to us, log in and upload a file, or utilize a third-party intermediary to submit the data to us on the clinician's or group's behalf. We estimate that the burden associated with the QCDR collection type is similar to the burden associated with the MIPS CQM collection type. Therefore, we discuss the burden for both together below. For MIPS CQM and QCDR collection types, we estimate an additional time for respondents (individual clinicians and groups) to become familiar with MIPS quality measure specifications and, in some cases, specialty measure sets and QCDR measures.

Therefore, we believe that the burden for an individual clinician or group to review measure specifications and submit quality data is total of 9 hours at a cost of $922.76 per response. This consists of 3 hours at $95.22/hr for a computer systems analyst (or their equivalent) to submit quality data along with 2 hours at $114.24/hr for a medical and health services manager, 1 hour at $95.22/hr for a computer systems analyst, 1 hour at $48.16/hr for an LPN, 1 hour at $40.02/hr for a billing clerk, and 1 hour at $217.32/hr for a physician to review measure specifications. Additionally, clinicians and groups who do not submit data directly will need to authorize or instruct the qualified registry or QCDR to submit quality measures' results and numerator and denominator data on quality measures to us on their behalf. We estimate that the time and effort associated with authorizing or instructing the quality registry or QCDR to submit this data will be approximately 5 minutes (0.083 hours) at $95.22/hr for a computer systems analyst at a cost of $7.90 (0.083 hr × $95.22/hr). Overall, we estimate 9.083 hr/response (3 hr + 2 hr + 1 hr + 1 hr + 1 hr + 1 hr + 0.083 hr) at a cost of $922.76/response [(3 hr × $95.22/hr) + (2 hr × $114.24/hr) + (1 hr × $217.32/hr) + (1 hr × $95.22/hr) + (1 hr × $48.16/hr) + (1 hr × $40.02/hr) + (0.083 hr × $95.22/hr)].

For the CY 2022 performance period/2024 MIPS payment year, in aggregate, we estimate a burden of 472,643 hours [9.083 hr/response × (40,507 clinicians submitting as individuals + 11,527 groups submitting via QCDR or MIPS CQM on behalf of individual clinicians or 52,036 responses)] at a cost of $ $48,016,739 (52,036 responses × $922.76/response). For the CY 2023 performance period/2025 MIPS payment year, in aggregate, we estimate a burden of 425,902 hours [9.083 hr/response × (36,456 clinicians submitting as individuals + 10,434 groups submitting via QCDR or MIPS CQM on behalf of individual clinicians or 46,890 responses)] at a cost of $43,268,216 (46,890 responses × $922.76/response). Based on these assumptions, we have estimated in Start Printed Page 65585 Table 93 the burden for these submissions. As shown in Table 94, using the unchanged currently approved hours per respondent burden estimate, the decrease of 913 respondents from 52,944 to 52,036 for the CY 2022 performance period/2024 MIPS payment year results in a decrease of −8,247 hours (−908 respondents × 9.083 hr/respondent) and −$837,866 (908 respondents × $922.76/respondent). We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 425,902 hours (46,890 respondents × 9.083 hr/respondent) and $43,268,216 (46,890 respondents × $922.76/respondents).

Start Printed Page 65586 (6) Quality Data Submission by Clinicians and Groups. ECQM Collection Type The following requirements and burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77505 through 77506), CY 2018 Quality Payment Program final rule (82 FR 53914 through 53915), CY 2019 PFS final rule (83 FR 60006 through 60007), CY 2020 PFS final rule (84 FR 63128 through 63130) and the CY 2021 PFS final rule (85 FR 84979 through 84980) for our previously finalized requirements and burden for quality data submission via the eCQM collection types. For the change in associated burden for quality data submission related to the provisions introducing MVP and subgroup reporting beginning in the CY 2023 performance period/2025 MIPS payment year, we refer readers to Table 99 of this section. Based on CY 2019 performance period/2021 MIPS payment year data, for the CY 2022 performance period/2024 MIPS payment year, we assume that 322,392 clinicians will elect to use the eCQM collection type.

40,446 clinicians are expected to submit eCQMs as individuals. And 8,127 groups and virtual groups are expected to submit eCQMs on behalf of the remaining 273,819 clinicians. This is a decrease of 2,109 individuals and 27 groups from the estimates of 42,555 individuals and 8,154 groups provided in the CY 2021 PFS final rule (85 FR 84979). We expect the burden to be the same for each respondent using the eCQM collection type, whether the clinician is participating in MIPS as an individual or group. Under the eCQM collection type, the individual clinician or group may either submit the quality measures data directly to us from their eCQM, log in and upload a file, or utilize a third-party intermediary to derive data from their CEHRT and submit it to us on the clinician's or group's behalf.

To prepare for the eCQM collection type, the clinician or group must review the quality measures on which we will be accepting MIPS data extracted from eCQMs, select the appropriate quality measures, extract the necessary clinical data from their CEHRT, and submit the necessary data to a QCDR/qualified registry or use a health IT vendor to submit the data on behalf of the clinician or group. We assume the burden for collecting quality measures data via eCQM is similar for clinicians and groups who submit their data directly to us from their CEHRT and clinicians and groups who use a health IT vendor to submit the data on their behalf. This includes extracting the necessary clinical data from their CEHRT and submitting the necessary data to a QCDR/qualified registry. We estimate that it will take no more than 2 hours at $95.22/hr for a computer systems analyst to submit the actual data file. The burden will also involve becoming familiar with MIPS quality measure specifications.

In this regard, we estimate it will take 6 hours for a clinician or group to review measure specifications. Of that time, we estimate 2 hours at $114.24/hr for a medical and health services manager, 1 hour at $217.32/hr for a physician, 1 hour at $95.22/hr for a computer systems analyst, 1 hour at $48.16/hr for an LPN, and 1 hour at $40.02/hr for a billing clerk. Overall, we estimate a cost of $812.76/response [(2 hr × $95.22/hr) + (2 hr × $114.24/hr) + (1 hr × $217.32/hr) + (1 hr × $95.22/hr) + (1 hr × $48.16/hr) + (1 hr × $40.02/hr)]. For the CY 2022 performance period/2024 MIPS payment year, in aggregate, we estimate a burden of 388,584 hours [8 hr × 48.573 (40,446 clinicians + 8,127 groups and virtual groups)] at a cost of $39,812,374 (48,573 responses × $819.64/response). For the CY 2023 performance period/2025 MIPS payment year, in aggregate, we estimate a burden of 350,186 hours [8 hr × 43,773 (36,401 clinicians + 7,372 groups and virtual groups)] at a cost of $35,878,102 (43,773 responses × $819.64/response).

Based on these assumptions, we have estimated in Table 95 the burden for these submissions. Start Printed Page 65587 As shown in Table 96, using the unchanged currently approved hours per respondent burden estimate, the decrease of 1,902 respondents from 50,475 to 48,573 for the CY 2022 performance period/2024 MIPS payment year results in a total difference of ×15,216 hours at a cost of ×$1,558,955. For CY 2023 performance period/2025 MIPS payment year, we are setting forth our estimate as new burden, which represents an increase of 350,184 hours (43,773 respondents × 8 hr/respondent) and $35,878,102 (43,773 respondents × $819.64/respondent). Start Printed Page 65588 (7) ICRs Regarding Burden for MVP Reporting Section IV.A.3.b.(2)(d) of this rule describes provisions related to implementing MVPs beginning with the CY 2023 performance period/2025 MIPS payment year. The MVPs will include the Promoting Interoperability performance category as a foundational element and incorporate population health claims-based measures, as feasible, along with the relevant measures and activities in the quality, cost, and improvement activities performance categories.

For the CY 2023 performance period/2025 MIPS payment year, we are finalizing an inventory of seven MVPs included in Appendix 3. MVP Inventory of this rule to assess performance across MVPs for the quality, cost, improvement activities, and Promoting Interoperability performance categories. Additionally, in section IV.A.3.b.(2)(b)(i) of this rule, we are finalizing to use the term “MVP Participant” to refer to clinicians who will choose to participate in MIPS for reporting MVPs. The following new ICRs reflect the burden associated with the first year of data collection related to the implementation of MVPs and subgroup reporting in the CY 2023 performance period/2025 MIPS payment year as described in section IV.A.3.b.(2)(c) of this rule. The requirements and burden associated with the implementation of MVPs and subgroups will be submitted to OMB for approval under control number 0938-1314 (CMS-10621).

While MVP respondents report on all performance categories, we believe that for purposes of data submission, the burden for clinicians submitting information for the Promoting Interoperability and improvement activities performance categories of MVPs will be consistent with the currently approved estimated burden per respondent for clinicians submitting data for these performance categories in traditional MIPS. We acknowledge that clinicians participating through MVPs will have fewer requirements to meet for the improvement activity performance category as discussed in section IV.A.3.b.(4)(d)(iv) of this final rule. We assume that these requirement changes will not significantly lower the burden for clinicians reporting MVPs. Therefore, we will not add additional ICRs to capture the burden for the Promoting Interoperability and Improvement Activity performance categories. For this rule, we are finalizing to create a separate ICR for estimating the burden associated with data submission for the Quality performance category of MVPs.

We considered whether we should have a separate ICR to estimate burden for submission of measures and activities in the Promoting Interoperability performance category of MVPs. Based on our assumption above that the burden for clinicians submitting information for these performance categories of MVPs will be consistent with the currently approved estimated burden per respondent for clinicians submitting data in traditional MIPS, we anticipate that the separate ICRs will not be of value to clinicians. We solicited comment on our proposal to distinctly estimate burden only for data submission in the Quality performance category of MVPs and whether we should revise the MVP submission ICR to include all the four MIPS performance categories and whether our assumptions on Promoting Interoperability and Improvement Activities should be modified for MVPs. We did not receive public comments on this provision. We are finalizing as proposed.

(a) Burden for MVP Quality Submission In section IV.A.3.b.(4)(d)(ii) of this rule, we are finalizing to implement voluntary MVP reporting beginning with the CY 2023 performance period/2025 MIPS payment year. Therefore, clinicians participating in MIPS will have the option to voluntarily submit data using MVPs starting with the CY 2023 performance period/2025 MIPS payment year. While we recognize the implementation of MVPs in MIPS will result in a burden for registration, we also assume that MVP reporting will result in a decline in burden for MVP participants due to the finalized changes in the MVP reporting requirements described in section IV.A.3.b.(4)(d) of this rule. We anticipate that the clinicians choosing to participate in MIPS for reporting MVPs will need to select from a reduced inventory of measures and activities for the quality and improvement activities performance categories. This reduction in burden is described in the quality, improvement activities and Promoting Interoperability performance categories sections below.

For the ICRs related to MVP participants, we used the MIPS submission data from the CY 2019 performance period/2021 MIPS payment year. Based on our review of the inventory of 7 MVPs in Appendix 3. MVP Inventory of this rule and the existing submission trends in MIPS for the measures and activities included in these MVPs, we anticipate that 10 percent of the clinicians who participate in traditional MIPS in the CY 2022 performance period/2024 MIPS payment year will report MVPs in the CY 2023 performance period/2025 MIPS payment year. Given that MVPs are new, voluntary, and represent a Start Printed Page 65589 reduction in burden per response, we believe that we should be conservative in estimating the number of clinicians submitting through MVPs during the initial year. Given that MVPs are a new mechanism available for clinicians, we believe that initial participation numbers will be relatively low.

In an effort to be conservative in our estimate of burden reduction due to MVP reporting and reflect the anticipate low uptake by clinicians in the first year of MVP availability, we assume that a total of 10 percent of MIPS submitters will become MVP participants in the CY 2023 performance period/2025 MIPS payment year. As described in section IV.A.3.b.(2)(c)(ii) of this rule, beginning with the CY 2023 performance period/2025 MIPS payment year, we are finalizing voluntary subgroup reporting within MIPS limited to clinicians reporting the MVP or the APP. We recognize the implementation of subgroups for clinicians to participate in MVP and APP reporting in MIPS will result in additional burden. However, we believe that subgroup participation option will allow clinicians in certain specialties and subspecialties to report on measures and activities meaningful to the scope of care provided. We anticipate that public reporting of subgroup performance information will allow patients to identify clinicians in multispecialty groups that are representative of the care specific to their clinical condition.

Clinician participation in subgroups is new to MIPS and we do not have any historical participation data to estimate the submission burden for clinicians who will choose to participate as subgroups for reporting the MVP or the APP. We refer readers to section IV.A.3.b.(3) of this final rule for details on the provisions related to subgroup composition. We anticipate that the subgroup reporting option will increase reporting and allow clinicians in specialties to report on measures and activities meaningful to their practice. Due to the delay in implementation of subgroup reporting in the CY 2023 performance period/2025 MIPS payment year, we anticipate that there is an adequate amount of time for clinicians that historically participate in MIPS to determine if they will be able to participate as subgroups for reporting on the measures and activities in an MVP. However, due to the limited number of MVPs available for clinicians to choose, the additional burden involved in reporting, and also given the voluntary option to participate as subgroups for reporting the MVPs or the APP, we anticipate that a relatively small number of clinicians will choose to participate as subgroups in the CY 2023 performance period/2025 MIPS payment year.

Therefore, we assume there will be 20 subgroups reporters in the CY 2023 performance period/2025 MIPS payment year. We assume that more clinicians will choose to participate as subgroups in future years. We solicited comment on our MVP and subgroup reporting assumptions for the CY 2023 performance period/2025 MIPS payment year. We received public comments on our MVP and subgroup reporting assumptions for the CY 2023 MIPS performance period/2025 MIPS payment year. The following is a summary of the comments we received and our responses.

Comment. One commenter stated that our estimate that 10 percent of eligible clinicians would report as MVP participants in the first year of implementation is low. The commenter shared their belief that the number of MVP participants would be higher because of the reduced reporting burden associated with MVP reporting. Response. We thank the commenter for their feedback.

We acknowledge the commenter's concern that our assumptions for MVP reporting are low. We agree with the commenter that MVP reporting is associated with a reduction in reporting burden. However, we believe that our estimates are appropriate because there would be a limited number of MVPs available for all clinicians during the CY 2023 performance period/2025 MIPS payment year. We expect that there would be increased participation in MVP reporting as more MVPs become available for clinicians in future years. We plan to revise our estimates for future years as more data becomes available.

After consideration of public comments, we are finalizing our proposed estimate for the number of MIPS eligible clinicians that would participate in MVP reporting during the CY 2023 performance period/2025 MIPS payment year. (i) Burden for MVP Registration. Individuals, Groups and APM Entities Beginning with the CY 2023 performance period/2025 MIPS payment year, we are finalizing that clinicians interested in participating in MIPS through MVP reporting would be required to complete an annual registration process described in section IV.A.3.b.(4)(f) of this rule. At the time of registration, MVP participants would need to select a specific MVP, a population health measure and if administrative claims measures are included in the selected MVP, the MVP participants would also need to choose an applicable administrative claims measure in the MVP. We refer readers to section IV.A.3.b.(4)(f) of this rule for additional details on MVP registration requirements.

Due to the delay in implementation of MVPs to the CY 2023 performance period/2025 MIPS payment year, we anticipate that there is an adequate amount of time for clinicians that historically participate in MIPS to determine if the measures and activities in an MVP are applicable to the scope of care provided. In Table 97, we estimate that the registration process for clinicians choosing to submit MIPS data for the measures and the activities in an MVP would require 0.25 hours of a computer systems analyst's time, similar to the currently approved burden of group registration process for CMS Web Interface finalized in the CY 2021 PFS final rule (85 FR 84983) for the CY 2023 performance period/2025 MIPS payment year. We assume that the staff involved in the MVP registration process will mainly be computer systems analysts or their equivalent, who have an average labor cost of $95.22/hour. As discussed above, based on data from the CY 2019 performance period/2021 MIPS payment year, we assume that approximately 10 percent of the clinicians that currently participate in MIPS would submit data for the measures and activities in an MVP. Note that we apply this 10 percent calculation after adding the clinicians who begin submitting though the CQM and eCQM collection types due to the sunset of Web Interface in the CY 2023 performance period/2025 MIPS payment year.

For the CY 2023 performance period/2025 MIPS payment year, we assume that a total of 25,798 submissions will be received for the measures and activities included in MVPs. This total includes our estimate of 20 subgroup reporters that would also be reporting MVPs in addition to MVP reporters who currently participate in MIPS. Therefore, we assume that the total number of individual clinicians, groups, subgroups and APM Entities to complete the MVP registration process is 12,917. We estimate that the total cost to clinicians participating as individuals and groups associated with the MVP registration process would be approximately $307,465. Table 97 includes our burden assumptions related to the MVP registration process for clinicians participating in MIPS for Start Printed Page 65590 reporting MVPs as individuals, groups, subgroups, and APM Entities.

(ii) Burden for Subgroup Registration We are finalizing the proposal to add a separate ICR to estimate the burden associated with subgroup registration to capture the subgroup registration requirements in section IV.A.3.b.(4)(f)(ii)(D) of this rule. In section IV.A.3.b.(3)(b)(ii) of this rule, we finalized the definition of a subgroup at § 414.1305 as a subset of a group, as identified by a combination of the group TIN, the subgroup identifier, and each eligible clinician's NPI. In addition to the burden for MVP registration process described above, clinicians who choose to form subgroups for reporting the MVPs or the APP will need to submit a list of each TIN/NPI associated with the subgroup and a plain language name for the subgroup in a manner specified by CMS, described in section IV.A.3.b.(4)(f)(ii)(D) of this rule. As discussed above, we estimate that clinicians will choose to form 20 subgroups for reporting the measures and activities in MVPs. Additionally, we estimate that clinicians who choose to participate as subgroups for reporting MVPs will require a minimum of 0.5 hours per subgroup respondent to submit the finalized requirements for subgroup registration.

We assume that the staff involved in the subgroup registration process will mainly be computer systems analysts or their equivalent, who have an average labor cost of $95.22/hr. We assume that all subgroups would report MVPs, the burden associated with subgroup quality reporting will be included with the MVP quality reporting ICR. The burden associated with subgroup submissions for Promoting Interoperability and improvement activities will be included with those ICRs. (iii) Burden for MVP Quality Performance Category Submission In the CY 2017 PFS final rule (81 FR 77100 through 77114), we established the submission criteria for quality measures (excluding the CMS Web Interface measures and the CAHPS for MIPS survey measure) at § 414.1335, which requires a MIPS eligible clinician, group, or virtual group that is reporting on Qualified Clinical Data Registry (QCDR) measures, MIPS clinical quality measures (MIPS CQMs), electronic CQMs (eCQMs), or Medicare Part B claims measures to submit data on at least six measures, including at least one outcome measure. As discussed in section IV.A.3.b.(4)(d)(ii) of this final rule, we finalized the proposal that except as provided in paragraph Start Printed Page 65591 § 414.1365(c)(1)(i), an MVP Participant must select and report 4 quality measures, including 1 outcome measure (or, if an outcome measure is not available, 1 high priority measure, included in the MVP.

The decrease in the number of required measures in the quality performance category from 6 to 4 is a two-thirds reduction in the number of measures needed for eligible clinicians to submit data for the quality performance category in MVPs described in Appendix 3. MVP Inventory of this final rule. Therefore, we estimate that the time for submitting the measures in the MVP quality performance category would, on average, take two-thirds of the currently approved burden per respondent for the quality performance category as it does to complete a MIPS quality submission through the CQM, eCQM, and Claims submission types. As described above in this section of the final rule, we estimate that 10 percent of the clinicians who participated in MIPS for the CY 2019 performance period/2021 MIPS payment year would submit data for the quality performance category of MVPs beginning with the CY 2023 performance period/2025 MIPS payment year. We anticipate that there would be 20 subgroups reporters in the CY 2023 performance period/2025 MIPS payment year.

As shown in Table 99, we estimate that approximately 2,825 clinicians would submit data for the MVP quality performance category using the Medicare Part B claims collection type. Approximately 5,210 clinicians and 10 subgroups would submit data using MIPS CQM and QCDR collection type. And approximately 4,862 clinicians and 10 subgroups would submit data using eCQMs collection type. We want to note that we used the same methodologies used in sections V.B.8.e.(4), V.B.8.e.(5) and V.B.8.e.(6) to estimate the quality submission burden for each collection type. As shown in Table 99, for the clinicians and subgroups submitting data for the MVP quality performance category, we estimate a burden of 26,670 hours (9.44 hr × 2,825 clinicians) at a cost of $2,691,329 (2,825 respondents × 952.68/respondent) for the Medicare Part B claims collection type, 31,163 hours [5.97 hr × 5,220 (5,210 + 10)] at a cost of $3,211,216 (5,220 × 615.18/respondent) for the MIPS CQM and QCDR collection type, and 25,822 hours [5.3 hr × 4,872 (4,862 + 10) respondents] at a cost of $2,662,191 (4,872 × 546.43/respondent) for the eCQM collection types.

Start Printed Page 65592 (8) Quality Data Submission via CMS Web Interface The finalized requirements and burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). Background In the CY 2021 PFS final rule, we finalized our policy to sunset the CMS Web Interface measures as a collection type/submission type starting with the CY 2022 performance period/2024 MIPS payment year. As a result of this provision, for the CY 2022 performance period/2024 MIPS payment year, we estimated a burden of zero due to our assumption that all Web Interface respondents will alternately utilize either the MIPS CQM and QCDR or eCQM collection types (85 FR 84981). In section IV.A.3.d.(1)(d) of this rule, we are finalizing to continue the CMS Web Interface measures as a collection type for the CY 2022 performance period/2024 MIPS payment year. Additionally, we are finalizing to sunset the CMS Web Interface measures as a collection type for the CY 2023 performance period/2025 MIPS payment year.

For this final rule, we estimate burden for the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years. For the CY 2022 performance period/2024 MIPS payment year, we assume that 114 groups will submit quality data via the CMS Web Interface based on the number of groups who completed 100 percent of reporting quality data via the Web Interface in the CY 2019 performance period/2021 MIPS payment year. This is an increase of 114 groups from the currently approved number of 0 groups provided in the CY 2021 PFS final rule (85 FR 84981 due to the provision to continue with the CMS Web Interface as a collection type for the CY 2022 performance period/2024 MIPS payment year. We estimate that 44,385 clinicians will submit as part of groups via this method, an increase of 44,385 from our currently approved estimate of 0 clinicians. The estimated burden associated with the group submission requirements is the time and effort associated with submitting data on a sample of the organization's beneficiaries that is Start Printed Page 65593 prepopulated in the CMS Web Interface.

Our burden estimate for submission includes the time (61 hours and 40 minutes or 61.67 hours) needed for each group to populate data fields in the web interface with information on approximately 248 eligible assigned Medicare beneficiaries and submit the data (we will partially pre-populate the CMS Web Interface with claims data from their Medicare Part A and B beneficiaries). The patient data either can be manually entered, uploaded into the CMS Web Interface via a standard file format, which can be populated by CEHRT, or submitted directly. Each group must provide data on 248 eligible assigned Medicare beneficiaries (or all eligible assigned Medicare beneficiaries if the pool of eligible assigned beneficiaries is less than 248) for each measure. In aggregate, we estimate a burden for the CY 2022 performance period/2024 MIPS payment year of 7,030 hours (114 groups × 61.67 hr) at a cost of $669,433 (114 groups × $5,872.21/group). For the CY 2023 performance period/2025 MIPS payment year, we are finalizing to revise our estimated burden to zero due to our assumption that with the finalized policy to sunset the CMS Web Interface as a collection type, all Web Interface respondents will alternately utilize either the MIPS CQM and QCDR or eCQM collection types.

Based on the assumptions discussed in this section, Table 100 summarizes the finalized estimated burden for groups submitting to MIPS via the CMS Web Interface. (9) Beneficiary Responses to CAHPS for MIPS Survey This rule is not implementing any new or revised collection of information requirements or burden related to the CAHPS for MIPS survey. The CAHPS for MIPS survey requirements and burden are currently approved by OMB under control number 0938-1222 (CMS-10450). Consequently, we are not making any changes to the CAHPS for MIPS Survey process under that control number. (10) Group Registration for CMS Web Interface The finalized requirements and burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621).

In the CY 2021 PFS final rule, we finalized to sunset the CMS Web Interface measures as a collection type/submission type starting with the CY 2022 performance period/2024 MIPS payment year. As a result, we estimated that there will be zero hours and $0 burden for group registration for the CMS Web Interface for the CY 2022 performance period/2024 MIPS payment year (85 FR 84984). As discussed in section IV.A.3.d.(1)(d) of this final rule, we are finalizing to continue the CMS Web Interface measures as a collection type for the CY 2022 performance period/2024 MIPS payment year. We are also finalizing to sunset the CMS Web Interface as a collection type starting with the CY 2023 performance period/2025 MIPS payment year. Start Printed Page 65594 Groups interested in participating in MIPS using the CMS Web Interface for the first time must complete an online registration process.

After first time registration, groups will only need to opt out if they are not going to continue to submit via the CMS Web Interface. In Table 102, we estimate that the registration process for groups under MIPS involves approximately 0.25 hours at $95.22/hr for a computer systems analyst (or their equivalent) to register the group. Because we are finalizing to sunset the CMS Web Interface beginning with the CY 2023 performance period/2025 MIPS payment year, it is possible that fewer groups will elect to register to submit quality data for the first time in the performance year prior to the collection type/submission type no longer being available. However, we currently have no data with which to estimate what the associated reduction may be. Consistent with our assumptions in the CY 2021 PFS final rule (85 FR 84983), we continue to assume that approximately 90 groups will elect to use the CMS Web Interface for the first time during the CY 2022 performance period/2025 MIPS payment year based on the estimated number of new registrations during the CY 2021 performance period/2023 MIPS payment year.

As shown in Table 102, we estimate a burden of 23 hours (90 new registrations × 0.25 hr/registration) at a cost of $2,190 (22.5 hr × $95.22/hr). As shown in Table 103, the estimated increase in the number of groups registering for the CMS Web Interface collection type to submit the MIPS data and the estimated increase in burden per respondent results in adjustment to the total time burden of +23 hours (+90 respondents × 0.25 hr/respondent) at a cost of $2,190 for the CY 2022 performance period/2024 MIPS payment year. For the CY 2023 performance period/2025 MIPS payment year, our finalized burden estimate is zero hours and $0. (11) Group Registration for CAHPS for MIPS Survey This rule is not implementing any new or revised collection of information requirements or burden related to the group registration for the CAHPS for MIPS Survey. The CAHPS for MIPS survey requirements and burden are currently approved by OMB under control number 0938-1222 (CMS-10450).

Consequently, we are not making any changes to the CAHPS for MIPS Survey registration process under that control number. F. ICRs Regarding the Call for MIPS Quality Measures This rule is not implementing any new or revised collection of information requirements or burden related to the call for MIPS quality measures. However, outside of the rulemaking process we replaced the existing tool for stakeholders beginning with the 2021 Annual Call for Measures. As described below, to account for the updated tool (MERIT), we are finalizing to revise our currently approved burden estimates.

The updated tool and revised burden will be submitted to OMB under control number 0938-1314 (CMS-10621). Beginning with the 2021 Annual Call for Measures, we replaced the customary Office of the National Coordinator (ONC) Issue Tracking System Jira platform that stakeholders Start Printed Page 65595 used to submit candidate quality measure specifications and all supporting data files for CMS review with the MUC Entry/Review Information Tool (MERIT). For the ONC Issue Tracking System Jira platform used by stakeholders, the approved estimated time for a practice administrator to identify, propose, and link to a quality measure is 0.9 hours and for a clinician to identify, propose, link to quality measure, and complete the Peer Review Journal Article form is 4.6 hours (0.6 hours to identify, propose, and link to quality measure (84 FR 63132) and 4 hours to complete the Peer Review Journal Article Form (84 FR 63133), with a total estimated time of 5.5 hours per quality measure submission. Based on the stakeholder experience with the updated tool and additional information collected at the time of submission, we estimate that it will add approximately 1.5 hours for the practice administrator at $114.24/hr and 0.5 hours at $217.32/hr for a clinician to identify, propose, and link the quality measure, and reduce approximately 2 hours at $217.32/hr for a clinician to complete the Peer Review Journal Article Form, resulting in a new estimated time of 2.4 hours for a practice administrator and 3.1 hours for a clinician, and an unchanged total estimated time of 5.5 hours per quality measure submission. In order to account for the implementation of the MERIT tool starting with the 2021 Annual Call for Measures, we are revising the estimated time required for a practice administrator to identify, propose, and link to a quality measure to 2.4 hours (from 0.9 hr) and a clinician to identify, propose, link to quality measure, and complete the Peer Review Journal Article Form to 3.1 hours (from 4.6 hr), resulting in a total estimated time of 5.5 hours per quality measure submission.

Based on the number of submissions received during the CY 2020 Call for Quality Measures process, we anticipate receiving the same number of 28 submissions during the CY 2021 Call for Quality Measures process (84 FR 63132). Although the total estimated time of 5.5 hours for completing a quality measure submission using the MERIT tool (see Table 104) is the same estimated time as the ONC Issue Tracking System Jira platform, we need to account for the changes to the individual components of the estimated time required by a practice administrator and clinician using the MERIT tool. Consistent with our assumptions in the CY 2021 PFS final rule (85 FR 84984), we estimate an annual burden of 154 hours (28 submissions × 5.5 hr/measure). Thus, we are finalizing to adjust our estimated annual burden from $30,197 (28 submissions × [(0.9 hr × $110.74/hr) + (4.6 hr × $212.78/hr)) to $26,541 (28 measures × [(2.4 hr × $114.24/hr) + (3.1 hr × $217.32/hr)]) a difference of −$4,329 for the CY 2022 performance period/2024 MIPS payment year. As shown in Table 105, using our currently approved burden estimates, the redistribution of the estimated time needed for the clinician and practice administrator as discussed above, we are estimating an adjustment of 0 hours at a cost of −$4,329 for the CY 2022 performance period/2024 MIPS payment year.

We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of $26,541 (28 measures × $947.89/respondent). Start Printed Page 65596 g. ICRs Regarding Promoting Interoperability Data (§§ 414.1375 and 414.1380) (1) Background For the CY 2022 performance period/2024 MIPS payment year, clinicians and groups can submit Promoting Interoperability data through direct, log in and upload, or log in and attest submission types. With the exception of submitters who elect to use the log in and attest submission type for the Promoting Interoperability performance category, which is not available for the quality performance category, we anticipate that individuals and groups will use the same data submission type for both of these performance categories and that the clinicians, practice managers, and computer systems analysts involved in supporting the quality data submission will also support the Promoting Interoperability data submission process. The following burden estimates show only incremental hours required above and beyond the time already accounted for in the quality data submission process.

Although this analysis assesses burden by performance category and submission type, we emphasize that MIPS is a consolidated program and submission analysis, and decisions are expected to be made for the program as a whole. (2) Reweighting Applications for Promoting Interoperability and Other Performance Categories The finalized requirements and burden associated with this rule's data submission will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2018 Quality Payment Program final rule (82 FR 53918 through 53919), CY 2019 PFS final rule (83 FR 60011 through 60012), CY 2020 PFS final rule (84 FR 63134 through 63135), and the CY 2021 PFS final rule (85 FR 84984 through 84985) for our previously finalized requirements and burden for reweighting applications for Promoting Interoperability and other performance categories. As established in the CY 2017 and CY 2018 Quality Payment Program final rules, MIPS eligible clinicians who meet the criteria for a significant hardship or other type of exception may submit an application requesting a zero percent weighting for the Promoting Interoperability, quality, cost, and/or improvement activities performance categories under specific circumstances (81 FR 77240 through 77243, 82 FR 53680 through 53686, and 82 FR 53783 through 53785). Respondents who apply for a reweighting of the quality, cost, and/or improvement activities performance categories have the option of applying for reweighting of the Promoting Interoperability performance category on the same online form.

We assume that respondents applying for a reweighting of the Promoting Interoperability performance category due to extreme and uncontrollable circumstances will also request a reweighting of at least one of the other performance categories simultaneously and not submit multiple reweighting applications. Table 106 summarizes the burden for clinicians to apply for reweighting of the Promoting Interoperability performance category to zero percent due to a significant hardship exception or as a result of a decertification of an EHR. Based on the number of reweighting applications received by March, 2021 for the CY 2020 performance period/2022 MIPS payment year, we assume 20,192 respondents (eligible clinicians or groups) will submit a request to reweight the Promoting Interoperability performance category to zero percent due to a significant hardship or EHR decertification and an additional 22,635 respondents will submit a request to reweight one or more of the quality, cost, Promoting Interoperability, or improvement activities performance categories due to an extreme or uncontrollable circumstance. For the CY 2022 performance period/2024 MIPS payment year, we estimate that a total of 42,797 reweighting applications will be submitted. This is a decrease of 9,302 respondents compared to our currently approved estimate of 52,099 respondents (85 FR 84984).

This decrease is likely due to the provision in section IV.A.3.e.(2)(b)(iv)(A) of this rule to automatically reweight the Promoting Interoperability performance category for small practices who previously had to apply for reweighting. For the CY 2020 performance period/2024 MIPS payment year, 13,894 respondents requested reweighting due to significant hardship for small practices. Similar to the data used to estimate the number of respondents in the CY 2021 PFS final rule, our respondent estimate includes a significant number of applications submitted as a result of a data issue CMS was made aware of and is specific to a single third-party intermediary. While we do not anticipate similar data issues to occur in each performance period, we do believe future similar incidents may occur and are electing to use this data without adjustment to reflect this belief. Similar to our assumptions in the CY 2021 PFS final rule (85 FR 84984), our respondent estimate does not include reweighting Start Printed Page 65597 applications submitted during the extended period ending November 29, 2021 due to the PHE for buy antibiotics, as we do not believe it would be an accurate basis of future estimates for reweighting application submissions.

We assume that, out of our total respondent count of 42,797 above, we estimate that 22,605 respondents (eligible clinicians or groups) will submit a request for reweighting the Promoting Interoperability performance category to zero percent due to extreme and uncontrollable circumstances, insufficient internet connectivity, lack of control over the availability of CEHRT, or as a result of a decertification of an EHR. In the CY 2021 PFS final rule (85 FR 84984) we discussed that, beginning with the CY 2019 performance period/2021 MIPS payment year, APM Entities may submit an extreme and uncontrollable circumstances exception application for all four performance categories and applicable to all MIPS eligible clinicians in the APM Entity group. As discussed in this section of this final rule, due to data limitations and our inability to determine who will use the APP versus the traditional MIPS submission mechanism for the CY 2022 performance period/2024 MIPS payment year, we assume ACO APM Entities will submit data through the APP and non-ACO APM Entities will participate through traditional MIPS, thereby submitting as an individual or group rather than as an entity. Therefore, we limited our analysis to ACOs that were eligible for an exception due to extreme and uncontrollable circumstances during the CY 2020 performance period/2022 MIPS payment year and elected not to report quality data. Based on this data, we estimate that 30 APM Entities will submit an extreme and uncontrollable circumstances exception application for the CY 2022 performance period/2024 MIPS payment year.

Combined with our aforementioned estimate of 42,797 eligible clinicians and groups, the total estimated number of respondents for the CY 2022 performance period/2024 MIPS payment year is 42,827. Consistent with our assumptions in the CY 2021 PFS final rule (85 FR 84984-84985), we continue to estimate it will take 0.25 hours for a computer system analyst to complete and submit the application. As shown in Table 106, we estimate an annual burden of 10,707 hours (42,827 applications × 0.25 hr/application) and $1,019,521 (10,707 hr × $95.22/hr). As shown in Table 107, using our currently approved burden estimates, the decrease in the estimated number of respondents (from 52,099 to 42,827 respondents) results in an adjustment of minus 2,318 hours (9,272 respondents × 0.25 hr/respondent) and minus $220,720 for the CY 2022 performance period/2024 MIPS payment year. We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 10,707 hours (42,827 respondents × 0.25 hr/respondent) and $1,019,521 (10,707 hours × $95.22/respondents).

Start Printed Page 65598 (3) Submitting Promoting Interoperability Data The requirements and burden associated with this rule's data submission will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77509 through 77511), CY 2018 Quality Payment Program final rule (82 FR 53919 through 53920), CY 2019 PFS final rule (83 FR 60013 through 60014), CY 2020 PFS final rule (84 FR 63135 through 63137), and the CY 2021 PFS final rule (85 FR 84985 through 84987) for our previously finalized requirements and burden for submission of data for the Promoting Interoperability performance category. In section IV.A.3.d.(4)(d)(ii) of this final rule, we are finalizing the additional requirement that MIPS eligible clinicians must attest to conducting an annual assessment of the High Priority Guides of the SAFER Guides beginning with the CY 2022 performance period/2024 MIPS payment year. Clinicians will complete this attestation by checking a box when they submit their Promoting Interoperability performance category data. We estimate that this requirement will add an additional minute to the current estimated time it takes to complete the submission of Promoting Interoperability data.

In the CY 2022 PFS proposed rule, we assumed no change in estimates as result of the proposal to modify the Provide Patients Electronic Access to Their Health Information measure to require MIPS eligible clinicians to ensure that patient health information remains available to the patient (or patient-authorized representative) to access indefinitely (86 FR 39509). As discussed in section IV. Of this final rule, this policy is not being finalized as proposed at this time. As shown in Table 108, based on data from the CY 2019 performance period/2021 MIPS payment year, we estimate that a total of 51,647 respondents consisting of 40,172 individual MIPS eligible clinicians and 11,475 groups and virtual groups will submit Promoting Interoperability data. Since our CY 2021 PFS final rule estimated 53,636 respondents, this represents a decrease of 1,989 respondents (51,647 respondents −53,636 active respondents).

We assume that MIPS eligible clinicians previously scored under the APM scoring standard, as described in the CY 2020 PFS final rule, will continue to submit Promoting Interoperability data (84 FR 63006) in a similar way through the APP. As a result, we do not anticipate any change in burden. Each MIPS eligible clinician in an APM Entity reports data for the Promoting Interoperability performance category through either their group TIN or individual reporting. Sections 1899 and 1115A of the Act (42 U.S.C. 1395jjj and 42 U.S.C.

1315a, respectively) state that the Shared Savings Program and the testing, evaluation, and expansion of Innovation Center models are not subject to the PRA. However, in the CY 2019 PFS final rule, we established that MIPS eligible clinicians who participate in the Shared Savings Program are no longer limited to reporting for the Promoting Interoperability performance category through their ACO participant TIN (83 FR 59822 through 59823). Burden estimates for this final rule assume group TIN-level reporting as we believe this is the most reasonable assumption for the Shared Savings Program, which requires that ACOs include full TINs as ACO participants. Start Printed Page 65599 As discussed in section IV.A.3.b.(2)(c)(ii) of this final rule, we will be introducing subgroup reporting in CY 2023 performance period/2025 MIPS payment year. As we discussed above in this section of the final rule, we estimate that there will be 20 subgroup submissions in CY 2023 performance period/2025 MIPS payment year, each of which will have burden related to the submission of Promoting Interoperability data.

We have included this burden in Table 109. With the inclusion of the additional minute (0.02 hr) to attest to conducting an annual assessment of the High Priority Guides of the SAFER Guides, we are adjusting our estimate of the time required for an individual or group to submit Promoting Interoperability data from 2.67 hours to 2.69 hours (2.67 hr + 0.02 hr). As shown in Table 110, the total burden estimate for submitting data on the specified Promoting Interoperability objectives and measures is estimated to be 138,930 hours (51,647 respondents × 2.69 incremental hours for a computer analyst's time above and beyond the physician, medical and health services manager, and computer system's analyst time required to submit quality data) and $13,228,915 (138,930 hr × $95.22/hr)). As shown in Table 111, with the introduction of subgroup reporting in CY 2023 performance period/2025 MIPS payment year, the total burden for submitting data on the specified Promoting Interoperability objectives and measures is estimated to be 138,984 hours (51,667 respondents × 2.69 incremental hours for a computer analyst's time above and beyond the physician, medical and health services manager, and computer system's analyst time required to submit quality data) and $13,234,078 (138,984 hr × $95.22/hr)). Start Printed Page 65600 Table 112, using our updated per respondent burden estimate (+0.02 hr/response), the decrease in number of respondents and SAFER guide attestation requirement results in a total adjustment of −4,278 hours at a cost of −$407,351 for the CY 2022 performance period/2024 MIPS payment year.

We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 138,984 hours (51,667 respondents × 2.69 incremental hours for a computer analyst's time above and beyond the physician, medical and health services manager, and computer system's analyst time required to submit quality data) and $13,234,078 (138,984 hours × $95.22/hour). h. ICRs Regarding the Nomination of Promoting Interoperability (PI) Measures This rule is not implementing any new or revised collection of information requirements or burden related to the nomination of Promoting Interoperability measures. The requirements and burden are currently approved by OMB under control number 0938-1314 (CMS-10621). Consequently, we are not making any changes to the process for nomination of Promoting Interoperability measures under that control number.

I. ICR Regarding Improvement Activities Submission (§§ 414.1305, 414.1355, 414.1360, and 414.1365) The finalized requirements and burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77511 through 77512), CY 2018 Quality Payment Program final rule (82 FR 53920 through 53922), CY 2019 PFS final rule (83 FR 60015 through 60017), CY 2020 PFS final rule (84 FR 63138 through 63140) and the CY 2021 PFS final rule (85 FR 84987 through 84989) for our previously finalized requirements and burden for submission of data for the improvement activities performance category. In section IV.A.3.d.(3) of this rule, we are finalizing to. (1) Revise group reporting requirements for the 50 percent threshold to address subgroups.

(2) add 7 new improvement activities, modify 15 existing improvement activities, and remove 6 previously adopted improvement activities for the CY 2022 performance period/2024 MIPS payment year and future years. (3) revise the “Drug Cost Transparency to include requirements for use of real-time benefit tools” improvement activity. And (4) add the buy antibiotics “Clinical Data Reporting with or without Clinical Trial” improvement activity for CY 2022 performance period/2024 MIPS payment year and future years. Additionally, we are finalizing to adjust our currently approved burden estimates based on more recent data. Specifically, we are finalizing to revise § 414.1360(a)(2) to state that, beginning with the CY 2023 performance period/2025 MIPS payment year, each improvement activity for which groups and virtual Start Printed Page 65601 groups submit a yes response in accordance with paragraph (a)(1) of this section must be performed by at least 50 percent of the NPIs that are billing under the group's TIN or virtual group's TINs or that are part of the subgroup, as applicable.

And the NPIs must perform the same activity during any continuous 90-day period within the same performance year. In section IV.A.3.d.(3)(b) of this rule, we discussed stakeholder requests through the Quality Payment Program help desk to apply the 50 percent threshold to a portion of clinicians in a group. We anticipate that clinicians will find applicable and meaningful activities specific to practice size, specialty, or practice setting. Therefore, we assume that the provision to apply the 50 percent minimum threshold to clinicians who submit for the improvement activity performance category as part of groups, virtual groups, or choose to participate as subgroups beginning with the CY 2023 performance period/2025 MIPS payment year will not present additional complexity or burden. We do not believe the changes to the improvement activities inventory will impact time or financial burden on stakeholders because MIPS eligible clinicians are still required to submit the same number of activities and the per response time for each activity is uniform.

Therefore, we are not adjusting the estimated time of 5 minutes (per response) currently approved for improvement activities submission. As represented in Table 113, based on data from the CY 2019 performance period/2021 MIPS payment year, we estimate that a total of 81,562 respondents consisting of 63,845 individual clinicians and 17,717 groups will submit improvement activities during the CY 2022 performance period/2024 MIPS payment year. Since our currently approved burden sets out 79,927 respondents, this represents an increase of 1,635 respondents (81,562 respondents−79,927 active respondents). This is an increase of 1,242 individuals and 393 groups from the estimates of 62,603 individuals and 17,324 groups provided in the CY 2021 PFS final rule (85 FR 50362). As discussed in sections V.B.8.e.

And V.B.8.g.(3) of this final rule regarding our estimate of clinicians and groups submitting data for the quality and Promoting Interoperability performance categories, we are finalizing to update our estimates for the number of clinicians and groups that will submit improvement activities data based on projections of the number of eligible clinicians that were not QPs or participating in an ACO in the CY 2019 performance period/2021 MIPS payment year but will be QPs in the CY 2022 performance period/2024 MIPS payment year, and will therefore not be required to submit improvement activities data. As discussed in section IV.A.3.b.(2)(c)(ii) of this final rule, we are finalizing subgroup reporting in the CY 2023 performance period/2025 MIPS payment year. As we discussed in section V.B.8.e.(7)(a) of this final rule, we estimate that there will be 20 subgroup reporters in the CY 2023 performance period/2025 MIPS payment year, each of which will have burden related to the submission of improvement activities. We have included this burden in Table 114. Start Printed Page 65602 Consistent with the CY 2021 PFS final rule, we continue to estimate that the per response time required per individual or group is 5 minutes for a computer system analyst to submit by logging in and manually attesting that certain activities were performed in the form and manner specified by CMS with a set of authenticated credentials (84 FR 63140).

As shown in Table 115, we estimate an annual burden of 6,770 hours (81,562 responses × 0.083 hr) at a cost of $644,639 (6,770 hr × $95.22/hr)) for the CY 2022 performance period/2024 MIPS payment year. As shown in Table 116, with the introduction of subgroup reporting in the CY 2023 performance period/2025 MIPS payment year, we estimate an annual burden of 6,771 hours (81,582 responses × 0.083 hr) and $644,735 (6,771 hr × $95.22/hr). Start Printed Page 65603 As shown in Table 117, using our unchanged currently approved per respondent burden estimate, the increase in the number of respondents results in an adjustment of 109 hours at a cost of $10,379 (109 hr × $95.22/hr) for the CY 2022 performance period/2024 MIPS payment year. We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 6,771 hours (81,582 responses × 0.083 hr) at a cost of $644,735 (6,771 hr × $95.22/hr). j.

ICRs Regarding the Nomination of Improvement Activities (§ 414.1360) The requirements and burden associated with this rule's data submission will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2018 Quality Payment Program final rule (82 FR 53922), CY 2019 PFS final rule (83 FR 60017 through 60018), CY 2020 PFS final rule (84 FR 63141) and the CY 2021 PFS final rule (85 FR 84989 through 85 FR 84990) for our previously finalized requirements and information collection burden for the nomination of improvement activities. In section IV.A.3.d.(3)(c)(i)(B) of this rule, we are finalizing. (1) To revise the required criteria for improvement activity nominations received through the Annual Call for Activities. (2) changes to the timeline for improvement activities nomination during a PHE.

And (3) to suspend activities that become obsolete or impacted by clinical practice guideline changes from the program when this occurrence happens outside of the rulemaking process. In section IV.A.3.d.(3)(c)(i)(B)(cc) of this rule, we are finalizing 2 new criteria that beginning with the CY 2022 Annual Call for Activities MIPS improvement activities. (1) Should not duplicate other improvement activities in the Inventory. And (2) should drive improvements that go beyond purely common clinical practices. Additionally, we are finalizing to increase the number of criteria stakeholders are required to meet when submitting an activity provision from a minimum of 1 to all 8 criteria, which includes the two new provision criteria.

We believe that this provision will provide clearer guidance to stakeholders when submitting a nomination for an improvement activity. In the CY 2021 PFS final rule, we estimated that it would require 0.6 hours for a medical and health services manager or equivalent and 0.4 hours for a physician to link the nominated improvement activity to existing and related cost and quality measures (85 FR 84989). Given that our current approved estimated time per respondent to nominate an improvement activity is 3 hours (1.8 hours for a medical and health services manager or equivalent and 1.2 hours for a physician), we assume that the new requirement to meet all 8 criteria will require approximately 1 hour at $114.24/hr for a medical and health services manager to identify and submit an activity and 0.4 hours at a rate of $217.32/hr for a clinician to review each activity. Combined with our currently approved burden estimate, we are finalizing to revise our estimate to 2.8 hours at $114.24/hr for a medical and health services manager or equivalent and 1.6 hours at $217.32/hr for a physician to nominate an improvement activity. This represents a change of +1 Start Printed Page 65604 hours (2.8 hr − 1.8 hr) for a medical and health services manager or equivalent and +0.4 hours (2 hr − 1.6 hr) for a physician and an overall increase of 1.4 hours.

We considered whether we should double our estimates for nomination of an improvement activity to 6 hours. Since only 2 of the required 8 criteria are new, we assume that stakeholders are familiar with the existing criteria and will not need additional time to review but will need the additional time to verify and confirm if the considered activity meets all the 8 criteria. We solicited comment on our estimate to revise the time for nomination of an improvement activity to 4.4 hours and if there are additional burden implications that we should consider for above provisions to revise the criteria. We did not receive public comments on the proposed burden estimates for this information collection. We are finalizing as proposed.

The burden estimates have not been updated from the CY 2021 PFS proposed rule (86 FR 39514 through 39516). In the CY 2021 PFS final rule, we finalized an exception stating that during the PHE, stakeholders can nominate improvement activities outside of the established Annual Call for Activities timeframe (85 FR 84989). Instead of only accepting nominations and modifications submitted February 1st through July 1 each year, we would accept nominations for the duration of the PHE as long as the improvement activity is still relevant. No other aspects of the Annual Call for Activities process would be affected (for example, criteria for nominating improvement activities, considerations for selection of improvement activities, or weighting policies would all still apply). In section IV.A.3.d.(3)(c)(i)(B)(aa) of this rule, we are finalizing to clarify that in order to implement a new improvement activity for a PHE during the same year as the nomination, the nomination will need to be received no later than January 5th of the nomination year to be included in a rule for notice-and-comment rulemaking during that fiscal or calendar year, a necessary precursor to implementation if it were to be finalized, as described above.

We believe this provision will not affect our currently approved burden estimates since we assume that the number of nominations will not change, but it will make an activity available for reporting to clinicians in the same performance year it was intended to be implemented. Similar to our assumptions in the CY 2021 PFS final rule (85 FR 84989), we expect additional nominations may be received as a result of this change. However, we do not have any data with which to estimate what the additional number may be. As a result, we are not making any changes our currently approved burden estimate. In section IV.A.3.d.(3)(c)(i)(C)(aa) of this rule, we are finalizing that beginning with the CY 2022 performance period/2024 MIPS payment year, for each improvement activity that is in the Inventory, if applicable, and impacted by significant changes or errors prior to the applicable data submission deadline, it will be removed from the program as soon as possible.

In the CY 2020 PFS final rule (84 FR 62988 through 62990), we finalized the factors for consideration in removing improvement activities. Following the publication of the CY 2021 PFS proposed rule, the improvement activities team became aware that clinicians could no longer complete the activity from April 1 through December 31, 2020, because one of the improvement activities in the Inventory had expired on March 31, 2020. We do not anticipate any burden for stakeholders because of the above provision as described, the policy does not change requirements for the nomination of improvement activities. This provision will help avoid stakeholder confusion and ensure the accuracy of the available activities in the Inventory. Therefore, we are not making any changes to our estimated burden due to the above policy.

Additionally, consistent with our assumptions in the CY 2021 PFS final rule (85 FR 84990) we continue to use our currently approved assumption that we will receive 31 nominations of new or modified activities which will be evaluated for the Improvement Activities Under Consideration (IAUC) list for possible inclusion in the CY 2023 Improvement Activities Inventory as we believe this estimate is more realistic than basing our estimate on the number of nominations received during the 2021 Annual Call for Activities. As shown in Table 118, accounting for the change in burden per respondent estimate due to the provision to require all the 8 criteria for nomination of an improvement activity as described above in this section, we are adjusting our estimated annual information collection burden to 136 hours (31 nominations × 4.4 hr/nomination) at a cost of $20,695 (31 × [(2.8 hr × $114.24/hr) + (1.6 hr × $217.32/hr)]). Start Printed Page 65605 As shown in Table 119, using our unchanged estimate of the number of activities nominated, the increase in the burden per nomination results in a change of 43 hours (31 nominations × 1.4 hr/nomination) at a cost of $6,492 (31 activities × [(1 hr × $114.24/hr) + (0.4 hr × $217.32/hr)]) for the CY 2022 performance period/2024 MIPS payment year. We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 136 hours (31 nominations × 4.4 hr) at a cost of $20,695 (31 × [(2.8 hr × $114.24/hr) + (1.6 hr × $217.32/hr)]). k.

Nomination of MVPs This rule is not implementing any new or revised collection of information requirements or burden related to the nomination of MVPs for inclusion in the Quality Payment Program. The requirements and burden are currently approved by OMB under control number 0938-1314 (CMS-10621). Consequently, we are not making any changes to the MVP nomination process under that control number. L. ICRs Regarding the Cost Performance Category (§ 414.1350) The cost performance category relies on administrative claims data.

The Medicare Parts A and B claims submission process (OMB control number 0938-1197. CMS-1500 and CMS-1490S) is used to collect data on cost measures from MIPS eligible clinicians. MIPS eligible clinicians are not required to provide any documentation by CD or hardcopy. Moreover, the policies in this rule do not result in the need to add or revise or delete any claims data fields. Consequently, we are not making any changes to this information collection under that control number.

M. ICRs Regarding Partial QP Elections (§§ 414.1310(b) and 414.1430) This rule is not implementing any new or revised collection of information requirements related to the Partial QP Elections to participate in MIPS as a MIPS eligible clinician. However, we are finalizing to adjust our currently approved burden estimates based on updated projections for the CY 2022 performance period/2024 MIPS payment year. The adjusted burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). As shown in Table 120, based on our predictive QP analysis for the 2022 QP performance period/2024 MIPS payment year, which accounts for historical response rates in the CY 2020 performance period/2022 MIPS payment year, we are revising our estimate that 150 APM Entities and 100 eligible clinicians (representing approximately 9,000 Partial QPs) will make the election to participate as a Partial QP in MIPS, a total of 250 elections which is a decrease of 50 from the 300 elections that are currently approved by OMB under the aforementioned control number.

We continue to estimate it will take the APM Entity representative or eligible clinician 15 minutes (0.25 hr) to make this election. In aggregate, we are revising our estimated annual burden to 63 hours (250 respondents × 0.25 hr/election) and $5,999 (63 hr × $95.22/hr). Start Printed Page 65606 As shown in Table 121, using our unchanged currently approved per respondent burden estimate (85 FR 84991), the decrease in the number of Partial QP elections results in an adjustment of 12.5 hours (−50 elections × 0.25 hr) at a cost of −$1,191 (−12.5 hr × $95.22/hr) for the CY 2022 performance period/2024 MIPS payment year. We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 63 hours (250 respondents × 0.25 hr/election) at a cost of $5,999 (63 hr × $95.22/hr). n.

ICRs Regarding Other Payer Advanced APM Determinations. Payer-Initiated Process (§ 414.1445) and Eligible Clinician Initiated Process (§ 414.1445) The following burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). (1) Payer Initiated Process (§ 414.1445) This rule is not implementing any new or revised collection of information requirements related to the Payer-Initiated Process. However, we are adjusting our currently approved burden estimates based on updated projections for the CY 2022 performance period/2024 MIPS payment year. As shown in Table 122, based on the actual number of requests received in the 2020 QP performance period, we are revising our estimate that for the 2023 QP performance period, 15 payer-initiated requests for Other Payer Advanced APM determinations will be submitted (6 Medicaid payers, 6 Medicare Advantage Organizations, and 3 remaining other payers), a decrease of 65 from the 80 total requests currently approved by OMB under the aforementioned control number.

We continue to estimate it will take 10 hours for a computer system analyst per arrangement submission. We are revising our estimated annual burden to 150 hours (15 submissions × 10 hr/submission) and $14,283 (150 hr × $95.22/hr). As shown in Table 123, using our unchanged currently approved per respondent burden estimate (85 FR 84992), the decrease in the number of payer-initiated requests from 800 to 150 results in an adjustment of −650 hours (−65 requests × 10 hr) at a cost of −$61,893 (−650 hr × $95.22/hr) for the CY 2022 performance period/2024 MIPS payment year. We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 150 hours (15 requests × 10 hr) at a cost of $14,283 (150 hr × $95.22/hr). Start Printed Page 65607 (2) Eligible Clinician Initiated Process (§ 414.1445) This rule is not implementing any new or revised collection of information requirements or burden related to the Eligible-Clinician Initiated Process.

As described below, we are adjusting our currently approved burden estimates based on updated projections for the CY 2022 performance period/2024 MIPS payment year. As mentioned above, the new and adjusted burden will be submitted to OMB for approval. As shown in Table 124, based on the actual number of requests received in the 2020 QP performance period, we estimate that in CY 2022 for the 2023 QP performance period, 15 Eligible-Clinician Initiated request for Other Payer Advanced APM determinations will be submitted, a decrease of 135 from the 150 total requests currently approved by OMB under the aforementioned control number. We continue to estimate it will take 10 hours for a computer system analyst per arrangement submission. We are adjusting our estimated annual burden to 150 hours (15 submissions × 10 hr/submission) and $14,283 (150 hr × $95.22/hr).

As shown in Table 125, using our unchanged currently approved per respondent burden estimate (85 FR 84993), the decrease in the number of eligible clinician-initiated requests from 150 to 15 results in an adjustment of −1,350 hours (−135 requests × 10 hr) at a cost of −$128,547 (−1,350 hr × $95.22/hr) for the CY 2022 performance period/2024 MIPS payment year. We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 150 hours (15 submissions × 10 hr/submission) at a cost of $14,283 (150 hr × $95.22/hr). Start Printed Page 65608 (3) Submission of Data for QP Determinations Under the All-Payer Combination Option (§ 414.1440) This rule is not implementing any new or revised collection of information requirements related to the Submission of Data for QP Determinations under the All-Payer Combination Option. The requirements and burden are currently approved by OMB under control number 0938-1314 (CMS-10621). Consequently, we are not making any changes under that control number.

O. ICRs Regarding Voluntary Participants Election To Opt-Out of Performance Data Display on Physician Compare (§ 414.1395) This rule is not implementing any new or revised collection of information requirements related to the election by voluntary participants to opt-out of public reporting on Physician Compare. As described below, we are adjusting our currently approved burden estimates based on data from the CY 2019 performance period/2021 MIPS payment year. The adjusted burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2018 Quality Payment Program final rule (82 FR 53924 through 53925), CY 2019 PFS final rule (83 FR 60022), CY 2020 PFS final rule (84 FR 63145 through 63146) and the CY 2021 PFS final rule (85 FR 84993) for our previously finalized requirements and burden for voluntary participants to opt-out of public reporting on Physician Compare.

In the CY 2021 PFS final rule (85 FR 84993), we estimated that 10 percent of the clinicians and groups who voluntarily participate in MIPS would opt out of public reporting. Based on the number of opt-out eligible clinicians that chose to opt-out of public reporting in the CY 2019 performance period/2021 MIPS payment year, we are revising our estimates. We anticipate that 0.1 percent of the total clinicians and groups who will voluntarily participate in the CY 2022 performance period/2024 MIPS payment year will also elect not to participate in public reporting. This results in a total of 38 (0.001 × 37,934 voluntary MIPS participants) clinicians and groups, a decrease of 3,448 from the currently approved estimate of 3,486. Voluntary MIPS participants are clinicians that are not QPs and are expected to be excluded from MIPS after applying the eligibility requirements set out in the CY 2019 PFS final rule but have elected to submit data to MIPS.

As discussed in the RIA section of the CY 2019 PFS final rule, we continue to estimate that 33 percent of clinicians that exceed one (1) of the low-volume criteria, but not all three (3), will elect to opt-in to MIPS, become MIPS eligible, and no longer be considered a voluntary reporter (83 FR 60050). Table 126 shows that for these voluntary participants, we continue to estimate it will take 0.25 hours for a computer system analyst to submit a request to opt-out. In aggregate, we estimate an annual burden of 10 hours (38 requests × 0.25 hr/request) and $952 (10 hr × $95.22/hr). Start Printed Page 65609 As shown in Table 127, using our unchanged currently approved per respondent burden estimate, the decrease of 3,448 opt outs by voluntary participants results in an adjustment of −862 hours (−3,448 requests × 0.25 hr) at a cost of $−82,079 (−862 hr × $95.22/hr) for the CY 2022 performance period/2024 MIPS payment year. We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 10 hours (38 requests × 0.25 hr/request) at a cost of $952 (10 hr × $95.22/hr).

p. Summary of Annual Quality Payment Program Burden Estimates Table 128 summarizes this final rule's total burden estimates for the Quality Payment Program for the CY 2021, CY 2022 and CY 2023 performance periods/2023, 2024, and 2025 MIPS payment years. As discussed earlier, for this final rule, we are subtracting the currently approved burden for the CY 2021 performance period/2023 MIPS payment year. As shown in table 128, this represents a decrease in burden of 1,479,672 hours and $144,576,960. In the CY 2021 PFS final rule, the total estimated burden for the CY 2022 MIPS performance period/2024 MIPS payment year was 1,473,741 hours at a cost of $144,034,968 (85 FR 84994).

Accounting for updated wage rates and the subset of all Quality Payment Program ICRs discussed in this rule compared to the CY 2021 PFS final rule, the total estimated annual burden of continuing policies and information set forth in the CY 2021 PFS final rule into the CY 2022 performance period/2024 MIPS payment year is 1,468,566 hours at a cost of $148,078,846. These represent a decrease of 5,175 hours and an increase of $4,043,878. To understand the burden implications of the policies in this rule, we provide an estimate of the total burden associated with continuing the policies and information collections set forth in the CY 2021 PFS final rule into the CY 2022 performance period/2024 MIPS payment year. This burden estimate of 1,424,586 hours at a cost of $143,651,994 reflects the availability of more accurate data to account for all potential respondents and submissions across all the performance categories and more accurately reflect the exclusion of QPs from all MIPS performance categories, a decrease of 43,980 hours and $4,426,813. This burden estimate is lower than the burden approved for information collection related to the CY 2021 PFS final rule due to updated data and assumptions.

Our total burden estimate for the CY 2022 performance period/2024 MIPS payment year is 1,428,391 hours and $144,014,757, which represents a decrease of 40,175 hours and $4,068,418 from the CY 2021 PFS final rule. The difference of +3,805 hours (43,980 hours−40,175 hours) and +$358,395 ($4,426,813−$4,068,418) between this estimate and the total burden shown in Table 128 is the increase in burden associated with impacts of the policies for the CY 2022 performance period/2024 MIPS payment year, which includes the re-introduction of the CMS Web Interface measures as a collection type/submission type. Table 128 also offers a comparison between the total currently approved estimated burden from the CY 2021 PFS final rule and our estimated burden for the CY 2023 performance period/2025 MIPS payment year. As discussed above, we are setting forth our estimates for the CY 2023 performance period/2025 MIPS payment year as new burden with no currently approved estimate. Our total burden estimate for the CY 2023 MIPS performance period/2025 MIPS payment year is 1,383,049 hours and $139,501,770.

We have included Table 128 to assist in understanding these differences. Note that the difference between the burden estimates for the CY 2022 and 2023 MIPS performance periods/2024 and 2025 MIPS payment years is entirely due to the policies to introduce MVP and subgroup reporting and sunset the CMS Web Interface measures as a collection type/submission type beginning in the CY 2023 MIPS performance period/2025 MIPS payment year. Start Printed Page 65610 Start Printed Page 65611 Start Printed Page 65612 Start Printed Page 65613 Table 131 represents averages for the estimated changes in burden for the CY 2021, 2022, and 2023 performance periods/2023, 2024, and 2025 MIPS payment years. Table 132 provides the reasons for changes in the estimated burden for information collections in the Quality Payment Program segment of this final rule. We have divided the reasons for our change in burden into those related to new policies and those related to adjustments in burden from continued Quality Payment Program Year 5 policies that reflect updated data and revised methods.

Start Printed Page 65614 Start Printed Page 65615 Start Printed Page 65616 C. Summary of Annual Burden Estimates for Changes Start Printed Page 65617 VI. Regulatory Impact Analysis A. Statement of Need In this final rule, we are finalizing payment and policy changes under the Medicare PFS and required statutory changes under the Consolidated Appropriations Act, 2021 and sections 2003 and 2005 of the SUPPORT for Patients and Communities Act of 2018. We also are finalizing changes to payment policy and other related policies for Medicare Part B.

In addition, this final rule will make modest revisions to certain Medicare provider and supplier enrollment regulatory provisions and add already existing provider and supplier requirements pertaining to prepayment and post-payment review activities. This final rule is necessary to make policy changes under Medicare FFS and to address various provider and supplier enrollment issues. Therefore, we included a detailed Regulatory Impact Analysis (RIA) to assess all costs and benefits of available regulatory alternatives and explain the selection of these regulatory approaches that we believe adhere to statutory requirements and, to the extent feasible, maximize net benefits B. Overall Impact We examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (February 2, 2013), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L.

96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995. Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). An RIA must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). We estimated, as discussed in this section, that the PFS provisions included in this final rule will redistribute more than $100 million in 1 year. Therefore, we estimate that this rulemaking is “economically significant” as measured by the $100 million threshold, and hence also a major rule under the Congressional Review Act. Accordingly, we prepared an RIA that, to the best of our ability, presents the costs and benefits of the rulemaking.

The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals, practitioners and most other providers and suppliers are small entities, either by nonprofit status or by having annual revenues that qualify for small business status under the Small Business Administration standards. (For details, see the SBA's website at http://www.sba.gov/​content/​table-small-business-size-standards (refer to the 620000 series)). Individuals and States are not included in the definition of a small entity.

The RFA requires that we analyze regulatory options for small businesses and other entities. We prepare a regulatory flexibility analysis unless we certify that a rule would not have a significant economic impact on a substantial number of small entities. Start Printed Page 65618 The analysis must include a justification concerning the reason action is being taken, the kinds and number of small entities the rule affects, and an explanation of any meaningful options that achieve the objectives with less significant adverse economic impact on the small entities. Approximately 95 percent of practitioners, other providers, and suppliers are considered to be small entities, based upon the SBA standards. There are over 1 million physicians, other practitioners, and medical suppliers that receive Medicare payment under the PFS.

Because many of the affected entities are small entities, the analysis and discussion provided in this section, as well as elsewhere in this final rule is intended to comply with the RFA requirements regarding significant impact on a substantial number of 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 RFA. 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 for Medicare payment regulations and has fewer than 100 beds. Medicare does not pay rural hospitals for their services under the PFS.

Rather, the PFS pays for physicians' services, which can be furnished by physicians and NPPs in a variety of settings, including rural hospitals. We did not prepare an analysis for section 1102(b) of the Act because we determined, and the Secretary certified, that this final rule will not have a significant impact on the operations of a substantial number of small rural hospitals. Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits on State, local, or tribal governments or on the private sector before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2021, that threshold is approximately $158 million. This final rule will impose no mandates on State, local, or tribal governments or on the private sector.

Executive Order 13132 establishes certain requirements that an agency must meet when it issues a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has federalism implications. Since this final rule does not impose any costs on State or local governments, the requirements of Executive Order 13132 are not applicable. We prepared the following analysis, which together with the information provided in the rest of this preamble, meets all assessment requirements. The analysis explains the rationale for and purposes of this final rule. Details the costs and benefits of the rule.

Analyzes alternatives. And presents the measures we will use to minimize the burden on small entities. As indicated elsewhere in this final rule, we discussed a variety of changes to our regulations, payments, or payment policies to ensure that our payment systems reflect changes in medical practice and the relative value of services, and to implement provisions of the statute. We provide information for each of the policy changes in the relevant sections of this final rule. We are unaware of any relevant Federal rules that duplicate, overlap, or conflict with this final rule.

The relevant sections of this final rule contain a description of significant alternatives if applicable. C. Changes in Relative Value Unit (RVU) Impacts 1. Resource-Based Work, PE, and MP RVUs Section 1848(c)(2)(B)(ii)(II) of the Act requires that increases or decreases in RVUs may not cause the amount of expenditures for the year to differ by more than $20 million from what expenditures would have been in the absence of these changes. If this threshold is exceeded, we make adjustments to preserve BN.

Our estimates of changes in Medicare expenditures for PFS services compared payment rates for CY 2021 with payment rates for CY 2022 using CY 2020 Medicare utilization. The payment impacts described in this final rule reflect averages by specialty based on Medicare utilization. The payment impact for an individual practitioner could vary from the average and will depend on the mix of services he or she furnishes. The average percentage change in total revenues will be less than the impact displayed here because practitioners and other entities generally furnish services to both Medicare and non-Medicare patients. In addition, practitioners and other entities may receive substantial Medicare revenues for services under other Medicare payment systems.

For instance, independent laboratories receive approximately 83 percent of their Medicare revenues from clinical laboratory services that are paid under the Clinical Laboratory Fee Schedule (CLFS). The PFS update adjustment factor for CY 2022, as specified in section 1848(d)(19) of the Act, is 0.00 percent before applying other adjustments. In addition, section 101 of Division N of the CAA provided a 3.75 percent increase in PFS payment amounts for services furnished on or after January 1, 2021, and before January 1, 2022 and required that the increase shall not be taken into account in determining PFS payment rates for subsequent years. The expiration of this 3.75 percent increase in payment amounts will result in the CY 2022 conversion factor being calculated as though the 3.75 percent increase for the CY 2021 conversion factor had never been applied. To calculate the CY 2022 PFS conversion factor (CF), we took the CY 2021 conversion factor without the 1-year 3.75 percent increase provided by the CAA and multiplied it by the BN adjustment required as described in the preceding paragraphs.

We estimate the CY 2022 PFS CF to be 33.5983 which reflects the BN adjustment under section 1848(c)(2)(B)(ii)(II) of the Act, the 0.00 percent update adjustment factor specified under section 1848(d)(19) of the Act, and the expiration of the 3.75 percent increase for services furnished in CY 2021, as provided in the CAA. We estimate the CY 2022 anesthesia CF to be 20.9343 which reflects the same overall PFS adjustments with the addition of anesthesia-specific PE and MP adjustments. Start Printed Page 65619 Table 136 shows the payment impact of the policies contained in this final rule on PFS services. To the extent that there are year-to-year changes in the volume and mix of services provided by practitioners, the actual impact on total Medicare revenues will be different from those shown in Table 136 (CY 2022 PFS Estimated Impact on Total Allowed Charges by Specialty). The following is an explanation of the information represented in Table 136.

• Column A (Specialty). Identifies the specialty for which data are shown. • Column B (Allowed Charges). The aggregate estimated PFS allowed charges for the specialty based on CY 2020 utilization and CY 2021 rates. That is, allowed charges are the PFS amounts for covered services and include coinsurance and deductibles (which are the financial responsibility of the beneficiary).

These amounts have been summed across all services furnished by physicians, practitioners, and suppliers within a specialty to arrive at the total allowed charges for the specialty. • Column C (Impact of Work RVU Changes). This column shows the estimated CY 2022 impact on total allowed charges of the changes in the work RVUs, including the impact of changes due to potentially misvalued codes. • Column D (Impact of PE RVU Changes). This column shows the estimated CY 2022 impact on total allowed charges of the changes in the PE RVUs.

• Column E (Impact of MP RVU Changes). This column shows the estimated CY 2022 impact on total allowed charges of the changes in the MP RVUs. • Column F (Combined Impact). This column shows the estimated CY 2022 combined impact on total allowed charges of all the changes in the previous columns. Column F may not equal the sum of columns C, D, and E due to rounding.

Start Printed Page 65620 Start Printed Page 65621 2. CY 2021 PFS Impact Discussion a. Changes in RVUs The most widespread specialty impacts of the RVU changes are generally related to the changes to RVUs for specific services resulting from the misvalued code initiative, including RVUs for new and revised codes. The estimated impacts for some specialties, including diagnostic testing facilities, portable x-ray, podiatry, hand surgery, and geriatrics, reflect increases relative to other physician specialties. These increases can be attributed largely to the update to clinical labor pricing as the services that these specialties furnish involve a higher proportion of clinical labor cost that is reflected in their PE RVUs.

These increases are also due to increases in value for particular services after considering the recommendations from the American Medical Association (AMA)'s Relative Value Scale Update Committee (RUC), and CMS review and increased payments resulting from updates to supply and equipment pricing. The estimated impacts for several specialties, including interventional radiology, vascular surgery, radiation oncology, and cardiology, reflect decreases in payments relative to payment to other physician specialties which are largely the result of the redistributive effects of the clinical labor pricing update. The services furnished by these specialties involve proportionally higher supply or equipment item costs, and therefore are affected negatively by the updates to clinical labor pricing. Since PE is budget neutralized within itself, increased pricing for clinical labor holds a corresponding relative decrease for other components of PE such as supplies and equipment. These decreases are also due to the revaluation of individual procedures based on reviews by the AMA RUC and CMS, as well as decreases resulting from the continued phase-in implementation of the previously finalized updates to supply and equipment pricing.

The estimated impacts also reflect decreases due to continued implementation of previously finalized code-level reductions that are being phased in over several years. For independent laboratories, it is important to note that these entities receive approximately 83 percent of their Medicare revenues from services that are paid under the CLFS. As a result, the estimated 2 percent decrease for CY 2021 is only applicable to approximately 17 percent of the Medicare payment to these entities. We often receive comments regarding the changes in RVUs displayed on the specialty impact table (Table 136), including comments received in response to the valuations. We remind stakeholders that although the estimated impacts are displayed at the specialty level, typically the changes are driven by the valuation of a relatively small number of new and/or potentially misvalued codes.

The percentage changes in Table 136 are based upon aggregate estimated PFS allowed charges summed across all services furnished by physicians, practitioners, and suppliers within a specialty to arrive at the total allowed charges for the specialty, and compared to the same summed total from the previous calendar year. Therefore, they are averages, and may not necessarily be representative of what is happening to the particular services furnished by a single practitioner within any given specialty. To illustrate how impacts can vary within specialties, we created a public use file that models the expected percentage change in total RVUs per practitioner. Using CY 2020 utilization data, Total RVUs change between −1 percent and 1 percent for more than 90 percent of practitioners, representing more than 81 percent of the changes in Total RVUs for all practitioners, with variation by specialty. Many specialties, such as chiropractic, clinical social worker, family practice, internal medicine and emergency medicine, exhibit little variation in changes in total RVUs per practitioner.

For these specialties, more than 90 percent of these practitioners will experience a change in Total RVUs between −1 percent and 1 percent. Other specialties exhibit more variation in changes in total RVUs per practitioner. For example, for diagnostic testing facilities, 39 percent of IDTFs will experience a 2 percent or more decrease in Total RVUs, but these suppliers represent only 33 percent of Total RVUs for this specialty. Meanwhile, one percent of IDTFs will experience 10 percent or more increases in Total RVUs and these suppliers account for 33 percent of Total RVUs for this specialty. We also note the code level RVU changes are available in the Addendum B public use file that we make available with each rule.

Many commenters requested that CMS maintain the 3.75 percent increase in PFS payment amounts that was specified under section 101 of the CAA for services furnished during CY 2021. We remind commenters that this increase was provided through a time-limited amendment to the statute, which CMS does not have legal authority to alter. The expiration of this 3.75 percent increase in payment amounts will result in the CY 2022 conversion factor being calculated as though the 3.75 percent increase for the CY 2021 conversion factor had never been applied. Several commenters requested clarification regarding whether the specialty impacts displayed in Table 136 reflected the expiration of the 3.75 percent CAA provision for CY 2022. We can clarify for the commenters that the specialty impacts displayed in Table 136 reflect changes that take place within the pool of total RVUs.

The specialty impacts table therefore includes any changes in spending which result from finalized policies within BN (such as the revaluation of E/M codes in CY 2021 or the clinical labor Start Printed Page 65622 pricing update in CY 2022) but does not include any changes in spending which result from finalized policies outside of BN. The expiration of the 3.75 percent CAA provision for CY 2022 is a statutory change that takes place outside of BN, and therefore, is not captured in the specialty impacts displayed in Table 136. b. Impact Column F of Table 136 displays the estimated CY 2022 impact on total allowed charges, by specialty, of all the RVU changes. A table showing the estimated impact of all of the changes on total payments for selected high volume procedures is available under “downloads” on the CY 2022 PFS final rule website at http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​PhysisianFeeSched/​.

We selected these procedures for sake of illustration from among the procedures most commonly furnished by a broad spectrum of specialties. The change in both facility rates and the nonfacility rates are shown. For an explanation of facility and nonfacility PE, we refer readers to Addendum A on the CMS website at http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​PhysisianFeeSched/​. D. Effect of Changes Related to Telehealth Services Before the PHE for buy antibiotics, approximately 15,000 FFS Medicare beneficiaries received a Medicare telemedicine service each week.

According to a report prepared by the Assistant Secretary for Planning and Evaluation (ASPE),[] in the last week of April 2020, nearly 1.7 million beneficiaries received telehealth services. By April 2020, nearly half of all Medicare primary care visits were telehealth encounters, a level consistent with health care encounters more broadly. There are approximately 271 services currently included on the list of Medicare telehealth services, including more than 165 that were added on a temporary basis during the PHE for buy antibiotics (including service categories such as emergency department visits, initial inpatient and nursing facility visits, and discharge day management services) that are covered through the end of the PHE. Preliminary data show that between mid-March and mid-October 2020, over 24.5 million out of 63 million Medicare beneficiaries and enrollees have received a Medicare telemedicine service during the PHE. It is important to note that preliminary data reflect that the largest increases in services furnished via telehealth communications systems, by beneficiary access/volume, were for services that were already on the Medicare telehealth services list before the PHE.

As discussed in section II.D. Of this final rule, we are finalizing our proposal to amend the regulatory definition of interactive telecommunications system for purposes of Medicare telehealth services to include audio-only communication technology under certain circumstances for mental health services furnished to established patients in their homes. We anticipate that this policy will increase utilization of Medicare telehealth mental health services relative to utilization that will occur without the change. The estimated cost impact on overall Medicare services is unclear, though these changes will largely maintain current policies and access to the specific mental health services that are available to beneficiaries during the PHE. By requiring that a modifier be appended to the claim to identify that the service was furnished via audio-only communication technology, we will be able to closely monitor utilization and address any potential concerns regarding overutilization through future rulemaking.

Comment. Commenters were very supportive of our proposal to allow for mental health services to be furnished using audio-only communications technology. A few commenters, while supportive of the use of audio-only communications technology during the PHE, urged CMS to further study and evaluate the safety and effectiveness of the audio-only modality for various levels of care and treatments to determine appropriateness of continuing payment after the PHE expires. Commenters supported the proposal to create a service-level modifier to identify mental health telehealth visits “furnished to a beneficiary in their home using audio-only communications technology.” Response. We are finalizing creation of a service-level modifier that would identify mental health telehealth services furnished to a beneficiary in their home using audio-only communications technology.

We anticipate that our policy of allowing mental health services to be furnished using audio-only communications technology this will have a positive impact on access to care for mental health services and contribute to overall health equity. Section 123 of the CAA removed the geographic and site of service restrictions for telehealth services furnished for the purpose of diagnosis, evaluation, or treatment of a mental health disorder, and required as a condition of payment for these telehealth services furnished in the patient's home that a physician or practitioner furnish an in-person, non-telehealth service to a beneficiary within 6 months prior to the first time the physician or practitioner furnishes a telehealth service to the beneficiary, and thereafter, at intervals as specified by the Secretary. Section 125 of the CAA created a new Medicare provider type—the rural emergency hospital, effective beginning in CY 2023—and added rural emergency hospitals to the list of eligible telehealth originating sites at section 1834(m)(4)(C)(ii) of the Act. As discussed in section II.D. Of this final rule, we will require, as a condition of payment for a telehealth service described in section 1834(m)(7) of the Act, that the billing physician or practitioner must have furnished an in-person, non-telehealth service to the beneficiary within the 6-month period before the date of service of a telehealth service as specified in section 1834(m)(7)(B)(i) of the Act, and proposed in this final rule that an in-person, non-telehealth service to the beneficiary must occur at 12-month intervals for subsequent care, with the possibility for exceptions that must be documented by the practitioner in the medical record.

We solicited comment on whether the required in-person, non-telehealth service could also be furnished by another physician or practitioner of the same specialty and same subspecialty within the same group as the physician or practitioner who furnishes the telehealth service, and we are finalizing a policy to allow this. Given that the removal of the geographic and site of service restrictions for telehealth will expand the availability of mental health services, we anticipate that utilization of these mental health services will be comparable to observed utilization for mental health services during the buy antibiotics PHE. We received public comments on whether the required in-person, non-telehealth service could also be furnished by another physician or practitioner of the same specialty and same subspecialty within the same group as the physician or practitioner who furnishes the telehealth service. The following is a summary of the comments we received and our responses. Comment.

Many commenters agreed with the alternative policy we considered to allow the required in- Start Printed Page 65623 person, non-telehealth service to be furnished by another physician or practitioner of the same specialty and subspecialty in the same group as the practitioner who furnishes the mental health telehealth services to the beneficiary if the practitioner who furnishes the telehealth services is unavailable. Response. We are adopting the alternative policy discussed in the proposed rule to allow a clinician's colleague in the same subspecialty in the same group to furnish the in-person, non-telehealth service to the beneficiary if the original practitioner is unavailable. This is also consistent with longstanding policy, which defines an established patient as an individual who receives professional services from the physician/NPP or another physician of the same specialty and subspecialty who belongs to the same group within the previous 3 years, for purposes of billing for E/M services. While the language in the CAA states that the physician or practitioner furnishing the in-person, non-telehealth service must be the same person as the practitioner furnishing the telehealth service, we believe this policy would be consistent with statutory requirements, because we have historically treated the billing practitioner and other practitioners of the same specialty or subspecialty in the same group as if they were the same individual.

After consideration of public comments, we are finalizing our alternative policy that a practitioner in the same subspecialty and the same group may furnish the in-person, non-telehealth service to the same beneficiary, if the original practitioner is unavailable. With regard to our policy to retain all services added to the Medicare telehealth services list on a Category 3 basis until the end of CY 2023, we believe the establishment of this certain end date will provide clarity to the stakeholder community but will have a negligible impact on PFS expenditures. For example, services that have already been added to the permanent telehealth services list are furnished via telehealth, on average, less than 0.1 percent of the time they are reported. Further, although data is still being collected, in our initial review of the data, we have not noticed an increase in the overall utilization trend for these services suggesting that practitioners may be furnishing these services via telehealth as replacement for in person encounters. The statutory conditions on payment for Medicare telehealth services under section 1834(m) of the Act, such as the originating site requirements related to geographic location and site of service, have limited increases in telehealth service utilization outside of the PHE for buy antibiotics.

However, we believe there is value in allowing physicians to furnish services added to the Medicare telehealth services list on a Category 3 basis, and for patients to receive broader access to this care through telehealth, through the end of CY 2023 in order to ease the transition from the PHE. Additionally, for services added to the Medicare telehealth list on a Category 3 basis, outside of the circumstances of the PHE for buy antibiotics, all of the statutory restrictions under section 1834(m) of the Act will also apply to these services. Therefore, we do not anticipate any significant increase in utilization. E. Effect of Changes Related to Services Furnished in Whole or in Part by PTAs and OTAs As discussed in section II.H.1., we are finalizing proposed revisions to the current de minimis policy for services furnished in whole or in part by PTAs/OTAs that we finalized in CY 2020 PFS final rule (84 FR 62702 through 62708) under which the CQ or CO modifier applies when the PTA or OTA furnished more than 10 percent of a service or a 15-minute unit of service.

Beginning January 1, 2022, CMS will apply a 15 percent reduction to the payment amount for a physical or occupational therapy service when the CQ/CO modifier is applied to the service. Our revision to the de minimis policy will allow the PT/OT to bill without the CQ/CO modifier for the final 15-minute unit (in a multi-unit billing scenario) when the PT/OT meets the billing threshold of 8 minutes, which is when the minutes are greater than the midpoint (7.5 minutes) of the 15-minute unit, regardless of any minutes provided by the PTA/OTA for that final unit. Under the policy we are finalizing, the PT/OT services will not be discounted as the result of any “left-over” minutes provided by the PTA/OTA when the therapist provides enough minutes on his or her own to meet the billing threshold amount. In these scenarios, the PTA's/OTA's minutes are considered immaterial for the purposes of billing. For example, if the PT/OT provided 23 minutes of a 15-minute service and the PTA/OTA provided another 20 minutes of the same service—three units of service can be billed for the 43 total minutes (38 minutes through 52 minutes).

Here, one full 15-minute unit of service is billed without the CQ/CO modifier for the PT/OT service with 8 minutes remaining, and one full unit of service is billed with the CQ/CO modifier for the service provided by the PTA/OTA with 5 minutes remaining. Under the policy, the third unit is billed without the CQ/CO modifier because the 8 minutes provided by the PT/OT meets the billing threshold amount. However, under our current de minimis policy, the 5 minutes provided by the PTA/OTA is more than 10 percent (it is 38 percent of the total service−PTA/OTA minutes divided by the total of PTA/OTA + PT/OT minutes. 5 divided by 13 = 38 percent) meaning the CQ/CO modifier is applied to the third and final unit of service. Under our current de minimis policy, under which the CQ/CO modifier is applied whenever the PTA/OTA provides more than 10 percent of a service whether or not the PT/OT furnishes enough of the service to bill for it without the portion furnished by the PTA/OTA, stakeholders have expressed concern that the PT/OT has a financial incentive not to have the PTA/OTA provide any additional minutes, regardless of the individual patient's needs, when those minutes of service lead to a reduced payment for a unit of a service.

There may be a cost implication to this policy as fewer billing scenarios may result in application of the CQ/CO modifiers and consequent payment reduction. However, we believe that basing our policy on a “midpoint rule” in which the PT/OT provides enough minutes on their own (8 or more minutes) to bill for the final unit of a billing scenario could eliminate the PT's/OT's financial incentive to not provide appropriate therapy to an individual patient when it is furnished by the PTA/OTA. On the other hand, if we were to continue with our de minimis standard to apply to all billing scenarios for PTA/OTA services that exceed the 10 percent standard, we are uncertain how to gauge the overall costs of this policy because of the possible altered PT/OT behavioral change that is due to the financial incentives built into that policy as discussed above. F. Other Provisions of the Regulation 1.

Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs) In section III.A. Of this final rule, we make multiple provisions related to RHCs and FQHCs. In terms of estimated impacts to the Medicare program, Payment for Attending Physician Services Furnished by RHCs or FQHCs to Hospice Patients as required by section 132 of the CAA, 2021 and Concurrent Billing for CCM and Start Printed Page 65624 Transitional Care Management TCM Services for RHCs and FQHCs will have negligible impact to Medicare spending. Section 130 requires that all independent RHCs are now subject to the per-visit limit (which is also referred to as “cap”) and phases in an increase in the statutory payment cap over an 8-year period. The cap in CY 2021, for services furnished after March 31, is set at $100 per visit, then at $126 per visit in 2022.

At $139 per visit in 2023. At $152 per visit in 2024. At $152 per visit in 2025. At $165 per visit in 2026. At $178 per visit in 2027.

And at $190 per visit in 2028. Beyond 2028, the limit is updated by the applicable Medicare Economic Index (MEI). This provision also controls the annual rate of growth in payments to certain provider-based RHCs whose payments are currently higher than the payment limit. Each year, but for services provided after March 31 in 2021, the payment limit shall be set at the greater of. (1) The RHC per visit amount from the prior year, increased by the percentage increase in the applicable MEI.

And (2) the cap limits applicable to each year as described above. In order to be eligible for this “grandfathering” policy, the RHC must have been based in a hospital with fewer than 50 beds and enrolled in Medicare as of December 31, 2019. Section 2 of Public Law 117-7, enacted on April 14, 2021, made technical corrections to section 130. First, for an RHC that is hospital-based and whose parent hospital has fewer than 50 beds, the date by which the RHC must be Medicare-certified, in order to be grandfathered, was changed from December 31, 2019 to December 31, 2020. Next, a clinic that is owned by a hospital with fewer than 50 beds and that submitted certain applications (received by Medicare) for certification as a Medicare RHC prior to the end of 2020 can be grandfathered, and its clinic-specific cap is to be set based on its 2021 cost per visit.

Lastly, a grandfathered RHC must continue to be owned by a hospital with fewer than 50 beds. If the parent hospital exceeds 50 beds, the RHC will lose its grandfathered status. Table 137 are the FY estimates (in millions) for the impact of section 130, which improves payments to RHCs. These providers are currently paid an all-inclusive rate (AIR) for all medically necessary medical and mental health services, and qualified preventive health services furnished on the same day (with some exceptions). The AIR is subject to a payment limit, except for certain provider-based RHCs that have an exception to the payment limit.

The RHC payment limit per visit for CY 2021 is $87.52, which is 1.4 percent higher than the CY 2020 payment limit of $86.31. In section III.B. Of this final rule, we discuss that we proposed to revise the regulatory requirement that an RHC or FQHC mental health visit must be a face-to-face (that is, in person) encounter between an RHC or FQHC patient and an RHC or FQHC practitioner to also include encounters furnished through interactive, real-time telecommunications technology, but only when furnishing services for the purposes of diagnosis, evaluation, or treatment of a mental health disorder. According to our analysis of Medicare Part B claims data for services furnished via Medicare telehealth under the PFS during the PHE, use of telehealth for many professional services spiked in utilization around April 2020 and diminished over time, but not to pre-flagyl levels. In contrast, Medicare claims data suggests that for mental health services both permanently and temporarily added to the Medicare Telehealth list, subsequent to April 2020, the trend is toward maintaining a steady state of usage over time.

Given the expanded availability of mental health services at RHCs and FQHCs, we do anticipate that this policy will increase spending. However, we are not certain of the magnitude of this increase, since it is not clear at this time how or whether trends related to utilization of communication technology during the PHE will continue after such a time that the PHE were to end. While the estimated cost impact of this provision is unclear, the requirement that a modifier be appended to the claim to identify that the service was furnished via audio-only communication technology will allow us to closely monitor utilization and address any potential concerns regarding overutilization through future rulemaking. 2. Requiring Certain Manufacturers To Report Drug Pricing Information for Part B (§§ 414.802 and 414.806) This provision implements new statutory requirements under sections 1847A and 1927 of the Act, as amended by section 401 of the CAA (for the purposes of this section of this final rule, hereinafter is referred to as “section 401”).

These new requirements will improve the accuracy of reported payment limits and limit the use of WAC-based pricing. As described in section III.D.1. Of this final rule, in considering whether to exclude repackagers from the reporting requirements at section 1847A(f)(2) of the Act, we conducted two analyses to estimate. (1) The proportion of repackaged products in our existing ASP data. (2) the number of new ASP submissions we can expect as a result of the new reporting requirements under section 401.

And (3) the proportion of those (new) submissions that involve repackaged products. Additionally, while we believe it will impact reporting volume and payment limits under section 1847A of the Act for many billing and payment codes, we are unable to estimate the magnitude of these effects for the following reasons. We estimate. (1) 361 non-reporting manufacturers (of either single source or multiple source drugs) will now be required to report ASP data under section 1847A(f)(2) of the Act. And (2) 6114 products payable under Part B that these non-reporting manufacturers sell.

However, we do not know which Healthcare Common Procedure Coding System (HCPCS) code payment limits will be impacted by these 6114 products, nor do we know the sales volume of these 6114 products. Because this information is used to calculate volume-weighted ASP payment limits, we are unable to quantitatively estimate the economic impacts of this provision (that is, the likely costs or savings) on beneficiaries, the government, and other Start Printed Page 65625 stakeholders. (We note that the economic impacts on manufacturers, as a result of the information collection requirements of this provision is discussed in section V. Of this final rule.) For single source drugs, these changes may result in lower payment limits because, typically, the WAC-based pricing is higher than ASP plus 6 percent. This then translates to cost savings for both the government and beneficiaries, who will pay coinsurance on a lesser amount.

However, for the reason stated previously, we are unable to predict the magnitude of this effect. Similarly, payment limits for multiple source drugs could increase or decrease, and we are unable to predict the direction or magnitude of specific or aggregate effects at this time. We do not anticipate that this provision of this final rule will necessitate the revision of existing Medicaid Drug Rebate Agreements. We welcomed comment on (1) the likely costs or savings to beneficiaries, the government, and other stakeholders and (2) other related impacts of this provision. We received public comments on the likely costs or savings to beneficiaries, the government, and other stakeholders, and other related impacts of this provision.

The following is a summary of the comments we received and our responses. Comment. One commenter suggested that CMS exclude repackagers from the proposed ASP reporting requirements. They stated that requiring all repackagers to report would likely be duplicative and increase the burden on all parties without providing tangible benefit. They recommend repackagers who already report ASP data continue to do so, but that CMS not require repackagers, as a group, to be subject to the reporting requirements at this time.

Response. We are not persuaded that repackagers should be excluded at this time. In order to maintain consistency and integrity of the ASP data for those manufacturers with and without Medicaid drug rebate agreements, and for operational reasons, we do not believe it is appropriate to exclude repackagers from the ASP reporting requirements. If warranted, we could revisit this in future rulemaking. Comment.

One commenter concluded that CMS' analysis and proposal not to exclude repackagers without a rebate agreement from reporting ASP data is reasonable. The commenter stated given that repackagers with a rebate agreement are required to report ASP data, it is reasonable not to exclude repackagers without a rebate agreement from the requirements of section 401. They added that having ASP data from repackagers with and without rebate agreements could also permit future analysis of the effect of repackagers' ASP submissions on Medicare Part B payment rates. Response. We agree it is reasonable not to exclude repackagers without a Medicaid drug rebate agreement and thank the commenter for their feedback.

After consideration of public comments, we are finalizing as proposed. 3. Determination of ASP for Certain Self-Administered Drug Products a. Anticipated Effects This provision implements new statutory requirements under section 1847A(g) of the Act, as amended by section 405 of the CAA 2021, (for the purposes of this section of this final rule, hereinafter is referred to as “section 405”). As identified by the OIG studies discussed in section III.D.2.

Of this final rule, the CMS payment-limit determination under section 1847A of the Act includes all versions of a product marketed under a single FDA approval, and consistent with section 1847A(b)(5) of the Act, the payment-limit determination does not exclude products based on packaging. Thus, the volume-weighted, average-ASP determination can include self-administered versions that may lead to increased program and beneficiary costs because of distorted ASP-based payment limits. In particular, the OIG studies identified two billing and payment codes that included self-administered NDCs. The OIG study determined that as a result of the inclusion of these NDCs in the calculation of the ASP payment limit, Medicare payment amounts remained inflated in 2017 and 2018, causing the program and its beneficiaries to pay an additional $497 million during this period. Since 2014, current payment methodology has resulted in an additional $173 million in Medicare beneficiary coinsurance for these two NDCs.

(See OIG's July 2020 report titled, “Loophole in Drug Payment Rule Continues To Cost Medicare and Beneficiaries Hundreds of Millions of Dollars,” available at https://oig.hhs.gov/​oei/​reports/​OEI-BL-20-00100.asp. ) Implementation of the regulatory changes has the potential to result in decreased payment limits for identified billing and payment codes that could, in turn, substantially reduce Medicare and beneficiary expenditures, as described in the OIG study. Since section 1847A(g)(3) of the Act requires CMS to implement the required payment changes beginning on July 1, 2021, these potential savings may be observed within the year. By adding sections 1847A(g)(1) and (2) of the Act, section 405 also directs the OIG to conduct future studies with same or similar methodologies to those in the July 2020 report and directs CMS to apply the lesser of payment methodology to the applicable billing and payment codes. This has the potential to result in additional savings to the program and beneficiaries if additional products are identified by these periodic OIG studies.

B. Expected Benefits Codifying the provisions set forth by section 405 will permit to CMS to apply the lesser of payment methodology at section 1847(g)(2) of the Act to billing and payment codes identified by future OIG studies (described in section III.D.2. Of this final rule). This provision addresses distorted payment limits for these products and may result in payment amounts that are better aligned with versions of these products that are payable under Part B (for example, versions that are usually not self-administered). Although we are unable to quantify the total magnitude of the potential savings, these changes have the potential to substantially reduce program expenditures and beneficiary coinsurance.

4. Appropriate Use Criteria Section 1834(q)(2) of the Act, as added by section 218(b) of the Protecting Access to Medicare Act (PAMA), established a program to promote the use of appropriate use criteria (AUC) for applicable imaging services furnished in an applicable setting. In the CY 2019 PFS final rule (83 FR 59452), we performed an RIA for this program. In this final rule, we are finalizing our proposal to begin the payment penalty phase of the program on the later of January 1, 2023 or the January 1 of the year after the year in which the PHE for buy antibiotics ends. Because, under our provisions, the payment penalty phase will be further delayed, we are updating the estimates for incremental changes from the RIA from the CY 2019 PFS final rule.

Since we did not propose new policy requirements nor do we have sufficient reason to change any of the assumptions made in the RIA finalized in the CY 2019 PFS (83 FR 60034 through 60044), we are only updating the analysis to reflect 2019 Medicare claims data (updated from 2014). We identify four incremental changes from the CY 2019 Start Printed Page 65626 PFS final rule estimates due to updated claims data. (1) Impact of required AUC consultations by ordering professionals. (2) impact to Medicare beneficiaries. (3) process efficiencies to potentially offset the estimated burden on Medicare beneficiaries.

And (4) impact on transmitting orders for advanced diagnostic imaging services. Each of these incremental changes results in a lower estimate. a. Impact of Required AUC Consultations by Ordering Professionals As discussed in detail in the CY 2019 PFS final rule (83 FR 60035 through 60037), the annual impact estimate of consultations by ordering professionals was $70,001,700. In our estimates, we calculated the burden for auxiliary personnel to consult AUC under the direction of an ordering professional and the burden for ordering professionals to perform the consultation directly.

We estimated that 90 percent of consultations will be performed by a medical assistant (occupation code 31-9092) and 10 percent of consultations will be performed by a general practitioner (occupation code 29-1062). We estimated that 43,181,818, 2-minute consultations occur annually. Using 2019 Medicare claims data as our basis for the analysis, we proposed to change the methodology used to determine the volume of consultations and proposed to use more granular data that will reduce potential double-counting of advanced diagnostic imaging services. For example, an imaging service furnished in an outpatient hospital department could have two claims associated with that service. There could be a claim from the facility and a claim from the physician that interprets that imaging service.

In the CY 2019 RIA (83 FR 60034 through 60044) we were concerned that the estimate of 43,181,818 consultations may be an overestimate because it took into account total claims. For this CY 2022 RIA, we proposed to change the method of counting the total number of advanced diagnostic imaging services that will be furnished under the AUC program which will correspond to the total number of consultations. Using the Integrated Data Repository we identified Medicare claims using the following parameters. (1) 2019 date of service. (2) claim lines containing one of the procedure codes identified in CR10481 and CR11268 at https://www.cms.gov/​Regulations-and-Guidance/​Guidance/​Transmittals/​2018Downloads/​R2040OTN.pdf and https://www.cms.gov/​files/​document/​r2404otn.pdf, respectively.

And (3) claims types of outpatient or practitioner. Claims were then separated based on the setting in which the imaging service was furnished and further by claim type. Using only services billed on the professional claim type, the total number of claim lines containing one of the identified procedure codes was included to total 30,359,901 advanced diagnostic imaging services estimated to be subject to the AUC program. By using this combination, we believe we can reduce the risk of double-counting services to obtain a more accurate estimate of total number of diagnostic imaging services subject to the AUC program. Therefore, this analysis will use the estimate of 30,359,901 AUC consultations.

Using the May 2020 BLS mean hourly wages, we update our estimates for a medical assistant (occupation code 31-9092) with mean hourly wage of $17.75 and 100 percent fringe benefits for 90 percent of consultations (910,797 hours) to be $30,511,701 (910,797 hours × $33.50/hour). The occupation for general practitioner is no longer listed on the BLS so, instead, we update our estimate using the occupation code for general internal medicine physician (29-1216) with mean hourly wage of $101.42 and 100 percent fringe benefits for 10 percent of consultations (101,200 hours) to be $20,527,408 (101,200 hours × $202.84/hour). The updated total annual estimated impact of consultations is $51,039,109, for an incremental change (reduction) of $18,962,591. B. Impact to Medicare Beneficiaries In the CY 2019 PFS final rule, we estimated that the additional 2-minute consultation would impact the Medicare beneficiary when their advanced diagnostic imaging service is ordered by the ordering professional by introducing additional time to their office visit.

For this update, we used the updated number of consultations calculated above from claims data, as well as the May 2020 BLS mean hourly wage. To estimate this annual cost, we multiplied the annual burden of 1,011,997 hours by the BLS occupation code that represents all occupations in the BLS (00-0000) as mean hourly wage plus 100 percent fringe ($54.14/hr) for a total estimate of $54,789,518 per year for an incremental change (reduction) of $13,211,482. We also estimated that, over time, process efficiencies may be implemented. We assumed that 50 percent of practices implemented an improvement process that streamlined AUC consultation so Medicare beneficiaries spent the same amount of time in the physician's office regardless of whether an advanced diagnostic imaging service was ordered. The updated estimate that such an improvement process could offset the estimated burden on Medicare beneficiaries by $27,394,759 annually for an incremental change (reduction) of $6,605,741.

C. Impact on Transmitting Orders for Advanced Diagnostic Imaging Services In the CY 2019 PFS final rule, we estimated that including AUC consultation information on the order for an advanced diagnostic imaging service to the furnishing professional or facility is estimated as the additional 5 minutes spent by a medical secretary (occupation code 43-6013). To update this estimate, we use the May 2020 mean hourly wage of $18.75 plus 100 percent fringe benefits to transmit the order for the advanced diagnostic imaging service. In aggregate, we assumed in the CY 2019 PFS final rule that 40,000,000 advanced diagnostic imaging services are ordered annually. We proposed to update that number to match the total number of AUC consultations proposed earlier in this RIA to 30,359,901, so the updated total annual burden to communicate additional information in the order is estimated as $94,495,192 ($18.75/hr × 2 × 0.083 hr × 30,359,901 orders) for an incremental change (reduction) of $20,044,808.

D. Impact on Furnishing Professionals and Facilities As described in the CY 2019 PFS final rule, we identified an estimated 174,064 furnishing professionals (comprising radiologists, ASCs, IDTFs and hospitals) and assumed that every identified furnishing professional will choose to update their processes for the purposes of the AUC program in the same way by purchasing an automated solution to report AUC consultation information which was estimated to cost $10,000 for each furnishing professional. We update this cost to account for inflation and therefore the updated estimated cost is $10,636.07 ($10,000 adjusted for inflation to 2021 dollars) for a total estimated one-time update cost of $1,851,356,888.48 (174,064 × $10,636.07). E. Appropriate Use Criteria for Advanced Diagnostic Imaging Services As described in the CY 2019 PFS final rule, we assumed that there may be some savings to the Medicare program due to the AUC program requirements and potential decreases in inappropriate utilization of advanced diagnostic imaging services.

This assumption was based on literature describing prior Start Printed Page 65627 experiences with clinical decision support in a pilot project conducted in Minnesota, a retrospective cohort study on evidence-based clinical decision support for lumbar MRI, brain MR and sinus CT and local implementation of clinical decision support, and we estimated that savings may account for $700,000,000 savings per year. f. Summary of Delay-Attributable Changes and Discounted Rates Table 138 summarizes the substantive changes from the CY 2019 PFS final rule to the CY 2022 PFS final rule impact estimates. The effect of a 3-year delay is approximated by applying 3 years' worth of discounting at 7 percent or 3 percent discount rates (Circular A-4, https://www.whitehouse.gov/​sites/​whitehouse.gov/​files/​omb/​assets/​regulatory_​matters_​pdf/​a-4.pdf ). 5.

Removal of Selected National Coverage Determinations (NCDs) We proposed to remove two older NCDs that no longer contain clinically pertinent and current information or that involve items or services that are used infrequently by beneficiaries. Generally, proactively removing obsolete or unnecessary NCDs removes barriers to innovation and reduces burden for stakeholders and CMS. The two NCDs fall into two impact categories. First, eliminating an NCD for items and services that were previously covered means that the item or service will no longer be automatically covered by Medicare. Instead, the coverage determinations for those items and services will be made by Medicare Administrative Contractors (MACs).

Second, if the previous national coverage determination barred coverage for an item or service under title XVIII, MACs will now be able to cover the item or service if the MAC determines that such action is appropriate under the statute. We believe that allowing local contractor flexibility in these cases better serves the needs of the Medicare program and its beneficiaries since we believe the future utilization for items and services within these policies will be limited, each affecting less than one percent of the Medicare FFS population. For the one NCD where NCD removal changes coverage from limited national coverage to MAC discretion, claims data from 2019 shows that less than one percent of the Medicare population is affected. Specifically, NCD 180.2 Enteral and Parenteral Nutrition Therapy provided coverage with limitations. Where in 2019 CMS paid 1,643,739 Medicare FFS claims for 83,551 unique beneficiaries totaling CMS payments of $356,228,606.

While we have claims data available for 2020, the data shows a decrease in claims, unique beneficiaries and total amount paid by CMS. We believe this may be due in part to the buy antibiotics flagyl. However, we do not have any information to be able to say that conclusively. The change could be due to other factors not examined here. We estimate there will be de minimis change to 2022 payments, compared to 2019 or 2020 because, as discussed in section III.F.

Of the final rule, local contractors have finalized two LCDs, effective for dates of service on or after September 5, 2021 that will continue to provide parenteral and enteral nutrition coverage for Medicare beneficiaries, after removal of NCD 180.2. Therefore, we believe that removing this NCD will not result in significant changes to payments. For the one non-covered NCD to be eliminated, Positron Emission Tomography (PET) Scans under NCD 220.6, we did not expect to find historical claims data for the non-oncologic uses of PET at issue. We broadly noncover non-oncologic indications of PET, in other words, we required that every non-oncologic indication for PET must have its own NCD in order to receive coverage. Because this NCD provides for noncoverage on non-oncologic indications, we do not have accurate claims data to estimate total impact.

However, based on the service, we expect future claims to affect less than one percent of Medicare FFS beneficiaries. As discussed in section III.F. Of this final rule, the NCD allows coverage for diagnostic PET imaging for oncologic uses not already determined by an NCD, to be made at the discretion of local MACs. We believe that extending local contractor discretion for non-oncologic indications of PET provides an immediate avenue to potential coverage in appropriate Start Printed Page 65628 candidates and provides a framework that better serves the needs of the Medicare program and its beneficiaries. For clarity, we did not propose to change any other subsections of 220.6.

Thus, the NCDs listed at 220.6.1 through 220.6.20 will not be changed by this provision. 6. Pulmonary Rehabilitation, Cardiac Rehabilitation and Intensive Cardiac Rehabilitation As discussed in section III.H., Pulmonary Rehabilitation (PR), Cardiac Rehabilitation (CR) and Intensive Cardiac Rehabilitation (ICR), of this final rule, we proposed largely conforming changes throughout §§ 410.47 (PR) and 410.49 (CR/ICR). These changes are intended to ensure consistency and accuracy in terminology, definitions and requirements where appropriate across PR and CR/ICR conditions of coverage. Specific to PR, we proposed to remove the requirement for direct physician-patient contact related to the periodic review of the patient's treatment plan because such interaction within the PR program is not necessary for all patients and can be specified, as needed, in individualized treatment plans (ITPs).

We also proposed to add coverage of PR for beneficiaries who were hospitalized with a buy antibiotics diagnosis and experience persistent symptoms, including respiratory dysfunction, for at least 4 weeks after hospital discharge. After considering public comments and additional clinical evidence, we are finalizing the revisions to improve consistency and accuracy across PR and CR/ICR conditions of coverage as proposed. We are also finalizing the removal of the PR requirement for direct physician-patient contact. We are expanding upon our proposal to cover PR for beneficiaries who were hospitalized with a buy antibiotics diagnosis and experience persistent symptoms, including respiratory dysfunction, for at least 4 weeks after hospital discharge. We are removing the proposed hospitalization requirement and finalizing coverage of PR for beneficiaries who have had confirmed or suspected buy antibiotics and experience persistent symptoms that include respiratory dysfunction for at least 4 weeks.

We did not receive public comments on the proposed impact so we use the same methodology in estimating the impact of the final expansion of coverage for PR below. In assessing the impact of these provisions, we note that the expansion of PR coverage may increase utilization. Based on the low utilization rate discussed below, we do not believe the other revisions will significantly impact utilization and the Medicare program. To estimate the potential increase from the expansion of coverage for PR, we searched the literature for articles that evaluated the utilization rate of PR for the currently eligible diagnosis of chronic obstructive pulmonary disease (COPD) in order to determine the historical utilization trends of this service. Nishi et al.

(2016) investigated the number of Medicare beneficiaries with COPD who received PR from January 1, 2003 to December 31, 2012. Their results included both individuals who had experienced hospitalizations for COPD and those who were outpatients only. The number of unique patients with COPD who initially participated in PR during the study period was 2.6 percent in 2003 (before conditions of coverage at § 410.47 were established) and 2.88 percent in 2012 (after conditions of coverage at § 410.47 were established).[] In 2019, Spitzer, et al. Published an article based on Medicare claims data from 2012, finding that 2.7 percent of eligible Medicare beneficiaries received PR within 12 months of hospitalization with COPD.[] Using claims data from FFS Medicare beneficiaries hospitalized for COPD in 2014, Lindenauer et al. (2020) reported that only 3 percent initiated PR within 1 year of their hospital discharge.[] Taken together, this data informs us that utilization of PR in the Medicare population is very low, and that the majority of patients who avail themselves of this service do so, post hospitalization.

There are limitations to applying this data to identify the utilization rate of PR to the conditions of coverage specified at § 410.47. Most notably, some of these studies included patients whose services were billed with non-PR respiratory therapy codes (G0237, G0238 and G0239), instead of only patients whose services were billed with the PR code (G0424). But the authors also limited patient inclusion to those with a principal or secondary COPD diagnosis, so we believe this suggests that 3 percent is an upper bound for the utilization of PR currently in Medicare beneficiaries. Given that participation in PR has remained steady for many years, we do not expect this pattern to change. As such, for the purposes of this analysis, we assume that 3 percent of eligible beneficiaries under the expansion of coverage (beneficiaries who have had confirmed or suspected buy antibiotics and experience persistent symptoms that include respiratory dysfunction for at least 4 weeks) will participate in PR.

To identify the eligible beneficiaries under our provision, we first identify the number of beneficiaries who had buy antibiotics using the Preliminary Medicare buy antibiotics Data Snapshot.[] At the time of writing, the Snapshot included data from January 1, 2020 to July 24, 2021, and identified 4,656,553 total buy antibiotics cases for Medicare beneficiaries. Using Medicare FFS data from February 24, 2020 to September 27, 2020 as compared to the same time frame in 2015 through 2019, Tarazi et al. (2021) found that the buy antibiotics related mortality rate, defined as death within 60 days of buy antibiotics diagnosis, was 17.5 percent.[] To calculate the number of beneficiaries that survive buy antibiotics to be eligible for PR under our coverage expansion, we reduced 4,656,553 by 17.5 percent (814,897) to 3,841,656 beneficiaries. A paper published by the Tony Blair Institute for Global Change [] states that the buy antibiotics Symptom Study led by King's College London indicated that about 10 percent of survey participants reported symptoms (including shortness of breath and other symptoms like fatigue, headache and loss of smell) beyond a four-week recovery period. Using this information, we estimate that the patient population we are expanding PR coverage to, those who have had confirmed or suspected buy antibiotics and experience persistent symptoms that include respiratory dysfunction for at least 4 weeks, to be 384,166 beneficiaries (3,841,656 × 0.10).

Based on our assumption of utilization above, 3 percent, for the newly covered patient population, we estimate 11,525 Start Printed Page 65629 beneficiaries will receive PR (384,166 × 0.03). Medicare covers PR for a maximum of 72 sessions. Using 2018 and 2019 Medicare claims data from the Chronic Conditions Data Warehouse (CCW), beneficiaries on average completed 14 sessions of PR. If we assume patients eligible based on our expansion of coverage will participate, on average, in the same number of sessions, we estimate the expansion of coverage will increase PR utilization by 161,350 sessions annually (11,525 beneficiaries × 14 average sessions completed per beneficiary). Claims for PR are submitted using CPT code G0424.

Our analysis of Medicare claims data indicates that 97.54 percent of PR sessions are billed under the Hospital OPPS at $55.66 (national average price) for an estimated total of $8,759,815 (161,350 PR sessions × 0.9754 × $55.66). The remaining 2.46 percent of PR sessions are billed under the PFS, with 2.12 percent of PR sessions furnished in a physician's office which has a national average price of $30.36 and 0.34 percent billed by a physician when PR was furnished in a HOPD which has a national average price of $13.96. Taken together, the estimated total for this remaining 2.46 percent of PR sessions is $111,508 ((161,350 PR sessions × 0.0212 × $30.36) + (161,350 PR sessions x 0.0034 × $13.96)). We estimate the total added cost to the Medicare program of this expansion of coverage to be $8,871,323 ($8,759,815 + $111,508) annually during and immediately following the PHE for buy antibiotics. The impact of our final rule increases the final estimate by $6,709,876 which reflects the larger patient population that will be eligible for PR.

Removing the proposed hospitalization requirement increased the number of eligible beneficiaries by 290,555. As buy antibiotics cases decline, we expect the annual impact to decrease because eligible patient populations will likely decrease. However, we are unable to estimate the longer term impact of our provisions due to the unpredictable nature of the PHE and the lack of long term data on buy antibiotics. 7. Medical Nutrition Therapy As discussed in section III.I., Medical Nutrition Therapy (MNT), of this final rule, we proposed to remove the restriction that patients only be referred to MNT by the treating physician and update the glomerular fiation rate (GFR) eligibility for patients with chronic kidney disease.

We do not anticipate any significant increase in utilization of MNT services resulting from our revisions. Despite various policy changes that could have improved use, such as increasing payment via adding work RVUs to MNT codes in 2006, approving MNT for telehealth coverage in 2005 and including registered dieticians (RDs) and nutrition professionals as telehealth distant site providers, and waiving out-of-pocket costs to beneficiaries, MNT participation remains under 2 percent of eligible beneficiaries. Based on an analysis of Medicare claims data from 2018, 2019, 2020, we identify the utilization rate of MNT services among eligible beneficiaries to be between 1.5 and 1.8 percent. Although MNT is covered by many State Medicaid programs and private insurers, use is low in the US.[] The Academy of Nutrition and Dietetics recognizes that research specific to the underuse of MNT services is scant.[] Anecdotal reports and related research on diabetes self-management training point to a multitude of reasons why utilization of the MNT services benefit have remained low. These potential barriers include lack of awareness of MNT by patients and clinicians, inconsistent coverage for MNT services by non-Medicare payers, patient travel and time issues to receive the services and lack of availability of services from RDs who may perceive the process of Medicare enrollment/insurance credentialing and billing as being burdensome and complex.[] Of about 100,000 RDs in the US, only 1,589 submitted Medicare FFS MNT claims in 2017.

One study revealed that less than half of RDs providing MNT services in an ambulatory care setting indicated they were not Medicare providers due to reasons such as perceived low reimbursement rates, not providing MNT to Medicare eligible patients, not knowing how to become a Medicare provider, and providing MNT to Medicare patients for diagnoses not covered by Medicare.[] Our revisions may increase beneficiary access to the MNT benefit and reduce primary care physician burden since we proposed that referrals can come from other physicians and not only from the physician treating the patient for their diabetes or kidney disease. Although, as discussed above, we do not expect the changes to make a significant impact on the Medicare program. We do not anticipate increased administrative burden as documentation in the medical record of any referred service is already a part of discharge planning in the hospital setting. The changes to the GFR requirements are to conform our regulation to updated clinical standards and also do not pose a significant change. 8.

Medicare Shared Savings Program a. Modifications to the Shared Savings Program Quality Reporting Requirements Under the APP and the Quality Performance Standard In section IV.A.3.d.(1)(d) of this final rule, we are extending the use of the CMS Web Interface as a collection type for the Quality Payment Program for performance years 2022, 2023, and 2024 for Shared Savings Program ACOs reporting under the APP. In section III.J.1.c. Of this final rule, we are finalizing that in order for ACOs to meet the quality reporting requirements under the Shared Savings Program for performance year 2022 and subsequent performance years, ACOs must meet the following requirements. For performance years 2022, 2023, and 2024.

An ACO must report on either. (a) The ten CMS Web Interface measures and administer a CAHPS for MIPS survey and CMS will calculate the two claims-based measures included under the APP, or (b) The three eCQMs/MIPS CQMs and administer a CAHPS for MIPS survey and CMS will calculate the two claims-based measures included under the APP. If an ACO chooses to report the three eCQMs/MIPS CQMs, its performance on all three eCQMs/MIPS CQMs will be used for purposes of MIPS scoring under the APP. If an ACO decides to report both the ten CMS Web Interface measures and the three eCQMs/MIPS CQMs, it will receive the higher of the Start Printed Page 65630 two quality scores for purposes of the MIPS Quality performance category. For performance year 2025 and subsequent years.

The ACO must report the three eCQMs/MIPS CQMs and administer a CAHPS for MIPS survey and CMS will calculate the two claims-based measures included under the APP. Absent the related provision analyzed below to reduce the quality performance standard for PY 2023 to the 30th percentile MIPS Quality performance category score, the changes to the quality reporting requirements, including the accommodation to continue the availability of the CMS Web Interface as a reporting mechanism under the APP will likely provide an easier path for a meaningful subset of ACOs that would otherwise have faced difficulty meeting the quality performance threshold previously established in rulemaking for PY 2023. However, we estimate that nearly all such ACOs would already have met the lower 30th percentile performance standard in PY 2023 without the additional reporting flexibility. Of the relatively few, remaining ACOs that we estimate would have failed to meet the lower 30th percentile performance standard without the additional reporting flexibility, we estimate that about half (on average) will meet the quality performance standard as a result of the quality reporting flexibility adopted in this final rule, and thereby further increase shared savings payments to ACOs by about $20 million in PY 2023. In section III.J.1.d.

Of this final rule, we are finalizing, with modifications, the proposal to freeze the quality performance standard at the 30th percentile across all MIPS Quality performance category scores for performance year 2023, and to establish incentives to encourage ACOs to begin the transition to eCQM/MIPS CQM reporting in performance year 2022 and performance year 2023. The quality performance standard will increase to the 40th percentile across all MIPS Quality performance category scores for performance years 2024 and subsequent performance years. The quality performance standard is the minimum performance level ACOs must achieve in order to share in any savings earned, avoid maximum shared losses under certain payment tracks, and avoid quality-related compliance actions. We are finalizing that, with the exception of an ACO in the first performance year of its first agreement period, an ACO will meet the quality performance standard under the Shared Savings Program by reporting quality data via the APP established under § 414.1367 according the method of submission established by CMS and for. Performance years 2022 and 2023.

++ Achieving a quality performance score that is equivalent to or higher than the 30th percentile across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring, or ++ If the ACO reports the three eCQMs/MIPS CQMs, meeting the data completeness requirement at § 414.1340 and the case minimum requirement at § 414.1380 for all three measures, and achieves a quality performance score equivalent to or higher than the 10th percentile of the performance benchmark on at least 1 of the 4 outcome measures in the APP measure set and a quality performance score equivalent to or higher than the 30th percentile of the performance benchmark on at least 1 of the 5 remaining measures in the APP measure set. Consequently, the ACO would be required to meet the performance benchmark on either 2 outcome measures (one measure at the 10th percentile and the other at the 30th percentile), or 1 outcome measure at the 10th percentile and any other measure in the APP measure set at the 30th percentile. If the ACO (1) does not report any of the 10 CMS Web Interface measures or any of the three eCQMs/MIPS CQMs and (2) does not administer a CAHPS for MIPS survey, the ACO would not meet the quality performance standard. Performance year 2024 and subsequent performance years. Achieving a quality performance score that is equivalent to or higher than the 40th percentile across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring.

If the ACO (1) does not report any of the 10 CMS Web Interface measures or any of the three eCQMs/MIPS CQMs and (2) does not administer a CAHPS for MIPS survey, the ACO would not meet the quality performance standard. Our analysis of quality performance data reported by ACOs for performance years starting during 2019 indicates that about 20 percent of ACOs would have failed a quality performance standard defined as the 40th percentile across all MIPS Quality performance category scores. There is significant uncertainty whether PY 2023 will play out similarly to the baseline data. The fraction of ACOs that would ultimately fail to meet a higher standard in PY 2023 could change significantly if the universe of MIPS Quality performance category scores improves relative to ACOs' quality performance scores, or alternatively if ACOs, particularly ACOs at risk of failing, respond to the increased quality performance standard by boosting their performance. Utilizing a Monte Carlo approach, assuming that the simulated poor performing ACOs have a 50 percent chance of improving their quality performance beyond the 40th percentile, if CMS kept the quality performance standard at the 40th percentile, then the cost of reducing to the 30th percentile in 2023 will be $190 million (range $10 million to $370 million).

There is a wide range because slight changes in quality scoring at the low end of the distribution could render the 40th percentile more or less of an effective point of discrimination among ACOs earning shared savings. B. Modifications to Other Shared Savings Program Requirements We do not anticipate a material aggregate impact for the other changes we are finalizing as proposed related to the Shared Savings Program, specifically. Revisions to the definition of primary care services used in the Shared Savings Program's beneficiary assignment methodology (section III.J.2. Of this final rule).

Revisions to the repayment mechanism arrangement policy, including changes to the calculation and recalculation of repayment mechanism amounts (section III.J.3. Of this final rule). Revision of the requirements concerning disclosure of prior participation in the Shared Savings Program by the ACO, ACO participants, and ACO providers/suppliers, and revisions to Shared Savings Program requirements to reduce the frequency and circumstances under which ACOs submit sample ACO participant agreements and executed ACO participant agreements to CMS (section III.J.4. Of this final rule). And revisions to the beneficiary notification requirement as it applies to ACOs under prospective assignment and ACOs under preliminary prospective assignment with retrospective reconciliation (section III.J.5.

Of this final rule). However, as we note in section III.J.3. Of this final rule, lower required repayment mechanism amounts could reduce costs for ACOs in fees charged by financial institutions for letters of credit and by insurance companies for surety bonds. We estimate that such relief, in total for all participating ACOs, could be worth $2 to $4 million annually under the approach we are finalizing (assuming a reduction of approximately $196 million in repayment mechanism amounts, in aggregate). Start Printed Page 65631 We also note that the revisions we are finalizing to the definition of primary care services used in the assignment methodology may have differing effects on a subset of participating ACOs, for example, by leading a beneficiary to be assigned to a competing ACO, for a small subset of beneficiaries.

We do not anticipate such ACO-level changes will result in a net impact on program spending overall. 9. Medicare Ground Ambulance Data Collection System In section III.K. Of this final rule, we finalized our proposed changes to the Medicare Ground Ambulance Data Collection System including the proposed change to the data collection period and data reporting period for selected ground ambulance organizations in year 3, proposed revisions to the timeline for when the payment reduction for failure to report will begin and when the data will be publicly available, and proposed revisions to the Medicare Ground Ambulance Data Collection Instrument. We stated in the proposed rule that while we believed that these changes and clarifications will be well received by the ground ambulance stakeholders, we did not believe that these changes will have any substantive impact on the cost or time associated with completing the Medicare Ground Ambulance Data Collection Instrument.

We also noted in the proposed rule that the overall length of the Medicare Ground Ambulance Data Collection Instrument would be the same as previously finalized (84 FR 62888) with these changes. Additionally, some of the instructions which we proposed to add were intended to improve clarity and may therefore reduce the time the ground ambulance organizations spend addressing the questions. We did not receive any public comments on our estimated impact on the cost or time associated with completing the Medicare Ground Ambulance Data Collection Instrument. As we discussed in section III.K of this final rule, we are finalizing our proposed changes to the Medicare Ground Ambulance Data Collection System. 10.

Medicare Diabetes Prevention Program Expanded Model a. Effects of Provisions Relating to the Medicare Diabetes Prevention Program Expanded Model (1) Effects on Beneficiaries We proposed to modify certain Medicare Diabetes Prevention Program (MDPP) expanded model policies to. (1) Allow CMS to remove the ongoing maintenance phase (months 13-24) of the MDPP set of services for those beneficiaries who started their first core session on or after January 1, 2022. (2) update the performance payments for the MDPP set of services in the core and core maintenance performance periods. And (3) waive the Medicare provider enrollment application fee for all organizations enrolling as MDPP suppliers on a prospective basis.

These changes will have a positive impact on beneficiaries' health by increasing the capacity of MDPP eligible organizations to enroll in Medicare as MDPP suppliers and increasing access to the MDPP set of services for beneficiaries. Eligible beneficiaries receive these services as preventive services, which require no copays or cost sharing. These changes address MDPP supplier and beneficiary needs based upon all available monitoring and evaluation data. The changes are also responsive respond to stakeholder comments. (2) Effects on the Market Currently, more than 1,000 organizations nationally are eligible to become MDPP suppliers based on their preliminary or full CDC Diabetes Prevention Recognition Program (DPRP) status.

However, only 27 percent of eligible organizations are participating in MDPP. We anticipate that the removal of the second year of the MDPP set of services will make MDPP attractive and feasible to more MDPP eligible organizations. Not only does a 12-month MDPP services period align with that of the CDC's National DPP and the DPP model test, our data show that only 10 percent of enrolled MDPP participants continue with the Ongoing Maintenance phase sessions (Year 2), and the majority are reaching their weight loss milestone within the first 6 months of the set of MDPP services. Stakeholders report that the second year of MDPP, or the ongoing maintenance phase, is cost prohibitive due to the costs to retain beneficiaries in year 2 of the expanded model as well as the costs to deliver an additional year of the expanded model that is not supported by the CDC National DPP curriculum. The CDC's National DPP curriculum supports a 1-year program and suppliers have found it difficult to extrapolate the curriculum to a second year.

Additionally, MDPP suppliers commented that they have an increasingly difficult time making the business case for MDPP given the costs associated with the ongoing maintenance phase and the low performance payments associated with the second year. Given the low volume of participants continuing in the second year of MDPP, delivering the MDPP ongoing maintenance period creates an undue burden to MDPP suppliers. The cost to offer and deliver the sessions to a small cohort of individuals outweigh the maximum payments available from Medicare. Stakeholders have consistently commented that CMS should shorten the MDPP expanded model to 1 year, with payment levels at least equivalent to the levels provided in the DPP model test. For example, during the DPP model test, suppliers were paid an average of $462 per beneficiary for the 1-year model test.

The second year has made delivering MDPP both financially unattractive and unstainable for many of the current and eligible MDPP suppliers. Suppliers have reported that it is very difficult to engage and retain beneficiaries in a second year, and the reimbursement levels for a second year are inadequate to cover supplier costs. We proposed to shorten the MDPP service period to 1 year and increase the performance payments in the first year. These changes respond to stakeholder feedback and may alleviate some of the difficulty retaining MDPP participants during the core maintenance phase of the expanded model. (3) Burden Related to Information Collection Requirements—No impact (a) Supplier Standards MDPP suppliers may encounter the Medicare enrollment fee during the following Medicare provider enrollment transactions.

Initial enrollment. Revalidation (every 5 years for MDPP). Or the addition of a new practice location. The provider/supplier enrollment fee for Calendar Year 2021 is $599. Although MDPP suppliers may submit a written request to CMS for a hardship exception to the application fee in accordance with § 424.514, many will not qualify and the hardship application process will simply add more burden on the organization.

We have heard from the CDC as well as other stakeholders that the enrollment fee is a potential barrier to eligible MDPP suppliers who will not otherwise enroll in Medicare except for MDPP. Approximately 39 percent of our current suppliers are non-traditional suppliers that serve their local communities and play a critical role in enrolling more diverse, equitable, and inclusive cohorts of Medicare beneficiaries to MDPP. These non-traditional suppliers include, but are not limited to YMCAs, county health departments, community health centers, and non-profit organizations that focus on health education, and otherwise will neither enroll nor be able Start Printed Page 65632 to enroll as a Medicare supplier at all if it were not for MDPP. They often serve as trusted sources of health information for their communities. However, they also represent a large number of eligible organizations who have not enrolled in Medicare as MDPP suppliers.

We anticipate that waiving the enrollment fee on a prospective basis along with the other programmatic adjustments are likely to result in more MDPP suppliers, increased beneficiary access to MDPP services, and an ongoing reduction of the incidence of diabetes in eligible Medicare beneficiaries, in both urban and rural communities. In April 2020, CMS waived all provider enrollment application fees as part of the buy antibiotics Emergency Declaration Blanket Waivers for Health Care Providers. As a result, we saw an increase in MDPP supplier enrollment. We believe that granting a waiver of the fee for MDPP suppliers to extend beyond the buy antibiotics Emergency Declaration Blanket Waiver, along with the other change to MDPP, may stimulate MDPP supplier enrollment and enhance the MDPP evaluation. We proposed waiving the Medicare provider enrollment fee beyond buy antibiotics Emergency Declaration Blanket Waivers for Health Care Providers because the enrollment fee creates a potential barrier to MDPP supplier enrollment, beneficiary access to the program, and subsequently, our ability to evaluate MDPP.

Specifically, we proposed, to waive the enrollment fee as described in section 1866(j)(2)(C)(i) and (ii) of the Act during the MDPP expanded model test phase. (b) Payment for MDPP Services Our regulations at § 414.84 specify the payments MDPP suppliers may be eligible to receive, payments for furnishing MDPP services, and meeting performance targets related to beneficiary weight loss and/or attendance. MDPP suppliers are paid by CMS by submitting claims for MDPP beneficiaries using claim form CMS-1500 ( https://www.cms.gov/​Medicare/​CMS-Forms/​CMS-Forms/​Downloads/​CMS1500.pdf ). As a condition for payment, claims submitted by MDPP suppliers must be for services furnished to eligible beneficiaries in accordance with § 414.84(b) and (c). We have streamlined the performance payments so that they are easier to understand and suppliers receive larger payments for participants reaching attendance and weight loss performance-based milestones.

For example, the attendance-based performance payments are based on a standardized per-session rate, paid after the 1st, 4th, and 9th sessions attended during the core sessions interval, and after attending the two (2) sessions during each of the core maintenance intervals. We have redistributed all the Year 2 ongoing maintenance sessions phase performance payments to certain core and core maintenance session performance payments in Year 1. As finalized, the maximum payment of $705 over a 1-year service period is $1 more than the current maximum payment of $704 under the original 2-year payment structure. We believe eliminating the second year and its associated payments while increasing the first-year payments will result in a more financially sustainable expanded model. Increasing the first year MDPP payment amounts should not negatively affect a supplier's performance (for example, participants' weight loss).

As finalized, we increased the per session payments to $35, with suppliers receiving $53 more per beneficiary who attends the 4th core session compared to current payments and $27 more than proposed. We increased the attendance-based payments in response to stakeholder comments and maintained the 5 percent weight loss payments. Although some of the largest payments to suppliers are still driven by weight loss achievement, the maximum payment for attendance only is finalized at $455 compared to $338 proposed and $205 current. Further, in order to maintain CDC Diabetes Prevention Recognition Program (DPRP) recognition status, which is required to be an MDPP supplier, certain levels of performance metrics (for example, weight loss) must be satisfied. There is no evidence that eliminating the second-year maintenance sessions, shortening the MDPP services period to 1 year, will have any negative effects on performance of the expanded model.

(4) Effects on the Medicare Program (a) Estimated 10-Year Impact of MDPP Table 140 shows an updated estimate (in millions) for the impact on Medicare spending of two changes to the Medicare Diabetes Prevention Program (MDPP) to be implemented in 2022, with corrected assumptions. Waiving the Medicare enrollment fee for all new MDPP suppliers. And Shortening the MDPP services period to 1 year and shifting all of the Ongoing Maintenance reimbursement amounts to year one. These estimates by the CMS Office of the Actuary do not consider waiving the Medicare enrollment fee as a direct cost and assume there will be an additional 500 beneficiaries per year participating in MDPP. The average payment for an MDPP participant will increase by $150.

While the maximum payment available to an MDPP supplier is only slightly greater than the maximum payment available under the original 2-year payment structure, the second year set of MDPP services have historically been far less utilized than the first year set of services. Therefore, eliminating the second-year payments has a minimal negative effect to the assumed costs of the expanded model. In the most recent year prior to the PHE, 747 Medicare FFS beneficiaries entered MDPP. Increasing the first-year payment amounts to suppliers and waiving the Medicare enrollment fee should increase access to MDPP, resulting in more utilization of the MDPP set of services. Starting in 2022, we can assume that 750 beneficiaries will have entered the expanded model each year without including the finalized changes.

After including these changes, we will now Start Printed Page 65633 assume 1,250 beneficiaries will enter the expanded model each year. This assumption has a high level of uncertainty and we revisit it in the Sensitivity Analysis section. Increasing the first year MDPP payment amounts should not negatively affect a supplier's performance (for example, participants' weight loss). Almost all of the increases to the payment amounts are applied after the 4th core session. Even though most of the payment increases are not tied to weight loss achievement, in order to maintain CDC Diabetes Prevention Recognition Program recognition status, which is required to be an MDPP supplier, certain levels of performance metrics (for example, weight loss) must be satisfied.

There is no evidence that eliminating the second-year maintenance sessions, shortening the MDPP services period to one year, will have any negative effects on performance of the expanded model. (b) Sensitivity Analysis Since the cost to suppliers for delivering the MDPP set of services is generally unknown, how utilization of the expanded model will be affected by the changes is highly uncertain. Table 141 shows the 10-year impact estimates (in millions) for different levels of additional beneficiary participation as a result of the changes. Finally, higher projected savings are associated with increases in beneficiary participation, while no additional beneficiaries will result in an estimated cost. The financial impacts we provided for the previously proposed payment schedule changes included errors that impacted our estimates.

Additional costs resulting from payment increases were not applied to the baseline participants. The count of 1,742 participants used to estimate future baseline participation included Medicare Advantage beneficiaries, which should have been excluded. And since there were only 747 new FFS participants in the most recent year prior to the start of the PHE, our best estimate would have assumed 250 additional FFS participants per year resulting from the previously proposed changes. b. Alternatives Considered No alternatives were considered.

The 2-year MDPP service period has depressed interest in MDPP among would-be MDPP suppliers. These actions address stakeholder comments on the barriers to MDPP expanded model success. If we do not take action, we will not be able to scale MDPP as intended, impacting Medicare beneficiary access to this expanded model. Reducing the MDPP from a 24-to a 12-month services period, increasing the year 1 performance payments, and waiving the Medicare provider enrollment application fee not only better aligns the expanded model with the evidence that helped certify the DPP model test initially, but it will encourage eligible organizations to enroll as MDPP suppliers. C.

Impact on Beneficiaries This change will have a positive impact on eligible MDPP beneficiaries, as it better aligns with the CDC's National DPP, giving both the participants and the coaches similar messaging regarding this expanded model, regardless of payer. MDPP suppliers often offer the MDPP set of services to mixed cohorts, or classes with participants who are not eligible for MDPP, but who are enrolled in a National DPP cohort. Since MDPP generally follows the CDC's National DPP and aligns its expanded model with the CDC's DPRP Standards, it is confusing to participants, coaches, and staff when talking about a 2-year set of services to its eligible Medicare participants when the non-Medicare participants have a 1-year program. Finally, reducing the MDPP service period from 2 years to 1 year allows more cohorts to start and finish MDPP during the expanded model initial period of performance, which is expected to end in March 2023. D.

Estimating Regulatory Familiarization Costs Given that we tried to align this rule as much as possible with the CDC DPRP Standards, there should be minimal regulatory familiarization costs. This rule impacts only enrolled MDPP suppliers and eligible beneficiaries who Start Printed Page 65634 have started the MDPP expanded model or are interested in MDPP. 11. treatment Administration Services In section II.J.1. Of this final rule, we are finalizing that effective January 1, 2022, CMS will pay $30 per dose for the administration of the influenza, pneumococcal and hepatitis B flagyl treatments.

In addition, CMS will maintain the current payment rate of $40 per dose for the administration of the buy antibiotics treatments through the end of the calendar year in which the ongoing PHE ends. Effective January 1 of the year following the year in which the PHE ends, the payment rate for buy antibiotics treatment administration will be set at a rate to align with the payment rate for the administration of other Part B preventive treatments. We estimate that the policy to increase the administration cost for influenza/pneumococcal/HBV treatment services to $30 in 2022 will increase Medicare spending by roughly $250 million in CY 2022. This estimate doesn't reflect the impact of induced utilization of the treatment, or any offsetting savings resulting from averted hospitalizations for those who would now get the treatment. This policy may encourage more health care providers to offer these services or encourage those that already offer these services to proactively identify and vaccinate more beneficiaries compared to what they might under the lower rates, which would result in further additional treatment costs.

However, if more beneficiaries were vaccinated then Medicare costs associated with the treatment of influenza, pneumonia, and hepatitis B could be reduced. In order to offset the costs associated with this policy roughly 10-11K influenza-related hospitalizations would have to be averted. 12. Medicare Provider and Supplier Enrollment Changes—Provider Enrollment As explained in section III.N. Of this final rule, we proposed changes to three of our existing revocation reasons.

We proposed to expand § 424.535(a)(2) to permit revocation based on the OIG exclusion of administrative or management services personnel furnishing services payable by a Federal health care program, such as a billing specialist, accountant, or human resources specialist. We proposed to expand § 424.535(a)(13) to permit revocation of a physician's or other eligible professional's enrollment if he or she surrenders his/her Drug Enforcement Administration (DEA) certificate of registration in response to an order to show cause. We proposed to revise the factors in § 424.535(a)(8)(ii) (which permits revocation based on a pattern or practice of submitting non-compliant claims) to better enable CMS to target shorter periods of non-compliant billing. We believe that all three of these changes will result in an increase in the number of revocations that CMS imposes. However, we believe this number will be rather small.

We currently impose only a limited number of revocations under §§ 424.535(a)(2), (a)(13), and (a)(8)(ii). Accordingly, since our expansion of these three revocation reasons will be fairly modest, we do not foresee more than a very slight increase in revocations. Table 143 outlines the number of revocations we estimate will ensue under our revocation expansions. These numbers only account for additional revocations stemming from our changes. Internal CMS data indicates that the average provider/supplier that will be affected by these regulatory expansions receives roughly $50,000 in Medicare payments each year.

(We used a similar $50,000 annual payment estimate for our provider enrollment provisions in the CY 2020 PFS final rule) (84 FR 62568)). Providers/suppliers revoked under our revocation expansions will thus not receive these payments. Hence, multiplying our $50,000 estimate by the revocation totals in Table 143 results in a projected transfer from these providers/suppliers to the Federal Government of $750,000 ($50,000 × 15 revocations). We did not receive public comments on these estimates and are therefore finalizing them as proposed. 13.

Provider/Supplier Medical Review Requirements—Prepayment and Post-Payment Reviews In section III.N.2. Of this final rule, we proposed to. (1) Define key terms including “additional documentation,” “additional documentation request,” “post-payment medical review,” and “prepayment medical review;” (2) codify contractors' authority to request additional documentation for prepayment and post-payment review within established timeframes. (3) codify timeframes for response to requests for documentation. And (4) codify result of a failure to comply with prepayment or post-payment documentation request(s) by a provider or supplier, specifically denial of payment.

We do not believe these provisions involve any additional impact or burden on providers, suppliers, or States. However, we welcomed feedback from stakeholders regarding the potential costs of these provisions. The regulations will incorporate already established key terms and definitions as well as processing requirements pertaining to prepayment and post-payment medical review into regulation. Placing this information in regulation will improve provider and supplier understanding of the medical review process and their responsibilities in complying with our review contractor's requests. Further, the regulations represent no change to medical review requirements.

As such, we did not anticipate any change in the number of prepayment medical reviews, post-payment medical reviews or the number of additional documentation requests made by contractors. We did not receive public comments on this provision, and therefore, we are finalizing as proposed. Start Printed Page 65635 14. Effect of Modifications to Medicare Coverage for Opioid Use Disorder (OUD) Treatment Services Furnished by Opioid Treatment Programs (OTPs) As discussed in section III.O of this final rule, we are finalizing our proposal to allow OTPs to continue to furnish the therapy and counseling portions of the weekly bundles, as well as any additional counseling or therapy that is billed using the add-on code, using audio-only telephone calls rather than via two-way interactive audio-video communication technology in cases where audio/video communication is not available to the beneficiary after the conclusion of the PHE for buy antibiotics, provided all other applicable requirements are met. We believe this change will facilitate broader access to these services for beneficiaries.

We are also finalizing our proposal to require that when these services are furnished using audio-only technology, practitioners certify that they had the capacity to furnish the services using two-way audio/video communication technology, but instead, used audio-only technology because audio/video communication technology was not available to the beneficiary. We believe the Part B cost impact of these final policies will be minimal, since payment for therapy and counseling is included in the bundled payment regardless of the modality used to deliver it and we do not expect that this provision will increase the frequency at which medically necessary counseling and therapy services are billed using the counseling and therapy add-on code (HCPCS code G2080). Additionally, as discussed in section III.O. Of this final rule, the FDA recently announced the approval of a new, higher dose naloxone hydrochloride nasal spray product used to treat opioid overdose and that the newly approved product delivers 8mg of naloxone. In the CY 2021 PFS final rule (85 FR 84683 through 84685), we finalized payment for HCPCS code G2215 (Take-home supply of nasal naloxone (provision of the services by a Medicare-enrolled Opioid Treatment Program).

List separately in addition to code for primary procedure). HCPCS code G2215 was priced based on an assumption of a typical case in which the beneficiary will be provided with a box of two 4mg nasal spray products. At the time of drafting the proposed rule, we did not yet have any available pricing information for this newly approved product. However, in order to be able to make payment to OTPs under Medicare for this product, we proposed to create a new G-code describing a take-home supply of this higher dose naloxone hydrochloride nasal spray product. After considering the comments received, we are finalizing our proposal to establish a new code for a higher-dose of naloxone hydrochloride nasal spray.

We will price this code as proposed. The drug component is based on the methodology at § 410.67(d)(2)(i) and the amount of the non-drug component of the code is based on the CY 2020 Medicare payment rate for CPT code 96161, as updated by the MEI. Based on utilization of the existing naloxone codes under the OTP benefit, we believe that the cost impact of finalizing this new code will be minimal. 15. Physician Self-Referral Update The physician self-referral law provisions are discussed in section III.P.

Of this final rule. As discussed in section III.P.2. Of this final rule, we are amending the provisions of § 411.354(c)(2) identifying unbroken chains of financial relationships that constitute “indirect compensation arrangements” to ensure that a longstanding prohibition on certain per unit of service-based compensation formulas for determining charges for the rental of office space and equipment remains within the ambit of the law. This provision, which was inadvertently omitted when the definition of “indirect compensation arrangement” was revised in the December 2, 2020 final rule entitled “Modernizing and Clarifying the Physician Self-Referral Regulations” (85 FR 77492), is necessary to protect against potential abuses such as overutilization and anti-competitive behavior. We believe that most parties have continued to comply with the regulatory provisions on per unit of service-based compensation formulas for the rental (or lease) of office space and equipment as they have done since the requirements became effective on October 1, 2009.

We are also adding provisions to assist stakeholders in identifying the individual unit to be analyzed under the provisions of § 411.354(c)(2)(ii)(A)(2)(i) through (iv). We believe that the clarity provided by these provisions will facilitate compliance without adding burden. As discussed in section III.P.3. Of this final rule, we are finalizing our proposal to permit the use of the exception for preventive screening tests and treatments at § 411.355(h) for buy antibiotics treatments during such period as the treatments are not subject to CMS-mandated frequency limits, provided that all other requirements of the exception are satisfied. We believe that this provision will ensure that the physician self-referral law will not impede the availability of critically important buy antibiotics treatments for Medicare and other patients.

As discussed in section III.P.4. Of this final rule, we are finalizing our proposal to publish the Code List for Certain Designated Health Services (Code List) solely on the CMS website. Commencing after the publication of the January 1, 2022 Code List in this final rule, the Code List will be updated annually and published on the CMS website at https://www.cms.gov/​Medicare/​Fraud-and-Abuse/​PhysicianSelfReferral/​List_​of_​Codes. No less than 30 consecutive calendar days prior to the effective date of a Code List update, we will provide advance notice of the updated Code List on the CMS website. We will also provide for a 30-day public comment period for each update using www.regulations.gov, and publish instructions for submitting comments on the CMS website.

We will address all public comments that we receive through this process on the CMS website. Finally, we are revising the definition of “List of CPT/HCPCS Codes” at § 411.351 by updating the URL that indicates where the Code List is published on the CMS website. We believe that these provisions will facilitate compliance with the physician self-referral law and allow easier access to the most up-to-date Code List. 16. Requirement for Electronic Prescribing for Controlled Substances for a Covered Part D Drug under a Prescription Drug Plan or an MA-PD Plan (section 2003 of the SUPPORT Act) In addition to the cost reflected in the Collection of Information section of this final rule, we expect that there will be an additional burden for CMS to award and work with a CMS contractor to develop a process for reviewing the PDE data to assess prescriber compliance with the regulatory provision and review and process prescriber attestations.

Based on similar contracts, and conversations with the industry, in the CY 2022 PFS proposed rule, we estimated the costs of (A) development of operational strategy for the new program, (B) reviewing PDE data, and (C) prescriber case work. We solicited stakeholder feedback on our estimate and all our assumptions. (A) Development of policy. We estimated that it would take our contractor a week of work, 40 hours, to develop the strategy for how the contractor will process the prescriber attestations. We estimated that it would take an operations manager and compliance officer working together at a combined hourly wage of $193.60/hr Start Printed Page 65636 ($120.90/hr + $72.70/hr) a full 40-hour work week to operationalize this aspect of it.

Therefore, we estimated the aggregate cost to be $7,744 (40hr * $193.60/hr). (B) Since systems already exist to collect the appropriate PDE data, in our proposed rule, we stated that our contractor would only have to review the data for compliance with the EPCS mandate. Therefore, we estimated that it would take 2 computer systems analysts each working at $95.22/hr, a week and a half of work, 60 hours. Therefore, the aggregate cost would be $5,713.20 (60 hr * $95.22/hr). (C) We estimated that it would take 4 administrative support workers each working at $36.82/hr, 60 hours to generate the letters and disseminate them to the appropriate prescriber, which means that it would cost our contractor $2,209.20/year (60 hr * $36.82/hr) in administrative support costs.

We estimated that it would be the full-time job of a customer service representative working at $37.02/hr to field prescriber inquiries about the disseminated letters. Thus, we estimated that our contractor would spend $77,001.60 ($37.02/hr * 40 * 52) on the salary of the customer service representative for this task. The aggregate impact for our contractor is 200 hours at a cost of $92,668. We solicited comment on the accuracy of this burden estimate and on any measures that CMS can take to decrease the impact of this provision, while maintaining its utility and implementing the statutory mandate. We did not receive public comments on the burden estimates for this provision, and therefore, we are finalizing as proposed.

17. Open Payments a. Payment Context Field for Teaching Hospitals This provision is for a mandatory freeform text context field. We have created this provision at the request of stakeholders, particularly after conversations with teaching hospitals. The teaching hospitals confirmed that the majority of their disputes arise because of a lack of information within the record and an inability to associate the payment to the correct area within their large organization, not the inaccuracy of the record itself.

The benefit of this field is to give better context to the records attributed to teaching hospitals and thereby reduce the number of disputes. For this reason, we also believe it will increase goodwill between the program's stakeholders. The cost is that reporting entities will need to collect an additional piece of information, which will increase burden. We do not believe this burden will be great because the volume of reported teaching hospital payments is much lower than the volume of physician covered recipient payments. In addition, we have created flexibility with this field so that the reporting entity can choose which piece of information is most appropriate and can be something that they already collect, such as a check number or name of the department in the hospital.

B. Optional Annual Recertification The optional annual recertification is at the request of reporting entities and will increase the availability of communication to CMS. The burden associated with this action is low because it will be a low-effort process only completed by the entities who choose to do so. C. Defining a Physician-Owned Distributorship Since the program began in 2013, we have heard feedback that physician-owned distributorship (PODs) should be better represented in the data because the conflict of interest potentially created by PODs is at the heart of the program.

We created this new definition due to the lack of an existing POD definition that would be appropriate for the program's needs. Although this is a new definition, it will only be a subset of the existing definitions of applicable manufacturer and applicable group purchasing organization. €œApplicable manufacturer—POD” and “Group purchasing organization—POD” are already “business type” choices when registering in the Open Payments system. Therefore, this definition will not alter existing regulations beyond requiring PODs to identify themselves as such. D.

Disallowing Record Deletion Without Reason We believe there is not currently language to prevent an applicable manufacturer or applicable group purchasing organization from submitting and attesting to records, then deleting the records to prevent publication. This action would be contrary to the spirit of transparency of the program. To help ensure compliance with this requirement, we are also adding a new field that will allow entities to communicate the reason for the deletion to CMS. Since the entities will have attested to the accuracy and completeness of these records, we believe it is appropriate to confirm the reason for the deletion. We have not perceived the behavior of inappropriate deletions within the data and do not believe it will increase burden beyond the additional field when deleting a record.

We are preemptively closing a potential loophole. E. Disallow Publication Delays of General Payments The statute requires that delays are “made pursuant to product research or development agreements and clinical investigations” (1128G(c)(1)(E) of the Act). A small number of general payments are delayed annually, which we are unable to verify meet this requirement. Research payments contain the appropriate fields to ensure that the statutory provisions are being met.

We do not believe that it will be a burden for the small number of general payments to either be reported as research payments or not delayed. F. Short-Term Loans Short-term loans are not required to be reported, but they must be shorter than 91 days to meet the exception. This provision does not create burden because it only clarifies that those 90 days must be the cumulative total for a year, which is already outlined in subregulatory guidance. We do not anticipate that this will change reporting behavior but want to explain the exception more clearly within the text of the final rule.

G. Remove General Ownership Records Ownership records have special rules for reporting outlined in the statute (section 1128G(a)(2) of the Act), which are not included in the format for general records. However, there is currently a general record for reporting ownership and investment interest (Nature of Payment = 11). We anticipate a small burden for the approximately 92 reporting entities who have previously used the general nature of payment category in order to fill out the different fields in the ownership record. This burden will allow the records to meet statutory mandates.

H. Updated Contact Information Open Payments conducts regular compliance-related outreaches to reporting entities when it encounters data that may not meet program requirements. We have found that the two contacts provided by applicable manufacturers and group purchasing organizations often become obsolete, especially if a company has not updated its contact information during the recertification process. It is crucial for the integrity of the data that we have the ability to contact entities in the case of Start Printed Page 65637 irregularities. Additionally, we believe that ensuring informal communications from CMS will reduce burden since it may prevent more formal compliance actions if the entity is unresponsive due to outdated contact information.

However, we do not believe this is an issue for the majority of reporting entities, nor do we believe that keeping the contact information updated will create a large burden. 18. Updates to the Quality Payment Program In section IV.A. Of this final rule, we include our finalized policies for the Quality Payment Program. In this section, we first present the overall and incremental impacts to the number of expected QPs and associated APM Incentive Payments.

In the following sections, we estimate the overall and incremental impacts to the total MIPS eligible population and the payment impacts by practice size for the CY 2022 performance period/2024 MIPS payment year based on various finalized policies, including policies to modify MIPS eligibility, the MIPS final score and the performance threshold and additional performance threshold as discussed in sections IV.A.3.a., IV.A.3.d., IV.A.3.e., and IV.A.3.f. Of this final rule. For the MIPS payment adjustment, we ran two RIA models. A baseline and a final policies model. The aim of the baseline model is to model the status of our population of clinicians for the CY 2022 performance period/2024 MIPS payment year if this final rule does not take effect.

It therefore reflects previously finalized policies for the CY 2022 performance period/2024 MIPS payment year. Select examples of the baseline policies scheduled to start in the CY 2022 performance period/2024 MIPS payment year include the removal of the Web Interface as a collection type and the change in the performance category weights. There was no defined performance threshold or additional performance threshold, so our baseline model assumed the performance threshold and additional performance threshold used for the previous period (CY 2021 performance period/2023 MIPS payment year). The aim of the final policies model is to estimate the incremental effect of the final policies for the CY 2022 performance period/2024 MIPS payment year on MIPS eligibility, MIPS final scores, and payment adjustments. In other words, by comparing the difference between our baseline model and our final policies model we can estimate the incremental impact of finalizing the policies contained in this final rule.

Select examples of the finalized policies include, the inclusion of new MIPS eligible clinician types, the inclusion of the Web Interface as a collection type, the change in performance threshold and additional performance threshold, and the changes to the complex patient bonus. Refer to section VI.F.18.e.(2) of this final rule for the detailed methods on how we integrated the policies into the baseline and final policies models. A. Assessing Use of 2020 Data for Estimating Future MIPS Performance In the 2022 PFS proposed rule (86 FR 39546), we stated that the RIA used the 2019 MIPS performance period data because the data for the 2020 MIPS performance period were not available in time to incorporate into the proposed rule model. We noted we would evaluate whether it is appropriate to use the 2020 performance period data to predict performance in CY 2022 for the final rule and whether adjustments would need to be made if CY 2020 performance period data are used.

We have already acknowledged some data from the CY 2020 performance period is not usable. For example, we have stated that based on our analysis of the 2020 performance period data, we could not reliably calculate scores for the cost measures that would adequately capture and reflect the performance of MIPS eligible clinicians. As a result, we reweighted the cost performance category for all MIPS eligible clinicians for the CY 2020 MIPS performance period.[] Additionally, in section IV.A.3.f.(2) of this final rule, we noted we have final score data for the CY 2020 performance period/2022 MIPS payment year available to use in our assessment of whether to use the mean or median for the performance threshold, but the data for the CY 2020 performance period/2022 MIPS payment year may be subject to change as a result of the targeted review process. However, we have also indicated that for certain purposes 2020 performance period data could be beneficial too. As discussed in section IV.A.3.e.(1)(c)(ii) of this final rule, we believe 2020 performance period data is appropriate to use for historic benchmarks in part because it is the most recent available dataset and it reflects a performance period in which clinicians were facing the PHE.

To evaluate whether the 2020 MIPS performance period data is appropriate to use to predict future performance, we considered whether the extreme and uncontrollable circumstances policy impacted submissions and data, and whether the buy antibiotics PHE impacted services provided (for example, quality measures, the number of MIPS eligible clinicians, claims). For the 2020 performance year, we applied the MIPS automatic extreme and uncontrollable circumstances policy to all individual MIPS eligible clinicians and allowed for extreme and uncontrollable applications due to the buy antibiotics PHE ( https://qpp.cms.gov/​resources/​buy antibiotics19?. €‹py=​2020 ). Due to these extreme and uncontrollable circumstances policies, not all clinicians or groups may have submitted data for the 2020 MIPS performance period. When we evaluated whether the 2020 MIPS performance period data is appropriate to use to estimate 2022 MIPS performance period performance for MIPS eligible clinicians, we compared the 2020 MIPS performance period data to the 2019 MIPS performance period data on key metrics.

Overall, we observed a decrease in the number of MIPS eligible clinicians at the individual level who exceed the low-volume threshold. We also observed a decline in data submitted by individual and group. Finally, when examining actual scores and payment information for the 2020 performance period/2022 MIPS payment year compared to the 2019 performance period/2021 MIPS payment year, we found an increase in the number of MIPS eligible clinicians receiving a neutral score. However, our initial findings suggest the extreme and uncontrollable circumstances policy combined with the buy antibiotics PHE limit the data needed to simulate future MIPS eligible population and associated performance. Therefore, this RIA uses the 2019 MIPS performance period submissions which were used for the CY 2021 PFS final rule RIA (85 FR 85011 through 85023) and CY 2022 PFS proposed rule RIA (86 FR 39545 through 39556).

We note that the findings are specific for purposes of estimating future performance for the entire population of MIPS eligible clinicians. B. Estimated APM Incentive Payments to QPs in Advanced APMs and Other Payer Advanced APMs For payment years 2019 through 2024, through the Medicare Option, eligible clinicians with a sufficient percentage of Medicare Part B payments for covered professional services or Medicare patients through Advanced APMs will be QPs in the applicable QP performance period for a year. These QPs will receive a lump-sum APM Incentive Payment equal to 5 percent of Start Printed Page 65638 their estimated aggregate paid amounts for Medicare covered professional services furnished during the calendar year immediately preceding the payment year. Beginning in payment year 2021, in addition to the Medicare Option, eligible clinicians may become QPs through the All-Payer Combination Option.

The All-Payer Combination Option allows eligible clinicians to become QPs by meeting the QP payment amount or patient count threshold through a pair of calculations that assess a combination of both Medicare Part B covered professional services furnished or patients through Advanced APMs and services furnished or patients through Other Payer Advanced APMs. Eligible clinicians who become QPs for a year are not subject to MIPS reporting requirements and payment adjustments. Eligible clinicians who do not become QPs but meet a lower threshold to become Partial QPs for the year may elect to report to MIPS and, if they elect to report, will then be scored under MIPS and receive a MIPS payment adjustment. Partial QPs are not eligible to receive the APM Incentive Payment. If an eligible clinician does not attain either QP or Partial QP status and does not meet any other exemption category, the eligible clinician will be subject to MIPS, will report to MIPS, and will receive the corresponding MIPS payment adjustment.

Beginning in payment year 2026, the update to the PFS CF for services that are furnished by clinicians who achieve QP status for a year is 0.75 percent, while the update to the PFS CF for services that are furnished by clinicians who do not achieve QP status for a year is 0.25 percent. In addition, MIPS eligible clinicians will receive positive, neutral, or negative MIPS payment adjustments to payment for their Part B PFS services in a payment year based on performance during a prior performance period. Although the statute establishes overall payment rate and procedure parameters until 2026 and beyond, this impact analysis covers only the 2024 MIPS payment year of the Quality Payment Program. Overall, we estimate that for the 2022 QP Performance Period between 225,000 and 290,000 eligible clinicians will become QPs. Therefore, they will be excluded them from MIPS and will qualify for the lump sum APM incentive payment in Payment Year 2024 based on 5 percent of their Part B paid amounts for covered professional services in the preceding year.

These paid amounts for QPs are estimated to be between approximately $12,000 million and $15,000 million in total for the 2022 performance year. The analysis for this final rule used the 2020 third snapshot participation file. We based APM Incentive Payment Amounts on paid amounts with service dates of January 1, through September 30, 2020. We multiplied the calculated amounts by 1.5 to approximate payment amounts for the full calendar year. We estimate that the total lump sum APM Incentive Payments will be approximately $600-750 million for the 2024 Quality Payment Program payment year.

In section VI.F.18.a. Of this final rule, we projected the number of eligible clinicians that will be QPs, and thus excluded from MIPS, using several sources of information. First, the projections are anchored in the most recently available public information on Advanced APMs. The projections reflect Advanced APMs that will be operating during the 2022 QP Performance Period as well as some Advanced APMs anticipated to be operational during the 2022 QP Performance Period. The projections also reflect an estimated number of eligible clinicians that will attain QP status through the All-Payer Combination Option.

We note that the Kidney Care Choices Model and the Radiation Oncology model have been included in our analysis as we anticipate that the model will be Advanced APMs in 2022. Additionally, we anticipate that the Maryland Primary Care Program will not be an Advanced APMs in 2022. The following APMs are expected to be Advanced APMs for the 2022 QP Performance Period. Bundled Payments for Care Improvement Advanced Model. Comprehensive Care for Joint Replacement Payment Model (CEHRT Track).

Global and Professional Direct Contracting Model. Kidney Care Choices Model (Kidney Care First. Professional Option and Global Option). Maryland Total Cost of Care Model (Care Redesign Program). Medicare Shared Savings Program (Basic Track Level E, and the ENHANCED Track).

Oncology Care Model (Two-Sided Risk Arrangements). Primary Care First (PCF) Model. Radiation Oncology model. And, Vermont All-Payer ACO Model (Vermont Medicare ACO Initiative). We used the Participation Lists and Affiliated Practitioner Lists, as applicable, (see 81 FR 77444 through 77445 for information on the APM Participant Lists and QP determinations) on the 2020 third snapshot participation file to estimate the number of QPs, total Part B paid amounts for covered professional services, and the aggregate total of APM Incentive Payments for the 2022 QP Performance Period.

We examined the extent to which Advanced APM participants will meet the QP Thresholds of having at least 50 percent of their Part B covered professional services or at least 35 percent of their Medicare beneficiaries furnished Part B covered professional services through the APM Entity. C. Impact for the CY 2021 Performance Period/2023 MIPS Payment Year In section IV.A.3.e.(2)(a)(ii) of this final rule, we finalize our proposal to double the complex patient bonus, and to increase its cap to 10 points for the CY 2021 Performance Period/2023 MIPS Payment Year. We expect this policy to result in an increase of 3 points in the median bonus thus increasing MIPS final scores at the median by 3 points. We do not know the effects of the PHE for buy antibiotics and its effect on MIPS performance in 2021, so we did not recreate the analysis and payment distributions with the updated bonus for the CY 2021 performance period/2023 MIPS payment year (85 FR 85012 through 85019).

The increase in complex patient bonus points will result in smaller payment adjustments for three reasons. First, the resulting increase in final scores will reduce the budget neutral pool. Second, the increase in complex patient bonus points will increase the number of clinicians with scores above the performance threshold or additional performance threshold, meaning more clinicians will share in the budget neutral pool and additional $500 million for exceptional performance and potentially lower the scaling factor that is applied to the MIPS payment adjustment and additional payment adjustment. Third, the average scores of those receiving a positive or additional adjustment will be higher, which means the adjustment rates for clinicians that have scores above the performance threshold or additional performance threshold will be lower. D.

Estimated Number of Clinicians Eligible for MIPS Eligibility for the CY 2022 Performance Period/2024 MIPS Payment Year (1) Methodology To Assess MIPS Eligibility (a) Clinicians Included in the Model Prior To Applying the Low-Volume Threshold Exclusion To estimate the number of MIPS eligible clinicians for the CY 2022 performance period/2024 MIPS payment year and the effect of the final Start Printed Page 65639 policies in this final rule, we ran two models as described in section VI.F.18., a baseline model and final policies model. For the baseline and final policies models, we used the same eligibility files and approach described in the CY 2021 PFS final rule (85 FR 85013) which resulted in the inclusion of 1.6 million clinicians who had PFS claims from October 1, 2018 to September 30, 2019, as well as additional clinicians associated with a group who had at least one PFS claim from October 1, 2019, through December 31, 2019. We used the same exclusion criteria to exclude clinicians from our MIPS eligibility assessment as described in the CY 2021 PFS final rule RIA (85 FR 85013) with the following model updates. (1) In both the baseline and final policies models, we excluded practitioners in Next Generation ACOs because the Next Generation ACO model ends in the CY 2021 MIPS performance period. (2) In both the baseline and final policies models, to determine which clinicians in the initial population of 1.6 million should be excluded as QPs, we used Advanced APM payment and patient percentages from the APM Participant List for the final snapshot date for the 2019 QP performance period.

We elected to use this data source because the APM participant list for the 2019 final snapshot can reliably be used for RIA projections. From this data, we calculated the QP and Partial QP determinations as described in section of IV.A.4.c.(1)(b) of this final rule for the 2022 QP performance period for both models. (3) In the final policies model, we included in our estimated MIPS eligible population for the CY 2022 performance period/2024 MIPS payment year clinical social workers and CNMs as finalized in section IV.A.3.a.(1) of this final rule. (4) In the final policies model, we are integrating the provision that starting with the CY 2022 MIPS performance period/2024 MIPS payment year, small practices, excluding virtual groups, must submit data as a group in any performance category to indicate that they wish to be scored as a group for Medicare Part B claims. This affects eligibility because previously a single Medicare Part B claims submission, without any other submission, started a group score.

Once a group score is created, a clinician who was individually excluded from MIPS for being under the low-volume threshold, may now be eligible if the group exceeds the low-volume threshold. This policy is described at section IV.A.3.a.(3) of this rule. (b) Assumptions Related To Applying the Low-Volume Threshold Exclusion The low-volume threshold policy may be applied at the individual (TIN/NPI) or group (TIN) levels based on how data are submitted including under the APM Entity level if the clinician is part of an APM Entity in a MIPS APM (hereafter, a MIPS APM Entity) that elects to submit to MIPS. A clinician or group that exceeds at least one but not all three low-volume threshold criteria may become MIPS eligible by electing to opt-in and subsequently submitting data to MIPS, thereby getting measured on performance and receiving a MIPS payment adjustment. For the final policies model, we describe below the estimated MIPS eligibility status and the associated PFS allowed charges of clinicians in the initial population of 1.6 million clinicians.

We present in section VI.F.18.d.(1)(c) the incremental impact of the final policies from the baseline model for the CY 2022 performance period/2024 MIPS payment year on the MIPS eligible clinician population and their associated PFS allowed charges. We applied the same assumptions presented in the CY 2021 PFS final rule RIA to apply the low-volume threshold and to understand whether clinicians participate as a group, virtual group, APM entity, or as individuals (85 FR 85013 through 85016), except for three modifications. We assumed only individuals or APM TINs that exceeded the low-volume threshold will receive an APM Performance Pathway (APP) score consistent with the policy as finalized in the CY 2021 PFS final rule (85 FR 84897).[] We assumed APM TINs that qualified for opt-in and submitted data as a TIN will also be eligible. Finally, we did not consider clinicians in groups as MIPS eligible clinicians nor start a group score for clinicians in small practices with only Medicare Part B claims submissions to reflect the policy finalized at section IV.A.3.a.(3) of this rule. Table 144 summarizes our eligibility estimates for the final policies model.

We identify approximately 212,000 clinicians [] as having “required eligibility” in Table 144. These clinicians will be MIPS eligible because they exceed the low volume threshold as individuals and are not otherwise excluded. These clinicians may ultimately choose to participate in MIPS as an individual, group, virtual group or APM entity or to not participate. Regardless of how they participate they will be considered MIPS eligible. We estimate approximately 595,000 additional MIPS eligible clinicians will be eligible as “group eligibility” in Table 144.

These clinicians belong to an APM entity, group or virtual group that meets the low-volume threshold and submits to MIPS. If they were not associated with the group submission, these clinicians would not be eligible for MIPS. Finally, we estimate about 3,000 clinicians will be eligible through “opt-in eligibility” through the “opt-in” policy for a total MIPS eligible clinician population of approximately 810,000. This leads to an associated $67 billion allowed PFS charges estimated to be included in the CY 2022 performance period/2024 MIPS payment year. Start Printed Page 65640 Furthermore, we estimate there will be approximately 412,000 clinicians as “Potentially MIPS eligible” in Table 144.

These clinicians are not MIPS eligible but could be if their practice decides to participate or they elect to opt-in. These clinicians will be included as MIPS eligible in the unlikely scenario in which all group practices elect to submit data as a group, or clinicians in a group that does not submit are eligible to opt-into MIPS individually and choose to do so. This assumption is important because it quantifies the maximum number of MIPS eligible clinicians. When this unlikely scenario is modeled, we estimate the MIPS eligible clinician population could be as high as 1.2 million clinicians. Finally, we estimate approximately 101,000 clinicians will not be MIPS eligible because they and their group are below the low-volume threshold on all three criteria and another approximately 304,000 will not be MIPS eligible because they are categorically excluded regardless of volume or submission activity.

Eligibility among many clinicians is contingent on submission to MIPS as a Start Printed Page 65641 group, virtual group or election to opt-in, therefore we will not know the number of MIPS eligible clinicians who submit until the submission period for the 2022 MIPS performance period is closed. For this final policies model analysis, we use the estimated population of 809,593 MIPS eligible clinicians described above. (c) Estimated Impact of the Final Policies on MIPS Eligibility and PFS Allowed Charges We illustrate in Table 145 how the final policies to add clinical social workers and CNMs as MIPS eligible clinician types and the policy to require small practices to submit data as a group for a group quality performance category score as finalized in sections IV.A.3.a.(1) and IV.A.3.a.(3) of this final rule affects the estimated number of MIPS eligible clinicians. The amended regulation text that we finalized in section IV.A.3.a.(2) of this final rule does not make modify how we assess eligibility in MIPS in our final policies model. The first row in Table 145 presents the estimates from the RIA baseline model with the number of individuals that will be MIPS eligible clinicians for the 2022 performance period/2024 MIPS payment year if this rule does not take effect.

The second row presents estimates from the RIA final policies model with the incremental impact of adding the two new MIPS eligible clinician types on the number of MIPS eligible clinicians for the CY 2022 performance period/2024 MIPS payment year. As shown in Table 145, the final policies lead to a small increase in the number of MIPS eligible clinicians (1.1 percent increase) and a minimal increase in the PFS allowed charges (0.1 percent increase) for the CY 2022 performance period/2024 MIPS payment year. e. Estimated Impacts on Payments to MIPS Eligible Clinicians for the CY 2022 Performance Period/2024 MIPS Payment Year (1) Summary of Approach In sections IV.A.3.d., IV.A.3.e. And IV.A.3.f.

Of this final rule, we present several provisions which impact the measures and activities that impact the performance category scores, final score calculation, and the MIPS payment adjustment. We discuss these changes in more detail in section VI.F.18.e.(2). Of this RIA as we describe our methodology to estimate MIPS payments for the CY 2022 performance period/2024 MIPS payment year. We then present the impact of the overall final policies on the CY 2022 performance period/2024 MIPS payment year and then compare select metrics to the baseline model, which only incorporates previously finalized policies for the CY 2022 performance period/2024 MIPS payment year. By comparing the baseline model to the final policies model, we can estimate the incremental impact of this rule's policies to the CY 2022 performance period/2024 MIPS payment year.

The payment impact for a MIPS eligible clinician is based on the clinician's final score, and MIPS eligible clinicians can participate as an individual, group, virtual group, or APM Entity in the four MIPS performance categories. Quality, cost, improvement activities, and Promoting Interoperability. As discussed in section VI.F.18. Of this final rule, we generally used data submitted for the 2019 performance period. For the cost performance category, we used the same data as the CY 2020 PFS final rule (84 FR 63169), which is primarily testing data for the cost measures.

The estimated payment impacts presented in this final rule are averages by practice size weighted by Medicare utilization. The payment impact for a MIPS eligible clinician will vary from the average and will depend on the measure submissions, scores and their performance. (2) Methodology To Assess Impact To estimate participation in MIPS for the CY 2022 performance period/2024 MIPS payment year for this final rule, we generally used 2019 MIPS performance period data for both the baseline and final policies models. Our baseline and final policies scoring models included the 801,013 and 809,593 estimated MIPS eligible clinicians, respectively, as described in section VI.F.18.d.(1) of this RIA. To estimate the impact of MIPS policies on MIPS eligible clinicians, we generally used the 2019 MIPS performance period submissions data, including data submitted for the quality, improvement activities, and Promoting Interoperability performance categories.

We supplemented this information with 2019 data available for CAHPS for MIPS and CAHPS for ACOs, testing data for the revised total per capita cost measure and Medicare Spending Per Beneficiary (MSPB) clinician measures which were finalized in the CY 2020 PFS final rule (84 FR 62969 through 62977), testing data for the new episode cost measures, administrative claims data for the new quality performance category measures, and other data sets.[] We calculated a hypothetical final score for the 2022 performance period/2024 MIPS Start Printed Page 65642 payment year for the baseline and final policies scoring models for each MIPS eligible clinician using score estimates for quality, cost, Promoting Interoperability, and improvement activities performance categories, where each are described in detail in the following subsections. (a) Methodology To Estimate the Quality Performance Category Score We estimated the quality performance category score using a methodology like the one described in the CY 2021 PFS final rule (85 FR 85016 through 85017) for baseline and final policy RIA models for the CY 2022 performance period/2024 MIPS payment year. For the baseline policies RIA model, which does not reflect the final policies for CY 2022 performance period/2024 MIPS payment year from this final rule, we made the following modifications to reflect the previously finalized policies for the CY 2022 performance period/2024 MIPS payment year for the quality performance category. As previously finalized in the CY 2021 PFS final rule (85 FR 84870 and 85 FR 84843), we removed the Web Interface as a collection type in MIPS and through the APP for the CY 2022 performance period/2024 MIPS payment year. Although the Web Interface is to be reinstated for groups for the CY 2022 performance period/2024 MIPS payment year and ACOs for CY 2022 performance period/2024 MIPS payment year through CY 2024 performance period/2026 MIPS payment year as discussed in sections IV.A.3.d.(1)(d) and IV.A.3.c.(2)(a), respectively, the baseline model is attempting to capture the CY 2022 performance period/2024 MIPS payment year as if this provision did not exist.

Therefore, the baseline model does not incorporate the Web Interface as a collection type for groups and ACOs. To estimate a quality performance category score for clinicians in groups who previously used the Web Interface as a collection type in 2019, we assumed these groups will use the other two other collection types (MIPS CQMs and eCQMs) available in the 2022 performance period/2024 MIPS payment year. We then applied the same methodology described in the CY 2021 PFS proposed rule when the removal of Web Interface as a collection type was previously proposed (85 FR 50387 through 50388) using 2019 MIPS submissions data. To estimate a quality performance category score for ACOs, we used the same methodology described in the CY 2021 PFS proposed rule when the Web Interface was not included in the APP (85 FR 50388). • We used the published 2021 MIPS historical quality benchmarks file to identify measures subject to the topped out scoring cap that was finalized (82 FR 53721 through 53727).[] For the final policies model, we made the following modifications to the baseline model to reflect the new final policies for the 2022 performance period/2024 MIPS payment year for the quality performance category.

As discussed in section IV.A.3.d.(1)(e) of this final rule, we finalized one new administrative claims measure for those for whom it is applicable. Clinician and Clinician Group Risk-standardized Hospital Admission Rates for Patients with Multiple Chronic Conditions. To implement this policy in our final policies RIA model for the CY 2022 performance period/2024 MIPS payment year, we used testing data for this new administrative claims measure. As discussed in section IV.A.3.d.(1)(c) of this final rule, we are finalizing our proposals with modification to maintain the data completeness criteria threshold of at least 70 percent for the CY 2021, CY 2022, and CY 2023 performance periods/2023, 2024, and 2025 MIPS payment years for QCDR measures, MIPS CQMs, or eCQMs. This is not a change from our baseline model assumptions.

As discussed in section IV.A.3.d.(1)(e) of this final rule, we are finalizing our proposal to establish measure substantive change criteria. We did not make modifications to the final policies model for this policy. We scored measures using the benchmarks described below. In section IV.A.3.d.(1)(g) of this final rule, we are finalizing several changes to the CAHPS for MIPS survey. We did not incorporate these changes into our model due to the lack of data.

In Appendix 1 of this final rule, we added 4 new quality measures, removed 13 measures, and finalized 87 substantially modified measures. Consistent with prior rules, (83 FR 50053), our RIA estimates assume that clinicians who reported Medicare Part B claims, eCQM, MIPS CQM and QCDR measures that are removed would find alternate measures. Therefore, we assign points to the measures that and included them in our scoring model. • As discussed in section IV.A.3.e.(1)(c)(ii) of this final rule, we did not finalize our proposal to use performance period benchmarks for the CY 2022 performance period in accordance with § 414.1380(b)(1)(ii) as opposed to a historical benchmark. For the final policies model, we utilized the most recent benchmark file.

The 2021 MIPS performance period historic benchmarks.[] However, the 2019 performance data we are using to estimate future performance includes data on measures that do not have a benchmark in the 2021 MIPS benchmark file (either because the measure was removed or because there were significant changes). If a benchmark was not available in the 2021 MIPS performance period historic benchmark file, then we supplemented the 2021 MIPS benchmark file with the benchmarks used for the CY 2019 performance period/2021 MIPS payment year. As discussed in section IV.A.3.e.(1)(c)(iii)(A) of this final rule, we are delaying our proposal to remove the 3-point floor for each measure that can be reliably scored against the benchmark and score the measure from 1 to 10 points until the CY 2023 performance period/2025 MIPS payment year. Similarly, we are delaying our proposal in section IV.A.3.e.(1)(c)(iii)(B) of this final rule to remove the special scoring policy of scoring 3 points for class 2 measures, except for clinicians in small practices until the CY 2023 performance period/2025 MIPS payment year. Therefore, our RIA for the CY 2022 performance period/2024 MIPS payment year re-established the 3-point floor for class 1 measures and 3 points for class 2 measures.

• As discussed in section IV.A.3.e.(1)(c)(iii)(B), we are finalizing our proposed policies for scoring new measures with modifications. For measures in their first two performance periods that meet data completeness and can be reliably scored against a benchmark (class 4a measures), we will assign a floor of 7 points for measures in their first year and a floor of 5 points for measures in their second year. For new measures in their first two performance periods that meet data completeness, but cannot be reliably scored against a benchmark because they lack a benchmark or do not meet case minimum in the program (class 4b measures), we will assign 7 points for measures in their first year and 5 points for measures in their second year. We incorporated these scoring changes into our final policies model. Because we are using 2019 MIPS performance period Start Printed Page 65643 data, we assume that measures new to MIPS in 2019 are in their first year and measures new to MIPS in 2018 are in their second year.

As discussed in sections IV.A.3.e.(1)(c)(vii) and IV.A.3.e.(1)(c)(viii) of this final rule, we finalized our proposal to remove measure bonus points for reporting high priority measures and for submitting with end-to-end electronic reporting beginning in the 2022 MIPS performance period. We incorporated these scoring changes into our final rule model for all MIPS collection types. As discussed in section IV.A.3.d.(1)(d), we are extending the Web Interface measures for the CY 2022 performance period/2024 MIPS payment year for groups and virtual groups using the existing 10 CMS Web Interface measures. To estimate the impact of this policy, we used the same methodology described in the CY 2021 PFS final rule (85 FR 85016 through 85017) using 2019 MIPS submissions data. Finally, we will extend the CMS Web Interface as a means of reporting quality under the APM Performance Pathway for Shared Savings Program ACOs for the 2022 performance period/2024 MIPS payment year through the 2024 performance period/2026 MIPS payment years as described in section IV.A.3.c.(2)(a) of this final rule.

Under the provision, Web Interface reporting will work in the same manner as for performance year 2021, where ACOs will have the option of reporting either the CMS Web Interface, the APP eCQM/MIPS CQM measure set, or both. To estimate the impact of this policy, we used the same methodology described in the CY 2021 PFS final rule RIA (85 FR 85016 through 85017) when Web Interface was retained for the APP. (b) Methodology To Estimate the Cost Performance Category Score We estimated the cost performance category score using a similar methodology described in the CY 2020 PFS final rule (84 FR 63169) with the modifications to the baseline and the final policies RIA model described in this section. In the baseline model, we refined our methodology for developing benchmarks to better reflect the previously finalized policy in CY 2017 Quality Payment Program final rule (81 FR 77308 through 77309). We did not estimate cost improvement scoring that starts in the 2022 performance period/2024 MIPS payment year as previously finalized at § 414.1380(a)(1)(ii) and in the CY 2019 PFS final rule (83 FR 58956) since we did not have sufficient data to conduct improvement scoring, which requires 2 years of cost data to model.

In the final policies model, we modified the baseline model to incorporate the provision to add five new episode-based cost performance category measures in the CY 2022 performance period/2024 MIPS payment year as described in section IV.A.3.d.(2) of this final rule, by using claims data from January 1, 2019 to December 31, 2019. Cost measures were scored if the clinicians or groups met or exceeded the case volume. 10 episodes for Melanoma Resection to align with the reporting case minimum for procedural cost measures currently in use in MIPS, 20 episodes for Sepsis to align with the reporting case minimum for acute inpatient condition cost measures currently in use in MIPS, 20 episodes for Diabetes and Asthma/COPD as used in field testing for these chronic measures, and 20 episodes for Colon Resection. These new cost episode-based measures were calculated for both the TIN/NPI and the TIN. (c) Methodology To Estimate the Facility-Based Measurement Scoring For the baseline model, we estimated the facility-based score using the scoring policies finalized in the CY 2018 Quality Payment Program final rule (82 FR 53763) and the methodology described in the CY 2020 PFS final rule (84 FR 63169).

For the final policies model, we used the methodology for the CY 2022 performance period/2024 MIPS payment year as discussed in section IV.A.3.e.(2)(b)(v)(B) of this final rule. We proposed at § 414.1380(e)(vi) that beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, the MIPS quality and cost performance category scores will be based on the facility-based measurement scoring methodology unless a clinician or group receives a higher MIPS final score through another MIPS submission. Therefore, if a MIPS eligible clinician or a group is eligible for facility-based measurement, but they participate in MIPS as an individual or group, we used the higher final score between the facility-based scoring and MIPS submission-based scoring. (d) Methodology To Estimate the Promoting Interoperability Performance Category Score For the baseline model, we used the CY 2019 MIPS Promoting Interoperability performance period data submissions data to estimate CY 2022 MIPS performance for the Promoting Interoperability performance category. We made the following two modifications to the 2019 performance period scoring to reflect the previously finalized policy changes between the CY 2019 and CY 2021 performance periods.

(1) We doubled the bonus points for clinicians who submitted the PDMP measure as described in section IV.A.3.d.(4)(c)(i) of this final rule. And (2) we did not incorporate the Verify Opioid Treatment Agreement measure data, a measure that was finalized in the CY 2019 performance period (83 FR 59807) but removed in the CY 2020 performance period (84 FR 62994). We retained the PDMP bonus for the baseline model for continuity between the CY 2021 and 2022 performance periods and for consistency since bonuses for the quality performance category were retained for the baseline as well. Because we lacked data on who would adopt the finalized Health Information Exchange bi-directional exchange measure for the CY 2021 performance period we only used past reporting on the two existing Health Information Exchange Objective measures to estimate CY 2022 Promoting Interoperability performance. For the final policies model, we considered the following policy provisions as potential modifications to the baseline model.

In section IV.A.3.d.(4)(c)(i) of this final rule, we finalized our proposal for the PDMP measure to remain optional and at 10 points. Modifications were not made to reflect this policy in the final policies model since the baseline model already incorporated this policy. In section IV.A.3.d.(4)(c)(ii) of this final rule, we did not finalize our proposed modifications to the Provide Patients Electronic Access to Their Health Information measure. For this model, we did not make any modifications and continued to use the Provide Patients Electronic Access to Their Health Information measure that was submitted for the 2019 MIPS performance period. • In section IV.A.3.d.(4)(c)(iii) of this final rule, we finalized to require two of the measures associated with the Public Health and Clinical Data Exchange Objective, beginning with the CY 2022 performance period.

Immunization Registry Reporting. And Electronic Case Reporting. We also finalized in section IV.A.3.d.(4)(c)(iii) of this final rule to retain the Public Health Registry Reporting, Clinical Data Registry Reporting, and Syndromic Surveillance Reporting measures, and to make them optional and available for bonus points beginning with the CY 2022 performance period/2024 MIPS payment year. We did not model these policy changes because the Promoting Start Printed Page 65644 Interoperability data we used for this analysis is based on the CY 2019 performance period when a clinician was only required to report two of the possible 5 measures for the Public Health and Clinical Data Exchange Objective. We believe incorporating this policy might artificially lower scores for the Public Health and Clinical Data Exchange Objective because there was no requirement to specifically report the Immunization Registry Reporting and Electronic Case Reporting measures in 2019.

In section IV.A.3.d.(4)(d) of this final rule, we finalized the additional requirement that eligible clinicians must attest to conducting an annual assessment of the High Priority Guide of the SAFER Guides beginning with the 2022 performance period. This policy was not implemented in the final policies model as it does not affect eligibility or payment. We included this policy in our burden calculations in section V.B.8.g.(3) of this rule. In section IV.A.3.d.(4)(g) of this final rule, we finalized changes to the attestation statements for information blocking. We did not include this policy in our model due to lack of information.

In section IV.A.3.d.(4)(h)(i) of this final rule, we finalized beginning with the CY 2022 performance period/2024 MIPS payment year, we will no longer require an application for clinicians and small practices seeking to qualify for the small practice hardship exception and reweighting. We will assign a weight of zero only in the event a small practice did not submit any data for any of the measures specified for the Promoting Interoperability performance category. This policy was implemented in the final policies model. In section IV.A.3.d.(4)(h)(ii) and IV.A.3.d.(4)(h)(iii) of this final rule, we finalized our proposal to continue the existing policy to reweight the Promoting Interoperability performance category for NPs, PAs, CRNAs, CNSs, physical therapists, occupational therapists, qualified speech-language pathologist, qualified audiologists, clinical psychologists, and registered dieticians or nutrition professionals for the CY 2022 performance period/2024 MIPS payment year. The baseline model already incorporated this policy.

In section IV.A.3.d.(4)(h)(iv), we finalized that we will apply the same Promoting Interoperability reweighting policy we adopted previously for NPs, PAs, CNSs, CRNAs, and other types of MIPS eligible clinicians to clinical social workers. This policy was implemented in the final policies model. (e) Methodology To Estimate the Improvement Activities Performance Category Score For the baseline model, we modeled the improvement activities performance category score based on CY 2019 performance period data and APM participation identified in section VI.F.18.d.(1) of this final rule. For clinicians and groups not participating in a MIPS APM, we used the CY 2019 submissions improvement activities score. We did not model the policy finalized for the CY 2020 performance period (84 FR 62980) to require a minimum threshold of 50 percent of clinicians in a group to complete an improvement activity for the group to receive credit since we did not have data to determine the proportion of clinicians in a group that completed the improvement activity.

We continued to apply the methodology described in the CY 2020 PFS final rule (84 FR 63170) to assign an improvement activities performance category score. For the APM participants identified in section VI.F.18.d.(1) of this final rule, we assigned an improvement activity performance category score of 100 percent. For the final policies model, we did not make modifications to the baseline model for the improvement activities changes finalized in section IV.A.3.d.(3) of this final rule. The final policies are (1) revise group reporting requirements for the 50 percent threshold to address subgroups. (2) revise the timeframe for improvement activities nominated during a PHE.

(3) revise the required criteria for improvement activity nominations received through the Annual Call for Activities. (4) suspend activities that raise possible safety concerns or become obsolete from the program when this occurrence happens outside of the rulemaking process. (5) add 7 new improvement activities, modify 15 existing improvement activities, and remove 6 previously adopted improvement activities. (6) revise the “Drug Cost Transparency to include requirements for use of real-time benefit tools” improvement activity. And (7) add the buy antibiotics “Clinical Data Reporting with or without Clinical Trial” improvement activity.

For policy 1, we lacked data to model the impact on improvement activities performance category. Policies 2 and 3 are related to the call for improvement activities which does not affect the improvement activities performance category scores. Policies 4 through 7 address changes to specific improvement activities or the improvement activity inventory. We anticipate most clinicians performing improvement activities will continue to identify and report similar improvement activities from the inventory in future years. Please see section VI.F.18.g.(2)(f) of this final rule for additional details on the impact of these policy changes.

(f) Methodology To Estimate the Complex Patient Bonus Points In section IV.A.3.e.(2)(a)(iii)(B) of this final rule, we will continue to apply the complex patient bonus, with updates, for the CY 2022 performance period/2024 MIPS payment year. For the baseline model, we used the complex patient bonus information calculated for the 2019 performance period data for the CY 2022 performance period/2024 MIPS payment year, as was previously done in the CY 2021 PFS final rule (85 FR 85017). For the final policies model, we calculated the complex patient bonus using the calculation in section IV.A.3.e.(2)(a)(iii)(B) of this final rule for the CY 2022 performance period/2024 payment year. We finalized updates to the complex patient bonus for the CY 2022 performance period/2024 MIPS payment year and future MIPS performance periods/payment years to account for social and medical complexity, while still using our current established indicators of dual proportion and HCC risk scores, respectively. Consistent with the policy for the 2022 performance period, our final policies RIA model calculated and applied the separate risk indicator complex patient bonus components methodology with a single overall cap.

(g) Methodology To Estimate the Final Score We did not make changes for how we calculated the MIPS final score. Our baseline and final policies models assigned a final score for each TIN/NPI by multiplying each estimated performance category score by the corresponding performance category weight, adding the products together, multiplying the sum by 100 points, adding the complex patient bonus, and capping at 100 points. For the baseline model, we applied the performance category weights and redistribution weights finalized in the CY 2021 PFS final rule (85 FR 84913 through 84916). For the final policies model, we modified the redistribution policy for small practices as described in section IV.A.3.e.(2)(b)(iii)(A) of this final rule. For both models, after adding any applicable bonus for complex patients, we reset any final scores that exceeded 100 points to equal 100 points.

For Start Printed Page 65645 MIPS eligible clinicians who were assigned a weight of zero percent for any performance category, we redistributed the weights according to section IV.A.3.e.(2)(b)(ii) of this final rule. (h) Methodology To Estimate the MIPS Payment Adjustment For the baseline model, we applied the hierarchy as finalized in the CY 2021 PFS final rule (85 FR 84917 through 84919) to determine which final score should be used for the payment adjustment for each MIPS eligible clinician when more than one final score is available. For the final policies model, we applied the scoring hierarchy finalized in section IV.A.3.f.(5) of this final rule. We then calculated the parameters of an exchange function in accordance with the statutory requirements related to the linear sliding scale, budget neutrality, minimum and maximum adjustment percentages, and additional payment adjustment for exceptional performance (§ 414.1405). For the baseline model, we applied the performance threshold and additional performance thresholds finalized for the CY 2021 performance period/2023 payment year (85 FR 84923), of 60 and 85, respectively.

For the final policies model, we used the performance threshold of 75 points in section IV.A.3.f.(2) and the additional performance threshold of 89 points in section IV.A.3.f.(3). We used these resulting parameters to estimate the positive or negative MIPS payment adjustment based on the estimated final score and the paid amount for covered professional services furnished by the MIPS eligible clinician. As discussed in the CY 2021 PFS final rule RIA (85 FR 85013), we adjusted the paid amount of non-engaged clinicians to equal their proportion of paid amount prior to the PHE for buy antibiotics for the baseline and final policies models. (3) Impact of Payments by Practice Size As we shift from previous MIPS transition policies by removing bonuses from the quality performance category and increasing the performance threshold and the additional performance threshold, we observe large changes between the baseline model and final policies model. First, we observe an increase in the funds available for redistribution due to the increase in clinicians with final scores below the performance threshold.

The baseline model estimates $428 million will be redistributed through BN and that $500 million will be distributed to MIPS eligible clinicians for exceptional performance. The mean and median final scores for the baseline model are 78.13 and 82.59, respectively. Our final policies model estimates that $603 million will be redistributed through BN. For clinicians who meet or exceed the additional performance threshold, an additional $360 million was estimated to be distributed. The mean and median final scores for the final policies model are 75.21 and 79.59, respectively.

In the final policies model, the estimated bonus for exceptional performance is less than the $500 million of available funding because the maximum additional payment adjustment for clinicians with exceptional performance reached 10 percent. As finalized in the 2017 QPP final rule (81 FR 77339 through 77340), we stated the maximum additional payment adjustment would be 10 percent, which is established by the statute, and that it would be multiplied by a scaling factor that cannot exceed 1.0. We reached the maximum additional payment adjustment allowed of 10 percent because the additional performance threshold is higher, and fewer clinicians performed above this higher additional performance threshold while a greater percentage of clinicians performed below the additional performance threshold. As a result, fewer clinicians are estimated to share the funds available through the additional bonus for exceptional performance. Second, we observe an increase in the maximum positive payment adjustment.

The baseline model estimates the maximum positive MIPS payment adjustment based on the budget neutral pool at 1.5 percent and the maximum positive MIPS additional payment adjustment for exceptional performance at 5.1 percent, for a combined maximum payment adjustment of 6.6 percent. The final policies model estimates the maximum MIPS positive payment adjustment based on the budget neutral pool is 4.4 percent and the maximum positive additional MIPS payment adjustment for exceptional performance bonus at 10.0 percent for a combined maximum payment adjustment of 14.4 percent. Finally, we see narrower differences in performance across practice sizes due to the shift from MIPS transition policies. Table 146 shows the overall impact of the payment adjustments by practice size and based on whether clinicians are expected to submit data to MIPS for the final policies model. In Table 147, we present the overall impact of the baseline and the final policies models among clinicians who submit data to assess the incremental impact of the final policies.

The overall proportion of clinicians receiving a positive or neutral payment adjustment decreases from 91.7 percent to 66.8 percent with the implementation of the final policies that shift away from MIPS transition policies. In addition, we no longer observe a disproportionate number of clinicians in small practices receiving a negative payment adjustment when implementing the final policies. For the CY 2022 performance period/2024 payment year, we have policies targeted towards small practices including special scoring policies to minimize burden and facilitate small practice participation in MIPS or APMs, which we describe in section VI.F.18.g.(2)(e) of this final rule. The intention of the final policies is to provide a more equitable participation process and reduce the disparity in performance between clinicians in large and small practices. These findings and final policies reflect movement away from the transition policies implemented during the early years of MIPS and how MIPS has shifted its focus to value rather than primarily on engagement.

However, non-engagement by not submitting data to MIPS among clinicians in small practices is still a concern. Among those who we estimate will not submit data to MIPS, 86 percent are in small practices (22,475 out of 26,180 clinicians who do not submit data). We intend to continue working with stakeholders to improve engagement in MIPS among clinicians in small practices. We want to highlight we are using 2019 MIPS performance period submissions data to simulate a 2022 MIPS performance period final score, and it is likely that there will be changes that we cannot account for at this time, including services and payments disrupted by the PHE for buy antibiotics or clinicians changing behavior in response to the performance thresholds increased for the CY 2022 performance period/2024 MIPS payment year to avoid a negative payment adjustment. It should also be noted that the estimated number of clinicians who do not submit data to MIPS may be an overestimate of non-engagement in MIPS for the CY 2022 performance period/2024 MIPS payment year.

This is because the PHE for buy antibiotics may have resulted in fewer clinicians submitting data to MIPS or more clinicians electing to apply for the extreme and uncontrollable circumstances policies due to the PHE for buy antibiotics for the 2019 MIPS performance period. Therefore, engagement levels in MIPS Start Printed Page 65646 for the CY 2022 performance period/2024 MIPS payment year may differ from these reported estimates. We also note this participation data is generally based off participation for the 2019 performance period, which is associated with the CY 2019 performance period/2021 MIPS payment year and had a performance threshold of 30 points, and that participation may change for the CY 2022 performance period/2024 MIPS payment year when the performance threshold is 75 points. Finally, the combined impact of negative and positive adjustments and the additional positive adjustments for exceptional performance as a percent of paid amount among those that do not submit data to MIPS on average was negative 8.5 percent. It was not the maximum negative payment adjustment of 9 percent because some MIPS eligible clinicians that do not submit data to MIPS can still receive a MIPS final score that is greater than 1/4 of the performance threshold (and avoid the maximum negative adjustment as stipulated by section 1848(q)(6)(A)(iv)(II) of the Act [] ) if they have sufficient claims volume to measure performance for cost measures or quality administrative claim measure, which utilizes administrative claims data and does not require separate data submission to MIPS.

Start Printed Page 65647 f. Estimated Impacts on Payments to MIPS Eligible Clinicians for the CY 2023 Performance Period/2025 MIPS Payment Year We proposed for the CY 2023 MIPS Performance Period to begin transitioning to MIPS Value Pathways (MVPs) and introduce subgroup reporting in the CY 2023 MIPS performance period/2025 payment year. As described in section IV.A.3.b.(2)(c) of this final rule, the first step in the transition plan for MVPs and subgroup reporting is to be voluntary, where eventually MVPs and subgroups will become required. Additionally, subgroups, if applicable, will have the option to report an APP. Since MVP and subgroup reporting will only begin in the CY 2023 performance period/2025 MIPS payment year, we do not have the data to report who will select MVPs and who will report through subgroups in the first year and how these clinicians will score.

As discussed in section IV.A.3.b.(5) of this final rule, for MVP scoring policies, we evaluated all traditional MIPS scoring policies and maintained those that are required under section 1848(q)(2) of the Act such as requirements to measure achievement and improvement of the quality and cost of care. We noted MVPs offer incentives in terms of requiring fewer measures and activities tied to a specialty or medical condition which can offer clinicians a more cohesive experience and that we would continue to evaluating additional incentives that align with our scoring policies and the goals of MVPs in future rulemaking. For this RIAs, we assume clinicians who elect to use MVPs and subgroups for reporting to MIPS will perform similarly to how they performed through traditional MIPS because the scoring policies are similar. We will revisit this assumption in future rulemaking as needed. As discussed in section V.B.8.e.(7)(a) of this final rule, for the purposes of estimating burden associated with the provision to implement MVP and subgroup reporting, we assume that 10 percent of MIPS eligible clinicians in the CY 2022 performance period/2024 MIPS payment year will report as MVP participants in the CY 2023 performance period/2025 MIPS payment year.

In addition, we assume that there will be 20 subgroup reporters in the CY 2023 performance period/2025 MIPS payment year. We anticipate a per respondent reduction of 3 hours and $412 dollars per CQM/QCDR quality submission, 3 hours and $336 per eCQM quality submission, and 5 hours and $717 per claims quality submission. Overall, we estimate a net reduction in burden of $7,463,145 in the quality performance category ICRs due to the introduction of MVP and subgroup reporting in the CY 2023 performance period/2025 MIPS payment year. We refer readers to section V.B.8.e.(7)(a)(iii) of this final rule for further discussion of our burden associated with MVPs and subgroups including the number of respondents. G.

Additional Impacts From Outside Payment Adjustments (1) Burden Overall In addition to policies affecting the payment adjustments, we proposed several policies that have an impact on burden in the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years. In section V.B.8 of Start Printed Page 65648 this final rule, we outline estimates of the costs of data collection that includes both the effect of policy updates and adjustments due to the use of updated data sources. For each provision included in this regulation which impacts our estimate of collection burden, the incremental burden for each is summarized in Table 148. We also provide additional burden discussions that we are not able to quantify. As discussed in the section V.B.8 of this final rule, we are setting forth our estimates for the CY 2023 performance period/2025 MIPS payment year as new burden with no currently approved estimate.

To provide the reader a better sense of the differences in burden between our CY 2022 and CY 2023 performance period/2024 and 2025 MIPS payment year estimates due to changes in policy, we are presenting our CY 2023 performance period/2025 MIPS payment year estimates in Table 148 in comparison to the CY 2022 performance period/2024 MIPS payment year estimate found in the CY 2021 PFS final rule. In Table 148, we are only including our CY 2023 performance period/2025 MIPS payment year estimates for the ICRs where our estimate is different from our CY 2022 performance period/2024 MIPS payment year estimate. Start Printed Page 65649 Start Printed Page 65650 (2) Additional Impacts to Clinicians (a) Web Interface As discussed in section IV.A.3.d.(1)(d) of this final rule, we finalized the proposal to continue the use of the CMS Web Interface measures as a collection type for groups and virtual groups with 25 or more eligible clinicians for the CY 2022 performance period/2024 MIPS payment year. We are also sunsetting the CMS Web Interface measures as a collection type for groups and virtual groups with 25 or more eligible clinicians starting with the CY 2023 performance period/2025 MIPS payment year. As discussed in section IV.A.3.c.(2)(a), we are also extending the CMS Web Interface as a means of reporting quality under the APP for Shared Savings Program ACOs for the CY 2022 performance period/2024 MIPS payment year through the CY 2024 performance period/2025 MIPS payment year.

We refer readers to sections V.B.8.e.(8) and V.B.8.e.(10) of this final rule for our discussion on the estimated burden associated with the extension of the CMS Web Interface collection type in CY 2022 performance period/2024 MIPS payment year and the sunset of the CMS Web Interface collection type in the CY 2023 performance period/2025 MIPS payment year (for those not using the APP). Additionally, we assume that the impacts associated with the sunset of CMS Web Interface measures as a collection type for groups and virtual groups with 25 or more eligible clinicians will remain the same as our discussion in the CY 2021 PFS final rule (85 FR 85020 through 85021). (b) Administrative Claims Measure As discussed in section IV.A.3.d.(1)(e), we are adding one new administrative claims measures beginning in the CY 2022 performance period/2024 MIPS payment year and for future performance periods. Clinician and Clinician Group Risk-standardized Hospital Admission Rates for Patients with Multiple Chronic Conditions. We acknowledge there are administrative burdens and related financial costs associated with each administrative claims measure that clinicians, groups, and organizations may choose to monitor.

However, because these costs can vary significantly due to organizational size, number of administrative claims measures being reported, volume of clinicians reporting each measure, and the specific methods employed to improve performance, we are unable to provide an estimate of the financial impact each clinician, group, or organization may experience. In summary, we are acknowledging that while there are no data submission requirements per § 414.1325(a)(2)(i) for administrative claim measures, there may be associated costs for clinicians and group practices to monitor new administrative claim measures. However, we are unable to quantify that impact. (c) Modifications to the Improvement Activities Inventory As discussed in section IV.A.3.d.(3)(c)(ii) of this final rule, we finalized the proposals to remove 7 previously adopted improvement activities, modify 15 existing improvement activities, and adopt 5 new improvement activities. We refer readers to Appendix 2 of this final rule for further details.

We do not believe these changes to the inventory will impact time or financial burden on stakeholders because MIPS eligible clinicians are still required to submit the same number of activities and the per response time for each activity is uniform. We do not expect these changes to the inventory to affect our currently approved information collection burden estimates in terms of neither the number of estimated respondents nor the burden per response. We anticipate most clinicians performing improvement activities, to comply with existing MIPS policies, will continue to perform the same activities under the policies in this final rule because previously finalized improvement activities continue to apply for the current and future years unless otherwise modified per rulemaking (82 FR 54175). Most of the improvement activities in the Inventory remain unchanged for the CY 2022 performance period/2024 MIPS payment year. (d) Stakeholders Nominating Improvement Activities In section IV.A.3.d.(3)(c)(i)(B) of this rule, we finalized these proposals.

(1) To revise the required criteria for improvement activity nominations received through the Annual Call for Activities. (2) changes to the timeline for improvement activities nomination during a PHE. And (3) to suspend Start Printed Page 65651 activities that become obsolete or impacted by clinical practice guideline changes from the program when this occurrence happens outside of the rulemaking process. Regarding the provision to clarify the timeline for an improvement activity nominated during the PHE, we believe this provision will not affect our currently approved burden estimates since we believe that the number of nominations will not change, but it would make an activity available for reporting to clinicians in the same performance year it was intended to be implemented. In section IV.A.3.d.(3)(c)(i)(B)(aa) of this rule, we finalized the proposal that in order to implement a new improvement activity for a PHE during the same year as the nomination, the nomination will need to be received no later than January 5th of the nomination year to be included in a rule for notice-and-comment rulemaking during that fiscal or calendar year, a necessary precursor to implementation if it were to be finalized.

As described in section V.B.8.j of this rule, we expect additional nominations may be received as a result of this provision, but we do not have any data with which to estimate what the additional number may be. As a result, we did not make any revisions to our currently approved burden estimate. Regarding the provision to suspend activities that become obsolete or impacted by clinical practice guideline changes from the program when this occurrence happens outside of the rulemaking process, we do not anticipate additional burden for stakeholders because of the provision described above as the policy does not change requirements for the nomination of improvement activities. As described in section IV.A.3.d.(3)(c)(i)(B) of this rule, due to the provisions to add two new criteria and to increase the number of criteria stakeholders are required to meet when submitting an activity provision from a minimum of 1 to all 8 criteria, which includes the two new criteria, we proposed to revise our estimated annual information collection burden for nomination of improvement activities to 136 hours (31 nominations × 4.4 hr/nomination) at a cost of $20,355 (31 × [(2.8 hr × $114.24/hr) + (1.6 hr × $210.44/hr)]). (e) Impact on Small Practices As described in section VI.F.18.e.(3) of this final rule RIA, we found 85 percent of clinicians who did not submit data to MIPS were in small practices.

However, the estimated number of MIPS eligible clinicians who do not submit data, including those in small practices, may be smaller in the CY 2022 performance period/2024 MIPS payment year since the submission window for the 2019 performance period was impacted by the start of the PHE for buy antibiotics. CMS is committed to identifying flexibilities and options to help clinicians in small practices participate meaningfully and successfully in MIPS. Specifically, CMS finalized several policies to support clinicians in small practices once they engage with MIPS in the quality, improvement activities and Promoting Interoperability performance categories for the CY 2022 performance period/2024 MIPS payment year. Based on our RIA model findings described in section VI.F.18.e.(3) of this final rule, the final policies for the CY 2022 performance period/2024 payment year led to clinicians in small practices no longer disproportionately receiving negative payment adjustments compared to clinicians in larger sized practices. Therefore, the combination of the special scoring policies for clinicians in small practices is expected to positively affect this group of clinicians and will hopefully encourage and improve future engagement in MIPS among clinicians in small practices.

(f) Impact on Third Party Intermediaries In section IV.A.3.h. Of this rule, we finalized multiple changes to the third-party intermediary regulations at § 414.1400. Specifically, we finalized. (1) Reorganization and consolidation of § 414.1400 generally. (2) an expansion of the general participation requirements of third-party intermediaries to third party intermediaries reporting to MIPS on behalf of APM Entities in order to align reporting requirements for all participants in MIPS.

(3) a requirement that, beginning with the CY 2023 performance period/2025 MIPS payment year, QCDRs and qualified registries must support MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. Health IT vendors must support MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. (4) to require QCDRs, qualified registries, health IT vendors, and CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. (5) to require QCDRs and qualified registries that have never submitted data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year) through the 2020 performance period/2022 MIPS payment year, to submit a participation plan as part of their self-nomination for CY 2023. (6) a requirement that, beginning with the 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval.

(7) a requirement that, beginning with the CY 2023 performance period/2025 MIPS payment year, the QCDR or qualified registry must submit a data validation plan annually, at the time of self-nomination, for CMS' approval, and may not change the plan once approved, without the prior approval of the agency. And (8) to add a rejection criterion to state that a QCDR does not have permission to use a QCDR measure owned by another QCDR for the applicable performance period. Additionally, to provide further clarification of our current policy (84 FR 63070 through 63073), we finalized the proposal to state that if a QCDR measure owner is not approved during a given self-nomination period, any associated QCDR measures with that QCDR would also not be approved. With regard to the reorganization and consolidation of § 414.1400 generally, we do not anticipate this to require any additional effort for affected entities as the provision is to allow CMS to reorganize the existing information. For the requirements related to expanding the general participation requirements of third-party intermediaries to third party intermediaries reporting to MIPS on behalf of APM Entities in order to align reporting requirements for all participants in MIPS, we did not propose to revise our burden estimates as this requirement is not different from how third-party intermediaries currently submit data for the quality, improvement activities and Promoting Interoperability performance categories in MIPS on behalf of individual eligible clinicians and groups.

As previously discussed in section IV.A.3.h.(2)(b)(ii) of this rule, we finalized the proposal to require QCDRs, qualified registries, health IT vendors, and CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. During the MVP Town Hall held in January 2021 (85 FR 74729), we heard from third-party intermediaries that they are confident that they can make the necessary updates to allow for subgroup reporting, if they have enough time. A few vendors suggested that we add Start Printed Page 65652 subgroup reporting to the existing CEHRT requirements. Given our provision described in section IV.A.3.b.(2)(d) of this rule to delay the implementation of subgroup reporting option to the CY 2023 performance period/2025 MIPS payment year, we assume that the delay will give these entities adequate time to make the necessary updates. We assume that there will be no additional burden that third-party intermediaries will incur to implement the subgroup reporting option.

We anticipate that there may be administrative burden associated with changes in workflows to their existing systems for submission of subgroup data for the CY 2023 performance period/2025 MIPS payment year. However, given that each of these entities and their information technology systems are unique, we are unable to quantify the burden for these entities to capture and submit data on behalf of clinicians who may choose to participate as subgroups. We do not anticipate a significant impact to QCDRs and qualified registries resulting from the finalized provision to require QCDRs and qualified registries to conduct an annual data validation audit and if one or more deficiencies or data errors are identified also conduct targeted audits. First, we are not revising our burden estimates because the finalized data validation requirements are like existing expectations which we have already accounted for the associated burden as stated in the CY 2017 Quality Payment Program final rule (81 FR 77383 through 77384) and the CY 2019 PFS final rule (83 FR 59998 through 59999). Second, we believe that the requirements for conduct of the data validation audits are aligned with methods and procedures which stakeholders currently utilize.

As discussed in section IV.A.3.h.(3)(a)(i) of this rule, due to the provision to require QCDRs and qualified registries that have never submitted data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year) through the CY 2020 performance period/2022 MIPS payment year to submit a participation plan as part of their self-nomination for CY 2023 performance period/2025 MIPS payment year, we refer readers to section V.B.8.c.(2) of this rule for details on the adjusted burden. As discussed in section V.B.8.c.(2) of this rule, we are not adjusting our burden estimates due to the provision related to two new rejection criteria for QCDR measures. (g) Assumptions &. Limitations We note several limitations to our estimates of clinicians' MIPS eligibility and participation, negative MIPS payment adjustments, and positive payment adjustments for the CY 2022 performance year/2024 MIPS payment year. Due to the PHE for buy antibiotics, we are aware that there may be changes in health care delivery and billing patterns that will impact results for the CY 2022 performance year/2024 MIPS payment year that we are not able to model with our historic data sources.

The scoring model results presented in this final rule assume that CY 2019 Quality Payment Program data submissions and performance are representative of CY 2022 Quality Payment Program data submissions and performance. The estimated performance for the CY 2022 performance year/2024 MIPS payment year using CY 2019 Quality Payment Program data may be underestimated because the performance threshold to avoid a negative payment adjustment for the 2019 MIPS performance period/2021 MIPS payment year was significantly lower (30 out of 100 points) than the performance threshold for the 2022 performance year/2024 payment year (75 out of 100). We anticipate clinicians may participate more robustly by submitting more performance categories to meet the higher performance threshold to avoid a negative payment adjustment. In our MIPS eligible clinician assumptions, we assumed that clinicians who elected to opt-in in the CY 2019 Quality Payment Program and submitted data would continue to elect to opt-in in the CY 2022 performance year/2024 MIPS payment year. It is difficult to predict, based on 2019 data, whether clinicians will elect to opt-in to participate in MIPS with the CY 2022 performance year/2024 payment year finalized policies.

In addition to the limitations described throughout the methodology sections, there are additional limitations to our estimates including. (1) To the extent that there are year-to-year changes in the data submission, volume and mix of services provided by MIPS eligible clinicians, the actual impact on total Medicare revenues will be different from those shown in Table 144. And (2) due to updates in measure specifications and new measures, our cost performance is modeled using test data that does not always overlap with CY 2019 so we may not be capturing performance for clinicians or groups that change practices or TINs between when the testing data and the 2019 performance period. Due to the limitations described, there is considerable uncertainty around our estimates that is difficult to quantify. G.

Alternatives Considered This final rule contains a range of policies, including some provisions related to specific statutory provisions. The preceding preamble provides descriptions of the statutory provisions that are addressed, identifies those policies when discretion has been exercised, presents rationale for our policies and, where relevant, alternatives that were considered. For purposes of the payment impact on PFS services of the policies contained in this final rule, we presented the estimated impact on total allowed charges by specialty. 1. Alternatives Considered for Utilization Data in PFS Ratesetting As discussed earlier in this section II.C.1 (Changes in Relative Value Unit (RVU) Impacts), our estimates of changes in Medicare expenditures for PFS services compared payment rates for CY 2021 with payment rates for CY 2022 using CY 2020 Medicare utilization.

As an alternative to using CY 2020 data, we considered using CY 2019 utilization data for the purposes of determining the CY 2022 RVUs, as well as in determining the CY 2022 BN adjustment and conversion factor. We considered using CY 2019 data due to the PHE for buy antibiotics, which has impacted the delivery of health care services over the past 18 months. Increases in remote delivery of services to reduce risk of exposure to both practitioner and patients, as well as postponement of elective procedures have resulted in a change to service utilization patterns across Medicare FFS payment systems. Specific to the PFS, overall service utilization decreased by approximately 20 percent in CY 2020 compared to CY 2019, which caused us to question whether CY 2020 data is the best available data to use for CY 2022 ratesetting. In order to determine if lower overall utilization in CY 2020 would result in differential impacts on specialties and practitioners, we modeled the PFS ratesetting process using CY 2019 utilization data.

We found that the use of CY 2020 as opposed to CY 2019 data in establishing payment rates had relatively little differential impacts on payment, despite the approximately 20 percent decrease in overall service utilization. Table 149 illustrates specialty-specific impacts for the proposed rule using CY 2019 data. Start Printed Page 65653 Start Printed Page 65654 The majority of specialties experienced shifts of less than a percent when we used CY 2019 data, as opposed to CY 2020 data, as displayed in Table 136, as the basis for setting rates. Several specialties shifted by approximately one percent. We did not detect a pattern of specialties that were notably affected by the choice of claims data, either positively or negatively.

While Pediatrics shifted from a 1 percent impact when we used CY 2020 claims data to a 5-payment impact when we used CY 2019 claims data, this shift is likely due to the smaller amount of allowed charges associated with the Pediatrics specialty. We analyzed the percentage change in total RVUs per practitioner. Using CY 2019 utilization data, Total RVUs change between −1 percent and 1 percent for 53 percent of practitioners, representing more than 48 percent of the changes in Total RUs for all practitioners, similar to the results we found when using CY 2020 claims that we discussed in section II.C.1. Variations by specialty were also similar to the results we found using CY 2020 claims and are contained in the public use file that describes the percentage change in total RVUs per practitioner. Similar to the process described in section II.C.1.

Of this final rule, we used CY 2019 claims data to estimate the CY 2021 PFS CF to be 33.6184 which reflects a BN adjustment under section 1848(c)(2)(B)(ii)(II) of the Act, which we estimated to be −0.04 using CY 2019 data, the 0.00 percent update adjustment factor specified under section 1848(d)(19) of the Act, and the expiration of the 3.75 percent fee schedule payment increase for CY 2021 provided by the CAA. The anesthesia CF, which reflects the same overall PFS adjustments with the addition of anesthesia-specific PE and MP adjustments, would shift by a similar magnitude as the PFS CF. Thus, the estimated PFS CF and anesthesia CF using CY 2019 data is slightly higher compared to using claims data for CY 2020 with an estimated difference of 0.0336 (a little less than three and half cents). We note that the BN adjustment will be recalculated for the CY 2022 PFS final rule and the use of CY 2019 claims may or may not be higher than the use of CY 2020 claims based on which policies are ultimately finalized. Comment.

We received few comments on our Alternatives Considered for Utilization Data in PFS Ratesetting. One commenter stated that they supported the use of the alternate CY 2019 claims data because it resulted in a slight improvement (approximately 1 percent) in the impact of changes in RVUs for their specialty. A different commenter stated that practice patterns in CY 2020 were atypical as a result of the buy antibiotics flagyl and they believed that the use of 2019 claims data would be likely to more closely approximate overall PFS service utilization and costs in 2022. Response. We continued to believe that the use of CY 2020 as opposed to CY 2019 data in establishing payment rates had relatively little differential impacts on payment, despite the approximately 20 percent decrease in overall service utilization.

We found that the use of CY 2020 as opposed to CY 2019 data in establishing payment rates had little differential impact on payment at the specialty, service categories, and individual services levels. We also did not detect a pattern of specialties who were notably affected by the choice of claims data, either positively or negatively. We received few comments on this alternative considered which we believe indicates support for our use of CY 2020 claims data from the majority of commenters. After consideration of the comments, we are finalizing our continued use of CY 2020 claims data instead of the potential alternative to use CY 2019 claims data for the purposes of determining the CY 2022 RVUs as well as in determining the CY 2022 BN adjustment and conversion factor. 2.

Alternatives Considered for Split (or Shared) Visits In section II.F of this final rule, we codify our current policy allowing billing of certain “split” or “shared” E/M visits by a physician, when the visit is performed in part by both a physician and an NPP, who are in the same group and the physician performs a substantive portion of the visit. We will codify in our regulations a definition of a split (or shared) visit as an E/M visit in the facility setting that is performed in part by both a physician and NPP who are in the same group, in accordance with applicable laws and regulations, such that the E/M visit could be billed by either the physician or the NPP if it were furnished independently by only one of them in the facility setting (rather than as a split (or shared) visit). The physician or NPP who performs the substantive portion of the split (or shared) visit will bill for the visit. We are also finalizing our proposed definition of substantive portion as more than half of the total time spent by the physician and NPP. We considered several alternative approaches.

First, we considered the option of disallowing split (or shared) visit billing beginning in CY 2022. Under this alternative, in settings where payment for “incident to” services is prohibited, physicians and NPPs would only be able to bill for visits they furnish in their entirety under their own NPI. Such a policy would be administratively simple, and reduce the likelihood of paying significantly more than the actual resource costs incurred. When physicians and practitioners furnish services in facility settings, they do not ordinarily incur the cost of clinical staff or other PE costs involved in furnishing the services. When the physician bills for an E/M visit, in accordance with section 1833(a)(1)(N) of the Act, the Medicare Part B payment is equal to 80 percent of the payment basis under the PFS which, under section 1848(a)(1) of the Act, is the lesser of the actual charge or the full fee schedule Start Printed Page 65655 amount for the service.

In contrast, if the NPP bills for it, in accordance with section 1833(a)(1)(O) of the Act, the Medicare Part B payment is equal to 80 percent of the lesser of the actual charge or 85 percent of the fee schedule rate. Because of this payment differential and the lower resource costs associated with E/M visits performed partly by a physician and partly by an NPP, it could be argued that the physician should not be able to bill for such a visit and be paid at the higher fee schedule amount. Our proposal was informed by our belief that longstanding clinical practice relies substantially upon shared visits between physicians and NPPs in facility settings. To avoid the potential disruption in this common medical practice approach, we did not propose to disallow billing for split (or shared) visits. Comment.

We received public comments confirming that it would be disruptive of current practice patterns to disallow split (or shared) visit billing. We did not receive public data indicating specifically how often split (or shared) visits occur. Response. After consideration of the public comments, we are finalizing a policy to continue allowing billing of split (or shared) visits under specified conditions. We will require a modifier on claims for these types of visits, as proposed, to help inform future policy in this area.

We also considered several alternatives for how to define the substantive portion of a split (or shared) visit. We considered defining “substantive portion” as any face-to-face portion of the split (or shared) visit, consistent with our current definition. We did not believe it would be appropriate to consider just any portion of the visit—with or without direct patient contact— as a substantive portion. For instance, we did not believe it would be appropriate to consider a brief or trivial interaction, with or without direct patient contact, such as where the physician merely “pokes their head” into the room, to be a substantive portion of the visit. We did not believe it would be appropriate to permit a physician to bill for a visit if they do not substantially participate in the visit, given that physicians are paid under the PFS at a higher rate than NPPs.

Therefore, we proposed to define “substantive portion” as more than half of the total time spent by the physician or NPP. Another alternative we considered, but did not propose, was to utilize the medical decision making (MDM) to define substantive portion. We did not propose this approach because MDM is not easily attributed to a single physician or NPP when the work is shared, because MDM is not necessarily quantifiable and can depend on patient characteristics. We believed that time is a more precise factor than MDM to use as a basis for deciding which practitioner performs the substantive portion of the visit. We believed that using the time spent by each practitioner furnishing the split (or shared) visit would provide a more precise metric than potentially finding a way to parse MDM between the physician and the NPP.

We also considered defining substantive portion as performance of the history and/or physical exam, which are key components of certain E/M visits. Given recent changes in the CPT E/M Guidelines, history and physical exam are no longer necessarily included in all E/M visits, because for office/outpatient E/M visits, the visit level can now be selected based on either MDM or time, and history and exam are performed only as medically appropriate. Also, the CPT Editorial Panel is considering removing history and physical exam as key visit components for institutional visits, similar to the changes already made for office/outpatient E/M visits. Accordingly, defining “substantive portion” as any key component including history or exam did not seem to be a viable approach. Lastly, we considered not defining substantive portion and instead leaving determinations regarding the substantive portion to MAC and/or medical review discretion.

However, this approach would impose a significant burden on MACs to assess individual cases and could lead to too much regional variation in payment. We solicited public comment to help inform what we consider to be the “substantive portion” of a split (or shared) visit in institutional settings and assist us in consideration of our definition of “substantive portion”. We received public comments to help inform what we consider to be the “substantive portion” of a split (or shared) visit in institutional settings and assist us in consideration of our definition of “substantive portion.” We refer readers to section II.F. Of this final rule with comment period for a complete discussion of the public comments on this topic and our responses, summarized below. Comment.

The commenters agreed that the individual who performs the substantive portion should bill for the visit. Approximately half of the commenters supported our proposal, believing that it was appropriate and would provide a clear rule. However, approximately half of the public comments recommended alternative definitions of substantive portion, including. A lower percentage of time (25 to 30 percent of the total time) (several comments). MDM (several comments).

Some portion of MDM (several comments). Choice of MDM or time, for example, based on whichever is used to select visit level (several comments). One of the three key components of history, exam, or MDM, at least until the AMA completes changes for E/M visit coding and the CPT E/M Guidelines that the commenters expect for 2023 (several comments). Some combination of the above, for example, more than half of the MDM or more than half of total time (several comments). Working with the CPT Editorial Panel to develop a policy (several comments).

These commenters were concerned about a perceived devaluation of the medical decision-making portion of visits, disruptions to current practice patterns, and administrative burdens associated with timing each of the practitioner's contribution to the visit. Response. Regarding recommendations to consider the substantive portion to be a lower percentage of time, having reviewed our current policy, we do not believe that the higher physician payment rate under the PFS should be made when a physician performs less than half of the visit, such as a quarter or a third of the total time or less than half of the MDM. We do not think that MDM is necessarily the most critical or central component of E/M visits, and it is not the only service component being paid for. PFS payment rates incorporate and assume a certain amount of physician time per visit, reflected in the assigned RVUs and reflected annually in our physician time files.

PFS payment rates reflect the typical amount of time spent on visits, and the Act requires us to reflect both time and intensity of work (physician and practitioner) in our payment rates. We do not believe this in any way devalues the unique education, training, experience, or expertise of physicians, but rather that both time and expertise are important and included in payment under the PFS. We continue to believe that MDM cannot be readily attributed to only the physician or the NPP, or definitively divided between them. We believe the commenters overestimate the administrative burden Start Printed Page 65656 of tracking and attributing time, given the advent of EHRs and new E/M visit coding structures. However, we understand that an adjustment period may be needed to establish systems to track and attribute time for split (or shared) visits, especially since the coding for E/M visits in many facility settings will not use MDM or time to distinguish visit levels until 2023.

Therefore, we are finalizing our definition of substantive portion for split (or shared) visits as proposed (more than half of the total time spent by the physician and NPP performing the split (or shared) visit) beginning January 1, 2023. However, we are modifying our proposed policy for one transitional year. For CY 2022, except for critical care visits, the substantive portion will be defined as one of the three key components (history, exam, or MDM), or more than half of the total time spent by the physician and NPP performing the split (or shared) visit). In other words, for CY 2022, the practitioner who spends more than half of the total time, or performs the history, exam, or MDM can be considered to have performed the substantive portion and can bill for the split (or shared) E/M visit. We wish to be clear that practitioners can still use MDM to select visit level for the E/M split (or shared) visit, as proposed.

We also are clarifying that when one of the three key components is used as the substantive portion in CY 2022, the practitioner who bills the visit must perform that component in its entirety in order to bill (see section II.F.1.c.1. Of this final rule for a more detailed discussion). For visits that are already timed (that is, critical care services), the choice to use more than half of the total time, or performance of the history, exam, or MDM will not apply. For critical care visits, starting in CY 2022, the substantive portion will be more than half of the total time, as proposed. We will continue to review and consider any future changes by the AMA/CPT Editorial Panel to the CPT E/M Guidelines for split (or shared) visits.

We also intend to monitor the claims data for split (or shared) visits, to better understand how frequently practitioners use or rely upon this billing construct. We considered disallowing split (or shared) billing in critical care, SNF and nursing facility (NF) visits, as well as new patient and initial patient visits. We require certain SNF/NF visits to be provided entirely by a physician, but we believed we should allow split (or shared) visit billing for other visits that can be split (or shared) in these settings. (We refer readers to our Conditions of Participation in 42 CFR 483.30 for information regarding the SNF/NF visits that are required to be performed in their entirety by a physician. That regulation requires that certain SNF/NF visits must be furnished directly and solely by a physician).

However, we believed current clinical practice generally allows sharing of critical care visits by appropriately trained and qualified practitioners, and we solicited comment on this belief and this alternative considered. We proposed to allow split (or shared) visit billing in critical care because we believe the practice of medicine has evolved towards a more team-based approach to care, and greater integration in the practice of physicians and NPPs, particularly when care is furnished by clinicians in the same group in the facility setting. Given this evolution in medical practice, the concerns that may have been present when we issued current policy may no longer be as relevant. We understand that there have been changes in the practice of medicine over the past several years, some facilitated by the advent of EHRs and other systems, toward a more team-based approach to care. There has also been an increase in alternative payment models that employ a more team-based approach to care.

Comment. We received many comments on our proposals for allowed settings of care, all in support of those proposals. Response. We thank the commenters for their support. After consideration of the public comments, we are finalizing as proposed.

We proposed to allow split (or shared) visits for both new and established patients as well as initial and subsequent visits. After conducting an internal review, including consulting our medical officers, we believed that the practice of medicine has evolved toward a more team-based approach to care, and greater integration in the practice of physicians and NPPs, particularly when care is furnished by practitioners in the same group in the facility setting. Given this evolution in medical practice, the concerns that may have been present when we issued the manual instructions may no longer be as relevant. We understand that there have been changes in the practice of medicine over the past several years, some facilitated by the advent of EHRs and other systems, toward a more team-based approach to care. There has also been an increase in alternative payment models that employ a more team-based approach to care.

In considering and reevaluating our policy, we saw no reason to preclude the physician or NPP from billing for split (or shared) visits for a new patient, in addition to an established patient, or for initial and subsequent split (or shared) visits. Therefore, we proposed to permit the physician or NPP to bill for split (or shared) visits for both new and established patients, as well as for initial and subsequent visits. We believed this approach is also consistent with the CPT E/M Guidelines for split (or shared) visits, which does not exclude these types of visits from being billed when furnished as split (or shared) services. Comment. We received many comments on this proposal, all in support of it.

Response. We thank the commenters for their support. After consideration of public comments, we are finalizing as proposed. 3. Alternatives Considered for Requiring Certain Manufacturers To Report Drug Pricing Information for Part B (§§ 414.802, 414.806) This provision implements new statutory requirements under sections 1847A and 1927 of the Act, as amended by section 401 of the CAA (for the purposes of this section of this final rule, hereinafter is referred to as “section 401”).

These new requirements will improve the accuracy of reported prices and limit the use of WAC-based pricing. As discussed in section III.D.1. Of this final rule, section 1847A(c)(6)(A) of the Act incorporates the definition of manufacturer at section 1927(k)(5) of the Act, but permits the Secretary to exempt repackagers from the definition of manufacturer, as determined appropriate, for purposes of section 1847A(f)(2) of the Act. We considered whether to implement the flexibility afforded by the statute. However, implementing the flexibility afforded by the statute could potentially lead to a gap in the ASP reporting requirements, meaning that ASPs could be distorted to the extent that certain sales are carved out of the reporting requirement through the use of repackagers.

As discussed previously in this RIA, we are unable to quantitatively estimate the impacts of this provision. We welcomed comments on our approach, and on the alternative relative to. (1) The likely costs or savings (to manufacturers, beneficiaries, the government, and other stakeholders). And (2) any other related impacts of this provision. Start Printed Page 65657 4.

Alternatives Considered for the MDPP Expanded Model Emergency Policy For the MDPP Expanded Model Emergency Policy, no alternatives were considered. The 2-year MDPP service period has depressed interest in MDPP among would-be MDPP suppliers. These actions address stakeholder comments on the barriers to MDPP expanded model success. If we do not take action, we will not be able to scale MDPP as intended, impacting Medicare beneficiary access to this program. Reducing the MDPP from a 24- to a 12-month services period, increasing the year 1 performance payments, and waiving the Medicare provider enrollment application fee not only better aligns the model with the evidence that helped certify the DPP model test initially, but it will encourage eligible organizations to enroll as MDPP suppliers.

5. Alternatives Considered for the Quality Payment Program We view the performance threshold as a critical factor affecting the distribution of payment adjustments in the Quality Payment Program. We ran a separate final policies RIA model based on the actual mean for the CY 2019 performance period/2021 MIPS payment year with a performance threshold of 86 and an additional performance threshold of 92 points, which are potential values that may be used for the CY 2022 performance period/2024 MIPS payment year. The model with a performance threshold of 86 and additional performance threshold of 92 has the same mean and median final score as our policies RIA model since the performance threshold does not change the final score. We estimate that $ 907 million will be redistributed through BN.

For clinicians who meet or exceed the additional performance threshold, an additional $241 million was distributed. The maximum positive payment adjustment will be 18.2 percent prior to the maximum additional payment adjustment and 28.2 percent after considering the MIPS maximum positive payment adjustment and the additional MIPS payment adjustment for exceptional performance. In addition, 74.0 percent of MIPS eligible clinicians will receive a negative payment adjustment among those that submit data. We report the findings for the baseline model which describes the impact for the CY 2022 performance period/2024 MIPS payment year if this regulation did not exist. The baseline model has a final score mean of 78.13 and median of 82.59.

We estimate that $428 million will be redistributed through BN. There will be a maximum payment adjustment of 6.6 percent after considering the MIPS payment adjustment and the additional MIPS payment adjustment for exceptional performance. In addition, 8.3 percent of MIPS eligible clinicians will receive a negative payment adjustment among those that submit data. H. Impact on Beneficiaries We do not believe these provisions will have a negative impact on beneficiaries given overall PFS BN.

1. Requiring Certain Manufacturers To Report Drug Pricing Information for Part B (§§ 414.802, 414.806) Section 1927(b)(3)(A)(iii) of the Act requires manufacturers with a Medicaid drug rebate agreement to report ASP data consistent with the information required for such reporting at section 1847A of the Act. Some manufacturers without Medicaid drug rebate agreements voluntarily submit ASP data for their single source drugs or biologicals that are payable under Part B, however other manufacturers without Medicaid drug rebate agreements do not voluntarily submit such data. Without manufacturer reported ASP data, CMS cannot calculate the ASP payment limit, and consequently, payment is typically based on Wholesale Acquisition Cost (WAC). Consistent with section 1847A(c)(3) of the Act and our regulations at § 414.804(a)(2), the ASP is net of price concessions.

However, consistent with the definition of WAC at section 1847A(c)(6)(B) of the Act, the WAC is not net of price concessions and is thus nearly always, and sometimes significantly, higher than ASP. Drugs with payment allowances based on WAC may have greater “spreads” between acquisition costs and payment than drugs for which there is an ASP-based payment allowance, which, in turn, may. (1) Incent the use of the drug based on its spread rather than on purely clinical considerations. (2) result in increased payments under Medicare Part B. And (3) result in increased beneficiary cost sharing.

This provision implements new statutory requirements under sections 1847A and 1927 of the Act, as amended by section 401 of Division CC, Title IV of the CAA, 2021. These new requirements will improve the accuracy of reported payment limits and limit the use of WAC-based pricing. For single source drugs, these changes may result in lower payment limits because, typically, the WAC plus 3 percent is higher than ASP plus 6 percent. This then translates to cost savings for both the government and beneficiaries, who will pay coinsurance on a lesser amount. However, for the reason stated earlier in this RIA (see section VI.G.4.

Of this final rule), we are unable to predict the magnitude of this effect. Similarly, payment limits for multiple source drugs could increase or decrease, and we are unable to predict the direction or magnitude of specific or aggregate effects at this time. 2. Determination of ASP for Certain Self-Administered Drug Products Although we are unable to quantify the total magnitude of the potential savings, these changes have the potential to substantially reduce program expenditures and beneficiary coinsurance. The OIG's July 2020 report (discussed in section III.D.2.

Of this final rule) determined that the inclusion of self-administered versions of certolizumab and abatacept in their respective volume-weighted, average ASPs, alone, has resulted in $173 million in additional Medicare beneficiary coinsurance between 2014 and 2018. The regulatory changes have the potential to result in decreased payment limits for identified billing and payment codes and could, in turn, substantially reduce beneficiary coinsurance. Since section 405 of Division CC, Title IV of the CAA, 2021 directs CMS to implement the statutory changes at section 1847A(g)(3) of the Act beginning on July 1, 2021, these potential savings may be observed within the year. 3. Medicare Diabetes Prevention Program Expanded Model Emergency Policy This change will have a positive impact on eligible MDPP beneficiaries, as it better aligns with the CDC's National DPP, giving both the participants and the coaches similar messaging around this program, regardless of payer.

MDPP suppliers often offer the MDPP set of services to mixed cohorts, or classes with participants who are not eligible for MDPP, but who are enrolled in a National DPP cohort. Since MDPP generally follows the CDC's National DPP and aligns its program with the CDC's DPRP Standards, it is confusing to participants, coaches, and staff when talking about a 2-year program to its eligible Medicare participants when the non-Medicare participants have a 1-year program. Finally, reducing the MDPP service period from 2 years to one (1) year allows more cohorts to start and finish MDPP during the expanded Start Printed Page 65658 model initial period of performance, which ends in March 2023. 4. Quality Payment Program There are several changes in this rule that are expected to have a positive effect on beneficiaries.

In general, we believe that many of these changes, including the MVP and subgroup provisions, will lead to more meaningful and relevant data being available to beneficiaries on the type and scope of care provided by clinicians on the compare tool. Additionally, beneficiaries could use the publicly reported information on clinician performance in subgroups to identify and choose clinicians in multispecialty groups relevant to their care needs. Consequently, we anticipate this will improve the quality and value of care provided to Medicare beneficiaries. For example, several of the new measures include patient-reported outcome-based measures, which may be used to help patients make more informed decisions about treatment options. Patient-reported outcome-based measures provide information on a patient's health status from the patient's point of view and may also provide valuable insights on factors such as quality of life, functional status, and overall disease experience, which may not otherwise be available through routine clinical data collection.

Patient-reported outcome-based measured are factors frequently of interest to patients when making decisions about treatment. K. Estimating Regulatory Familiarization Costs If regulations impose administrative costs on private entities, such as the time needed to read and interpret this rule, we should estimate the cost associated with regulatory review. Due to the uncertainty involved with accurately quantifying the number of entities that will review the rule, we assumed that the total number of unique commenters on this year's rule will be the number of reviewers of last year's rule. We acknowledge that this assumption may understate or overstate the costs of reviewing this rule.

It is possible that not all commenters will review this year's rule in detail, and it is also possible that some reviewers will choose not to comment on the rule. For these reasons we thought that the number of commenters will be a fair estimate of the number of reviewers of last year's rule. We also recognized that different types of entities are in many cases affected by mutually exclusive sections of this rule, and therefore for the purposes of our estimate we assume that each reviewer reads approximately 50 percent of the rule. Using the wage information from the BLS for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing this rule is $114.24 per hour, including overhead and fringe benefits https://www.bls.gov/​oes/​current/​oes_​nat.htm. Assuming an average reading speed, we estimate that it will take approximately 8.0 hours for the staff to review half of this rule.

For each facility that reviews the rule, the estimated cost is $913.92 (8.0 hours × $114.24). Therefore, we estimated that the total cost of reviewing this regulation is $32,380,186 ($885.92 × 35,430 reviewers on this year's proposed rule). J. Accounting Statement As required by OMB Circular A-4 (available at http://www.whitehouse.gov/​omb/​circulars/​a004/​a-4.pdf ), in Tables 150 and 151 (Accounting Statements), we have prepared an accounting statement. This estimate includes growth in incurred benefits from CY 2021 to CY 2022 based on the FY 2022 President's Budget baseline.

K. Conclusion The analysis in the previous sections, together with the remainder of this preamble, provided an initial Regulatory Flexibility Analysis. The previous analysis, together with the preceding portion of this preamble, provides an RIA. In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget. Chiquita Brooks-LaSure, Administrator of the Centers for Medicare &.

Medicaid Services, approved this document on October 28, 2021. Start List of Subjects 42 CFR Part 403 Grant programs—healthHealth insuranceHospitalsIntergovernmental relationsMedicareReporting and recordkeeping requirements 42 CFR Part 405 Administrative practice and procedureDiseasesHealth facilitiesHealth insuranceHealth professionsMedical devicesMedicareReporting and recordkeeping requirementsRural areasX-rays 42 CFR Part 410 DiseasesHealth facilitiesHealth professionsLaboratoriesMedicareReporting and recordkeeping requirementsRural areasX-rays 42 CFR Part 411 DiseasesMedicareReporting and recordkeeping requirements 42 CFR Part 414 Administrative practice and procedureBiologicsDiseasesDrugsHealth facilitiesHealth professionsMedicareReporting and recordkeeping requirements 42 CFR Part 415 Health facilitiesHealth professionsMedicareReporting and recordkeeping requirements 42 CFR Part 423 Administrative practice and procedureEmergency medical servicesHealth facilitiesHealth maintenance organizations (HMO)Health professionalsMedicarePenaltiesPrivacyReporting and recordkeeping requirements 42 CFR Part 424 Emergency medical servicesHealth facilitiesHealth professionsMedicareReporting and recordkeeping requirements 42 CFR Part 425 Administrative practice and procedureHealth facilitiesHealth professionsMedicareReporting and recordkeeping requirements End List of Subjects For the reasons set forth in the preamble, the Centers for Medicare &. Medicaid Services amends 42 CFR chapter IV as set forth below. Start Part End Part Start Amendment Part1. The authority citation for part 403 continues to read as follows.

End Amendment Part Start Authority 42 U.S.C. 1302, and 1395hh. End Authority Start Amendment Part2. In § 403.902— End Amendment Part Start Amendment Parta. Amend the definition of “Ownership or investment interest” by adding paragraphs (3)(vi) and (vii).

End Amendment Part Start Amendment Partb. Add a definition for “Physician-owned distributorship” in alphabetical order. And End Amendment Part Start Amendment Partc. Revise the definition of “Short term medical supply or device loan”. End Amendment Part The additions and revision read as follows.

Definitions. * * * * * Ownership or investment interest * * * (3) * * * (vi) A titular ownership or investment interest that excludes the ability or right to receive the financial benefits of ownership or investment, including, but not limited to, the distribution of profits, dividends, proceeds of sale, or similar returns on investment. Or (vii) An interest in an entity that arises from an employee stock ownership plan (ESOP) that is qualified under section 401(a) of the Internal Revenue Code of 1986. * * * * * Physician-owned distributorship , for the purposes of determining the existence of a reportable ownership or investment interest under this subpart, means an entity that. (1) Meets the definition of an applicable manufacturer or applicable group purchasing organization as defined in this section, and (2) Meets at least one of the following two conditions.

(i) Has a minimum of 5 percent direct or indirect ownership or investment interest in the applicable manufacturer or applicable group purchasing organization held by a physician or a physician's immediate family member, or (ii) A physician or a physician's immediate family member receives compensation from the applicable manufacturer or group purchasing organization in the form of a commission, return on investment, profit sharing, profit distribution, or other remuneration directly or indirectly derived from the sale or distribution of devices by the applicable manufacturer or group purchasing organization in which the physician or physician's immediate family member has ownership. (3) This physician owned distributor definition does not apply for purposes of any other laws or regulations, including, but not limited to, section 1877 of the Act, the regulations at 42 CFR part 411, subpart J, section 1128B of the Act, or the regulations at 42 CFR 1001.952. * * * * * Short term medical supply or device loan means the loan of a covered device or a device under development, or the provision of a limited quantity of medical supplies for a short-term trial period, not to exceed a loan period of 90 cumulative days per calendar year or a quantity of 90 cumulative days of average daily use per calendar year, to permit evaluation of the device or medical supply by the covered recipient. * * * * * Start Amendment Part3. Amend § 403.904 by adding paragraph (a)(3) to read as follows.

End Amendment Part Reports of payments or other transfers of value to covered recipients. (a) * * * (3) An applicable manufacturer or applicable group purchasing organization that has reported payments or transfers of value under the scope of this section may not remove, delete, or alter any record/(s) unless an error is discovered in the information that had been furnished, or the record is otherwise believed to meet exceptions for reporting. * * * * * Start Amendment Part4. Amend § 403.908 by revising paragraph (c)(3) and adding paragraph (c)(4) to read as follows. End Amendment Part Procedures for electronic submission of reports.

* * * * * (c) * * * (3) During registration, applicable manufacturers and applicable group purchasing organizations must name two points of contact with appropriate contact information. These points of contact must be updated for 2 years following record submission. (4) An applicable manufacturer or applicable group purchasing organization that meets the definition of physician-owned distributorship as defined in § 403.902 must identify its status as a physician-owned distributorship when registering or recertifying. * * * * * Start Part End Part Start Amendment Part5. The authority citation for part 405 continues to read as follows.

End Amendment Part Start Authority 42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k). End Authority Start Amendment Part6. Amend § 405.902 by adding definitions for “Additional documentation”, “Additional documentation request (ADR)”, “Post-payment medical review”, and “Prepayment medical review” in alphabetical order to read as follows. End Amendment Part Start Printed Page 65660 Definitions.

* * * * * Additional documentation means any information requested by a contractor when conducting a prepayment review or post-payment review. Additional documentation request (ADR) means a contractor's initial documentation request in reviewing claims selected for prepayment review or post-payment review. * * * * * Post-payment medical review (or post-payment review) means a review that occurs after payment is made on the selected claim to determine whether the initial determination for payment was appropriate. Prepayment medical review (or prepayment review) means a review that occurs before an initial determination for payment is made on the selected claim to determine whether payment should be made. * * * * * Start Amendment Part7.

Add § 405.903 to read as follows. End Amendment Part Prepayment review. (a) A contractor may select a claim(s) for prepayment review. (b) In conducting a prepayment review, a contractor may issue additional documentation requests to a provider or supplier. (1) A provider or supplier will be provided 45 calendar days to submit additional documentation in response to a contractor's request, except as stated in paragraph (b)(2) and (c) of this section.

(2) A contractor may accept documentation received after 45-calendar days for good cause. Good cause means situations such as natural disasters, interruptions in business practices, or other extenuating circumstances that the contractor deems good cause in accepting the documentation. (c) A provider or supplier will be provided 30 calendar days to submit additional documentation in response to a UPIC's request for additional documentation. A UPIC may accept documentation received after the 30 calendar days for good cause. Good cause means situations such as natural disasters, interruptions in business practices, or other extenuating circumstances that the UPIC deems good cause in accepting the documentation.

(d) A contractor's prepayment review will result in an initial determination under § 405.920. Start Amendment Part8. Add §§ 405.929 and 405.930 under the undesignated ceneter heading “Initial Determinations” in subpart I to read as follows. End Amendment Part Post-payment review. (a) A contractor may select a claim(s) for post-payment review, which is conducted under the reopening authority in § 405.980.

(b) In conducting a post-payment review, a contractor may issue an additional documentation request to a provider or supplier. (1) A provider or supplier will be provided 45 calendar days to submit additional documentation in response to a contractor's request, except as stated in paragraph (b)(2) and (c) of this section. (2) A contractor may accept documentation received after 45 calendar days for good cause. Good cause means situations such as natural disasters, interruptions in business practices, or other extenuating circumstances that the contractor deems good cause in accepting the documentation. (c) A provider or supplier will be provided 30 calendar days to submit additional documentation in response to a UPIC's request for additional documentation.

A UPIC may accept documentation received after 30 calendar days for good cause. Good cause means situations such as natural disasters, interruptions in business practices, or other extenuating circumstances that the UPIC deems good cause in accepting the documentation. (d) The outcome of a contractor's review will result in either no change to the initial determination or a revised determination under § 405.984. Failure to respond to additional documentation request. If a contractor gives a provider or supplier notice and time to respond to an additional documentation request and the provider or supplier does not provide the additional documentation in a timely manner, the contractor has authority to deny the claim.

Start Amendment Part9. Amend § 405.986 by revising the paragraph (a) subject heading to read as follows. End Amendment Part Good cause for reopening. (a) Establishing good cause for reopening. * * * * * * * * Start Amendment Part10.

Amend § 405.2411 by— End Amendment Part Start Amendment Parta. Revising paragraph (b)(2). End Amendment Part Start Amendment Partb. Redesignating paragraph (b)(3) as (b)(4). And End Amendment Part Start Amendment Partc.

Adding a new paragraph (b)(3). End Amendment Part The revision and addition read as follows. Scope of benefits. * * * * * (b) * * * (2) Covered when furnished during a Part A stay in a skilled nursing facility only when provided by a physician, nurse practitioner, physician assistant, certified nurse midwife or clinical psychologist employed or under contract with the RHC or FQHC at the time the services are furnished. (3) Inclusive of hospice attending physician services, and are covered when furnished during a patient's hospice election only when provided by an RHC/FQHC physician, nurse practitioner, or physician assistant designated by the patient as his or her attending physician and employed or under contract with the RHC or FQHC at the time the services are furnished.

And * * * * * Start Amendment Part11. Amend § 405.2446 by revising paragraph (c) to read as follows. End Amendment Part Scope of services. * * * * * (c) FQHC services are covered when provided in outpatient settings only, including a patient's place of residence, which may be a skilled nursing facility or a nursing facility, other institution used as a patient's home, or are hospice attending physician services furnished during a hospice election. * * * * * Start Amendment Part12.

Amend § 405.2462— End Amendment Part Start Amendment Parta. By revising paragraphs (a) and (b). End Amendment Part Start Amendment Partb. By redesignating paragraphs (c) through (g) as paragraphs (e) through (i), respectively. End Amendment Part Start Amendment Partc.

By adding new paragraphs (c) and (d). And End Amendment Part Start Amendment Partd. In newly redesignated paragraph (e) introductory text, by removing the reference “paragraph (d)” and adding in its place “paragraph (f)”. End Amendment Part The revisions and additions read as follows. Payment for RHC and FQHC services.

(a) Payment to independent RHCs that are authorized to bill under the reasonable cost system. (1) RHCs that are authorized to bill under the reasonable cost system are paid on the basis of an all-inclusive rate, subject to a payment limit per visit determined in paragraph (b) of this section, for each beneficiary visit for covered services. This rate is determined by the Medicare Administration Contractor (MAC), in accordance with this subpart and general instructions issued by CMS. (2) The amount payable by the MAC for a visit is determined in accordance with paragraphs (i)(1) and (2) of this section. Start Printed Page 65661 (b) RHC payment limit per visit.

(1) In establishing limits on payment for rural health clinic services provided by rural health clinics the limit for services provided prior to April 1, 2021. (i) In 1988, after March 31, at $46 per visit. And (ii) In a subsequent year (before April 1, 2021), at the limit established for the previous year increased by the percentage increase in the Medicare Economic Index (MEI) (as defined in section 1842(i)(3) of the Act) applicable to primary care services (as defined in section 1842(i)(4) of the Act) furnished as of the first day of that year. (2) In establishing limits on payment for rural health services furnished on or after April 1, 2021, by rural health clinics or any rural health clinic that is enrolled on or after January 1, 2021 under section 1866(j) of the Act), the limit for services provided. (i) In 2021, after March 31, at $100 per visit.

(ii) In 2022, at $113 per visit. (iii) In 2023, at $126 per visit. (iv) In 2024, at $139 per visit. (v) In 2025, at $152 per visit. (vi) In 2026, at $165 per visit.

(vii) In 2027, at $178 per visit. And (viii) In 2028, at $190 per visit. (ix) In a subsequent year, at the limit established for the previous year increased by the percentage increase in MEI applicable to primary care services furnished as of the first day of such year. (3) In establishing limits on payment for rural health services furnished on or after April 1, 2021, by provider-based rural health clinics as described in section (c)(4) of this part, the limit for services provided. (i) In 2021, after March 31, at an amount equal to the greater of.

(A) For rural health clinics that had an all-inclusive rate established for services furnished in 2020— ( 1 ) The all-inclusive rate applicable to the rural health clinic for services furnished in 2020, increased by the percentage increase in the MEI applicable to primary care services furnished as of the first day of 2021, or ( 2 ) The payment limit per visit applicable in paragraph (b)(2) of this section. (B) For rural health clinics that did not have an all-inclusive rate established for services furnished in 2020— ( 1 ) The all-inclusive rate applicable to the rural health clinic for services furnished in 2021, or ( 2 ) The payment limit per visit applicable in paragraph (b)(2) of this section. (ii) In a subsequent year, at an amount equal to the greater of. (A) The amount established under paragraph (b)(3)(i)(A) or (B) of this section, as applicable for the previous year, increased by the percentage increase in MEI applicable to primary care services furnished as of the first day of such subsequent year, or (B) The payment limit per visit applicable under paragraph (b)(2) of this section for such subsequent year. (c) Payment to provider-based RHCs that are authorized to bill under the reasonable cost system.

(1) An RHC that is authorized to bill under the reasonable cost system is paid in accordance with parts 405 and 413 of this subchapter, as applicable, if the RHC is— (i) An integral and subordinate part of a hospital, skilled nursing facility or home health agency participating in Medicare (that is, a provider of services). And (ii) Operated with other departments of the provider under common licensure, governance and professional supervision. (2) An RHC, described in paragraph (c)(1) of this section, is paid on the basis of an all-inclusive rate, subject to a payment limit per visit, described in paragraphs (b)(1) and (2) of this section, for each beneficiary visit for covered services when in a hospital with greater than 50 beds as determined in § 412.105(b) of this subchapter. This all-inclusive rate is determined by the MAC, in accordance with this subpart and general instructions issued by CMS. The amount payable by the MAC for a visit is determined in accordance with paragraphs (i)(1) and (2) of this section.

(3) Prior to April 1, 2021, an RHC, described in paragraph (c)(1) of this section, is paid on the basis of an all-inclusive rate and is not subject to a payment limit per visit described in paragraphs (b)(1) and (2) of this section for each beneficiary visit for covered services when in a hospital with less than 50 beds as determined in § 412.105(b) of this subchapter. This all-inclusive rate is determined by the MAC, in accordance with this subpart and general instructions issued by CMS. The amount payable by the MAC for a visit is determined in accordance with paragraphs (i)(1) and (2) of this section. (4) On or after April 1, 2021, an RHC, described in paragraph (c)(1) of this section, is paid on the basis of an all-inclusive rate, subject to a payment limit per visit, described in paragraph (b)(3) of this section, for each beneficiary visit for covered services when it meets the specified qualifications in paragraph(d) of this section. This all-inclusive rate is determined by the MAC, in accordance with this subpart and general instructions issued by CMS.

The amount payable by the MAC for a visit is determined in accordance with paragraphs (i)(1) and (2) of this section. (d) Specified qualifications. A provider-based rural health clinic must meet the following qualifications to have a payment limit per visit established in accordance with paragraph (b)(3) of this section. (1) As of December 31, 2020, was in a hospital with less than 50 beds (as determined in § 412.105(b) of this subchapter) and after December 31, 2020, in a hospital that continues to have less than 50 beds (not taking into account any increase in the number of beds pursuant to a waiver during the buy antibiotics Public Health Emergency (PHE)). And one of the following circumstances.

(i) As of December 31, 2020, was enrolled under section 1866(j) of the Act (including temporary enrollment during the buy antibiotics PHE). Or (ii) Submitted an application for enrollment under section 1866(j) of the Act (or a request for temporary enrollment during the buy antibiotics PHE) that was received not later than December 31, 2020. (2) [Reserved] * * * * * Start Amendment Part13. Amend § 405.2463 by revising paragraphs (a)(1)(i) introductory text and (b)(3) introductory text to read as follows. End Amendment Part What constitutes a visit.

(a) * * * (1) * * * (i) Face-to-face encounter (or, for mental health disorders only, an encounter that meets the requirements under paragraph (b)(3) of this section) between an RHC patient and one of the following. * * * * * (b) * * * (3) Visit—Mental health. A mental health visit is a face-to-face encounter or an encounter furnished using interactive, real-time, audio and video telecommunications technology or audio-only interactions in cases where the patient is not capable of, or does not consent to, the use of video technology for the purposes of diagnosis, evaluation or treatment of a mental health disorder, including an in-person mental health service furnished within 6 months prior to the furnishing of the telecommunications service and that an in-person mental health service (without the use of telecommunications technology) must be provided at least every 12 months while the beneficiary Start Printed Page 65662 is receiving services furnished via telecommunications technology for diagnosis, evaluation, or treatment of mental health disorders, unless, for a particular 12-month period, the physician or practitioner and patient agree that the risks and burdens outweigh the benefits associated with furnishing the in-person item or service, and the practitioner documents the reasons for this decision in the patient's medical record, between an RHC or FQHC patient and one of the following. * * * * * Start Amendment Part14. Amend § 405.2466 by revising paragraph (b)(1)(iv) to read as follows.

End Amendment Part Annual reconciliation. * * * * * (b) * * * (1) * * * (iv) For RHCs and FQHCs, payment for pneumococcal, influenza, and buy antibiotics treatment and their administration is 100 percent of Medicare reasonable cost. * * * * * Start Amendment Part15. Amend § 405.2469 by revising paragraph (d) to read as follows. End Amendment Part FQHC supplemental payments.

* * * * * (d) Per visit supplemental payment. A supplemental payment required under this section is made to the FQHC when a covered face-to-face encounter or an encounter furnished using interactive, real-time, audio and video telecommunications technology or audio-only interactions in cases where beneficiaries do not wish to use or do not have access to devices that permit a two-way, audio/video interaction for the purposes of diagnosis, evaluation or treatment of a mental health disorder occurs between a MA enrollee and a practitioner as set forth in § 405.2463. Additionally, there must be an in-person mental health service furnished within 6 months prior to the furnishing of the telecommunications service and that an in-person mental health service (without the use of telecommunications technology) must be provided at least every 12 months while the beneficiary is receiving services furnished via telecommunications technology for diagnosis, evaluation, or treatment of mental health disorders, unless, for a particular 12-month period, the physician or practitioner and patient agree that the risks and burdens outweigh the benefits associated with furnishing the in-person item or service, and the practitioner documents the reasons for this decision in the patient's medical record. Start Part End Part Start Amendment Part16. The authority citation for part 410 continues to read as follows.

End Amendment Part Start Authority 42 U.S.C. 1302, 1395m, 1395hh, 1395rr, and 1395ddd. End Authority Start Amendment Part17. Amend § 410.33 by— End Amendment Part Start Amendment Parta. Revising paragraphs (c) and (g)(6)(i) and (ii).

End Amendment Part Start Amendment Partb. Redesignating paragraphs (g)(8)(i) through (iii) as paragraphs (g)(8)(i)(A) through (C), respectively. And End Amendment Part Start Amendment Partc. Adding paragraphs (g)(8)(i) introductory text and (g)(8)(ii). And End Amendment Part Start Amendment Partd.

Revising paragraph (g)(9). End Amendment Part The revisions and additions read as follows. Independent diagnostic testing facility. * * * * * (c) Nonphysician personnel. (1) Except as otherwise stated in paragraph (c)(2) of this section, any nonphysician personnel used by the IDTF to perform tests must demonstrate the basic qualifications to perform the tests in question and have training and proficiency as evidenced by licensure or certification by the appropriate State health or education department.

In the absence of a State licensing board, the technician must be certified by an appropriate national credentialing body. The IDTF must maintain documentation available for review that these requirements are met. (2) For services that do not require direct or in-person beneficiary interaction, treatment, or testing, any nonphysician personnel used by the IDTF to perform the tests must meet all applicable State licensure requirements for doing so. If there are any applicable State licensure requirements, the IDTF must maintain documentation available for review that these requirements are met. * * * * * (g) * * * (6) * * * (i) Except as otherwise stated in paragraph (g)(6)(ii) of this section, have a comprehensive liability insurance policy of at least $300,000 per location that covers both the place of business and all customers and employees of the IDTF.

The policy must be carried by a nonrelative-owned company. Failure to maintain required insurance at all times will result in revocation of the IDTF's billing privileges retroactive to the date the insurance lapsed. IDTF suppliers are responsible for providing the contact information for the issuing insurance agent and the underwriter. In addition, the IDTF must— (A) Ensure that the insurance policy must remain in force at all times and provide coverage of at least $300,000 per incident. And (B) Notify the CMS designated contractor in writing of any policy changes or cancellations.

(ii) Paragraph (g)(6)(i) of this section does not apply to IDTFs that only perform services that do not require direct or in-person beneficiary interaction, treatment, or testing. * * * * * (8) * * * (i) Except as otherwise stated in paragraph (g)(8)(ii) of this section, answer, document, and maintain documentation of a beneficiary's written clinical complaint at the physical site of the IDTF. (For mobile IDTFs, this documentation would be stored at their home office.) This includes, but is not limited to, the following. * * * * * (ii) Paragraph (g)(8)(i) of this section does not apply to IDTFs that only perform services that do not require direct or in-person beneficiary interaction, treatment, or testing. (9) Openly post these standards for review by patients and the public.

(This requirement does not apply to IDTFs that only perform services that do not require direct or in-person beneficiary interaction, treatment, or testing.) * * * * * Start Amendment Part18. Amend § 410.37 by adding paragraph (j) to read as follows. End Amendment Part Colorectal cancer screening tests. Conditions for and limitations on coverage. * * * * * (j) Expansion of coverage of colorectal cancer screening tests.

Effective January 1, 2022, colorectal cancer screening tests include a planned screening flexible sigmoidoscopy or screening colonoscopy that involves the removal of tissue or other matter or other procedure furnished in connection with, as a result of, and in the same clinical encounter as the screening test. Start Amendment Part19. Amend § 410.47— End Amendment Part Start Amendment Parta. In paragraph (a), by revising the definitions of “Individualized treatment plan”, “Medical director”, Outcomes assessment”, “Physician prescribed exercise”, “Psychosocial assessment”, and “Supervising physician”. End Amendment Part Start Amendment Partb.

By revising paragraphs (b) through (e). End Amendment Part Start Amendment Partc. By removing paragraph (f). And End Amendment Part Start Amendment Partd. By redesignating paragraph (g) as paragraph (f).

End Amendment Part The revisions read as follows. Start Printed Page 65663 Pulmonary rehabilitation program. Conditions of coverage. (a) * * * Individualized treatment plan means a written plan tailored to each individual patient that includes all of the following. (i) A description of the individual's diagnosis.

(ii) The type, amount, frequency, and duration of the items and services furnished under the plan. (iii) The goals set for the individual under the plan. Medical director means the physician who oversees the pulmonary rehabilitation program at a particular site. Outcomes assessment means an evaluation of progress as it relates to the individual's rehabilitation which includes the following. (i) Evaluations, based on patient-centered outcomes, which must be measured by the physician or program staff at the beginning and end of the program.

Evaluations measured by program staff must be considered by the physician in developing and/or reviewing individualized treatment plans. (ii) Objective clinical measures of exercise performance and self-reported measures of shortness of breath and behavior. * * * * * Physician-prescribed exercise means aerobic exercise combined with other types of exercise (such as conditioning, breathing retraining, step, and strengthening) as determined to be appropriate for individual patients by a physician. Psychosocial assessment means an evaluation of an individual's mental and emotional functioning as it relates to the individual's rehabilitation or respiratory condition which includes an assessment of those aspects of an individual's family and home situation that affects the individual's rehabilitation treatment, and psychosocial evaluation of the individual's response to and rate of progress under the treatment plan. * * * * * Supervising physician means a physician that is immediately available and accessible for medical consultations and medical emergencies at all times items and services are being furnished to individuals under pulmonary rehabilitation programs.

(b) General rule —(1) Covered conditions. Medicare Part B covers pulmonary rehabilitation for beneficiaries. (i) With moderate to very severe COPD (defined as GOLD classification II, III and IV), when referred by the physician treating the chronic respiratory disease. (ii) Who have had confirmed or suspected buy antibiotics and experience persistent symptoms that include respiratory dysfunction for at least four weeks. (iii) Additional medical indications for coverage for pulmonary rehabilitation may be established through a national coverage determination (NCD).

(2) Components. Pulmonary rehabilitation must include all of the following. (i) Physician-prescribed exercise during each pulmonary rehabilitation session. (ii) Education or training that is closely and clearly related to the individual's care and treatment which is tailored to the individual's needs and assists in achievement of goals toward independence in activities of daily living, adaptation to limitations and improved quality of life. Education must include information on respiratory problem management and, if appropriate, brief smoking cessation counseling.

(iii) Psychosocial assessment. (iv) Outcomes assessment. (v) An individualized treatment plan detailing how components are utilized for each patient. The individualized treatment plan must be established, reviewed, and signed by a physician every 30 days. (3) Settings.

(i) Medicare Part B pays for pulmonary rehabilitation in the following settings. (A) A physician's office. (B) A hospital outpatient setting. (ii) All settings must have the following. (A) A physician immediately available and accessible for medical consultations and emergencies at all times when items and services are being furnished under the program.

This provision is satisfied if the physician meets the requirements for direct supervision for physician office services, at § 410.26 of this subpart. And for hospital outpatient services at § 410.27 of this subpart. (B) The necessary cardio-pulmonary, emergency, diagnostic, and therapeutic life-saving equipment accepted by the medical community as medically necessary (for example, oxygen, cardiopulmonary resuscitation equipment, and defibrillator) to treat chronic respiratory disease. (c) Medical director standards. The physician responsible for a pulmonary rehabilitation program is identified as the medical director.

The medical director, in consultation with staff, is involved in directing the progress of individuals in the program and must possess all of the following. (1) Expertise in the management of individuals with respiratory pathophysiology. (2) Cardiopulmonary training in basic life support or advanced cardiac life support. (3) Be licensed to practice medicine in the State in which the pulmonary rehabilitation program is offered. (d) Supervising physician standards.

Physicians acting as the supervising physician must possess all of the following. (1) Expertise in the management of individuals with respiratory pathophysiology. (2) Cardiopulmonary training in basic life support or advanced cardiac life support. (3) Be licensed to practice medicine in the State in which the pulmonary rehabilitation program is offered. (e) Limitations on coverage.

The number of pulmonary rehabilitation sessions are limited to a maximum of 2 1-hour sessions per day for up to 36 sessions over up to 36 weeks with the option for an additional 36 sessions over an extended period of time if approved by the Medicare Administrative Contractor. * * * * * Start Amendment Part20. Amend § 410.49— End Amendment Part Start Amendment Parta. In paragraph (a), by revising the definition of “Medical director”, revising paragraph (i) in the definition of “Outcomes assessment”, and revising the definition of “Physician-prescribed exercise”. And End Amendment Part Start Amendment Partb.

By revising paragraphs (b)(1) introductory text, (b)(2) introductory text, (b)(2)(ii), (b)(3)(i) introductory text, (d) introductory text, (e) introductory text, and (f). End Amendment Part The revisions read as follows. Cardiac rehabilitation program and intensive cardiac rehabilitation program. Conditions of coverage. (a) * * * Medical director means the physician who oversees the cardiac rehabilitation or intensive cardiac rehabilitation program at a particular site.

Outcomes assessment * * * (i) Evaluations, based on patient-centered outcomes, which must be measured by the physician or program staff at the beginning and end of the program. Evaluations measured by program staff must be considered by the physician in developing and/or reviewing individualized treatment plans. * * * * * Start Printed Page 65664 Physician-prescribed exercise means aerobic exercise combined with other types of exercise (such as strengthening and stretching) as determined to be appropriate for individual patients by a physician. * * * * * (b) * * * (1) Covered conditions. Medicare Part B covers cardiac rehabilitation and intensive cardiac rehabilitation for beneficiaries who have experienced one or more of the following.

* * * * * (2) Components. Cardiac rehabilitation and intensive cardiac rehabilitation must include all of the following. * * * * * (ii) Cardiac risk factor modification, including education, counseling, and behavioral intervention, tailored to the individual's needs. * * * * * (3) * * * (i) Medicare Part B pays for cardiac rehabilitation and intensive cardiac rehabilitation in the following settings. * * * * * (d) Medical director standards.

The physician responsible for a cardiac rehabilitation program or intensive cardiac rehabilitation program is identified as the medical director. The medical director, in consultation with staff, is involved in directing the progress of individuals in the program and must possess all of the following. * * * * * (e) Supervising physician standards. Physicians acting as the supervising physician must possess all of the following. * * * * * (f) Limitations on coverage —(1) Cardiac rehabilitation.

The number of cardiac rehabilitation sessions are limited to a maximum of 2 1-hour sessions per day for up to 36 sessions over up to 36 weeks with the option for an additional 36 sessions over an extended period of time if approved by the Medicare Administrative Contractor. (2) Intensive cardiac rehabilitation. Intensive cardiac rehabilitation sessions are limited to 72 1-hour sessions (as defined in section 1848(b)(5) of the Act), up to 6 sessions per day, over a period of up to 18 weeks. Start Amendment Part21. Amend § 410.59 by revising paragraph (a)(4)(iii)(B) and adding paragraphs (a)(4)(iv) and (v) to read as follows.

End Amendment Part Outpatient occupational therapy services. Conditions. (a) * * * (4) * * * (iii) * * * (B) Except as provided in paragraph (a)(4)(iv) of this section, furnishes a portion of a service, or in the case of a 15-minute (or other time interval) timed code, a portion of a unit of service separately from the part furnished by the occupational therapist such that the minutes for that portion of a service (or unit of a service) furnished by the occupational therapist assistant exceed 10 percent of the total minutes for that service (or unit of a service). (iv) Paragraph (a)(4)(iii)(B) of this section does not apply when determining whether the prescribed modifier applies to the last 15-minute unit of a service billed for a patient on a treatment day when the occupational therapist provides more than the midpoint of a 15-minute timed code, that is, 8 or more minutes, regardless of any minutes for the same service furnished by the occupational therapy assistant. (v) Where there are two remaining 15-minute units to bill of the same service, and the occupational therapist and occupational therapy assistant each provided between 9 and 14 minutes of the service with a total time of at least 23 minutes and no more than 28 minutes, one unit of the service is billed with the prescribed modifier for the minutes furnished by the occupational therapy assistant and one unit is billed without the prescribed modifier for the service provided by the occupational therapist.

* * * * * Start Amendment Part22. Amend § 410.60 by revising paragraph (a)(4)(iii)(B) and adding paragraphs (a)(4)(iv) and (v) to read as follows. End Amendment Part Outpatient physical therapy services. Conditions. (a) * * * (4) * * * (iii) * * * (B) Except as provided in paragraph (a)(4)(iv) of this section, furnishes a portion of a service, or in the case of a 15-minute (or other time interval) timed code, a portion of a unit of service separately from the part furnished by the physical therapist such that the minutes for that portion of a service (or unit of a service) furnished by the physical therapist assistant exceed 10 percent of the total minutes for that service (or unit of a service).

(iv) Paragraph (a)(4)(iii)(B) of this section does not apply when determining whether the prescribed modifier applies to the last 15-minute unit of a service billed for a patient on a treatment day, when the physical therapist provides more than the midpoint of a 15-minute timed code, that is, 8 or more minutes, regardless of any minutes for the same service furnished by the physical therapist assistant. (v) Where there are two remaining 15-minute units to bill of the same service, and the physical therapist and physical therapist assistant each provided between 9 and 14 minutes of the service with a total time of at least 23 minutes, one unit of the service is billed with the prescribed modifier for the minutes furnished by the physical therapist assistant and one unit is billed without the prescribed modifier for the service provided by the physical therapist. * * * * * Start Amendment Part23. Amend § 410.67— End Amendment Part Start Amendment Parta. In paragraph (b), by revising paragraphs (3) and (4) in the definition of “Opioid use disorder treatment service”.

End Amendment Part Start Amendment Partb. By revising paragraphs (d)(4)(ii) and (iii) and (d)(5). And End Amendment Part Start Amendment Partc. By adding paragraph (d)(6). End Amendment Part The revisions and addition read as follows.

Medicare coverage and payment of Opioid use disorder treatment services furnished by Opioid treatment programs. * * * * * (b) * * * Opioid use disorder treatment service * * * (3) Substance use counseling by a professional to the extent authorized under State law to furnish such services including services furnished via two-way interactive audio-video communication technology, as clinically appropriate, and in compliance with all applicable requirements. During a Public Health Emergency, as defined in § 400.200 of this chapter, or for services furnished after the end of such emergency, in cases where audio/video communication technology is not available to the beneficiary, the counseling services may be furnished using audio-only telephone calls if all other applicable requirements are met. (4) Individual and group therapy with a physician or psychologist (or other mental health professional to the extent authorized under State law), including services furnished via two-way interactive audio-video communication technology, as clinically appropriate, and in compliance with all applicable requirements. During a Public Health Emergency, as defined in § 400.200 of this chapter, or for services furnished after the end of such emergency, in cases where audio/video communication technology is not available to the beneficiary, the therapy Start Printed Page 65665 services may be furnished using audio-only telephone calls if all other applicable requirements are met.

* * * * * (d) * * * (4) * * * (ii) The payment amounts for the non-drug component of the bundled payment for an episode of care, the adjustments for counseling or therapy, intake activities, periodic assessments, and the non-drug component of the adjustment for take-home supplies of opioid antagonist medications will be geographically adjusted using the Geographic Adjustment Factor described in § 414.26 of this subchapter. (iii) The payment amounts for the non-drug component of the bundled payment for an episode of care, the adjustments for counseling or therapy, intake activities, periodic assessments, and the non-drug component of the adjustment for take-home supplies of opioid antagonist medications will be updated annually using the Medicare Economic Index described in § 405.504(d) of this subchapter. (5) Payment for medications delivered, administered or dispensed to a beneficiary as part of the bundled payment or an adjustment to the bundled payment under paragraph (d)(4)(i) of this section is considered a duplicative payment if a claim for delivery, administration or dispensing of the same medications for the same beneficiary on the same date of service was also separately paid under Medicare Part B or Part D. CMS will recoup the duplicative payment made to the opioid treatment program. (6) For purposes of the adjustment to the bundled payment under paragraph (d)(4)(i)(A) of this section, after the end of the Public Health Emergency as defined in § 400.200 of this chapter, when services are furnished using audio-only technology the practitioner must certify, in a form and manner specified by CMS, that they had the capacity to furnish the services using two-way, audio/video communication technology, but used audio-only technology because audio/video communication technology was not available to the beneficiary.

* * * * * Start Amendment Part24. Add § 410.72 to read as follows. End Amendment Part Registered dietitians' and nutrition professionals' services. (a) Definition. Registered dietitians and nutrition professionals.

Meet the qualifications at § 410.134. (b) Covered registered dietitian and nutrition professional services. Medicare Part B covers. (1) Coverage condition. Medical nutrition therapy (MNT) services as defined at § 410.130 under the conditions of coverage at § 410.132.

(2) Other services. Registered dietitians and nutrition professionals may also provide diabetes self-management (DSMT) services if they are or represent an accredited DSMT entity and have an order from a physician or qualified nonphysician practitioner who is treating the patient's diabetic condition. (3) Limits on MNT and DSMT. (i) DSMT and MNT cannot be furnished to a patient on the same date of service, and (ii) MNT and DSMT services cannot be furnished incident to the professional services of a physician or nonphysician practitioner service. (c) Limitations.

The following services are not registered dietitian or nutrition professional services for purposes of billing Medicare Part B. (1) Services furnished by a registered dietitian or nutrition professional to an inpatient of a Medicare-participating hospital. (2) Services furnished by a registered dietitian or nutrition professional to an inpatient of a Medicare-participating SNF. (3) Services furnished by a registered dietitian or nutrition professional to a patient in a Medicare-participating ESRD facility in accordance with the limitation on coverage of MNT service listed at § 410.132(b)(1). (d) Professional services.

Registered dietitians and nutrition professionals can be paid for professional services only when the services have been directly performed by them. (e) Telehealth services. MNT and DSMT services may be provided as telehealth services (meeting the requirements in § 410.78) when registered dietitians or nutrition professionals act as distant site practitioners. (f) Restrictions. The services of a registered dietitian or nutrition professional are provided on an assignment-related basis, and a registered dietitian or nutrition professional may not charge a beneficiary in excess of the amounts permitted under 42 CFR 424.55.

If a beneficiary has made payment for a service in excess of these limits, the registered dietitian or nutrition professional must refund the full amount of the impermissible charge to the beneficiary. Start Amendment Part25. Amend § 410.74 by revising paragraphs (a)(2)(v) and (d)(2) to read as follows. End Amendment Part Physician assistants' services. (a) * * * (2) * * * (v) Prior to January 1, 2022, furnishes services that are billed by the employer of a physician assistant.

And * * * * * (d) * * * (2) The services of a physician assistant are provided on an assignment-related basis, and the physician assistant may not charge a beneficiary in excess of the amounts permitted under 42 CFR 424.55. If a beneficiary has made payment for a service in excess of these limits, the physician assistant must refund the full amount of the impermissible charge to the beneficiary. * * * * * Start Amendment Part26. Amend § 410.75 by revising paragraph (e)(2) to read as follows. End Amendment Part Nurse practitioners' services.

* * * * * (e) * * * (2) The services of a nurse practitioner are provided on an assignment-related basis, and the nurse practitioner may not charge a beneficiary in excess of the amounts permitted under 42 CFR 424.55. If a beneficiary has made payment for a service in excess of these limits, the nurse practitioner must refund the full amount of the impermissible charge to the beneficiary. * * * * * Start Amendment Part27. Amend § 410.76 by revising paragraph (e)(2) to read as follows. End Amendment Part Clinical nurse specialists' services.

* * * * * (e) * * * (2) The services of a clinical nurse specialist are provided on an assignment-related basis, and the clinical nurse specialist may not charge a beneficiary in excess of the amounts permitted under 42 CFR 424.55. If a beneficiary has made payment for a service in excess of these limits, the clinical nurse specialist must refund the full amount of the impermissible charge to the beneficiary. * * * * * Start Amendment Part28. Amend § 410.77 by revising paragraph (d)(2) to read as follows. End Amendment Part Certified nurse-midwives' services.

Qualifications and conditions. * * * * * (d) * * * (2) The services of a certified nurse-midwife are provided on an assignment-related basis, and the certified nurse-midwife may not charge a beneficiary in excess of the amounts permitted under 42 CFR 424.55. If a beneficiary has made Start Printed Page 65666 payment for a service in excess of these limits, the certified nurse-midwife must refund the full amount of the impermissible charge to the beneficiary. * * * * * Start Amendment Part29. Amend 410.78 by revising paragraph (a)(3) and adding paragraphs (b)(3)(xiii) and (xiv) and (b)(4)(iv)(D) to read as follows.

End Amendment Part Telehealth services. (a) * * * (3) Interactive telecommunications system means, except as otherwise provided in this paragraph, multimedia communications equipment that includes, at a minimum, audio and video equipment permitting two-way, real-time interactive communication between the patient and distant site physician or practitioner. For services furnished for purposes of diagnosis, evaluation, or treatment of a mental health disorder to a patient in their home, interactive telecommunications may include two-way, real-time audio-only communication technology if the distant site physician or practitioner is technically capable to use an interactive telecommunications system as defined in the previous sentence, but the patient is not capable of, or does not consent to, the use of video technology. A modifier designated by CMS must be appended to the claim for services described in this paragraph to verify that these conditions have been met. * * * * * (b) * * * (3) * * * (xiii) A rural emergency hospital (as defined in section 1861(kkk)(2) of the Act), for services furnished on or after January 1, 2023.

(xiv) The home of a beneficiary for the purposes of diagnosis, evaluation, and/or treatment of a mental health disorder for services furnished on or after the first day after the end of the PHE as defined in our regulation at § 400.200 except as otherwise provided in this paragraph. Payment will not be made for a telehealth service furnished under this paragraph unless the following conditions are met. (A) The physician or practitioner has furnished an item or service in-person, without the use of telehealth, for which Medicare payment was made (or would have been made if the patient were entitled to, or enrolled for, Medicare benefits at the time the item or service is furnished) within 6 months prior to the initial telehealth service. (B) The physician or practitioner has furnished an item or service in-person, without the use of telehealth, at least once within 12 months of each subsequent telehealth service described in this paragraph, unless, for a particular 12-month period, the physician or practitioner and patient agree that the risks and burdens associated with an in-person service outweigh the benefits associated with furnishing the in-person item or service, and the practitioner documents the reason(s) for this decision in the patient's medical record. (C) The requirements of paragraphs (b)(3)(xiv)(A) and (B) may be met by another physician or practitioner of the same specialty and subspecialty in the same group as the physician or practitioner who furnishes the telehealth service, if the physician or practitioner who furnishes the telehealth service described under this paragraph is not available.

(4) * * * (iv) * * * (D) Services furnished on or after the first day after the end of the PHE as defined in our regulation at § 400.200 for the purposes of diagnosis, evaluation, and/or treatment of a mental health disorder. Payment will not be made for a telehealth service furnished under this paragraph unless the physician or practitioner has furnished an item or service in person, without the use of telehealth, for which Medicare payment was made (or would have been made if the patient were entitled to, or enrolled for, Medicare benefits at the time the item or service is furnished) within 6 months prior to the initial telehealth service and within 6 months of any subsequent telehealth service. * * * * * Start Amendment Part30. Amend § 410.79 by revising paragraphs (c)(1)(ii) and (e)(3)(v)(C) to read as follows. End Amendment Part Medicare Diabetes Prevention Program expanded model.

Conditions of coverage. * * * * * (c) * * * (1) * * * (ii) An MDPP beneficiary is eligible for the first ongoing maintenance session interval only if the beneficiary. (A) Starts his or her first core session on or before December 31, 2021. (B) Attends at least one in-person core maintenance session during the final core maintenance session interval. And (C) Achieves or maintains the required minimum weight loss at a minimum of one in-person core maintenance session during the final core maintenance session interval.

* * * * * (e) * * * (3) * * * (v) * * * (C) Beneficiaries who began the set of MDPP services between January 1, 2021 and December 31, 2021 and who are in the second year of the set of MDPP services as of the start of an applicable 1135 waiver event, whose in-person sessions are suspended due to the applicable 1135 waiver event, and who elect not to continue with MDPP services virtually can elect to attend ongoing maintenance sessions. And may restart the ongoing maintenance session interval in which they were participating at the start of the applicable 1135 waiver event or may resume with the most recent attendance session of record. * * * * * Start Amendment Part31. Amend § 410.105 by revising paragraph (d)(3)(ii) and adding paragraphs (d)(3)(iii) and (iv) to read as follows. End Amendment Part Requirements for coverage of CORF services.

* * * * * (d) * * * (3) * * * (ii) Except as provided in paragraph (d)(3)(iii) of this section, furnishes a portion of a service, or in the case of a 15-minute (or other time interval) timed code, a portion of a unit of service, separately from the part furnished by the physical or occupational therapist such that the minutes for that portion of a service (or unit of a service) exceed 10 percent of the total time for that service (or unit of a service). (iii) Paragraph (d)(3)(ii) of this section does not apply when determining whether the prescribed modifier applies to the last 15-minute unit of a service billed for a patient on a treatment day when the physical or occupational therapist provides more than the midpoint of a 15-minute timed code, that is, 8 or more minutes, regardless of any minutes for the same service furnished by the physical therapist assistant or occupational therapy assistant. (iv) Where there are two remaining 15-minute units to bill of the same service and the physical therapist and the physical therapist assistant or the occupational therapist and the occupational therapy assistant, as applicable, each provided between 9 and 14 minutes, with a total time of at least 23 minutes, one unit of the service is billed with the prescribed modifier for the minutes furnished by the physical therapist assistant or occupational therapy assistant and one unit is billed without the prescribed modifier for the service provided by the Start Printed Page 65667 physical therapist or occupational therapist. Start Amendment Part32. Amend § 410.130 by revising the definition of “Chronic renal insufficiency” and removing the definition of “Treating physician”.

End Amendment Part The revision reads as follows. Definitions. * * * * * Chronic renal insufficiency means the stage of renal disease associated with a reduction in renal function not severe enough to require dialysis or transplantation (glomerular fiation rate [GFR] 15-59 ml/min/1.73m 2 ). * * * * * Start Amendment Part33. Amend § 410.132 by revising paragraphs (a), (b)(5), and (c) to read as follows.

End Amendment Part Medical nutrition therapy. (a) Conditions for coverage of MNT services. Medicare Part B pays for MNT services provided by a registered dietitian or nutrition professional as defined in § 410.134 when the beneficiary is referred for the service by a physician. (b) * * * (5) An exception to the maximum number of hours in paragraphs (b)(2), (3), and (4) of this section may be made when a physician determines that there is a change of diagnosis, medical condition, or treatment regimen related to diabetes or renal disease that requires a change in MNT during an episode of care. (c) Referrals.

Referral may only be made by a physician when the beneficiary has been diagnosed with diabetes or renal disease as defined in this subpart with documentation noted by a referring physician in the beneficiary's medical record. Start Amendment Part34. Amend § 410.150 by revising paragraph (b)(15) to read as follows. End Amendment Part To whom payment is made. * * * * * (b) * * * (15)(i) Prior to January 1, 2022, to the qualified employer of a physician assistant for professional services furnished by the physician assistant and for services and supplies provided 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. (ii) Effective on or after January 1, 2022, payment is made to a physician assistant for professional services furnished by a physician assistant 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 professional services of the physician assistant. * * * * * Start Amendment Part35. Amend § 410.152 by revising paragraphs (l) introductory text and (l)(5) to read as follows. End Amendment Part Amounts of payment. * * * * * (l) Amount of payment.

Preventive services. Except as provided otherwise in this paragraph, Medicare Part B pays 100 percent of the Medicare payment amount established under the applicable payment methodology for the service furnished by a provider or supplier for the following preventive services. * * * * * (5) Colorectal cancer screening tests (excluding barium enemas). (i) For the colorectal cancer screening tests described in § 410.37(j), Medicare Part B pays at the specified percentage as follows. (A) 80 percent for CY 2022.

(B) 85 percent for CY 2023 through 2026. (C) 90 percent for 2027 through 2029. (D) 100 percent beginning January 1, 2030. (ii) [Reserved] * * * * * Start Part End Part Start Amendment Part36. The authority citation for part 411 continues to read as follows.

End Amendment Part Start Authority 42 U.S.C. 1302, 1395w-101 through 1395w-152, 1395hh, and 1395nn. End Authority Start Amendment Part37. Amend § 411.351 by revising the definition of “List of CPT/HCPCS Codes” to read as follows. End Amendment Part Start Amendment Part38.

Amend § 411.354 by revising paragraphs (c)(2)(ii)(A) through (C) to read as follows. End Amendment Part Financial relationship, compensation, and ownership or investment interest. * * * * * (c) * * * (2)* * * (ii) * * * (A)( 1 ) The referring physician (or immediate family member) receives aggregate compensation from the person or entity in the chain with which the physician (or immediate family member) has a direct financial relationship that varies with the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS. And ( 2 ) The amount of compensation that the physician (or immediate family member) receives per individual unit— ( i ) Is not fair market value for items or services actually provided. ( ii ) Could increase as the number or value of the physician's referrals to the entity furnishing DHS increases, or could decrease as the number or value of the physician's referrals to the entity decreases.

( iii ) Could increase as the amount or value of the other business generated by the physician for the entity furnishing DHS increases, or could decrease as the amount or value of the other business generated by the physician for the entity furnishing DHS decreases. Or ( iv ) Is payment for the lease of office space or equipment or for the use of premises or equipment. (B) For purposes of applying paragraph (c)(2)(ii)(A)( 2 ) of this section, the individual unit is. ( 1 ) Item, if the physician (or immediately family member) is compensated solely per item provided. ( 2 ) Service, if the physician (or immediate family member) is compensated solely per service provided, which includes arrangements where the “service” provided includes both items and services.

( 3 ) Time, if the conditions of paragraph (c)(2)(ii)(B)(1) or ( 2 ) of this section are not met. (C) If the financial relationship between the physician (or immediate family member) and the person or entity Start Printed Page 65668 in the chain with which the referring physician (or immediate family member) has a direct financial relationship is an ownership or investment interest, the nonownership or noninvestment interest closest to the referring physician (or immediate family member) is used to determine whether the aggregate compensation varies with the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS and whether the amount of compensation that the physician (or immediate family member) receives per individual unit meets the conditions in paragraph (c)(2)(ii)(A)( 2 ) of this section. (For example, if a referring physician has an ownership interest in company A, which owns company B, which has a compensation arrangement with company C, which has a compensation arrangement with entity D that furnishes DHS, we would look to the aggregate compensation between company B and company C for purposes of this paragraph (c)(2)(ii). * * * * * Start Amendment Part39. Amend § 411.355 by revising paragraph (h) to read as follows.

End Amendment Part General exceptions to the referral prohibition related to both ownership/investment and compensation. * * * * * (h) Preventive screening tests and treatments. (1) Preventive screening tests and treatments that meet the following conditions. (i) The preventive screening test or treatment is listed on the List of CPT/HCPCS Codes as a code to which the exception in this paragraph is applicable. (ii) The preventive screening test or treatment is covered by Medicare.

(iii) The preventive screening test or treatment is subject to a CMS-mandated frequency limit. (2) During such period as the treatment is not subject to a CMS-mandated frequency limit, paragraph (h)(1)(iii) of this section does not apply to a buy antibiotics treatment identified on the List of CPT/HCPCS Codes as a code to which the exception in this paragraph is applicable. * * * * * Start Part End Part Start Amendment Part40. The authority citation for part 414 continues to read as follows. End Amendment Part Start Authority 42 U.S.C.

1302, 1395hh, and 1395rr(b)(l). End Authority Start Amendment Part41. Amend § 414.64 by revising paragraph (a) to read as follows. End Amendment Part Payment for medical nutrition therapy. (a) Payment under the physician fee schedule.

Medicare payment for medical nutrition therapy is made under the physician fee schedule in accordance with subpart B of this part. Payment to nonphysician professionals, as specified in paragraph (b) of this section, is 80 percent (or 100 percent if such services are recommended with a grade of A or B by the United States Preventive Services Task Force for any indication or population and are appropriate for the individual) of the lesser of the actual charges or 85 percent of the physician fee schedule amount. * * * * * Start Amendment Part42. Amend § 414.84— End Amendment Part Start Amendment Parta. By revising paragraphs (b)(1)(i).

End Amendment Part Start Amendment Partb. In paragraph (b)(1)(ii), by removing the reference “CY 2018” and adding in its place the reference “CY 2022”. End Amendment Part Start Amendment Partc. By revising paragraph (b)(2)(i). End Amendment Part Start Amendment Partd.

In paragraph (b)(2)(ii), by removing the reference CY 2018” and adding in its place the reference “CY 2022”. End Amendment Part Start Amendment Parte. By revising paragraph (b)(3)(i). End Amendment Part Start Amendment Partf. In paragraph (b)(3)(ii), by removing the reference “CY 2018” and adding in its place the reference “CY 2022”.

End Amendment Part Start Amendment Partg. By revising paragraph (b)(4)(i)(A). End Amendment Part Start Amendment Parth. In paragraph (b)(4)(i)(B), by removing the reference “CY 2018” and adding in its place the reference “CY 2022”. End Amendment Part Start Amendment Parti.

By revising paragraph (b)(4)(ii)(A). End Amendment Part Start Amendment Parth. In paragraph (b)(4)(ii)(B), by removing the reference “CY 2018” and adding in its place the reference “CY 2022”. And End Amendment Part Start Amendment Partj. By revising paragraphs (b)(5), (b)(6)(i), (b)(7)(i) and (ii), and (c).

End Amendment Part The revisions read as follows. Payment for MDPP Services. * * * * * (b) * * * (1) * * * (i) For a first core session furnished January 1, 2022, through December 31, 2022 the amount is $35. * * * * * (2) * * * (i) For the fourth core session furnished January 1, 2022, through December 31, 2022 the amount is $105. * * * * * (3) * * * (i) For the ninth core session furnished January 1, 2022, through December 31, 2022 the amount is $175.

* * * * * (4) * * * (i) * * * (A) For a second core maintenance session January 1, 2022, through December 31, 2022 the amount is $93. * * * * * (ii) * * * (A) For a second core maintenance session January 1, 2022, through December 31, 2022 the amount is $75. * * * * * (5) Performance Goal 5. Attends two ongoing maintenance sessions and maintains the required minimum weight loss during an ongoing maintenance session interval. For an MDPP beneficiary who attends his or her first core session on or before December 31, 2021, CMS makes a performance payment to an MDPP supplier if an MDPP beneficiary attends two ongoing maintenance sessions during an ongoing maintenance session interval, achieves attendance at that second ongoing maintenance session upon attendance at an ongoing maintenance session furnished by that supplier, and achieves or maintains the required minimum weight loss as measured in-person during an ongoing maintenance session furnished during the applicable ongoing maintenance session interval.

CMS makes this performance payment to an MDPP supplier only once per MDPP beneficiary per ongoing maintenance session interval. The amount of this performance payment is determined as follows. (i) For a second ongoing maintenance session furnished in interval 1 (months 13-15 of the MDPP services period), January 1, 2022, through December 31, 2022, the amount is $52. (ii) For a second ongoing maintenance session furnished in interval 2 (months 16-18 of the MDPP services period), January 1, 2022, through December 31, 2022, the amount is $52. (iii) For a second ongoing maintenance session furnished in interval 3 (months 19-21 of the MDPP services period), January 1, 2022, through December 31, 2022, the amount is $53.

(iv) For a second ongoing maintenance session furnished in interval 4 (months 22-24 of the MDPP services period), January 1, 2022, through December 31, 2022 the amount is $53. (v) For a second ongoing maintenance session furnished during a subsequent year. The performance payment amount specified in this paragraph, adjusted as specified in paragraph (d) of this section. (6) * * * (i) For a core session or core maintenance session, as applicable, furnished January 1, 2022, through December 31, 2022, the amount is $169. * * * * * (7) * * * (i) For a core session or core maintenance session, as applicable, Start Printed Page 65669 furnished January 1, 2022, through December 31, 2022, the amount is $35.

(ii) For a core session or core maintenance session, as applicable, furnished during a calendar year subsequent to CY 2018. The performance payment amount specified in this paragraph, adjusted as specified in paragraph (d) of this section. (c) Bridge payment. CMS makes a bridge payment to an MDPP supplier only for a core session or core maintenance session furnished to an MDPP beneficiary who has previously received MDPP services from a different MDPP supplier. An MDPP supplier that has previously been paid either a bridge payment or a performance payment for an MDPP beneficiary is not eligible to be paid a bridge payment for that beneficiary.

A bridge payment is made only on an assignment-related basis in accordance with § 424.55 of this subchapter, and MDPP suppliers must accept the Medicare allowed charge as payment in full and may not bill or collect from the beneficiary any amount. CMS will make a bridge payment only to an MDPP supplier that complies with all applicable enrollment and program requirements, and only for MDPP services furnished by an eligible coach, on or after his or her coach eligibility start date and, if applicable, before his or her coach eligibility end date. As a condition of payment, the MDPP supplier must report the NPI of the coach who furnished the session on the claim for the MDPP session. The amount of the bridge payment is determined as follows. (1) For core session or core maintenance session, as applicable, furnished January 1, 2022, through December 31, 2022, the amount is $35.

(2) For core session and core maintenance session, as applicable, furnished during a calendar year subsequent to CY 2022. The bridge payment amount specified in this paragraph, adjusted as specified in paragraph (d) of this section. * * * * * Start Amendment Part43. Amend § 414.626 by revising paragraphs (b)(1) and (f) to read as follows. End Amendment Part Data reporting by ground ambulance organizations.

* * * * * (b) * * * (1) Within 30 days of the date that CMS notifies a ground ambulance organization under paragraph (c)(3) of this section that it has selected the ground ambulance organization to report data under this section, the ground ambulance organization must select a data collection period that corresponds with its annual accounting period and provide the start date of that data collection period to CMS or its contractor. * * * * * (f) Public availability of data. Beginning in 2024, and at least once every 2 years thereafter, CMS will post on its website data that it collected under this section, including but not limited to summary statistics and ground ambulance organization characteristics. * * * * * Start Amendment Part44. Amend § 414.802 by revising the definition of “Drug” to read as follows.

End Amendment Part Definitions. * * * * * Drug means a drug or a biological, and for purposes of applying section 1847A(f) of the Act, includes an item, service, supply, or product that is payable under Medicare Part B as a drug or biological. * * * * * Start Amendment Part45. Section 414.806 is revised to read as follows. End Amendment Part Penalties associated with misrepresentation and the failure to submit timely and accurate ASP data.

(a) Misrepresentation. Section 1847A(d)(4)(A) of the Act specifies the penalties associated with misrepresentations in the reporting of the manufacturer's average sales price for a drug as defined at § 414.802. (b) Failure to provide timely information or the submission of false information. (1) For a manufacturer that has entered into and has in effect a rebate agreement under section 1927 of the Act, section 1927(b)(3)(C) of the Act specifies the penalties associated with a manufacturer's failure to submit timely information or the submission of false information. (2) For a manufacturer that has not entered into and does not have in effect a rebate agreement under section 1927 of the Act, sections 1847A(d)(4)(B) and (C) of the Act specify the penalties associated with a manufacturer's failure to submit timely information or the submission of false information.

Start Amendment Part46. Amend § 414.904 by adding paragraph (d)(4) to read as follows. End Amendment Part Average sales price as the basis for payment. * * * * * (d) * * * (4) Payment adjustment for certain drugs for which there is a self-administered version —(i) In general. Except as provided in paragraphs (d)(4)(ii) and (iii) of this section, if the Inspector General identifies a drug or biological product in a study described in section 1847A(g)(1) of the Act, the Secretary must apply the payment limit for the applicable billing and payment code as specified in paragraph (d)(4)(iv) of this section, beginning with the first day of the second quarter after such study is publicly available.

The methodology described in this paragraph will be recalculated each quarter thereafter, except when conditions described in paragraph (d)(4)(ii) are met. (ii) Exception. The adjustment described in paragraph (d)(4)(i) of this section does not apply to the payment limit for a billing and payment code for a quarter if, at the time that ASP calculations are finalized for such quarter, the drug in the dosage form described by the billing and payment code is included by the FDA on the drug shortage list in effect under section 506E of the Federal Food, Drug, and Cosmetic Act. (iii) Special rule for certain billing and payment codes. Effective July 1, 2021, for a billing and payment code described under section 1847A(g)(3) of the Act, the payment limit for the applicable billing and payment code must be determined as described in paragraph (d)(4)(iv) of this section, and the exception specified at paragraph (d)(4)(ii) of this section does not apply.

(iv) Lesser-of methodology. For purposes of this section, the payment limit is the lesser of. (A) The payment limit determined under section 1847A of the Act for such billing and payment code if each National Drug Code for such product so identified under section 1847A(g)(1) of the Act were excluded from such determination. And (B) The payment limit otherwise determined under section 1847A of the Act for such billing and payment code without application of section 1847A(g) of the Act. (v) NDC changes.

For an Inspector General-identified National Drug Code, as described under section 1847A(g)(1) or (3) of the Act, for which the manufacturer has redesignated the National Drug Code (without changes to the dosage form), the application of the lesser-of methodology described in this paragraph must use manufacturer-reported ASP data associated with the redesignated National Drug Code in the same manner as the one originally identified by the Inspector General. * * * * * Start Amendment Part47. Amend § 414.1300 by revising paragraphs (a)(2) and (3) to read as follows. End Amendment Part Start Printed Page 65670 Basis and scope. (a) * * * (2) Section 1848(k)—Quality Reporting System.

(3) Section 1848(m)—Incentive Payments for Quality Reporting. * * * * * Start Amendment Part48. Amend § 414.1305— End Amendment Part Start Amendment Parta. By revising the definitions of “Collection type” and “Meaningful EHR user for MIPS”. End Amendment Part Start Amendment Partb.

In the definition of “MIPS determination period”, by revising paragraph (2). End Amendment Part Start Amendment Partc. In the definition of “MIPS eligible clinician”, by revising the introductory text, paragraph (2) introductory text, and adding paragraph (3). End Amendment Part Start Amendment Partd. By adding the definitions of “Multispecialty group”, “MVP participant”, “Population health measure”, “QCDR measure”, “Single specialty group”, “Special status” and “Subgroup” in alphabetical order.

And End Amendment Part Start Amendment Parte. By revising the definition of “Submission type”. End Amendment Part The revisions and additions read as follows. Definitions. * * * * * Collection type means a set of quality measures with comparable specifications and data completeness criteria, as applicable, including, but not limited to.

Electronic clinical quality measures (eCQMs). MIPS clinical quality measures (MIPS CQMs). QCDR measures. Medicare Part B claims measures. CMS Web Interface measures (except as provided in paragraph (1) of this definition, for the CY 2017 through CY 2022 performance periods/2019 through 2024 MIPS payment years).

The CAHPS for MIPS survey. And administrative claims measures. (1) For the CY 2021 through CY 2024 performance periods/2023 through 2026 MIPS payment years, collection types include CMS Web Interface measures for APM Entities reporting through the APM Performance Pathway in accordance with § 414.1367. (2) [Reserved] * * * * * Meaningful EHR user for MIPS means a MIPS eligible clinician who possesses CEHRT, uses the functionality of CEHRT, reports on applicable objectives and measures specified for the Promoting Interoperability performance category for a performance period in the form and manner specified by CMS, does not knowingly and willfully take action (such as to disable functionality) to limit or restrict the compatibility or interoperability of CEHRT, and engages in activities related to supporting providers with the performance of CEHRT. * * * * * MIPS determination period means.

* * * (2) Subject to § 414.1310(b)(1)(iii), an individual eligible clinician, group, or APM Entity group that is identified as not exceeding the low-volume threshold or as having special status, as applicable, during the first segment of the MIPS determination period will be identified as such for the applicable MIPS payment year regardless of the results of the second segment of the MIPS determination period. An individual eligible clinician, group, or APM Entity group for which the unique billing TIN and NPI combination is established during the second segment of the MIPS determination period will be assessed based solely on the results of such segment. MIPS eligible clinician as identified by a unique billing TIN and NPI combination used to assess performance, means any of the following (except as excluded under § 414.1310(b)). * * * * * (2) For the 2021 through 2023 MIPS payment years. * * * * * (3) For the 2024 MIPS payment year and future years.

(i) A clinician described in paragraph (2) of this definition. (ii) A clinical social worker (as defined in section 1861(hh)(1) of the Act). (ii) A certified nurse midwife (as defined in section 1861(gg)(2) of the Act). And (vii) A group that includes such clinicians. * * * * * Multispecialty group means a group that consists of two or more specialty types.

MVP participant means an individual MIPS eligible clinician, multispecialty group, single-specialty group, subgroup, or APM Entity that is assessed on an MVP in accordance with § 414.1365 for all MIPS performance categories. For the CY 2026 performance period/2028 MIPS payment year and future years, MVP Participant means an individual MIPS eligible clinician, single-specialty group, subgroup, or APM Entity that is assessed on an MVP in accordance with § 414.1365 for all MIPS performance categories. * * * * * Population health measure means a quality measure that indicates the quality of a population or cohort's overall health and well-being, such as access to care, clinical outcomes, coordination of care and community services, health behaviors, preventive care and screening, health equity, or utilization of health services. * * * * * QCDR measure means a quality measure that is submitted by a QCDR and approved by CMS under § 414.1400. QCDR measures consist of.

(1) Measures that are not included in the MIPS final list of quality measures described in § 414.1330(a)(1) for the applicable MIPS payment year. And (2) Measures that are included in the MIPS final list of quality measures described in § 414.1330(a)(1) for the applicable MIPS payment year, but have undergone substantive changes, as determined by CMS. * * * * * Single specialty group means a group that consists of one specialty type. * * * * * Special status means that a MIPS eligible clinician. (1) Meets the definition of an ASC-based MIPS eligible clinician, facility-based MIPS eligible clinician, hospital-based MIPS eligible clinician, non-patient facing MIPS eligible clinician, or is in a small practice.

Or (2) Is located in an HPSA or rural area. Subgroup means a subset of a group which contains at least one MIPS eligible clinician and is identified by a combination of the group TIN, subgroup identifier, and each eligible clinician's NPI. Submission type means the mechanism by which the submitter type submits data to CMS, including, but not limited to. (1) Direct. (2) Log in and upload.

(3) Log in and attest. (4) Medicare Part B claims. And (5) CMS Web Interface (except as provided in paragraph (5)(i) of this definition, for the CY 2017 through CY 2022 performance periods/2019 through 2024 MIPS payment years). (i) For the CY 2021 through CY 2024 performance periods/2023 through 2026 MIPS payment years, submission types include the CMS Web Interface for APM Entities reporting through the APM Performance Pathway in accordance with § 414.1367. (ii) [Reserved] * * * * * Start Amendment Part49.

Amend § 414.1310 by revising paragraph (e)(1) to read as follows. End Amendment Part Applicability. * * * * * (e) * * * Start Printed Page 65671 (1) Except as provided under §§ 414.1315(a)(2), 414.1317(b), 414.1318(b), and 414.1370(f)(2) each MIPS eligible clinician in the group receives a final score based on the group's combined performance assessment. * * * * * Start Amendment Part50. Amend § 414.1317 by revising paragraph (b)(2) to read as follows.

End Amendment Part APM Entity groups. * * * * * (b) * * * (2) Performance category weights. The cost performance category weight is zero percent of the final score for an APM Entity. The performance category reweighting scenarios under § 414.1380(c)(2) apply to an APM Entity. * * * * * Start Amendment Part51.

Section 414.1318 is added to subpart O to read as follows. End Amendment Part Subgroups. (a) Eligibility and special status —(1) General. Except as provided under paragraph (a)(2) of this section, for a MIPS payment year, determinations of meeting the low-volume threshold criteria and special status for subgroups are determined at the group level in accordance with §§ 414.1305 and 414.1310. (2) Exclusions.

An individual eligible clinician or group that elects to participate in MIPS as a MIPS eligible clinician in accordance with § 414.1310(b)(1)(iii)(A) or (b)(2) is not eligible to participate in a subgroup. (b) Final score. Except as provided under § 414.1317(b), each MIPS eligible clinician in the subgroup receives a final score based on the subgroup's combined performance assessment. (c) Subgroup reporting requirements. For individual eligible clinicians to participate in MIPS as a subgroup, all of the following requirements must be met.

(1) Individual eligible clinicians that elect to participate in MIPS as a subgroup must aggregate their quality and improvement activities performance data across the subgroup's identifier. (2) Individual eligible clinicians that elect to participate in MIPS as a subgroup will have their performance assessed at the subgroup level across all the MIPS performance categories based on an MVP in accordance with § 414.1365 and on the APM Performance Pathway in accordance with § 414.1367, as applicable. Subgroups that are MVP Participants must adhere to an election process described in § 414.1365(b). Start Amendment Part52. Amend § 414.1320 by— End Amendment Part Start Amendment Parta.

Redesignating paragraphs (d) through (g) as paragraphs (e) through (h), respectively. And End Amendment Part Start Amendment Partb. Adding a new paragraph (d). End Amendment Part The addition reads as follows. MIPS performance period.

* * * * * (d) For purposes of the CY 2020 performance period/2022 MIPS payment year, the performance period for. (1) The quality and cost performance categories are the full calendar year (January 1 through December 31) that occurs 2 years prior to the applicable MIPS payment year. (2) The improvement activities performance categories are a minimum of a continuous 90-day period within the calendar year that occurs 2 years prior to the applicable MIPS payment year, up to and including the full calendar year. * * * * * Start Amendment Part53. Amend § 414.1325 by revising paragraph (c)(1) to read follows.

End Amendment Part Data submission requirements. * * * * * (c) * * * (1) For the quality performance category, the direct. Login and upload. Medicare Part B claims (beginning with the CY 2019 MIPS performance period/2021 MIPS payment year, for small practices only). And CMS Web Interface (for groups consisting of 25 or more eligible clinicians, a third party intermediary submitting on behalf of a group) submission type.

* * * * * Start Amendment Part54. Amend § 414.1340 revising paragraphs (a)(3) and (b)(3) to read as follows. End Amendment Part Data completeness criteria for the quality performance category. (a) * * * (3) At least 70 percent of the MIPS eligible clinician or group's patients that meet the measure's denominator criteria, regardless of payer for MIPS payment years 2022, 2023, 2024, and 2025. * * * * * (b) * * * (3) At least 70 percent of the applicable Medicare Part B patients seen during the performance period to which the measure applies for MIPS payment years 2022, 2023, 2024, and 2025.

* * * * * Start Amendment Part55. Amend § 414.1350 by revising paragraph (c)(4) and adding paragraph (c)(6) to read as follows. End Amendment Part Cost performance category. * * * * * (c) * * * (4) For the procedural episode-based measures specified beginning with the CY 2019 performance period/2021 MIPS payment year, the case minimum is 10, unless otherwise specified for individual measures. Beginning with the CY 2022 performance period/2024 MIPS payment year, the case minimum for Colon and Rectal Resection procedural episode-based measure is 20 episodes.

* * * * * (6) For the chronic condition episode-based measures specified beginning with the CY 2022 performance period/2024 MIPS payment year, the case minimum is 20. * * * * * Start Amendment Part56. Amend § 414.1360 by revising paragraph (a)(2) to read as follows. End Amendment Part Data submission criteria for the improvement activities performance category. (a) * * * (2) Groups and virtual groups.

Beginning with the 2022 performance year, each improvement activity for which groups and virtual groups submit a yes response in accordance with paragraph (a)(1) of this section must be performed by at least 50 percent of the NPIs that are billing under the group's TIN or virtual group's TINs or that are part of the subgroup, as applicable. And the NPIs must perform the same activity during any continuous 90-day period within the same performance year. * * * * * Start Amendment Part57. Section 414.1365 is added to subpart O to read as follows. End Amendment Part MIPS Value Pathways.

(a) General. (1) Beginning with the CY 2023 MIPS performance period/2025 MIPS payment year, CMS uses MVPs included in the MIPS final inventory of MVPs established by CMS through rulemaking to assess performance for the quality, cost, improvement activities, and Promoting Interoperability performance categories. (2) [Reserved] (b) MVP/Subgroup registration. (1) To report an MVP, an MVP Participant must register for the MVP, and if applicable, as a subgroup during a period that begins on April 1 and ends on November 30 of the applicable CY performance period or a later date specified by CMS. To report the CAHPS for MIPS survey associated with an MVP, a group, subgroup or APM Entity must complete their registration by June 30 of such performance period or a later date specified by CMS.

Start Printed Page 65672 (2) At the time of registration, the MVP Participant must submit the following information, as applicable. (i) Each MVP Participant must select an MVP, 1 population health measure included in the MVP, and any outcomes-based administrative claims measure on which the MVP Participant intends to be scored. (ii) Each subgroup must submit a list of each TIN/NPI associated with the subgroup and a plain language name for the subgroup. (c) MVP reporting requirement s—(1) Quality. Except as provided in paragraph (c)(1)(i) of this section, an MVP Participant must select and report, if applicable, 4 quality measures, including 1 outcome measure (or, if an outcome measure is not available, 1 high priority measure), included in the MVP, excluding the population health measure required under paragraph (c)(4)(ii) of this section.

(i) Paragraph (c)(1) introductory text of this section does not apply to a small practice that reports on an MVP that includes fewer than 4 Medicare Part B claims measures, provided that the small practice reports each such measure that is applicable. (ii) [Reserved] (2) Cost. An MVP Participant is scored on the cost measures included in the MVP that they select and report. (3) Improvement activities. An MVP Participant who reports an MVP, must report one of the following.

(i) Two medium-weighted improvement activities. (ii) One high-weighted improvement activity. (iii) Participation in a certified or recognized patient-centered medical home (PCMH) or comparable specialty practice, as described at § 414.1380(b)(3)(ii). (4) Foundational layer —(i) Promoting interoperability. An MVP Participant is required to meet the Promoting Interoperability performance category reporting requirements described at § 414.1375(b).

(A) For the CY 2023 and 2024 performance periods/2025 and 2026 MIPS payment years, an MVP Participant that is a subgroup is required to submit its affiliated group's data for the Promoting Interoperability performance category. (B) [Reserved] (ii) Population health measures. Each MVP Participant is scored on 1 population health measure in accordance with paragraph (d)(1) of this section. (d) MVP scoring —(1) General. An MVP Participant that is not an APM Entity is scored on measures and activities included in the MVP in accordance with paragraphs (d)(1) through (3) of this section.

An MVP Participant that is an APM Entity is scored on measures and activities included in the MVP in accordance with § 414.1317(b). (2) Performance standards. Unless otherwise indicated in this paragraph (d), the performance standards described at § 414.1380(a)(1)(i) through (iv) apply to the measures and activities included in the MVP. (3) Performance categories. An MVP Participant is scored under MIPS in four performance categories.

(i) Quality performance category. Except as provided in paragraphs (d)(3)(i)(A)(1) and (d)(3)(i)(B) of this section, the quality performance category score for MVP Participants is calculated in accordance with § 414.1380(b)(1) based on measures included in the MVP. (A) Population health measures. Except as provided in paragraph (d)(3)(i)(A)( 1 ) of this section, each selected population health measure that does not have a benchmark or meet the case minimum requirement is excluded from the MVP participant's total measure achievement points and total available measure achievement points. ( 1 ) Subgroups are scored on each selected population health measure that does not have a benchmark or meet the case minimum requirement based on their affiliated group score, if available.

If the subgroup's affiliated group score is not available, each such measure is excluded from the subgroup's total measure achievement points and total available measure achievement points. ( 2 ) [Reserved] (B) Outcomes-based administrative claims measures. MVP Participants receive zero measure achievement points for each selected outcomes-based administrative claims measure that does not have a benchmark or meet the case minimum requirement. (ii) Cost performance category. The cost performance category score is calculated for an MVP Participant using the methodology at § 414.1380(b)(2)(i) through (v) and the cost measures included in the MVP that they select and report.

(iii) Improvement activities performance category. The improvement activities performance category score is calculated based on the submission of high- and medium-weighted improvement activities. MVP Participants will receive 20 points for each medium-weighted improvement activity and 40 points for each high-weighted improvement activity required under § 414.1360 on which data is submitted in accordance with § 414.1325 or for participation in a certified or recognized patient-centered medical home (PCMH) or comparable specialty practice, as described at § 414.1380(b)(3)(ii). (iv) Promoting interoperability performance category. The Promoting Interoperability performance category score is calculated for an MVP Participant using the methodology at § 414.1380(b)(4), except as provided in paragraph (d)(3)(iv)(A) of this section.

(A) If a subgroup does not submit its affiliated group's data for the Promoting Interoperability performance category, the subgroup will receive a score of zero for the Promoting Interoperability performance category. (B) [Reserved] (e) Final score calculation. The final score is calculated for an MVP Participant using the methodology at § 414.1380(c), unless otherwise indicated in this paragraph (e). (1) MVP performance category weights. For an MVP Participant that is not an APM Entity, the final score is calculated using the performance category weights described at § 414.1380(c)(1).

For an MVP Participant that is an APM Entity, the final score is calculated using the performance category weights described at § 414.1317(b). (2) Reweighting MVP performance categories —(i) General reweighting. For an MVP Participant that is not an APM Entity, in accordance with paragraph (e)(2)(iii) of this section, a scoring weight different from the weights described at § 414.1380(c)(1) will be assigned to a performance category, and its weight as described at § 414.1380(c)(1) will be redistributed to another performance category or categories, in the circumstances described at § 414.1380(c)(2)(i)(A)(2) through (9) and § 414.1380(c)(2)(i)(C). For an MVP Participant that is an APM Entity, the performance category weights will be redistributed in accordance with § 414.1317(b). (ii) Subgroups.

For an MVP Participant that is a subgroup, any reweighting applied to its affiliated group will also be applied to the subgroup. In addition, if reweighting is not applied to the affiliated group, the subgroup may receive reweighting in the following circumstances independent of the affiliated group. (A) A subgroup may submit an application to CMS demonstrating that it was subject to extreme and uncontrollable circumstances and receive reweighting in accordance with § 414.1380(c)(2)(i)(A)(6) and (c)(2)(i)(C)(2). In the event that a Start Printed Page 65673 subgroup submits data for a performance category, the scoring weight described at § 414.1380(c)(1) would be applied and its weight would not be redistributed. (B) A subgroup will receive reweighting if CMS determines, based on information known to the agency prior to the beginning of the relevant MIPS payment year, that data for the subgroup are inaccurate, unusable or otherwise compromised due to circumstances outside of the control of the subgroup and its agents, in accordance with § 414.1380(c)(2)(i)(A)(9) and (c)(2)(i)(C)(10).

(iii) Reweighting scenarios. For an MVP Participant that is not an APM Entity, a scoring weight different from the weights described at § 414.1380(c)(1) will be assigned to a performance category, and its weight as described at § 414.1380(c)(1) will be redistributed to another performance category or categories, in accordance with § 414.1380(c)(2)(ii). For an MVP Participant that is an APM Entity, the performance category weights will be redistributed in accordance with § 414.1317(b). (3) Facility-based scoring. If an MVP Participant, that is not an APM Entity, is eligible for facility-based scoring, a facility-based score also will be calculated in accordance with § 414.1380(e).

(4) Complex patient bonus. A complex patient bonus will be added to the final score for an MVP Participant in accordance with § 414.1380(c)(3). Start Amendment Part58. Amend § 414.1375— End Amendment Part Start Amendment Parta. By revising paragraph (b)(2)(ii).

End Amendment Part Start Amendment Partb. By revising the paragraph (b)(3) subject heading. End Amendment Part Start Amendment Partc. By revising paragraph (b)(3)(ii) introductory text. And End Amendment Part Start Amendment Partc.

Adding paragraph (b)(3)(iii). End Amendment Part The revisions and addition read as follows. Promoting Interoperability (PI) performance category. * * * * * (b) * * * (2) * * * (ii) Beginning with the 2021 MIPS payment year. (A) Report that the MIPS eligible clinician completed the actions included in the Security Risk Analysis measure during the year in which the performance period occurs.

(B) For each required measure, as applicable, report the numerator (of at least one) and denominator, or yes/no statement, or an exclusion for each measure that includes an option for an exclusion. And (C) Beginning with the 2024 MIPS payment year, report that the MIPS eligible clinician completed the actions included in the SAFER Guides measure during the year in which the performance period occurs. (3) Engaging in activities related to supporting providers with the performance of CEHRT. Support for health information exchange and the prevention of information blocking. Actions to limit or restrict the compatibility or interoperability of CEHRT.

* * * * * * * * (ii) Support for health information exchange and the prevention of information blocking. For the 2019, 2020, 2021, 2022, and 2023 MIPS payment years, the MIPS eligible clinician must attest to CMS that he or she— * * * * * (iii) Actions to limit or restrict the compatibility or interoperability of CEHRT. Beginning with the 2024 MIPS payment year, the MIPS eligible clinician must attest to CMS that he or she— (A) Did not knowingly and willfully take action (such as to disable functionality) to limit or restrict the compatibility or interoperability of certified EHR technology. (B) [Reserved] Start Amendment Part59. Amend § 414.1380 by— End Amendment Part Start Amendment Parta.

Revising paragraphs (b)(1)(i) introductory text and(b)(1)(i)(A)( 1 ). End Amendment Part Start Amendment Partb. Adding paragraphs (b)(1)(i)(A)( 3 ) and (b)(1)(i)(C). End Amendment Part Start Amendment Partc. Revising paragraphs (b)(1)(iii), (b)(1)(v)(A) introductory text, and (b)(1)(v)(B) introductory text.

End Amendment Part Start Amendment Partd. Adding paragraph (b)(1)(v)(B)( 1 )( iii ). End Amendment Part Start Amendment Parte. Revising paragraphs (b)(1)(vi)(C) introductory text, (b)(1)(vi)(C)( 4 ), (b)(1)(vi)(E), (b)(1)(vii) introductory text, (b)(1)(vii)(A), (b)(2)(iii) introductory text, and (b)(2)(v) introductory text. End Amendment Part Start Amendment Partf.

Adding paragraphs (b)(2)(v)(A) and (B). End Amendment Part Start Amendment Partg. Revising paragraph (b)(4)(ii) introductory text and (b)(4)(ii)(C). End Amendment Part Start Amendment Parth. Revising the table in paragraph (c) introductory text.

End Amendment Part Start Amendment Parti. Revising paragraph (c)(2)(i)(A)( 4 ). End Amendment Part Start Amendment Partj. Removing and reserving paragraph (c)(2)(i)(A)( 5 ). End Amendment Part Start Amendment Partk.

Revising paragraphs (c)(2)(i)(C)( 9 ), (c)(2)(ii)(A), and (c)(2)(ii)(F). End Amendment Part Start Amendment Partl. Adding paragraph (c)(2)(ii)(G). And End Amendment Part Start Amendment Partm. Revising paragraphs (c)(3) and (e)(6)(iv) through (vi).

End Amendment Part The revisions and additions read as follows. Scoring. * * * * * (b) * * * (1) * * * (i) Measure achievement points. For the CY 2017 through 2021 performance periods/2019 through 2023 MIPS payment years, MIPS eligible clinicians receive between 3 and 10 measure achievement points (including partial points) for each measure required under § 414.1335 on which data is submitted in accordance with § 414.1325 that has a benchmark at paragraph (b)(1)(ii) of this section, meets the case minimum requirement at paragraph (b)(1)(iii) of this section, and meets the data completeness requirement at § 414.1340 and for each administrative claims-based measure that has a benchmark at paragraph (b)(1)(ii) of this section and meets the case minimum requirement at paragraph (b)(1)(iii) of this section. Except as provided under paragraph (b)(1)(i)(C) of this section, beginning with the CY 2023 performance period/2025 MIPS payment year, MIPS eligible clinicians receive between 1 and 10 measure achievement points (including partial points) for each such measure.

The number of measure achievement points received for each such measure is determined based on the applicable benchmark decile category and the percentile distribution. MIPS eligible clinicians receive zero measure achievement points for each measure required under § 414.1335 on which no data is submitted in accordance with § 414.1325. MIPS eligible clinicians that submit data in accordance with § 414.1325 on a greater number of measures than required under § 414.1335 are scored only on the required measures with the greatest number of measure achievement points. Beginning with the CY 2019 performance period/2021 MIPS payment year, MIPS eligible clinicians that submit data in accordance with § 414.1325 on a single measure via multiple collection types are scored only on the data submission with the greatest number of measure achievement points. (A) * * * ( 1 ) Except as provided in paragraphs (b)(1)(i)(A)( 2 ) and ( 3 ) of this section, for the CY 2017 through 2021 MIPS performance periods/2019 through 2023 MIPS payment years, MIPS eligible clinicians receive 3 measure achievement points for each submitted measure that meets the data completeness requirement, but does not have a benchmark or meet the case minimum requirement.

Beginning with the CY 2022 performance period/2024 MIPS payment year, MIPS eligible clinicians other than small practices receive 0 measure achievement points Start Printed Page 65674 for each such measure, and small practices receive 3 measure achievement points for each such measure. * * * * * ( 3 ) Beginning with the CY 2023 performance period/2025 MIPS payment year, MIPS eligible clinicians receive 7 measure achievement points for each submitted measure in its first year in MIPS and 5 measure achievement points for each submitted measure in its second year in MIPS that meets the data completeness requirement, but does not have a benchmark or meet the case minimum requirement. * * * * * (C) New measures. Beginning with the CY 2023 performance period/2025 MIPS payment year, for each measure required under § 414.1335 on which data is submitted in accordance with § 414.1325 that has a benchmark at paragraph (b)(1)(ii) of this section, meets the case minimum requirement at paragraph (b)(1)(iii) of this section, and meets the data completeness requirement at § 414.1340, a MIPS eligible clinician receives between 7 and 10 measure achievement points (including partial points) for each such measure in its first year in MIPS and between 5 and 10 measure achievement points for each such measure in its second year in MIPS. * * * * * (iii) Minimum case requirements.

Except as otherwise specified in the MIPS final list of quality measures described in § 414.1330(a)(1), the minimum case requirement is 20 cases. (v) * * * (A) High priority measures. Subject to paragraph (b)(1)(v)(A)( 1 ) of this section, for the CY 2017 through 2021 MIPS performance periods/2019 through 2023 MIPS payment years, MIPS eligible clinicians receive 2 measure bonus points for each outcome and patient experience measure and 1 measure bonus point for each other high priority measure. Beginning with the 2021 MIPS payment year, MIPS eligible clinicians do not receive such measure bonus points for CMS Web Interface measures. * * * * * (B) End-to-end electronic reporting.

Subject to paragraph (b)(1)(v)(B)( 1 ) of this section, for the CY 2017 through 2021 MIPS performance periods/2019 through 2023 MIPS payment years, MIPS eligible clinicians receive 1 measure bonus point for each measure (except claims-based measures) submitted with end-to-end electronic reporting for a quality measure under certain criteria determined by the Secretary. ( 1 ) * * * ( iii ) Beginning in the 2024 MIPS payment year, MIPS eligible clinicians will no longer receive measure bonus for submitting using end-to-end electronic reporting. * * * * * (vi) * * * (C) The improvement percent score is assessed at the performance category level for the quality performance category and included in the calculation of the quality performance category score as described in paragraph (b)(1)(vii) of this section. * * * * * ( 4 ) Beginning with the CY 2018 performance period/2020 MIPS payment year, we will assume a quality performance category achievement percent score of 30 percent if a MIPS eligible clinician earned a quality performance category score less than or equal to 30 percent in the previous year. * * * * * (E) For the purpose of improvement scoring methodology, the term “improvement percent score” means the score that represents improvement for the purposes of calculating the quality performance category score as described in paragraph (b)(1)(vii) of this section.

* * * * * (vii) Quality performance category score. A MIPS eligible clinician's quality performance category score is the sum of all the measure achievement points assigned for the measures required for the quality performance category criteria plus the measure bonus points in paragraph (b)(1)(v) of this section. The sum is divided by the sum of total available measure achievement points. The improvement percent score in paragraph (b)(1)(vi) of this section is added to that result. The quality performance category score cannot exceed 100 percentage points.

(A) For each measure that is submitted, if applicable, and impacted by significant changes or errors prior to the applicable data submission deadline at § 414.1325(e), performance is based on data for 9 consecutive months of the applicable CY performance period. If such data are not available or CMS determines that they may result in patient harm or misleading results, the measure is excluded from a MIPS eligible clinician's total measure achievement points and total available measure achievement points. For purposes of this paragraph (b)(1)(vii)(A), “significant changes or errors” means changes to or errors in a measure that are outside the control of the clinician and its agents and that CMS determines may result in patient harm or misleading results. Significant changes or errors include, but are not limited to, changes to codes (such as ICD-10, CPT, or HCPCS codes) or the active status of codes, the inadvertent omission of codes or inclusion of inactive or inaccurate codes, or changes to clinical guidelines or measure specifications. CMS will publish on the CMS website a list of all measures scored under this paragraph (b)(1)(vii)(A) as soon as technically feasible, but by no later than the data submission deadline at § 414.1325(e)(1).

* * * * * (2) * * * (iii) The cost performance category score is the sum of the following, not to exceed 100 percent. * * * * * (v) A cost performance category score is not calculated if a MIPS eligible clinician or group is not attributed any cost measures for the performance period because the clinician or group has not met the minimum case volume specified by CMS for any of the cost measures or a benchmark has not been created for any of the cost measures that would otherwise be attributed to the clinician or group. (A) Beginning with the 2024 MIPS payment year, if data used to calculate a score for a cost measure are impacted by significant changes during the performance period, such that calculating the cost measure score would lead to misleading or inaccurate results, then the affected cost measure is excluded from the MIPS eligible clinician's or group's cost performance category score. For purposes of this paragraph (b)(2)(v)(A), “significant changes” are changes external to the care provided, and that CMS determines may lead to misleading or inaccurate results. Significant changes include, but are not limited to, rapid or unprecedented changes to service utilization, and will be empirically assessed by CMS to determine the extent to which the changes impact the calculation of a cost measure score that reflects clinician performance.

(B) [Reserved] * * * * * (4) * * * (ii) Beginning with the 2019 performance period/2021 MIPS payment year, a MIPS eligible clinician's Promoting Interoperability performance category score equals the sum of the scores for each of the required measures and any applicable bonus scores, not to exceed 100 points. * * * * * Start Printed Page 65675 (C) Each optional measure is worth five or ten bonus points, as specified by CMS. * * * * * (c) * * * Table 1 to Paragraph (c) Introductory TextFor the 2019 MIPS payment year:Final score = [(quality performance category score × quality performance category weight) + (cost performance category score × cost performance category weight) + (improvement activities performance category score × improvement activities performance category weight) + (Promoting Interoperability performance category score × Promoting Interoperability performance category weight)], not to exceed 100 points.For the 2020 MIPS payment year:Final score = [(quality performance category score × quality performance category weight) + (cost performance category score × cost performance category weight) + (improvement activities performance category score × improvement activities performance category weight) + (Promoting Interoperability performance category score × Promoting Interoperability performance category weight)] × 100 + [the complex patient bonus + the small practice bonus], not to exceed 100 points.Beginning with the 2021 MIPS payment year:Final score = [(quality performance category score × quality performance category weight) + (cost performance category score × cost performance category weight) + (improvement activities performance category score × improvement activities performance category weight) + (Promoting Interoperability performance category score × Promoting Interoperability performance category weight)] × 100 + the complex patient bonus, not to exceed 100 points. * * * * * (2) * * * (i) * * * (A) * * * ( 4 ) For the Promoting Interoperability performance category. ( i ) For the 2021 through 2024 MIPS payment years, the MIPS eligible clinician is a physical therapist, occupational therapist, clinical psychologist, qualified audiologist, qualified speech-language pathologist, or a registered dietitian or nutrition professional.

In the event that a MIPS eligible clinician submits data for the Promoting Interoperability performance category, the scoring weight specified in paragraph (c)(1) of this section will be applied and its weight will not be redistributed. ( ii ) For the 2019 through 2024 MIPS payment years, the MIPS eligible clinician is a nurse practitioner, physician assistant, clinical nurse specialist, or certified registered nurse anesthetist. In the event that a MIPS eligible clinician submits data for the Promoting Interoperability performance category, the scoring weight specified in paragraph (c)(1) of this section will be applied and its weight will not be redistributed. ( iii ) For the 2024 MIPS payment year, the MIPS eligible clinician is a clinical social worker. In the event that a MIPS eligible clinician submits data for the Promoting Interoperability performance category, the scoring weight specified in paragraph (c)(1) of this section will be applied and its weight will not be redistributed.

* * * * * (C) * * * ( 9 ) For the 2020 MIPS payment year through the 2023 MIPS payment year the MIPS eligible clinician demonstrates through an application submitted to CMS that they are in a small practice as defined in § 414.1305, and overwhelming barriers prevent them from complying with the requirements for the Promoting Interoperability performance category. Beginning with the 2024 MIPS payment year the MIPS eligible clinician is in a small practice as defined in § 414.1305. * * * * * (ii) * * * (A) For the 2019 MIPS payment year. Table 2 to Paragraph (c)(2)(ii)(A)Performance category (%)Weighting for the 2019 MIPS payment year (%)Reweight scenario if no promoting interoperability performance category score (%)Reweight scenario if no quality performance category score (%)Reweight scenario if no improvement activities performance category score (%)Quality6085075Cost0000Improvement Activities1515500Promoting Interoperability2505025 * * * * * (F) Except as provided in paragraph (c)(2)(ii)(G) of this section, beginning with the 2024 MIPS payment year. Table 7 to Paragraph (c)(2)(ii)(F)Reweighting scenarioQuality (%)Cost (%)Improvement activities (%)Promoting interoperability (%)No Reweighting Needed:Scores for all four performance categories30301525No Cost5501530Start Printed Page 65676No Promoting Interoperability5530150No Quality0301555No Improvement Activities4530025No Cost and no Promoting Interoperability850150No Cost and no Quality001585No Cost and no Improvement Activities700030No Promoting Interoperability and no Quality050500No Promoting Interoperability and no Improvement Activities703000No Quality and no Improvement Activities030070 (G) For small practices beginning with the 2024 MIPS payment year.

Table 8 to Paragraph (c)(2)(ii)(G)Reweighting scenarioQuality (%)Cost (%)Improvement activities (%)Promoting interoperability (%)No Reweighting Needed:Scores for all four performance categories30301525No Cost5501530No Promoting Interoperability4030300No Quality0301555No Improvement Activities4530025No Cost and no Promoting Interoperability500500No Cost and no Quality001585No Cost and no Improvement Activities700030No Promoting Interoperability and no Quality050500No Promoting Interoperability and no Improvement Activities703000No Quality and no Improvement Activities030070 * * * * * (3) Complex patient bonus. For the CY 2020, 2021, 2022, and 2023 MIPS payment years and associated performance periods, provided that a MIPS eligible clinician, group, virtual group or APM Entity submits data for at least one MIPS performance category for the applicable performance period for the MIPS payment year, a complex patient bonus will be added to the final score for the MIPS payment year, as stated in paragraphs (c)(3)(i) through (iv) of this section. Beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, provided that a MIPS eligible clinician, group, subgroup, virtual group or APM Entity submits data for at least one MIPS performance category for the applicable performance period for the MIPS payment year, a complex patient bonus will be added to the final score for the MIPS payment year, if applicable, as described in paragraphs (c)(3)(v) through (viii) of this section. (i) For the CY 2020, 2021, 2022, and 2023 MIPS payment years and associated performance periods, for MIPS eligible clinicians and groups, the complex patient bonus is calculated as follows. [The average HCC risk score assigned to beneficiaries (pursuant to the HCC risk adjustment model established by CMS pursuant to section 1853(a)(1) of the Act) seen by the MIPS eligible clinician or seen by clinicians in a group] + [the dual eligible ratio × 5].

(ii) For the CY 2020, 2021, 2022, and 2023 MIPS payment years and associated performance periods, for APM Entities and virtual groups, the complex patient bonus is calculated as follows. [The beneficiary weighted average HCC risk score for all MIPS eligible clinicians, and if technically feasible, TINs for models and virtual groups which rely on complete TIN participation within the APM Entity or virtual group, respectively] + [the average dual eligible ratio for all MIPS eligible clinicians, and if technically feasible, TINs for models and virtual groups which rely on complete TIN participation, within the APM Entity or virtual group, respectively, × 5]. (iii) For the 2020, 2021, 2022, and 2023 MIPS payment years and associated performance periods, the complex patient bonus cannot exceed 5.0 except as provided in paragraph (c)(3)(iv) of this section. (iv) For the 2022 and 2023 MIPS payment years and associated performance periods, the complex patient bonus is calculated pursuant to paragraphs (c)(3)(i) and (ii) of this section, and the resulting numerical value is then multiplied by 2.0. The complex patient bonus cannot exceed 10.0.

(v) Beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, the complex patient bonus is limited to MIPS eligible clinicians, groups, subgroups, APM Entities, and virtual groups with a risk indicator at or above the risk indicator calculated median. To determine the median for the respective risk indicator (HCC and dual proportion), risk indicators associated with the final score assigned to a clinician from the most recent prior performance period, for all those who have submitted data for at least one MIPS performance category or are facility-based, are used. (vi) Beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, for MIPS eligible clinicians, groups, and subgroups, the complex patient bonus components are calculated as follows for the specific Start Printed Page 65677 risk indicators. Medical complex patient bonus component = 1.5 + 4 * associated HCC standardized score calculated with the average HCC risk score assigned to beneficiaries (pursuant to the HCC risk adjustment model established by CMS pursuant to section 1853(a)(1) of the Act) seen by the MIPS eligible clinician or seen by clinicians in a group or subgroup. Social complex patient bonus component = 1.5 + 4 * associated dual proportion standardized score.

The components are added together to calculate one overall complex patient bonus. A standardized score for each risk indicator is determined based on the mean and standard deviation of the raw risk indicator score and provides a standardized measurement of how far each risk score is from the mean. (raw risk indicator score−risk indicator mean)/risk indicator standard deviation. (vii) Beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, for APM Entities and virtual groups, the complex patient bonus components are calculated as follows for the specific risk indicators. Medical complex patient bonus component = 1.5 + 4 * the beneficiary weighted average HCC risk standardized score for all MIPS eligible clinicians, and if technically feasible, TINs for models and virtual groups which rely on complete TIN participation within the APM Entity or virtual group, respectively.

Social complex patient bonus component = 1.5 + 4 * the average dual proportion standardized score for all MIPS eligible clinicians, and if technically feasible, TINs for models and virtual groups which rely on complete TIN participation, within the APM Entity or virtual group, respectively. The components are added together to calculate one overall complex patient bonus. A standardized score for each risk indicator is determined based on the mean and standard deviation of the raw risk indicator score and provides a standardized measurement of how far each risk score is from the mean. (raw risk indicator score−risk indicator mean)/risk indicator standard deviation. (viii) Beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, the complex patient bonus cannot exceed 10.0 and cannot be below 0.0.

* * * * * (e) * * * (6) * * * (iv) Quality. The quality performance category score is established by determining the percentile performance of the facility in the value-based purchasing program for the specified year as described in paragraph (e)(1) of this section and awarding a score associated with that same percentile performance in the MIPS quality performance category score for those MIPS-eligible clinicians who are not eligible to be scored using facility-based measurement for the MIPS payment year. A clinician or group receiving a facility-based performance score will not earn improvement points based on prior performance in the MIPS quality performance category (v) Cost. The cost performance category score is established by determining the percentile performance of the facility in the value-based purchasing program for the specified year as described in paragraph (e)(1) of this section and awarding a score associated with that same percentile performance in the MIPS cost performance category score for those MIPS eligible clinicians who are not eligible to be scored using facility-based measurement for the MIPS payment year. A clinician or group receiving a facility-based performance score will not earn improvement points based on prior performance in the MIPS cost performance category.

(A) Other cost measures. MIPS eligible clinicians who are scored under facility-based measurement are not scored on cost measures described in paragraph (b)(2) of this section. (B) [Reserved] (vi) Use of score from facility-based measurement. The MIPS quality and cost performance category scores will be based on the facility-based measurement scoring methodology described in paragraph (e)(6) of this section unless. (A) For the CY 2019 MIPS performance period/2021 MIPS payment year, through the CY 2021 MIPS performance period/2023 MIPS payment year, a clinician or group receives a higher combined MIPS quality and cost performance category score through another MIPS submission.

(B) Beginning with the CY 2022 MIPS performance period/2024 MIPS payment year, a clinician or group receives a higher MIPS final score through another MIPS submission. Start Amendment Part60. Amend § 414.1395 by revising paragraph (c) to read as follows. End Amendment Part Public reporting. * * * * * (c) New measures and activities.

(1) CMS does not publicly report any data on new quality or cost measure for the first 2 years in which it is in the program, after which CMS evaluates the measure to determine whether it is suitable for public reporting under paragraph (b) of this section. (2) CMS does not publicly report any MVP data on new improvement activity or Promoting Interoperability measure, objective, or activity included in an MVP for the first year in which it is included in the MVP. * * * * * Start Amendment Part61. Revise § 414.1400 to read as follows. End Amendment Part Third party intermediaries.

(a) General. (1) MIPS data may be submitted on behalf of a MIPS eligible clinician, group, virtual group, subgroup, or APM Entity by any of the following third party intermediaries. (i) QCDR. (ii) Qualified registry. (iii) Health IT vendor.

Or (iv) CMS-approved survey vendor. (2) Third party intermediary approval criteria— (i) To be approved as a third party intermediary, an entity must agree to meet the applicable requirements of this section, including, but not limited to, the following. (A) A third party intermediary's principle place of business and retention of any data must be based in the U.S. (B) If the data is derived from CEHRT, a QCDR, qualified registry, or health IT vendor must be able to indicate its data source. (C) All data must be submitted in the form and manner specified by CMS.

(D) If the clinician chooses to opt-in in accordance with § 414.1310, the third party intermediary must be able to transmit that decision to CMS. (E) The third party intermediary must provide services throughout the entire performance period and applicable data submission period. (F) Prior to discontinuing services to any MIPS eligible clinician, group, virtual group, subgroup, or APM Entity during a performance period, the third party intermediary must support the transition of such MIPS eligible clinician, group, virtual group, subgroup, or APM Entity to an alternate third party intermediary, submitter type, or, for any measure on which data has been collected, collection type according to a CMS approved a transition plan. (ii) The determination of whether to approve an entity as a third party intermediary for a MIPS payment year may take into account. (A) Whether the entity failed to comply with the requirements of this section for any prior MIPS payment year for which it was approved as third party intermediary.

And (B) Whether the entity provided inaccurate information regarding the Start Printed Page 65678 requirements of this subpart to any eligible clinician. (iii) Beginning with the 2023 MIPS payment year, third party intermediaries must attend and complete training and support sessions in the form and manner, and at the times, specified by CMS. (3) All data submitted to CMS by a third party intermediary on behalf of a MIPS eligible clinician, group, virtual group, subgroup, or APM Entity must be certified by the third party intermediary as true, accurate, and complete to the best of its knowledge. Such certification must be made in a form and manner and at such time as specified by CMS. (b) Additional requirements for QCDRs and qualified registries —(1) General.

(i) Beginning with the CY 2021 performance period/2023 MIPS payment year, QCDRs and qualified registries must be able to submit data for all of the following MIPS performance categories. (A) Quality, except. (1) The CAHPS for MIPS survey. And (2) For qualified registries, QCDR measures. (B) Improvement activities.

And (C) Promoting Interoperability, if the eligible clinician, group, virtual group, or subgroup is using CEHRT, unless the third party intermediary's MIPS eligible clinicians, groups, virtual groups, or subgroups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)(4)(i) through (iii) or (c)(2)(i)(C)(1) through (7) or (c)(2)(i)(C)(9). (ii) Beginning with the CY 2023 performance period/2025 MIPS payment year, QCDRs and qualified registries must support MVPs that are applicable to the MVP participant on whose behalf they submit MIPS data. QCDRs and qualified registries may also support the APP. (2) Self-nomination. For the CY 2018 and 2019 performance periods/2020 and 2021 MIPS payment years, entities seeking to qualify as a QCDR or qualified registry must self-nominate September 1 until November 1 of the CY preceding the applicable performance period.

For the CY 2020 performance period/2022 MIPS payment year and future years, entities seeking to qualify as a QCDR or qualified registry must self-nominate during a 60-day period during the CY preceding the applicable performance period (beginning no earlier than July 1 and ending no later than September 1). Entities seeking to qualify as a QCDR or qualified registry for a performance period must provide all information required by CMS at the time of self-nomination and must provide any additional information requested by CMS during the review process. For the CY 2019 performance period/2021 MIPS payment year and future years, existing QCDRs and qualified registries that are in good standing may attest that certain aspects of their previous year's approved self-nomination have not changed and will be used for the applicable performance period. (3) Conditions for approval. (i) Beginning with the CY 2020 performance period/2022 MIPS payment year, the QCDR or qualified registry must have at least 25 participants by January 1 of the year prior to the applicable performance period.

(ii) If an entity seeking to qualify as a QCDR or qualified registry uses an external organization for purposes of data collection, calculation, or transmission, it must have a signed, written agreement with the external organization that specifically details the responsibilities of the entity and the external organization. The written agreement must be effective as of September 1 of the year preceding the applicable performance period. (iii) Beginning with the CY 2021 performance period/2023 MIPS payment year, the QCDR or qualified registry must provide performance feedback to their clinicians and groups at least 4 times a year, and provide specific feedback to their clinicians and groups on how they compare to other clinicians who have submitted data on a given measure within the QCDR or qualified registry. Exceptions to this requirement may occur if the QCDR or qualified registry submits notification to CMS within the performance period promptly within the month of realization of the impending deficiency and provides sufficient rationale as to why they do not believe they would be able to meet this requirement (for example, if the QCDR does not receive the data from their clinician until the end of the performance period). (iv) Beginning with the CY 2023 performance period/2025 MIPS payment year, the QCDR or qualified registry must submit a data validation plan annually, at the time of self-nomination for CMS' approval and may not change the plan once approved without the prior approval of the agency.

(v) Beginning with the CY 2021 performance period/2023 MIPS payment year, the QCDR or qualified registry must conduct annual data validation audits in accordance with this paragraph (b)(3)(v). (A) The QCDR or qualified registry must conduct data validation for the payment year prior to submitting any data for that payment year to CMS for purposes of the MIPS program. (B) The QCDR or qualified registry must conduct data validation on data for each performance category for which it will submit data, including if applicable the Quality, Improvement Activities, and Promoting Interoperability performance categories. (C) The QCDR or qualified registry must conduct data validation on data for each submitter type for which it will submit data, including MIPS eligible clinicians, groups, virtual groups, subgroups, APM entities, voluntary participants, and opt-in participants, if applicable. (D) The QCDR or qualified registry must use clinical documentation (provided by the clinicians they are submitting data for) to validate that the action or outcome measured actually occurred or was performed.

(E) The QCDR or qualified registry must conduct each data validation audit using a sampling methodology that meets the following requirements. (1) Uses a sample size of at least 3 percent of the TIN/NPIs for which the QCDR or qualified registry will submit data to CMS, except that if a 3 percent sample size would result in fewer than 10 TIN/NPIs, the QCDR or qualified registry must use a sample size of at least 10 TIN/NPIs, and if a 3 percent sample size would result in more than 50 TIN/NPIs, the QCDR or qualified registry may use a sample size of 50 TIN/NPIs. (2) Uses a sample that includes at least 25 percent of the patients of each TIN/NPI in the sample, except that the sample for each TIN/NPI must include a minimum of 5 patients and does not need to include more than 50 patients. (F) Each QCDR or qualified registry data validation audit must include the following. (1) Verification of the eligibility status of each eligible clinician, group, virtual group, subgroup, opt-in participant, and voluntary participant.

(2) Verification of the accuracy of TINs and NPIs. (3) Calculation of reporting and performance rates. (4) Verification that only the MIPS quality measures and QCDR measures, as applicable, that are relevant to the performance period will be used for MIPS submission. (G) In a form and manner and by a deadline specified by CMS, the QCDR or qualified registry must report the results of each data validation audit, including the overall data deficiencies or data error rate, the types of deficiencies or data errors discovered, the percentage of clinicians impacted by any deficiency or Start Printed Page 65679 error, and, how and when each deficiency or data error type was corrected. (1) QCDRs and qualified registries must conduct validation on the data they intend to submit for the MIPS performance period and provide the results of the executed data validation plan by May 31st of the year following the performance period.

(2) [Reserved] (vi) Beginning with the CY 2021 performance period/2023 MIPS payment year, the QCDR or qualified registry must conduct targeted audits in accordance with this paragraph (b)(3)(vi). (A) If a data validation audit under paragraph (b)(3)(v) of this section identifies one or more deficiency or data error, the QCDR or qualified registry must conduct a targeted audit into the impact and root cause of each such deficiency or data error for that MIPS payment year. (B) The QCDR or qualified registry must conduct any required targeted audits for the MIPS payment year and correct any deficiencies or data errors identified through such audit prior to the submission of data for that MIPS payment year. (C) The QCDR or qualified registry must conduct the targeted audit using the sampling methodology that meets the requirements described in paragraph (b)(3)(iv)(E) of this section. The sample for the targeted audit must not include data from the sample used for the data validation audit in which the deficiency or data error was identified.

(D) In a form and manner and by a deadline specified by CMS, the QCDR or qualified registry must report the results of each targeted audit, including the overall deficiency or data error rate, the types of deficiencies or data errors discovered, the percentage of clinicians impacted by each deficiency or data error, and how and when each deficiency or data error type was corrected. (vii) For the CY 2023 performance period/2025 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for any of the 2019 through 2023 MIPS payment years must submit a participation plan for CMS' approval. The participation plan must include the QCDR and/or qualified registry's detailed plans about how the QCDR or qualified registry intends to encourage clinicians to submit MIPS data to CMS through the QCDR or qualified registry. (viii) Beginning with the CY 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval. This participation plan must include the QCDR's and/or qualified registry's detailed plans about how the QCDR or qualified registry intends to encourage clinicians to submit MIPS data to CMS through the QCDR or qualified registry.

(4) QCDR measures for the quality performance category—(i) QCDR measure self-nomination requirements. For the CY 2018 performance period/2020 MIPS payment year and future years, at the time of self-nomination an entity seeking to become a QCDR must submit the following information for any measure it intends to submit for the payment year. (A) For MIPS quality measures, the entity must submit specifications including the MIPS measure IDs and specialty-specific measure sets, as applicable. (B) For QCDR measures, the entity must submit for CMS-approval measure specifications including. Name/title of measures, NQF number (if NQF- endorsed), descriptions of the denominator, numerator, and when applicable, denominator exceptions, denominator exclusions, risk adjustment variables, and risk adjustment algorithms.

In addition, no later than 15 calendar days following CMS approval of any QCDR measure specifications, the entity must publicly post the measure specifications for that QCDR measure (including the CMS- assigned QCDR measure ID) and provide CMS with a link to where this information is posted. (ii) QCDR measure submission requirements. A QCDR must include the CMS-assigned QCDR measure ID when submitting data on any QCDR measure to CMS. (iii) QCDR measure approval criteria. (A) QCDR measure requirements for approval are.

( 1 ) QCDR measures that are beyond the measure concept phase of development. ( 2 ) QCDR measures that address significant variation in performance. ( 3 ) Beginning with the CY 2022 performance period/2024 MIPS payment year, all QCDR measures must meet face validity. To be approved for the CY 2023 performance period/2025 MIPS payment year, all QCDR measures must meet face validity for the initial MIPS payment year for which it is approved. For subsequent years after being initially approved, all QCDR measures must be fully developed and tested, with complete testing results at the clinician level, prior to submitting the QCDR measure at the time of self-nomination.

( i ) To be included in an MVP for the CY 2022 performance period/2024 MIPS payment year and future years, a QCDR measure must be fully tested. ( ii ) [Reserved] ( 4 ) Beginning with the CY 2022 performance period/2023 MIPS payment year, QCDRs are required to collect data on a QCDR measure, appropriate to the measure type, prior to submitting the QCDR measure for CMS consideration during the self-nomination period. ( 5 ) Beginning with the CY 2020 performance period/2022 MIPS payment year, CMS may provisionally approve the individual QCDR measures for 1 year with the condition that QCDRs address certain areas of duplication with other approved QCDR measures or MIPS quality measures in order to be considered for the program in subsequent years. If such areas of duplication are not addressed, CMS may reject the duplicative QCDR measure. (B) QCDR measure considerations for approval include, but are not limited to.

( 1 ) Measures that are outcome-based rather than clinical process measures. ( 2 ) Measures that address patient safety and adverse events. ( 3 ) Measures that identify appropriate use of diagnosis and therapeutics. ( 4 ) Measures that address the domain of care coordination. ( 5 ) Measures that address the domain for patient and caregiver experience.

( 6 ) Measures that address efficiency, cost, and resource use. ( 7 ) Beginning with the CY 2021 performance period/2023 MIPS payment year - ( i ) That QCDRs link their QCDR measures as feasible to at least one cost measure, improvement activity, or an MVP at the time of self-nomination. ( ii ) In cases where a QCDR measure does not have a clear link to a cost measure, improvement activity, or an MVP, CMS would consider exceptions if the potential QCDR measure otherwise meets the QCDR measure requirements and considerations. ( 8 ) Beginning with the CY 2020 performance period/2022 MIPS payment year CMS may consider the extent to which a QCDR measure is available to MIPS eligible clinicians reporting through QCDRs other than the QCDR measure owner for purposes of MIPS. If CMS determines that a QCDR measure is not available to MIPS eligible clinicians, groups, and virtual groups reporting through other QCDRs, CMS may not approve the measure.

( 9 ) Greater consideration is given to measures for which QCDRs. Start Printed Page 65680 (i) Conducted an environmental scan of existing QCDR measures. MIPS quality measures. Quality measures retired from the legacy Physician Quality Reporting System (PQRS) program. And ( ii ) Utilized the CMS Quality Measure Development Plan Annual Report and the Blueprint in the CMS Measures Management System to identify measurement gaps prior to measure development.

( 10 ) Beginning with the CY 2020 performance period/2022 MIPS payment year, CMS places greater preference on QCDR measures that meet case minimum and reporting volumes required for benchmarking after being in the program for 2 consecutive CY performance periods. Those that do not, may not continue to be approved. ( i ) Beginning with the CY 2020 performance period/2022 MIPS payment year, in instances where a QCDR believes the low-reported QCDR measure that did not meet benchmarking thresholds is still important and relevant to a specialist's practice, that the QCDR may develop and submit a QCDR measure participation plan for our consideration. This QCDR measure participation plan must include the QCDR's detailed plans and changes to encourage eligible clinicians and groups to submit data on the low-reported QCDR measure for purposes of the MIPS program. ( ii ) [Reserved] (C) Beginning with the CY 2021 performance period/2023 MIPS payment year, QCDR measures may be approved for 2 years, at CMS discretion by attaining approval status by meeting QCDR measure considerations and requirements.

Upon annual review, CMS may revoke a QCDR measure's second year approval, if the QCDR measure is found to be. Topped out. Duplicative of a more robust measure. Reflects an outdated clinical guideline. Or if the QCDR self-nominating the QCDR measure is no longer in good standing.

(iv) QCDR measure rejection criteria. Beginning with the CY 2020 performance period/2022 MIPS payment year, QCDR measure rejection considerations include, but are not limited to. (A) QCDR measures that are duplicative or identical to other QCDR measures or MIPS quality measures that are currently in the program. (B) QCDR measures that are duplicative or identical to MIPS quality measures that have been removed from MIPS through rulemaking. (C) QCDR measures that are duplicative or identical to quality measures used under the legacy Physician Quality Reporting System (PQRS) program, which have been retired.

(D) QCDR measures that meet the topped out definition as described at § 414.1305. (E) QCDR measures that are process-based, with consideration to whether the removal of the process measure impacts the number of measures available for a specific specialty. (F) Whether the QCDR measure has potential unintended consequences to a patient's care. (G) Considerations and evaluation of the measure's performance data, to determine whether performance variance exists. (H) QCDR measures that split a single clinical practice or action into several QCDR measures.

(I) QCDR measures that are “check-box” with no actionable quality action. (J) QCDR measures that do not meet the case minimum and reporting volumes required for benchmarking after being in the program for 2 consecutive years. (K) QCDR measures with clinician attribution issues, where the quality action is not under the direct control of the reporting clinician. (L) QCDR measures that focus on rare events or “never events” in the measurement period. (M) QCDR does not have permission to use a QCDR measure owned by another QCDR for the applicable performance period.

(N) If a QCDR measure owner is not approved or is not in good standing, any associated QCDR measures will not be approved. (c) Additional requirements for Health IT vendors. (1) Beginning with the CY 2021 performance period/2023 MIPS payment year, health IT vendors must be able to submit data for the MIPS performance categories as follows. (i) Health IT vendors that support MVPs must be able to submit data for all of the MIPS performance categories. (A) Quality, except.

( 1 ) The CAHPS for MIPS survey. And ( 2 ) QCDR measures. (B) Improvement activities. And (C) Promoting Interoperability, if the eligible clinician, group, virtual group, or subgroup is using CEHRT, unless. ( 1 ) The third party intermediary's MIPS eligible clinicians, groups, virtual groups, or subgroups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)( 4 )( i ) through ( iii ) or (c)(2)(i)(C)( 1 ) through ( 7 ) or (c)(2)(i)(C)( 9 ).

( 2 ) [Reserved] (ii) Health IT vendors that do not support MVPs must be able to submit data for at least one of the MIPS performance categories described in paragraphs (c)(1)(i) of this section. (iii) Beginning with the CY 2023 performance period/2025 MIPS payment year, Health IT vendors must support MVPs that are applicable to the MVP participant on whose behalf they submit MIPS data. Health IT vendors may also support the APP. (2) [Reserved] (d) Additional requirements for CMS-approved survey vendors. (1) CMS-approved survey vendors may submit data on the CAHPS for MIPS survey for the MIPS quality performance category.

(2) Entities seeking to be a CMS-approved survey vendor for any MIPS performance period must submit a survey vendor application to CMS in a form and manner specified by CMS for each MIPS performance period for which it wishes to transmit such data. The application and any supplemental information requested by CMS must be submitted by deadlines specified by CMS. For an entity to be a CMS-approved survey vendor, it must meet the following criteria. (3) The entity must have sufficient experience, capability, and capacity to accurately report CAHPS data, including. (i) At least 3 years of experience administering mixed-mode surveys (that is, surveys that employ multiple modes to collect date), including mail survey administration followed by survey administration via Computer Assisted Telephone Interview (CATI).

(ii) At least 3 years of experience administering surveys to a Medicare population. (iii) At least 3 years of experience administering CAHPS surveys within the past 5 years. (iv) Experience administering surveys in English and at least one other language for which a translation of the CAHPS for MIPS survey is available. (v) Use equipment, software, computer programs, systems, and facilities that can verify addresses and phone numbers of sampled beneficiaries, monitor interviewers, collect data via CATI, electronically administer the survey and schedule call-backs to beneficiaries at varying times of the day and week, track fielded surveys, assign final disposition codes to reflect the outcome of data collection of each sampled case, and track cases from mail surveys through telephone follow-up activities. And (vi) Employment of a program manager, information systems specialist, call center supervisor and mail center supervisor to administer the survey.

Start Printed Page 65681 (4) The entity has certified that it has the ability to maintain and transmit quality data in a manner that preserves the security and integrity of the data. (5) The entity has successfully completed, and has required its subcontractors to successfully complete, vendor training(s) administered by CMS or its contractors. (6) The entity has submitted a quality assurance plan and other materials relevant to survey administration, as determined by CMS, including cover letters, questionnaires and telephone scripts. (7) The entity has agreed to participate and cooperate, and has required its subcontractors to participate and cooperate, in all oversight activities related to survey administration conducted by CMS or its contractors. (8) The entity has sent an interim survey data file to CMS that establishes the entity's ability to accurately report CAHPS data.

(e) Remedial action and termination of third party intermediaries. (1) If CMS determines that a third party intermediary has ceased to meet one or more of the applicable criteria for approval, has submitted a false certification under paragraph (a)(3) of this section, or has submitted data that are inaccurate, unusable, or otherwise compromised, CMS may take one or more of the following remedial actions after providing written notice to the third party intermediary. (i) Require the third party intermediary to submit a corrective action plan (CAP) by a date specified by CMS. The CAP must address the following issues, unless different or additional information is specified by CMS. (A) The issues that contributed to the non-compliance.

(B) The impact to individual clinicians, groups, or virtual groups, regardless of whether they are participating in the program because they are MIPS eligible, voluntary participating, or opting in to participating in the MIPS program. (C) The corrective actions to be implemented by the third party intermediary to ensure that the non-compliance has been resolved and will not recur in the future. (D) The detailed timeline for achieving compliance with the applicable requirements. (ii) Publicly disclose the entity's data error rate on the CMS website until the data error rate falls below 3 percent. (2) CMS may immediately or with advance notice terminate the ability of a third party intermediary to submit MIPS data on behalf of a MIPS eligible clinician, group, or virtual group for one or more of the following reasons.

(i) CMS has grounds to impose remedial action. (ii) CMS has not received a CAP within the specified time-period or the CAP is not accepted by CMS. Or (iii) The third party intermediary fails to correct the deficiencies or data errors by the date specified by CMS. (3) Contains data inaccuracies affecting the third party intermediary's total clinicians may lead to remedial action/termination of the third party intermediary for future program year(s) based on CMS discretion. (4) For purposes of this paragraph (e), CMS may determine that submitted data are inaccurate, unusable, or otherwise compromised, including but not limited to, if the submitted data.

(i) Includes, without limitation, TIN/NPI mismatches, formatting issues, calculation errors, or data audit discrepancies. (ii) [Reserved] (f) Auditing of entities submitting MIPS data. Any third party intermediary must comply with the following procedures as a condition of its qualification and approval to participate in MIPS as a third party intermediary. (1) The entity must make available to CMS the contact information of each MIPS eligible clinician or group on behalf of whom it submits data. The contact information must include, at a minimum, the MIPS eligible clinician or group's practice phone number, address, and, if available, email.

(2) The entity must retain all data submitted to CMS for purposes of MIPS for 6 years from the end of the MIPS performance period. (3) For the purposes of auditing, CMS may request any records or data retained for the purposes of MIPS for up to 6 years from the end of the MIPS performance period. Start Amendment Part62. Amend § 414.1405 by adding paragraphs (b)(9), (d)(7), and (g) to read as follows. End Amendment Part Payment.

* * * * * (b) * * * (9) Pursuant to the methodology established at paragraph (g) of this section, the performance threshold for the 2024 MIPS payment year is 75 points. The prior period used to determine the performance threshold is the 2019 MIPS payment year. * * * * * (d) * * * (7) The additional performance threshold for the 2024 MIPS payment year is 89 points. * * * * * (g) Performance threshold methodology. For each of the 2024, 2025, and 2026 MIPS payment years, the performance threshold is the mean of the final scores for all MIPS eligible clinicians from a prior period as specified under paragraph (b) of this section.

Start Amendment Part63. Amend § 414.1430 by— End Amendment Part Start Amendment Parta. Revising paragraph (a)(1)(iii). End Amendment Part Start Amendment Partb. Adding paragraphs (a)(1)(iv).

End Amendment Part Start Amendment Partc. Removing the second occurrence of paragraph (a)(2)(ii). End Amendment Part Start Amendment Partd. Adding paragraphs (a)(2)(iii) and (iv). And End Amendment Part Start Amendment Parte.

Revising paragraphs (b)(1)(i)(A) and (B) and (b)(2)(i)(A) and (B). End Amendment Part The revisions and additions read as follows. Qualifying APM participant determination. QP and partial QP thresholds. (a) * * * (1) * * * (iii) 2023 and 2024.

50 percent. (iv) 2025 and later. 75 percent. (2) * * * (iii) 2023 and 2024. 50 percent.

(iv) 2025 and later. 75 percent. * * * * * (b) * * * (1) * * * (i) * * * (A) 2021 through 2024. 50 percent. (B) 2025 and later.

75 percent. * * * * * (2) * * * (i) * * * (A) 2021 through 2024. 35 percent. (B) 2025 and later. 50 percent.

* * * * * Start Amendment Part64. Amend § 414.1450 by revising paragraph (c) introductory text to read as follows. End Amendment Part APM incentive payment. * * * * * (c) APM Incentive Payment recipient. CMS will pay the APM Incentive Payment amount for a payment year to a solvent TIN or TINs associated with the QP, identified based on Medicare Part B claims submitted for covered professional services during the base period or payment year, according to this section.

If no TIN or TINs with which the QP has an association can be identified at a step, CMS will move to the next and successive steps listed in paragraphs (c)(1) through (8) of this section until CMS identifies a TIN or TINs with which the QP is associated, and to which CMS will make the APM Start Printed Page 65682 Incentive Payment. If more than one TIN is identified at a step, the payment will be proportionately divided among the TINs according to the relative total paid amounts for Part B covered professional services paid to each TIN for services provided during the base year. * * * * * Start Part End Part Start Amendment Part65. The authority citation for part 415 continues to read as follows. End Amendment Part Start Authority 42 U.S.C.

1302 and 1395hh. End Authority Start Amendment Part66. Section 415.140 is added to subpart D to read as follows. End Amendment Part Conditions for payment. Split (or shared) visits.

(a) Definitions. For purposes of this section, the following definitions apply. Facility setting for purposes of this section means institutional settings in which payment for services and supplies furnished incident to a physician or practitioner's professional services is prohibited under § 410.26(b)(1) of this subchapter. Split (or shared) visit means an evaluation and management (E/M) visit in the facility setting that is performed in part by both a physician and a nonphysician practitioner who are in the same group, in accordance with applicable law and regulations such that the service could be could be billed by either the physician or nonphysician practitioner if furnished independently by only one of them. Substantive portion means more than half of the total time spent by the physician and nonphysician practitioner performing the split (or shared) visit, except as otherwise provided in this paragraph.

For visits other than critical care visits furnished in calendar year 2022, substantive portion means one of the three key components (history, exam or medical decision-making) or more than half of the total time spent by the physician and nonphysician practitioner performing the split (or shared) visit. (b) Conditions of payment. For purposes of this section, the following conditions of payment apply. (1) Substantive portion of split (or shared) visit. In general, payment is made to the physician or nonphysician practitioner who performs the substantive portion of the split (or shared) visit.

(2) Medical record documentation. Documentation in the medical record must identify the physician and nonphysician practitioner who performed the visit. The individual who performed the substantive portion of the visit (and therefore bills for the visit) must sign and date the medical record. (3) Claim modifier. The designated modifier must be included on the claim to identify that the service was a split (or shared) visit.

Start Part End Part Start Amendment Part67. The authority citation for part 423 continues to read as follows. End Amendment Part Start Authority 42 U.S.C. 1302, 1306, 1395w-101 through 1395w-152, and 1395hh. End Authority Start Amendment Part68.

Amend § 423.160 by revising paragraph (a)(5) to read as follows. End Amendment Part Standards for electronic prescribing. (a) * * * (5) Beginning on January 1, 2021, prescribers must, except in the circumstances described in paragraphs (a)(5)(i) through (iv) of this section, conduct prescribing for at least 70 percent of their Schedule II, III, IV, and V controlled substances that are Part D drugs electronically using the applicable standards in paragraph (b) of this section. Prescriptions written for a beneficiary in a long-term care facility will not be included in determining compliance until January 1, 2025. Compliance actions against prescribers who do not meet the compliance threshold based on prescriptions written for a beneficiary in a long-term care facility will commence on or after January 1, 2025.

Compliance actions against prescribers who do not meet the compliance threshold based on other prescriptions will commence on or after January 1, 2023. Prescribers will be exempt from this requirement in the following situations. (i) Prescriber and dispensing pharmacy are the same entity. (ii) Prescriber issues 100 or fewer controlled substance prescriptions for Part D drugs per calendar year as determined using CMS claims data as of December 31st of the preceding year. (iii) Prescriber has an NCPDP database address in the geographic area of an emergency or disaster declared by a Federal, State, or local government entity.

(iv) Prescriber has received a CMS-approved waiver because the prescriber is unable to conduct electronic prescribing of controlled substances (EPCS) due to circumstances beyond the prescriber's control. * * * * * Start Part End Part Start Amendment Part69. The authority for part 424 continues to read as follows. End Amendment Part Start Authority 42 U.S.C. 1302 and 1395hh.

End Authority Start Amendment Part70. Amend § 424.205 by redesignating paragraphs (b)(5) and (6) as paragraphs (b)(6) and (7), respectively, and adding new paragraph (b)(5). End Amendment Part The addition reads as follows. Requirements for Medicare Diabetes Prevention Program suppliers. * * * * * (b) * * * (5) The Medicare provider enrollment application fee does not apply to all Medicare Diabetes Prevention Program (MDPP) suppliers that submit an enrollment application on or after January 1, 2022.

* * * * * Start Amendment Part71. Amend § 424.502 by revising the definition of “Institutional provider” to read as follows. End Amendment Part Definitions. * * * * * Institutional provider means any provider or supplier that submits a paper Medicare enrollment application using the CMS-855A, CMS-855B (not including physician and nonphysician practitioner organizations), CMS-855S, or an associated internet-based PECOS enrollment application. * * * * * Start Amendment Part72.

Amend § 424.530 by revising paragraphs (a)(2) introductory text and (a)(11)(i) to read as follows. End Amendment Part Denial of enrollment in the Medicare program. (a) * * * (2) Provider or supplier conduct. The provider or supplier, or any owner, managing employee, authorized or delegated official, medical director, supervising physician, or other health care or administrative or management services personnel furnishing services payable by a Federal health care program, of the provider or supplier is— * * * * * (11) * * * (i) A physician or other eligible professional's Drug Enforcement Administration (DEA) Certificate of Registration to dispense a controlled substance is currently suspended or revoked or is surrendered in response to an order to show cause. * * * * * Start Amendment Part73.

Amend § 424.535 by revising paragraphs (a)(2) introductory text, Start Printed Page 65683 (a)(8)(ii), (a)(13)(i), and (e) to read as follows. End Amendment Part Revocation of enrollment in the Medicare program. (a) * * * (2) Provider or supplier conduct. The provider or supplier, or any owner, managing employee, authorized or delegated official, medical director, supervising physician, or other health care or administrative or management services personnel furnishing services payable by a Federal health care program, of the provider or supplier is— * * * * * (8) * * * (ii) CMS determines that the provider or supplier has a pattern or practice of submitting claims that fail to meet Medicare requirements. In making this determination, CMS considers, as appropriate or applicable, the following.

(A) The percentage of submitted claims that were denied during the period under consideration. (B) Whether the provider or supplier has any history of final adverse actions and the nature of any such actions. (C) The type of billing non-compliance and the specific facts surrounding said non-compliance (to the extent this can be determined). (D) Any other information regarding the provider or supplier's specific circumstances that CMS deems relevant to its determination. * * * * * (13) * * * (i) A physician or other eligible professional's Drug Enforcement Administration (DEA) Certificate of Registration to dispense a controlled substance is currently suspended or revoked or is surrendered in response to an order to show cause.

* * * * * (e) Reversal of revocation. If the revocation was due to adverse activity (sanction, exclusion, or felony) against the provider's or supplier's owner, managing employee, authorized or delegated official, medical director, supervising physician, or other health care or administrative or management services personnel furnishing services payable by a Federal health care program, the revocation may be reversed if the provider or supplier terminates and submits proof that it has terminated its business relationship with that individual within 30 days of the revocation notification. * * * * * Start Amendment Part74. Amend § 424.545 in paragraph (b) by removing the reference “§ 405.374” and adding in its place the reference “§ 424.546”. End Amendment Part Start Amendment Part75.

Add § 424.546 to read as follows. End Amendment Part Deactivation rebuttals. (a) Rebuttal submittal period. (1) If a provider or supplier receives written notice from CMS or its contractor that the provider's or supplier's billing privileges are to be or have been deactivated under § 424.540, the provider or supplier has 15 calendar days from the date of the written notice to submit a rebuttal to CMS as permitted under § 424.545(b). (2) CMS may, at its discretion, extend the 15-day time-period referenced in paragraph (a)(1) of this section.

(b) Rebuttal requirements. A rebuttal submitted pursuant to this section and § 424.545(b) must. (1) Be in writing. (2) Specify the facts or issues about which the provider or supplier disagrees with the deactivation's imposition and/or the effective date, and the reasons for disagreement. (3) Submit all documentation the provider or supplier wants CMS to consider in its review of the deactivation.

(4) Be submitted in the form of a letter that is signed and dated by the individual supplier (if enrolled as an individual physician or nonphysician practitioner), the authorized official or delegated official (as those terms are defined in 42 CFR 424.502), or a legal representative (as defined in 42 CFR 498.10). If the legal representative is an attorney, the attorney must include a statement that he or she has the authority to represent the provider or supplier. This statement is sufficient to constitute notice of such authority. If the legal representative is not an attorney, the provider or supplier must file with CMS written notice of the appointment of a representative. This notice of appointment must be signed and dated by, as applicable, the individual supplier, the authorized official or delegated official, or a legal representative.

(c) Waiver of rebuttal rights. The provider's or supplier's failure to submit a rebuttal that is both timely under paragraph (a) of this section and fully compliant with all of the requirements of paragraph (b) of this section constitutes a waiver of all rebuttal rights under this section and § 424.545(b). (d) CMS review. Upon receipt of a timely and compliant deactivation rebuttal, CMS reviews the rebuttal to determine whether the imposition of the deactivation and/or the designated effective date are correct. (e) Imposition.

Nothing in this section or in § 424.545(b) requires CMS to delay the imposition of a deactivation pending the completion of the review described in paragraph (d) of this section. (f) Initial determination. A determination made under this section is not an initial determination under § 498.3(b) of this chapter and therefore not appealable. Start Part End Part Start Amendment Part76. The authority citation for part 425 continues to read as follows.

End Amendment Part Start Authority 42 U.S.C. 1302, 1306, 1395hh, and 1395jjj. End Authority Start Amendment Part77. Amend § 425.116 by revising paragraph (c) to read as follows. End Amendment Part Agreements with ACO participants and ACO providers/suppliers.

* * * * * (c) Submission of agreements. The ACO must submit an executed ACO participant agreement for each ACO participant that it requests to add to its list of ACO participants in accordance with § 425.118. The agreements may be submitted in the form and manner set forth in § 425.204(c)(6) or as otherwise specified by CMS. Start Amendment Part78. Amend § 425.204 by revising paragraphs (b), (c)(6), (f)(4)(ii)(A) and (B), (f)(4)(iii) introductory text, and (f)(4)(iii)(A) and adding paragraph (f)(4)(v) to read as follows.

End Amendment Part Content of the application. * * * * * (b) Prior participation. Upon request by CMS during the application cycle, the ACO must submit information regarding prior participation in the Medicare Shared Savings Program by the ACO, its ACO participants, or its ACO providers/suppliers, including such information as may be necessary for CMS to determine whether to approve an ACO's application in accordance with § 425.224(b). (c) * * * (6) Upon request by CMS during the application cycle or at any point during an agreement period, the ACO must submit documents demonstrating that its ACO participants, ACO providers/suppliers, and other individuals or entities performing functions or services related to ACO activities are required to comply with the requirements of the Shared Savings Program. Upon such a request, the evidence to be submitted must include, without limitation, sample or form agreements and, in the case of ACO participant agreements, the first and signature page(s) of each executed ACO participant agreement.

Start Printed Page 65684 CMS may request all pages of an executed ACO participant agreement to confirm that it conforms to the sample form agreement submitted by the ACO. The ACO must certify that all of its ACO participant agreements comply with the requirements of this part. * * * * * (f) * * * (4) * * * (ii) * * * (A) One-half percent of the total per capita Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiaries, based on expenditures and the number of assigned beneficiaries for the most recent calendar year for which 12 months of data are available. (B) One percent of the total Medicare Parts A and B fee-for-service revenue of its ACO participants, based on revenue for the most recent calendar year for which 12 months of data are available, and based on the ACO's number of assigned beneficiaries for the most recent calendar year for which 12 months of data are available. (iii) CMS recalculates the ACO's repayment mechanism amount for the second and each subsequent performance year in the agreement period in accordance with paragraph (f)(4)(ii) of this section based on the certified ACO participant list for the relevant performance year, except that the number of assigned beneficiaries used in the calculations is the number of beneficiaries assigned to the ACO at the beginning of the relevant performance year under § 425.400(a)(2)(i) (for ACOs under preliminary prospective assignment with retrospective reconciliation) or § 425.400(a)(3)(i) (for ACOs under prospective assignment).

(A) If the recalculated repayment mechanism amount exceeds the existing repayment mechanism amount by at least $1,000,000, CMS notifies the ACO in writing that the amount of its repayment mechanism must be increased to the recalculated repayment mechanism amount. * * * * * (v)(A) An ACO that established a repayment mechanism to support its participation in a two-sided model beginning on July 1, 2019, January 1, 2020, or January 1, 2021, may elect to decrease the amount of its repayment mechanism if the repayment mechanism amount for performance year 2022, as recalculated pursuant to paragraph (f)(4)(iii) of this section, is less than the existing repayment mechanism amount. (B) CMS will notify the ACO in writing if the ACO may elect to decrease the amount of its repayment mechanism pursuant to this paragraph (f)(4)(v). The ACO must submit such election, and revised repayment mechanism documentation, in a form and manner and by a deadline specified by CMS. CMS will review the revised repayment mechanism documentation and may reject the election if the repayment mechanism documentation does not comply with the requirements of this paragraph (f).

* * * * * Start Amendment Part79. Amend § 425.312 by revising paragraph (a)(2)(ii) and adding paragraph (a)(2)(iii) to read as follows. End Amendment Part Beneficiary notifications. (a) * * * (2) * * * (ii) In the case of an ACO that has selected preliminary prospective assignment with retrospective reconciliation, by the ACO or ACO participant providing each fee-for-service beneficiary with a standardized written notice prior to or at the first primary care visit of the performance year in the form and manner specified by CMS. (iii) In the case of an ACO that has selected prospective assignment, by the ACO or ACO participant providing each prospectively assigned beneficiary with a standardized written notice prior to or at the first primary care visit of the performance year in the form and manner specified by CMS.

* * * * * Start Amendment Part80. Amend § 425.400 by— End Amendment Part Start Amendment Parta. Revising paragraph (c)(1)(v) introductory text. End Amendment Part Start Amendment Partb. Adding paragraph (c)(1)(vi).

And End Amendment Part Start Amendment Partc. Revising paragraphs (c)(2)(i) introductory text, (c)(2)(i)(A)(2), and (c)(2)(ii). End Amendment Part The revisions and addition read as follows. General. * * * * * (c) * * * (1) * * * (v) For the performance year starting on January 1, 2021.

* * * * * (vi) For the performance year starting on January 1, 2022, and subsequent performance years as follows. (A) CPT codes. ( 1 ) 96160 and 96161 (codes for administration of health risk assessment). ( 2 ) 99201 through 99215 (codes for office or other outpatient visit for the evaluation and management of a patient). ( 3 ) 99304 through 99318 (codes for professional services furnished in a nursing facility.

Professional services or services reported on an FQHC or RHC claim identified by these codes are excluded when furnished in a SNF). ( 4 ) 99319 through 99340 (codes for patient domiciliary, rest home, or custodial care visit). ( 5 ) 99341 through 99350 (codes for evaluation and management services furnished in a patient's home for claims identified by place of service modifier 12). ( 6 ) 99354 and 99355 (add-on codes, for prolonged evaluation and management or psychotherapy services beyond the typical service time of the primary procedure. When the base code is also a primary care service code under this paragraph (c)(1)(vi)).

( 7 ) 99421, 99422, and 99423 (codes for online digital evaluation and management). ( 8 ) 99424, 99425, 99426, and 99427 (codes for principal care management services). ( 9 ) 99437, 99487, 99489, 99490 and 99491 (codes for chronic care management). ( 10 ) 99439 (code for non-complex chronic care management). ( 11 ) 99483 (code for assessment of and care planning for patients with cognitive impairment).

( 12 ) 99484, 99492, 99493 and 99494 (codes for behavioral health integration services). ( 13 ) 99495 and 99496 (codes for transitional care management services). ( 14 ) 99497 and 99498 (codes for advance care planning. Services identified by these codes furnished in an inpatient setting are excluded). (B) HCPCS codes.

( 1 ) G0402 (code for the Welcome to Medicare visit). ( 2 ) G0438 and G0439 (codes for the annual wellness visits). ( 3 ) G0442 (code for alcohol misuse screening service). ( 4 ) G0443 (code for alcohol misuse counseling service). ( 5 ) G0444 (code for annual depression screening service).

( 6 ) G0463 (code for services furnished in ETA hospitals). ( 7 ) G0506 (code for chronic care management). ( 8 ) G2010 (code for the remote evaluation of patient video/images). ( 9 ) G2012 and G2252 (codes for virtual check-in). ( 10 ) G2058 (code for non-complex chronic care management).

( 11 ) G2064 and G2065 (codes for principal care management services). ( 12 ) G2212 (code for prolonged office or other outpatient visit for the evaluation and management of a patient). Start Printed Page 65685 ( 13 ) G2214 (code for psychiatric collaborative care model). (C) Primary care service codes include any CPT code identified by CMS that directly replaces a CPT code specified in paragraph (c)(1)(vi)(A) of this section or a HCPCS code specified in paragraph (c)(1)(vi)(B) of this section, when the assignment window (as defined in § 425.20) for a benchmark or performance year includes any day on or after the effective date of the replacement code for payment purposes under FFS Medicare. (2)(i) Except as otherwise specified in paragraph (c)(2)(i)(A)(2) of this section, when the assignment window (as defined in § 425.20) for a benchmark or performance year includes any month(s) during the buy antibiotics Public Health Emergency defined in § 400.200 of this chapter, in determining beneficiary assignment, we use the primary care service codes identified in paragraph (c)(1) of this section, and additional primary care service codes as follows.

(A) * * * (2) 99441, 99442, and 99443 (codes for telephone evaluation and management services). These codes are used in determining beneficiary assignment as specified in paragraphs (c)(2)(i) and (ii) of this section and until they are no longer payable under Medicare fee-for-service payment policies as specified under section 1834(m) of the Act and §§ 410.78 and 414.65 of this subchapter. * * * * * (ii) Except as otherwise specified in paragraph (c)(2)(i)(A)(2) of this section, the additional primary care service codes specified in paragraph (c)(2)(i) of this section are applicable to all months of the assignment window (as defined in § 425.20), when the assignment window includes any month(s) during the buy antibiotics Public Health Emergency defined in § 400.200 of this chapter. Start Amendment Part81. Amend § 425.512 by— End Amendment Part Start Amendment Parta.

Revising paragraphs (a)(2) and (3). End Amendment Part Start Amendment Partb. Redesignating paragraph (a)(4) as paragraph (a)(5). End Amendment Part Start Amendment Partc. Adding a new paragraph (a)(4).

End Amendment Part Start Amendment Partd. Revising newly redesignated paragraph (a)(5). And End Amendment Part Start Amendment Parte. Revising paragraphs (b)(2)(i) and (ii) and (b)(3)(i) and (ii). End Amendment Part The revisions and addition read as follows.

Determining the ACO quality performance standard for performance years beginning on or after January 1, 2021. (a) * * * (2) For the first performance year of an ACO's first agreement period under the Shared Savings Program. If the ACO reports data via the APP and meets the data completeness requirement at § 414.1340 of this subchapter and the case minimum requirement at § 414.1380 of this subchapter on the measures specified in this paragraph (a)(2) for the applicable performance year, the ACO will meet the quality performance standard. (i) For performance years 2022, 2023, and 2024. The ten CMS Web Interface measures or the three eCQMs/MIPS CQMs, and the CAHPS for MIPS survey.

(ii) For performance year 2025 and subsequent performance years. The three eCQMs/MIPS CQMs and the CAHPS for MIPS survey. (3) For performance year 2021. (i) Except as specified in paragraph (a)(2) of this section, CMS designates the quality performance standard as the ACO reporting quality data via the APP established under § 414.1367 of this subchapter, according to the method of submission established by CMS and achieving a quality performance score that is equivalent to or higher than the 30th percentile across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring. (ii) If an ACO does not report any of the ten CMS Web Interface measures or any of the three eCQMs/MIPS CQMs and does not administer a CAHPS for MIPS survey under the APP, the ACO will not meet the quality performance standard.

(4) For performance years 2022 and 2023. (i) Except as specified in paragraph (a)(2) of this section, CMS designates the quality performance standard as the ACO reporting quality data via the APP established under § 414.1367 of this subchapter according to the method of submission established by CMS and either. (A) Achieving a quality performance score that is equivalent to or higher than the 30th percentile across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring, or (B) If the ACO reports the three eCQMs/MIPS CQMs in the APP measure set, meeting the data completeness requirement at § 414.1340 of this subchapter and the case minimum requirement at § 414.1380 of this subchapter for all three eCQMs/MIPS CQMs, achieving a quality performance score equivalent to or higher than the 10th percentile of the performance benchmark on at least one of the four outcome measures in the APP measure set and a quality performance score equivalent to or higher than the 30th percentile of the performance benchmark on at least one of the remaining five measures in the APP measure set. (ii) If an ACO does not report any of the ten CMS Web Interface measures or any of the three eCQMs/MIPS CQMs and does not administer a CAHPS for MIPS survey under the APP, the ACO will not meet the quality performance standard. (5) For performance year 2024 and subsequent performance years.

(i) Except as specified in paragraph (a)(2) of this section, CMS designates the quality performance standard as the ACO reporting quality data via the APP established under § 414.1367 of this subchapter, according to the method of submission established by CMS and achieving a quality performance score that is equivalent to or higher than the 40th percentile across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring. (ii) If an ACO does not report any of the three eCQMs/MIPS CQMs and does not administer a CAHPS for MIPS survey under the APP, the ACO will not meet the quality performance standard. (b) * * * (2) * * * (i) For performance years 2021, 2022, and 2023, the ACO's minimum quality performance score is set to the equivalent of the 30th percentile MIPS Quality performance category score across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring, for the relevant performance year. (ii) For performance year 2024 and subsequent performance years, the ACO's minimum quality performance score is set to the equivalent of the 40th percentile MIPS Quality performance category score across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring, for the relevant performance year. (3) * * * (i) For performance years 2021, 2022, and 2023, CMS will use the higher of the ACO's quality performance score or the equivalent of the 30th percentile MIPS Quality performance category score across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring, for the relevant performance year.

(ii) For performance year 2024 and subsequent performance years, CMS will use the higher of the ACO's quality performance score or the equivalent of the 40th percentile MIPS Quality performance category score across all MIPS Quality performance category Start Printed Page 65686 scores, excluding entities/providers eligible for facility-based scoring, for the relevant performance year. * * * * * Start Signature Xavier Becerra, Secretary, Department of Health and Human Services. End Signature The following appendices will not appear in the Code of Federal Regulations. 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CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-P[FR Doc. 2021-23972 Filed 11-2-21.

Start Preamble Centers for Disease Control and Prevention buy flagyl online fast delivery (CDC), Department of Health and Human Services (HHS). Notice of meeting and request for comment. In accordance with the Federal buy flagyl online fast delivery Advisory Committee Act, the Centers for Disease Control and Prevention (CDC) announces the following meeting of the Advisory Committee on Immunization Practices (ACIP). This meeting is open to the public.

Time will be available buy flagyl online fast delivery for public comment. The meeting will be webcast live via the World Wide Web. The meeting will be held on November 19, 2021, from 12:00 p.m. To 3:00 buy flagyl online fast delivery p.m., EST (times subject to change).

The public may submit written comments from November 19, 2021 through November 22, 2021. You may submit comments buy flagyl online fast delivery identified by Docket No. CDC-2021-0125 by any of the following methods. • Federal eRulemaking Portal.

Https://www.regulations.gov. Follow the instructions for submitting comments. • Mail. Centers for Disease Control and Prevention, 1600 Clifton Road NE, MS H24-8, Atlanta, Georgia 30329-4027, Attn.

ACIP Meeting. Instructions. All submissions received must include the Agency name and Docket Number. All relevant comments received in conformance with the https://www.regulations.gov suitability policy will be posted without change to https://www.regulations.gov, including any personal information provided.

For access to the docket to read background documents or comments received, go to https://www.regulations.gov. Written public comments submitted up to 72 hours prior to the ACIP meeting will be provided to ACIP members before the meeting. Start Further Info Stephanie Thomas, ACIP Committee Management Specialist, Centers for Disease Control and Prevention, National Center for Immunization and Respiratory Diseases, 1600 Clifton Road NE, MS-H24-8, Atlanta, Georgia 30329-4027. Telephone.

(404) 639-8367. Email. ACIP@cdc.gov. End Further Info End Preamble Start Supplemental Information In accordance with 41 CFR 102-3.150(b), less than 15 calendar days' notice is being given for this meeting due to the exceptional circumstances of the buy antibiotics flagyl and rapidly evolving buy antibiotics treatment development and regulatory processes.

The Secretary of Health and Human Services has determined that buy antibiotics is a Public Health Emergency. A notice of this ACIP meeting has also been posted on CDC's ACIP website at. Http://www.cdc.gov/​treatments/​acip/​index.html. In addition, CDC has sent notice of this ACIP meeting by email to those who subscribe to receive email updates about ACIP.

Purpose. The committee is charged with advising the Director, CDC, on the use of immunizing agents. In addition, under 42 U.S.C. 1396s, the committee is mandated to establish and periodically review and, as appropriate, revise the list of treatments for administration to treatment-eligible children through the treatments for Children program, along with schedules regarding dosing interval, dosage, and contraindications to administration of treatments.

Further, under provisions of the Affordable Care Act, section 2713 of the Public Health Service Act, immunization recommendations of the ACIP that have been approved by the CDC Director and appear on CDC immunization schedules must be covered by applicable health plans. Matters to be Considered. The agenda will include discussions on buy antibiotics treatment booster doses. A vote on buy antibiotics booster doses is scheduled.

Agenda items are subject to change as priorities dictate. For more information on the meeting agenda visit https://www.cdc.gov/​treatments/​acip/​meetings/​meetings-info.html. Public Participation Interested persons or organizations are invited to participate by submitting written views, recommendations, and data. Please note that comments received, including attachments and other supporting materials, are part of the public record and are subject to public disclosure.

Comments will be posted on https://www.regulations.gov. Therefore, do not include any information in your comment or Start Printed Page 64939 supporting materials that you consider confidential or inappropriate for public disclosure. If you include your name, contact information, or other information that identifies you in the body of your comments, that information will be on public display. CDC will review all submissions and may choose to redact, or withhold, submissions containing private or proprietary information such as Social Security numbers, medical information, inappropriate language, or duplicate/near duplicate examples of a mass-mail campaign.

CDC will carefully consider all comments submitted into the docket. Written Public Comment. The docket will be opened to receive written comments on November 19, 2021. Written comments must be received on or before November 22, 2021.

Oral Public Comment. This meeting will include time for members of the public to make an oral comment. Oral public comment will occur before any scheduled votes including all votes relevant to the ACIP's Affordable Care Act and treatments for Children Program roles. Priority will be given to individuals who submit a request to make an oral public comment before the meeting according to the procedures below.

Procedure for Oral Public Comment. All persons interested in making an oral public comment at the November 19, 2021 ACIP meeting must submit a request at http://www.cdc.gov/​treatments/​acip/​meetings/​ no later than 11:59 p.m., EST, November 18, 2021, according to the instructions provided. If the number of persons requesting to speak is greater than can be reasonably accommodated during the scheduled time, CDC will conduct a lottery to determine the speakers for the scheduled public comment session. CDC staff will notify individuals regarding their request to speak by email by 9:00 a.m., EST, on November 19, 2021.

To accommodate the significant interest in participation in the oral public comment session of ACIP meetings, each speaker will be limited to 3 minutes, and each speaker may only speak once per meeting. The Director, Strategic Business Initiatives Unit, Office of the Chief Operating Officer, Centers for Disease Control and Prevention, has been delegated the authority to sign Federal Register notices pertaining to announcements of meetings and other committee management activities, for both the Centers for Disease Control and Prevention and the Agency for Toxic Substances and Disease Registry. Start Signature Kalwant Smagh, Director, Strategic Business Initiatives Unit, Office of the Chief Operating Officer, Centers for Disease Control and Prevention. End Signature End Supplemental Information [FR Doc.

2021-25387 Filed 11-17-21. 11:15 am]BILLING CODE 4163-18-PStart Preamble Start Printed Page 65524 (iv) MIPS Reweighting Based on Extreme and Uncontrollable Circumstances (A) MIPS Applications for Reweighting for the CY 2021 Performance Period/2023 MIPS Payment Year Based on Extreme and Uncontrollable Circumstances We anticipate that the national PHE for buy antibiotics will continue through CY 2021. Therefore, we remind clinicians that the application-based extreme and uncontrollable circumstances policy, as described in § 414.1380(c)(2)(i)(A)( 6 ) and (c)(2)(i)(C)( 2 ), will be available for the CY 2021 performance period/2023 MIPS payment year (85 FR 84916 through 84917). Please refer to https://qpp.cms.gov/​about/​buy antibiotics19?.

€‹py=​2021 for details. The application allows clinicians, groups, and virtual groups significantly impacted by the PHE for buy antibiotics to request reweighting for any or all MIPS performance categories. Under this policy, if a clinician, group, or virtual group submits a reweighting application and also submits data for a performance category for which an application was submitted, the data submission will override the application, and the clinician, group, or virtual group will be scored on the data submitted. Additionally, if an application is submitted for one performance category only, and data is submitted for the other 2 performance categories, only the performance category for which the application was submitted will be reweighted and the other performance categories will be scored.

We believe this approach maintains a balance of encouraging participation in the Quality Payment Program while still providing for flexibility in weighting the performance categories for those who have been affected by the national PHE for buy antibiotics. Please refer to https://qpp.cms.gov/​about/​buy antibiotics19?. €‹py=​2021 for more information. (B) MIPS Reweighting Based on Extreme and Uncontrollable Circumstances.

Automatic and Application-Based Policies Clarification Under the application-based extreme and uncontrollable circumstances policy codified at §  414.1380(c)(2)(i)(A)( 6 ) for the quality, cost, and improvement activities performance categories and at § 414.1380(c)(2)(i)(C)( 2 ) for the promoting interoperability performance category, clinicians who are subject to extreme and uncontrollable circumstances may submit an application to CMS to request reweighting of a performance category or categories. We also established an automatic extreme and uncontrollable circumstances policy at § 414.1380(c)(2)(i)(A)( 8 ) for the quality, cost, and improvement activities performance categories and at § 414.1380(c)(2)(i)(C)( 3 ) for the promoting interoperability performance category, under which we automatically reweight the performance categories for clinicians who are located in an area affected by extreme and uncontrollable circumstances as identified by us. Based on stakeholder inquiries, we recognize not all stakeholders understand how individual MIPS eligible clinicians who are eligible for reweighting under the automatic extreme and uncontrollable circumstances policy and who also submit an application for reweighting based on extreme and uncontrollable circumstances are affected by the intersection of these policies. Currently, under both the application-based and automatic extreme and uncontrollable circumstances policies, if a MIPS eligible clinician who is located in an area affected by extreme and uncontrollable circumstances as identified by CMS submits data for any of the MIPS performance categories by the applicable submission deadline for the MIPS performance period, they will be scored on each performance category for which they submit data, and the performance category will not be reweighted to zero percent in the final score.

Under the automatic extreme and uncontrollable circumstances policy, the other performance categories for which data was not submitted will remain reweighted to zero percent (82 FR 53898, 83 FR 59874). Additionally, as described in the CY 2019 PFS final rule (83 FR 59874), under the automatic extreme and uncontrollable circumstances policy, a MIPS eligible clinician who is located in an area affected by extreme and uncontrollable circumstances as identified by CMS will Start Printed Page 65525 not be scored on the cost performance category. As we stated in the CY 2019 PFS final rule (83 FR 59874), if a MIPS eligible clinician is located in an affected area, we would assume the clinician does not have sufficient cost measures applicable to him or her and assign a weight of zero percent to that category in the final score, even if we receive administrative claims data that will enable us to calculate the cost measures for that clinician. The following example is intended to illustrate the intersection of the automatic and application-based extreme and uncontrollable circumstances policies.

A MIPS eligible clinician who is located in an area affected by extreme and uncontrollable circumstances as identified by CMS and eligible for the automatic extreme and uncontrollable circumstances policy submits an application for reweighting based on extreme and uncontrollable circumstances. The application requests reweighting for the Promoting Interoperability performance category, and the clinician submits data for the quality and improvement activities performance categories. The clinician will be scored on the quality and improvement activities performance categories because they submitted data for those categories. The cost performance category is reweighted to zero percent under the automatic extreme and uncontrollable circumstances policy, as discussed above.

And the Promoting Interoperability performance category is also reweighted to zero percent under the automatic extreme and uncontrollable circumstances policy. The application for reweighting was not needed in this example to reweight the Promoting Interoperability performance category. Please refer to https://qpp.cms.gov/​about/​buy antibiotics19?. €‹py=​2021 for more information.

(v) Redistributing Performance Category Weights for Facility-Based Measurement (A) Background In the CY 2018 Quality Payment Program final rule, we established facility-based measurement under section 1848(q)(2)(C)(ii) of the Act which provides that the Secretary may use measures used for payment systems other than for physicians, such as measures for inpatient hospitals, for purposes of the quality and cost performance categories (82 FR 53752 through 53767). Scoring under facility-based measurement was available for clinicians beginning with the CY 2019 performance period/2021 MIPS payment year. We established facility-based measurement to better align incentives between facilities and the MIPS eligible clinicians who provide services there (82 FR 53753). For more background on facility-based measurement, we refer readers to both the CY 2018 Quality Payment Program final rule (82 FR 53752 through 53767) and the CY 2019 PFS final rule (83 FR 59856 through 59867).

(B) Redistribution of Performance Category Weights Under Facility-Based Measurement In the CY 2019 PFS final rule, we established that clinicians and groups would not need to elect or opt-in to facility-based measurement, but instead we would automatically apply facility-based measurement to MIPS eligible clinicians and groups who are eligible for facility-based measurement and who would benefit by having a higher combined quality and cost performance category score (83 FR 59863). In this same final rule, we finalized policies for redistributing weight among the performance categories for the CY 2019 performance period/2021 MIPS payment year under § 414.1380(c)(2)(ii)(C). Under those redistribution policies, if the cost performance category is reweighted to zero percent of the final score, its weight is redistributed entirely to the quality performance category, unless the quality performance category is reweighted to zero percent, in which case the quality and cost performance category weights would be redistributed to the improvement activities and Promoting Interoperability performance categories. A clinician or group could have the weight of the cost performance category redistributed because they did not meet the case minimum for any of the measures in the cost performance category.

Because facility-based measurement always includes both the quality and cost performance categories, it is possible a clinician or group would be scored on the cost performance category under facility-based measurement but not outside of facility-based measurement. There are two common scenarios for a facility-based clinician or group which could occur in the CY 2019 performance period/2021 MIPS payment year. In the first scenario, a facility-based clinician or group meets the case minimum for at least one cost performance category measure and receives a cost performance category percent score as defined at § 414.1380(b)(2). The respective quality and cost scores will be multiplied by the available points in the quality performance category (45 points) and the available points in the cost performance category (15 points) to determine the combined contribution of the quality performance category and the cost performance category to the final score out of the available 60 points.

In the second scenario, a facility-based clinician or group does not meet the case minimum for any cost performance category measure and the cost performance category weight is redistributed to the quality performance category so the quality performance category score alone determines the score out of the available 60 points. Table 65 shows these two scenarios. Start Printed Page 65526 In the CY 2020 PFS final rule, we established a redistribution policy for the CY 2020 performance period/2022 MIPS payment year at § 414.1380(c)(2)(ii)(D), for scenarios when the cost performance category weight is redistributed to the Promoting Interoperability performance category, as well as to the quality performance category (84 FR 63028). Under this policy, the weights of the combined quality and cost performance categories could be different for a clinician or group under facility-based measurement and outside of facility-based measurement in circumstances in which the clinician or group was not scored on the cost performance category outside of facility-based measurement but was scored on all other performance categories.

Table 66 shows the scenario in which the combined weights of the quality and cost performance categories differ if cost is included, which occurs when the cost performance category is redistributed, and all other categories are scored. We established similar redistribution policies for CY 2021 performance period/2023 MIPS payment year and CY 2022 performance period/2024 MIPS payment year at § 414.1380(c)(2)(ii)(E) and (F) in that same rule (84 FR 63029 through 63031), which also described situations where the combined weight of the cost and quality performance categories was not always consistent. For more on the background and proposed policies related to redistribution of performance categories, please see section IV.A.3.e.(2)(b)(iii) of this final rule. Based on inquires we received from clinicians who were eligible for facility-based measurement, we believe our policy for determining the combined quality and cost performance category scores via facility-based measurement and outside of facility-based measurement is not ideal because it could result in a facility-based clinician or group receiving a lower final score than they would otherwise receive outside of facility-based measurement.

We considered whether this more complex consideration of the scores and the weights in the performance categories necessitated a reconsideration of an opt-in requirement for facility-based measurement. However, we believe that establishing such a requirement would create administrative burden for clinicians and groups. Instead of adding an opt-in requirement, we proposed a new policy to determine the MIPS final score for clinicians and groups who are eligible for facility-based measurement. We proposed at § 414.1380(e)(6)(vi)(B) that beginning with the CY 2022 performance period/2024 MIPS payment year, the MIPS quality and cost performance category scores will be based on the facility-based measurement scoring methodology unless a clinician or group receives a higher MIPS final score through another MIPS submission.

Under this proposed policy, we will calculate two final scores for clinicians and groups who are facility-based. One score will be based on the clinician or group's performance and the weights of the performance categories if facility-based measurement did not apply, and the other will be based on the application of facility-based measurement. The example below shows how this proposed policy will apply for a facility-based group that did not meet the case minimum for any of the cost measures but was scored on all other performance categories. As a result of this policy, the group in this example will receive a final score on the basis of their performance outside of facility-based measurement because they have obtained a higher final score through the combination of their submitted quality measures, submitted improvement activities and submitted promoting interoperability measures.

We solicited comments on this proposal. We received public comments on the redistribution of performance category weights under facility-based measurement. The following is a summary of the comments we received and our responses. Comment.

A few commenters supported CMS' proposal to take the higher of the two scores when Start Printed Page 65527 determining the final score for facility-based eligible clinicians and groups. One commenter suggested that CMS adopt this policy starting from CY 2021 performance period/2023 MIPS payment year. Response. We thank the commenters for their support and feedback and note that, as mentioned in the 2021 Facility-Based Measurement Quick Start Guide, because the FY 2022 total performance score from the Hospital Value-Based Purchasing Program will be unavailable, we will not be able to calculate MIPS facility-based scores for the CY 2021 MIPS performance period/2023 MIPS payment year.[] Please refer to https://qpp-cm-prod-content.s3.amazonaws.com/​uploads/​1293/​2021%20MIPS%20Facility%20Based%20Quick%20Start%20Guide.pdf for more information.

After consideration of public comments, we finalize the proposal at § 414.1380(e)(6)(vi)(B) that beginning with the CY 2022 performance period/2024 MIPS payment year, the MIPS quality and cost performance category scores will be based on the facility-based measurement scoring methodology unless a clinician or group receives a higher MIPS final score through another MIPS submission. F. MIPS Payment Adjustments (1) Background For our previously established policies regarding the final score used to determine MIPS payment adjustments we refer readers to the CY 2021 PFS final rule (85 FR 84917 through 84926), CY 2020 PFS final rule (84 FR 63031 through 63045), CY 2019 PFS final rule (83 FR 59878 through 59894), CY 2018 Quality Payment Program final rule (82 FR 53785 through 53799) and CY 2017 Quality Payment Program final rule (81 FR 77329 through 77343). In the CY 2022 PFS proposed rule (86 FR 39453 through 39458), we proposed.

(1) To select the mean as our methodology for calculating the performance threshold. (2) to establish the performance threshold for the 2024 MIPS payment year using 2019 MIPS payment year data. (3) to establish the additional performance threshold for exceptional performance for the 2024 MIPS payment year. And (4) to update the scoring hierarchy to include subgroups.

In addition, we are including information about our timing for providing MIPS performance feedback to clinicians for the performance period in 2020. (2) Establishing the Performance Threshold Under section 1848(q)(6)(D)(i) of the Act, for each year of MIPS, the Secretary shall compute a performance threshold with respect to which the final scores of MIPS eligible clinicians are compared for purposes of determining the MIPS payment adjustment factors under section 1848(q)(6)(A) of the Act for a year. The performance threshold for a year must be either the mean or median (as selected by the Secretary, and which may be reassessed every 3 years) of the final scores for all MIPS eligible clinicians for a prior period specified by the Secretary. Section 1848(q)(6)(D)(iii) of the Act included a special rule for the initial 2 years of MIPS, which requires the Secretary, prior to the performance period for such years, to establish a performance threshold for purposes of determining the MIPS payment adjustment factors under section 1848(q)(6)(A) of the Act and an additional performance threshold for purposes of determining the additional MIPS payment adjustment factors under section 1848(q)(6)(C) of the Act, each of which shall be based on a period prior to the performance period and take into account data available for performance on measures and activities that may be used under the performance categories and other factors determined appropriate by the Secretary.

Section 51003(a)(1)(D) of the Bipartisan Budget Act of 2018 (Pub. L. 115-123, February 9, 2018) amended section 1848(q)(6)(D)(iii) of the Act to extend the special rule to apply for the initial 5 years of MIPS instead of only the initial 2 years of MIPS. In addition, section 51003(a)(1)(D) of the Bipartisan Budget Act of 2018 added a new clause (iv) to section 1848(q)(6)(D) of the Act, which includes an additional special rule for the third, fourth, and fifth years of MIPS (the 2021 through 2023 MIPS payment years).

This additional special rule provides, for purposes of determining the MIPS payment adjustment factors under section 1848(q)(6)(A) of the Act, in addition to the requirements specified in section 1848(q)(6)(D)(iii) of the Act, the Secretary shall increase the performance threshold for each of the third, fourth, and fifth years to ensure a gradual and incremental transition to the performance threshold described in section 1848(q)(6)(D)(i) of the Act (as estimated by the Secretary) with respect to the sixth year (the 2024 MIPS payment year) to which the MIPS applies. We have applied these special rules for the past 5 years to provide for a gradual and incremental transition to the year 6 performance threshold. For further information on established performance threshold policies we refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77333 through 77338), CY 2018 Quality Payment Program (82 FR 53787 through 53794), CY 2019 PFS final rule (83 FR 59880 through 59883), the CY 2020 PFS final rule (84 FR 63031 through 63037), and the CY 2021 PFS final rule (85 FR 84919 through 84923). We codified the performance thresholds for each of the first 5 years of MIPS at § 414.1405(b)(4), (5), (6), (7), and (8) as presented in Table 68.

Start Printed Page 65528 In the CY 2020 PFS final rule (84 FR 63031 through 63037) at § 414.1405(b)(7) and (8), we finalized the performance thresholds for the 2022 and 2023 MIPS payment years at 45 and 60 points, respectively, an increase of 15 points each year until the 2024 MIPS payment year, for which we estimated that the performance threshold would be 74.01 points. We believe that this approach effectively provided for a gradual and incremental transition to the performance threshold we had estimated for the 2024 MIPS payment year, as required by the statute. Beginning with the 2024 MIPS payment year, section 1848(q)(6)(D)(i) of the Act requires the performance threshold to be the mean or median (as selected by the Secretary) of the final scores for all MIPS eligible clinicians with respect to a prior period specified by the Secretary. That section also provides that the Secretary may reassess the selection of the mean or median every 3 years.

Thus, we considered whether to use the mean or median as the methodology for determining the performance threshold. We will use this methodology to determine a performance threshold for each of the following 3 years. The 2024 MIPS payment year, 2025 MIPS payment year, and 2026 MIPS payment year. We would then reassess and establish the methodology (mean or median) that we will use for each of the next 3 years (2027 MIPS payment year, 2028 MIPS payment year, and 2029 MIPS payment year).

At the time of drafting of this final rule, we have final score data from the CY 2017 performance period/2019 MIPS payment year through the CY 2020 performance period/2022 MIPS payment year available to use in our assessment of whether to use the mean or median as our methodology for the next 3 years. At this time, however, the targeted review process (see § 414.1385) for the CY 2020 performance period/2022 MIPS payment year has not yet concluded, and the data for the CY 2020 performance period/2022 MIPS payment year may be subject to change as a result of targeted review which began on August 2, 2021, and will conclude on November 29, 2021, at 8:00 p.m., eastern standard time. For more information on the targeted review process, see our announcement sent to our list serve on September 27th, 2021 available at https://qpp-cm-prod-content.s3.amazonaws.com/​uploads/​1631/​2020%20Scoring%20Updates_​EUC%20Reweighting%20Requests%20Extension_​Listserv.pdf. We do not believe it would be appropriate to consider mean and median final scores from the CY 2020 performance period/2022 MIPS payment year for purposes of establishing the performance threshold for the 2024 MIPS payment year in this final rule when those scores may be subject to change as a result of the targeted review process.

Furthermore, we are not utilizing final scores from the CY 2020 performance period/2022 MIPS payment for the creation of our regulatory impact analysis model. For a detailed discussion of the RIA methodology, including the basis of our decision to not use CY 2020 performance period/2022 MIPS payment year data, please see section VI.F.18.a of this final rule. From our review of the data available to us, we have identified the mean and median final scores for each of the 2019 through 2021 MIPS payment years, as shown in Table 69. These six values represent the prior year mean and median final scores that we considered for the 2024 MIPS payment year performance threshold.

As shown in Table 69, using the median final score gives a possible range of performance thresholds from 89.71 points to 99.63 points. Given our performance threshold of 60 points in year 5, these values would result in an increase of 29.71 points to 39.63 points for year 6. Selecting the median of final scores as our methodology would, at a minimum, nearly double the annual increase in the performance threshold of 15 points that we had from year 2 to year 5 of the program. Section 1848(q)(6)(D)(iv) of the Act required that we increase the performance threshold for each of the third, fourth, and fifth years of MIPS to ensure a gradual and incremental transition to the performance threshold we estimated with respect to the sixth year of MIPS.

In prior rules we estimated the year six Start Printed Page 65529 performance threshold to be 74.01 points and used this estimate to determine how to gradually raise the performance threshold (83 FR 59881, 84 FR 63032, 84 FR 40802). Although section 1848(q)(6)(D)(iv) of the Act does not require this approach for the sixth year and subsequent years of MIPS, we believe that it is appropriate to set the performance threshold at a level that is in line with our previous estimates for year 6. We believe that continuing the gradual and incremental increase into year 6 would provide consistency to our stakeholders. After evaluating the possible values shown in Table 69, we believe that using the mean as our methodology would continue this approach.

Using the mean final score as the methodology would yield a possible range of performance thresholds from 74.65 points to 85.61 points (rounded to 75 points and 86 points respectively). Given our performance threshold of 60 points in year 5, these values would result in an increase of 15 points to 26 points for year 6. Given these values and our annual performance threshold increases of 15 points for years 2 to 5 of the program, 75 is the value that is most consistent with the gradual and incremental approach that we have elected to continue. Therefore, we proposed at § 414.1405(g) that for each of the 2024, 2025, and 2026 MIPS payment years, the performance threshold is the mean of the final scores for all MIPS eligible clinicians from a prior period as specified under § 414.1405(b).

This methodology will be used for MIPS payment years 2024 through 2026 of the program after which we will reassess the methodology for MIPS payment years 2027 through 2029. In addition to selecting the methodology (mean or median), section 1848(q)(6)(D)(i) of the Act also requires us to specify a prior period from which we will use the final scores for all MIPS eligible clinicians to calculate the mean or median. As shown in Table 69, the mean final scores are 74.65, 87, and 85.61 points for MIPS payment years 2019 through 2021 respectively. In previous rules (83 FR 59881, 84 FR 63032), we used the MIPS payment year 2019 mean final score to estimate a performance threshold of 74.01 points for year 6 of the program.

Our data have been updated to reflect completed targeted reviews since the time we made this estimate, and the mean final score for the 2019 MIPS payment year is now 74.65 points (see Table 69). This value would be an increase of almost exactly 15 points from the MIPS payment year 2023 performance threshold of 60 points, which is identical to the increases of the previous 3 years and consistent with our intention to continue the gradual and incremental approach that has been utilized in prior years. After reviewing the available final score data, we proposed at § 414.1405(b)(9) to use the MIPS payment year 2019 as the prior period and the rounded mean final score of 75 points as the year 6 performance threshold. When we establish the performance threshold for future MIPS payment years in future rulemaking, we will reassess using the mean final score for MIPS payment year 2019 as mean final scores for subsequent years become available.

We solicited comments on these proposals, as well as the alternative methodology of the median that we considered but did not propose. Additionally, we solicited comments on calculating the performance threshold using an alternative year's final scores that we considered but did not propose. We received public comments on establishing the performance threshold. The following is a summary of the comments we received and our responses.

Comment. One commenter requested that CMS not roll back or reduce the performance threshold from its current value with the transition to MVPs in future years. The commenter believes that the extended phase in of the performance threshold under traditional MIPS was not necessary and had the unintended consequence of clinicians not taking MIPS as seriously as they should have. The commenter also stated that any phase-in does not advance the goals of transitioning to value-based care.

Response. In future years of the program we will evaluate the data available to us and select a performance threshold in accordance with the requirements of the statute. The gradual and incremental increase in the performance threshold gave clinicians time to anticipate the transition to the statutorily mandated methodology for the performance threshold beginning in year six. The CY 2022 performance period/2024 MIPS payment year is the first year of the program where CMS does not have additional flexibilities and must set the performance threshold at the mean or median of a prior year's final scores, thus ending the performance threshold transition period.

While we agree with the commenter that further phase in of the performance threshold is not needed, it is possible the performance threshold numerical value for a future year could be lower than the numerical value for the CY 2022 performance period/2024 MIPS payment year, depending on the final score data available. Comment. One commenter believes that data from the CY 2019 performance period/2021 MIPS payment year is a better basis for creating performance thresholds than the CY 2017 performance period/2019 MIPS payment year. The commenter believes that the entire structure of the program as far as scoring was very different in 2017 and that 2019 offers a more accurate picture compared to 2017.

Response. We understand that the program has undergone modifications since the CY 2017 performance period/2019 MIPS payment year. However, we have previously stated our intent to use a gradual and incremental approach to raising the performance threshold. For reference, the mean and median final scores for CY 2019 performance period/2021 MIPS payment year are 85.61 and 92.30 respectively and would represent an increase in the performance threshold of 25.61 or 32.3 points.

We raised the performance threshold 12 points from CY 2017 performance period/2019 MIPS payment year to CY 2018 performance period/2020 MIPS payment year and raised the performance threshold 15 points in each subsequent year. We believe that raising the performance threshold 15 points in CY 2022 performance period/2024 MIPS payment year is consistent with our gradual and incremental approach. We recognize that clinicians are facing ongoing difficulties due to the PHE, and we believe that choosing the lowest performance threshold value available to us would gradually increase the performance threshold while minimizing disruption to clinicians during this emergency. Comment.

Several commenters supported setting the performance threshold at 75 and using the mean from a prior performance period. Some commenters stated the 15-point increase aligns with the gradual increase over the last 4 years. One commenter stated it was an attainable goal. A few commenters stated this meant having a larger budget neutral pool to redistribute funds, but one commenter requested more information about impact to their specialty.

One commenter supported that it was the lowest of the possible options. Response. We thank the commenters for their support for setting the performance threshold for the CY 2022 performance period/2024 MIPS payment year at 75 points, for noting that the 15-point increase is the same magnitude as the change in prior years, and for noting that the performance threshold selected was the lowest of the Start Printed Page 65530 possible options. Overall information on prior year's final scores can be found in the corresponding Quality Payment Program Experience Report and specialty specific information can be found in the Public Use File in the QPP resource library ( https://qpp.cms.gov/​resources/​resource-library ).

Comment. A few commenters expressed concern with the proposed performance threshold, specifically for small practices. A few commenters requested setting a separate performance threshold for small practices at a value such as 60, or setting the performance threshold for other practices higher at 85 points. Response.

We appreciate this feedback from commenters. However, as we previously discussed, the statute requires us to set the performance threshold at the mean or median of a prior period's final scores, and we do not have the statutory authority to establish a separate performance threshold for small practices. We also note that CMS does not have the authority to waive the statutory requirements for setting the performance threshold using our extreme and uncontrollable circumstances policies or section 1135 of the Act. We encourage the commenters to look at our estimates of how our proposed policies will affect the payment adjustments, broken down by practice size, for the MIPS 2024 payment year in our regulatory impact analysis (see section VI.F.18.e of this final rule).

As shown in the impact analysis, we project the discrepancy in payment adjustments between large and small practices to shrink as a cumulative result of our policies, including raising the performance threshold. Comment. Many commenters opposed the proposed performance threshold and recommended that CMS lower the performance threshold. Most of these commenters requested that CMS explore ways to use its authority to adjust the performance threshold beginning with the CY 2022 performance period/2024 MIPS payment year.

Commenters specifically requested that CMS consider emergency authorities under the PHE such as the section 1135 waiver authority or its Extreme and Uncontrollable Circumstances policy. Commenters noted the stress of the continuing flagyl on practices. That the proposed performance threshold of 75 points represents a significant increase from the 30 points in 2019 or 45 points for 2020. A few commenters acknowledged that CMS has chosen the lowest value possible (75 points), but the commenters believe that positive payment adjustments will become more difficult to obtain, especially as the buy antibiotics flagyl continues.

One commenter expressed concern that clinicians may become frustrated and lose motivation to engage with the MIPS program. Another commenter stated that the steep increases in the performance threshold assumes that practices will not only perform, as well as they did before buy antibiotics but that they will be able to perform better than before. Some commenters stated that CMS should establish a transitional policy that recognizes the impact of the buy antibiotics PHE. One commenter appreciated the flexibilities that CMS has put in place during the flagyl and urges CMS not to flip a switch in 2022 as if the past 3 years have been business as usual.

A few commenters suggested lower performance threshold levels, including 60, 50 and 45. One commenter requested that CMS delay the increase to the performance threshold until the implementation of MVPs. Response. We understand the commenters concern about the stress the PHE is putting on practices.

However, we do not have the authority to set the performance threshold for MIPS payment year 2024 at a value other than the mean or median of the final scores with respect to a prior period, as required by section 1848(q)(6)(D)(i) of the Act. We agree that positive payment adjustments could be more difficult to obtain with a higher performance threshold and are actively working to keep clinicians engaged with the introduction of MVPs which provide a streamlined way for clinicians to participate in the program with a set of measures that are relevant to their practice. We understand that the performance threshold of 75 represents a steep increase from the pre-flagyl performance threshold of 45 points, which was applicable for the CY 2019 performance period/2021 MIPS payment year. For the past 4 years we have finalized increases of 15 points.

We increased the performance threshold from 15 to 30 between the CY 2018 and 2019 performance periods/2020 and 2021 MIPS payment years, from 30 to 45 between the CY 2019 and 2020 performance periods/2021 and 2022 MIPS payment years, and from 45 to 60 between the CY 2020 and 2021 performance periods/2022 and 2023 MIPS payment years. We acknowledge the commenter's concern that this increase assumes that clinicians will not only perform, as well as they did before buy antibiotics but that they will be able to perform better than before. We note that the proposed increase of 15 points is the same as the increase in the previous 3 years and was based on a gradual and incremental approach to setting the performance threshold. As discussed previously, we are statutorily required to set the performance threshold for the 2024 MIPS payment year at the mean or median of the final scores with respect to a prior period, and we do not have the flexibility to choose other values.

We appreciate the commenter's suggestion to adopt a transitional policy for the performance threshold due to the PHE but reiterate that we do not have the flexibility to do so due to the statutory requirements discussed previously. We also note that CMS does not have the authority to waive the statutory requirements for setting the performance threshold under section 1135 of the Act. Comment. A few commenters opposed the proposed performance threshold for specialty related or practice related reasons.

A few commenters were specifically concerned about groups or specialties that can only be measured on two performance categories. One commenter expressed their opinion that setting the performance threshold at the mean or median of prior final scores of all MIPS eligible clinicians in a prior period was an unfair standard for their specialty because they are limited in their ability to report under the Promoting Interoperability performance category. They stated this limitation gives them fewer opportunities to amass points. Another commenter stated that their group was unable to report Promoting Interoperability performance category measures and would be reweighted in a manner that would increase their cost category weight.

A different commenter stated that they have a limited number of quality measures that they can report. As a result, they stated that for groups such as theirs that have limited measures and a high-weighted quality category, CMS now requires 100 percent quality to meet the performance threshold or otherwise they would receive a negative MIPS payment adjustment. One commenter expressed concern that CRNAs cannot report 6 of the measures in the MIPS Anesthesia Measure set because they do not provide relevant services. The commenter suggested CMS should address how specialties such as anesthesia can meet the performance threshold, perhaps through the use of CAHPS data or by allowing them to report additional Improvement Activities.

Response. We understand that different specialties sometimes face challenges with not being able to report Start Printed Page 65531 measures and activities for every performance category. We agree that the final scores of these clinicians may be based on fewer categories than they would be for a clinician reporting all 4 performance categories. However, we remind clinicians that even if their final score is based on fewer than 4 performance categories they still have the ability to score anywhere from 0 to 100 points for their final score, just as a clinician reporting all 4 performance categories would.

In this way, we do not believe that a performance threshold of 75 points is disadvantageous to clinicians reporting fewer than 4 performance categories. As stated below, we also encourage clinicians that do not have enough quality measures relevant to their scope of practice to work with their specialty societies to provide recommendations during the specialty measure set solicitation process and to consider reporting a relevant MVP when one becomes available. We note, for the commenter who stated that not being able to report Promoting Interoperability would cause their group to be reweighted in a manner that would increase their cost category weight, that the cost category weight would only increase if a group was reweighted for the Promoting Interoperability and Quality performance categories. If a group is reweighted for the Promoting Interoperability performance category only, the cost category weight remains at 30 percent.

We believe the commenter who stated that they have a limited number of quality measures that they can report is referring to the possibility that if the weight of other performance categories is redistributed to the quality category, a clinician may need to achieve a high score in quality in order to exceed the proposed performance threshold of 75 points. We understand that some clinicians may not have 6 measures in the Quality performance category that are relevant to their practice. To address this, we have our eligible measure applicability policy within the quality performance category to reduce the denominator of required measures for the MIPS CQM and Medicare Part B claims collection types, in the event that a clinician has less than 6 applicable measures to report. In this way, clinicians can be scored on the quality measures that are relevant to their scope of practice.

For more information on the eligible measure applicability policy please see the CY 2017 through CY 2019 PFS final rules (81 FR 77290 through 77291, 82 FR 53750 through 53732). For the commenter's concerns on the specialty measures available, we solicit stakeholder recommendations for new specialty measure sets and revisions to existing specialty sets on an annual basis. We urge stakeholders to work with their specialty societies to provide recommendations during the specialty measure set solicitation process (for more information please see the QPP resource library at http://www.qpp.cms.gov ). We are also developing MIPS Value Pathways (MVPs) to provide clinicians with a simplified method to report measures that are relevant to their practice and we encourage them to report an MVP when one that is relevant to their scope of practice is available.

We thank the commenter for their suggestion to expand the use of CAHPS or to allow clinicians to report additional improvement activities if they cannot report 6 quality measures. Comment. Many commenters expressed concern that the proposal to increase the performance threshold to 75 points would increase the number of clinicians receiving a negative payment adjustment and decrease the number of clinicians with positive or neutral adjustments. Many commenters also stated their concern that the increase in the performance threshold comes with several proposed policies to remove bonuses and floors for quality measures and proposals to change quality data completeness which may lower the MIPS final score.

A few commenters requested that CMS reconsider the reporting and scoring policies, delay the scoring policies, or gradually phase in the scoring changes, especially if CMS finalized the proposed performance threshold. One commenter specifically requested continuing current scoring for an additional year. A few commenters noted the difficulty of achieving the performance threshold now compared to a few years ago because of the scoring changes. A few commenters noted the cost of participating in MIPS versus the potential incentive.

One commenter cited a study on the cost to participate in MIPS and expressed concern that clinicians would still get negative MIPS payment adjustment after these costs due to a premature increase in the performance threshold following 3 years of flexibilities due to the buy antibiotics PHE. Response. We acknowledge the commenters concerns regarding the increased burden on clinicians due to the buy antibiotics PHE and agree that the statutory formula for determining the performance threshold beginning with the 2024 MIPS payment year could lead to additional clinicians receiving a negative payment adjustment. The MIPS is a budget neutral program and is designed in the statute to balance the positive payment adjustments of clinicians who score above the performance threshold against the negative payment adjustments of clinicians whose scores are below the performance threshold.

We encourage the commenter to look at our estimates of how our proposed policies will affect the payment adjustments for the MIPS 2024 payment year in our regulatory impact analysis (see section VI.F.18.e of this final rule). In light of the continuing burden of the PHE we are making changes to some scoring flexibility proposals including postponing the removal of the 3-point scoring floor on quality measures and keeping the data completeness threshold at 70 percent (see section IV.A.3.e.(1)(c)(iii)(B) of this final rule). We are also introducing some new flexibilities including a 7-point floor for scoring new measures in their first year and a 5-point floor in their second year (see section IV.A.3.e.(1)(c)(iii)(B) of this final rule). Comment.

A few commenters discussed refinements for the performance threshold methodology. One commenter suggested CMS determine what the mean or median of “raw” or “achievement” final performance scores would be and use that figure to set the 2022 threshold. The commenter stated that CMS only uses the base quality measure score, absent any bonus points, to determine improvement scoring in the Quality category. Therefore, the commenter stated that method could be used in setting the performance threshold as well.

Another commenter recommended that CMS evaluate balancing the reported data from 2019, 2020, and 2021 to control for self-selection bias since the commenter believed MIPS reporting has been fundamentally voluntary for these performance periods. One commenter asked what the agency's intent is with respect to performance thresholds and quality benchmark data going forward given that CY 2022 performance period/2024 MIPS payment year benchmarks will be based on CY 2022 performance period data while CY 2024 performance period/2026 MIPS payment year benchmarks appear to revert to performance period 2017 data. The commenter noted the performance threshold is based on CY 2017 performance period data while benchmarks are proposed to be based on CY 2022 performance period data. Response.

We appreciate the commenter's suggestion to use a “raw” or “achievement” score to set the performance threshold. We interpret the Start Printed Page 65532 suggestion of “raw” or “achievement” scores to mean removing any performance category bonuses, final score bonuses or improvement scoring. We note section 1848(q)(6)(D)(i) of the Act requires us to set the performance threshold using composite performance scores, which we refer to as the final score as defined under § 414.1305 (81 FR 77319 through 77320). We do not believe that the statute allows us to use “raw” or “achievement” scores when setting the performance threshold.

We thank the commenter for the suggestion of balancing the scores from 2019, 2020, and 2021 but reiterate that the statute requires us to choose the mean or median from a prior period and does not allow us to balance scores from multiple years. We refer the commenter to section IV.A.3.e(1)(c)(ii) of this final rule, where we are not finalizing our proposal to use performance period benchmarks and instead we will continue to use historic quality benchmarks for the CY 2022 performance period/2024 MIPS payment year will be based on CY 2020 performance period data. In regards to the comment on using 2017 data for purposes of the CY 2024 performance period/2026 MIPS payment year benchmarks, we note that we have not yet made any proposals on quality benchmarks for the CY 2024 performance period/2026 MIPS payment year. Comment.

One commenter supported the larger size of positive payment adjustments that a higher performance threshold would cause due to a greater quantity of money being redistributed through BN, but requested more information on the impact to specialties and practices. The commenter stated that this information will give societies a stronger argument for their membership as to why clinicians should continue to participate in MIPS. Response. We encourage the commenter to read our projections of the impact of the Quality Payment Program Finalized policies on payment adjustments for MIPS payment year 2024 in our Regulatory Impact Analysis (see section VI.F.18.e of this final rule).

We also note that CMS publishes a Quality Payment Program Experience Report and Public Use File at https://qpp.cms.gov/​resources/​resource-library. A detailed breakdown of a prior year's scores can be found in the QPP Experience Report and specialty specific information can be found in the Public Use File. After consideration of public comments, we are finalizing our proposal at § 414.1405(g) that for each of the 2024, 2025, and 2026 MIPS payment years, the performance threshold is the mean of the final scores for all MIPS eligible clinicians from a prior period as specified under § 414.1405(b). We are also finalizing our proposal at § 414.1405(b)(9) to use the MIPS payment year 2019 as the prior period and the rounded mean final score of 75 points as the year 6 performance threshold.

(3) Additional Performance Threshold for Exceptional Performance Section 1848(q)(6)(D)(ii) of the Act requires the Secretary to compute, for each year of the MIPS (beginning with the 2019 MIPS payment year and ending with the 2024 MIPS payment year), an additional performance threshold for purposes of determining the additional MIPS payment adjustment factors for exceptional performance under section 1848(q)(6)(C) of the Act. For each such year, the Secretary shall apply either of the following methods for computing the additional performance threshold. (1) The threshold shall be the score that is equal to the 25th percentile of the range of possible final scores above the performance threshold determined under section 1848(q)(6)(D)(i) of the Act. Or (2) the threshold shall be the score that is equal to the 25th percentile of the actual final scores for MIPS eligible clinicians with final scores at or above the performance threshold with respect to the prior period described in section 1848(q)(6)(D)(i) of the Act.

Under section 1848(q)(6)(C) of the Act, a MIPS eligible clinician with a final score at or above the additional performance threshold will receive an additional MIPS payment adjustment factor and may share in the $500 million of funding available for the year under section 1848(q)(6)(F)(iv) of the Act. We note that under section 1848(q)(6)(F)(iv) of the Act, funding is available for additional MIPS payment adjustment factors under section 1848(q)(6)(C) of the Act only through the 2024 MIPS payment year, which is the sixth year of the MIPS program. In the CY 2020 PFS final rule (84 FR 63037 through 63040), we used the special rule under section 1848(q)(6)(D)(iii) of the Act to set the additional performance threshold at 85 points for the 2022 and 2023 MIPS payment years. We note that the special rule under section 1848(q)(6)(D)(iii) of the Act applies only to the initial 5 years of MIPS, so we cannot use that rule to establish the additional performance threshold for the 2024 MIPS payment year.

As noted above, under section 1848(q)(6)(D)(ii) of the Act, we may set the additional performance threshold at either. (1) The 25th percentile of the range of possible final scores above the performance threshold, or (2) the 25th percentile of the actual final scores for MIPS eligible clinicians with final scores at or above the performance threshold with respect to the prior period described in section 1848(q)(6)(D)(i) of the Act. In the CY 2022 PFS proposed rule (86 FR 39453), for illustrative purposes, we referenced the possible additional performance thresholds shown in Table 70. Note that mean or median refers to the methodology for calculation of the performance threshold.

As can be seen in Table 70, the potential values for the additional performance threshold range from a low of 81.26 to a high of 100. However, to remain consistent with our gradual and incremental approach, we proposed to use the mean as our methodology for setting the performance threshold during the next 3 years and Start Printed Page 65533 we proposed to use the final score data from MIPS payment year 2019. We are finalizing these proposals in section IV.A.3.f.2 of this final rule. The selection of the mean for the methodology and final score data from the 2019 MIPS payment year leaves us with the options in the first column of Table 70 for where we can set the additional performance threshold.

With a performance threshold of 75 points for the 2024 MIPS payment year based on final scores for the 2019 MIPS payment year, the calculation methods in section 1848(q)(6)(D)(ii) of the Act give us two possible options for where we can set the additional performance threshold for MIPS payment year 2024. The first calculation method (described in section 1848(q)(6)(D)(ii)(I) of the Act), using the range of possible final scores above the proposed performance threshold for the 2024 MIPS payment year, yields a value of 81.26 points (the 25th percentile of the range of 75.01 to 100). The calculation is as follows. 75.01 + [(100−75.01) * 0.25] = 81.26.

The second calculation method (described in section 1848(q)(6)(D)(ii)(II) of the Act), the 25th percentile of the actual final scores for the 2019 MIPS payment year at or above the proposed performance threshold for the 2024 MIPS payment year, yields a value of 88.94. For the second calculation method, we will apply the 25th percentile calculation of (n+1)p/100 to the 2019 MIPS payment year final score data that are at or above 75. We considered using each of these methods, but we do not believe that it would be appropriate to lower the additional performance threshold to 81.26 points from its present value of 85 points. Maintaining or increasing the additional performance threshold will serve as a greater incentive to clinicians to continue to improve their performance on the MIPS measures and activities and to achieve exceptional performance.

We believe that an additional performance threshold of 88.94 points rounded to 89 points is appropriate. This is an increase of 4 points from the prior year, which we believe is a gradual increase. Therefore, using the second calculation method described above, we proposed at § 414.1405(d)(7) to set the additional performance threshold for the 2024 MIPS payment year at 89 points. We solicited comments on these proposals, as well as the alternative additional performance thresholds listed that we considered but did not propose.

We received public comments on the additional performance threshold for exceptional performance. The following is a summary of the comments we received and our responses. Comment. A few commenters expressed concern about the exceptional performance funding under section 1848(q)(6)(F)(iv) of the Act ending after the CY 2022 performance period/2024 MIPS payment year.

One commenter believes that eliminating this funding is contradictory to the mission of the Quality Payment Program as it provides an additional incentive for improving performance. A few commenters expressed concerns about the cost of participating in MIPS and that the majority of the MIPS adjustment has been funded from the exceptional performance funding under section 1848(q)(6)(F)(iv) of the Act rather than from negative payment adjustments. Some commenters requested that CMS work with Congress to extend the funding. Response.

We acknowledge the commenters' concern about the exceptional performance funding under section 1848(q)(6)(F)(iv) of the Act ending after the CY 2022 performance period/2024 MIPS payment year. We acknowledge that in previous years the additional performance threshold has funded a large portion of positive MIPS payment adjustments. However, we point the commenter to our Regulatory Impact Analysis (see section VI.F.18.e of this final rule) where we estimate that positive MIPS payment adjustments funded by BN will be much higher than in previous years. Comment.

A few commenters suggested that CMS should consider using the section 1135 waiver authority it has under the PHE or its Extreme and Uncontrollable Circumstances policy to waive the statutory requirement to set the additional performance threshold at either. (1) The 25th percentile of the range of possible final scores above the performance threshold, or (2) the 25th percentile of the actual final scores for MIPS eligible clinicians with final scores at or above the performance threshold with respect to the prior period described in section 1848(q)(6)(D)(i) of the Act, and instead keep the additional performance threshold at 85 points in 2022. Response. We note that CMS does not have the authority to waive the statutory requirements for setting the additional performance threshold using our extreme and uncontrollable circumstances policies or section 1135 of the Act.

Comment. One commenter acknowledged the two statutory options CMS presented for the additional performance threshold (81.26 and 88.94), but urged CMS to use PHE authorities to maintain the additional performance threshold at 85 points instead of 89 points. The commenter stated that it gives clinicians a final opportunity to qualify for this funding and takes into account the unusual operational and clinical circumstances present during the buy antibiotics flagyl. Response.

We agree with the commenter that there have been unusual operational and clinical circumstances for clinicians during the buy antibiotics flagyl. However, we are not aware of any PHE authorities available to CMS that would allow us to set the additional performance threshold for the 2024 MIPS payment year at any value other than those resulting from the calculation methods described in section 1848(q)(6)(D)(ii) of the Act. Comment. A few commenters supported the additional performance threshold.

One commenter stated that the increase to the additional performance threshold increases the difficulty but still makes the additional positive payment adjustment an attainable goal. Response. We thank the commenters for their support. Comment.

A few commenters supported a lower additional performance threshold. Some commenters requested that CMS select the option of 81 points rather than the proposed 89 points to account for loss of score potential due to removal of bonus points in the quality performance category and the increased weight of the cost performance category. One commenter noted that CMS has the latitude to select 81 points as it meets the 25th percentile of possible scores and believes that the lower additional performance threshold will incentivize a greater number of clinicians. The commenter also noted that choosing a lower additional performance threshold will allow CMS to both reward top performers in MIPS and incentivize more of them by setting reasonable thresholds to reward them for their performance.

Other commenters requested keeping the additional performance threshold at 85 points. Response. We established the additional performance threshold at 85 points for the 2022 and 2023 MIPS payment years in the CY 2020 PFS final rule (84 FR 63037 through 63040). We do not believe that it is appropriate to set the additional performance threshold at a lower value (81 points) than it was set at for the CY 2020 performance period/2022 MIPS payment year nor do we have the authority to keep the additional Start Printed Page 65534 performance threshold at 85 points as was requested by the commenter.

We believe that 89 points is an appropriate value to incentivize the highest performing clinicians, given that the threshold has been 85 points for the past 2 years. After consideration of public comments, we are finalizing the proposal at § 414.1405(d)(7) to set the additional performance threshold for the 2024 MIPS payment year at 89 points. (4) Example of Adjustment Factors Figure A provides an illustrative example of how various final scores will be converted to a MIPS payment adjustment factor and potentially an additional MIPS payment adjustment factor, using the statutory formula and based on our finalized policies for the 2024 MIPS payment year. In Figure A, the performance threshold is set at 75 points.

The applicable percentage is 9 percent for the 2024 MIPS payment year. The MIPS payment adjustment factor is determined on a linear sliding scale from zero to 100, with zero being the lowest possible score which receives the negative applicable percentage (negative 9 percent for the 2024 MIPS payment year) and resulting in the lowest payment adjustment, and 100 being the highest possible score which receives the highest positive applicable percentage and resulting in the highest payment adjustment. However, there are two modifications to this linear sliding scale. First there is an exception for a final score between zero and one-fourth of the performance threshold (zero and 18.75 points based on the performance threshold of 75 points for the 2024 MIPS payment year).

All MIPS eligible clinicians with a final score in this range will receive the lowest negative applicable percentage (negative 9 percent for the 2024 MIPS payment year). Second, the linear sliding scale line for the positive MIPS payment adjustment factor is adjusted by the scaling factor, which cannot be higher than 3.0. If the scaling factor is greater than zero and less than or equal to 1.0, then the MIPS payment adjustment factor for a final score of 100 will be less than or equal to 9 percent. If the scaling factor is above 1.0 but is less than or equal to 3.0, then the MIPS payment adjustment factor for a final score of 100 will be greater than 9 percent.

Only those MIPS eligible clinicians with a final score equal to 75 points (which is the finalized performance threshold) will receive a neutral MIPS payment adjustment. Because the performance threshold is 75 points, we anticipate that more clinicians will receive a positive adjustment than a negative adjustment and that the scaling factor will be less than 1 and the MIPS payment adjustment factor for each MIPS eligible clinician with a final score of 100 points will be less than 9 percent. Start Printed Page 65535 Table 71 illustrates the changes in payment adjustment based on the final policies from the CY 2021 PFS final rule (85 FR 84923 through 84925) for the 2023 MIPS payment year and the final policies for the 2024 MIPS payment year, as well as the applicable percent required by section 1848(q)(6)(B) of the Act. Start Printed Page 65536 (5) Final Score Hierarchy Used in Payment Adjustment Calculation In the CY 2021 PFS final rule (85 FR 84917 through 84919), we modified the final score hierarchy that applies when more than one final score is associated with a TIN/NPI, as displayed in Table 72.

Beginning with the CY 2021 performance period/2023 MIPS payment year, if a TIN/NPI has a virtual group final score associated with it, we use the virtual group final score to determine the MIPS payment adjustment. If a TIN/NPI does not have a virtual group final score associated with it, we use the highest available final score associated with the TIN/NPI to determine the MIPS payment adjustment. Start Printed Page 65537 In the CY 2022 PFS proposed rule (86 FR 39457), we proposed policies applicable to subgroups, including a definition of a subgroup at § 414.1305 as a subset of a group which contains at least one MIPS eligible clinician and is identified by a combination of the group TIN, subgroup identifier, and each eligible clinician's NPI. Each clinician in a subgroup would be identifiable by a unique TIN/NPI combination just as in any MIPS group or APM Entity.

In addition, a clinician, group, subgroup, or APM Entity could choose more than one MIPS reporting option for a performance period. A clinician, group, subgroup, or APM Entity could choose to report through MVPs, traditional MIPS, and/or the APP (assuming they are eligible for each of these reporting options) for a performance period. As a result, there could be more than one final score for a clinician, group, subgroup, or APM Entity for a performance period from MVPs, traditional MIPS, and/or the APP. Therefore, we proposed to update the scoring hierarchy to include subgroups and to specify that the scoring hierarchy would apply with respect to any available final score that is associated with a TIN/NPI from MVPs, traditional MIPS, and/or the APP.

The proposed updated scoring hierarchy can be seen in Table 73. We solicited comments on this proposal. We received public comments on the proposed updated scoring hierarchy. The following is a summary of the comments we received and our responses.

Comment. A few commenters requested clarification on the scoring hierarchy. One commenter expressed concerns with the modified hierarchy, citing the complexity of adding subgroups to MIPS and concerns about allowing ACO clinicians to report outside the ACO. The commenter recommended that to reduce complexity, ACO performance should be evaluated at the ACO level for MIPS evaluations.

Another commenter noted confusion about how payment adjustments would be calculated and applied for clinicians reporting an MVP as part of a subgroup. Response. We acknowledge the commenters concern about the complexity of the scoring hierarchy for ACO reporters. However, we disagree with the recommendation that ACOs only be evaluated at the ACO level.

CMS is introducing subgroups to collect data at a more granular level that will be more useful for beneficiaries to use to make informed healthcare decisions. Having data at the subgroup level will allow beneficiaries to evaluate performance data, especially performance data about specialists, that is more closely related to the actual clinicians the beneficiaries may see for their medical care. We also note that subgroup scores will not be rolled up to the ACO level. If a TIN reports as a subgroup, the subgroup score would only be applicable to the NPIs in the subgroup.

Comment. A few commenters supported the proposed scoring hierarchy. Commenters appreciated CMS' intent to select the highest final score achieved for a TIN/NPI across the QPP pathways for individual, group subgroup or APM entity. Response.

We thank the commenter for their support. Comment. One commenter asked CMS to confirm that a MIPS eligible clinician that participates in MVPs via multiple subgroups would receive the highest final score that can be attributed to their TIN/NPI combination from any reporting option (traditional MIPS, APP reporting, or any MVP subgroup reporting) and participation option (as an individual, group, subgroup, or APM Entity (with the exception of virtual groups). Response.

The commenter is correct that, with the exception of virtual groups, a MIPS eligible clinician will receive the highest final score that can be attributed to their TIN/NPI combination from the listed reporting options (traditional MIPS, APP, or MVPs) and participation options (individual, group, subgroup, or APM entity). After consideration of public comments, we are finalizing the proposed updated scoring hierarchy as proposed. G. Review and Correction of MIPS Final Score (1) Feedback and Information To Improve Performance Under section 1848(q)(12)(A)(i) of the Act, we are at a minimum required to provide MIPS eligible clinicians with timely (such as quarterly) confidential feedback on their performance under the quality and cost performance categories beginning July 1, 2017, and we have discretion to provide such feedback regarding the improvement activities and Promoting Interoperability performance categories.

In the CY 2018 Quality Payment Program final rule (82 FR 53799 through 53801), we finalized that on an annual basis, beginning July 1, 2018, performance feedback will be provided to MIPS eligible clinicians and groups for the quality and cost performance categories, and if technically feasible, for the improvement activities and advancing care information (now called the Promoting Interoperability) performance categories. On July 1, 2018, we provided the first performance feedback for the Quality Payment Program. The second performance feedback was provided on July 1, 2019. In the CY 2021 PFS proposed rule (85 FR 50321), we noted that we aim to provide performance feedback on or around July 1 of each year, but due to the PHE and buy antibiotics, we estimated that we would provide performance feedback for the performance period in 2019 in late July Start Printed Page 65538 or early August of 2020.

The third performance feedback (for the CY 2019 performance period) was provided on August 5, 2020. In the proposed rule, we noted that similar to the CY 2019 performance period, due to the PHE for buy antibiotics, we may provide performance feedback for the CY 2020 performance period after July 1, 2021. Although we aim to provide performance feedback on or around July 1 of each year, it is possible that the release date could be later than July 1 depending on the circumstances. We provided performance feedback for the CY 2020 performance period on August 2 and September 27, 2021.

We direct readers to qpp.cms.gov for more information. h. Third Party Intermediaries We refer readers to §§ 414.1305 and 414.1400, the CY 2017 Quality Payment Program final rule (81 FR 77362 through 77390), the CY 2018 Quality Payment Program final rule (82 FR 53806 through 53819), the CY 2019 PFS final rule (83 FR 59894 through 59910), the CY 2020 PFS final rule (84 FR 63049 through 63080), the May 8th buy antibiotics IFC (85 FR 27594 through 27595), and the CY 2021 PFS final rule (85 FR 84926 through 84947) for our previously established policies regarding third party intermediaries. As discussed in the CY 2022 PFS proposed rule (86 FR 39458), we proposed to make several changes.

(1) Reorganization and consolidation of § 414.1400 generally. (2) new third party intermediaries general requirements. (3) new requirements specific to both QCDRs and qualified registries. (4) new requirements specific to only QCDRs.

And (5) remedial action and termination of third parties. (1) Reorganization and Consolidation of § 414.1400 Generally We recognize that many of our policies for third party intermediaries are similar or verbatim, and yet in prior rules, we have described them separately. To minimize the lengthiness and burden of reading our policies, we proposed to consolidate our regulatory text under § 414.1400. To be clear, our proposed updates would not change previously finalized requirements for third party intermediaries, but would bring more clarity and simplicity to the regulatory text.

These changes are discussed by topic in more detail below. We also note that in several places at § 414.1400 the regulation text was only updated to reflect both the applicable MIPS performance period/MIPS payment year. (a) Reorganization for Requirements Related to MIPS Performance Categories That Must Be Supported by Third Party Intermediaries We previously established in the CY 2017 Quality Payment Program final rule (81 FR 77363 through 77364), further revised in the Quality Payment Program provisions in the CY 2019 and CY 2020 PFS final rules ((83 FR 60088 and 84 FR 63049 through 63052, respectively), and further clarified our requirements for QCDRs, qualified registries, and health IT vendors with regards to submitting data for the purposes of the MIPS program in the Quality Payment Program provisions in the CY 2021 PFS final rule. Our current policy, codified at § 414.1400(a)(2), states that, beginning with the CY 2021 performance period/2023 MIPS payment year, QCDRs and qualified registries must be able to submit data for all of the following MIPS performance categories, and Health IT vendors must be able to submit data for at least one of the following MIPS performance categories.

Except as provided under paragraph (a)(2)(ii), QCDRs, qualified registries, and health IT vendors must be able to submit data for all of the following MIPS performance categories. Quality, except. ++ The CAHPS for MIPS survey. And ++ For qualified registries and Health IT vendors, QCDR measures.

Improvement activities. And • Promoting Interoperability, if the eligible clinician, group, or virtual group is using CEHRT. However, a third party intermediary may be excepted from this requirement if its MIPS eligible clinicians, groups or virtual groups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)( 4 ) or ( 5 ) or (c)(2)(i)(C)( 1 ) through ( 7 ) or (c)(2)(i)(C)(9)). ++ Health IT vendors that do not support MIPS Value Pathways must be able to submit data for at least one of the MIPS performance categories described in paragraphs (a)(2)(i)(A) through (C) of this section.

++ Promoting Interoperability, if the eligible clinician, group, or virtual group is using CEHRT. However, a third party intermediary may be excepted from this requirement if its MIPS eligible clinicians, groups or virtual groups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)( 4 ) or ( 5 ) or § 414.1380(c)(2)(i)(C)( 1 ) through ( 7 ) or § 414.1380(c)(2)(i)(C)( 9 )). In an effort to simplify, we proposed reorganizing the existing language at § 414.1400(a)(2). Specifically, we proposed providing updates to separately identify and provide clarity to data submission requirements since data requirements vary based on third party intermediary type and to provide clarification to exceptions to Promoting Interoperability for virtual groups and subgroups.

We proposed the following updates. To revise and redesignate existing paragraph at § 414.1400(a)(2) through (a)(2)(i) to proposed paragraphs § 414.1400(b)(1)(i) and (c)(1) through (c)(1)(i) to state the following. To state at proposed § 414.1400(b)(1)(i), beginning with the CY 2021 performance period/2023 MIPS payment year, QCDRs and qualified registries must be able to submit data for all of the following MIPS performance categories. Quality, except.

++ The CAHPS for MIPS survey. And ++ For qualified registries, QCDR measures. Improvement activities. And Promoting Interoperability, if the eligible clinician, group, virtual group, or subgroup is using CEHRT, unless.

++ The third party intermediary's MIPS eligible clinicians, groups, virtual groups, or subgroups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)( 4 )( i ) through ( iii ) or (c)(2)(i)(C)( 1 ) through (7) or (c)(2)(i)(C)( 9 )). To state at proposed § 414.1400(c)(1), beginning with the CY 2021 performance period/2023 MIPS payment year, health IT vendors must be able to submit data for the MIPS performance categories as follows. To state at proposed § 414.1400(c)(1)(i) through (c)(1)(i)(B), health IT vendors that support MVPs must be able to submit data for all of the MIPS performance categories. Quality, except.

++ The CAHPS for MIPS survey. And ++ QCDR measures. Improvement activities. And To revise and redesignate existing paragraph at § 414.1400(a)(2)(iii) to proposed paragraph § 414.1400(c)(1)(i)(C) state, Promoting Interoperability, if the eligible clinician, group, virtual group, or subgroup is using CEHRT, unless.

++ The third party intermediary's MIPS eligible clinicians, groups, virtual groups, or subgroups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)( 4 )( i ) through ( iii ) or (c)(2)(i)(C)( 1 ) through ( 7 ) or (c)(2)(i)(C)( 9 ). • To revise and redesignate existing paragraph at § 414.1400(a)(2)(ii) to proposed paragraph § 414.1400(c)(1)(ii) to state, health IT vendors that do not support MVPs must be able to submit data for at least one of the MIPS Start Printed Page 65539 performance categories described in paragraphs (c)(1)(i) through (iii) of this section. We proposed to create a new requirement at § 414.1400(c)(1)(iii) for health IT vendors to support MVPs. For more information on this proposal, please refer to section “proposed new requirement for third party intermediaries to support MVPs and the APP” at section IV.A.3.h.(2)(b)(i) of this final rule.

To move the current Health IT vendor requirements from paragraphs §§ 414.1400(a)(2)(ii) through (iii) and (d) to a new paragraph applicable to Health IT vendor requirements at § 414.1400(c). This will separately identify and provide clarity to data submission requirements specific to Health IT vendors. To move the current CMS-approved survey vendor requirements from paragraphs (a)(3) and (e) to a new paragraph applicable to CMS-approved survey vendor requirements at § 414.1400(d). We proposed to the redesignate paragraph (a)(3) current requirements to paragraph (d)(1) CMS-approved survey vendors may submit data on the CAHPS for MIPS survey for the MIPS quality performance category.

For the current requirements at paragraph (e), we proposed to move up those requirements to paragraph (d)(2). To redesignate paragraph (a)(4) as paragraph (a)(2). To redesignate paragraph (a)(5) as paragraph (a)(3). We solicited public comments on our proposals.

We did not receive public comments on these proposals, and therefore, we are finalizing them as proposed. (b) Reorganization for Requirements Related QCDR and Qualified Registries Self-Nomination We proposed to consolidate and redesignate the existing language at § 414.1400(b)(1) and (c)(1) to proposed § 414.1400(b)(2) to reference both QCDR and qualified registries. We proposed this consolidation to provide clarity and alignment with the aforementioned proposals and consolidate the duplicative criteria of QCDRs and qualified registries. As discussed below, we also proposed to consolidate and redesignate the performance feedback requirements previously at existing § 414.1400(b)(1) and (c)(1) to § 414.1400(b)(3)(iii).

We proposed to state at § 414.1400(b)(2), Self-nomination. For the CY 2018 and 2019 performance periods/2020 and 2021 MIPS payment years, entities seeking to qualify as a QCDR or qualified registry must self-nominate September 1 until November 1 of the CY preceding the applicable performance period. For the CY 2020 performance period/2022 MIPS payment year and future years, entities seeking to qualify as a QCDR or qualified registry must self-nominate during a 60-day period during the CY preceding the applicable performance period (beginning no earlier than July 1 and ending no later than September 1). Entities seeking to qualify as a QCDR or qualified registry for a performance period must provide all information required by CMS at the time of self-nomination and must provide any additional information requested by CMS during the review process.

For the CY 2019 performance period/2021 MIPS payment year and future years, existing QCDRs and qualified registries that are in good standing may attest that certain aspects of their previous year's approved self-nomination have not changed and will be used for the applicable performance period. We also proposed removing the last two sentences of existing § 414.1400(b)(1), which are duplicative with existing § 414.1400(b)(3)(iii). We proposed consolidating this language with existing paragraph (b)(3)(iii). We solicited public comments on our proposals.

The following is a summary of the comments we received and our responses. Comment. One commenter suggested that we refine the QCDR option under MIPS to streamline the self-nomination process, and to provide better incentives for organizations, including medical associations, to continue to invest in their QCDRs and develop new, meaningful measures for specialists to use for MIPS reporting and other clinical and research purposes. Response.

We thank the commenter for their suggestion. We may consider it for future rulemaking. Comment. One commenter expressed support for the updates that CMS has made to the QCDR and qualified registry self-nomination process, including the development of the measure submission portal at QualityPaymentProgram.cms.gov.

Response. We thank the commenter for their support. After consideration of public comments, we are finalizing these policies as proposed. (c) Reorganization for Requirements Related to QCDR and Qualified Registries Conditions for Approval We refer readers to existing § 414.1400(b)(2) for QCDR conditions for approval and existing § 414.1400(c)(2) for qualified registries conditions for approval.

In this final rule, we proposed the following in order to better organize, consolidate the duplicative criteria of QCDRs and qualified registries, and refer to both “QCDR and qualified registry” instead of one or the other. • We proposed to redesignate existing paragraph (b)(2) to proposed paragraph (b)(3) and to revise the paragraph heading as, Conditions for approval. We also proposed to update the reference to both QCDR and qualified registry in proposed paragraph (b)(3). We proposed to revise to include both QCDR and qualified registry and redesignate existing paragraph (b)(2)(i) to proposed paragraph (b)(3)(i).

We proposed to revise and redesignate existing paragraph (b)(2)(ii) to paragraph (b)(3)(ii). We also proposed to extend our policy for collaboration. For more information on this proposal, please refer to section “collaboration of entities to become a QCDR and proposal to extend policy for collaboration of entities to become a qualified registry” at section IV.A.3.h.(3)(a)(ii) of this final rule. As discussed above, we proposed to consolidate and redesignate the performance feedback requirements previously at existing § 414.1400(b)(1) and (c)(1) to § 414.1400(b)(3)(iii).

Furthermore, to consolidate similar performance feedback requirements, we also proposed to revise and redesignate existing paragraph (b)(2)(iii) to paragraph (b)(3)(iii) to state, beginning with the CY 2021 performance period/2023 MIPS payment year, require the QCDR or qualified registry must to provide performance feedback to their clinicians and groups at least 4 times a year, and provide specific feedback to their clinicians and groups on how they compare to other clinicians who have submitted data on a given measure within the QCDR or qualified registry. Exceptions to this requirement may occur if the QCDR or qualified registry submits notification to CMS within the reporting period promptly within the month of realization of the impending deficiency and provides sufficient rationale as to why they do not believe they would be able to meet this requirement (for example, if the QCDR does not receive the data from their clinician until the end of the performance period). • We proposed to consolidate and redesignate paragraphs (b)(2)(iv) and (c)(2)(iii) in their entirety, into a new paragraph (b)(3)(v), and to correct a typographical error in which the word “MIPS” was omitted in the first sentence. Start Printed Page 65540 We proposed to consolidate and redesignate paragraphs (b)(2)(v) and (c)(3)(iv), in their entirety, into a new paragraph (b)(3)(vi).

We solicited public comments on our proposals. We did not receive public comments on these proposals, and therefore, we are finalizing them as proposed. (d) Reorganization for Requirements Related to QCDR Measures (i) Reorganization for Requirements Related to QCDR Measures for the Quality Performance Category We refer readers to existing language at § 414.1400(b)(3) for QCDR measures for the quality performance category. We currently define “QCDR measure” at existing § 414.1400(b)(3).

We recognize that the QCDR measure definition is referred to throughout our policies and that it is not specific to § 414.1400(b)(3) or third party intermediaries. Therefore, to provide further clarity and to better align with the current policy, we proposed moving the QCDR measure definition to the definitions section at § 414.1305. We also proposed the following revisions to better organize regulation text at § 414.1400(b)(4) and to update cross-references to correspond to the new section numbers as reflected in this final rule. We proposed to redesignate paragraphs (b)(3)(i), (b)(3)(i)(A), and (b)(3)(i)(B) to definitions at § 414.1305.

We proposed to revise and redesignate existing paragraph (b)(3)(ii) to proposed paragraph (b)(4)(i) to state, for the CY 2018 performance period/2020 MIPS payment year and future years, at the time of self-nomination an entity seeking to become a QCDR must submit the following information for any measure it intends to submit for the payment year. ++ For MIPS quality measures, the entity must submit specifications including the MIPS measure IDs and specialty-specific measure sets, as applicable. + For QCDR measures, the entity must submit for CMS-approval measure specifications including. Name/title of measures, NQF number (if NQF- endorsed), descriptions of the denominator, numerator, and when applicable, denominator exceptions, denominator exclusions, risk adjustment variables, and risk adjustment algorithms.

In addition, no later than 15 calendar days following CMS approval of any QCDR measure specifications, the entity must publicly post the measure specifications for that QCDR measure (including the CMS- assigned QCDR measure ID) and provide CMS with a link to where this information is posted. We also proposed adding a header to state, “QCDR measure self-nomination requirements”. We believe adding a heading will help readers clearly distinguish QCDR measure self-nomination requirements. We proposed moving existing paragraph (b)(3)(iii) in its entirety to proposed paragraph (b)(4)(ii) and adding a header to state, “QCDR measure submission requirements”.

We believe adding a heading will help readers clearly distinguish QCDR measure submission requirements. • We proposed moving existing paragraphs (b)(3)(v) through (v)(C)( 1 ) in its entirety, to proposed paragraphs (b)(4)(iii) through (b)(4)(iii)(A)( 3 ). • We proposed to revise and redesignate existing paragraph at (b)(3)(v)(C)( 2 ) to paragraph (b)(4)(iii)(A)( 3 )( i ) to state, to be included in an MVP for the CY 2022 performance period/2024 MIPS payment year and future years, a QCDR measure must be fully tested. We proposed moving existing paragraph (b)(3)(vii) in its entirety, to paragraph (b)(4)(iv).

(ii) Reorganization for Requirements Related to QCDR Measure Approval Criteria We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77374 through 77375) and the Quality Payment Program provisions in the CY 2020 PFS final rule (84 FR 63059), where we finalized existing § 414.1400(b)(3)(v). At § 414.1400, we proposed to reorganize and make minor updates to the existing requirements at paragraph (b)(3)(v) to proposed paragraph (b)(4)(iii). We proposed to reorganize the existing requirements so that QCDR measure approval at paragraph (b)(3)(v) is discussed before QCDR measure considerations at paragraph (b)(3)(iv). Therefore, we proposed the following revisions.

To revise and redesignate existing paragraph (b)(3)(v) “QCDR measure requirement for approval include” to proposed paragraph (b)(4)(iii) and add a heading to state, “QCDR measure approval criteria”. We believe adding a heading will help readers clearly distinguish QCDR measure approval criteria. We also proposed to include the following updates. ++ Move existing paragraph (b)(3)(v) to proposed revised paragraph (b)(4)(iii)(A) to state, QCDR measure requirements for approval are.

++ Move existing paragraph (b)(3)(v)(A) in its entirety to proposed paragraph (b)(4)(iii)(A)( 1 ). ++ Move existing paragraph (b)(3)(v)(B) in its entirety to proposed paragraph (b)(4)(iii)(A)( 2 ). ++ Revise existing paragraphs (b)(3)(v)(C) and (b)(3)(v)(C)( 1 ) to proposed paragraph (b)(4)(iii)(A)( 3 ) to state, beginning with the CY 2022 performance period/2024 MIPS payment year, all QCDR measures must meet face validity. To be approved for the CY 2023 performance period/2025 MIPS payment year, all QCDR measures must be must meet face validity for the initial MIPS payment year for which it is approved.

For subsequent years after being initially approved, all QCDR measures must be fully developed and tested, with complete testing results at the clinician level, prior to submitting the QCDR measure at the time of self-nomination. ++ Move existing paragraph (b)(3)(v)(C)( 2 ) in its entirety to proposed paragraph (b)(4)(iii)(A)( 3 )( i ). ++ Move existing paragraph (b)(3)(v)(D) in its entirety to proposed paragraph (b)(4)(iii)(A)( 4 ). ++ Move existing paragraph (b)(3)(v)(E) in its entirety to proposed paragraph (b)(4)(iii)(A)( 5 ).

We solicited public comment on our proposals. The following is a summary of the comments we received and our responses. Comment. A few commenters supported the measure requirement for face validity testing of measures and stated it should be extended for future years.

One commenter noted particular concern for the face validity testing requirement, as the testing process is arduous and funding, staff, and other resources have been significantly reduced due to the PHE for buy antibiotics. A few commenters suggested that CMS delay the deadline for full QCDR measure testing to 2023 or later due to the impact of buy antibiotics on providers and registries. Another commenter suggested that CMS limit the face validity testing requirement, stating that because the buy antibiotics extreme and uncontrollable circumstances exception decreased the number of groups reporting to MIPS through QCDRs, the face validity testing requirement should be limited to the first 2 years for which measures are approved or until 2 years after the end of the buy antibiotics PHE. Several commenters expressed concerns with QCDR measure testing requirements and pointed to the significant burden of these requirements.

One commenter expressed the belief that a barrier to use of QCDR measures is the requirement that they be fully tested, which is Start Printed Page 65541 extremely burdensome for QCDR measure owners. Another commenter asked for clarification as to what constitutes acceptable measure testing. Commenters requested that CMS develop a transparent and consistent process for evaluating QCDR testing approaches and results. Commenters noted that failure to ease the QCDR requirements may result in interested parties opting to not participate in the QCDR program.

Response. We note that we did not propose to substantively modify the measure requirement for face validity and testing in the proposed rule, such as to delay these requirements. The existing requirement (85 FR 84939) at § 414.1400(b)(3)(v)(C)( 1 ) states that, for a QCDR measure to approved for the CY 2022 performance period/2024 MIPS payment year it must meet face validity. To be approved for the CY 2023 performance period/2025 MIPS payment year and for each subsequent year, a QCDR measure must meet face validity for the initial MIPS payment year for which it is approved.

Separately, paragraph (b)(3)(v)(C) provides that, beginning with the CY 2022 performance period/2024 MIPS payment year, a QCDR measure must be fully developed and tested, with complete testing results at the clinician level, prior to submitting the QCDR measure at the time of self-nomination. In addition, paragraph (b)(3)(v)(C)( 1 ) requires that, for each subsequent year, for which a QCDR measure is approved, it must be fully tested. We intended our proposed reorganization of these standards at paragraph (b)(4)(B)(iii)( 3 ) to track these existing requirements. In regards to what constitutes acceptable testing and the burden associated with, and possible delay of such testing, we refer readers to our discussion of this and related issues in past rules (85 FR 27594 through 27595.

85 FR 84940. 85 FR 84926. 85 FR 84936. 84 FR 63066.

84 FR 63065 through 63067. 83 FR 59901 through 59902. 82 FR 53805 through 53806) and guidance documents, including the current CMS Measures Management System Blueprint for additional guidance in measure testing at https://www.cms.gov/​Medicare/​Quality-Initiatives-Patient-Assessment-Instruments/​MMS/​Downloads/​Blueprint.pdf. Although we did not address any changes to the QCDR measure testing requirement at § 414.1400(b)(3)(v)(C)( 1 ) in the CY 2022 PFS proposed rule, based on public comments received on our proposals, we are considering proposing in next year's rulemaking to further delay this requirement for traditional MIPS until the CY 2024 performance period/2026 MIPS payment year, instead of the CY 2023 performance period/2025 MIPS payment year as previously finalized.

We clarify that this delay would not modify the existing requirement at paragraph (b)(3)(v)(C)( 2 ), to be included in an MIPS Value Pathway for the 2024 MIPS payment year and future years, a QCDR measure must be fully tested. Comment. One commenter suggested that CMS provide more meaningful credit/incentivization for measure testing participation given the difficulty to motivate practices to engage in measure testing. The commenter suggested an improvement activity credit for measure testing given the difficulty to motivate practices to engage in measure testing.

Response. We thank the commenter for their suggestion. We may consider it for future rulemaking. We encourage the commenter to visit the 2021 Improvement Activities Inventory for additional guidance on improvement activities that focus on QCDR participation at https://qpp-cm-prodcontent.s3.amazonaws.com/​uploads/​1189/​2021%20Improvement%20Activities%20List.zip.

After consideration of public comments, we are finalizing these policies as proposed. (iii) Reorganization for Requirements Related to QCDR Measure Considerations for Approval We refer readers to the Quality Payment Program provisions in the CY 2019 PFS final rule (84 FR 63198 through 63199), where we finalized existing § 414.1400(b)(3)(iv) “QCDR measure considerations for approval.” We proposed to reorganize and make minor updates to the language at existing paragraph (b)(3)(iv) to paragraph (b)(4)(iii)(B). We proposed to reorganize the existing requirements so that QCDR measure approval at paragraph (b)(3)(v) is discussed before QCDR measure considerations at paragraph (b)(3)(iv). We also proposed to redesignate existing paragraph (b)(3)(vi) to paragraph (b)(4)(iii)(C).

Specifically, we proposed the following revisions. To revise and redesignate existing paragraph (b)(3)(iv) “QCDR measure considerations for approval include” to paragraph (b)(4)(iii)(B) “QCDR measure considerations for approval include, but are not limited to”. • Move existing paragraphs (b)(3)(iv)(A) in its entirety to paragraph (b)(4)(iii)(B)( 1 ). • Move existing paragraph (b)(3)(iv)(B) in its entirety to paragraph (b)(4)(iii)(B)( 2 ).

• Move existing paragraph (b)(3)(iv)(C) in its entirety to paragraph (b)(4)(iii)(B)( 3 ). • Move existing paragraph (b)(3)(iv)(D) in its entirety to paragraph (b)(4)(iii)(B)( 4 ). • Move existing paragraph (b)(3)(iv)(E) in its entirety to paragraph (b)(4)(iii)(B)( 5 ). • Move existing paragraph (b)(3)(iv)(F) in its entirety to paragraph (b)(4)(iii)(B)( 6 ).

• Move existing paragraph (b)(3)(iv)(G) in its entirety to paragraph (b)(4)(iii)(B)( 7 ). • Revise and consolidate existing paragraph (b)(3)(iv)(G)( 1 ) to paragraph (b)(4)(iii)(B)( 7 )( i ) to state that QCDR link their QCDR measures as feasible to at least one cost measure, improvement activity, or an MVP at the time of self-nomination. • Revise and redesignate existing paragraph (b)(3)(iv)(G)( 2 ) to paragraph (b)(4)(iii)(B)( 7 )( ii ) to state that in cases where a QCDR measure does not have a clear link to a cost measure, improvement activity, or an MVP, CMS would consider exceptions if the potential QCDR measure otherwise meets the QCDR measure requirements and considerations. • Move existing paragraph (b)(3)(iv)(H) in its entirety to paragraph (b)(4)(iii)(B)( 8 ).

• Move existing paragraph (b)(3)(iv)(I) in its entirety to paragraph (b)(4)(iii)(B)( 9 ). • Revise and redesignate existing paragraph (b)(3)(iv)(J) to paragraph (b)(4)(iii)(B)( 10 ) to state beginning with the CY 2020 performance period/2022 MIPS payment year, CMS places greater preference on QCDR measures that meet case minimum and reporting volumes required for benchmarking after being in the program for 2 consecutive CY performance periods. Those that do not, may not continue to be approved. • Move existing paragraph (b)(3)(iv)(J)( 1 ) in its entirety to paragraph (b)(4)(iii)(B)( 10 )( i ).

• Move existing paragraph (b)(3)(iv)(J)( 2 ) to paragraph reserve (b)(4)(iii)(B)( 10 )( ii ). Move existing paragraph (b)(3)(vi) in its entirety to paragraph (b)(4)(iii)(C). We solicited public comments on our proposals. The following is a summary of the comments we received and our responses.

Comment. The commenter suggested that we assess whether the limit on the number of QCDR measures available (30 measures) should be revised. Response. We thank the commenter for their suggestion.

We may consider it for future rulemaking. Start Printed Page 65542 After consideration of public comments, we are finalizing these policies as proposed. (iv) QCDR Measure Rejection Criteria We refer readers to the existing requirements at § 414.1400(b)(3)(vii). We proposed reorganizing existing requirements at paragraph (b)(3)(vii) to proposed paragraph (b)(4)(iv).

Therefore, we proposed the following revisions. • To revise and redesignate existing paragraph (b)(3)(vii) “QCDR measure rejection criteria” to paragraph (b)(4)(iv) and add a heading to state, QCDR measure rejection criteria. We believe adding a heading will help readers clearly distinguish measure rejection criteria. We also proposed to include the following updates.

• To move existing paragraph (b)(3)(vii) to proposed paragraph (b)(4)(iv) to state, QCDR measure rejection criteria. Beginning with the CY 2020 performance period/2022 MIPS payment year, QCDR measure rejection considerations include, but are not limited to. Move existing paragraphs (b)(3)(vii)(A) through (L) in their entirety to (b)(4)(iv)(A) through (L). We solicited public comments on our proposals.

We did not receive public comments on these proposals, and therefore, we are finalizing them as proposed. (e) Reorganization for Requirements Related to Remedial Action and Termination of Third Party Intermediaries We refer readers to § 414.1400(f), the CY 2017 Quality Payment Program final rule (81 FR 77548), CY 2019 PFS final rule (83 FR 59908 through 59910), the CY 2020 PFS final rule (84 FR 63077 through 63080), and the CY 2021 PFS final rule (85 FR 84930 through 84937) for previously finalized policies for remedial action and termination of third party intermediaries. With the proposed updates being made at § 414.1400, we proposed to redesignate the following sections. We proposed to redesignate current paragraph (f) as paragraph (e) and to update cross-references to correspond to the new section numbers as reflected in this final rule.

We also proposed to redesignate current paragraph (g) as paragraph (f) and to update cross-references to correspond to the new section numbers as reflected in this final rule. We solicited public comments on these proposals. We did not receive public comments on these proposals, and therefore, we are finalizing them as proposed. (2) Third Party Intermediaries General Requirements We refer readers to previously established § 414.1400(a) and the CY 2017 Quality Payment Program final rule (81 FR 77363 through 77364), and as further revised in the CY 2019 PFS final rule (83 FR 60088), CY 2020 PFS final rule (84 FR 63049 through 63052), CY 2021 PFS final rule (85 FR 84926 through 84947) for our established policy regarding third party intermediaries general requirements.

In the CY 2022 PFS proposed rule, we proposed two changes for third party intermediaries. (1) Third party intermediary submissions for APM Entities. And (2) MIPS performance categories that must be supported by third party intermediaries. We also solicited comment on third party intermediaries that derive data from CEHRT.

These proposals and the request for comments are discussed in more detail below. (a) Third Party Intermediary Submissions for APM Entities As finalized in the Quality Payment Program provisions in the CY 2021 PFS final rule (85 FR 84895), APM Entities now have the option of reporting to MIPS on behalf of the MIPS eligible clinicians participating in their APM Entity. They have the option of reporting to traditional MIPS or via the APP (85 FR 84859). APM Entities have historically used Third Party Intermediaries for submitting their quality measures to their APMs, rather than to MIPS, however, these third party intermediaries now have the opportunity to submit these data for purposes of MIPS.

In the CY 2022 PFS proposed rule, we proposed to add APM Entities to § 414.1400(a)(1), expanding the general participation requirements of third party intermediaries to third party intermediaries reporting to MIPS on behalf of APM Entities in order to align reporting requirements for all participants in MIPS. We note that the Promoting Interoperability performance category is scored for APM Entities based on data submitted by the participant MIPS eligible clinicians and groups as described at § 414.1317(b)(1), and therefore, would not be required to be submitted by the third party intermediary on behalf of the APM Entity. We solicited comments on this proposal. We did not receive public comments on this proposal, and therefore, we are finalizing it as proposed.

(b) MIPS Performance Categories That Must Be Supported by Third Party Intermediaries We refer readers to previously established § 414.1400(a)(2) and the CY 2017 Quality Payment Program final rule (81 FR 77363 through 77364), and as further revised in the CY 2019 PFS final rule (83 FR 60088), CY 2020 PFS final rule (84 FR 63049 through 63052), CY 2021 PFS final rule (85 FR 84926 through 84947) for our established policy regarding the types of MIPS data that third party intermediaries may submit. In the CY 2022 PFS proposed rule, we proposed new requirements in alignment with our proposals in sections IV.A.3.b.(2)(c), IV.A.3.b.(4)(e) and IV.A.3.b.(3)(e) of this final rule to adopt MVPs and subgroups. (i) New Requirement for Third Party Intermediaries To Support MVPs and the APP As described in the Quality Payment Program provisions finalized in the CY 2021 PFS final rule (85 FR 84849), MVPs should include measures and activities from the quality, cost, improvement activities, and Promoting Interoperability performance categories. As described in section IV.A.3.b.(2)(c)(i) of this final rule, we discussed our proposals related to furthering our transition to MIPS Value Pathways (MVPs).

As MVPs are implemented, proposed beginning with the CY 2023 performance period/2025 MIPS payment year, we also proposed the methods in which an MVP participant may report on an MVP or the APP. Since QCDRs, qualified registries, and health IT vendors are required under existing § 414.1400(a)(1) to submit data for quality, improvement activities, and promoting interoperability, we believe they would have the experience needed to support MVP and APP reporting. Therefore, we proposed to create a new requirement at § 414.1400(b)(1)(ii) to state that, beginning with the CY 2023 performance period/2025 MIPS payment year, QCDRs and qualified registries must support MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. QCDRs and qualified registries may also support the APP.

Additionally, we proposed to create a new requirement at paragraph § 414.1400(c)(1)(iii) to state that beginning with the CY 2023 performance period/2025 MIPS payment year, Health IT vendors must support MVPs that are applicable to the Start Printed Page 65543 MVP participants on whose behalf they submit MIPS data. Health IT vendors may also support the APP. Based off historical participation, we are aware that some third party intermediaries (QCDRs and qualified registries) support a single specialty or subspecialty, while others support multiple specialties. Therefore, we believe that it is not appropriate to expect that all third party intermediaries are able to support all MVPs that are implemented in the program.

Rather, the third party intermediaries should identify and support MVPs that are relevant to the clinicians and groups they support. We do not believe that CMS-approved survey vendors will be able to support MVP reporting, because they are historically limited, in that they only support the CAHPS for MIPS Survey Measure. As discussed in section IV.A.3.b.(2)(c) of this final rule, MVPs will start with the CY 2023 performance period/2025 MIPS payment year. We believe this delay in implementation will allow third party intermediaries sufficient time for programming and system preparation for MVP reporting success.

We solicited comments on our proposals. The following is a summary of the comments we received and our responses. Comment. One commenter supported third party intermediaries only reporting on the MVPs that reflect their participant needs but suggested third-party intermediaries be able to choose which MVPs they wish to support.

The commenter expressed concerns about MVPs being arbitrarily assigned to third-party intermediaries. One commenter noted that supporting an entire MVP is very different from supporting the inclusion of specific QCDR measures in an MVP and could carry much more burden for the registry and sought clarification of whether CMS will assign specific MVPs to a QCDR or qualified registry. Response. We thank the commenter for their support.

At this time, CMS does not intend on assigning specific MVPs to a third party intermediary. As described in the CY 2022 PFS proposed rule (86 FR 39462), we proposed at § 414.1400(b)(1)(ii) and (c)(1)(iii) that QCDRs, qualified registries, and Health IT vendors must support MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. We refer readers to Appendix 3 of this final rule, where discuss the MVPs being finalized beginning with the CY 2023 performance period/CY 2025 MIPS payment year, around the clinical topics of stroke care, heart disease, rheumatology, chronic conditions, emergency medicine, anesthesia, and lower extremity joint repair. QCDRs, qualified registries, and Health IT vendors that support MVP participants, who work in the aforementioned clinical areas will be required to support these MVPs, as applicable.

Furthermore, we expect that QCDRs, qualified registries, and Health IT vendors who support MVPs would support all measures and activities, across the quality, PI, and improvement activities performance category that are included in the MVP (cost measures and population health measures are calculated by CMS and do not require data submission by a third party intermediary or a clinician). The expectation that the QCDR and qualified registry support measures and activities across all three performance categories is not new, as these third party intermediaries are currently required to do so. We believe allowing QCDRs to only support specific QCDR measures in an MVP creates undue burden on the MVP Participant who would need to find other means to complete MVP reporting requirements. This may deter clinicians from utilizing a third party intermediary.

For the time being, CMS does not intend on assigning specific MVPs to a third party intermediary. It is required for QCDRs, qualified registries, and Health IT vendors to identify (CMS approved) MVPs that are relevant to the clinicians they support and report on those. Comment. One commenter supported third party intermediaries supporting MVPs but requested clarification on whether a QCDR would be responsible for validating an MVP participant's performance on population health measures and/or providing “enhanced” performance feedback, including performance data comparing the performance of similar clinicians who report on the same MVP.

Response. Third party intermediaries will not be expected to validate the performance on the current population health measures, since they are administrative claims-based and do not require external data submission. The responsibility of identifying the population health measure that should be calculated will fall to the MVP participant to determine at the time of MVP registration. CMS calculates these measures based on administrative claims data.

In the CY 2022 PFS proposed rule (86 FR 39383), we describe our proposal to include comparative performance feedback within the annual performance feedback that CMS currently provides under traditional MIPS. While CMS intends to provide this enhanced feedback through our existing performance feedback processes, QCDRs and qualified registries will still be required to provide clinicians they support with performance feedback as described at § 414.1400(b)(iii) and (c)(ii), regardless of whether the clinician chooses to report through traditional MIPS or an MVP. Comment. One commenter suggested that CMS mandate that EHR vendors support the quality measures in MVPs, otherwise clinicians would be forced to join multiple registries with the cost exceeding the maximum penalty.

Response. To clarify, health IT vendors (such as EHRs), QCDRs, and qualified registries who support MVPs are required to support all measures and activities available in the MVP across the quality, improvement activities, and promoting interoperability performance categories. The exceptions to this requirement are the cost measures and population health measures, which do not require external data submission to be calculated. In addition, some MVPs may include QCDR measures, which are only reportable through a QCDR.

In instances where QCDR measures are included in an MVP, a qualified registry or health IT vendor will be expected to support all other quality measures included within the MVP. Comment. One commenter expressed concerns about layering another auditing requirement on QCDRs and qualified registries when MVPs are finalized as this could increase regulatory complexity and result in added work and burden without making a significant difference in the quality of data submitted. One commenter requested that CMS add more detail in future requirements for third-party intermediaries to validate data submitted by MVP participants.

Response. We disagree with the commenter. QCDRs and qualified registries are currently required to conduct data validation on data that is submitted to CMS for purposes of the MIPS program, to ensure the data is true, accurate, and complete. We refer readers to section IV.A.3.h.(3)(a)(iii) of this final rule for a detailed discussion of those requirements.

The current data validation requirements that are utilized in traditional MIPS, will also be applied to MVP submissions. MVPs are considered a method of reporting under MIPS, but is nonetheless a part of the program. Therefore, the requirements and expectations remain the same— QCDRs and qualified registries must conduct data validation on data submitted to CMS for purposes of the MIPS program, regardless of whether Start Printed Page 65544 the data is submitted under traditional MIPS or through an MVP. In the future, data validation information that is covered in the Self-Nomination Toolkit for QCDRs and qualified registries available at https://qpp-cm-prod-content.s3.amazonaws.com/​uploads/​1083/​2021%20Self-Nomination%20Toolkit%20for%20QCDRs%20and%20Qualified%20Registries.zip will also include MVPs.

Comment. One commenter requested clarification on whether QCDRs and qualified registries are required or permitted to support the APP, stating that the preamble states this is a requirement while the regulatory text says that QCDRs and qualified registries may support the APP. The commenter opposed a requirement for QCDRs and qualified registries to support the APP. Response.

In the CY 2021 PFS final rule (85 FR 84859), we discussed that APM Entities have the option of reporting to MIPS on behalf of the MIPS eligible clinicians participating in their APM Entity. Additionally, there is an option of reporting to traditional MIPS or via the APP. Furthermore, in the proposed rule (86 FR 39462), we proposed to add APM Entities to § 414.1400(a)(1), expanding the general participation requirements of third party intermediaries to third party intermediaries reporting to MIPS on behalf of APM Entities in order to align reporting requirements for all. We want to note that QCDRs and qualified registries would not be required to support the APP, but may do so.

If QCDRs and qualified registries would like to support the APP, they would need to meet all of the other requirements of being a QCDR or qualified registry reporting to MIPS (with the exception of PI reporting, which has some exceptions) as described above. After consideration of public comments, we are finalizing these policies as proposed. (ii) Requirements for All Third Party Intermediaries To Support Subgroup Reporting As proposed in section IV.A.3.b.(3) of this final rule, subgroup reporting would allow clinicians in multispecialty practices to participate in MIPS more meaningfully. Since subgroups would be implemented concurrently with MVPs, it is important that third party intermediaries have the capability to support subgroup reporting of MVPs.

As described above, we believe QCDRs, qualified registries, and health IT vendors would have the capacity to support MVP and APP reporting. In the CY 2022 PFS proposed rule, we proposed to require QCDRs, qualified registries, health IT vendors, and CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. Therefore, we proposed to revise § 414.1400(a)(1) to state that MIPS data may be submitted on behalf of a MIPS eligible clinician, group, virtual group, subgroup or APM Entity by any of the following third party intermediaries. QCDR.

Qualified registry. Health IT vendor. Or CMS-approved survey vendor. We believe it is imperative for all third party intermediaries to be able to support subgroup reporting as we envision that to be the future of the program.

While the CAHPS for MIPS survey vendors cannot support MVPs or the APP, we believe they can support the reporting of the CAHPS for MIPS measure within an MVP and the APP, if a subgroup decides to report on that measure. Due to the limited experience, CAHPS for MIPS survey vendors have in quality reporting, we do not believe it is feasible for them to support MVP reporting since MVP reporting would require experience with reporting across the performance categories and the use of several collection types for quality reporting. However, there may be instances where the CAHPS for MIPS survey measure may be included in an MVP. For example, in the Optimizing Chronic Conditions Management MVP, as described in Appendix 3.

MVP Inventory, of this final rule. In such instances, if groups or subgroups would like to report this measure, they should be able to utilize a CAHPS for MIPS survey vendor to do so. We believe it is important that all third party intermediaries support subgroup reporting in order to support meaningful quality reporting. We understand that there may be a level of burden to third party intermediaries that are required in supporting subgroup reporting by requiring them to support another clinician type.

However, we believe that requiring third party intermediaries to support subgroup reporting will allow for clinicians to participate in a manner that is more meaningful. We noted in section IV.A.3.b.(4)(f)(ii)(D) of this final rule, subgroups would have to register through the MVP participant registration process. Third party intermediaries would need to be able to track the subgroup identifiers and support the data submission process accordingly. We solicited comments on our proposal.

The following is a summary of the comments we received and our responses. Comment. A few commenters expressed concern regarding the burden for registries to identify and validate subgroup reporting. Response.

To clarify, as discussed in section IV.A.3.b.(4)(f)(ii)(D) of this final rule, subgroups must self-identify and register through a registration process in order to be considered a subgroup. The subgroup would need to register directly through the MVP registration process, that is done separately and not through a third party intermediary. Therefore, we believe there is no burden to registries to identify the subgroups. As MVP participants such as subgroups enroll to use the services of a registry, the subgroup will share with the registry their CMS-assigned identifier and a list of participants within that subgroup.

The registry will need to submit the subgroup identifier information with the subgroup's data at the time of submission. We understand there may be concerns in scenarios in which subgroups inadvertently provide an incorrect subgroup identifier to the registry. We will take that into consideration for future rulemaking, as we determine whether there are additional system safeguards, such as a system rejection of an incorrect identifier can be implemented to limit the occurrence of such issues. With regards to data validation, all QCDRs and qualified registries will continue to be held to the data validation requirements that currently exist, regardless of whether a clinician or group decides to participate in MVP reporting or traditional MIPS reporting.

While we understand there is a level of burden associated with data validation, we believe the benefit outweighs the burden to ensure that all data submitted to CMS is true, accurate, and complete. Comment. One commenter suggested that CMS delay its proposal requiring third party intermediaries to support subgroup reporting to allow more time for registries to implement reporting processes. Several commenters expressed concern that subgroup reporting will impose a large increase in burden on registries, particularly with respect to how registries validate NPIs.

A few commenters expressed concern that QCDRs may lack the capacity to support subgroup reporting. Response. We disagree with the need for further delay. We intentionally proposed MVPs and subgroup reporting with a delayed implementation to account for the time that clinicians, third party intermediaries, and healthcare organizations would need to prepare to operationalize MVP and subgroup reporting.

We believe the availability of subgroup reporting Start Printed Page 65545 should go hand-in-hand with the implementation of MVPs, and therefore, should be jointly available beginning with the CY 2023 performance period/2025 MIPS payment year. The delayed implementation should provide third party intermediaries sufficient time for system and operation preparations for subgroup reporting. In addition, we do not believe that subgroup reporting will impose a large increase in burden to registries. We refer readers to section IV.A.3.b.(3) of this final rule, for further discussion of validation requirements.

Subgroups are derived from their affiliated TINs who would have otherwise reported traditional MIPS through a registry. After consideration of public comments, we are finalizing this policy as proposed. (c) Request for Comment on Third Party Intermediaries That Derive Data From CEHRT For third party intermediaries that will be submitting quality measure data on behalf of MIPS eligible clinicians, we believe that EHR systems will be able to provide measure results for a set of providers that are part of a subgroup where required for subgroup reporting. We note that the existing CEHRT definition for eligible clinicians at § 414.1305 includes the 45 CFR 170.315(c)(4) “Clinical quality measures—filter” as an optional element.

This criterion requires health IT to be able to filter CQM results at both patient and aggregate levels. Moreover, a Health IT Module must be able to filter by a single proposed data element (for example, provider type) or a combination of any of the data elements). Historically, the “Clinical quality measures—filter” at 45 CFR 170.315(c)(4)” (CQM-filter) criterion has been applicable for certified health IT modules supporting quality measurement for participants in certain APMs. We believe technology certified to this optional criterion could support subgroup reporting via third party intermediaries that derive data from CEHRT by ensuring that an EHR can produce CQM results filtered for a specific group of provider NPIs that are part of a subgroup.

These filtered CQM results could then be shared with a third party intermediary, which provides this data for reporting to CMS. However, we also believe health IT developers are offering non-certified functionality that can effectively support reporting of measure results for a subgroup. As a result, we did not propose any changes at this time to the language in the CEHRT definition for eligible clinicians regarding the “optional” status of technology certified to the CQM-filter criterion. We are interested in general feedback from stakeholders on the current capabilities of third party intermediaries that derive data from CEHRT to successfully receive and transmit data to CMS for CQMs based on subgroups.

Capabilities of EHR systems to support subgroup reporting, including reporting facilitated by third party intermediaries, and whether requiring the adoption of technology certified to the CQM-filter criterion would help to support subgroup reporting. And challenges which entities may face in meeting requirements to report on subgroups when deriving data from CEHRT. We solicited feedback on this topic. Comment.

A few commenters responded to CMS' request for information regarding CEHRT and third party intermediaries. One commenter urged CMS to establish clear expectations and guidelines to ensure data security and to define roles and responsibilities for data validation and data cleaning. Another commenter recommended that CMS consider making the CQM filter criterion mandatory for CEHRT because, otherwise, organizations would likely be required to contract with qualified registries/QCDRs to submit MIPS data. Another commenter disagreed, stating that as a developer of CEHRT that provides CQM functionality, they do not believe that the CQM-filer criterion is necessary.

Response. We thank commenters for the feedback received through this request for information. We may consider this information to inform future rulemaking. (3) New Requirements for Both Qualified Clinical Data Registries (QCDRs) and Qualified Registries (a) Background We refer readers to §§ 414.1305 and 414.1400, the CY 2017 Quality Payment Program final rule (81 FR 77362 through 77390), the CY 2018 Quality Payment Program final rule (82 FR 53806 through 53819), the CY 2019 PFS final rule (83 FR 59894 through 59910), the CY 2020 PFS final rule (84 FR 63049 through 63080), the May 8th buy antibiotics IFC (85 FR 27594 through 27595), and the CY 2021 PFS final rule (85 FR 84926 through 84947) for our previously established policies regarding QCDRs and qualified registries.

In the CY 2022 PFS proposed rule, we proposed several changes for both QCDRs and qualified registries. (1) New requirement for approved QCDRs and qualified registries that have not submitted performance data. (2) collaboration of entities to become a QCDR and qualified registry. And (3) data validation audit and targeted audit requirements.

These proposals are discussed in more detail below. (i) New Requirement for Approved QCDRs and Qualified Registries That Have Not Submitted Performance Data We require that both QCDRs and qualified registries must have a minimum of 25 participants signed up by the prior performance period at existing § 414.1400(b)(2) and (c)(2). We refer readers to CY 2017 Quality Payment Program final rule (81 FR 77362 through 77390), the CY 2018 Quality Payment Program final rule (82 FR 53806 through 53819), the CY 2019 PFS final rule (83 FR 59894 through 59910), the CY 2020 PFS final rule (84 FR 63049 through 63080), the May 8th buy antibiotics IFC (85 FR 27594 through 27595), and the CY 2021 PFS final rule (85 FR 84926 through 84947). We identified a number of QCDRs and qualified registries that have continued to self-nominate to become a third party intermediary for the MIPS program, but have not submitted clinician, group or virtual group data to CMS.

As the MIPS program continues to mature, we wish to reduce the number of vendors that self-nominate to become a qualified vendor, but do not actively participate in the MIPS program. We believe that maintaining these vendors who do not actively participate does not provide a benefit to the MIPS program, rather it creates stakeholder confusion by including these vendors in our qualified postings. We proposed a two-tiered approach to solve this issue. First, we proposed to create a new requirement at § 414.1400(b)(3)(vii) to require QCDRs and qualified registries that have never submitted data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year) through the CY 2020 performance period/2022 MIPS payment year, to submit a participation plan as part of their self-nomination for CY 2023.

Exceptions to this requirement may occur if data is received for the CY 2021 performance period/2023 MIPS payment year. Under this scenario, QCDRs and qualified registries would not need to submit a participation plan for CY 2023 of the self-nomination period. If they do not submit data, their participation plan must be submitted as part of self-nomination for CY 2023 and must be accepted by CMS to continue to be an approved QCDR or qualified registry. Start Printed Page 65546 Secondly, we proposed to codify a new requirement at paragraph (b)(3)(viii) to state, beginning with the CY 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval.

For example, for the CY 2024 performance period/2026 MIPS payment year, vendors will be required to have submitted performance data for the CY 2021 and 2022 performance periods/2023 and 2024 MIPS payment years. Under this proposal, the participation plan must explain the QCDR's or qualified registry's detailed plans about how the vendor intends to encourage clinicians to submit MIPS data to CMS through the third party intermediary on behalf of clinicians or groups. The vendor must also explain why they should still be allowed to participate as a qualified vendor. We note that this proposed participation plan was modeled off of the current requirement for QCDR measure participation at existing § 414.1400(b)(3)(iv)(J)( 1 ) (redesignated to proposed paragraph (b)(4)(iii)(B)(10)( i )).

We solicited comments on this proposal. The following is a summary of the comments we received and our responses. Comment. A few commenters disagreed with the proposal to require a participation plan for approved QCDRs that did not submit data for 2 years preceding the applicable self-nomination period.

One commenter stated that the buy antibiotics PHE reduced reporting by eligible clinicians to QCDRs. Response. While we are sympathetic and acknowledge that the impact the PHE may have had on reduced reporting, we note that we are proposing an incremental approach to assess QCDR data reporting. This includes the first proposal which would apply to any QCDR or qualified registry that has not submitted data to CMS since the inception of MIPS (CY 2017).

We believe a QCDR should have been able to report data to CMS for years preceding CY 2021. Specifically, we believe a QCDR should have been able to report data to CMS for CY 2019. If a QCDR was new in CY 2020 and did not submit data to CMS, the QCDR still has CY 2021 to report for clinicians which in turn, satisfies this requirement. Furthermore, the proposal provides QCDRs and qualified registries the opportunity to submit participation plans, which could support the decision to allow a QCDR or qualified registry to continue their MIPS participation.

This plan would outline possible reasons for low/no reporting to CMS and the efforts the QCDR plans to take to further encourage their clinicians to submit data to CMS. Some examples include but are not limited to. A reduction in associated fees, improvement of an EHR interface to reduce data extraction burden, expansion of the numbers/types of measures the QCDR chooses to report, etc. As such, this proposal would not immediately remove a QCDR or qualified registry from participating as a third party intermediary.

As discussed above, we want to reduce the number of vendors that self-nominate to become a qualified vendor, but do not actively participate in the MIPS program. We believe that maintaining these vendors who do not actively participate does not provide a benefit to the MIPS program. We note that our goal is to decrease the operational burden on CMS and those vendors who do not submit MIPS data to CMS. CMS would decrease its operational burden by not having to go through the vetting process of these entities or monitor program compliance during the year.

Additionally, we believe that we can better utilize the resources used for vendors that do not submit MIPS data elsewhere to improve the MIPS program. Furthermore, vendors who choose not to submit MIPS data to CMS are depriving CMS of data that would benefit the MIPS program. Lastly, vendors who do not submit data will decrease their burden in the long-term by not self-nominating year after year. Comment.

One commenter disagreed with the proposal for QCDRs and qualified registries who do not submit data 2 years preceding the applicable self-nomination period to submit a participation plan at the time of self-nomination. The commenter noted that CMS would also require the participation plan to include moving users over to submit their MIPS data through the qualified registry. The commenter expressed concern that this policy would create significant demand on QCDRs specifically, due to the already cumbersome Eligible Measure Applicability (EMA) process required for qualified registries. The commenter currently uses both the qualified registry and QCDR to collect data, however, the commenter only submits the data to CMS through the QCDR.

Response. We disagree with the commenter's interpretation of this policy. The intention of the participation plan requirement is to explain the QCDR's or qualified registry's detailed plans about how the vendor intends to encourage clinicians to submit MIPS data to CMS through the third party intermediary on behalf of clinicians or group and to explain why they should still be allowed to participate as a qualified vendor. The participation plan will not require moving users over to submit their MIPS data through the qualified registry and that this policy would create significant demand on QCDRs.

We note that during the CY 2019 MIPS performance period, the Eligible Measure Applicability (EMA) process was updated to be applicable to collection types (that is, EMA applies to Part B Claims measures and MIPS clinical quality measures (CQMs) but does not apply to electronic clinical quality measures (eCQMs), QCDR measures, or Web Interface) rather than third party intermediaries. As such, EMA does not apply to QCDRs and qualified registries as an entity, rather it could apply to MIPS CQMs that the QCDR or qualified registry is approved to support. We encourage third party intermediaries to participate as a QCDR if they intend to self-nominate their own QCDR measures or use another QCDR's measures (with permission from the QCDR who owns the measure) or as a qualified registry if they plan to support their clients through the reporting of CQMs or eCQMs only. After consideration of public comments, we are finalizing these policies as proposed.

(ii) Collaboration of Entities To Become a QCDR and Proposal To Extend Policy for Collaboration of Entities To Become a Qualified Registry (A) Background In the CY 2017 Quality Payment Program final rule (81 FR 77377), we finalized to allow collaboration of entities to become a QCDR based on our experience with the qualifying entities wishing to become QCDRs for performance periods. We stated that we believed our previously finalized policy supporting entity collaboration should be continued under MIPS. Therefore, we discussed that an entity that may not meet the criteria of a QCDR solely on its own, but could do so in conjunction with another entity and would be eligible for qualification through collaboration with another entity. Additionally, we finalized at § 414.1400(b)(2)(ii), specifically for QCDRs, that if the entity uses an external organization for purposes of data collection, calculation, or transmission, it must have a signed, written agreement with the external organization that specifically details the Start Printed Page 65547 responsibilities of the entity and the external organization.

The written agreement must be effective as of September 1 of the year preceding the applicable performance period. For example, an entity, such as a specialty society, that needs technical support may partner with an outside entity such as a health IT vendor to qualify as a QCDR. While entities, such as QCDRs, Health IT vendors, and qualified registries, can collaborate with external organizations, those entities could only do so to meet requirements to be a QCDR. We did not explicitly create a policy for entities to collaborate to meet the requirements to be a qualified registry.

(B) Proposal To Extend to Qualified Registries We believe we should extend the previously finalized policy to apply to entities that wish to collaborate to become a qualified registry as well because extending this policy to qualified registries would also help smaller specialty societies that may not have the resources on their own to become a qualified registry. This will allow those societies to be able to partner with other entities to meet the definition of a qualified registry. Therefore, in the CY 2022 PFS proposed rule, we proposed to revise and redesignate existing paragraph (b)(2)(ii) to new paragraph (b)(3)(ii) to state, if the entity seeking to qualify as a QCDR or qualified registry uses an external organization for purposes of data collection, calculation, or transmission, it must have a signed, written agreement with the external organization that specifically details the responsibilities of the entity and the external organization. The written agreement must be effective as of September 1 of the year preceding the applicable performance period.

For example, an entity, such as a specialty society, that needs technical support may partner with an outside entity such as a health IT vendor to qualify as a qualified registry. We solicited comments on this proposal. We did not receive public comments on this proposal, and therefore, we are finalizing it as proposed. (iii) Data Validation Audit and Targeted Audit Requirements (A) Information Required at the Time of Self-Nomination In the CY 2017 Quality Payment Program final rule (81 FR 77366 through 77367.

81 FR 77383 through 77384) we discussed our expectation for QCDRs and qualified registries to conduct validation on the data they intend to submit for the MIPS performance period. We also discussed that the full self-nomination process would require the following. A submission of basic information, a description of the process the QCDR and qualified registry will use for completion of a targeted audit of a subset of data prior to submission, the provision of a data validation plan along with the results of the executed data validation plan by May 31 of the year following the performance period. Additionally, in the Quality Payment Program provisions in the CY 2021 PFS final rule (85 FR 84930 through 84937.

85 FR 84944 through 84947) at existing § 414.1400(b)(2)(iv) and (v), and (c)(2)(iii) and (iv), we finalized the data validation audit requirements as condition for approval. While we did finalize the requirements for the data validation audits as condition for approval, we did not codify the requirements for QCDR and qualified registries to submit data validation plan during self-nomination along with the results of the executed data validation plan by May 31 of the year following the performance period. In order to provide clarification and to better align with the previously finalized policy (81 FR 77366 through 77367. 81 FR 77383 through 77384), we proposed to codify the following revisions.

As stated in previous polices (81 FR 77366 through 77367;81 FR 77383 through 77384), QCDRs and qualified registries are required to submit the results of their data validation plan to CMS by May 31 of the year following the performance period. Therefore, we proposed to codify at § 414.1400(b)(3)(v)(G)( 1 ) to state that QCDRs and qualified registries must conduct validation on the data they intend to submit for the applicable MIPS performance period, and provide the results of the executed data validation plan by May 31st of the year following the performance period. Furthermore, QCDRs and qualified registries are required to submit their data validation plan explaining their process of data validation submission annually during self-nomination, and it must be approved by CMS for before use. To provide further clarity and to better align with the existing policy (81 FR 77366 through 77367.

81 FR 77383 through 77384), we also proposed to codify a new requirement at § 414.1400(b)(3)(iv) to state that, beginning with the CY 2023 performance period/2025 MIPS payment year, the QCDR or qualified registry must submit a data validation plan annually, at the time of self-nomination, for CMS' approval, and may not change the plan once approved, without the prior approval of the agency. As discussed above we proposed to codify at § 414.1400(b)(3)(iv) to provide further clarity to better align with previous policies. Therefore, we proposed to reorganize at § 414.1400(b)(2)(iv) though (viii) to better align with the above changes. We proposed with the following revisions.

We proposed to revise and redesignate existing paragraph (b)(2)(iv) to paragraph (b)(3)(v) to state, that beginning with the CY 2021 performance period/2023 MIPS payment year, the QCDR or qualified registry must conduct annual data validation audits in accordance with this paragraph (b)(3)(v). We proposed to revise and redesignate existing paragraph (b)(2)(iv)(A) to paragraph (b)(3)(vi)(A) to state that, if a data validation audit under paragraph (b)(3)(v) identifies one or more deficiency or data error, the QCDR or qualified registry must conduct a targeted audit into the impact and root cause of each such deficiency or data error for that MIPS payment year. We proposed to revise and redesignate existing paragraph (b)(2)(v) to paragraph (b)(3)(vi) to state that beginning with the CY 2021 performance period/2023 MIPS payment year, the QCDR or qualified registry must conduct targeted audits in accordance with this paragraph (b)(3)(vi). We proposed to revise and redesignate paragraph (b)(2)(vi) to paragraph (b)(3)(vii), to state for the CY 2023 performance period/2025 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for any of the CY 2017 through 2021 performance periods/2019 through 2023 MIPS payment years must submit a participation plan for CMS' approval.

This participation plan must include the QCDR's detailed plans and changes to encourage eligible clinicians and groups to submit data on the low-reported QCDR measure for purposes of the MIPS program. • We proposed to revise and redesignate existing paragraph (b)(2)(vii) to paragraph (b)(4)(viii) to state that beginning with the CY 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval. Start Printed Page 65548 The following is a summary of the comments we received and our responses. Comment.

Several commenters expressed concerns about the “overly burdensome” nature and significant cost of the CMS data validation audit requirements for third party intermediaries. One commenter expressed concerns with the randomized auditing resulting in an unintended consequence of increasing burden on small and mid-sized group practices because of the low number of participants reporting via the qualified registry as individuals. One commenter stated that the audit requirements are duplicative, unnecessary, and do not enhance data quality and validity because QCDRs already have rigorous internal data and quality standards. A few commenters stated that clinicians and registries were impacted by the buy antibiotics flagyl, specifically that dozens of audits were conducted and QCDRs and qualified registries have encountered practices struggling to collect and report data while a majority of their time and effort has been spent on responding to the buy antibiotics flagyl.

Response. While we understand that data validation requires a level of effort, time, and cost by the QCDRs and qualified registries, we disagree that this causes undue burden. While we acknowledge and appreciate the efforts and participation of all group practices of varying sizes including small and mid-sized groups, we believe it is important to hold all practices to the same standards for data validation audits to ensure that all data submitted is true, accurate, and complete. As discussed in the CY 2017 Quality Payment Program final rule (81 FR 77366 through 77367.

81 FR 77383 through 77384), we expect that QCDRs and qualified registries would conduct validation on the data they intend on submitting for the MIPS performance period and provide the results of the data validation to CMS in the form of a data validation execution report by May 31st of the year following the performance period. As noted in the CY 2017 PFS final rule (81 FR 77366 through 77367), we believe it is necessary to establish a requirement that QCDRs conduct data validation to ensure they are actively monitoring the data they submit to CMS for purposes of a pay-for-performance program. We also believe it is important for QCDRs to validate the data that they intend to submit to us for purposes of the MIPS program to ensure that the data submitted is true, accurate, and complete (85 FR 84936). We disagree that audit requirements are duplicative, unnecessary, and do not enhance data quality and validity because QCDRs already have rigorous internal data and quality standards.

While we appreciate that many QCDRs already have rigorous internal data and quality standards, we are not asking QCDRs to duplicate work. If QCDRs have their own auditing requirements, they can use the same auditing process or combine the efforts to reduce duplication as long as they meet the data validation requirements specified by the regulation at a minimum (81 FR 77366 through 77367. 81 FR 77383 through 77384). For example, if a QCDR already audits 10 percent of their data prior to submission for all performance categories, this would meet the 3 percent portion of the data validation requirement.

Additionally, despite our requirements to have validation audits, each year there are still some QCDRs that submit inaccurate data. As payment adjustments increase, this could adversely affect a practice with respect to their payment because these payment calculations were based on inaccurate data submitted to CMS. Furthermore, while we do acknowledge that the impact of the PHE for buy antibiotics may have affected some providers and registries ability to conduct audits due to practices struggling to collect and report data due to majority of their time and effort being spent on responding to the buy antibiotics flagyl, as stated above, we believe it is important to enforce the requirements for data validation audits to ensure all data submitted is true, accurate, and complete. We will continue to assess the implications of the PHE for buy antibiotics and will consider whether to make any policy changes in future rulemaking.

Comment. One commenter expressed that NCQA data validation alleviates the burden on health plans having to perform their own audit of data received from an HIE and on providers from having to respond to data requests from health plans. This commenter suggested that CMS leverage NCQA processes for data validation. Response.

We thank the commenter for their suggestion. We may consider it for future rulemaking. After consideration of public comments, we are finalizing these policies as proposed. (4) New Requirements Specific to QCDRs (a) Background We refer readers to § 414.1400(b), the CY 2017 Quality Payment Program final rule (81 FR 77374 through 77375), the CY 2018 Quality Payment Program final rule (82 FR 53813 through 53814), the CY 2019 PFS final rule (83 FR 59900 through 59906), the CY 2020 PFS final rule (84 FR 63058 through 63074), the May 8th buy antibiotics IFC (85 FR 27594 through 27595), and the CY 2021 PFS final rule (84937 through 84944) for where we previously finalized standards and criteria for QCDRs, specifically QCDR measure requirements.

In this section, we proposed to update policies related to QCDR measure rejections. (b) QCDR Measures (i) QCDR Measure Rejections (A) New QCDR Measure Rejection Criteria We refer readers to the Quality Payment Program provisions in the CY 2020 PFS final rule (84 FR 63070 through 63073) at § 414.1400(b)(3)(vii) where we have previously adopted QCDR measure rejection criteria. In the CY 2022 PFS proposed rule, we proposed to add two new criteria. (1) QCDR does not have permission to use a QCDR measure.

And (2) QCDR not approved or not in good standing. These are discussed in more detail below in this section. (aa) QCDR Does Not Have Permission To Use a QCDR Measure In the CY 2018 Quality Payment Program final rule (82 FR 53813 through 53814), we discussed that beginning with the 2018 performance period and for future program years, QCDR vendors may seek permission from another QCDR to use an existing measure that is owned by the other QCDR. We noted that the QCDR measure owner (QCDR vendor) would still own and maintain the QCDR measure, but would allow other QCDRs to utilize their measure with proper notification.

We intended for this policy to help reduce the number of QCDR measures that are similar in concept or clinical topic, or duplicative of other QCDR measures that are being approved. Additionally, in the Quality Payment Program provisions in the CY 2020 PFS final rule (84 FR 63070 through 63073) at § 414.1400(b)(3)(vii), we finalized the QCDR measure rejection criteria considerations. We noted that these considerations would help to ensure that QCDR measures are meaningful and measurable. Although we finalized the QCDR measure rejection criteria, we did not codify that QCDRs may seek permission from another QCDR to use an existing measure that is owned by another QCDR.

In order to provide further clarity to the existing policies (82 FR 53813 through 53814. 84 FR Start Printed Page 65549 63070 through 63073), we proposed to codify a new requirement and add a rejection criterion at § 414.1400(b)(4)(iv)(M) to state, a QCDR does not have permission to use a QCDR measure owned by another QCDR for the applicable performance period. We solicited comments on this proposal. The following is a summary of the comments we received and our responses.

Comment. A few commenters supported the proposal to add the rejection criterion that “A QCDR does not have permission to use QCDR measure owned by another QCDR for the applicable performance period” because CMS currently allows QCDRs to seek permission from another QCDR to report on an existing measure that is owned by the other QCDR, and because if a QCDR would like to use an existing QCDR measure that is owned by another QCDR, it must obtain permission from the QCDR measure owner that it can use the measure for the performance period and include proof of such permission in its self-nomination application. Response. We thank the commenters for their support.

After consideration of public comments, we are finalizing this policy as proposed. (bb) QCDR Not Approved or Not in Good Standing Additionally, if a QCDR measure owner is not approved or is not in good standing, any QCDR measures associated with that QCDR would also not be approved. We believe it is important to have an approved QCDR measure owner for all approved QCDR measures. This would ensure that there is active involvement by the QCDR measure owner so that any potential measure issues can be mitigated during the specified MIPS performance period.

For example, any mid-year guideline changes or measure questions would need to be immediately clarified to avoid negative impacts to clinicians such as the inability to construct a benchmark due to an error in the measure specifications. Therefore, we proposed to codify another rejection criterion at § 414.1400(b)(4)(iv)(N) to state that, if a QCDR measure owner is not approved during a given self-nomination period, any associated QCDR measures with that QCDR would also not be approved. We solicited comments on this proposal. We have received inquiries from stakeholders on what can be done in circumstances when an active QCDR wishes to use an inactive QCDR's measure.

We are interested in feedback from stakeholders on what should be done in such circumstances. For example, what should happen if “QCDR A” is using “QCDR B's” measures in a given performance period and “QCDR B” is terminated mid performance period?. Alternatively, what if “QCDR A” is using a measure from “QCDR B” and “QCDR B” decides not to self-nominate for the subsequent performance period?. While “QCDR A” could partner with “QCDR B” as described at § 414.1400(b)(3)(ii), are there other policy options we should consider to minimize impact to the MIPS eligible clinician who has selected the QCDR measure for reporting?.

We solicited comments on the above circumstances. The following is a summary of the comments we received and our responses. Comment. A few commenters disagreed with the proposal to add a rejection criterion requiring permission to use an inactive QCDR's measures.

One commenter stated that there is no evidence that inactive QCDRs are withholding access to these measures. The commenter noted the ability of QCDRs to license measures allows QCDRs to ensure the appropriate use of their measures and incentivizes organizations to invest in developing new and improved measures. The commenter suggested that CMS should continue its policy that allows active or inactive QCDR measure owners to choose to license their measures only to QCDRs that have the experience and expertise to properly implement a measure in a particular specialty. Therefore, there is no reason to change CMS' current policy under which an active QCDR that wishes to use an inactive QCDR's measure can approach the inactive QCDR and the two QCDRs can negotiate an agreement regarding the transfer of ownership if the active QCDR has the appropriate experience and expertise in QCDR measure development.

In the event that such agreement cannot be reached between the two parties, the inactive QCDR can decline to license rights to the QCDR measure. One commenter suggested that CMS require that either there be an agreement between the two QCDRs to transfer ownership of the measure or that the initial QCDR should maintain their measures and license it to other QCDRs. Response. We thank the commenters for their comments and suggestions.

We clarify that if a QCDR measure owner is not approved or is not in good standing, any QCDR measures owned or maintained with that QCDR would also not be approved. We disagree that the proposal to add a rejection criterion requiring permission to use an inactive QCDR's measures is not supported by evidence that inactive QCDRs are withholding access to these measures. We note that there have been instances where active QCDRs have inquired about using QCDR measures of inactive QCDR measure stewards. We also disagree that this policy is not needed.

We believe it is imperative that all QCDR measures in the MIPS program have an active QCDR measure steward to provide ongoing maintenance and updates to QCDR measures. For example, recently, a QCDR who shares their measures with several other QCDRs discovered multiples discrepancies, including risk adjustment calculation issues. If they had not been an active QCDR and performing quality assurance on these QCDR measures, this issue would likely not have been discovered and resolved. We do agree that the ability of QCDRs to license measures allows QCDRs to ensure the appropriate use of their measures and incentivizes organizations to invest in developing new and improved measures.

We also agree that active or inactive QCDR measure owners may choose to license their measures only to QCDRs that have the experience and expertise to properly implement a measure in a particular specialty. Furthermore, this process is consistent with what CMS requires for all other measures available for all clinicians to report in the MIPS program (the non-QCDR measures). That is, every measure in the program needs an active measure steward that agrees to support and maintain the measure. A non-active QCDR cannot be compelled to meet this requirement.

In this context, we interpret the commenter's reference to a “policy under which an active QCDR that wishes to use an inactive QCDR's measure can approach the inactive QCDR and the two QCDRs can negotiate an agreement regarding the transfer of ownership”, to apply to our statements regarding QCDR licensing as discussed in the CY 2018 PFS final rule (82 FR 53813). There we noted that, beginning with the 2018 performance period and for future program years, a QCDR vendor may seek permission from another QCDR to use an existing measure that is owned by the other QCDR. While we thank the commenter for the suggestion to require the transfer of ownership of a measure from an inactive QCDR to an active QCDR or that the inactive QCDR should maintain the measure and license it to active QCDRs, we note that such approaches are beyond the scope of our regulations, which in this case is limited to approval and disapproval criteria for QCDRs and Start Printed Page 65550 QCDR measures. We are considering building out additional policies to ensure that all QCDR measures that are used/owned are properly maintained throughout the performance period.

After consideration of public comments, we are finalizing this policy as proposed. (5) Remedial Action and Termination of Third Party Intermediaries We refer readers to § 414.1400(f), the CY 2017 Quality Payment Program final rule (81 FR 77548), CY 2019 PFS final rule (83 FR 59908 through 59910), the CY 2020 PFS final rule (84 FR 63077 through 63080), and the CY 2021 PFS final rule (85 FR 84930 through 84937) for previously finalized policies for remedial action and termination of third party intermediaries. In the Quality Payment Program provisions in the CY 2019 PFS final rule (83 FR 59908 through 59910), we discussed that the threshold for “inaccurate, unusable or otherwise compromised” may be met if the submitted data includes TIN/NPI mismatches, formatting issues, calculation errors, or data audit discrepancies that affect more 3 percent of the total number of MIPS eligible clinicians or groups for which data was submitted by the third party intermediary. We proposed to update the existing language at § 414.1400(f)(3)(ii) to broadly explain that it is up CMS' discretion on whether third party intermediaries' inaccuracies may lead to possible remedial action or termination.

As discussed earlier, we proposed consolidating and redesignating the existing language at § 414.1400(f) as paragraph (e) and § 414.1400(g) as paragraph (f) to provide clarity and alignment with the aforementioned proposals to consolidate the duplicative criteria of QCDRs and qualified registries. Therefore, we proposed to revise and redesignate existing language at § 414.1400(f)(3)(ii) to paragraph (e)(3) to state, contains data inaccuracies affecting the third party intermediary's total clinicians may lead to remedial action/termination of the third party intermediary for future program year(s) based on CMS discretion. We did not receive public comments on this policy, and therefore, we are finalizing it as proposed. I.

Public Reporting on the Compare Tools Hosted by the U.S. Department of Health &. Human Services (HHS) In the CY 2022 PFS proposed rule, we proposed to amend § 414.1395(c) to add a 1-year delay of publicly reporting new improvement activities and Promoting Interoperability measures and attestations reported via MVP. We also proposed a one-time, 1-year delay to subgroup-level public reporting, such that subgroup-level public reporting will begin with CY 2024 performance information available in 2025, and each year thereafter, on the Compare Tools hosted by the U.S.

Department of Health and Human Services (HHS), referred to as “compare tool” throughout this final rule, available at https://www.medicare.gov/​care-compare/​ and data.medicare.gov, as technically feasible. We proposed to add facility affiliations, beyond the hospital affiliations currently displayed on individual profile pages. Additional facility affiliations would include. Inpatient rehabilitation facilities (IRFs).

Long-term care hospitals (LTCHs). Skilled nursing facilities (SNFs). Inpatient psychiatric facilities (IPFs). Home health agencies (HHAs).

Hospices. And dialysis facilities. Finally, we solicited comments on publicly reporting utilization data on clinician and group profile pages (86 FR 39466 through 39469). For previous discussions on public reporting, we refer readers to the CY 2016 PFS final rule (80 FR 71116 through 71123), the CY 2017 Quality Payment Program final rule (81 FR 77390 through 77399), the CY 2018 Quality Payment Program final rule (82 FR 53819 through 53832), the CY 2019 PFS final rule (83 FR 59910 through 59915), the CY 2020 PFS final rule (84 FR 63080 through 63083), the CY 2021 PFS final rule (85 FR 84947 through 85 FR 84948) and the Care Compare.

Doctors and Clinicians Initiative Page at https://www.cms.gov/​Medicare/​Quality-Initiatives-Patient-Assessment-Instruments/​Compare-DAC. (1) MVP and Subgroup Public Reporting The introduction of MVPs and subgroup reporting provides for new types of performance information that are available for public reporting, provided they meet the established public reporting standards at § 414.1395(b). In consideration of our MVP and subgroup performance information public reporting proposals, we wish to remind readers that all submitted MIPS performance information is available for public reporting (81 FR 77395 through 77397). Additionally, we previously finalized at § 414.1395(c) that, for each program year, CMS does not publicly report any first-year measures for the first 2 years, meaning any measure in its first 2 years of use in the quality and cost performance categories.

We also note that MIPS performance category and composite final scores for MIPS eligible clinicians participating in MVPs will continue to be publicly reported as required under section 1848(q)(A)(i)(I) of the Act and finalized at § 414.1395(a)(1)(i). We believe delaying public reporting of certain MVP and subgroup performance information provides a catalyst to encourage clinician participation in MVPs and subgroups while they familiarize themselves with these options. For this reason, we proposed, for individuals, groups, and subgroups reporting via MVP, to add a 1-year delay for publicly reporting new improvement activities and Promoting Interoperability measures and attestations, as technically feasible. This means that new improvement activities and Promoting Interoperability measures and attestations would be available for public reporting at their inception in traditional MIPS, but we would delay public reporting of new improvement activities and Promoting Interoperability measures and attestations by 1 year after inception for those reporting via MVP.

We note that improvement activities and Promoting Interoperability measures and attestations that have already been in MIPS for more than 1 year and become newly available as part of an MVP would be available for public reporting in the first year the MVP is in the program. That is, non-first year improvement activities and Promoting Interoperability measures and attestations that are newly part of an MVP would be available for public reporting in the first year the MVP is in the program (86 FR 39466 through 39467). Table 74 further clarifies when this 1-year delay would apply. Start Printed Page 65551 We recognized that under this proposal, we would be further delaying the release of performance information for improvement activities and Promoting Interoperability measures and attestations reported via MVP.

Because of this, as a potential incentive, we also considered whether to delay public reporting of quality and cost measure information reported via MVP by 1 additional year, for a total of 3 years. We solicited comments on our proposal to delay public reporting of new improvement activities and Promoting Interoperability measures and attestations reported via MVP by 1 year, as well as any feedback on alternate approaches we should consider spurring clinicians to report performance data on MVPs while making performance data available for patients on the compare tool. We proposed to amend this MVP public reporting policy at § 414.1395(c)(2) to state CMS does not publicly report any MVP data on new improvement activities or Promoting Interoperability measure, objective, or activity included in an MVP for the first year in which it is included in the MVP. We also proposed to amend § 414.1395(c)(1) to state that CMS does not publicly report any data on new quality or cost measure for the first 2 years in which it is in the program, after which CMS evaluates the measure to determine whether it is suitable for public reporting under § 414.1395(b).

Currently, § 414.1395(c) refers to these quality and cost measures as “first year measures”. We proposed to change “first year measures” to “new measures” (86 FR 39467). The introduction of MVPs and subgroup reporting in MIPS provides for new types of performance information that are available for public reporting, provided they meet the public reporting standards. Currently, we display information on profile pages at the individual clinician and group level, since this is the level of information we provide for and at which patients and caregivers search for on the compare tool.

To ensure that patients and caregivers have access to subgroup performance information, we proposed creating a separate workflow from the established ones for individuals and groups, since we only display information at the level at which it was publicly reported (86 FR 39467). That is, we only publicly report individual-level performance information on individual clinician profile pages and group-level performance information on group profile pages. We do not publicly report group-level performance information on individual profile pages or individual-level information on group profile pages, as doing so would not be truly representative of either the group's or individual's own performance, and we do not want to mislead website users. Instead, we would link from the individual or group profile page to the corresponding subgroup performance information.

That is, we proposed to create a subgroup public reporting workflow, in which we would indicate with plain language on an individual profile page that the clinician reports performance information as part of a subgroup or on a group profile page that the group has subgroups for purposes of performance information and then link to that subgroup's performance information. Future user testing would determine how to best display and put in plain language subgroup performance information. Subgroup performance information will also be available on http://data.medicare.gov/​. Subgroups represent a new type of reporting for MIPS, that is available for clinicians reporting on MVPs or via the APP.

For this reason, we also proposed to delay all subgroup-level public reporting for 1 year, including measures, activities and attestations across the quality, cost, improvement activities, and Promoting Interoperability performance categories in order to encourage clinician participation in subgroups without the risk of displaying subgroup performance information as clinicians familiarize themselves with the option of subgroup reporting. This would only be a one-time delay in public reporting of subgroup-level information. That is, we would not publicly report any CY 2023 subgroup-level measure, attestation, or activity performance information. This information would be available for public reporting beginning with CY 2024 performance period/2026 MIPS payment year.

We would publicly report CY 2024 performance period/2026 MIPS payment year subgroup information and for each performance period thereafter if the information meets our established public reporting standards. Since we are moving toward more granular level performance information, we believe delaying subgroup public reporting by 1 year provides an incentive for subgroup participation and experience. As an alternative, we also considered a 1-year public reporting delay of performance information for all new subgroups each performance year, as technically feasible. For example, subgroups that begin in CY 2023 are not eligible for public reporting until CY 2024, subgroups that begin in CY 2024 are not eligible for public reporting until CY 2025, and so on for each subsequent year.

Another alternative we considered was to publicly report all subgroup performance information without delay and provide new subgroups the opportunity to opt-out, during the preview period, of having their performance information publicly reported for their first year. Some subgroups may want to have their performance information publicly reported and having an overall 1-year delay may be a disincentive to subgroup participation. We solicited comments on these considerations. We noted that MIPS performance category and composite final scores for MIPS eligible clinicians participating in MVPs will continue to be publicly reported for those participating in subgroups, as required under section 1848(q)(A)(i)(I) of the Act and finalized at § 414.1395(a)(1)(i), and will not be delayed by 1 year for public reporting.

We also solicited comments on additional factors that we should consider as we look to expand the availability of MVP and subgroup data on the compare tools. For example, Start Printed Page 65552 should there be a certain threshold of MVPs available, or clinicians participating in MVPs prior to public reporting?. For public reporting of subgroups, are there factors we should consider to make this information usable to the patient but reflective of the subgroups characteristics and composition?. Should we test an indicator of MVP participation for compare tool profile pages to see if this is useful information for patients making healthcare decisions?.

We solicited comments on this proposal and additional ways public reporting may encourage MVP participation. The following is a summary of the comments we received and our responses. Comments. Several commenters supported the proposal to delay, by 1 year, the public reporting of new improvement activities and Promoting Interoperability measures attestations reported through MVPs.

One commenter requested clarification as to why new Promoting Interoperability measures and attestations would be delayed only for MVP participants. While some commenters supported the delay, they recommended extending the delay beyond 1 year. Two commenters stated a concern that delaying public reporting for MVPs and not traditional MIPS may be confusing for patients. One of the commenters recommended adding a note to profile pages explaining why there may not be performance information.

The same commenter also recommended that instead of delaying public reporting for MVPs, CMS should allow MVP participants to opt-out of public reporting for their first year. Another commenter recommended beginning public reporting MVP performance information only once MVP reporting becomes mandatory. Response. We agree with most commenters that a 1-year delay of new improvement activities and Promoting Interoperability measures and attestations is an appropriate way to incentivize participation in MVPs.

We also want to clarify that we proposed this 1-year delay as an incentive because new quality and cost measures already have a delay in public reporting for the first 2 years of use for clinicians in traditional MIPS. This delay is for new improvement activities and Promoting Interoperability measures, objectives, and activities in all MVPs whether they are new or existing MVPs. We appreciate the recommendations to extend the delay beyond 1 year, to allow MVP participants to opt-out of public reporting in their first year, and to only publicly report performance information reported via MVPs once MVP reporting becomes mandatory. We do believe that a 1-year delay is enough time to allow clinicians to familiarize themselves with MVPs as we do not want to further delay valid performance information that consumers can use to make informed healthcare decisions.

It is for this same reason that we do not want to have MVP participants opt-out of public reporting or to delay public reporting of performance information reported via MVPs until MVP reporting becomes mandatory. We also want to clarify that performance information available via MVPs is the same as the performance information available in traditional MIPS and that we are required to publicly report performance information submitted by MIPS eligible clinicians. We do not believe that a delay for MVP participants and not traditional MIPS will be confusing to website users. Under traditional MIPS, we delay public reporting of new quality and cost measures by 2 years, and this has not caused any confusion to date.

We also clarify that improvement activities and Promoting Interoperability measures and attestations that are already in traditional MIPS will be available for public reporting without any 1-year delay. After consideration of public comments, we are finalizing this policy as proposed. Comment. Several commenters supported the one time, 1-year delay of subgroup public reporting, such that subgroup public reporting will begin with the availability of CY 2024 performance period/2026 MIPS payment year performance information.

One commenter recommended extending the delay to 3 years. Response. We agree that a one-time 1-year delay is enough time for participants to familiarize themselves with this subgroup-level reporting. We also clarify that CY 2023 performance period/2025 MIPS payment year subgroup-level measure, attestation, or activity performance information across all MIPS performance categories would not be available for public reporting.

We would begin publicly reporting subgroup-level performance information with CY 2024 performance period/2026 MIPS payment year, which would be available for public reporting in CY 2025. After consideration of the public comments, we are finalizing this policy as proposed. After consideration of all of the public comments received on MVP and subgroup public reporting, we are finalizing all policies in this section as proposed. We did not receive any public comments on the proposal to create a separate subgroup workflow, and therefore, are finalizing it as proposed.

(2) Publicly Reporting APM Performance Pathway Information In the CY 2021 Quality Payment Program final rule, we finalized to establish an APM performance pathway (APP) beginning in the 2021 MIPS performance year. This is an optional MIPS reporting and scoring pathway for MIPS eligible clinicians who participate in MIPS APMs. We also note that since APP participants are MIPS eligible clinicians, their MIPS performance category and composite final scores will be publicly reported as required under section 1848(q)(A)(i)(I) of the Act and finalized at § 414.1395(a)(1)(i). In the CY 2017 Quality Payment Program final rule, we finalized, as technically feasible, to use ACO profile pages as a guide to publicly reporting more APM data (81 FR 77398).

Currently, groups who participate in an ACO have an indicator showing their participation, as well as a link to the ACO profile page with available performance information. User testing has shown that website users find the ACO information meaningful and displayed in a user-friendly way. For this reason, we plan to continue this approach for APM performance information, including that which comes in via the APP, as technically feasible. We also solicited comments on alternative ways to publicly report performance information reporting via APPs and additional considerations to publicly reporting this information (86 FR 39467).

We did not receive public comments on alternative ways to publicly report performance information reported via APPs or any additional considerations to publicly reporting this information. (3) Facility Affiliations Compare tool profile pages for clinicians currently provide demographic information, including names, addresses, phone numbers, medical specialties, APM affiliations, Medicare assignment status, board certifications, education and residency, gender, and group and hospital affiliations. User testing consistently shows that Medicare patients and caregivers find value in these types of information. For hospital affiliations, website users have consistently noted the importance of understanding up front the relationships clinicians may have with facilities where they perform services when searching for a clinician.

Specifically, patients and caregivers have noted during user testing that hospital affiliation is important to them, Start Printed Page 65553 since they may be looking for a clinician to perform a procedure at a hospital or want to know the hospitals a clinician could potentially admit them if needed. Linking from the clinician profile page to their affiliated hospital page has provided a seamless experience for patients and caregivers, as they do not need to separately search for clinicians and hospitals. Rather, they can navigate to a hospital profile page directly from the clinician's profile page. With these user testing findings in mind, and because the Compare Tools include information on a number of other types of facilities beyond hospitals, we believe it would benefit patients and caregivers to also be able to navigate from clinician profile pages to profile pages for other types of facilities such as.

HHAs. Hospices. And dialysis facilities (86 FR 39468). Expanding the types of clinician-facility affiliations, beyond hospital affiliation, publicly reported would allow us to provide additional information about clinicians with or without any hospital affiliation but who are affiliated with other types of facilities.

User testing with patients and caregivers has shown that facility affiliations not only for hospitals but also for IRFs, LTCHs, SNFs, IPFs, HHAs, hospices, and dialysis facilities would be helpful to their healthcare decision-making. Specifically, we proposed adding affiliations to clinician profile pages for each of the following types of facilities, pending the results of user testing, as applicable and technically feasible. IRFs. LTCHs.

And dialysis facilities. User testing will determine how to best display these affiliations on compare tool clinician profile pages. To determine clinician affiliations to these facilities, we would use claims data the same way we do to display the hospital affiliations currently available on clinician profile pages (77 FR 69165). We build the clinician-hospital affiliations based on observing a clinician practicing at a given hospital caring for at least three different Medicare patients on three different dates of service in the preceding 6 months, as documented in Medicare claims.

We would use similar criteria for determining additional facility affiliations. Clinicians can email the Quality Payment Program Service Center at http://www.QPP@cms.hhs.gov if they believe their facility affiliations are displayed incorrectly. We solicited comments on the proposal to add affiliations to clinician profile pages for each of the following types of facilities and link to the specific facility's page on the compare tool. IRFs.

Hospices. And dialysis facilities. Further, we also solicited comment on whether there should be a limit on the number of procedures done or conditions treated at a given facility to determine clinician-facility affiliations. The following is a summary of the comments we received and our responses.

Comments. Several commenters supported adding facility affiliations beyond hospital affiliations to clinician profile pages on the compare tools. Specifically, these commenters supported the addition of affiliations for all facilities proposed, including IRFs, LTCHs, SNFs, IPFs, HHAs, hospices, and dialysis facilities. One commenter also recommended including clinicians' role as SNF medical directors on their profile pages.

A few commenters noted concern, with two of these commenters opposing the proposal, related to the threshold for determining facility affiliations and how CMS would handle a clinician with multiple affiliations. These commenters believed that the three different Medicare patients on three different dates of service in the preceding 6 months threshold may be too low for determining facility affiliations. One of the commenters recommended CMS conduct user testing to determine how consumers react when a clinician is affiliated with multiple facilities or with a facility that has poor quality ratings. Another commenter requested clarification on how we plan to obtain and verify facility affiliation and noted concern about location and specialty accuracy.

Response. We agree with commenters that adding affiliations to facilities beyond hospitals, on clinician profile pages, will aid patients in making healthcare decisions. We currently do not have a mechanism or source of data for verifying medical director or other healthcare administrative roles in SNFs or other types of care settings. Rather, if the clinician has filed a claim, it is because that clinician is actively treating patients and furnishing healthcare services, even if they also have an administrative role.

We would not have information to report for a medical director or other healthcare administrator unless they have filed a claim. We understand the commenters concern and will explore alternative data sources that are found to be reliable. Regarding the concern about a clinician having multiple affiliations, we have user tested clinician profile pages that display multiple facility affiliations and have found that if a clinician has multiple affiliations, beneficiaries and their caregivers consider it important for them to know when making healthcare decisions. We also want to note that the threshold for determining facility affiliations has been reliable for determining the hospital affiliations that are currently on clinician profile pages, which is why we proposed using this threshold for the additional facility affiliations.

We will continue to monitor this process as we expand using our currently methodology to affiliate other settings of care to clinicians. In response to questions regarding how we plan to obtain and verify facility affiliation, we plan to determine additional facility affiliations by using claims data in the same way we determine the hospital affiliations currently on clinician profile pages. This analysis includes reviewing claims for clinicians practicing at a given facility caring for at least three different Medicare patients on three different dates of service in the preceding 6 months, as documented in Medicare claims. Clinicians can email the Quality Payment Program Service Center at http://www.QPP@cms.hhs.gov with the correct information if they believe their facility affiliations are displayed incorrectly, as they do today for hospital affiliation.

We would then manually edit the affiliation on the website. This manual edit would remain in effect for 6 months only. To ensure a more permanent change, clinicians must update their information in the Medicare Provider Enrollment, Chain, and Ownership System (PECOS). For more information, clinicians can visit the Care Compare.

Doctors and Clinicians Initiative Page at https://www.cms.gov/​Medicare/​Quality-Initiatives-Patient-Assessment-Instruments/​Compare-DAC. Regarding the accuracy of clinician specialty and location, we note that this information is obtained from the PECOS. We rely on clinicians to ensure that their information in PECOS is up to date to ensure the most accurate information is publicly reported. After consideration of public comments, we are finalizing this policy as proposed.

(4) Utilization Data Request for Information Under section 104(e) of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), beginning with 2016, the Secretary is required to integrate utilization data information on Start Printed Page 65554 Physician Compare.[] To satisfy section 104(e) of the MACRA, we previously implemented a policy to begin to include utilization data in a downloadable format in late 2017 using the most currently available data, and previously finalized that the specific codes to be included will be determined via data analysis and reported at the eligible clinician level (80 FR 71130). We finalized to continue to include utilization data in the downloadable database (81 FR 77398). This information continues to be available today on www.data.cms.gov/​provider-data. To date, we have gathered utilization data for procedures from physician/supplier Medicare Part B non-institutional claims on certain services and procedures and published it in the public use file (PUF) file entitled “Physician and Other Supplier Data.” These data are useful to the healthcare industry, healthcare researchers, and other stakeholders who can accurately interpret these data and use them in meaningful analyses.

However, this information is presented in a technical way that is not easily accessible or usable by patients, who do not frequently visit data.cms.gov or understand medical procedure coding. This information also does not provide detail on the specific conditions clinicians treat, though in select cases it may be inferred by the clinicians and researchers reviewing this information. Section 10331(b)(3) of the Affordable Care Act requires that for public reporting, to the extent practicable, to include processes to assure that the data made available provides a robust and accurate portrayal of a clinician's performance. In our efforts to continue to provide patients and caregivers with meaningful information to make informed healthcare decisions, we believe utilization data may also have a place on clinician and group profile pages, if presented in a consumer-friendly way.

We envision utilization data on patient-facing profile pages providing two main areas of benefit. The first is allowing for more granular clinician searches, so that patients not only find specific types of clinicians but also those clinicians experienced in performing specific types of procedures and/or treating specific conditions. The second is providing categories of utilization data in a more plain language display that is usable to patients and their caregivers. In summary, utilization data could provide information to Medicare patients and their caregivers on the specific diagnoses clinicians treat and the frequency with which certain services or procedures are performed by a clinician or group and/or which types of clinicians do not provide certain services.

For example, someone with severe arthritis of the knee may want to search for an orthopedic surgeon who specifically does knee replacements. The way the clinician search works currently would only show results for “orthopedic surgeons” generally. That is, the patient would not see which of these clinicians specialize in this procedure, and likely would need to spend time calling clinicians to ascertain more detail. This could similarly be the case for finding a clinician who focuses on treatment of a certain condition.

We believe indicating which clinicians focus on certain procedures or conditions would relieve some of this patient burden, as it would yield more specific search results. There are a number of factors that could influence how procedure- and condition-specific information is determined, which is why we solicited comments on this topic in several areas. For display purposes, we may wish to apply a minimum experience level, such as the number of times a clinician performed a procedure or treated a condition, before a clinician profile is annotated to indicate experience with the condition or procedure. Regarding the methods in which we would identify clinician volume of procedures conducted or treat specific conditions, we would need to set a threshold for making these assertions.

We have considered several options. The threshold could be based on the number of times a clinician has performed a procedure or treated a condition within a certain time-period, or the proportion of the clinician's practice that is represented by the procedure or condition. Alternatively, thresholds may be devised based on ranking clinicians compared to their peers (specialty and geography may be considered when defining peers) in volume of procedures performed or frequency with which they treat each condition. We note also that these approaches utilize Medicare claims data only.

That is, these data would not include procedures performed or conditions treated for patients who have other types of insurance, since this information is not available. We also acknowledge that this utilization data only represents the care provided to Medicare beneficiaries and clinicians offer care to those with other forms of insurance. This disclaimer could be added to any data that may be publicly reported. We solicited comments on these approaches and whether there are any additional ones we should consider.

Additionally, because the Compare Tools utilize a location-based search, national or local thresholds may be appropriate. For example, clinicians in urban centers may specialize in a small number of procedures that they perform on a weekly basis, while a clinician in a rural area might be the most experienced at a given procedure, but not have comparable volume to the urban clinician who practices a very narrow scope. We solicited comments on these considerations, as well as if there are others. We also solicited comments on the potential types of utilization data that, if publicly reported, could help Medicare patients and their caregivers make informed healthcare decisions, as well as on technical considerations for presenting a specific affiliation between clinicians and diagnoses and/or procedures.

Specifically, we solicited comments on. The types of conditions and procedures that would most benefit patients' clinician searches. Important features and considerations for clinician searches by conditions or procedures. The lookback period for Medicare claims in order to identify a clinician's volume of procedures balancing frequency with recent experience (for example, 6 months, 1 year, 2 years).

Clinician specialties or conditions with special considerations (for example, non-patient facing clinicians). The maximum number of conditions treated or procedures performed to display on a given clinicians profile page. And Methods to set a threshold of treatment volume to display that a clinician commonly performs a procedure or treats a condition. For example, the threshold could be.

(1) The number of times a clinician treated a condition or performed a procedure. (2) the total scope that a condition or treatment represents in a clinician's practice. Or (3) the clinician's rank—either overall among all clinicians or among a subset of clinicians—in the number of times that clinician treated a condition or performed a procedure. Any other factors or considerations not listed above.

We received public comments on considerations for publicly reporting utilization data. We thank the commenters' feedback and will take these comments into consideration in future years. Start Printed Page 65555 4. Overview of the APM Incentive (a) Overview Under the Quality Payment Program, eligible clinicians who are Qualifying APM Participants (QPs) for a year are eligible to receive an APM Incentive Payment in the corresponding payment year for payment years 2019 through 2024.

In the CY 2017 Quality Payment Program final rule (81 FR 77480 through 77489), we finalized at § 414.1450(d) that this payment is made based on the clinician's QP status in the QP Performance Period that is 2 years prior (for example, the 2021 payment will correspond to the 2019 performance year), and at § 414.1450(b)(1) that the payment is equal to 5 percent of the estimated aggregate payments for covered professional services in the base period (the year between the QP performance and payment years). We also finalized at § 414.1450(c)(1) (82 FR 31729) that the APM Incentive Payment will go to the TIN associated with the Advanced APM Entity through which an eligible clinician becomes a QP during the QP Performance Period. In 2019, our first year of making APM Incentive Payments, we learned that the amount of time between the QP Performance Period (during which QP status is attained) and the QP payment year (during which APM Incentive Payments are issued) creates challenges to disbursing the payment for some QPs in a routine and efficient manner, for example for QPs who may have changed practices in the interim. Consistent with section 1833(z) of the Act, QP status is determined for, and connected to, an eligible clinician (identified by their NPI) for the QP payment year based on their Advanced APM participation during the QP Performance Period.

In the proposed rule, we stated that we do not believe that changes in a QP's practice or TIN in the interim year between the QP determination and the QP payment year should affect a QP's ability to receive the APM Incentive Payment. To address some of the unanticipated challenges we encountered in disbursing the APM Incentive Payments, in the CY 2021 PFS final rule, we finalized a hierarchy, codified at § 414.1450, that, based on our experience and lessons learned in making payments in 2019, provides more ways to identify an appropriate TIN to which we can make the APM Incentive Payment when a QP has experienced changes in their practice or TIN since the performance year in which they attained QP status. (c) APM Incentive Payment Recipient In the 2021 PFS final rule (85 FR 84472), we revised our approach to identifying the TIN or TINs to which we make the APM Incentive Payment and established a process that enables QPs to provide CMS with updated enrollment information that could be used to complete the payment in the event our approach does not yield an appropriate TIN or TINs to which to send their APM Incentive Payments. The process for those QPs to update their information, as well as a preliminary list of NPIs to whom it may be applicable, is included in a public notice published annually in the Federal Register.

We explained in the CY 2021 PFS final rule that the revised approach would involve looking at a QP's relationship with TINs at different, specified periods in time, as well as considering the relationships such TINs have with certain APM Entities and Advanced APMs. We stated that we believe this revised approach enables us to more appropriately identify TINs with which QPs currently have relationships to receive other Medicare payments, and through which the QPs likely would anticipate receiving their APM Incentive Payments. We noted that, when the QP is no longer affiliated with the TIN through which they achieved QP status, this approach will prioritize identifying an alternate TIN with which the QP is affiliated at the time the APM Incentive Payment is made, and to which it is appropriate to make the payment. The approach we adopted also serves to reduce uncertainty for QPs as they anticipate the APM Incentive Payments, as well as potential delays in our ability to make their payments.

To improve and expand the ways we identify the TIN(s) to which we make the APM Incentive Payment for a QP in a timely and efficient manner, we finalized a policy to sequentially apply a decision hierarchy and codified the hierarchy in § 414.1450(c). We apply the hierarchy by beginning at the first step, and if we are unable to identify one or more TINs with which the QP has a current affiliation at this step, we move to the next and successive steps of the hierarchy until we do identify one or more TINs with which the QP is affiliated. As discussed in the CY 2021 PFS final rule, if we identify more than one TIN at the applicable step in the hierarchy, we divide the APM Incentive Payment proportionally between the QP's TINs based on the relative paid amount for Part B covered professional services that are billed through each of the TINs. We proposed to clarify that, when we divide the APM Incentive Payment between two or more TINs, we apportion the APM Incentive Payment among TINs based on the share of total payments for covered professional services made to each TIN in the same base year that we use to calculate the APM Incentive Payment for the year.

To calculate the APM Incentive Payment, we sum the total estimated aggregate payments for covered professional services for a QP for the base year, which is based on claims submitted for covered professional services, as codified at § 414.1450(b)(1) through (3). We proposed to codify this policy at § 414.1450(c). In the course of making APM Incentive Payments during CY 2020 PFS final rule, we explored the possibility of expanding our search at each step of the hierarchy at § 414.450(c) to identify potential payee TINs that are associated with the QP during the QP payment year. Based on our findings, we stated we believe expanding our search in this way would enable us to make payments earlier in the calendar year and reduce the number of QP NPIs for whom we cannot identify a payee TIN using our hierarchy, and thus, rely on our public notice to request additional information.

Therefore, we proposed to revise the hierarchy at § 414.1450(c) so that, using the criterion described in each step of our current regulation, we would first seek to identify a TIN associated with the QP during the base year, and if no such TIN is identified in the base year, we would then seek to identify a TIN associated with the QP during the payment year. We have found in many instances that there are changes in enrollment information in PECOS for a QP over the span of 2 years between the QP performance period and payment year. By using enrollment information for the QP during the payment year, we are more likely to identify an appropriate TIN to which to make the APM Incentive Payment hierarchy. Under the proposal, applying the steps in the APM Incentive Payment hierarchy, we would make the APM Incentive Payment to one or more solvent TINs associated with the QP, identified by paid Medicare Part B claims for covered professional services and associated PECOS enrollment information during the base period.

And if no such TIN is identified, we will make the payment to such TINs associated with the QP during the payment year. We proposed to codify this policy in the regulation at § 414.1450(c). If no such TIN or TINs can be identified at a particular step, we will Start Printed Page 65556 move to the next and successive steps listed in § 414.1450(c)(1) through (8) until we identify one or more solvent TINs with which the QP is associated, and then would make the APM Incentive Payment to any such TIN(s). If more than one TIN is identified at a step based on paid claims during the applicable year either the base year or payment year, as we explain earlier and proposed to codify in the regulation under § 414.1450(c), would divide the APM Incentive Payment proportionately among such TINs according to the relative total paid amounts for Part B covered professional services to each TIN in same the base year we use to calculate the APM Incentive Payment.

We proposed, for each step in the APM Incentive Payment decision hierarchy, we would first search for a payment TIN or TINs associated with the QP during the base period. If no such TIN is found during the base year, we would search for any TIN or TINs that are similarly situated with respect to the criterion at that step in the hierarchy and associated with the QP during the payment year. If such a TIN or TINs are found, we would make the APM Incentive Payment to such TIN or TINs. We will continue at each step in the hierarchy to first attempt to identify the relevant base year TIN or TINs associated with the QP because, as noted in the proposed rule, we believe such TINs are more likely to be associated with the APM Entity through which the QP attained their QP status during the QP performance period.

However, if no such TIN is found in the base year, we would proceed at that step to search for a TIN or TINs with which the QP is associated in the payment year. We explained that we believe this approach creates the greatest opportunity to identify and pay an appropriate TIN as efficiently and early as possible during the payment year. The proposed change would maintain the current hierarchy while adding a sub-step at each level in which we would conduct our search based on more current enrollment information. The proposed change would allow for the identification of an appropriate TIN or TINs at each step by first checking the base year, and then checking the payment year before moving on to the next step in the process.

We stated we believe that by maintaining the current hierarchy we would continue to incent Advanced APM participation by prioritizing making payments to TINs affiliated with Advanced APMs, even if they are not in the same Advanced APM Entity through which QP status originally was achieved. For example, we stated that we anticipate that many eligible clinicians who earned QP status in 2020 through a practice participating in the CPC+ model will join the new Primary Care First (PCF) model in 2022. In the event the eligible clinician's CPC+ participant TIN is no longer active, our proposed modification to the hierarchy would enable us to pay the APM Incentive Payment to a TIN participating in the PCF model in 2022. We stated that we continue to believe it would be appropriate to first identify the relevant base year TIN or TINs at each step in of the hierarchy because we believe those TINs are more likely to be associated with the APM Entity through which the QP attained their QP status during the QPs performance period.

However, if no TIN is found in the base year, we would proceed to identify any TINs associated with the QP in the payment year, and then use the same process for the subsequent steps in the hierarchy until we identify one or more TINs associated with the QP at a particular step for a particular year (base year or payment year). We explained that we believe this approach will be a more efficient and expeditious way to identify a TIN or TINs to which to make the APM Incentive Payment for QPs. We solicited comments on this proposal to amend our APM Incentive Payment decision hierarchy to include an additional attempt to identify and pay, at each step, one or more solvent TINs associated with the QP during the payment year when no such TIN is identified for the QP in the base year. We received several comments on this proposal.

Comment. We received many public comments in support of this approach to identifying payee TINs during the payment year. Response. We thank commenters for their support of this policy.

Comment. We received two public comments advocating that the APM Incentive Payment should be paid directly to the ACO or APM Entity. Response. We disagree with this comment for several reasons.

First, the APM Incentive Payment is not earned by the APM Entity in the way a shared savings payment may be earned by the ACO under the Shared Savings Program. Although QP determinations are in some cases are made at the APM Entity group level, QP status is conferred on an individual eligible clinician. As a result, the individual QP is excluded from the MIPS reporting and payment adjustment requirements, and it is the QP who earns the APM incentive payment. Therefore, the payment is disbursed for the eligible clinician who is a QP to a TIN that is affiliated with the QP, even in instances where the QP is no longer affiliated with the APM Entity.

The payment is designed as an incentive in lieu of the pursuance of a MIPS payment adjustment. CMS makes the APM Incentive Payment to one or more TINs to which the QP has reassigned their billing rights. Thus, the QP and TIN may resolve between themselves the handling of the APM Incentive Payment. Some APM Entities are the same as the Medicare enrolled TIN to which QPs have reassigned their Medicare payment rights, and to which we would make the APM Incentive Payment.

Other APM Entities, such as ACOs, are not. For these reasons, we do not make the APM Incentive Payment directly to an ACO, and we do not believe it would be appropriate to do so. Comment. One commenter suggested that we should allow QPs to individually identify their preferred payee TIN to receive the APM Incentive Payment.

Response. It would not be practically feasible for every QP to individually identify a recipient TIN for the QP incentive payment. Our experience working with PECOS and other voluntary systems, including our annual public notice, indicate that requiring individual eligible clinicians to elect a recipient TIN for the incentive payment could cause significant delays in completing the payments. These delays would be of such duration that CMS would likely miss the statutory deadline of December 31 of the payment year in which we are required to have completed these payments.

Further, some QPs might never complete the prerequisite step, which would make it difficult if not impossible to disburse APM Incentive Payments for them. Moreover, eligible clinicians are not without an opportunity to indicate to CMS the TINs with which they have current billing arrangements. In fact, all Medicare enrolled eligible clinicians are required to update their billing information, including reassignments within the PECOS system within a specified timeframe. By ensuring PECOS is updated at all times, eligible clinicians have an opportunity to ensure that if they become QPs for a year, the APM Incentive Payment will be received by a TIN to which they have reassigned their billing rights.

We believe it is both appropriate and efficient for clinicians to use the longstanding and required processes that are in place to update their billing information, which enables us to identify one or more appropriate TINs to which to make the APM Incentive Payment. Finally, we have established in regulations a payment decision Start Printed Page 65557 hierarchy that specifies how we will identify the TIN or TINs to which we will distribute the APM Incentive Payment. One of the main purposes for establishing this hierarchy and for updating it this year is to provide predictability for eligible clinicians regarding the APM Incentive Payment disbursements. After consideration of the public comments, we are finalizing our proposed update to the APM Incentive Payment decision hierarchy, and amending our regulation at § 415.1415(c), as proposed.

C. Advanced APMs 1. Qualifying APM Participant Determination a. General Overview In the CY 2017 Quality Payment Program final rule (81 FR 77439 through 77445), we finalized our policy at § 414.1425(b) for Qualifying APM Participant (QP) determinations.

For the purposes of making QP determinations, an eligible clinician must be present on the Participation List of an APM Entity in an Advanced APM on one of the “snapshot dates” (March 31, June 30, or August 31) for the QP Performance Period. An eligible clinician included on a Participation List on any one of such dates is included in the APM Entity group even if that eligible clinician is not included on that Participation List at one of the prior- or later-listed dates. We perform QP determinations for the eligible clinicians in an APM entity group three times during the QP Performance Period using claims data for services furnished from January 1 through each of the respective QP snapshot dates. An eligible clinician can be determined to be a QP only if the eligible clinician appears on the Participation List on a snapshot date that we use to determine the APM Entity group and to make QP determinations at the APM Entity group level based on participation in the Advanced APM.

For eligible clinicians who appear on a Participation List in more than one APM Entity, but do not to achieve QP status based on any APM Entity level determinations, we make QP determinations at the individual level as described in § 414.1425(c)(4). Likewise, for eligible clinicians on an Affiliated Practitioner list for an Advanced APM we make QP determinations at the individual level three times during the QP Performance Period using claims data for services furnished from January 1 through each of the respective QP determination snapshot dates as described in § 414.1425(b)(2). B. QP Thresholds and Partial QP Thresholds Section 1833(z)(2)(B) of the Act describes the thresholds for the level of participation in Advanced APMs required for an eligible clinician to become a QP for a year.

The Medicare Option, based on Part B payments for covered professional services or counts of patients furnished covered professional services under Part B, has been applicable since payment year 2019. The All-Payer Combination Option, which uses the Medicare Option, as well as an eligible clinician's participation in Other Payer Advanced APMs, is applicable beginning in the payment year 2021. In the CY 2017 Quality Payment Program final rule (81 FR 77433 through 77439) we finalized our policy for the Medicare Option as codified at § 414.1430(a) and for the All-Payer Option at § 414.1430(b). Section 114 of Division CC of the CCA amended section 1833(z)(2)(B) of the Act with regard to payment years 2023 and 2024 (which correspond respectively to performance years 2021 and 2022), by freezing for such years the applicable payment amount and patient count thresholds for an eligible clinician to achieve QP status.

Specifically, the CAA amended section 1833(z)(2)(B) of the Act to continue the QP payment amount thresholds that apply in payment years 2021 and 2022 to payment years 2023 and 2024. Additionally, the CAA amended section 1833(z)(2)(D) of the Act to require that, for payment years 2023 and 2024, the Secretary use the same percentage criteria for the QP patient count threshold that are applied in payment year 2022. As such, the Medicare Option QP thresholds for payment years 2023 and 2024 (performance years 2021 and 2022) will remain at 50 percent for the payment amount method and 35 percent for the patient count method. The CAA also amended section 1848(q)(1)(C)(iii) of the Act to extend through payment year 2024 the Partial QP thresholds that are established for payment years 2021 and 2022.

Therefore, the Partial QP thresholds for payment years 2023 and 2024 (performance years 2021 and 2022) will remain at 40 percent for the payment amount method and 25 percent for the patient count method. For performance years beginning with 2023 (corresponding to payment years beginning with 2025) the statute prescribes the QP thresholds for the payment amount method, and the QP thresholds we established for the patient count method at § 414.1430 will take effect. Specifically, for performance years beginning with 2023, the Medicare Option QP thresholds will be 75 percent for the payment amount method and 50 percent for the patient count method. The Partial QP thresholds under the Medicare Option will be 50 percent for the payment amount method and 35 percent for the patient count method.

Under the All-Payer Combination Option, the QP thresholds for performance years 2021 and 2022 (corresponding to payment years 2023 and 2024) will be 50 percent for the payment amount method and 35 percent for the patient count method. The Partial QP thresholds for performance years 2021 and 2022 will be 40 percent for the payment amount method and 25 percent for the patient count method. In order to become a QP through the All-Payer Combination Option, eligible clinicians must first meet certain threshold percentages under the Medicare Option. For performance years 2021 and later (corresponding to payment year 2023 and later), the minimum Medicare Option threshold an eligible clinician must meet for the All-Payer Combination Option is 25 percent for the payment amount method or 20 percent under the patient count method.

Start Printed Page 65558 Although we included proposed amendments to our regulation at § 414.1430(a)(1) and (2) in the CY 2022 PFS proposed rule to reflect the changes made by the CAA to the QP and Partial QP Thresholds under the Medicare Option payment amount method, we inadvertently neglected to discuss those proposed amendments in the preamble. Additionally, we inadvertenly did not include proposed regulation text at § 414.1430(a)(3) or (4) to reflect the amendments made by the CAA to the QP and Partial QP thresholds under the Medicare Option patient count method. Or to the regulation text at § 414.1430(b) to reflect amendments to the All Payer Option payment amount and patient count QP and Partial QP thresholds. However, we believe it is preferable to revise the regulation text to consistently and accurately reflect the statutory threshold percentages for each year in accordance with the CAA amendments for both the Medicare Option and All Payer Option and for both the payment amount and patient count methods for each of the options.

Therefore, we are finalizing the proposed amendments to § 414.1430(a)(1) and (2) and making amendments to § 414.1430(a)(3) and (4). And § 414.1430(b)(1) through (4) to reflect the applicable statutory threshold percentages as amended by the CAA. We received four public comments, all in support of the statutory changes to the QP and Partial QP threshold levels. We thank the commenters for their input and will implement the amendments made by the CAA as discussed and revise the regulation at § 414.1430 as proposed.

V. Collection of Information Requirements Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq. ), we are required to publish 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.

For the purposes of the PRA and this section of the preamble, collection of information is defined under 5 CFR 1320.3(c) of OMB's implementing regulations. To fairly evaluate whether an information collection should be approved by OMB, PRA section 3506(c)(2)(A) requires that we solicit comment on the following issues. The need for the information collection and its usefulness in carrying out the proper functions of our agency. The accuracy of our burden estimates.

The quality, utility, and clarity of the information to be collected. Our effort to minimize the information collection burden on the affected public, including the use of automated collection techniques. We solicited public comment on each of the required issues under section 3506(c)(2)(A) of the PRA for the following information collection requirements. A.

Wage Estimates To derive average costs, we used data from the U.S. Bureau of Labor Statistics' May 2020 National Occupational Employment and Wage Estimates for all salary estimates ( http://www.bls.gov/​oes/​current/​oes_​nat.htm ). In this regard, Table 76 presents the mean hourly wage, the cost of fringe benefits and overhead (calculated at 100 percent of salary), and the adjusted hourly wage. Start Printed Page 65559 For the CY 2019 and CY 2020 PFS final rules, we used the BLS wage for “Physicians and Surgeons” (occupation code 29-1060) to estimate the cost for Physicians.

In BLS' most recent set of occupational wage rates (dated May 2020) they have discontinued this occupation in their wage data. As a result, in order to estimate the burden for Physicians, similar to the estimates in the CY 2021 PFS final rule (85 FR 84958), we are using a rate of $217.32/hr which is the average of the following BLS occupations and adjusted wage estimates. As indicated, we adjusted BLS' hourly wage estimates by a factor of 100 percent to obtain the adjusted hourly wage estimate. This is necessarily a rough adjustment, both because fringe benefits and overhead costs vary significantly from employer to employer, and because methods of Start Printed Page 65560 estimating these costs vary widely from study to study.

Nonetheless, we believe that doubling the hourly wage to estimate total cost is a reasonably accurate estimation method. B. Information Collection Requirements (ICRs) 1. ICRs Requiring Certain Manufacturers To Report Drug Pricing Information for Part B (§§ 414.802 and 414.806) The following provisions will be subject to the standard PRA process under OMB control number 0938-0921 (CMS-10110).

The standard PRA process includes the publication of 60- and 30-day Federal Register notices that will provide the public with opportunities for public review and comment. We expect to publish the 60-day notice shortly after the publication of this final rule. The new provisions at §§ 414.802 and 414.806 will implement new statutory requirements under sections 1847A and 1927 of the Act, as amended by section 401 of Division CC, Title IV of the CAA, 2021 (for the purposes of this section of this final rule, hereinafter is referred to as “section 401”), which requires manufacturers without a Medicaid drug rebate agreement to report ASP information to CMS for calendar quarters beginning on January 1, 2022, for drugs or biologicals payable under Medicare Part B and described in sections 1842(o)(1)(C), (E), or (G) or 1881(b)(14)(B) of the Act, including items, services, supplies, and products that are payable under Part B as a drug or biological. Specifically, to implement the new reporting requirements for manufacturers without Medicaid drug rebate agreements, we proposed to modify.

(1) The definition of drug at § 414.802. And (2) the regulations describing civil money penalties at § 414.806. The new requirements will improve the accuracy of reported payment limits and limit the use of WAC-based pricing. For the purposes of section 401's new reporting requirements, for manufacturers without Medicaid drug rebate agreements, confidentiality requirements appear in section 1847A(f)(2)(D) of the Act which states that the ASP data are confidential and shall not be disclosed by the Secretary in a form which discloses the identity of a specific manufacturer or wholesaler or prices charged for drugs or biologicals by such manufacturer or wholesaler, except—as the Secretary determines to be necessary to carry out section 1847A of the Act (including the determination and implementation of the payment amount), or to carry out section 1847B of the Act.

To permit the Comptroller General of the United States to review the information provided. To permit the Director of the Congressional Budget Office to review the information provided. To permit the MedPAC to review the information provided. And to permit the Medicaid and CHIP Payment and Access Commission to review the information provided.

For manufacturers with Medicaid drug rebate agreements, confidentiality requirements appear in section 1927(b)(3)(D) of the Act which states that the ASP data are confidential and shall not be disclosed by the Secretary in a form which discloses the identity of a specific manufacturer or wholesaler, prices charged for drugs by such manufacturer or wholesaler, except—in relevant part, as the Secretary determines to be necessary to carry out section 1847A of the Act (including the determination of the payment amount), or to carry our section 1847B of the Act, to permit the Comptroller General to review the information provided, to permit the Director of the Congressional Budget Office to review the information provided, and to permit the Executive Director of the Medicare Payment Advisory Commission (MedPAC) and the Executive Director of the Medicaid and CHIP Payment and Access Commission to review the information provided. The burden associated with these requirements is the time and effort required by manufacturers of drugs and biologicals payable under Medicare Part B to prepare and submit the required ASP data to CMS. We have previously estimated the burden associated with ASP reporting requirements for manufacturers with Medicaid drug rebate agreements. Because section 401 extends the ASP reporting requirements to manufacturers without Medicaid drug rebate agreements, we are updating our burden estimates to account for the additional manufacturers who will now be required to report ASP data to us.

As described in section III.D.1. Of this final rule, in considering whether to exclude repackagers from the reporting requirements at section 1847A(f)(2) of the Act, we conducted analyses to estimate. (1) The proportion of repackaged products in our existing ASP data. (2) the number of new ASP submissions we can expect as a result of the new reporting requirements under section 401.

And (3) the proportion of those (new) submissions that involve repackaged products. Based on our existing ASP data, 547 manufacturers (respondents) report ASP data to us. Of these, 331 respondents have products for which they are required to submit ASP data, and 216 respondents have products for which they currently submit ASP data voluntarily, but will now be required to do so under section 1847A(f)(2) of the Act. (331 + 216 = 547) We also estimate that under the new reporting requirements of section 401, a total of 568 respondents have products for which they will now be required to report ASP data to us.

The 568 includes the 216 respondents (above) and 361 respondents who have products (identified by us) for which they will now be required to submit ASP data under section 1847A(f)(2) of the Act and did not previously voluntarily submit these data to us. There were 9 respondents who voluntarily submitted ASP data for some, but not all, of their products identified in our analysis. (216 + 361−9 overlap = 568) We estimate a total of 740 respondents will report ASP data to us. This includes the 547 respondents who currently submit ASP data to us (voluntarily, or as currently required), and the 361 respondents who have products (identified by us) for which they will now be required to submit ASP data under section 1847A(f)(2) of the Act and did not previously voluntarily submit these data to us.

However, there were 168 respondents who currently are required to submit ASP data to us, or who voluntarily submit ASP data to us, for whom we identified additional products that they did not previously submit ASP data, and will now be required to submit ASP data for these additional products under the new reporting requirements of section 401. (547 + 361−168 overlap = 740) These respondents submit ASP data four times per year for a total of 2,960 submissions (740 respondents × 4 submissions/year). Based on our experience with ASP data reporting, we continue to estimate that the time associated with reporting, record keeping, and third-party disclosure for ASP data reporting is 13 hours. 10 hours to review instructions and search existing data resources and 3 hours to gather the data, compile the data, submit via electronic media and upload to the automated system.

This estimate includes labor costs for respondents to extract data from their information systems and to compile and submit the ASP data, including signature, to CMS via the internet-based automated system and electronic media. This estimate also includes the cost of the compact disc (CD) and overnight mail service used to report the data, Start Printed Page 65561 time to review instructions, search existing data resources, gather the data needed, and complete and review the information collection. Based on these analyses and assumptions, we estimate an annual burden of 38,480 hours (2,960 submissions/yr × 13 hours per response) at a cost of $1,495,332.80 (38,480 hr × $38.86/hr), rounding to $1,495,333. We solicited comment on the likely costs or savings manufacturers from this provision.

We did not receive public comments on the analyses or the estimates. We are finalizing the definition of the term “drug” at § 414.802 as proposed. 2. ICRs Regarding the Medicare Shared Savings Program (Sections VI.F.8.a.

And b.) Section 1899(e) of the Act provides that chapter 35 of title 44 U.S.C., which includes such provisions as the PRA, shall not apply to the Shared Savings Program. Accordingly, we are not setting out burden under the authority of the PRA. Please refer to sections VI.F.8.a. And b.

Of this final rule for a discussion of the impacts associated with this rule's changes to the Shared Savings Program's quality reporting requirements, quality performance standard, beneficiary assignment methodology, repayment mechanism requirements, requirements for disclosure of prior participation in the Shared Savings Program by the ACO, ACO participants, and ACO providers/suppliers, requirements for ACOs to submit sample ACO participant agreements and executed ACO participant agreements to CMS, and beneficiary notification requirements. 3. ICRs Regarding the Medicare Ground Ambulance Data Collection System (§ 414.626) Section 1834(l)(17) of the Act requires that the Secretary develop a ground ambulance data collection system that collects cost, revenue, utilization, and other information determined appropriate by the Secretary with respect to providers of services and suppliers of ground ambulance services (ground ambulance organizations). Section 1834(l)(17)(I) of the Act states that the PRA does not apply to the collection of information required under section 1834(l)(17) of the Act.

Accordingly, this collection of information section does not set out any burden for the proposed provisions that we are finalizing in this final rule. Please see section VI. Of this final rule for a discussion of the estimated impacts. We received no public comments on the collection of information requirements for the Medicare Ground Ambulance Data Collection System.

We are finalizing as proposed. 4. ICRs Regarding the Medicare Diabetes Prevention Program (MDPP) Expanded Model (§§ 410.79, 414.84, 424.205, and 424.502) In section III.L. Of this final rule, we finalize policies necessary to shorten the Medicare Diabetes Prevention Program (MDPP) services period to one (1) year on a prospective basis, amend and update the amount of the performance payments for the Core Sessions and Core Maintenance Sessions, and make changes to eliminate the ongoing maintenance phase for MDPP beneficiaries who start MDPP set of services on or after January 1, 2022.

In addition, we are finalizing a provision to waive the provider enrollment Medicare application fee for all organizations enrolling in Medicare as MDPP suppliers during the MDPP expanded model on or after January 1, 2022. We expect the finalized policies will increase the number of eligible organizations willing to enroll as MDPP suppliers. We also anticipate that the shortened service period will make MDPP more marketable to beneficiaries in that their time commitment is reduced and less intimidating with a 12-month vs. 24-month service period.

We anticipate the shortened MDPP services period will reduce the recordkeeping burden for suppliers. Section 1115A(d)(3) of the Act exempts Innovation Center model tests and expansions, which include the MDPP expanded model, from the provisions of the PRA. Accordingly, this collection of information section does not set out any burden for the provisions. Please see section VI.

Of this final rule for a discussion of the estimated impacts. 5. ICRs for Prepayment and Post-Payment Definitions, Documentation Request Timeframes, and Payment Denials for Noncompliance With Documentation Requests (§§ 405.902, 405.903, 405.929, and 405.930) In section III.N.2. Of this final rule, we proposed to.

(1) Define key terms including “additional documentation,” “additional documentation request,” “post-payment medical review,” and “prepayment medical review;” (2) codify contractors' authority to request additional documentation for prepayment and post-payment review within established timeframes. (3) codify timeframes for response to requests for documentation. (4) codify result of a failure to comply with prepayment or post-payment documentation request(s) by a provider or supplier, specifically denial of payment. The codification of contractor authority to request additional documentation for post-payment reviews, associated timeframes, and resulting denials for failure to comply with these requests is not subject to the PRA per 5 CFR 1320.3(h)(9).

The request for additional documentation will be on a case-by-case basis using non-standardized follow-up questions. With regard to the (1) definitions for “additional documentation” and “additional documentation request,” “post-payment medical review,” and “prepayment medical review;” (2) the codification of contractor authority to Start Printed Page 65562 request additional documentation for pre-payment reviews. (3) the associated provider and supplier timeframes for providing additional documentation from the pre-payment reviews. And (4) possible denials for failure to comply with these requests, we do not expect that these proposals will affect our information collection burden estimates because these policies do not require providers or suppliers to submit any more documentation to CMS than what is already approved by OMB under control number 0938-0969 (CMS-10417).

The regulations simply codify certain requirements by clarifying definitions, timeframes, and results for noncompliance. We did not receive public comments on this provision, and therefore, we are finalizing as proposed. 6. ICRs Regarding the Requirement for Electronic Prescribing for Controlled Substances for a Covered Part D Drug Under a Prescription Drug Plan or an MA-PD Plan (§ 423.160(a)) Pending our finalization of the following provisions, the changes will be subject to the standard PRA process under OMB control number 0938-1396 (CMS-10755) to give stakeholders optimal opportunity to comment on our burden for this provision, given how dynamic the burden for EPCS is.

The standard PRA process includes the publication of 60- and 30-day Federal Register notices that will provide the public with opportunities for public review and comment. We expect to publish the 60-day notice shortly after the publication of the final rule. The purpose of this provision is to continue to implement section 2003 of the SUPPORT for Patients and Communities Act, which requires that the prescribing of a Schedule II, III, IV, or V controlled substance under Medicare Part D be done electronically in accordance with an electronic prescription drug program beginning January 1, 2021, subject to any exceptions, which HHS may specify. We refer readers to the CY 2021 PFS final rule (85 FR 84472) for our previously finalized requirements and burden for the first phase of implementing this statutory mandate, which required prescribers to use the NCPDP SCRIPT 2017071 standard for Electronic Prescription for Controlled Substances (EPCS) prescription transmissions.

The purpose of this final rule is to delay the date for CMS to begin taking compliance actions, implement certain exceptions to the mandate, and implement a compliance threshold. In the CY 2021 PFS final rule, we estimated that the one-time burden to implement this provision would be 828,750 hours (165,750 prescribers * 6 hr) at a cost of $36,418,590 (994,500 hr * $36.62/hr). We arrived at the estimate of 165,750 prescribers having to implement EPCS based on taking the 425,000 Part D prescriber practices, and decreasing that amount by 60 percent to account for the 60 percent of prescriber practices that likely already had EPCS in place by January 1, 2021. Based on our current PDE data, we estimate that 70 percent of Part D prescribers already conduct EPCS,[] which would leave 30 percent of Part D prescribers that would have to implement EPCS, if we did not propose any exceptions to this mandate.

We also proposed that prescribers writing prescriptions for beneficiaries in long term care facilities will have an extension for those prescriptions until January 1, 2025 along with the following exceptions to the EPCS mandate. (1) For prescriptions issued when the prescriber and dispensing pharmacy are the same entity. (2) cases where prescribers issue only a small number of Part D. (3) cases where a prescriber's NCPDP database address is in a geographic service area of an emergency or disaster declared by a Federal, State or local government entity.

And (4) cases where a prescriber has received a CMS-approved waiver. These exceptions will result in fewer prescribers being required to conduct EPCS. Based on our PDE data, we believe that these exceptions will substantially decrease the number of prescribers having to implement EPCS as a result of this regulation. We have listed the exceptions and the estimated number of prescribers falling under each exception in Table 79.[] We do not anticipate that our proposal to include a compliance threshold of 70 percent will have any material effect on the impact of this provision.

The reason for this is that based on our PDE data and conversations with prescribers, we believe that the 30 percent or less of the time that prescribers are not e-prescribing is because they are unable to e-prescribe, so they would have applied for a waiver. Although there are sometimes scenarios where beneficiaries may request that their prescriptions not be transmitted electronically, it appears as though those circumstances are not enough to make a material impact, since beneficiaries often change their views when they are given countervailing reasons that the prescriptions should be transmitted via EPCS. Start Printed Page 65563 Table 79 gives our estimate of the number of prescribers affected by our exceptions broken down by the type of exception. As shown in Table 79, we estimate that our exceptions will exempt approximately 582,664 prescribers from the EPCS requirement, which consistutes approximately 38 percent of prescribers, since there are an estimated 1,548,221 Part D prescribers [] (582,664/1,548,221).

Since the number of exempted prescribers from this mandate far exceeds the number of prescribers who currently do not e-prescribe controlled substances in Part D, we do not expect that the total number of Part D prescribers who electronically prescribe controlled substances will increase following our implementation of this mandate. As a result, we do not believe there will be a measurable impact to the prescriber community as a whole, once this provision is finalized. However, for individual prescribers who have to implement this mandate, we expect that the implementation costs will be the same amounts that we finalized in the CY 2021 PFS final rule. Based on the modeling that we have seen, we have found that EHR companies provide the initial set-up of e-prescribing software free of charge, provided the prescribers pay the per transaction cost of $1.88 mentioned in the CY 2021 PFS final rule.

Based on the comments received on our CY 2021 PFS proposed rule, we understand that implementing EPCS can lead to technological glitches, and then fixing those issues. We understand that the EHR companies remedy the issues free of charge. However, we also understand that such fixes take time away from the medical office staff. We estimate that such fixes would take the staff approximately 1 extra hour from the estimate given in our CY 2020 PFS proposed rule, when averaged across all prescribers.

As a result, we have changed our one-time burden estimate of e-prescribing set-up from 5 hours to 6 hours per provider, which means a total of 994,500 hours (165,750 prescribers * 6 hr) at a cost of $36,617,490 (994,500 hr * $36.82/hr), since we anticipate that this work will be completed by an Administrative Support Worker. In this regard, the impact of this rule is plus 1 hour per response, plus 165,750 hours (165,750 prescribers × 1 hr/response), and $6,102,915 (165,750 hr × $36.82/hr). We proposed that prescribers have the ability to apply for a waiver from the EPCS requirement, should they be facing circumstances beyond their control that prevent them from e-prescribing, and these circumstances are not the result of a natural disaster or emergency. Due to the high prevalence of EPCS, the miniscule compliance actions that we proposed for non-compliance, and the number of prescribers that we expect to exempt from the mandate, we only expect to receive about 100 attestations per year.

Although we proposed certain fields be in this attestation, these were minimal, and there was no accompanying documentation required. (Note, as outlined in section II.Q. Of this final rule, to meet the standard for a waiver, prescribers must provide documentation showing the existence of a circumstance beyond their control and that such a circumstance prevents them from conducting EPCS.) We expect that each attestation will take 10 minutes (0.1667 hr) for a prescriber at $217.32/hr to complete. In aggregate, CMS estimates an annual burden for filling out attestations of 16.67 hours (100 attestations × 0.1667 hr) at a cost of $3,622.72 (16.67 hr × $217.32/hr).

In addition, we solicit comment on any other potential information collection implications. We received no comments on our proposed burden estimates and assumptions, and have finalized our provision as proposed. As a result, we are finalizing our burden estimates and assumptions as proposed. Start Printed Page 65564 7.

ICRs Regarding Open Payments Provisions Included in the CY 2022 PFS (42 CFR Part 403) The following requirement and burden changes will be submitted to OMB for approval under control number 0938-1237 (CMS-10495). The following estimates burden changes to the Open Payments final rule at §§ 403.900 through 403.914 in this final rule. A. Payment Context Field for Teaching Hospitals The mandatory context field is a new requirement for reporting entities submitting and attesting to records that are attributed to teaching hospitals only.

The field will be freeform text entry. We estimate that for each applicable manufacturer and applicable group purchasing organization (GPO), the inclusion of this field for collection and reporting activities will average an additional 6 total hours. The applicable instrument for these activities in the current PRA package is the “General-Research-Ownership Submission Data Elements”. At the support staff cost per FTE of $42.40/hr, this will increase costs by $254.40 (6 hr × $42.40/hr) per applicable manufacturer or applicable GPO submitting teaching hospital records.

However, because we anticipate fewer disputes due to this field, we believe it will decrease dispute resolution by 2 total hours for support staff at $42.40/hr respectively, reducing costs by $84.80 (2 hr × $42.40/hr) per applicable manufacturer and applicable GPO. This results in a net increase in burden for each applicable manufacturer and applicable GPO submitting teaching hospital records of $169.60 ($254.40−$84.80). In Program Year (PY) 2019, 794 applicable manufacturers and applicable GPOs submitted at least one teaching hospital record, meaning the increase in burden will be a total of 3,176 hours (4 hours × 794 reporting entities) at a cost of $42./40/hr or a total of $134,662.40 (3,176 × $42.40). In addition, we estimate this will reduce teaching hospital dispute resolution estimates by 2 hours per support staff FTE at $37.82/hr or $75.64 (2 hr × $37.82/hr) per teaching hospital with records attributed to them.

In PY 2019, 1,202 hospitals had record attributed to them, so for teaching hospitals we estimate a total burden reduction of 2,404 hours at a cost of $90,919.28 (2,404 × $75.64). In aggregate, we estimate an annual burden of 772 hours (3,176−2,404) at a cost of $43,743.12 ($134,662.40−$90,919.28). B. Optional Annual Recertification The annual recertification is voluntary for applicable manufacturers or applicable group purchasing organizations.

We approximate that 15 percent of applicable manufacturers and group purchasing organizations, or 240 reporting entities (0.15 [1,595 applicable manufacturers and applicable GPOs]) will complete and submit the proposed optional annual recertification. We anticipate that it will be a simple check box form to be included in the AM (Attestation) and GPO (Attestation) Annual IC Requirement and the “Attestation and Assumptions Screen Shots” Instrument in the existing PRA package. We estimate that it will take 0.5 hours at $42.40/hr for support staff to complete and submit the recertification. In aggregate, we estimate an added annual burden of 120 hours (240 entities × 0.5 hr/response) at a cost of $5,088 (120 hr × $42.40/hr).

C. Defining a Physician-Owned Distributorship (42 CFR 403.902) The new definition is not subject to the PRA since it will not revise, add, or remove any collection of information requirements or burden. D. Disallowing Record Deletion Without Reason (§ 403.904(a)(3)) This provision clarifies that entities are not permitted to delete records without reason once their timeliness, completeness, and accuracy has been attested to.

In order to ensure compliance with this requirement, a freeform text dialogue box will be added to the system when records are deleted that asks the applicable manufacturer or GPO to input a reason for the deletion. This will be included in the AM (Data collection and submission) and Applicable GPO (Data Collection and Submission) IC requirements and the “Open Payments User Guide” Instrument in the existing PRA package. We anticipate that this will take an average of 2 hours at $42.40/hr to input a reason for the deletion. In aggregate, we estimate an added annual burden of 80 hours (40 applicable manufacturers or GPOs deleting records annually × 2 hr/response) at a cost of $3,392 (80 hr × $42.40/hr).

E. Disallow Publication Delays of General Payments A very small number of general payments are delayed from publication by reporting entities every year, and these records will simply either be reported as research records instead, or not delayed at all. Therefore, we anticipate a negligible burden for this provision. F.

Short Term Loans (§ 403.902) This provision is merely a clarification of an existing requirement in regulation text. The purpose of this language is to clarify that the exemption for short-term loans from reporting requirements only applies for loans of less than 91 cumulative days per calendar year. In other words, multiple short-term loans in a calendar year will still meet reporting requirements if they add up to 91 days or greater. We do not believe this provision will change reporting behavior, and therefore do not anticipate an increase in burden.

G. Remove General Ownership Records Currently the Open Payments system allows for a reporting entity to submit either a general record with a nature of payment category of ownership, or an ownership and investment interest record. For Program Years 2015-2019, approximately 92 applicable Start Printed Page 65565 manufacturers and GPOs reported records with the nature of payment category of ownership. Since reporting these general records as ownership records will require the addition of two additional pieces of information, we anticipate that it will take these 92 entities an additional 3 hours at $42.40/hr to report the two extra fields.

In aggregate, we estimate an added annual burden of 276 hours (92 entities × 3 hr/response) at a cost of $11,702 (276 hr × $42.40/hr). This will be included in the AM (Data collection and submission) and Applicable GPO (Data Collection and Submission) IC requirements and the “Open Payments User Guide” Instrument in the existing PRA package. h. Updated Contact Information (§ 403.908(c)(3)) This provision creates a requirement for reporting entities to keep their contact information up to date with CMS.

The ability to communicate with a reporting entity is important because CMS may need to contact the entity in the case of perceived issues with the records. Applicable manufacturers and applicable GPOs will only be required to update their contact information if the two contacts provided become obsolete due to a change in the organization. This will also only apply to entities that do not have records to report for 2 years after a program year in which they reported. Therefore, we anticipate that it will only affect approximately 30 applicable manufacturers and applicable group purchasing organizations.

We estimate that it will take 0.5 hours at $42.40/hr to update the contact information. In aggregate, we estimate an added annual burden of 15 hours (30 entities × 0.5 hr/response) at a cost of $636 (15 hr × $42.40/hr). This will be included in the AM (Data collection and submission) and Applicable GPO (Data Collection and Submission) IC requirements and the “Open Payments User Guide” Instrument in the existing PRA package. I.

Summary 8. The Quality Payment Program (QPP) (42 CFR Part 414 and Section IV. Of This Final Rule) The following QPP-specific ICRs reflect this final rule's policy changes as well as adjustments to the policies that have been finalized in the CY 2017 and 2018 Quality Payment Program final rules (81 FR 77008 and 82 FR 53568, respectively), the CY 2019, CY 2020, and CY 2021 PFS final rules (83 FR 59452, 84 FR 62568 and 85 FR 84472, respectively). A.

Background (1) ICRs Associated With MIPS and Advanced APMs There is a series of ICRs associated with the Quality Payment Program, including for MIPS and Advanced APMs. The MIPS ICRs consist of. Registration for virtual groups (see section V.B.8.b of this final rule). QCDR self-nomination applications and other requirements (see section V.B.8.c.(2) of this final rule).

Qualified registry self-nomination applications and other requirements (see section V.B.8.c.(3) of this final rule). CAHPS survey vendor applications (see section V.B.8.c.(4) of this final rule). Health IT vendors (see section V.B.8.c.(5) of this final rule). Open Authorization credentialing and token request process (see section V.B.8.d of this final rule).

Quality Payment Program Identity Management Application Process (see section V.B.8.e.(3) of this final rule). Quality performance category data submission by Medicare Part B claims collection type (see section V.B.8.e.(4) of this final rule), QCDR and MIPS CQM collection type (see section V.B.8.e.(5) of this final rule), eCQM collection type (see section V.B.8.e.(6) of this final rule), MVP Quality submission (see section V.B.8.e.(7)(a)(iii) of this final rule), and CMS Web Interface collection type (see section V.B.8.e.(8) of this final rule). CAHPS for MIPS survey beneficiary participation (see section V.B.8.e.(9) of this final rule). Group registration for CMS Web Interface (see section V.B.8.e.(10) of this final rule).

Group registration for CAHPS for MIPS survey (see section V.B.8.e.(11) of this final rule). MVP registration (see section V.B.8.e.(7)(a)(i) of this final rule). Subgroups registration (see section V.B.8.e.(7)(a)(ii) of this final rule). All for quality measures (see section V.B.8.f of this final rule).

Reweighting applications for Promoting Interoperability and other performance categories (see section V.B.8.g.(2) of this final rule). Promoting Interoperability performance category data submission (see section V.B.8.g.(3) of this final rule). Call for Promoting Interoperability measures (see section V.B.8.h of this final rule). Improvement activities performance category data submission (see section V.B.8.i of this final rule).

Nomination of improvement activities (see section V.B.8.j of this final rule). Nomination of MVPs (see section Start Printed Page 65566 V.B.8.k of this final rule). And opt-out of Physician Compare for voluntary participants (see section V.B.8.o of this final rule). The ICRs for Advanced APMs consist of.

Partial Qualifying APM Participant (QP) election (section V.B.8.m of this final rule). Other Payer Advanced APM identification. Payer Initiated and Eligible Clinician Initiated Processes (sections V.B.8.n.(1) and V.B.8.n.(2) of this final rule). And submission of data for QP determinations under the All-Payer Combination Option (section V.B.8.n.(3) of this final rule).

(2) Summary of Quality Payment Program Changes. MIPS We have included the change in estimated burden for the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years due to the finalized policies and information collections in this final rule. The finalized policies in this rule impact the burden estimates for the CY 2022 and CY 2023 MIPS performance periods/2024 and 2025 MIPS payment years. However, our currently approved burden estimates for the CY 2021 performance period (85 FR 84958 through 84998) approved by OMB on May 28, 2021, included estimated burden due to finalized policies and assumptions for the CY 2021 and CY 2022 performance periods/2023 and 2024 MIPS payment years.

The currently approved estimated burden for the package does not include the CY 2023 performance period/2025 MIPS payment year. To understand the burden implications of the policies finalized in this final rule relative to the current package that was approved by OMB on May 28, 2021. We have subtracted the burden for the policies and information collections set forth for the CY 2021 performance period/2023 MIPS payment year in the CY 2021 PFS final rule (see Table 128). We have revised our burden estimates for the CY 2022 performance period/2024 MIPS payment year due to the finalized policies in this rule and changes for continuing the policies and information collections set forth in the CY 2021 PFS final rule into the CY 2022 performance period/2024 MIPS payment year (see Table 129).

We are setting forth new burden for the CY 2023 performance period/2025 MIPS payment year (see Table 130), meaning that there will be no currently approved figures for these estimates. In the CY 2022 PFS proposed rule (86 FR 39479 through 39528), we compared our proposed burden estimates for the CY 2022 and 2023 performance periods/2024 and 2025 MIPS payment years to the CY 2022 performance period/2024 MIPS payment year in the CY 2021 PFS final rule (85 FR 84994). We believe that using the approach described above for the final rule will help readers easily understand and follow the changes in the estimated burden due to the policies and assumptions in the CY 2022 PFS final rule relative to the currently approved burden. The following nine MIPS ICRs show changes in burden due to the finalized policies in this rule.

(1) QCDR self-nomination applications. (2) Qualified Registry self-nomination applications. (3) Quality performance category data submission by QCDR and MIPS CQM collection type. (4) Quality performance category data submission by eCQM collection type.

(5) Group registration for CMS Web Interface. (6) CMS Web Interface submission burden. (7) Reweighting applications for Promoting Interoperability and other performance categories. (8) Promoting Interoperability performance category data submission.

And (9) Nomination of improvement activities. In aggregate, we estimate the finalized policies will result in a net increase in burden of 3,805 hours and $358,305 for the CY 2022 performance period/2024 MIPS payment year. The remaining changes to our currently approved burden estimates are adjustments due to the revised burden assumptions based on the updated data available at the time of publication of this final rule. We have also added 3 new ICRs (MVP Registration, MVP Quality Submissions, and Subgroups Registration) for the associated burden related to the policies for implementation of MVPs and subgroups beginning with the CY 2023 performance period/2025 MIPS payment year.

The MVP and subgroup registration ICRs reflect the burden associated with the MVP and subgroup registration requirements described in section IV.A.3.b(4)(f) of this rule. The MVP quality submission ICR reflects the change in burden associated with the requirements for the quality performance category of MVPs described in section IV.A.3.b(4)(d)(ii) of this rule. With these new ICRs and the other policy changes discussed for the CY 2022 performance period/2024 MIPS payment year, we estimate the finalized policies will result in a net increase in burden of 1,383,049 hours and $139,501,770 for the CY 2023 performance period/2025 MIPS payment year. As discussed above, we are setting forth our estimates for the CY 2023 performance period/2025 MIPS payment year as new burden with no currently approved estimates for comparison.

We are not making any changes or adjustments to the following ICRs. Registration for virtual groups. CAHPS survey vendor applications. Quality Payment Program Identity Management Application Process.

Group registration for CAHPS for MIPS survey. CAHPS for MIPS survey beneficiary participation. Open Authorization (OAuth) Credentialing and Token Request Process. Nomination of MVPs and call for Promoting Interoperability measures.

See section V.B.8. Of this final rule for a summary of the ICRs, the overall burden estimates, and a summary of the assumption and data changes affecting each ICR. The accuracy of our estimates of the total burden for data submission under the quality, Promoting Interoperability, and improvement activities performance categories may be impacted by two primary factors. First, we are unable to predict with absolute certainty who will be a QP for the CY 2022 performance period/2024 MIPS payment year.

New eligible clinician participants in Advanced APMs who become QPs will be excluded from MIPS reporting requirements and payment adjustments, and as such, are unlikely to report under MIPS. While some current Advanced APM participants may end participation such that the APM Entity's eligible clinicians may not be QPs for a year based on § 414.1425(c)(5), and thus be required to report under MIPS. Second, it is difficult to predict what Partial QPs, who can elect whether to report to MIPS, will do in the CY 2022 performance period/2024 MIPS payment year compared to the CY 2019 performance period/2021 MIPS payment year, and therefore, the actual number of Advanced APM participants and how they elect to submit data may be different than our estimates. However, we believe our estimates are the most appropriate given the available data.

Additionally, we will continue to update our estimates annually as data becomes available. In the 2022 PFS proposed rule (86 FR 39480), we discussed a recent JAMA article (Khullar, et al., 2021) [] which included new data on the burden involved in submitting data for the Quality Payment Program. We have chosen not to include this data in our estimates because of the small sample size included (30 TINs, half of which are APM participants, which we do not include in our estimates). In addition, the article did not indicate the time Start Printed Page 65567 spent per activity involved in submissions for MIPS, so we are unable to determine if the totals in the article represent only the activities relevant for regulatory burden or separate the totals for the individual ICRs.

We solicited comment on our assumptions for estimating the burden for clinicians submitting data for the Quality Payment Program. We did not receive public comments regarding our burden estimates for clinicians submitting data in the Quality Payment Program. We are finalizing to not include the data from the above referenced article in our assumptions. We made updates to our figures to correct a few technical errors that we observed in the CY 2022 PFS proposed rule.

(3) Summary of Quality Payment Program Changes. Advanced APMs For these ICRs (identified above under, “ICRs Associated with MIPS and Advanced APMs”), the changes to currently approved burden estimates are adjustments based on updated projections for the CY 2022 performance period/2024 MIPS payment year. We did not implement any changes to the Other Payer Advanced APM identification. Eligible Clinician Initiated Process and submission of Data for QP determinations under the All-Payer Combination Option ICRs.

(4) Framework for Understanding the Burden of MIPS Data Submission Because of the wide range of information collection requirements under MIPS, Table 82 presents a framework for understanding how the organizations permitted or required to submit data on behalf of clinicians vary across the types of data, and whether the clinician is a MIPS eligible clinician or other eligible clinician voluntarily submitting data, MIPS APM participant, or an Advanced APM participant. As shown in the first row of Table 82, MIPS eligible clinicians and other clinicians voluntarily submitting data will submit data either as individuals, groups, or virtual groups for the quality, Promoting Interoperability, and improvement activities performance categories. Note that virtual groups are subject to the same data submission requirements as groups, and therefore, we will refer only to groups for the remainder of this section unless otherwise noted. We want to note that we have included subgroups to Table 82 due to the introduction of subgroups for clinicians choosing to report MVPs or the APP in the CY 2023 performance period/2025 MIPS payment year described in section IV.A.3.b.(2)(d)(ii) of this final rule.

Because MIPS eligible clinicians are not required to submit any additional information for assessment under the cost performance category, the administrative claims data used for the cost performance category is not represented in Table 82. For MIPS eligible clinicians participating in MIPS APMs, the organizations submitting data on behalf of MIPS eligible clinicians will vary between performance categories and, in some instances, between MIPS APMs. As discussed in section IV.A.3.c. Of this final rule, for clinicians in APM Entities, the APM Performance Pathway is available for both ACO and non-ACOs to submit quality data.

Due to data limitations and our inability to determine who will use the APM Performance Pathway versus the traditional MIPS submission mechanism for the CY 2022 performance period/2024 MIPS payment year, we assume ACO APM Entities will submit data through the APM Performance Pathway, using the CMS Web Interface option, and non-ACO APM Entities will participate through traditional MIPS, thereby submitting as an individual or group rather than as an entity. We also want to note that as finalized in section IV.A.3.d.(1)(d) of this final rule, we are finalizing to extend the CMS Web Interface as a collection type beyond the CY 2022 performance period/2024 MIPS payment year for clinicians participating in the Shared Savings Program. Per section 1899 of the Act (42 U.S.C. 1395jjj), submissions received from eligible clinicians in ACOs are not included in burden estimates for this final rule because quality data submissions to fulfill requirements of the Shared Savings Program are not subject to the PRA.

For the Promoting Interoperability performance category, group TINs may submit data on behalf of eligible clinicians in MIPS APMs, or eligible clinicians in MIPS APMs may submit data individually. For the improvement activities performance category, we will assume no reporting burden for MIPS APM participants. In the CY 2017 PFS final rule, we described that for MIPS APMs, we compare the requirements of the specific MIPS APM with the list of activities in the improvement activities Inventory and score those activities in the same manner that they are otherwise scored for MIPS eligible clinicians (81 FR 77185). Although the policy allows for the submission of additional improvement activities if a MIPS APM receives less than the maximum improvement activities performance category score, to date all MIPS APM have qualified for the maximum improvement activities score.

Therefore, we assume that no additional submission will be needed. Eligible clinicians who attain Partial QP status may incur additional burden if they elect to participate in MIPS, which is discussed in more detail in the CY 2018 PFS final rule (82 FR 53841 through 53844). Start Printed Page 65568 The policies finalized in the CY 2017 and CY 2018 Quality Payment Program final rules, the CY 2019, CY 2020, and CY 2021 PFS final rules, and continued in this final rule create some additional data collection requirements not listed in Table 82. These additional data collections, some of which are currently approved by OMB under the control numbers 0938-1314 (Quality Payment Program, CMS-10621) and 0938-1222 (CAHPS for MIPS, CMS-10450), are as follows.

Additional ICRs Related to MIPS Third-Party Intermediaries (See Section V.B.8.c) • Self-nomination of new and returning QCDRs (81 FR 77507 through 77508, 82 FR 53906 through 53908, and Start Printed Page 65569 83 FR 59998 through 60000) (OMB 0938-1314). Self-nomination of new and returning registries (81 FR 77507 through 77508, 82 FR 53906 through 53908, and 83 FR 59997 through 59998) (OMB 0938-1314). Approval process for new and returning CAHPS for MIPS survey vendors (82 FR 53908) (OMB 0938-1222). Open Authorization Credentialing and Token Request Process (New) (OMB 0938-1314) (see section V.B.8.d).

Additional ICRs Related to the Data Submission and the Quality Performance Category (See Section V.B.8.e) Additional ICRs Related to the Promoting Interoperability Performance Category (See Section V.B.8.g) Reweighting Applications for Promoting Interoperability and other performance categories (82 FR 53918 and 83 FR 60011 through 60012) (OMB 0938-1314). Additional ICRs Related to Call for New MIPS Measures and Activities (See Sections V.B.8.f, V.B.8.h, V.B.8.j. And V.B.8.k) Nomination of improvement activities (82 FR 53922 and 83 FR 60017 through 60018) (OMB 0938-1314). Call for new Promoting Interoperability measures (83 FR 60014 through 60015) (OMB 0938-1314).

Call for MIPS quality measures (83 FR 60010 through 60011) (OMB 0938-1314). Nomination of MVPs (OMB 0938-1314). Additional ICRs Related to MIPS (See Section V.B.8.o) Opt out of performance data display on Physician Compare for voluntary reporters under MIPS (82 FR 53924 through 53925 and 83 FR 60022) (OMB 0938-1314). Additional ICRs Related to APMs (See Sections V.B.8.m and V.B.8.n) Partial QP Election (81 FR 77512 through 77513, 82 FR 53922 through 53923, and 83 FR 60018 through 60019) (OMB 0938-1314).

Other Payer Advanced APM determinations. Payer Initiated Process (82 FR 53923 through 53924 and 83 FR 60019 through 60020) (OMB 0938-1314). Other Payer Advanced APM determinations. Eligible Clinician Initiated Process (82 FR 53924 and 83 FR 60020) (OMB 0938-1314).

Submission of Data for All-Payer QP Determinations (83 FR 60021) (OMB 0938-1314). b. ICRs Regarding the Virtual Group Election (§ 414.1315) This rule is not implementing any new or revised collection of information requirements or burden related to the virtual group election. The virtual group election requirements and burden are currently approved by OMB under control number 0938-1343 (CMS-10652).

Consequently, we are not making any changes to the virtual group election process under that control number. C. ICRs Regarding Third-Party Intermediaries (§ 414.1400) The finalized requirements and burden associated with this rule's data submission changes related to qualified registries and QCDRs will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). In section IV.A.3.h.

Of this rule, we are finalizing policies related to the third-party intermediary regulations at § 414.1400. Specifically, we are finalizing. (1) Requirement for third-party intermediaries to submit MIPS data for APM Entities. (2) requirement for QCDRs and qualified registries to support MVPs, QCDRs and qualified registries may also support the APP.

(3) requirement for all QCDRs and qualified registries to support subgroup reporting. (4) requirements for approved QCDRs and qualified registries that have not submitted performance data. And (5) new QCDR measure rejection criteria. The burden associated with each of these topics is discussed separately below for qualified registries, QCDRs, and survey vendors.

(1) Background Under MIPS, the quality, Promoting Interoperability, and improvement activities performance category data may be submitted via relevant third-party intermediaries, such as qualified registries, QCDRs, and health IT vendors. Data on the CAHPS for MIPS survey, which counts as either one quality performance category measure, or towards an improvement activity, can be submitted via CMS-approved survey vendors. Entities seeking approval to submit data on behalf of clinicians as a qualified registry, QCDR, or survey vendor must complete a self-nomination process annually.[] The processes for self-nomination for entities seeking approval as qualified registries and QCDRs are similar with the exception that QCDRs have the option to nominate QCDR measures for approval for the reporting of quality performance category data. Therefore, differences between QCDRs and qualified registry self-nomination are associated with the preparation of QCDR measures for approval.

(2) QCDR Self-Nomination Applications As described below, in this rule we are adjusting the number of self-nomination applications based on current data (from 82 to 84), change the number of QCDR measures submitted for consideration by each QCDR at the time of self-nomination (from 2 to 12), and adjust the average time required to submit information for each QCDR measure (from 2.5 hours to 0.75 hours). (a) Self-Nomination Process and Other Requirements In section IV.A.3.h.(1) of this rule, we are reorganizing and consolidating § 414.1400 generally. We assume that this provision does not change the existing requirements for third-party intermediaries during the self-nomination process. Therefore, we are not revising our burden estimates related to these provisions.

We refer readers to § 414.1400 which states that QCDRs interested in submitting MIPS data to us on behalf of a MIPS eligible clinician, group, or virtual group will need to complete a self-nomination process to be considered for approval to do so. We also refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77507 through 77508), CY 2018 Quality Payment Program final rule (82 FR 53906 through 53908), CY 2019 PFS final rule (83 FR 59998 through 60000), the CY 2020 PFS final rule (84 FR 63116 through 63121) and the CY 2021 PFS final rule (85 FR 84964 through 84969) for our previously finalized requirements and burden for self-nomination of QCDRs and nomination of QCDR measures. In section IV.A.3.h.(2)(a) of this rule, we are finalizing to add APM Entities to § 414.1400(a)(1), and expand the general participation requirements of third-party intermediaries, to third-party intermediaries reporting to MIPS on behalf of APM Entities reporting to MIPS in order to align reporting requirements for all participants in Start Printed Page 65570 MIPS. We are also finalizing that beginning with the CY 2023 performance period/2025 MIPS payment year, QCDRs and qualified registries must support the APP, and MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data.

As finalized in the CY 2017 PFS final rule, third-party intermediaries currently support MIPS data submission on behalf of eligible clinicians (81 FR 77016). APM Entities have historically used third party intermediaries for submitting their quality measures to their APMs. Additionally, QCDRs, qualified registries and health IT vendors are required under existing § 414.1400(a)(1) to submit data for the quality, improvement activities, and Promoting Interoperability performance categories in MIPS. Therefore, we anticipate no additional steps being added to the self-nomination process as a result of this provision for third-party intermediaries to submit MIPS data on behalf of APM Entities, and to support measures and activities in MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data.

For this final rule, we assume that there will be no impact on the time required for QCDRs to complete either the simplified or full self-nomination process because of the above provisions. Additionally, we are finalizing to require QCDRs, qualified registries, health IT vendors, and CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. We anticipate that at the time of self-nomination, QCDRs would be using a checkbox to indicate their compliance for the requirement to support data submission for subgroups beginning with the CY 2023 performance period/2025 MIPS payment year. We assume that this will not impact the overall time estimated for QCDRs to submit their information at the time of self-nomination.

Therefore, as discussed in the CY 2022 PFS proposed rule (86 FR 84965) we did not make any adjustments in the time required for QCDRs during the simplified or full self-nomination process because of this provision. However, we anticipate that third-party intermediaries will need to make administrative changes to their existing workflows for submission of MVPs and APP data for clinicians participating as subgroups beginning with the CY 2023 performance period/2025 MIPS payment year. We refer readers to section VI.F.18.g(2)(f) of this final rule where we discuss our impact analysis. In section IV.A.3.h.(3)(a)(iii) of this rule, to provide further clarity and to better align with the existing policy (81 FR 77366 through 77367.

81 FR 77383 through 77384), we are finalizing to codify that QCDRs, and qualified registries must conduct validation on the data they intend to submit for the applicable MIPS performance period and provide the results of the executed data validation plan by May 31st of the year following the performance period. Additionally, we are finalizing to codify a new requirement at § 414.1400(b)(3)(iv) to state that, beginning with the CY 2023 performance period/2025 MIPS payment year, the QCDR or qualified registry must submit a data validation plan annually, at the time of self-nomination, for CMS' approval, and may not change the plan once approved, without the prior approval of the agency. We anticipate that this provision does not make any changes to the existing data validation requirements for QCDRs and qualified registries. Through this provision, we are codifying the finalized policies related to data validation for QCDRs and qualified registries in previous rules.

In the CY 2022 PFS proposed rule (86 FR 39483), we did not revise our burden estimates as a result of the above provision because the associated burden was captured in the CY 2017 PFS final rule (81 FR 77383 through 77384) and the CY 2019 PFS final rule (83 FR 59998 through 59999) and submitted to OMB for approval under control number 0938-1314 (CMS-10621). In section IV.A.3.h(3)(a)(i) of this final rule, we are finalizing new requirements for approved QCDRs and qualified registries that have not submitted performance data. First, we are finalizing to create a new requirement at § 414.1400(b)(3)(vii) to require QCDRs and qualified registries that have never submitted data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year) through the CY 2020 performance period/2022 MIPS payment year, to submit a participation plan as part of their self-nomination for CY 2023. If the QCDRs and qualified registries did not submit data, their participation plan must be submitted as part of self-nomination for the 2023 self-nomination period and must be accepted by CMS to continue to be an approved QCDR or qualified registry.

We are also finalizing to codify a new requirement at paragraph § 414.1400(b)(3)(viii) to state that, beginning with the CY 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval. Under this provision, the participation plan must explain the QCDR and/or qualified registry's detailed plans about how the vendor intends to encourage clinicians to submit MIPS data to CMS through the third-party intermediary on behalf of clinicians or groups. The vendor must also explain why they should still be allowed to participate as a qualified vendor. Based on our review of the existing list of approved QCDRs that did not submit performance data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year), we estimate that approximately 10 QCDRs will submit participation plans for the CY 2022 and the CY 2023 self-nomination periods.

Similar to our assumptions for submission of a Corrective Action Plan (CAP) in the CY 2021 PFS final rule (85 FR 84968), we anticipate that the effort involved in developing a participation plan including the policies specified in this rule and submitting it to CMS is likely to be no more than 3 hours for a computer systems analyst at a rate of $95.22/hr. For the CY 2022 performance period/2024 MIPS payment year, we estimate an annual burden of 30 hours (3 hr × 10 participation plans) at a cost of $2,857 (30 hr × $95.22/hr) for QCDRs that will need to develop and submit a participation plan. In section IV.A.3.h.(4) of this rule, we are finalizing to codify new requirements that if a QCDR measure owner is not an approved active QCDR for a given self-nomination period, that QCDR measure will not be available for use. Additionally, we are finalizing to codify a new requirement in section IV.A.3.h.(4)(a)(i)(A) of this rule and add a rejection criterion at § 414.1400(b)(4)(iv)(M) to state, a QCDR does not have permission to use a QCDR measure owned by another QCDR for the applicable performance period.

It was finalized in the CY 2018 PFS final rule (82 FR 53813) that beginning with the CY 2018 performance period/2020 MIPS payment year, QCDR vendors may seek permission from another QCDR to use an existing measure that is owned by the other QCDR. Additionally, in the CY 2020 PFS final rule (84 FR 63070 through 63073), we finalized the QCDR measure rejection criteria considerations. Specifically, we stated that all previously approved QCDR measures and new QCDR measures would be reviewed on an annual basis (as a part of the QCDR measure review Start Printed Page 65571 process that occurs after the self-nomination period closes on September 1st) to determine whether they are appropriate for the program. In the CY 2020 PFS final rule, we indicated to stakeholders that as information becomes available in future years, we will revisit our assumptions to better reflect the impact of these requirements on QCDRs and the quantity of measures annually (84 FR 63118 through 63119).

As discussed in the CY 2019 PFS final rule (83 FR 60000) and CY 2020 PFS final rule (84 FR 63118), we are not accounting for QCDR measure licensing costs as part of our burden estimate. Based on the number of QCDR measures submitted at the time of self-nomination for the CY 2021 performance period/2023 MIPS payment year, we assume that 82 QCDRs will submit 984 measures for consideration in the CY 2022 performance period/2024 MIPS payment year, approximately 12 measures per QCDR, on average. We anticipate that out of the 984 measures, 820 measures will be existing or borrowed measures, approximately 10 measures submitted per QCDR self-nomination application. The remaining 104 measures will be new measures, approximately 2 measures on average per QCDR.

Using the above assumption that each QCDR submitting measures for approval during the self-nomination process will submit approximately 12 measures (10 existing or borrowed measures + 2 new measures), we estimate an increase of 10 measures from the currently approved estimate of 2 measures per QCDR. The estimated increase in the total number of measures submitted by a QCDR at the time of self-nomination is due to the inclusion of the existing or borrowed QCDR measures in our assumptions. Additionally, we anticipate that less information is needed for a QCDR to submit an existing or borrowed measure for approval, therefore, we estimate that the time needed for a QCDR to submit an existing or borrowed measure is 0.5 hours, independent of the selection of the simplified or full self-nomination process. Consistent with our assumption in the CY 2020 PFS final rule (84 FR 63119), we continue to estimate that each QCDR will require 2 hours to submit a new QCDR measures for approval, independent of the selection of the simplified or full self-nomination process.

To account for the difference in the time for submission of new vs existing QCDR measures for approval, we are using the weighted average to estimate the time required for QCDR measure submission at the time of self-nomination. Therefore, we assume that the weighted average of the time required for each QCDR to submit a new or existing or borrowed measure for approval during the self-nomination process is 0.75 hours [((2 new measures × 2 hours) + (10 existing or borrowed measures × 0.5 hours))/total # of measures (12)]. Based on the above assumptions, we are finalizing to revise our estimates in the amount of time required for a QCDR to submit measures during the self-nomination process from a total of 2 hours to approximately 0.75 hours, a decrease of 1.75 hours from the currently approved estimated burden per QCDR measure submission. In the CY 2019 PFS final rule, we estimated that it would take 0.5 hours and 3 hours for a QCDR to submit all the required information during the simplified and full self-nomination process, respectively (83 FR 59999).

Based on our experience with the amount of time needed for QCDRs during the 2020 self-nomination period, we assume that the estimated time of 3 hours per QCDR for a full self-nomination process is an overestimate and therefore, are adjusting our estimated time required for the QCDR full-self-nomination process to 2.5 hours, a decrease of 0.5 hours. We are not making any adjustments in the amount of time needed for simplified self-nomination process. For this final rule, we are adjusting the number of QCDRs that submitted applications for self-nomination from 90 to 84 based on the actual number of applications received during the CY 2021 self-nomination period for the CY 2022 performance period/2024 MIPS payment year, an increase of two applications from the currently approved estimate of 82. This is a decrease of 6 from the estimate of 90 provided in the CY 2022 PFS proposed rule (86 FR 39484).

For QCDRs that submit measures as part of their self-nomination process, while simultaneously accounting for the estimated increase in the number of existing or borrowed QCDR measures submitted with the self-nomination application and the decrease in the estimated time for the QCDR full-nomination process, we are finalizing to revise our estimated time for the QCDR self-nomination process to a minimum of 9.5 hours [0.5 hours for the simplified self-nomination process + (12 measures × 0.75 hr/measure for QCDR measure submission)] and a maximum of 11.5 hours [2.5 hours for the full self-nomination process + (12 measures × 0.75 hr/measure for QCDR measure submission)], an increase of 4 hours at a cost of $ 380.88 (4 hr × $95.22/hr) and 3.5 hours at a cost of $333.27 (3.5 hr × $95.22/hr) from the currently approved burden per respondent estimate in the CY 2021 PFS final rule (85 FR 84965). Consistent with our assumptions in the CY 2021 PFS final rule (85 FR 84967), based on updated data for the number of QCDR applications submitted during the CY 2020 self-nomination period, we are adjusting our estimate that 18 QCDRs will submit targeted audits for the CY 2022 performance period/2024 MIPS payment year, an increase of 1 from the currently approved estimate of 17 targeted audits in the CY 2021 PFS final rule (85 FR 84965). This is a decrease of 2 compared to our estimate of 20 targeted audits in the CY 2022 PFS proposed rule (86 FR 39484). Using the currently approved unchanged burden per respondent estimate, the estimated burden associated with QCDRs completing targeted audits will range from 90 hours (18 audits × 5 hr/audit) at a cost of $8,570 (18 audits × $476.10/audit) for the simplified self-nomination process to 180 hours (18 audits × 10 hr/audit) at a cost of $17,140 (18 audits × $952.20/audit) for the full self-nomination process (see Table 68 for the cost per audit).

We assume that this would adjust our burden estimates for targeted audits by +5 hours (+1 respondents × 5 hr/audit) at a cost of $476 (5 hrs × $95.22/hr) and +10 hours (+1 respondents × 10 hr/audit) at a cost of $952 (10 hrs × $95.22/hr) for the simplified and full self-nomination process, respectively. Based on the assumptions discussed in this section, we provide an estimate of the total annual burden associated with a QCDR self-nominating to be considered “qualified” to submit quality measures results and numerator and denominator data on behalf of MIPS eligible clinicians. As shown in Table 83, we assume that the staff involved in the QCDR self-nomination process will continue to be computer systems analysts or their equivalent, who have an average labor rate of $95.22/hr. Using the change in the number of respondents and the estimated time per respondent for QCDRs that submit measures for approval during the self-nomination process, the annual burden for the simplified and full-self nomination process will range from 798 hours (84 QCDRs × 9.5 hr) to 966 hours (84 QCDRs × 11.5 hr) at a cost ranging from $75,986 (798 hr × $95.22/hr) and $91,983 (966 hr × $95.22/hr), respectively.

As shown in Table 83, combined with our adjusted estimate of annual burden for targeted audits and the burden for submission of participation plans, we are finalizing to revise our estimated Start Printed Page 65572 burden for the QCDR self-nomination process, ranging from 918 hours [798 hr (84 QCDRs × 9.5 hr) + 90 hr (18 audits × 5 hr) + 30 hr (10 participation plans × 3 hr)] at a cost of $87,413 [$75,986 (798 hr × $95.22/hr) + $8,570 (18 audits × $476.10/audit) + $2,857 (30 hr × $95.22/hr)] for a simplified self-nomination process to 1,176 hours [966 hr (84 QCDRs × 11.5 hr) + 180 hr (18 audits × 10 hr) + 30 hr (10 participation plans × 3 hr)] at a cost of $111,980 [$91,983 (966 hr × $95.22/hr) + $17,140 (18 audits × $952.20/audit) + $2,857 (30 hr × $95.22/hr)] for the full self-nomination process. As shown in Table 84, for the CY 2022 performance period/2024 MIPS payment year, independent of the change to our per response time estimate, the estimated increase in 2 respondents from the currently approved 82 respondents to 84 results in an increase of between +19 hours (+2 respondents × 9.5 hrs/respondent for the simplified self-nomination process) and +23 hours (+ 2 respondents × 11.5 hrs/respondent for the full self-nomination process) at a cost of between +$1,809 (+2 respondents × $904.60/respondent for the simplified self-nomination process) and +$2,190 (+2 respondents × $1,095.03/respondent for the full self-nomination process) (see Table 83 for the cost per QCDR). Accounting for the change in time required for the QCDR self-nomination process results in an adjustment of between +328 hours (82 respondents × +4 hr for the simplified self-nomination process or also referred to as minimum burden) at a cost + $31,232 [82 respondents × $380.88 (+4 hr × $95.22/hr)/respondent) and +287 hours (82 respondents × 3.5 hr for the full self-nomination process or also referred to as maximum burden) at a cost of and +$27,328 (82 respondents × $333.27 (+3.5 hr × $95.22/hr)/respondent). The reason for the increase in minimum burden compared to the maximum burden is due to an increase in the change in the number of hours required for the simplified self-nomination process compared to the increase in the number of hours for the full self-nomination process.

In aggregate, when these impacts are combined with the estimate for targeted audits and participation plans discussed above, the net impact ranges between + 382 hours [19 hr (+2 respondents × 9.5 hrs/respondent) + 5 hr (+1 targeted audit × 5 hrs/audit) + 30 hr (10 participation plans × 3 hr/plan) + 328 hr (82 respondents × 4 hr)] at a cost of $36,374 ($1,809 + $476 + $2,857 + $31,232) for the simplified self-nomination process (also referred to as minimum burden) and +350 hours [23 hr (+2 respondents × 11.5 hrs/respondent) + 10 hr (+1 targeted audits × 10 hrs/audit) + 30 hr (10 participation plans × 3 hr/plan) + 287 hr (+82 respondents × 3.5 hr)] at a cost of $33,328 [$2,190 (+2 respondents × $1,095.03/respondent + $952 (10 hr × $95.22/hr) + $2,857 (30 hr × $95.22/hr) + $27,328 (82 respondents × $333.27/respondent)] for the full self-nomination process (also referred to as maximum burden) for the CY 2022 performance period/2024 MIPS payment year. As discussed above in this section of the rule, we are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year. Therefore, we estimate the total change in burden for the QCDR self-nomination process would be 918 hours at a cost of $87,413 for the simplified self-nomination process (also referred to as minimum burden) and 1,176 hours at a cost of $111,980 for the full self-nomination process (also referred to as maximum burden). For the purposes of calculating estimated change in burden in Tables 128, 129, and 130 of this final rule, we use only the maximum burden estimate.

Start Printed Page 65573 (b) QCDR Measure Requirements In the CY 2018 Quality Payment Program final rule (82 FR 53813 through 53814), we discussed that beginning with the CY 2018 performance period/2020 MIPS payment year and for future program years, QCDR vendors may seek permission from another QCDR to use an existing measure that is owned by the other QCDR. Additionally, in the CY 2020 Quality Payment Program rule (84 FR 63070 through 63073) we finalized the QCDR measure rejection criteria considerations. In section IV.A.3.h.(4)(a)(i)(A)(aa) of this rule, we are finalizing to codify a new requirement and add a rejection criterion that a QCDR does not have permission to use a QCDR measure owned by another QCDR for the applicable performance period. Additionally, we are finalizing to codify new requirements that if a QCDR measure owner is not an approved active QCDR for a given self-nomination period, that QCDR measure will not be available for use.

The inactive QCDR measure owner has the option to transfer ownership of the QCDR measure to an active QCDR or agree upon terms set forth with the active QCDR allowing co-ownership of the QCDR measure. We refer readers to section IV.A.3.h.(4)(a)(i)(A) of this rule for additional details on the finalized policies for transfer of ownership of QCDR measures. This provision is to codify the existing requirements for the QCDR self-nomination process. We are not adjusting our burden estimates as result of this provision because we assume that this does not change the requirements, or the time required for a QCDR to submit information for a QCDR measure at the time of self-nomination.

Additionally, we are finalizing to codify another rejection criterion at § 414.1400(b)(4)(iv)(N) to state that, if a QCDR measure owner is not approved during a given self-nomination period, any associated QCDR measures with that QCDR will also not be approved. We are not revising our burden estimates as a result of the above provision because we assume that there will not be additional requirements for QCDRs to submit at the time of self-nomination. This is part of the measure specification requirements for QCDRs which submit measures for approval during the self-nomination process. (3) Qualified Registry Self-Nomination Process and Other Requirements The requirements and burden associated with this rule's data submission changes related to qualified registries will be submitted to OMB for approval under control number 0938-1314 (CMS-10621).

We refer readers to § 414.1400 which states that qualified registries interested in submitting MIPS data to us on behalf of MIPS eligible clinicians, groups, or virtual groups need to complete a self-nomination process to be considered for approval to do so. We also refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77507 through 77508), CY 2018 Quality Payment Program final rule (82 FR 53906 through 53908), CY 2019 PFS final rule (83 FR 59997 through 59998), CY 2020 PFS final rule (84 FR 63114 through 63116) and the CY 2021 PFS final rule (85 FR 84967 through 85 FR 84969) for our previously finalized requirements and burden for self-nomination of qualified registries. In section IV.A.3.h.(1) of this rule, we are finalizing reorganization and consolidation of § 414.1400 generally. We assume that this provision does not change the existing requirements for third-party intermediaries during the self-nomination process.

Therefore, we did not revise our burden estimates related to these provisions. In section IV.A.3.h.(2)(a) of this rule, we are finalizing to add APM Entities to § 414.1400(a)(1), expanding the general participation requirements of third-party intermediaries, to third party intermediaries reporting to MIPS on behalf of APM Entities reporting to MIPS to align reporting requirements for all participants in MIPS. We are also finalizing that beginning with the CY 2023 performance period/2025 MIPS payment year, QCDRs and qualified registries must support APP, and MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. As finalized in the CY 2017 PFS final rule, third-party intermediaries currently support MIPS data submission on behalf of eligible clinicians (81 FR 77016).

APM Entities have historically used third party intermediaries for submitting their quality measures to their APMs. Additionally, QCDRs, qualified registries and health IT vendors are required under existing § 414.1400(a)(1) to submit data for the quality, improvement activities, and promoting interoperability performance categories in MIPS. Similar to our discussion for QCDRs above, we anticipate no additional steps being added to the qualified registry self-nomination process as a result of this provision for third-party intermediaries to submit MIPS data on behalf of APM Entities, and to support measures and activities in MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. For this final rule, we assume that there will be no impact on the time required for qualified registries to complete either the simplified or full Start Printed Page 65574 self-nomination process because of the above provisions.

Additionally, we are finalizing to require QCDRs, qualified registries, health IT vendors, and CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. We anticipate that at the time of self-nomination, qualified registries would be using a checkbox to indicate their compliance for the requirement to support data submission for subgroups beginning with the CY 2023 performance period/2025 MIPS payment year. We assume that this would not impact the overall time estimated for qualified registries to submit their information at the time of self-nomination. Therefore, we are not making any adjustments in the time required for qualified registries during the simplified or full self-nomination process because of this provision.

However, we anticipate that third-party intermediaries would need to make administrative changes to their existing workflows for submission of MVPs and APP data for clinicians participating as subgroups beginning with the CY 2023 performance period/2025 MIPS payment year. We refer readers to section VI.F.18.g.(2)(f) of this rule where we discuss our impact analysis. For this final rule, we are adjusting the number of qualified registries that submitted applications for self-nomination from 210 to 147 based on the number of applications received during the CY 2021 self-nomination period for the CY 2022 performance period/2024 MIPS payment year, a decrease of 36 applications from the currently approved estimate of 183. This is also a decrease of 63 from the estimate of 210 provided in the CY 2022 PFS proposed rule (86 FR 39487).

Therefore, we are revising our estimates for this information collection related to the qualified registry self-nomination process. We are not making any new adjustments to the estimated burden per respondent as a result of this updated data. Based on our estimates in the CY 2021 PFS final rule (85 FR 84967) and the updated data received for the number of qualified registries that submitted self-nomination applications, we are adjusting the estimated number of qualified registries that will submit targeted audits for the CY 2022 performance period/2024 MIPS payment year. Similar to our assumptions in the CY 2021 PFS final rule (85 FR 84967) and based on the updated data received from the CY 2021 self-nomination period, we are adjusting our estimate that 46 qualified registries will be required to conduct targeted audits, a decrease of 10 from the currently approved estimate of 56 in the CY 2021 PFS final rule (85 FR 84965).

Therefore, we estimate the total impact associated with qualified registries completing targeted audits will range from 230 hours (46 registries × 5 hours/audit) at a cost of $21,901 (46 registries × $476.10/audit) to 460 hours (46 registries × 10 hours/audit) at a cost of $43,801 (46 registries × $952.20/audit) for the simplified and full self-nomination process, respectively (see Table 83 for the cost per audit). We assume that this would adjust our burden estimates for targeted audits by −50 hours (−10 respondents × 5 hr/audit) at a cost of −$4,761 (−50 hrs × $95.22/hr) and + −100 hours (−10 respondents × 10 hr/audit) at a cost of −$9,522 (−100 hrs × $95.22/hr) for the simplified and full self-nomination process, respectively. Using our currently approved time per response estimate of 3 hours, the resulting adjustment in burden for QCDRs and qualified registries to submit CAPs is 30 hours (10 respondents × 3 hrs/respondent) at a cost of $2,857 (30 hours × $95.22/hr). In section IV.A.3.h.(3)(a)(i) of this final rule, we are finalizing new requirements for approved QCDRs and qualified registries that have not submitted performance data.

First, we are finalizing to create a new requirement at paragraph at § 414.1400(b)(3)(vii) to require QCDRs and qualified registries that have never submitted data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year) through the CY 2020 performance period/2022 MIPS payment year, to submit a participation plan as part of their self-nomination for CY 2023. Exceptions to this requirement may occur if data is received for the CY 2021 performance period/2023 MIPS payment year. Under this scenario, QCDRs and qualified registries will not need to submit a participation plan for the CY 2023 self-nomination process. If the QCDRs and qualified registries did not submit data, their participation plan must be submitted as part of self-nomination for the CY 2023 MIPS self-nomination period and must be accepted by CMS to continue to be an approved QCDR or qualified registry.

We are also finalizing to codify a new requirement that, beginning with the CY 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval. Under this provision, the participation plan must explain the QCDR and/or qualified registry's detailed plans about how the vendor intends to encourage clinicians to submit MIPS data to CMS through the third-party intermediary on behalf of clinicians or groups. The vendor must also explain why they should still be allowed to participate as a qualified vendor. Based on our review of the existing list of approved qualified registries that did not submit performance data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year), we estimate that 19 qualified registries would submit participation plans for the CY 2023 self-nomination period.

Similar to our assumptions used for submission of a CAP in the CY 2021 PFS final rule (85 FR 84968), we anticipate that the effort involved in developing a participation plan including the policies specified in this rule and submitting it to CMS is likely to be no more than 3 hours for a computer systems analyst at a rate of $95.22/hr. For the CY 2023 performance period/2025 MIPS payment year, we estimate an annual burden of 57 hours (3 hr × 19 participation plans) at a cost of $5,428 (57 hr × $95.22/hr) for qualified registries to develop and submit a participation plan. As stated above, based on the number of self-nominations received for the CY 2022 performance period/2024 MIPS payment year, we are finalizing to adjust the estimated number of qualified registries that will self-nominate for the CY 2022 self-nomination period to 147, a decrease of 36 from the currently approved estimate of 183 in the CY 2021 PFS final rule (85 FR 84969). In the CY 2019 PFS final rule, we estimated that it would take 3 hours for a qualified registry to submit all the required information during the full self-nomination process (83 FR 59998).

Based on our experience with the self-nomination process, we believe that the number of fields needed to be submitted for a qualified registry are fewer than those needed for a QCDR. We assume that our previous assumption of 3 hours is an overestimate. Therefore, we are adjusting the estimated time required for a qualified registry submitting a full-self-nomination process to 2 hours, a decrease of 1 hour. We assume that the staff involved in the qualified registry self-nomination process will continue to be computer systems analysts or their equivalent, who have an average labor rate of $95.22/hr.

Using the change in estimated burden per respondent time, associated with the self-nomination process range from a minimum of 0.5 hours to a maximum of 2 hours, we Start Printed Page 65575 estimate that the annual burden would range from 74 hours (147 qualified registries × 0.5 hr) to 294 hours (147 qualified registries × 2 hr) at a cost ranging from $7,046 (74 hr × $95.22/hr) and $27,995 (294 hr × $95.22/hr), respectively (see Table 85). Both the minimum and maximum burden shown in Table 85 reflect the adjustments to the number of respondents due to availability of more recent data. Combined with our estimates of burden associated with completing targeted audits and developing and submitting participation plans and corrective action plans, our total burden estimate ranges from 391 hours [74 hr (147 qualified registries × 0.5 hr) + 57 hr (+19 participation plans × 3 hr/plan) + 230 hr (46 targeted audits × 5 hours/audit) + 30 hr (10 CAPs × 3 hr) at a cost of $37,232 [$7,046 (74 hr × $95.22/hr) + $5,428 (57 hr × $95.22/hr) + $21,901 (46 registries × $476.10/audit) + $2,857 (30 hours × $95.22/hr)] to 841 hours [294 hr (147 qualified registries × 2 hr) + 57 hr (+19 participation plans × 3 hr/plan) + 460 hr (46 targeted audits × 10 hours/audit) + 30 hr (10 CAPs × 3 hr)] at a cost of $80,081 [$27,995 (294 hr × $95.22/hr) + $5,428 (57 hr × $95.22/hr) + $43,801 (46 registries × $952.20/audit) + $2,857 (30 hours × $95.22/hr) for the simple self-nomination process (see minimum burden in Table 85) and full self-nomination process (see maximum burden in Table 85) respectively. Based on the assumptions discussed in this section, we provide an estimate of the total annual burden associated with a qualified registry self-nominating to be considered “qualified” to submit quality measures results and numerator and denominator data on MIPS eligible clinicians.

As shown in Table 86, for the CY 2022 performance period/2024 MIPS payment year, independent of the change to our per response time estimate, the estimated decrease in 36 respondents from the currently approved 183 respondents to 147 results in a change of −18 hours (−36 respondents × 0.5 hrs/respondent) at a cost of −$1,714 (−18 hours × $95.22/hr) for the simplified self-nomination process and a change of −72 hours (−36 respondents × 2 hrs/respondent) at a cost of −$6,856 (−72 hours × $95.22/hr). Accounting for the change in time required for the qualified registry self-nomination process results in an adjustment of 0 hours for the simplified self-nomination process and −183 hours (183 respondents × −1 hours) at a cost of −$17,425 (−183 hours × $95.22/hr) for the full self-nomination process. When the above impacts are combined with the estimates for targeted audits, participation plans and corrective action plans discussed above, the net impact ranges between −11 hours [−18 hr (−36 respondents × 0.5 hrs/respondent) + 0 hr +−50 hr (−10 audits × 5 hr/audit) + 57 hr (+19 participation plans × 3 hr/plan) + 0 hr)] at a cost of −$1,046 [(−$1,713 (−18 hours × $95.22/hr) + $0 +−$4,761 (−50 hrs × $95.22/hr) + $5,428 (+57 hr × $95.22/hr) + $0)] for the simplified self-nomination process and −298 hours [(−72 hr (−36 respondents × 2 hrs/respondent) + −183 hr (183 respondents × −1 hours) + −100 hr (−10 audits × 10 hr/audit) + 57 hr (+19 participation plans × 3 hr) + 0 hr)] at a cost of −$28,375 [(−$6,856 (−72 hours × $95.22/hr)−$17,425 (−183 hours × $95.22/hr)−$9,522 (−100 hrs × $95.22/hr) + $5,428 (+57 hr × $95.22/hr) + $0)] for the full self-nomination process for the CY 2022 performance period/2024 MIPS payment year. As discussed above in this section of the rule, we are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year.

Therefore, we estimate the total change in burden for the qualified registry self-nomination process would be 391 hours at a cost of $37,232 for the simplified self-nomination process and 841 hours at a cost of $80,081 for the full self-nomination process. For the purposes of calculating estimated change in burden in Tables 128, 129, and 130 of this final Start Printed Page 65576 rule, we use only the maximum burden estimate. We received public comments for our burden estimates related to QCDRs and qualified registries. The following is a summary of the public comments received for the Quality Payment Program ICRs regarding the burden estimates for QCDR and qualified registries.

Comment. One commenter did not agree with CMS burden estimates for audits conducted by QCDRs and qualified registries and shared their belief that the time required for a QCDR was two to three-fold more than CMS estimates. The commenter shared their concern that our estimate does not accurately represent the total amount of time it takes for a QCDR or qualified registry to conduct data audits. Response.

We would like to clarify that our burden estimates provided for the QCDR and qualified registry self-nomination process are not intended to capture the holistic total annual time for a QCDR or a qualified registry to participate in MIPS. Our burden estimate of 9.5 hours to 11.5 hours for the QCDR and 0.5 hours to 2 hours for the qualified registry self-nomination process specifically includes the estimated time it takes for a QCDR or qualified registry to populate and submit a self-nomination form and QCDR measures, if applicable. These burden estimates do not include any time needed to comply with third-party intermediary requirements outside of the self-nomination process. We believe our burden estimate is a reasonable average across all respondents based on our review of the nomination process, the information required to complete the nomination form, and the criteria required to self-nominate as a QCDR or registry.

After consideration of public comments, we are not making any changes to our estimates of the time required for the QCDR and qualified registry self-nomination process. (4) Survey Vendor Requirements In section IV.A.3.h(2)(b)(ii) of this rule, we are finalizing to require CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. Because of this provision, we anticipate no additional steps being added to the requirements for CAHPS for MIPS survey vendors to submit a participation form and assume there would be no impact on the time required for the survey vendors. Therefore, we are not making any adjustments in the time required for CAHPS survey vendors to submit their information because of this provision.

The requirements and burden for CAHPS survey vendors to submit data for eligible clinicians are currently approved by OMB under control number 0938-1222 (CMS-10450). Consequently, we are not making any changes to the CAHPS for MIPS Survey vendor information collection request under that control number. (5) Health IT Vendors In section IV.A.3.h.(2)(b) of this rule, we are finalizing to create a new requirement at paragraph § 414.1400(c)(1)(iii) to state that, beginning with the CY 2023 performance period/2025 MIPS payment year, health IT vendors must support MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. Health IT vendors may also support the APP.

Additionally, we are finalizing to require health IT vendors to support subgroup reporting beginning with the CY 2023 performance period/2025 MIPS payment year. We do not anticipate any requirement or burden changes as it relates to the support of reporting data. As stated in the CY 2019 PFS final rule (83 FR 59998), health IT vendors are not included in the burden estimates for MIPS. D.

ICR Regarding Open Authorization (OAuth) Credentialing and Token Request Process This rule is not implementing new or revised collection of information requirements or burden related to the identity management application process. The requirements and burden are currently approved by OMB under control number 0938-1314 (CMS-10621). Consequently, we are not making any changes to the identity management application process under that control number. E.

ICRs Regarding Quality Data Submission (§§ 414.1318, 414.1325, 414.1335, and 414.1365) (1) Background We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77502 through 77503), CY 2018 Quality Payment Program final rule (82 FR 53908 through 53912), CY 2019 PFS final rule (83 FR 60000 through 60003), CY 2020 PFS final rule (84 FR 63121 through 63124), and the CY 2021 PFS final rule (85 FR 84970 through 84974) for our previously finalized requirements for data submission for the quality performance category. Under our current policies, two groups of clinicians must submit quality data under MIPS. Those who submit as MIPS eligible clinicians and those who submit data voluntarily but are not subject to MIPS payment adjustments. Clinicians are ineligible for MIPS payment adjustments if they are newly Start Printed Page 65577 enrolled to Medicare.

Are QPs. Are partial QPs who elect to not participate in MIPS. Are not one of the clinician types included in the definition for MIPS eligible clinician. Or do not exceed the low-volume threshold as an individual or as a group.

(2) Changes and Adjustments to Quality Performance Category Respondents To determine which QPs should be excluded from MIPS, we used the Advanced APM payment and patient percentages from the APM Participant List for the final snapshot date for the 2019 QP performance period. From this data, we calculated the QP determinations as described in the Qualifying APM Participant (QP) definition at § 414.1305 for the CY 2022 performance period/2024 MIPS payment year. Due to data limitations, we could not identify specific clinicians who have not yet enrolled in APMs, but who may become QPs in the future CY 2022 performance period/2024 MIPS payment year (and therefore will no longer need to submit data to MIPS). Hence, our model may underestimate or overestimate the number of respondents.

In the CY 2019 PFS final rule, we finalized limiting the Medicare Part B claims collection type to small practices beginning with the CY 2019 performance period/2021 MIPS payment year and allowing clinicians in small practices to report Medicare Part B claims as a group or as individuals (83 FR 59752). As in the CY 2021 PFS final rule, we continue to use CY 2019 performance period/2021 MIPS payment year data to estimate the number of respondents in the CY 2022 PFS final rule. There may be an undercount in submissions due to the PHE for buy antibiotics, because of the automatic extreme and uncontrollable circumstances policy, and application-based policy that allowed clinicians to elect not to submit during the submission period for the CY 2019 performance period/2021 MIPS payment year that we are using to inform our burden estimates. Despite this limitation, we believe the data from the CY 2019 performance period/2021 MIPS payment year is still the best data source available as it most accurately reflects the impacts of policies finalized in previous rules and trends toward increased group reporting.

In section IV.A.3.d.(1)(d) of this rule, we are finalizing to continue the CMS Web Interface measures as a collection type for the CY 2022 performance period/2024 MIPS payment year. Additionally, we are finalizing to sunset the CMS Web Interface measures as a collection type/submission type starting with the CY 2023 performance period/2025 MIPS payment year. In the CY 2021 PFS final rule (85 FR 84981), we finalized the sunset of CMS Web Interface as a collection type for the CY 2022 performance period/2024 MIPS payment year. We refer readers to the CY 2021 PFS final rule for discussion on our assumptions for the CY 2022 performance period/2024 MIPS payment year, where we estimated a burden of zero due to our assumption that all Web Interface respondents will alternately utilize either the MIPS CQM and QCDR or eCQM collection types.

Based on the number of groups that submitted quality performance data via the CMS Web Interface in the CY 2019 performance period/2021 MIPS payment year, we are not able to ascertain what alternative collection type(s) the groups would elect. In order to estimate the number of groups that will select each of these collection types, we first clustered the number of groups which submitted data via the CMS Web Interface collection type during the CY 2019 performance period/2021 MIPS payment year by practice size (between 25 and 49 clinicians, between 50 and 99 clinicians, etc.). Then, for each cluster, we allocated these groups to each of the MIPS CQM and QCDR and eCQM collection types based on the percent of TINs that submitted MIPS data via these two collection types. For example, of the 1,629 TINs with a practice size of 25 to 49 clinicians which submitted data for the CY 2019 performance period/2021 MIPS payment year, 1,066 (65 percent) submitted data via the MIPS CQM and QCDR collection type and 563 (35 percent) submitted data via the eCQM collection type.

We applied these percentages to the 7 TINs with a practice size of 25 to 49 clinicians which submitted data via the CMS Web Interface collection type for the CY 2019 performance period/2021 MIPS payment year to estimate that 4 (7 TINs × 0.56) would elect to submit data via the MIPS CQM and QCDR collection type and the remaining 3 (7 TINs × 0.44) would elect to submit data via the eCQM collection type. In total, beginning with the CY 2023 performance period/2025 MIPS payment year, we estimate that 64 of the 114 groups that submitted data via the CMS Web Interface collection type for the CY 2019 performance period/2021 MIPS payment year will submit quality data via the MIPS CQM and QCDR collection type and 50 groups will now submit quality data via the eCQM collection type. We note that 114 groups are an increase of 114 from our currently approved estimate of 0 groups in the CY 2022 performance period/2024 MIPS payment year. We also performed this analysis to determine the number of clinicians that will be affected and will need to submit quality data via an alternate collection type beginning with the CY 2023 performance period/2025 MIPS payment year.

In total, of the estimated 45,599 individual clinicians affected by this provision, we estimate that 11,432 will submit quality data as part of a group via the MIPS CQM and QCDR collection type and 34,167 will submit quality data as part of a group via the eCQM collection type. These estimates are reflected in Tables 90 and 92 and the associated changes in burden are reflected in Tables 91 and 93. In aggregate, as discussed in section V.B.8.p. Of this final rule, we estimate the provision to sunset the CMS Web Interface measures as a collection type/submission type will result in a net decrease in quality performance data reporting burden while acknowledging the additional financial impacts on clinicians as discussed in section VI.F.18.g.(2)(a) of the Regulatory Impact Analysis.

We assume that 100 percent of ACO APM Entities will submit quality data to CMS as required under their models. While we do not believe there is additional reporting for ACO APM entities, consistent with assumptions used in the CY 2020 and CY 2021 PFS final rules (84 FR 63122 and 85 FR 84972), we include all quality data voluntarily submitted by MIPS APM participants at the individual or TIN-level in our respondent estimates. As stated in section V.B.8.e.(2) of this final rule, we assume non-ACO APM Entities will participate through traditional MIPS and submit as an individual or group rather than as an entity. To estimate who will be a MIPS APM participant in the CY 2022 performance period/2024 MIPS payment year, we used the Advanced APM payment and patient percentages from the APM Participant List for the final snapshot date for the 2019 QP performance period.

We elected to use this data source because the overlap with the data submissions for the CY 2019 performance period/2021 MIPS payment year enabled the exclusion of Partial QPs that elected to not participate in MIPS and required fewer assumptions as to who is a QP or not. Based on this information, if we determine that a MIPS eligible clinician will not be scored as a MIPS APM, then their reporting assumption is based on their reporting as a group or individual Start Printed Page 65578 for the CY 2019 performance period/2021 MIPS payment year. Our burden estimates for the quality performance category do not include the burden for the quality data that APM Entities submit to fulfill the requirements of their APMs. The burden is excluded from this collection of information section but is discussed in the regulatory impact analysis section of this final rule because sections 1899(e) and 1115A(d)(3) of the Act (42 U.S.C.

1395jjj(e) and 1315a(d)(3), respectively) state that the Shared Savings Program and the testing, evaluation, and expansion of Innovation Center models tested under section 1115A of the Act (or section 3021 of the Affordable Care Act) are not subject to the PRA.[] Tables 84, 85, and 86 explain our revised estimates of the number of organizations (including groups, virtual groups, and individual MIPS eligible clinicians) submitting data on behalf of clinicians segregated by collection type. Table 87 provides our estimated counts of clinicians that will submit quality performance category data as MIPS individual clinicians or groups in the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years based on data from the CY 2019 performance period/2021 MIPS payment year. For the CY 2022 performance period/2024 MIPS payment year, respondents will have the option to submit quality performance category data via Medicare Part B claims, direct, and log in and upload submission types, and Web Interface. For the CY 2023 performance period/2025 MIPS payment year, respondents will no longer have the option to submit quality performance category data via the Web Interface.

We estimate the burden for collecting data via collection type. Medicare Part B claims, QCDR and MIPS CQMs, eCQMs, and the CMS Web Interface. We believe that, while estimating burden by submission type may be better aligned with the way clinicians participate with the Quality Payment Program, it is more important to reduce confusion and enable greater transparency by maintaining consistency with previous rulemaking. For the CY 2023 performance period/2025 MIPS payment year, we are finalizing in section IV.A.3.b.(2)(c) of this rule that clinicians in MIPS will have the option to submit measures and activities in MVPs.

We refer readers to section IV.A.3.b.(4)(d) of this rule for additional details on the reporting requirements for MVPs. For the quality performance category of MVPs, we assume that MVP Participants will choose to report via the Medicare Part B claims, QCDR, MIPS CQMs, and eCQMs collection type. Table 99 of this rule includes the estimated burden for collecting data for the quality performance category of MVPs. As shown in Table 87, using participation data from the CY 2019 performance period/2021 MIPS payment year, combined with the estimate of QPs for the CY 2022 performance period/2024 MIPS payment year, we estimate a total of 625,703 clinicians will submit quality data as individuals or groups in each of the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years, a decrease of 25,811 clinicians when compared to our estimate of 651,514 clinicians in the CY 2021 PFS final rule (85 FR 84972).

For the CY 2022 performance period/2024 payment year, we estimate 28,252 clinicians will submit data as individuals for the Medicare Part B claims collection type. 279,247 clinicians will submit data as individuals or as part of groups for the MIPS CQM and QCDR collection type. 273,819 clinicians will submit data as individuals or as part of groups via eCQM collection types. And 44,385 clinicians will submit as part of groups via the CMS Web Interface.

Compared to the CY 2022 performance period/2024 MIPS payment year burden estimated in the CY 2021 PFS final rule (85 FR 84972), these are decreases from the estimates of 29,273, 295,941, and 326,300 for Medicare Part B claims, MIPS CQM and QCDR, eCQM, and an increase of 44,385 for the CMS Web Interface collection types, respectively. These adjustments are due to the availability of updated data from the CY 2019 performance period/2021 MIPS payment year and the delay in sunsetting the CMS Web Interface from the CY 2022 performance period/2024 MIPS payment year to the CY 2023 performance period/2025 MIPS payment year. For the CY 2023 performance period/2025 MIPS payment year, we estimate 25,427 clinicians will submit data as individuals for the Medicare Part B claims collection type. 288,637 clinicians will submit data as individuals or as part of groups for the MIPS CQM and QCDR collection type.

311,326 clinicians will submit data as individuals or as part of groups via the eCQM collection type. Table 87 provides estimates of the number of clinicians to collect quality measures data via each collection type, regardless of whether they decide to submit as individual clinicians or as part of groups. Because our burden estimates for quality data submission assume that burden is reduced when clinicians elect to submit as part of a group, we also separately estimate the expected number of clinicians to submit as individuals or part of groups. Start Printed Page 65579 Because MIPS eligible clinicians may submit data for multiple collection types for a single performance category, the estimated numbers of individual clinicians and groups to collect via the various collection types are not mutually exclusive and reflect the occurrence of individual clinicians or groups that collected data via multiple collection types during the CY 2019 performance period/2021 MIPS payment year.

We captured the burden of any eligible clinician that may have historically collected via multiple collection types, as we assume they will continue to collect via multiple collection types and that our MIPS scoring methodology will take the highest score where the same measure is submitted via multiple collection types. Table 88 uses methods similar to those described to estimate the number of clinicians that will submit data as individual clinicians via each collection type in the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years. For the CY 2022 performance period/2024 MIPS payment year, we estimate that approximately 28,252 clinicians will submit data as individuals using the Medicare Part B claims collection type. Approximately 40,507 clinicians will submit data as individuals using MIPS CQM and QCDR collection type.

And approximately 40,446 clinicians will submit data as individuals using eCQMs collection type. Based on performance data from the CY 2019 performance period/2021 MIPS payment year, these are decreases of −1,021, −833, and −1,809 respondents from the currently approved estimates of 29,273, 41,340, and 42,255 for the Medicare Part B claims, MIPS CQM and QCDR, and eCQM collection types, respectively. As shown in Table 88, for the CY 2023 performance period/2025 MIPS payment year, we estimate that approximately 25,427 clinicians will submit data as individuals using the Medicare Part B claims collection type. Approximately 36,456 clinicians will submit data as individuals using MIPS CQM and QCDR collection type.

And approximately 36,401 clinicians will submit data as individuals using eCQMs collection type. As stated above, we are setting forth our estimates for the CY 2023 performance period/2025 MIPS payment year as new burden with no currently approved estimate. Start Printed Page 65580 Consistent with the policy finalized in the CY 2018 Quality Payment Program final rule that for MIPS eligible clinicians who collect measures via Medicare Part B claims, MIPS CQM, eCQM, or QCDR collection types and submit more than the required number of measures (82 FR 53735 through 54736), we will score the clinician on the required measures with the highest assigned measure achievement points and thus, the same clinician may be counted as a respondent for more than one collection type. Therefore, our columns in Table 88 are not mutually exclusive.

Table 89 provides our estimated counts of groups or virtual groups that will submit quality data on behalf of clinicians for each collection type in the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years. We assume that clinicians that submitted quality data as groups in the CY 2019 performance period/2021 MIPS payment year will continue to submit quality data either as groups or virtual groups for the same collection types as they did as a group or TIN within a virtual group for the CY 2022 and 2023 performance periods/2024 and 2025 MIPS payment years. Specifically, for the CY 2022 performance period/2024 MIPS payment year we estimate that 11,529 groups and virtual groups will submit data for the MIPS CQM and QCDR collection type on behalf of 243,169 clinicians. 8,127 groups and virtual groups will submit for eCQM collection types on behalf of 249,878 eligible clinicians.

And 114 groups will submit data via the CMS Web Interface on behalf of 44,385 clinicians. These are decreases of −75 and −93 respondents from the currently approved estimates of 11,604, and 8,220 groups and virtual groups for the MIPS CQM and QCDR and eCQM collection types, and an increase of +114 groups from the currently approved estimates of 0 groups for the CMS Web Interface collection types, respectively. As shown in Table 89, for the CY 2023 performance period/2025 MIPS payment year we estimate that 10,434 groups and virtual groups will submit data for the MIPS CQM and QCDR collection type on behalf of 313,038 clinicians and 7,359 groups and virtual groups will submit for eCQM collection types on behalf of 339,109 eligible clinicians. As stated above, we are setting forth our estimates for the CY 2023 performance period/2025 MIPS payment year as new burden with no currently approved estimate.

The reason for the difference in estimated number of respondents from the estimates for the CY 2022 performance period/2024 MIPS payment year described above, is due to the sunset of the CMS Web Interface as a collection type and the implementation of MVPs beginning with the CY 2023 performance period/2025 MIPS payment year. As the data does not exist for APM performance pathway or MIPS quality measures for non-ACO APM entities, we assume non-ACO APM Entities will participate through traditional MIPS and base our estimates on submissions received in the CY 2019 performance period/2021 MIPS payment year. Start Printed Page 65581 The burden associated with the submission of quality performance category data have some limitations. We believe it is difficult to quantify the burden accurately because clinicians and groups may have different processes for integrating quality data submission into their practices' workflows.

Moreover, the time needed for a clinician to review quality measures and other information, select measures applicable to their patients and the services they furnish, and incorporate the use of quality measures into the practice workflows is expected to vary along with the number of measures that are potentially applicable to a given clinician's practice and by the collection type. For example, clinicians submitting data via the Medicare Part B claims collection type need to integrate the capture of quality data codes for each encounter whereas clinicians submitting via the eCQM collection types may have quality measures automated as part of their EHR implementation. We believe the burden associated with submitting quality measures data will vary depending on the collection type selected by the clinician, group, or third-party. As such, we separately estimated the burden for clinicians, groups, and third parties to submit quality measures data by the collection type used.

For the purposes of our burden estimates for the Medicare Part B claims, MIPS CQM and QCDR, and eCQM collection types, we also assume that, on average, each clinician or group will submit 6 quality measures. For the CY 2023 performance period/2025 MIPS payment year we refer readers to section IV.A.3.b.(4)(d) of the rule for the changes related to MVP and subgroup reporting requirements. In terms of the quality measures available for clinicians and groups to report for the CY 2022 performance period/2024 MIPS payment year, we are finalizing that the total number of quality measures will be 200. The new MIPS quality measures finalized for inclusion in MIPS for the CY 2022 performance period/2024 MIPS payment year and future years are found in Table Group A of Appendix 1.

MIPS quality measures with substantive changes can be found in Table Group D of Appendix 1. And MIPS quality measures finalized for removal can be found in Table Group C of Appendix 1. These measures are stratified by collection type in Table 90, as well as counts of new, removed, and substantively changed measures. Start Printed Page 65582 For the CY 2022 performance period/2024 MIPS payment year, we are finalizing a net reduction of 9 quality measures across all collection types compared to the 209 measures finalized for the CY 2021 performance period/2023 MIPS payment year (85 FR 84974).

Specifically, as discussed in section IV.A.3.d.(1)(e) of this rule, we are finalizing to add 1 new administrative claims outcome measure, remove 13 quality measures, and make substantive updates to 87 quality measures. We do not anticipate that our provision to remove these measures will increase or decrease the reporting burden on clinicians and groups as respondents generally are still required to submit quality data for 6 measures. For the change in associated burden related to the provisions introducing MVP and subgroup reporting beginning in the CY 2023 performance period/2025 MIPS payment year, we refer readers to Table 99 of this section. (3) Quality Payment Program Identity Management Application Process This rule is not implementing any new or revised collection of information requirements or burden related to the identity management application process.

The requirements and burden are currently approved by OMB under control number 0938-1314 (CMS-10621). Consequently, we are not making any changes to the identity management application process under that control number. (4) Quality Data Submission by Clinicians. Medicare Part B Claims-Based Collection Type This rule is not implementing any new or revised collection of information requirements related to the submission of Medicare Part B claims data for the quality performance category.

However, we are adjusting our currently approved burden estimates based on more recent data. For the change in associated burden related to the provisions introducing MVP and subgroup reporting beginning in the CY 2023 performance period/2025 MIPS payment year, we refer readers to Table 99 of this section. The following burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77501 through 77504), CY 2018 Quality Payment Program final rule (82 FR 53912), CY 2019 PFS final rule (83 FR 60004 through 60005), CY 2020 PFS final rule (84 FR 63124 through 63126) and the CY 2021 PFS final rule (85 FR 84975 through 84976) for our previously finalized requirements and burden for quality data submission via the Medicare Part B claims collection type.

As noted in Table 88, based on data from the CY 2019 performance period/2021 MIPS payment year, we assume that 28,252 individual clinicians will collect and submit quality data via the Medicare Part B claims collection type. In this rule, we are finalizing to adjust the number of Medicare Part B claims respondents from the currently approved estimate of 29,273 to 28,252 (a decrease of 1,021) based on more recent data and our methodology of accounting only for clinicians in small practices who submitted such claims data in the CY 2019 performance period/2021 MIPS payment year rather than all clinicians who submitted quality data codes to us for the Medicare Part B claims collection type. As shown in Table 91, consistent with our currently approved per response time figures, we estimate that the burden of quality data submission using Medicare Part B claims will range from 0.15 hours (9 minutes) for a computer systems analyst at a cost of $14.28 (0.15 hr × $95.22/hr) to 7.2 hours for a computer systems analyst at a cost of $685.58 (7.2 hr × $95.22/hr). The burden will involve becoming familiar with MIPS quality measure specifications.

Consistent with our currently approved per response time figures, we believe that the start-up cost for a clinician's practice to review measure specifications is 7 hours, consisting of 3 hours at $114.24/hr for a medical and health services manager, 1 hour at $217.32/hr for a physician, 1 hour at $48.16/hr for an LPN, 1 hour at $95.22/hr for a computer systems analyst, and 1 hour at $40.02/hr for a billing and posting clerk. We are not revising our currently approved per response time estimates. As shown in Table 91, considering both data submission and start-up requirements for our adjusted number of clinicians, the estimated time (per clinician) ranges from a minimum of 7.15 hours (0.15 hr + 7 hr) to a maximum of 14.2 hours (7.2 hr + 7 hr). In this regard the total annual time for the CY 2022 performance period/2024 MIPS payment year ranges from 202,002 hours (7.15 hr × 28,252 clinicians) to 401,178 hours (14.2 hr × 28,252 clinicians).

The estimated annual cost (per clinician) ranges from $758 [(0.15 hr × $95.22/hr) + (3 hr × $114.24/hr) + (1 hr × $95.22/hr) + (1 hr × $48.16/hr) + (1 hr × $40.02/hr) + (1 hr × $217.32/hr)] to a maximum of $1,429.02 [(7.2 hr × $95.22/hr) + (3 hr × $114.24/hr) + (1 hr × $95.22/hr) + (1 hr × $48.16/hr) + (1 hr × $40.02/hr) + (1 hr × $217.32/hr)]. The total annual cost for the CY 2022 performance period/2024 MIPS payment year ranges from a minimum of $21,407,105 (28,252 clinicians × $758) Start Printed Page 65583 to a maximum of $40,372,673 (28,252 clinicians × $1,429.02). As shown in Table 91, for purposes of calculating total burden associated with the Claims collection type for the CY 2023 performance period/2025 MIPS payment year only the maximum burden is used. The decrease in the number of annual respondents results in an estimated total annual time of 361,063 hours (14.2 hr × 25,427 clinicians) for the CY 2023 performance period/2025 MIPS payment year.

Using the currently approved unchanged estimate for cost per respondent, the total annual cost for the CY 2023 performance period/2025 MIPS payment year is $36,335,692 (25,427 clinicians × $1,429.02 per respondent). Table 91 summarizes our estimated range of total annual burden associated with clinicians submitting quality data via Medicare Part B claims for both the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years. As shown in Table 91, using the unchanged currently approved hours per respondent, we estimate that the burden per respondent for quality data submission using the Medicare Part B Claims collection type will range from $758 to $1,429.02. The decrease in number of respondents from 29,273 to 28,252 results in a total adjustment of between −7,300 hours (−1,021 respondents × 7.15 hr/respondent) at a cost of −$773,918 (−1,021 respondents × $758/respondent) and −14,498 hours (−1,021 respondents × 14.2 hr/respondent) at a cost of −$1,459,029 (−1,021 respondents × $1,429.02/respondent).

For purposes of calculating total burden associated with this final rule as shown in Tables 125, 126, 127, and 128, only the maximum burden is used. As shown in Table 92, for purposes of calculating total burden associated the CY 2023 performance period/2025 MIPS payment year only the maximum burden is used. We are setting forth our CY 2023 performance period/2025 MIPS payment year estimate as new burden, which results in an increase of 361,063 hours (25,427 respondents × 14.2 hr/respondent) at a cost of $36,355,692 (25,427 respondents × $1,429/respondent). Start Printed Page 65584 (5) Quality Data Submission by Individuals and Groups Using MIPS CQM and QCDR Collection Types The following requirement and burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621).

We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77504 through 77505), CY 2018 Quality Payment Program final rule (82 FR 53912 through 53914), CY 2019 PFS final rule (83 FR 60005 through 60006), CY 2020 PFS final rule (84 FR 63127 through 63128), CY 2021 PFS final rule (85 FR 84977 through 84979) for our previously finalized requirements and burden for quality data submission via the MIPS CQM and QCDR collection types. For the change in associated burden for quality data submission related to the provisions introducing MVP and subgroup reporting beginning in the CY 2023 performance period/2025 MIPS payment year, we refer readers to Table 99. As noted in Tables 84, 85, and 86, and based on data from the CY 2019 performance period/2021 MIPS payment year, for the CY 2022 performance period/2024 MIPS payment year, we assume that 279,247 clinicians will submit quality data as individuals or groups using MIPS CQM or QCDR collection types. 52,036 clinicians will submit as individuals and the remaining 279,223 clinicians will submit as members of 11,527 groups and virtual groups.

This is an increase of 10,696 individuals and a decrease of 32 groups from the estimates of 41,340 individuals and the 11,559 groups provided in the CY 2021 PFS final rule (85 FR 84977). Given that the number of measures required for clinicians and groups is the same, we expect the burden to be the same for each respondent collecting data via MIPS CQM or QCDR, whether the clinician is participating in MIPS as an individual or group. Under the MIPS CQM and QCDR collection types, the individual clinician or group may either submit the quality measures data directly to us, log in and upload a file, or utilize a third-party intermediary to submit the data to us on the clinician's or group's behalf. We estimate that the burden associated with the QCDR collection type is similar to the burden associated with the MIPS CQM collection type.

Therefore, we discuss the burden for both together below. For MIPS CQM and QCDR collection types, we estimate an additional time for respondents (individual clinicians and groups) to become familiar with MIPS quality measure specifications and, in some cases, specialty measure sets and QCDR measures. Therefore, we believe that the burden for an individual clinician or group to review measure specifications and submit quality data is total of 9 hours at a cost of $922.76 per response. This consists of 3 hours at $95.22/hr for a computer systems analyst (or their equivalent) to submit quality data along with 2 hours at $114.24/hr for a medical and health services manager, 1 hour at $95.22/hr for a computer systems analyst, 1 hour at $48.16/hr for an LPN, 1 hour at $40.02/hr for a billing clerk, and 1 hour at $217.32/hr for a physician to review measure specifications.

Additionally, clinicians and groups who do not submit data directly will need to authorize or instruct the qualified registry or QCDR to submit quality measures' results and numerator and denominator data on quality measures to us on their behalf. We estimate that the time and effort associated with authorizing or instructing the quality registry or QCDR to submit this data will be approximately 5 minutes (0.083 hours) at $95.22/hr for a computer systems analyst at a cost of $7.90 (0.083 hr × $95.22/hr). Overall, we estimate 9.083 hr/response (3 hr + 2 hr + 1 hr + 1 hr + 1 hr + 1 hr + 0.083 hr) at a cost of $922.76/response [(3 hr × $95.22/hr) + (2 hr × $114.24/hr) + (1 hr × $217.32/hr) + (1 hr × $95.22/hr) + (1 hr × $48.16/hr) + (1 hr × $40.02/hr) + (0.083 hr × $95.22/hr)]. For the CY 2022 performance period/2024 MIPS payment year, in aggregate, we estimate a burden of 472,643 hours [9.083 hr/response × (40,507 clinicians submitting as individuals + 11,527 groups submitting via QCDR or MIPS CQM on behalf of individual clinicians or 52,036 responses)] at a cost of $ $48,016,739 (52,036 responses × $922.76/response).

For the CY 2023 performance period/2025 MIPS payment year, in aggregate, we estimate a burden of 425,902 hours [9.083 hr/response × (36,456 clinicians submitting as individuals + 10,434 groups submitting via QCDR or MIPS CQM on behalf of individual clinicians or 46,890 responses)] at a cost of $43,268,216 (46,890 responses × $922.76/response). Based on these assumptions, we have estimated in Start Printed Page 65585 Table 93 the burden for these submissions. As shown in Table 94, using the unchanged currently approved hours per respondent burden estimate, the decrease of 913 respondents from 52,944 to 52,036 for the CY 2022 performance period/2024 MIPS payment year results in a decrease of −8,247 hours (−908 respondents × 9.083 hr/respondent) and −$837,866 (908 respondents × $922.76/respondent). We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 425,902 hours (46,890 respondents × 9.083 hr/respondent) and $43,268,216 (46,890 respondents × $922.76/respondents).

Start Printed Page 65586 (6) Quality Data Submission by Clinicians and Groups. ECQM Collection Type The following requirements and burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77505 through 77506), CY 2018 Quality Payment Program final rule (82 FR 53914 through 53915), CY 2019 PFS final rule (83 FR 60006 through 60007), CY 2020 PFS final rule (84 FR 63128 through 63130) and the CY 2021 PFS final rule (85 FR 84979 through 84980) for our previously finalized requirements and burden for quality data submission via the eCQM collection types. For the change in associated burden for quality data submission related to the provisions introducing MVP and subgroup reporting beginning in the CY 2023 performance period/2025 MIPS payment year, we refer readers to Table 99 of this section.

Based on CY 2019 performance period/2021 MIPS payment year data, for the CY 2022 performance period/2024 MIPS payment year, we assume that 322,392 clinicians will elect to use the eCQM collection type. 40,446 clinicians are expected to submit eCQMs as individuals. And 8,127 groups and virtual groups are expected to submit eCQMs on behalf of the remaining 273,819 clinicians. This is a decrease of 2,109 individuals and 27 groups from the estimates of 42,555 individuals and 8,154 groups provided in the CY 2021 PFS final rule (85 FR 84979).

We expect the burden to be the same for each respondent using the eCQM collection type, whether the clinician is participating in MIPS as an individual or group. Under the eCQM collection type, the individual clinician or group may either submit the quality measures data directly to us from their eCQM, log in and upload a file, or utilize a third-party intermediary to derive data from their CEHRT and submit it to us on the clinician's or group's behalf. To prepare for the eCQM collection type, the clinician or group must review the quality measures on which we will be accepting MIPS data extracted from eCQMs, select the appropriate quality measures, extract the necessary clinical data from their CEHRT, and submit the necessary data to a QCDR/qualified registry or use a health IT vendor to submit the data on behalf of the clinician or group. We assume the burden for collecting quality measures data via eCQM is similar for clinicians and groups who submit their data directly to us from their CEHRT and clinicians and groups who use a health IT vendor to submit the data on their behalf.

This includes extracting the necessary clinical data from their CEHRT and submitting the necessary data to a QCDR/qualified registry. We estimate that it will take no more than 2 hours at $95.22/hr for a computer systems analyst to submit the actual data file. The burden will also involve becoming familiar with MIPS quality measure specifications. In this regard, we estimate it will take 6 hours for a clinician or group to review measure specifications.

Of that time, we estimate 2 hours at $114.24/hr for a medical and health services manager, 1 hour at $217.32/hr for a physician, 1 hour at $95.22/hr for a computer systems analyst, 1 hour at $48.16/hr for an LPN, and 1 hour at $40.02/hr for a billing clerk. Overall, we estimate a cost of $812.76/response [(2 hr × $95.22/hr) + (2 hr × $114.24/hr) + (1 hr × $217.32/hr) + (1 hr × $95.22/hr) + (1 hr × $48.16/hr) + (1 hr × $40.02/hr)]. For the CY 2022 performance period/2024 MIPS payment year, in aggregate, we estimate a burden of 388,584 hours [8 hr × 48.573 (40,446 clinicians + 8,127 groups and virtual groups)] at a cost of $39,812,374 (48,573 responses × $819.64/response). For the CY 2023 performance period/2025 MIPS payment year, in aggregate, we estimate a burden of 350,186 hours [8 hr × 43,773 (36,401 clinicians + 7,372 groups and virtual groups)] at a cost of $35,878,102 (43,773 responses × $819.64/response).

Based on these assumptions, we have estimated in Table 95 the burden for these submissions. Start Printed Page 65587 As shown in Table 96, using the unchanged currently approved hours per respondent burden estimate, the decrease of 1,902 respondents from 50,475 to 48,573 for the CY 2022 performance period/2024 MIPS payment year results in a total difference of ×15,216 hours at a cost of ×$1,558,955. For CY 2023 performance period/2025 MIPS payment year, we are setting forth our estimate as new burden, which represents an increase of 350,184 hours (43,773 respondents × 8 hr/respondent) and $35,878,102 (43,773 respondents × $819.64/respondent). Start Printed Page 65588 (7) ICRs Regarding Burden for MVP Reporting Section IV.A.3.b.(2)(d) of this rule describes provisions related to implementing MVPs beginning with the CY 2023 performance period/2025 MIPS payment year.

The MVPs will include the Promoting Interoperability performance category as a foundational element and incorporate population health claims-based measures, as feasible, along with the relevant measures and activities in the quality, cost, and improvement activities performance categories. For the CY 2023 performance period/2025 MIPS payment year, we are finalizing an inventory of seven MVPs included in Appendix 3. MVP Inventory of this rule to assess performance across MVPs for the quality, cost, improvement activities, and Promoting Interoperability performance categories. Additionally, in section IV.A.3.b.(2)(b)(i) of this rule, we are finalizing to use the term “MVP Participant” to refer to clinicians who will choose to participate in MIPS for reporting MVPs.

The following new ICRs reflect the burden associated with the first year of data collection related to the implementation of MVPs and subgroup reporting in the CY 2023 performance period/2025 MIPS payment year as described in section IV.A.3.b.(2)(c) of this rule. The requirements and burden associated with the implementation of MVPs and subgroups will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). While MVP respondents report on all performance categories, we believe that for purposes of data submission, the burden for clinicians submitting information for the Promoting Interoperability and improvement activities performance categories of MVPs will be consistent with the currently approved estimated burden per respondent for clinicians submitting data for these performance categories in traditional MIPS. We acknowledge that clinicians participating through MVPs will have fewer requirements to meet for the improvement activity performance category as discussed in section IV.A.3.b.(4)(d)(iv) of this final rule.

We assume that these requirement changes will not significantly lower the burden for clinicians reporting MVPs. Therefore, we will not add additional ICRs to capture the burden for the Promoting Interoperability and Improvement Activity performance categories. For this rule, we are finalizing to create a separate ICR for estimating the burden associated with data submission for the Quality performance category of MVPs. We considered whether we should have a separate ICR to estimate burden for submission of measures and activities in the Promoting Interoperability performance category of MVPs.

Based on our assumption above that the burden for clinicians submitting information for these performance categories of MVPs will be consistent with the currently approved estimated burden per respondent for clinicians submitting data in traditional MIPS, we anticipate that the separate ICRs will not be of value to clinicians. We solicited comment on our proposal to distinctly estimate burden only for data submission in the Quality performance category of MVPs and whether we should revise the MVP submission ICR to include all the four MIPS performance categories and whether our assumptions on Promoting Interoperability and Improvement Activities should be modified for MVPs. We did not receive public comments on this provision. We are finalizing as proposed.

(a) Burden for MVP Quality Submission In section IV.A.3.b.(4)(d)(ii) of this rule, we are finalizing to implement voluntary MVP reporting beginning with the CY 2023 performance period/2025 MIPS payment year. Therefore, clinicians participating in MIPS will have the option to voluntarily submit data using MVPs starting with the CY 2023 performance period/2025 MIPS payment year. While we recognize the implementation of MVPs in MIPS will result in a burden for registration, we also assume that MVP reporting will result in a decline in burden for MVP participants due to the finalized changes in the MVP reporting requirements described in section IV.A.3.b.(4)(d) of this rule. We anticipate that the clinicians choosing to participate in MIPS for reporting MVPs will need to select from a reduced inventory of measures and activities for the quality and improvement activities performance categories.

This reduction in burden is described in the quality, improvement activities and Promoting Interoperability performance categories sections below. For the ICRs related to MVP participants, we used the MIPS submission data from the CY 2019 performance period/2021 MIPS payment year. Based on our review of the inventory of 7 MVPs in Appendix 3. MVP Inventory of this rule and the existing submission trends in MIPS for the measures and activities included in these MVPs, we anticipate that 10 percent of the clinicians who participate in traditional MIPS in the CY 2022 performance period/2024 MIPS payment year will report MVPs in the CY 2023 performance period/2025 MIPS payment year.

Given that MVPs are new, voluntary, and represent a Start Printed Page 65589 reduction in burden per response, we believe that we should be conservative in estimating the number of clinicians submitting through MVPs during the initial year. Given that MVPs are a new mechanism available for clinicians, we believe that initial participation numbers will be relatively low. In an effort to be conservative in our estimate of burden reduction due to MVP reporting and reflect the anticipate low uptake by clinicians in the first year of MVP availability, we assume that a total of 10 percent of MIPS submitters will become MVP participants in the CY 2023 performance period/2025 MIPS payment year. As described in section IV.A.3.b.(2)(c)(ii) of this rule, beginning with the CY 2023 performance period/2025 MIPS payment year, we are finalizing voluntary subgroup reporting within MIPS limited to clinicians reporting the MVP or the APP.

We recognize the implementation of subgroups for clinicians to participate in MVP and APP reporting in MIPS will result in additional burden. However, we believe that subgroup participation option will allow clinicians in certain specialties and subspecialties to report on measures and activities meaningful to the scope of care provided. We anticipate that public reporting of subgroup performance information will allow patients to identify clinicians in multispecialty groups that are representative of the care specific to their clinical condition. Clinician participation in subgroups is new to MIPS and we do not have any historical participation data to estimate the submission burden for clinicians who will choose to participate as subgroups for reporting the MVP or the APP.

We refer readers to section IV.A.3.b.(3) of this final rule for details on the provisions related to subgroup composition. We anticipate that the subgroup reporting option will increase reporting and allow clinicians in specialties to report on measures and activities meaningful to their practice. Due to the delay in implementation of subgroup reporting in the CY 2023 performance period/2025 MIPS payment year, we anticipate that there is an adequate amount of time for clinicians that historically participate in MIPS to determine if they will be able to participate as subgroups for reporting on the measures and activities in an MVP. However, due to the limited number of MVPs available for clinicians to choose, the additional burden involved in reporting, and also given the voluntary option to participate as subgroups for reporting the MVPs or the APP, we anticipate that a relatively small number of clinicians will choose to participate as subgroups in the CY 2023 performance period/2025 MIPS payment year.

Therefore, we assume there will be 20 subgroups reporters in the CY 2023 performance period/2025 MIPS payment year. We assume that more clinicians will choose to participate as subgroups in future years. We solicited comment on our MVP and subgroup reporting assumptions for the CY 2023 performance period/2025 MIPS payment year. We received public comments on our MVP and subgroup reporting assumptions for the CY 2023 MIPS performance period/2025 MIPS payment year.

The following is a summary of the comments we received and our responses. Comment. One commenter stated that our estimate that 10 percent of eligible clinicians would report as MVP participants in the first year of implementation is low. The commenter shared their belief that the number of MVP participants would be higher because of the reduced reporting burden associated with MVP reporting.

Response. We thank the commenter for their feedback. We acknowledge the commenter's concern that our assumptions for MVP reporting are low. We agree with the commenter that MVP reporting is associated with a reduction in reporting burden.

However, we believe that our estimates are appropriate because there would be a limited number of MVPs available for all clinicians during the CY 2023 performance period/2025 MIPS payment year. We expect that there would be increased participation in MVP reporting as more MVPs become available for clinicians in future years. We plan to revise our estimates for future years as more data becomes available. After consideration of public comments, we are finalizing our proposed estimate for the number of MIPS eligible clinicians that would participate in MVP reporting during the CY 2023 performance period/2025 MIPS payment year.

(i) Burden for MVP Registration. Individuals, Groups and APM Entities Beginning with the CY 2023 performance period/2025 MIPS payment year, we are finalizing that clinicians interested in participating in MIPS through MVP reporting would be required to complete an annual registration process described in section IV.A.3.b.(4)(f) of this rule. At the time of registration, MVP participants would need to select a specific MVP, a population health measure and if administrative claims measures are included in the selected MVP, the MVP participants would also need to choose an applicable administrative claims measure in the MVP. We refer readers to section IV.A.3.b.(4)(f) of this rule for additional details on MVP registration requirements.

Due to the delay in implementation of MVPs to the CY 2023 performance period/2025 MIPS payment year, we anticipate that there is an adequate amount of time for clinicians that historically participate in MIPS to determine if the measures and activities in an MVP are applicable to the scope of care provided. In Table 97, we estimate that the registration process for clinicians choosing to submit MIPS data for the measures and the activities in an MVP would require 0.25 hours of a computer systems analyst's time, similar to the currently approved burden of group registration process for CMS Web Interface finalized in the CY 2021 PFS final rule (85 FR 84983) for the CY 2023 performance period/2025 MIPS payment year. We assume that the staff involved in the MVP registration process will mainly be computer systems analysts or their equivalent, who have an average labor cost of $95.22/hour. As discussed above, based on data from the CY 2019 performance period/2021 MIPS payment year, we assume that approximately 10 percent of the clinicians that currently participate in MIPS would submit data for the measures and activities in an MVP.

Note that we apply this 10 percent calculation after adding the clinicians who begin submitting though the CQM and eCQM collection types due to the sunset of Web Interface in the CY 2023 performance period/2025 MIPS payment year. For the CY 2023 performance period/2025 MIPS payment year, we assume that a total of 25,798 submissions will be received for the measures and activities included in MVPs. This total includes our estimate of 20 subgroup reporters that would also be reporting MVPs in addition to MVP reporters who currently participate in MIPS. Therefore, we assume that the total number of individual clinicians, groups, subgroups and APM Entities to complete the MVP registration process is 12,917.

We estimate that the total cost to clinicians participating as individuals and groups associated with the MVP registration process would be approximately $307,465. Table 97 includes our burden assumptions related to the MVP registration process for clinicians participating in MIPS for Start Printed Page 65590 reporting MVPs as individuals, groups, subgroups, and APM Entities. (ii) Burden for Subgroup Registration We are finalizing the proposal to add a separate ICR to estimate the burden associated with subgroup registration to capture the subgroup registration requirements in section IV.A.3.b.(4)(f)(ii)(D) of this rule. In section IV.A.3.b.(3)(b)(ii) of this rule, we finalized the definition of a subgroup at § 414.1305 as a subset of a group, as identified by a combination of the group TIN, the subgroup identifier, and each eligible clinician's NPI.

In addition to the burden for MVP registration process described above, clinicians who choose to form subgroups for reporting the MVPs or the APP will need to submit a list of each TIN/NPI associated with the subgroup and a plain language name for the subgroup in a manner specified by CMS, described in section IV.A.3.b.(4)(f)(ii)(D) of this rule. As discussed above, we estimate that clinicians will choose to form 20 subgroups for reporting the measures and activities in MVPs. Additionally, we estimate that clinicians who choose to participate as subgroups for reporting MVPs will require a minimum of 0.5 hours per subgroup respondent to submit the finalized requirements for subgroup registration. We assume that the staff involved in the subgroup registration process will mainly be computer systems analysts or their equivalent, who have an average labor cost of $95.22/hr.

We assume that all subgroups would report MVPs, the burden associated with subgroup quality reporting will be included with the MVP quality reporting ICR. The burden associated with subgroup submissions for Promoting Interoperability and improvement activities will be included with those ICRs. (iii) Burden for MVP Quality Performance Category Submission In the CY 2017 PFS final rule (81 FR 77100 through 77114), we established the submission criteria for quality measures (excluding the CMS Web Interface measures and the CAHPS for MIPS survey measure) at § 414.1335, which requires a MIPS eligible clinician, group, or virtual group that is reporting on Qualified Clinical Data Registry (QCDR) measures, MIPS clinical quality measures (MIPS CQMs), electronic CQMs (eCQMs), or Medicare Part B claims measures to submit data on at least six measures, including at least one outcome measure. As discussed in section IV.A.3.b.(4)(d)(ii) of this final rule, we finalized the proposal that except as provided in paragraph Start Printed Page 65591 § 414.1365(c)(1)(i), an MVP Participant must select and report 4 quality measures, including 1 outcome measure (or, if an outcome measure is not available, 1 high priority measure, included in the MVP.

The decrease in the number of required measures in the quality performance category from 6 to 4 is a two-thirds reduction in the number of measures needed for eligible clinicians to submit data for the quality performance category in MVPs described in Appendix 3. MVP Inventory of this final rule. Therefore, we estimate that the time for submitting the measures in the MVP quality performance category would, on average, take two-thirds of the currently approved burden per respondent for the quality performance category as it does to complete a MIPS quality submission through the CQM, eCQM, and Claims submission types. As described above in this section of the final rule, we estimate that 10 percent of the clinicians who participated in MIPS for the CY 2019 performance period/2021 MIPS payment year would submit data for the quality performance category of MVPs beginning with the CY 2023 performance period/2025 MIPS payment year.

We anticipate that there would be 20 subgroups reporters in the CY 2023 performance period/2025 MIPS payment year. As shown in Table 99, we estimate that approximately 2,825 clinicians would submit data for the MVP quality performance category using the Medicare Part B claims collection type. Approximately 5,210 clinicians and 10 subgroups would submit data using MIPS CQM and QCDR collection type. And approximately 4,862 clinicians and 10 subgroups would submit data using eCQMs collection type.

We want to note that we used the same methodologies used in sections V.B.8.e.(4), V.B.8.e.(5) and V.B.8.e.(6) to estimate the quality submission burden for each collection type. As shown in Table 99, for the clinicians and subgroups submitting data for the MVP quality performance category, we estimate a burden of 26,670 hours (9.44 hr × 2,825 clinicians) at a cost of $2,691,329 (2,825 respondents × 952.68/respondent) for the Medicare Part B claims collection type, 31,163 hours [5.97 hr × 5,220 (5,210 + 10)] at a cost of $3,211,216 (5,220 × 615.18/respondent) for the MIPS CQM and QCDR collection type, and 25,822 hours [5.3 hr × 4,872 (4,862 + 10) respondents] at a cost of $2,662,191 (4,872 × 546.43/respondent) for the eCQM collection types. Start Printed Page 65592 (8) Quality Data Submission via CMS Web Interface The finalized requirements and burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). Background In the CY 2021 PFS final rule, we finalized our policy to sunset the CMS Web Interface measures as a collection type/submission type starting with the CY 2022 performance period/2024 MIPS payment year.

As a result of this provision, for the CY 2022 performance period/2024 MIPS payment year, we estimated a burden of zero due to our assumption that all Web Interface respondents will alternately utilize either the MIPS CQM and QCDR or eCQM collection types (85 FR 84981). In section IV.A.3.d.(1)(d) of this rule, we are finalizing to continue the CMS Web Interface measures as a collection type for the CY 2022 performance period/2024 MIPS payment year. Additionally, we are finalizing to sunset the CMS Web Interface measures as a collection type for the CY 2023 performance period/2025 MIPS payment year. For this final rule, we estimate burden for the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years.

For the CY 2022 performance period/2024 MIPS payment year, we assume that 114 groups will submit quality data via the CMS Web Interface based on the number of groups who completed 100 percent of reporting quality data via the Web Interface in the CY 2019 performance period/2021 MIPS payment year. This is an increase of 114 groups from the currently approved number of 0 groups provided in the CY 2021 PFS final rule (85 FR 84981 due to the provision to continue with the CMS Web Interface as a collection type for the CY 2022 performance period/2024 MIPS payment year. We estimate that 44,385 clinicians will submit as part of groups via this method, an increase of 44,385 from our currently approved estimate of 0 clinicians. The estimated burden associated with the group submission requirements is the time and effort associated with submitting data on a sample of the organization's beneficiaries that is Start Printed Page 65593 prepopulated in the CMS Web Interface.

Our burden estimate for submission includes the time (61 hours and 40 minutes or 61.67 hours) needed for each group to populate data fields in the web interface with information on approximately 248 eligible assigned Medicare beneficiaries and submit the data (we will partially pre-populate the CMS Web Interface with claims data from their Medicare Part A and B beneficiaries). The patient data either can be manually entered, uploaded into the CMS Web Interface via a standard file format, which can be populated by CEHRT, or submitted directly. Each group must provide data on 248 eligible assigned Medicare beneficiaries (or all eligible assigned Medicare beneficiaries if the pool of eligible assigned beneficiaries is less than 248) for each measure. In aggregate, we estimate a burden for the CY 2022 performance period/2024 MIPS payment year of 7,030 hours (114 groups × 61.67 hr) at a cost of $669,433 (114 groups × $5,872.21/group).

For the CY 2023 performance period/2025 MIPS payment year, we are finalizing to revise our estimated burden to zero due to our assumption that with the finalized policy to sunset the CMS Web Interface as a collection type, all Web Interface respondents will alternately utilize either the MIPS CQM and QCDR or eCQM collection types. Based on the assumptions discussed in this section, Table 100 summarizes the finalized estimated burden for groups submitting to MIPS via the CMS Web Interface. (9) Beneficiary Responses to CAHPS for MIPS Survey This rule is not implementing any new or revised collection of information requirements or burden related to the CAHPS for MIPS survey. The CAHPS for MIPS survey requirements and burden are currently approved by OMB under control number 0938-1222 (CMS-10450).

Consequently, we are not making any changes to the CAHPS for MIPS Survey process under that control number. (10) Group Registration for CMS Web Interface The finalized requirements and burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). In the CY 2021 PFS final rule, we finalized to sunset the CMS Web Interface measures as a collection type/submission type starting with the CY 2022 performance period/2024 MIPS payment year. As a result, we estimated that there will be zero hours and $0 burden for group registration for the CMS Web Interface for the CY 2022 performance period/2024 MIPS payment year (85 FR 84984).

As discussed in section IV.A.3.d.(1)(d) of this final rule, we are finalizing to continue the CMS Web Interface measures as a collection type for the CY 2022 performance period/2024 MIPS payment year. We are also finalizing to sunset the CMS Web Interface as a collection type starting with the CY 2023 performance period/2025 MIPS payment year. Start Printed Page 65594 Groups interested in participating in MIPS using the CMS Web Interface for the first time must complete an online registration process. After first time registration, groups will only need to opt out if they are not going to continue to submit via the CMS Web Interface.

In Table 102, we estimate that the registration process for groups under MIPS involves approximately 0.25 hours at $95.22/hr for a computer systems analyst (or their equivalent) to register the group. Because we are finalizing to sunset the CMS Web Interface beginning with the CY 2023 performance period/2025 MIPS payment year, it is possible that fewer groups will elect to register to submit quality data for the first time in the performance year prior to the collection type/submission type no longer being available. However, we currently have no data with which to estimate what the associated reduction may be. Consistent with our assumptions in the CY 2021 PFS final rule (85 FR 84983), we continue to assume that approximately 90 groups will elect to use the CMS Web Interface for the first time during the CY 2022 performance period/2025 MIPS payment year based on the estimated number of new registrations during the CY 2021 performance period/2023 MIPS payment year.

As shown in Table 102, we estimate a burden of 23 hours (90 new registrations × 0.25 hr/registration) at a cost of $2,190 (22.5 hr × $95.22/hr). As shown in Table 103, the estimated increase in the number of groups registering for the CMS Web Interface collection type to submit the MIPS data and the estimated increase in burden per respondent results in adjustment to the total time burden of +23 hours (+90 respondents × 0.25 hr/respondent) at a cost of $2,190 for the CY 2022 performance period/2024 MIPS payment year. For the CY 2023 performance period/2025 MIPS payment year, our finalized burden estimate is zero hours and $0. (11) Group Registration for CAHPS for MIPS Survey This rule is not implementing any new or revised collection of information requirements or burden related to the group registration for the CAHPS for MIPS Survey.

The CAHPS for MIPS survey requirements and burden are currently approved by OMB under control number 0938-1222 (CMS-10450). Consequently, we are not making any changes to the CAHPS for MIPS Survey registration process under that control number. F. ICRs Regarding the Call for MIPS Quality Measures This rule is not implementing any new or revised collection of information requirements or burden related to the call for MIPS quality measures.

However, outside of the rulemaking process we replaced the existing tool for stakeholders beginning with the 2021 Annual Call for Measures. As described below, to account for the updated tool (MERIT), we are finalizing to revise our currently approved burden estimates. The updated tool and revised burden will be submitted to OMB under control number 0938-1314 (CMS-10621). Beginning with the 2021 Annual Call for Measures, we replaced the customary Office of the National Coordinator (ONC) Issue Tracking System Jira platform that stakeholders Start Printed Page 65595 used to submit candidate quality measure specifications and all supporting data files for CMS review with the MUC Entry/Review Information Tool (MERIT).

For the ONC Issue Tracking System Jira platform used by stakeholders, the approved estimated time for a practice administrator to identify, propose, and link to a quality measure is 0.9 hours and for a clinician to identify, propose, link to quality measure, and complete the Peer Review Journal Article form is 4.6 hours (0.6 hours to identify, propose, and link to quality measure (84 FR 63132) and 4 hours to complete the Peer Review Journal Article Form (84 FR 63133), with a total estimated time of 5.5 hours per quality measure submission. Based on the stakeholder experience with the updated tool and additional information collected at the time of submission, we estimate that it will add approximately 1.5 hours for the practice administrator at $114.24/hr and 0.5 hours at $217.32/hr for a clinician to identify, propose, and link the quality measure, and reduce approximately 2 hours at $217.32/hr for a clinician to complete the Peer Review Journal Article Form, resulting in a new estimated time of 2.4 hours for a practice administrator and 3.1 hours for a clinician, and an unchanged total estimated time of 5.5 hours per quality measure submission. In order to account for the implementation of the MERIT tool starting with the 2021 Annual Call for Measures, we are revising the estimated time required for a practice administrator to identify, propose, and link to a quality measure to 2.4 hours (from 0.9 hr) and a clinician to identify, propose, link to quality measure, and complete the Peer Review Journal Article Form to 3.1 hours (from 4.6 hr), resulting in a total estimated time of 5.5 hours per quality measure submission. Based on the number of submissions received during the CY 2020 Call for Quality Measures process, we anticipate receiving the same number of 28 submissions during the CY 2021 Call for Quality Measures process (84 FR 63132).

Although the total estimated time of 5.5 hours for completing a quality measure submission using the MERIT tool (see Table 104) is the same estimated time as the ONC Issue Tracking System Jira platform, we need to account for the changes to the individual components of the estimated time required by a practice administrator and clinician using the MERIT tool. Consistent with our assumptions in the CY 2021 PFS final rule (85 FR 84984), we estimate an annual burden of 154 hours (28 submissions × 5.5 hr/measure). Thus, we are finalizing to adjust our estimated annual burden from $30,197 (28 submissions × [(0.9 hr × $110.74/hr) + (4.6 hr × $212.78/hr)) to $26,541 (28 measures × [(2.4 hr × $114.24/hr) + (3.1 hr × $217.32/hr)]) a difference of −$4,329 for the CY 2022 performance period/2024 MIPS payment year. As shown in Table 105, using our currently approved burden estimates, the redistribution of the estimated time needed for the clinician and practice administrator as discussed above, we are estimating an adjustment of 0 hours at a cost of −$4,329 for the CY 2022 performance period/2024 MIPS payment year.

We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of $26,541 (28 measures × $947.89/respondent). Start Printed Page 65596 g. ICRs Regarding Promoting Interoperability Data (§§ 414.1375 and 414.1380) (1) Background For the CY 2022 performance period/2024 MIPS payment year, clinicians and groups can submit Promoting Interoperability data through direct, log in and upload, or log in and attest submission types. With the exception of submitters who elect to use the log in and attest submission type for the Promoting Interoperability performance category, which is not available for the quality performance category, we anticipate that individuals and groups will use the same data submission type for both of these performance categories and that the clinicians, practice managers, and computer systems analysts involved in supporting the quality data submission will also support the Promoting Interoperability data submission process.

The following burden estimates show only incremental hours required above and beyond the time already accounted for in the quality data submission process. Although this analysis assesses burden by performance category and submission type, we emphasize that MIPS is a consolidated program and submission analysis, and decisions are expected to be made for the program as a whole. (2) Reweighting Applications for Promoting Interoperability and Other Performance Categories The finalized requirements and burden associated with this rule's data submission will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2018 Quality Payment Program final rule (82 FR 53918 through 53919), CY 2019 PFS final rule (83 FR 60011 through 60012), CY 2020 PFS final rule (84 FR 63134 through 63135), and the CY 2021 PFS final rule (85 FR 84984 through 84985) for our previously finalized requirements and burden for reweighting applications for Promoting Interoperability and other performance categories.

As established in the CY 2017 and CY 2018 Quality Payment Program final rules, MIPS eligible clinicians who meet the criteria for a significant hardship or other type of exception may submit an application requesting a zero percent weighting for the Promoting Interoperability, quality, cost, and/or improvement activities performance categories under specific circumstances (81 FR 77240 through 77243, 82 FR 53680 through 53686, and 82 FR 53783 through 53785). Respondents who apply for a reweighting of the quality, cost, and/or improvement activities performance categories have the option of applying for reweighting of the Promoting Interoperability performance category on the same online form. We assume that respondents applying for a reweighting of the Promoting Interoperability performance category due to extreme and uncontrollable circumstances will also request a reweighting of at least one of the other performance categories simultaneously and not submit multiple reweighting applications. Table 106 summarizes the burden for clinicians to apply for reweighting of the Promoting Interoperability performance category to zero percent due to a significant hardship exception or as a result of a decertification of an EHR.

Based on the number of reweighting applications received by March, 2021 for the CY 2020 performance period/2022 MIPS payment year, we assume 20,192 respondents (eligible clinicians or groups) will submit a request to reweight the Promoting Interoperability performance category to zero percent due to a significant hardship or EHR decertification and an additional 22,635 respondents will submit a request to reweight one or more of the quality, cost, Promoting Interoperability, or improvement activities performance categories due to an extreme or uncontrollable circumstance. For the CY 2022 performance period/2024 MIPS payment year, we estimate that a total of 42,797 reweighting applications will be submitted. This is a decrease of 9,302 respondents compared to our currently approved estimate of 52,099 respondents (85 FR 84984). This decrease is likely due to the provision in section IV.A.3.e.(2)(b)(iv)(A) of this rule to automatically reweight the Promoting Interoperability performance category for small practices who previously had to apply for reweighting.

For the CY 2020 performance period/2024 MIPS payment year, 13,894 respondents requested reweighting due to significant hardship for small practices. Similar to the data used to estimate the number of respondents in the CY 2021 PFS final rule, our respondent estimate includes a significant number of applications submitted as a result of a data issue CMS was made aware of and is specific to a single third-party intermediary. While we do not anticipate similar data issues to occur in each performance period, we do believe future similar incidents may occur and are electing to use this data without adjustment to reflect this belief. Similar to our assumptions in the CY 2021 PFS final rule (85 FR 84984), our respondent estimate does not include reweighting Start Printed Page 65597 applications submitted during the extended period ending November 29, 2021 due to the PHE for buy antibiotics, as we do not believe it would be an accurate basis of future estimates for reweighting application submissions.

We assume that, out of our total respondent count of 42,797 above, we estimate that 22,605 respondents (eligible clinicians or groups) will submit a request for reweighting the Promoting Interoperability performance category to zero percent due to extreme and uncontrollable circumstances, insufficient internet connectivity, lack of control over the availability of CEHRT, or as a result of a decertification of an EHR. In the CY 2021 PFS final rule (85 FR 84984) we discussed that, beginning with the CY 2019 performance period/2021 MIPS payment year, APM Entities may submit an extreme and uncontrollable circumstances exception application for all four performance categories and applicable to all MIPS eligible clinicians in the APM Entity group. As discussed in this section of this final rule, due to data limitations and our inability to determine who will use the APP versus the traditional MIPS submission mechanism for the CY 2022 performance period/2024 MIPS payment year, we assume ACO APM Entities will submit data through the APP and non-ACO APM Entities will participate through traditional MIPS, thereby submitting as an individual or group rather than as an entity. Therefore, we limited our analysis to ACOs that were eligible for an exception due to extreme and uncontrollable circumstances during the CY 2020 performance period/2022 MIPS payment year and elected not to report quality data.

Based on this data, we estimate that 30 APM Entities will submit an extreme and uncontrollable circumstances exception application for the CY 2022 performance period/2024 MIPS payment year. Combined with our aforementioned estimate of 42,797 eligible clinicians and groups, the total estimated number of respondents for the CY 2022 performance period/2024 MIPS payment year is 42,827. Consistent with our assumptions in the CY 2021 PFS final rule (85 FR 84984-84985), we continue to estimate it will take 0.25 hours for a computer system analyst to complete and submit the application. As shown in Table 106, we estimate an annual burden of 10,707 hours (42,827 applications × 0.25 hr/application) and $1,019,521 (10,707 hr × $95.22/hr).

As shown in Table 107, using our currently approved burden estimates, the decrease in the estimated number of respondents (from 52,099 to 42,827 respondents) results in an adjustment of minus 2,318 hours (9,272 respondents × 0.25 hr/respondent) and minus $220,720 for the CY 2022 performance period/2024 MIPS payment year. We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 10,707 hours (42,827 respondents × 0.25 hr/respondent) and $1,019,521 (10,707 hours × $95.22/respondents). Start Printed Page 65598 (3) Submitting Promoting Interoperability Data The requirements and burden associated with this rule's data submission will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77509 through 77511), CY 2018 Quality Payment Program final rule (82 FR 53919 through 53920), CY 2019 PFS final rule (83 FR 60013 through 60014), CY 2020 PFS final rule (84 FR 63135 through 63137), and the CY 2021 PFS final rule (85 FR 84985 through 84987) for our previously finalized requirements and burden for submission of data for the Promoting Interoperability performance category.

In section IV.A.3.d.(4)(d)(ii) of this final rule, we are finalizing the additional requirement that MIPS eligible clinicians must attest to conducting an annual assessment of the High Priority Guides of the SAFER Guides beginning with the CY 2022 performance period/2024 MIPS payment year. Clinicians will complete this attestation by checking a box when they submit their Promoting Interoperability performance category data. We estimate that this requirement will add an additional minute to the current estimated time it takes to complete the submission of Promoting Interoperability data. In the CY 2022 PFS proposed rule, we assumed no change in estimates as result of the proposal to modify the Provide Patients Electronic Access to Their Health Information measure to require MIPS eligible clinicians to ensure that patient health information remains available to the patient (or patient-authorized representative) to access indefinitely (86 FR 39509).

As discussed in section IV. Of this final rule, this policy is not being finalized as proposed at this time. As shown in Table 108, based on data from the CY 2019 performance period/2021 MIPS payment year, we estimate that a total of 51,647 respondents consisting of 40,172 individual MIPS eligible clinicians and 11,475 groups and virtual groups will submit Promoting Interoperability data. Since our CY 2021 PFS final rule estimated 53,636 respondents, this represents a decrease of 1,989 respondents (51,647 respondents −53,636 active respondents).

We assume that MIPS eligible clinicians previously scored under the APM scoring standard, as described in the CY 2020 PFS final rule, will continue to submit Promoting Interoperability data (84 FR 63006) in a similar way through the APP. As a result, we do not anticipate any change in burden. Each MIPS eligible clinician in an APM Entity reports data for the Promoting Interoperability performance category through either their group TIN or individual reporting. Sections 1899 and 1115A of the Act (42 U.S.C.

1395jjj and 42 U.S.C. 1315a, respectively) state that the Shared Savings Program and the testing, evaluation, and expansion of Innovation Center models are not subject to the PRA. However, in the CY 2019 PFS final rule, we established that MIPS eligible clinicians who participate in the Shared Savings Program are no longer limited to reporting for the Promoting Interoperability performance category through their ACO participant TIN (83 FR 59822 through 59823). Burden estimates for this final rule assume group TIN-level reporting as we believe this is the most reasonable assumption for the Shared Savings Program, which requires that ACOs include full TINs as ACO participants.

Start Printed Page 65599 As discussed in section IV.A.3.b.(2)(c)(ii) of this final rule, we will be introducing subgroup reporting in CY 2023 performance period/2025 MIPS payment year. As we discussed above in this section of the final rule, we estimate that there will be 20 subgroup submissions in CY 2023 performance period/2025 MIPS payment year, each of which will have burden related to the submission of Promoting Interoperability data. We have included this burden in Table 109. With the inclusion of the additional minute (0.02 hr) to attest to conducting an annual assessment of the High Priority Guides of the SAFER Guides, we are adjusting our estimate of the time required for an individual or group to submit Promoting Interoperability data from 2.67 hours to 2.69 hours (2.67 hr + 0.02 hr).

As shown in Table 110, the total burden estimate for submitting data on the specified Promoting Interoperability objectives and measures is estimated to be 138,930 hours (51,647 respondents × 2.69 incremental hours for a computer analyst's time above and beyond the physician, medical and health services manager, and computer system's analyst time required to submit quality data) and $13,228,915 (138,930 hr × $95.22/hr)). As shown in Table 111, with the introduction of subgroup reporting in CY 2023 performance period/2025 MIPS payment year, the total burden for submitting data on the specified Promoting Interoperability objectives and measures is estimated to be 138,984 hours (51,667 respondents × 2.69 incremental hours for a computer analyst's time above and beyond the physician, medical and health services manager, and computer system's analyst time required to submit quality data) and $13,234,078 (138,984 hr × $95.22/hr)). Start Printed Page 65600 Table 112, using our updated per respondent burden estimate (+0.02 hr/response), the decrease in number of respondents and SAFER guide attestation requirement results in a total adjustment of −4,278 hours at a cost of −$407,351 for the CY 2022 performance period/2024 MIPS payment year. We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 138,984 hours (51,667 respondents × 2.69 incremental hours for a computer analyst's time above and beyond the physician, medical and health services manager, and computer system's analyst time required to submit quality data) and $13,234,078 (138,984 hours × $95.22/hour).

h. ICRs Regarding the Nomination of Promoting Interoperability (PI) Measures This rule is not implementing any new or revised collection of information requirements or burden related to the nomination of Promoting Interoperability measures. The requirements and burden are currently approved by OMB under control number 0938-1314 (CMS-10621). Consequently, we are not making any changes to the process for nomination of Promoting Interoperability measures under that control number.

I. ICR Regarding Improvement Activities Submission (§§ 414.1305, 414.1355, 414.1360, and 414.1365) The finalized requirements and burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2017 Quality Payment Program final rule (81 FR 77511 through 77512), CY 2018 Quality Payment Program final rule (82 FR 53920 through 53922), CY 2019 PFS final rule (83 FR 60015 through 60017), CY 2020 PFS final rule (84 FR 63138 through 63140) and the CY 2021 PFS final rule (85 FR 84987 through 84989) for our previously finalized requirements and burden for submission of data for the improvement activities performance category. In section IV.A.3.d.(3) of this rule, we are finalizing to.

(1) Revise group reporting requirements for the 50 percent threshold to address subgroups. (2) add 7 new improvement activities, modify 15 existing improvement activities, and remove 6 previously adopted improvement activities for the CY 2022 performance period/2024 MIPS payment year and future years. (3) revise the “Drug Cost Transparency to include requirements for use of real-time benefit tools” improvement activity. And (4) add the buy antibiotics “Clinical Data Reporting with or without Clinical Trial” improvement activity for CY 2022 performance period/2024 MIPS payment year and future years.

Additionally, we are finalizing to adjust our currently approved burden estimates based on more recent data. Specifically, we are finalizing to revise § 414.1360(a)(2) to state that, beginning with the CY 2023 performance period/2025 MIPS payment year, each improvement activity for which groups and virtual Start Printed Page 65601 groups submit a yes response in accordance with paragraph (a)(1) of this section must be performed by at least 50 percent of the NPIs that are billing under the group's TIN or virtual group's TINs or that are part of the subgroup, as applicable. And the NPIs must perform the same activity during any continuous 90-day period within the same performance year. In section IV.A.3.d.(3)(b) of this rule, we discussed stakeholder requests through the Quality Payment Program help desk to apply the 50 percent threshold to a portion of clinicians in a group.

We anticipate that clinicians will find applicable and meaningful activities specific to practice size, specialty, or practice setting. Therefore, we assume that the provision to apply the 50 percent minimum threshold to clinicians who submit for the improvement activity performance category as part of groups, virtual groups, or choose to participate as subgroups beginning with the CY 2023 performance period/2025 MIPS payment year will not present additional complexity or burden. We do not believe the changes to the improvement activities inventory will impact time or financial burden on stakeholders because MIPS eligible clinicians are still required to submit the same number of activities and the per response time for each activity is uniform. Therefore, we are not adjusting the estimated time of 5 minutes (per response) currently approved for improvement activities submission.

As represented in Table 113, based on data from the CY 2019 performance period/2021 MIPS payment year, we estimate that a total of 81,562 respondents consisting of 63,845 individual clinicians and 17,717 groups will submit improvement activities during the CY 2022 performance period/2024 MIPS payment year. Since our currently approved burden sets out 79,927 respondents, this represents an increase of 1,635 respondents (81,562 respondents−79,927 active respondents). This is an increase of 1,242 individuals and 393 groups from the estimates of 62,603 individuals and 17,324 groups provided in the CY 2021 PFS final rule (85 FR 50362). As discussed in sections V.B.8.e.

And V.B.8.g.(3) of this final rule regarding our estimate of clinicians and groups submitting data for the quality and Promoting Interoperability performance categories, we are finalizing to update our estimates for the number of clinicians and groups that will submit improvement activities data based on projections of the number of eligible clinicians that were not QPs or participating in an ACO in the CY 2019 performance period/2021 MIPS payment year but will be QPs in the CY 2022 performance period/2024 MIPS payment year, and will therefore not be required to submit improvement activities data. As discussed in section IV.A.3.b.(2)(c)(ii) of this final rule, we are finalizing subgroup reporting in the CY 2023 performance period/2025 MIPS payment year. As we discussed in section V.B.8.e.(7)(a) of this final rule, we estimate that there will be 20 subgroup reporters in the CY 2023 performance period/2025 MIPS payment year, each of which will have burden related to the submission of improvement activities. We have included this burden in Table 114.

Start Printed Page 65602 Consistent with the CY 2021 PFS final rule, we continue to estimate that the per response time required per individual or group is 5 minutes for a computer system analyst to submit by logging in and manually attesting that certain activities were performed in the form and manner specified by CMS with a set of authenticated credentials (84 FR 63140). As shown in Table 115, we estimate an annual burden of 6,770 hours (81,562 responses × 0.083 hr) at a cost of $644,639 (6,770 hr × $95.22/hr)) for the CY 2022 performance period/2024 MIPS payment year. As shown in Table 116, with the introduction of subgroup reporting in the CY 2023 performance period/2025 MIPS payment year, we estimate an annual burden of 6,771 hours (81,582 responses × 0.083 hr) and $644,735 (6,771 hr × $95.22/hr). Start Printed Page 65603 As shown in Table 117, using our unchanged currently approved per respondent burden estimate, the increase in the number of respondents results in an adjustment of 109 hours at a cost of $10,379 (109 hr × $95.22/hr) for the CY 2022 performance period/2024 MIPS payment year.

We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 6,771 hours (81,582 responses × 0.083 hr) at a cost of $644,735 (6,771 hr × $95.22/hr). j. ICRs Regarding the Nomination of Improvement Activities (§ 414.1360) The requirements and burden associated with this rule's data submission will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2018 Quality Payment Program final rule (82 FR 53922), CY 2019 PFS final rule (83 FR 60017 through 60018), CY 2020 PFS final rule (84 FR 63141) and the CY 2021 PFS final rule (85 FR 84989 through 85 FR 84990) for our previously finalized requirements and information collection burden for the nomination of improvement activities.

In section IV.A.3.d.(3)(c)(i)(B) of this rule, we are finalizing. (1) To revise the required criteria for improvement activity nominations received through the Annual Call for Activities. (2) changes to the timeline for improvement activities nomination during a PHE. And (3) to suspend activities that become obsolete or impacted by clinical practice guideline changes from the program when this occurrence happens outside of the rulemaking process.

In section IV.A.3.d.(3)(c)(i)(B)(cc) of this rule, we are finalizing 2 new criteria that beginning with the CY 2022 Annual Call for Activities MIPS improvement activities. (1) Should not duplicate other improvement activities in the Inventory. And (2) should drive improvements that go beyond purely common clinical practices. Additionally, we are finalizing to increase the number of criteria stakeholders are required to meet when submitting an activity provision from a minimum of 1 to all 8 criteria, which includes the two new provision criteria.

We believe that this provision will provide clearer guidance to stakeholders when submitting a nomination for an improvement activity. In the CY 2021 PFS final rule, we estimated that it would require 0.6 hours for a medical and health services manager or equivalent and 0.4 hours for a physician to link the nominated improvement activity to existing and related cost and quality measures (85 FR 84989). Given that our current approved estimated time per respondent to nominate an improvement activity is 3 hours (1.8 hours for a medical and health services manager or equivalent and 1.2 hours for a physician), we assume that the new requirement to meet all 8 criteria will require approximately 1 hour at $114.24/hr for a medical and health services manager to identify and submit an activity and 0.4 hours at a rate of $217.32/hr for a clinician to review each activity. Combined with our currently approved burden estimate, we are finalizing to revise our estimate to 2.8 hours at $114.24/hr for a medical and health services manager or equivalent and 1.6 hours at $217.32/hr for a physician to nominate an improvement activity.

This represents a change of +1 Start Printed Page 65604 hours (2.8 hr − 1.8 hr) for a medical and health services manager or equivalent and +0.4 hours (2 hr − 1.6 hr) for a physician and an overall increase of 1.4 hours. We considered whether we should double our estimates for nomination of an improvement activity to 6 hours. Since only 2 of the required 8 criteria are new, we assume that stakeholders are familiar with the existing criteria and will not need additional time to review but will need the additional time to verify and confirm if the considered activity meets all the 8 criteria. We solicited comment on our estimate to revise the time for nomination of an improvement activity to 4.4 hours and if there are additional burden implications that we should consider for above provisions to revise the criteria.

We did not receive public comments on the proposed burden estimates for this information collection. We are finalizing as proposed. The burden estimates have not been updated from the CY 2021 PFS proposed rule (86 FR 39514 through 39516). In the CY 2021 PFS final rule, we finalized an exception stating that during the PHE, stakeholders can nominate improvement activities outside of the established Annual Call for Activities timeframe (85 FR 84989).

Instead of only accepting nominations and modifications submitted February 1st through July 1 each year, we would accept nominations for the duration of the PHE as long as the improvement activity is still relevant. No other aspects of the Annual Call for Activities process would be affected (for example, criteria for nominating improvement activities, considerations for selection of improvement activities, or weighting policies would all still apply). In section IV.A.3.d.(3)(c)(i)(B)(aa) of this rule, we are finalizing to clarify that in order to implement a new improvement activity for a PHE during the same year as the nomination, the nomination will need to be received no later than January 5th of the nomination year to be included in a rule for notice-and-comment rulemaking during that fiscal or calendar year, a necessary precursor to implementation if it were to be finalized, as described above. We believe this provision will not affect our currently approved burden estimates since we assume that the number of nominations will not change, but it will make an activity available for reporting to clinicians in the same performance year it was intended to be implemented.

Similar to our assumptions in the CY 2021 PFS final rule (85 FR 84989), we expect additional nominations may be received as a result of this change. However, we do not have any data with which to estimate what the additional number may be. As a result, we are not making any changes our currently approved burden estimate. In section IV.A.3.d.(3)(c)(i)(C)(aa) of this rule, we are finalizing that beginning with the CY 2022 performance period/2024 MIPS payment year, for each improvement activity that is in the Inventory, if applicable, and impacted by significant changes or errors prior to the applicable data submission deadline, it will be removed from the program as soon as possible.

In the CY 2020 PFS final rule (84 FR 62988 through 62990), we finalized the factors for consideration in removing improvement activities. Following the publication of the CY 2021 PFS proposed rule, the improvement activities team became aware that clinicians could no longer complete the activity from April 1 through December 31, 2020, because one of the improvement activities in the Inventory had expired on March 31, 2020. We do not anticipate any burden for stakeholders because of the above provision as described, the policy does not change requirements for the nomination of improvement activities. This provision will help avoid stakeholder confusion and ensure the accuracy of the available activities in the Inventory.

Therefore, we are not making any changes to our estimated burden due to the above policy. Additionally, consistent with our assumptions in the CY 2021 PFS final rule (85 FR 84990) we continue to use our currently approved assumption that we will receive 31 nominations of new or modified activities which will be evaluated for the Improvement Activities Under Consideration (IAUC) list for possible inclusion in the CY 2023 Improvement Activities Inventory as we believe this estimate is more realistic than basing our estimate on the number of nominations received during the 2021 Annual Call for Activities. As shown in Table 118, accounting for the change in burden per respondent estimate due to the provision to require all the 8 criteria for nomination of an improvement activity as described above in this section, we are adjusting our estimated annual information collection burden to 136 hours (31 nominations × 4.4 hr/nomination) at a cost of $20,695 (31 × [(2.8 hr × $114.24/hr) + (1.6 hr × $217.32/hr)]). Start Printed Page 65605 As shown in Table 119, using our unchanged estimate of the number of activities nominated, the increase in the burden per nomination results in a change of 43 hours (31 nominations × 1.4 hr/nomination) at a cost of $6,492 (31 activities × [(1 hr × $114.24/hr) + (0.4 hr × $217.32/hr)]) for the CY 2022 performance period/2024 MIPS payment year.

We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 136 hours (31 nominations × 4.4 hr) at a cost of $20,695 (31 × [(2.8 hr × $114.24/hr) + (1.6 hr × $217.32/hr)]). k. Nomination of MVPs This rule is not implementing any new or revised collection of information requirements or burden related to the nomination of MVPs for inclusion in the Quality Payment Program. The requirements and burden are currently approved by OMB under control number 0938-1314 (CMS-10621).

Consequently, we are not making any changes to the MVP nomination process under that control number. L. ICRs Regarding the Cost Performance Category (§ 414.1350) The cost performance category relies on administrative claims data. The Medicare Parts A and B claims submission process (OMB control number 0938-1197.

CMS-1500 and CMS-1490S) is used to collect data on cost measures from MIPS eligible clinicians. MIPS eligible clinicians are not required to provide any documentation by CD or hardcopy. Moreover, the policies in this rule do not result in the need to add or revise or delete any claims data fields. Consequently, we are not making any changes to this information collection under that control number.

M. ICRs Regarding Partial QP Elections (§§ 414.1310(b) and 414.1430) This rule is not implementing any new or revised collection of information requirements related to the Partial QP Elections to participate in MIPS as a MIPS eligible clinician. However, we are finalizing to adjust our currently approved burden estimates based on updated projections for the CY 2022 performance period/2024 MIPS payment year. The adjusted burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621).

As shown in Table 120, based on our predictive QP analysis for the 2022 QP performance period/2024 MIPS payment year, which accounts for historical response rates in the CY 2020 performance period/2022 MIPS payment year, we are revising our estimate that 150 APM Entities and 100 eligible clinicians (representing approximately 9,000 Partial QPs) will make the election to participate as a Partial QP in MIPS, a total of 250 elections which is a decrease of 50 from the 300 elections that are currently approved by OMB under the aforementioned control number. We continue to estimate it will take the APM Entity representative or eligible clinician 15 minutes (0.25 hr) to make this election. In aggregate, we are revising our estimated annual burden to 63 hours (250 respondents × 0.25 hr/election) and $5,999 (63 hr × $95.22/hr). Start Printed Page 65606 As shown in Table 121, using our unchanged currently approved per respondent burden estimate (85 FR 84991), the decrease in the number of Partial QP elections results in an adjustment of 12.5 hours (−50 elections × 0.25 hr) at a cost of −$1,191 (−12.5 hr × $95.22/hr) for the CY 2022 performance period/2024 MIPS payment year.

We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 63 hours (250 respondents × 0.25 hr/election) at a cost of $5,999 (63 hr × $95.22/hr). n. ICRs Regarding Other Payer Advanced APM Determinations. Payer-Initiated Process (§ 414.1445) and Eligible Clinician Initiated Process (§ 414.1445) The following burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621).

(1) Payer Initiated Process (§ 414.1445) This rule is not implementing any new or revised collection of information requirements related to the Payer-Initiated Process. However, we are adjusting our currently approved burden estimates based on updated projections for the CY 2022 performance period/2024 MIPS payment year. As shown in Table 122, based on the actual number of requests received in the 2020 QP performance period, we are revising our estimate that for the 2023 QP performance period, 15 payer-initiated requests for Other Payer Advanced APM determinations will be submitted (6 Medicaid payers, 6 Medicare Advantage Organizations, and 3 remaining other payers), a decrease of 65 from the 80 total requests currently approved by OMB under the aforementioned control number. We continue to estimate it will take 10 hours for a computer system analyst per arrangement submission.

We are revising our estimated annual burden to 150 hours (15 submissions × 10 hr/submission) and $14,283 (150 hr × $95.22/hr). As shown in Table 123, using our unchanged currently approved per respondent burden estimate (85 FR 84992), the decrease in the number of payer-initiated requests from 800 to 150 results in an adjustment of −650 hours (−65 requests × 10 hr) at a cost of −$61,893 (−650 hr × $95.22/hr) for the CY 2022 performance period/2024 MIPS payment year. We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 150 hours (15 requests × 10 hr) at a cost of $14,283 (150 hr × $95.22/hr). Start Printed Page 65607 (2) Eligible Clinician Initiated Process (§ 414.1445) This rule is not implementing any new or revised collection of information requirements or burden related to the Eligible-Clinician Initiated Process.

As described below, we are adjusting our currently approved burden estimates based on updated projections for the CY 2022 performance period/2024 MIPS payment year. As mentioned above, the new and adjusted burden will be submitted to OMB for approval. As shown in Table 124, based on the actual number of requests received in the 2020 QP performance period, we estimate that in CY 2022 for the 2023 QP performance period, 15 Eligible-Clinician Initiated request for Other Payer Advanced APM determinations will be submitted, a decrease of 135 from the 150 total requests currently approved by OMB under the aforementioned control number. We continue to estimate it will take 10 hours for a computer system analyst per arrangement submission.

We are adjusting our estimated annual burden to 150 hours (15 submissions × 10 hr/submission) and $14,283 (150 hr × $95.22/hr). As shown in Table 125, using our unchanged currently approved per respondent burden estimate (85 FR 84993), the decrease in the number of eligible clinician-initiated requests from 150 to 15 results in an adjustment of −1,350 hours (−135 requests × 10 hr) at a cost of −$128,547 (−1,350 hr × $95.22/hr) for the CY 2022 performance period/2024 MIPS payment year. We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 150 hours (15 submissions × 10 hr/submission) at a cost of $14,283 (150 hr × $95.22/hr). Start Printed Page 65608 (3) Submission of Data for QP Determinations Under the All-Payer Combination Option (§ 414.1440) This rule is not implementing any new or revised collection of information requirements related to the Submission of Data for QP Determinations under the All-Payer Combination Option.

The requirements and burden are currently approved by OMB under control number 0938-1314 (CMS-10621). Consequently, we are not making any changes under that control number. O. ICRs Regarding Voluntary Participants Election To Opt-Out of Performance Data Display on Physician Compare (§ 414.1395) This rule is not implementing any new or revised collection of information requirements related to the election by voluntary participants to opt-out of public reporting on Physician Compare.

As described below, we are adjusting our currently approved burden estimates based on data from the CY 2019 performance period/2021 MIPS payment year. The adjusted burden will be submitted to OMB for approval under control number 0938-1314 (CMS-10621). We refer readers to the CY 2018 Quality Payment Program final rule (82 FR 53924 through 53925), CY 2019 PFS final rule (83 FR 60022), CY 2020 PFS final rule (84 FR 63145 through 63146) and the CY 2021 PFS final rule (85 FR 84993) for our previously finalized requirements and burden for voluntary participants to opt-out of public reporting on Physician Compare. In the CY 2021 PFS final rule (85 FR 84993), we estimated that 10 percent of the clinicians and groups who voluntarily participate in MIPS would opt out of public reporting.

Based on the number of opt-out eligible clinicians that chose to opt-out of public reporting in the CY 2019 performance period/2021 MIPS payment year, we are revising our estimates. We anticipate that 0.1 percent of the total clinicians and groups who will voluntarily participate in the CY 2022 performance period/2024 MIPS payment year will also elect not to participate in public reporting. This results in a total of 38 (0.001 × 37,934 voluntary MIPS participants) clinicians and groups, a decrease of 3,448 from the currently approved estimate of 3,486. Voluntary MIPS participants are clinicians that are not QPs and are expected to be excluded from MIPS after applying the eligibility requirements set out in the CY 2019 PFS final rule but have elected to submit data to MIPS.

As discussed in the RIA section of the CY 2019 PFS final rule, we continue to estimate that 33 percent of clinicians that exceed one (1) of the low-volume criteria, but not all three (3), will elect to opt-in to MIPS, become MIPS eligible, and no longer be considered a voluntary reporter (83 FR 60050). Table 126 shows that for these voluntary participants, we continue to estimate it will take 0.25 hours for a computer system analyst to submit a request to opt-out. In aggregate, we estimate an annual burden of 10 hours (38 requests × 0.25 hr/request) and $952 (10 hr × $95.22/hr). Start Printed Page 65609 As shown in Table 127, using our unchanged currently approved per respondent burden estimate, the decrease of 3,448 opt outs by voluntary participants results in an adjustment of −862 hours (−3,448 requests × 0.25 hr) at a cost of $−82,079 (−862 hr × $95.22/hr) for the CY 2022 performance period/2024 MIPS payment year.

We are setting forth new burden estimates for the CY 2023 performance period/2025 MIPS payment year, which results in an increase of 10 hours (38 requests × 0.25 hr/request) at a cost of $952 (10 hr × $95.22/hr). p. Summary of Annual Quality Payment Program Burden Estimates Table 128 summarizes this final rule's total burden estimates for the Quality Payment Program for the CY 2021, CY 2022 and CY 2023 performance periods/2023, 2024, and 2025 MIPS payment years. As discussed earlier, for this final rule, we are subtracting the currently approved burden for the CY 2021 performance period/2023 MIPS payment year.

As shown in table 128, this represents a decrease in burden of 1,479,672 hours and $144,576,960. In the CY 2021 PFS final rule, the total estimated burden for the CY 2022 MIPS performance period/2024 MIPS payment year was 1,473,741 hours at a cost of $144,034,968 (85 FR 84994). Accounting for updated wage rates and the subset of all Quality Payment Program ICRs discussed in this rule compared to the CY 2021 PFS final rule, the total estimated annual burden of continuing policies and information set forth in the CY 2021 PFS final rule into the CY 2022 performance period/2024 MIPS payment year is 1,468,566 hours at a cost of $148,078,846. These represent a decrease of 5,175 hours and an increase of $4,043,878.

To understand the burden implications of the policies in this rule, we provide an estimate of the total burden associated with continuing the policies and information collections set forth in the CY 2021 PFS final rule into the CY 2022 performance period/2024 MIPS payment year. This burden estimate of 1,424,586 hours at a cost of $143,651,994 reflects the availability of more accurate data to account for all potential respondents and submissions across all the performance categories and more accurately reflect the exclusion of QPs from all MIPS performance categories, a decrease of 43,980 hours and $4,426,813. This burden estimate is lower than the burden approved for information collection related to the CY 2021 PFS final rule due to updated data and assumptions. Our total burden estimate for the CY 2022 performance period/2024 MIPS payment year is 1,428,391 hours and $144,014,757, which represents a decrease of 40,175 hours and $4,068,418 from the CY 2021 PFS final rule.

The difference of +3,805 hours (43,980 hours−40,175 hours) and +$358,395 ($4,426,813−$4,068,418) between this estimate and the total burden shown in Table 128 is the increase in burden associated with impacts of the policies for the CY 2022 performance period/2024 MIPS payment year, which includes the re-introduction of the CMS Web Interface measures as a collection type/submission type. Table 128 also offers a comparison between the total currently approved estimated burden from the CY 2021 PFS final rule and our estimated burden for the CY 2023 performance period/2025 MIPS payment year. As discussed above, we are setting forth our estimates for the CY 2023 performance period/2025 MIPS payment year as new burden with no currently approved estimate. Our total burden estimate for the CY 2023 MIPS performance period/2025 MIPS payment year is 1,383,049 hours and $139,501,770.

We have included Table 128 to assist in understanding these differences. Note that the difference between the burden estimates for the CY 2022 and 2023 MIPS performance periods/2024 and 2025 MIPS payment years is entirely due to the policies to introduce MVP and subgroup reporting and sunset the CMS Web Interface measures as a collection type/submission type beginning in the CY 2023 MIPS performance period/2025 MIPS payment year. Start Printed Page 65610 Start Printed Page 65611 Start Printed Page 65612 Start Printed Page 65613 Table 131 represents averages for the estimated changes in burden for the CY 2021, 2022, and 2023 performance periods/2023, 2024, and 2025 MIPS payment years. Table 132 provides the reasons for changes in the estimated burden for information collections in the Quality Payment Program segment of this final rule.

We have divided the reasons for our change in burden into those related to new policies and those related to adjustments in burden from continued Quality Payment Program Year 5 policies that reflect updated data and revised methods. Start Printed Page 65614 Start Printed Page 65615 Start Printed Page 65616 C. Summary of Annual Burden Estimates for Changes Start Printed Page 65617 VI. Regulatory Impact Analysis A.

Statement of Need In this final rule, we are finalizing payment and policy changes under the Medicare PFS and required statutory changes under the Consolidated Appropriations Act, 2021 and sections 2003 and 2005 of the SUPPORT for Patients and Communities Act of 2018. We also are finalizing changes to payment policy and other related policies for Medicare Part B. In addition, this final rule will make modest revisions to certain Medicare provider and supplier enrollment regulatory provisions and add already existing provider and supplier requirements pertaining to prepayment and post-payment review activities. This final rule is necessary to make policy changes under Medicare FFS and to address various provider and supplier enrollment issues.

Therefore, we included a detailed Regulatory Impact Analysis (RIA) to assess all costs and benefits of available regulatory alternatives and explain the selection of these regulatory approaches that we believe adhere to statutory requirements and, to the extent feasible, maximize net benefits B. Overall Impact We examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (February 2, 2013), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995.

Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). An RIA must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). We estimated, as discussed in this section, that the PFS provisions included in this final rule will redistribute more than $100 million in 1 year. Therefore, we estimate that this rulemaking is “economically significant” as measured by the $100 million threshold, and hence also a major rule under the Congressional Review Act.

Accordingly, we prepared an RIA that, to the best of our ability, presents the costs and benefits of the rulemaking. The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals, practitioners and most other providers and suppliers are small entities, either by nonprofit status or by having annual revenues that qualify for small business status under the Small Business Administration standards.

(For details, see the SBA's website at http://www.sba.gov/​content/​table-small-business-size-standards (refer to the 620000 series)). Individuals and States are not included in the definition of a small entity. The RFA requires that we analyze regulatory options for small businesses and other entities. We prepare a regulatory flexibility analysis unless we certify that a rule would not have a significant economic impact on a substantial number of small entities.

Start Printed Page 65618 The analysis must include a justification concerning the reason action is being taken, the kinds and number of small entities the rule affects, and an explanation of any meaningful options that achieve the objectives with less significant adverse economic impact on the small entities. Approximately 95 percent of practitioners, other providers, and suppliers are considered to be small entities, based upon the SBA standards. There are over 1 million physicians, other practitioners, and medical suppliers that receive Medicare payment under the PFS. Because many of the affected entities are small entities, the analysis and discussion provided in this section, as well as elsewhere in this final rule is intended to comply with the RFA requirements regarding significant impact on a substantial number of 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 RFA. 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 for Medicare payment regulations and has fewer than 100 beds. Medicare does not pay rural hospitals for their services under the PFS.

Rather, the PFS pays for physicians' services, which can be furnished by physicians and NPPs in a variety of settings, including rural hospitals. We did not prepare an analysis for section 1102(b) of the Act because we determined, and the Secretary certified, that this final rule will not have a significant impact on the operations of a substantial number of small rural hospitals. Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits on State, local, or tribal governments or on the private sector before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2021, that threshold is approximately $158 million.

This final rule will impose no mandates on State, local, or tribal governments or on the private sector. Executive Order 13132 establishes certain requirements that an agency must meet when it issues a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has federalism implications. Since this final rule does not impose any costs on State or local governments, the requirements of Executive Order 13132 are not applicable. We prepared the following analysis, which together with the information provided in the rest of this preamble, meets all assessment requirements.

The analysis explains the rationale for and purposes of this final rule. Details the costs and benefits of the rule. Analyzes alternatives. And presents the measures we will use to minimize the burden on small entities.

As indicated elsewhere in this final rule, we discussed a variety of changes to our regulations, payments, or payment policies to ensure that our payment systems reflect changes in medical practice and the relative value of services, and to implement provisions of the statute. We provide information for each of the policy changes in the relevant sections of this final rule. We are unaware of any relevant Federal rules that duplicate, overlap, or conflict with this final rule. The relevant sections of this final rule contain a description of significant alternatives if applicable.

C. Changes in Relative Value Unit (RVU) Impacts 1. Resource-Based Work, PE, and MP RVUs Section 1848(c)(2)(B)(ii)(II) of the Act requires that increases or decreases in RVUs may not cause the amount of expenditures for the year to differ by more than $20 million from what expenditures would have been in the absence of these changes. If this threshold is exceeded, we make adjustments to preserve BN.

Our estimates of changes in Medicare expenditures for PFS services compared payment rates for CY 2021 with payment rates for CY 2022 using CY 2020 Medicare utilization. The payment impacts described in this final rule reflect averages by specialty based on Medicare utilization. The payment impact for an individual practitioner could vary from the average and will depend on the mix of services he or she furnishes. The average percentage change in total revenues will be less than the impact displayed here because practitioners and other entities generally furnish services to both Medicare and non-Medicare patients.

In addition, practitioners and other entities may receive substantial Medicare revenues for services under other Medicare payment systems. For instance, independent laboratories receive approximately 83 percent of their Medicare revenues from clinical laboratory services that are paid under the Clinical Laboratory Fee Schedule (CLFS). The PFS update adjustment factor for CY 2022, as specified in section 1848(d)(19) of the Act, is 0.00 percent before applying other adjustments. In addition, section 101 of Division N of the CAA provided a 3.75 percent increase in PFS payment amounts for services furnished on or after January 1, 2021, and before January 1, 2022 and required that the increase shall not be taken into account in determining PFS payment rates for subsequent years.

The expiration of this 3.75 percent increase in payment amounts will result in the CY 2022 conversion factor being calculated as though the 3.75 percent increase for the CY 2021 conversion factor had never been applied. To calculate the CY 2022 PFS conversion factor (CF), we took the CY 2021 conversion factor without the 1-year 3.75 percent increase provided by the CAA and multiplied it by the BN adjustment required as described in the preceding paragraphs. We estimate the CY 2022 PFS CF to be 33.5983 which reflects the BN adjustment under section 1848(c)(2)(B)(ii)(II) of the Act, the 0.00 percent update adjustment factor specified under section 1848(d)(19) of the Act, and the expiration of the 3.75 percent increase for services furnished in CY 2021, as provided in the CAA. We estimate the CY 2022 anesthesia CF to be 20.9343 which reflects the same overall PFS adjustments with the addition of anesthesia-specific PE and MP adjustments.

Start Printed Page 65619 Table 136 shows the payment impact of the policies contained in this final rule on PFS services. To the extent that there are year-to-year changes in the volume and mix of services provided by practitioners, the actual impact on total Medicare revenues will be different from those shown in Table 136 (CY 2022 PFS Estimated Impact on Total Allowed Charges by Specialty). The following is an explanation of the information represented in Table 136. • Column A (Specialty).

Identifies the specialty for which data are shown. • Column B (Allowed Charges). The aggregate estimated PFS allowed charges for the specialty based on CY 2020 utilization and CY 2021 rates. That is, allowed charges are the PFS amounts for covered services and include coinsurance and deductibles (which are the financial responsibility of the beneficiary).

These amounts have been summed across all services furnished by physicians, practitioners, and suppliers within a specialty to arrive at the total allowed charges for the specialty. • Column C (Impact of Work RVU Changes). This column shows the estimated CY 2022 impact on total allowed charges of the changes in the work RVUs, including the impact of changes due to potentially misvalued codes. • Column D (Impact of PE RVU Changes).

This column shows the estimated CY 2022 impact on total allowed charges of the changes in the PE RVUs. • Column E (Impact of MP RVU Changes). This column shows the estimated CY 2022 impact on total allowed charges of the changes in the MP RVUs. • Column F (Combined Impact).

This column shows the estimated CY 2022 combined impact on total allowed charges of all the changes in the previous columns. Column F may not equal the sum of columns C, D, and E due to rounding. Start Printed Page 65620 Start Printed Page 65621 2. CY 2021 PFS Impact Discussion a.

Changes in RVUs The most widespread specialty impacts of the RVU changes are generally related to the changes to RVUs for specific services resulting from the misvalued code initiative, including RVUs for new and revised codes. The estimated impacts for some specialties, including diagnostic testing facilities, portable x-ray, podiatry, hand surgery, and geriatrics, reflect increases relative to other physician specialties. These increases can be attributed largely to the update to clinical labor pricing as the services that these specialties furnish involve a higher proportion of clinical labor cost that is reflected in their PE RVUs. These increases are also due to increases in value for particular services after considering the recommendations from the American Medical Association (AMA)'s Relative Value Scale Update Committee (RUC), and CMS review and increased payments resulting from updates to supply and equipment pricing.

The estimated impacts for several specialties, including interventional radiology, vascular surgery, radiation oncology, and cardiology, reflect decreases in payments relative to payment to other physician specialties which are largely the result of the redistributive effects of the clinical labor pricing update. The services furnished by these specialties involve proportionally higher supply or equipment item costs, and therefore are affected negatively by the updates to clinical labor pricing. Since PE is budget neutralized within itself, increased pricing for clinical labor holds a corresponding relative decrease for other components of PE such as supplies and equipment. These decreases are also due to the revaluation of individual procedures based on reviews by the AMA RUC and CMS, as well as decreases resulting from the continued phase-in implementation of the previously finalized updates to supply and equipment pricing.

The estimated impacts also reflect decreases due to continued implementation of previously finalized code-level reductions that are being phased in over several years. For independent laboratories, it is important to note that these entities receive approximately 83 percent of their Medicare revenues from services that are paid under the CLFS. As a result, the estimated 2 percent decrease for CY 2021 is only applicable to approximately 17 percent of the Medicare payment to these entities. We often receive comments regarding the changes in RVUs displayed on the specialty impact table (Table 136), including comments received in response to the valuations.

We remind stakeholders that although the estimated impacts are displayed at the specialty level, typically the changes are driven by the valuation of a relatively small number of new and/or potentially misvalued codes. The percentage changes in Table 136 are based upon aggregate estimated PFS allowed charges summed across all services furnished by physicians, practitioners, and suppliers within a specialty to arrive at the total allowed charges for the specialty, and compared to the same summed total from the previous calendar year. Therefore, they are averages, and may not necessarily be representative of what is happening to the particular services furnished by a single practitioner within any given specialty. To illustrate how impacts can vary within specialties, we created a public use file that models the expected percentage change in total RVUs per practitioner.

Using CY 2020 utilization data, Total RVUs change between −1 percent and 1 percent for more than 90 percent of practitioners, representing more than 81 percent of the changes in Total RVUs for all practitioners, with variation by specialty. Many specialties, such as chiropractic, clinical social worker, family practice, internal medicine and emergency medicine, exhibit little variation in changes in total RVUs per practitioner. For these specialties, more than 90 percent of these practitioners will experience a change in Total RVUs between −1 percent and 1 percent. Other specialties exhibit more variation in changes in total RVUs per practitioner.

For example, for diagnostic testing facilities, 39 percent of IDTFs will experience a 2 percent or more decrease in Total RVUs, but these suppliers represent only 33 percent of Total RVUs for this specialty. Meanwhile, one percent of IDTFs will experience 10 percent or more increases in Total RVUs and these suppliers account for 33 percent of Total RVUs for this specialty. We also note the code level RVU changes are available in the Addendum B public use file that we make available with each rule. Many commenters requested that CMS maintain the 3.75 percent increase in PFS payment amounts that was specified under section 101 of the CAA for services furnished during CY 2021.

We remind commenters that this increase was provided through a time-limited amendment to the statute, which CMS does not have legal authority to alter. The expiration of this 3.75 percent increase in payment amounts will result in the CY 2022 conversion factor being calculated as though the 3.75 percent increase for the CY 2021 conversion factor had never been applied. Several commenters requested clarification regarding whether the specialty impacts displayed in Table 136 reflected the expiration of the 3.75 percent CAA provision for CY 2022. We can clarify for the commenters that the specialty impacts displayed in Table 136 reflect changes that take place within the pool of total RVUs.

The specialty impacts table therefore includes any changes in spending which result from finalized policies within BN (such as the revaluation of E/M codes in CY 2021 or the clinical labor Start Printed Page 65622 pricing update in CY 2022) but does not include any changes in spending which result from finalized policies outside of BN. The expiration of the 3.75 percent CAA provision for CY 2022 is a statutory change that takes place outside of BN, and therefore, is not captured in the specialty impacts displayed in Table 136. b. Impact Column F of Table 136 displays the estimated CY 2022 impact on total allowed charges, by specialty, of all the RVU changes.

A table showing the estimated impact of all of the changes on total payments for selected high volume procedures is available under “downloads” on the CY 2022 PFS final rule website at http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​PhysisianFeeSched/​. We selected these procedures for sake of illustration from among the procedures most commonly furnished by a broad spectrum of specialties. The change in both facility rates and the nonfacility rates are shown. For an explanation of facility and nonfacility PE, we refer readers to Addendum A on the CMS website at http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​PhysisianFeeSched/​.

D. Effect of Changes Related to Telehealth Services Before the PHE for buy antibiotics, approximately 15,000 FFS Medicare beneficiaries received a Medicare telemedicine service each week. According to a report prepared by the Assistant Secretary for Planning and Evaluation (ASPE),[] in the last week of April 2020, nearly 1.7 million beneficiaries received telehealth services. By April 2020, nearly half of all Medicare primary care visits were telehealth encounters, a level consistent with health care encounters more broadly.

There are approximately 271 services currently included on the list of Medicare telehealth services, including more than 165 that were added on a temporary basis during the PHE for buy antibiotics (including service categories such as emergency department visits, initial inpatient and nursing facility visits, and discharge day management services) that are covered through the end of the PHE. Preliminary data show that between mid-March and mid-October 2020, over 24.5 million out of 63 million Medicare beneficiaries and enrollees have received a Medicare telemedicine service during the PHE. It is important to note that preliminary data reflect that the largest increases in services furnished via telehealth communications systems, by beneficiary access/volume, were for services that were already on the Medicare telehealth services list before the PHE. As discussed in section II.D.

Of this final rule, we are finalizing our proposal to amend the regulatory definition of interactive telecommunications system for purposes of Medicare telehealth services to include audio-only communication technology under certain circumstances for mental health services furnished to established patients in their homes. We anticipate that this policy will increase utilization of Medicare telehealth mental health services relative to utilization that will occur without the change. The estimated cost impact on overall Medicare services is unclear, though these changes will largely maintain current policies and access to the specific mental health services that are available to beneficiaries during the PHE. By requiring that a modifier be appended to the claim to identify that the service was furnished via audio-only communication technology, we will be able to closely monitor utilization and address any potential concerns regarding overutilization through future rulemaking.

Comment. Commenters were very supportive of our proposal to allow for mental health services to be furnished using audio-only communications technology. A few commenters, while supportive of the use of audio-only communications technology during the PHE, urged CMS to further study and evaluate the safety and effectiveness of the audio-only modality for various levels of care and treatments to determine appropriateness of continuing payment after the PHE expires. Commenters supported the proposal to create a service-level modifier to identify mental health telehealth visits “furnished to a beneficiary in their home using audio-only communications technology.” Response.

We are finalizing creation of a service-level modifier that would identify mental health telehealth services furnished to a beneficiary in their home using audio-only communications technology. We anticipate that our policy of allowing mental health services to be furnished using audio-only communications technology this will have a positive impact on access to care for mental health services and contribute to overall health equity. Section 123 of the CAA removed the geographic and site of service restrictions for telehealth services furnished for the purpose of diagnosis, evaluation, or treatment of a mental health disorder, and required as a condition of payment for these telehealth services furnished in the patient's home that a physician or practitioner furnish an in-person, non-telehealth service to a beneficiary within 6 months prior to the first time the physician or practitioner furnishes a telehealth service to the beneficiary, and thereafter, at intervals as specified by the Secretary. Section 125 of the CAA created a new Medicare provider type—the rural emergency hospital, effective beginning in CY 2023—and added rural emergency hospitals to the list of eligible telehealth originating sites at section 1834(m)(4)(C)(ii) of the Act.

As discussed in section II.D. Of this final rule, we will require, as a condition of payment for a telehealth service described in section 1834(m)(7) of the Act, that the billing physician or practitioner must have furnished an in-person, non-telehealth service to the beneficiary within the 6-month period before the date of service of a telehealth service as specified in section 1834(m)(7)(B)(i) of the Act, and proposed in this final rule that an in-person, non-telehealth service to the beneficiary must occur at 12-month intervals for subsequent care, with the possibility for exceptions that must be documented by the practitioner in the medical record. We solicited comment on whether the required in-person, non-telehealth service could also be furnished by another physician or practitioner of the same specialty and same subspecialty within the same group as the physician or practitioner who furnishes the telehealth service, and we are finalizing a policy to allow this. Given that the removal of the geographic and site of service restrictions for telehealth will expand the availability of mental health services, we anticipate that utilization of these mental health services will be comparable to observed utilization for mental health services during the buy antibiotics PHE.

We received public comments on whether the required in-person, non-telehealth service could also be furnished by another physician or practitioner of the same specialty and same subspecialty within the same group as the physician or practitioner who furnishes the telehealth service. The following is a summary of the comments we received and our responses. Comment. Many commenters agreed with the alternative policy we considered to allow the required in- Start Printed Page 65623 person, non-telehealth service to be furnished by another physician or practitioner of the same specialty and subspecialty in the same group as the practitioner who furnishes the mental health telehealth services to the beneficiary if the practitioner who furnishes the telehealth services is unavailable.

Response. We are adopting the alternative policy discussed in the proposed rule to allow a clinician's colleague in the same subspecialty in the same group to furnish the in-person, non-telehealth service to the beneficiary if the original practitioner is unavailable. This is also consistent with longstanding policy, which defines an established patient as an individual who receives professional services from the physician/NPP or another physician of the same specialty and subspecialty who belongs to the same group within the previous 3 years, for purposes of billing for E/M services. While the language in the CAA states that the physician or practitioner furnishing the in-person, non-telehealth service must be the same person as the practitioner furnishing the telehealth service, we believe this policy would be consistent with statutory requirements, because we have historically treated the billing practitioner and other practitioners of the same specialty or subspecialty in the same group as if they were the same individual.

After consideration of public comments, we are finalizing our alternative policy that a practitioner in the same subspecialty and the same group may furnish the in-person, non-telehealth service to the same beneficiary, if the original practitioner is unavailable. With regard to our policy to retain all services added to the Medicare telehealth services list on a Category 3 basis until the end of CY 2023, we believe the establishment of this certain end date will provide clarity to the stakeholder community but will have a negligible impact on PFS expenditures. For example, services that have already been added to the permanent telehealth services list are furnished via telehealth, on average, less than 0.1 percent of the time they are reported. Further, although data is still being collected, in our initial review of the data, we have not noticed an increase in the overall utilization trend for these services suggesting that practitioners may be furnishing these services via telehealth as replacement for in person encounters.

The statutory conditions on payment for Medicare telehealth services under section 1834(m) of the Act, such as the originating site requirements related to geographic location and site of service, have limited increases in telehealth service utilization outside of the PHE for buy antibiotics. However, we believe there is value in allowing physicians to furnish services added to the Medicare telehealth services list on a Category 3 basis, and for patients to receive broader access to this care through telehealth, through the end of CY 2023 in order to ease the transition from the PHE. Additionally, for services added to the Medicare telehealth list on a Category 3 basis, outside of the circumstances of the PHE for buy antibiotics, all of the statutory restrictions under section 1834(m) of the Act will also apply to these services. Therefore, we do not anticipate any significant increase in utilization.

E. Effect of Changes Related to Services Furnished in Whole or in Part by PTAs and OTAs As discussed in section II.H.1., we are finalizing proposed revisions to the current de minimis policy for services furnished in whole or in part by PTAs/OTAs that we finalized in CY 2020 PFS final rule (84 FR 62702 through 62708) under which the CQ or CO modifier applies when the PTA or OTA furnished more than 10 percent of a service or a 15-minute unit of service. Beginning January 1, 2022, CMS will apply a 15 percent reduction to the payment amount for a physical or occupational therapy service when the CQ/CO modifier is applied to the service. Our revision to the de minimis policy will allow the PT/OT to bill without the CQ/CO modifier for the final 15-minute unit (in a multi-unit billing scenario) when the PT/OT meets the billing threshold of 8 minutes, which is when the minutes are greater than the midpoint (7.5 minutes) of the 15-minute unit, regardless of any minutes provided by the PTA/OTA for that final unit.

Under the policy we are finalizing, the PT/OT services will not be discounted as the result of any “left-over” minutes provided by the PTA/OTA when the therapist provides enough minutes on his or her own to meet the billing threshold amount. In these scenarios, the PTA's/OTA's minutes are considered immaterial for the purposes of billing. For example, if the PT/OT provided 23 minutes of a 15-minute service and the PTA/OTA provided another 20 minutes of the same service—three units of service can be billed for the 43 total minutes (38 minutes through 52 minutes). Here, one full 15-minute unit of service is billed without the CQ/CO modifier for the PT/OT service with 8 minutes remaining, and one full unit of service is billed with the CQ/CO modifier for the service provided by the PTA/OTA with 5 minutes remaining.

Under the policy, the third unit is billed without the CQ/CO modifier because the 8 minutes provided by the PT/OT meets the billing threshold amount. However, under our current de minimis policy, the 5 minutes provided by the PTA/OTA is more than 10 percent (it is 38 percent of the total service−PTA/OTA minutes divided by the total of PTA/OTA + PT/OT minutes. 5 divided by 13 = 38 percent) meaning the CQ/CO modifier is applied to the third and final unit of service. Under our current de minimis policy, under which the CQ/CO modifier is applied whenever the PTA/OTA provides more than 10 percent of a service whether or not the PT/OT furnishes enough of the service to bill for it without the portion furnished by the PTA/OTA, stakeholders have expressed concern that the PT/OT has a financial incentive not to have the PTA/OTA provide any additional minutes, regardless of the individual patient's needs, when those minutes of service lead to a reduced payment for a unit of a service.

There may be a cost implication to this policy as fewer billing scenarios may result in application of the CQ/CO modifiers and consequent payment reduction. However, we believe that basing our policy on a “midpoint rule” in which the PT/OT provides enough minutes on their own (8 or more minutes) to bill for the final unit of a billing scenario could eliminate the PT's/OT's financial incentive to not provide appropriate therapy to an individual patient when it is furnished by the PTA/OTA. On the other hand, if we were to continue with our de minimis standard to apply to all billing scenarios for PTA/OTA services that exceed the 10 percent standard, we are uncertain how to gauge the overall costs of this policy because of the possible altered PT/OT behavioral change that is due to the financial incentives built into that policy as discussed above. F.

Other Provisions of the Regulation 1. Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs) In section III.A. Of this final rule, we make multiple provisions related to RHCs and FQHCs. In terms of estimated impacts to the Medicare program, Payment for Attending Physician Services Furnished by RHCs or FQHCs to Hospice Patients as required by section 132 of the CAA, 2021 and Concurrent Billing for CCM and Start Printed Page 65624 Transitional Care Management TCM Services for RHCs and FQHCs will have negligible impact to Medicare spending.

Section 130 requires that all independent RHCs are now subject to the per-visit limit (which is also referred to as “cap”) and phases in an increase in the statutory payment cap over an 8-year period. The cap in CY 2021, for services furnished after March 31, is set at $100 per visit, then at $126 per visit in 2022. At $139 per visit in 2023. At $152 per visit in 2024.

At $152 per visit in 2025. At $165 per visit in 2026. At $178 per visit in 2027. And at $190 per visit in 2028.

Beyond 2028, the limit is updated by the applicable Medicare Economic Index (MEI). This provision also controls the annual rate of growth in payments to certain provider-based RHCs whose payments are currently higher than the payment limit. Each year, but for services provided after March 31 in 2021, the payment limit shall be set at the greater of. (1) The RHC per visit amount from the prior year, increased by the percentage increase in the applicable MEI.

And (2) the cap limits applicable to each year as described above. In order to be eligible for this “grandfathering” policy, the RHC must have been based in a hospital with fewer than 50 beds and enrolled in Medicare as of December 31, 2019. Section 2 of Public Law 117-7, enacted on April 14, 2021, made technical corrections to section 130. First, for an RHC that is hospital-based and whose parent hospital has fewer than 50 beds, the date by which the RHC must be Medicare-certified, in order to be grandfathered, was changed from December 31, 2019 to December 31, 2020.

Next, a clinic that is owned by a hospital with fewer than 50 beds and that submitted certain applications (received by Medicare) for certification as a Medicare RHC prior to the end of 2020 can be grandfathered, and its clinic-specific cap is to be set based on its 2021 cost per visit. Lastly, a grandfathered RHC must continue to be owned by a hospital with fewer than 50 beds. If the parent hospital exceeds 50 beds, the RHC will lose its grandfathered status. Table 137 are the FY estimates (in millions) for the impact of section 130, which improves payments to RHCs.

These providers are currently paid an all-inclusive rate (AIR) for all medically necessary medical and mental health services, and qualified preventive health services furnished on the same day (with some exceptions). The AIR is subject to a payment limit, except for certain provider-based RHCs that have an exception to the payment limit. The RHC payment limit per visit for CY 2021 is $87.52, which is 1.4 percent higher than the CY 2020 payment limit of $86.31. In section III.B.

Of this final rule, we discuss that we proposed to revise the regulatory requirement that an RHC or FQHC mental health visit must be a face-to-face (that is, in person) encounter between an RHC or FQHC patient and an RHC or FQHC practitioner to also include encounters furnished through interactive, real-time telecommunications technology, but only when furnishing services for the purposes of diagnosis, evaluation, or treatment of a mental health disorder. According to our analysis of Medicare Part B claims data for services furnished via Medicare telehealth under the PFS during the PHE, use of telehealth for many professional services spiked in utilization around April 2020 and diminished over time, but not to pre-flagyl levels. In contrast, Medicare claims data suggests that for mental health services both permanently and temporarily added to the Medicare Telehealth list, subsequent to April 2020, the trend is toward maintaining a steady state of usage over time. Given the expanded availability of mental health services at RHCs and FQHCs, we do anticipate that this policy will increase spending.

However, we are not certain of the magnitude of this increase, since it is not clear at this time how or whether trends related to utilization of communication technology during the PHE will continue after such a time that the PHE were to end. While the estimated cost impact of this provision is unclear, the requirement that a modifier be appended to the claim to identify that the service was furnished via audio-only communication technology will allow us to closely monitor utilization and address any potential concerns regarding overutilization through future rulemaking. 2. Requiring Certain Manufacturers To Report Drug Pricing Information for Part B (§§ 414.802 and 414.806) This provision implements new statutory requirements under sections 1847A and 1927 of the Act, as amended by section 401 of the CAA (for the purposes of this section of this final rule, hereinafter is referred to as “section 401”).

These new requirements will improve the accuracy of reported payment limits and limit the use of WAC-based pricing. As described in section III.D.1. Of this final rule, in considering whether to exclude repackagers from the reporting requirements at section 1847A(f)(2) of the Act, we conducted two analyses to estimate. (1) The proportion of repackaged products in our existing ASP data.

(2) the number of new ASP submissions we can expect as a result of the new reporting requirements under section 401. And (3) the proportion of those (new) submissions that involve repackaged products. Additionally, while we believe it will impact reporting volume and payment limits under section 1847A of the Act for many billing and payment codes, we are unable to estimate the magnitude of these effects for the following reasons. We estimate.

(1) 361 non-reporting manufacturers (of either single source or multiple source drugs) will now be required to report ASP data under section 1847A(f)(2) of the Act. And (2) 6114 products payable under Part B that these non-reporting manufacturers sell. However, we do not know which Healthcare Common Procedure Coding System (HCPCS) code payment limits will be impacted by these 6114 products, nor do we know the sales volume of these 6114 products. Because this information is used to calculate volume-weighted ASP payment limits, we are unable to quantitatively estimate the economic impacts of this provision (that is, the likely costs or savings) on beneficiaries, the government, and other Start Printed Page 65625 stakeholders.

(We note that the economic impacts on manufacturers, as a result of the information collection requirements of this provision is discussed in section V. Of this final rule.) For single source drugs, these changes may result in lower payment limits because, typically, the WAC-based pricing is higher than ASP plus 6 percent. This then translates to cost savings for both the government and beneficiaries, who will pay coinsurance on a lesser amount. However, for the reason stated previously, we are unable to predict the magnitude of this effect.

Similarly, payment limits for multiple source drugs could increase or decrease, and we are unable to predict the direction or magnitude of specific or aggregate effects at this time. We do not anticipate that this provision of this final rule will necessitate the revision of existing Medicaid Drug Rebate Agreements. We welcomed comment on (1) the likely costs or savings to beneficiaries, the government, and other stakeholders and (2) other related impacts of this provision. We received public comments on the likely costs or savings to beneficiaries, the government, and other stakeholders, and other related impacts of this provision.

The following is a summary of the comments we received and our responses. Comment. One commenter suggested that CMS exclude repackagers from the proposed ASP reporting requirements. They stated that requiring all repackagers to report would likely be duplicative and increase the burden on all parties without providing tangible benefit.

They recommend repackagers who already report ASP data continue to do so, but that CMS not require repackagers, as a group, to be subject to the reporting requirements at this time. Response. We are not persuaded that repackagers should be excluded at this time. In order to maintain consistency and integrity of the ASP data for those manufacturers with and without Medicaid drug rebate agreements, and for operational reasons, we do not believe it is appropriate to exclude repackagers from the ASP reporting requirements.

If warranted, we could revisit this in future rulemaking. Comment. One commenter concluded that CMS' analysis and proposal not to exclude repackagers without a rebate agreement from reporting ASP data is reasonable. The commenter stated given that repackagers with a rebate agreement are required to report ASP data, it is reasonable not to exclude repackagers without a rebate agreement from the requirements of section 401.

They added that having ASP data from repackagers with and without rebate agreements could also permit future analysis of the effect of repackagers' ASP submissions on Medicare Part B payment rates. Response. We agree it is reasonable not to exclude repackagers without a Medicaid drug rebate agreement and thank the commenter for their feedback. After consideration of public comments, we are finalizing as proposed.

3. Determination of ASP for Certain Self-Administered Drug Products a. Anticipated Effects This provision implements new statutory requirements under section 1847A(g) of the Act, as amended by section 405 of the CAA 2021, (for the purposes of this section of this final rule, hereinafter is referred to as “section 405”). As identified by the OIG studies discussed in section III.D.2.

Of this final rule, the CMS payment-limit determination under section 1847A of the Act includes all versions of a product marketed under a single FDA approval, and consistent with section 1847A(b)(5) of the Act, the payment-limit determination does not exclude products based on packaging. Thus, the volume-weighted, average-ASP determination can include self-administered versions that may lead to increased program and beneficiary costs because of distorted ASP-based payment limits. In particular, the OIG studies identified two billing and payment codes that included self-administered NDCs. The OIG study determined that as a result of the inclusion of these NDCs in the calculation of the ASP payment limit, Medicare payment amounts remained inflated in 2017 and 2018, causing the program and its beneficiaries to pay an additional $497 million during this period.

Since 2014, current payment methodology has resulted in an additional $173 million in Medicare beneficiary coinsurance for these two NDCs. (See OIG's July 2020 report titled, “Loophole in Drug Payment Rule Continues To Cost Medicare and Beneficiaries Hundreds of Millions of Dollars,” available at https://oig.hhs.gov/​oei/​reports/​OEI-BL-20-00100.asp. ) Implementation of the regulatory changes has the potential to result in decreased payment limits for identified billing and payment codes that could, in turn, substantially reduce Medicare and beneficiary expenditures, as described in the OIG study. Since section 1847A(g)(3) of the Act requires CMS to implement the required payment changes beginning on July 1, 2021, these potential savings may be observed within the year.

By adding sections 1847A(g)(1) and (2) of the Act, section 405 also directs the OIG to conduct future studies with same or similar methodologies to those in the July 2020 report and directs CMS to apply the lesser of payment methodology to the applicable billing and payment codes. This has the potential to result in additional savings to the program and beneficiaries if additional products are identified by these periodic OIG studies. B. Expected Benefits Codifying the provisions set forth by section 405 will permit to CMS to apply the lesser of payment methodology at section 1847(g)(2) of the Act to billing and payment codes identified by future OIG studies (described in section III.D.2.

Of this final rule). This provision addresses distorted payment limits for these products and may result in payment amounts that are better aligned with versions of these products that are payable under Part B (for example, versions that are usually not self-administered). Although we are unable to quantify the total magnitude of the potential savings, these changes have the potential to substantially reduce program expenditures and beneficiary coinsurance. 4.

Appropriate Use Criteria Section 1834(q)(2) of the Act, as added by section 218(b) of the Protecting Access to Medicare Act (PAMA), established a program to promote the use of appropriate use criteria (AUC) for applicable imaging services furnished in an applicable setting. In the CY 2019 PFS final rule (83 FR 59452), we performed an RIA for this program. In this final rule, we are finalizing our proposal to begin the payment penalty phase of the program on the later of January 1, 2023 or the January 1 of the year after the year in which the PHE for buy antibiotics ends. Because, under our provisions, the payment penalty phase will be further delayed, we are updating the estimates for incremental changes from the RIA from the CY 2019 PFS final rule.

Since we did not propose new policy requirements nor do we have sufficient reason to change any of the assumptions made in the RIA finalized in the CY 2019 PFS (83 FR 60034 through 60044), we are only updating the analysis to reflect 2019 Medicare claims data (updated from 2014). We identify four incremental changes from the CY 2019 Start Printed Page 65626 PFS final rule estimates due to updated claims data. (1) Impact of required AUC consultations by ordering professionals. (2) impact to Medicare beneficiaries.

(3) process efficiencies to potentially offset the estimated burden on Medicare beneficiaries. And (4) impact on transmitting orders for advanced diagnostic imaging services. Each of these incremental changes results in a lower estimate. a.

Impact of Required AUC Consultations by Ordering Professionals As discussed in detail in the CY 2019 PFS final rule (83 FR 60035 through 60037), the annual impact estimate of consultations by ordering professionals was $70,001,700. In our estimates, we calculated the burden for auxiliary personnel to consult AUC under the direction of an ordering professional and the burden for ordering professionals to perform the consultation directly. We estimated that 90 percent of consultations will be performed by a medical assistant (occupation code 31-9092) and 10 percent of consultations will be performed by a general practitioner (occupation code 29-1062). We estimated that 43,181,818, 2-minute consultations occur annually.

Using 2019 Medicare claims data as our basis for the analysis, we proposed to change the methodology used to determine the volume of consultations and proposed to use more granular data that will reduce potential double-counting of advanced diagnostic imaging services. For example, an imaging service furnished in an outpatient hospital department could have two claims associated with that service. There could be a claim from the facility and a claim from the physician that interprets that imaging service. In the CY 2019 RIA (83 FR 60034 through 60044) we were concerned that the estimate of 43,181,818 consultations may be an overestimate because it took into account total claims.

For this CY 2022 RIA, we proposed to change the method of counting the total number of advanced diagnostic imaging services that will be furnished under the AUC program which will correspond to the total number of consultations. Using the Integrated Data Repository we identified Medicare claims using the following parameters. (1) 2019 date of service. (2) claim lines containing one of the procedure codes identified in CR10481 and CR11268 at https://www.cms.gov/​Regulations-and-Guidance/​Guidance/​Transmittals/​2018Downloads/​R2040OTN.pdf and https://www.cms.gov/​files/​document/​r2404otn.pdf, respectively.

And (3) claims types of outpatient or practitioner. Claims were then separated based on the setting in which the imaging service was furnished and further by claim type. Using only services billed on the professional claim type, the total number of claim lines containing one of the identified procedure codes was included to total 30,359,901 advanced diagnostic imaging services estimated to be subject to the AUC program. By using this combination, we believe we can reduce the risk of double-counting services to obtain a more accurate estimate of total number of diagnostic imaging services subject to the AUC program.

Therefore, this analysis will use the estimate of 30,359,901 AUC consultations. Using the May 2020 BLS mean hourly wages, we update our estimates for a medical assistant (occupation code 31-9092) with mean hourly wage of $17.75 and 100 percent fringe benefits for 90 percent of consultations (910,797 hours) to be $30,511,701 (910,797 hours × $33.50/hour). The occupation for general practitioner is no longer listed on the BLS so, instead, we update our estimate using the occupation code for general internal medicine physician (29-1216) with mean hourly wage of $101.42 and 100 percent fringe benefits for 10 percent of consultations (101,200 hours) to be $20,527,408 (101,200 hours × $202.84/hour). The updated total annual estimated impact of consultations is $51,039,109, for an incremental change (reduction) of $18,962,591.

B. Impact to Medicare Beneficiaries In the CY 2019 PFS final rule, we estimated that the additional 2-minute consultation would impact the Medicare beneficiary when their advanced diagnostic imaging service is ordered by the ordering professional by introducing additional time to their office visit. For this update, we used the updated number of consultations calculated above from claims data, as well as the May 2020 BLS mean hourly wage. To estimate this annual cost, we multiplied the annual burden of 1,011,997 hours by the BLS occupation code that represents all occupations in the BLS (00-0000) as mean hourly wage plus 100 percent fringe ($54.14/hr) for a total estimate of $54,789,518 per year for an incremental change (reduction) of $13,211,482.

We also estimated that, over time, process efficiencies may be implemented. We assumed that 50 percent of practices implemented an improvement process that streamlined AUC consultation so Medicare beneficiaries spent the same amount of time in the physician's office regardless of whether an advanced diagnostic imaging service was ordered. The updated estimate that such an improvement process could offset the estimated burden on Medicare beneficiaries by $27,394,759 annually for an incremental change (reduction) of $6,605,741. C.

Impact on Transmitting Orders for Advanced Diagnostic Imaging Services In the CY 2019 PFS final rule, we estimated that including AUC consultation information on the order for an advanced diagnostic imaging service to the furnishing professional or facility is estimated as the additional 5 minutes spent by a medical secretary (occupation code 43-6013). To update this estimate, we use the May 2020 mean hourly wage of $18.75 plus 100 percent fringe benefits to transmit the order for the advanced diagnostic imaging service. In aggregate, we assumed in the CY 2019 PFS final rule that 40,000,000 advanced diagnostic imaging services are ordered annually. We proposed to update that number to match the total number of AUC consultations proposed earlier in this RIA to 30,359,901, so the updated total annual burden to communicate additional information in the order is estimated as $94,495,192 ($18.75/hr × 2 × 0.083 hr × 30,359,901 orders) for an incremental change (reduction) of $20,044,808.

D. Impact on Furnishing Professionals and Facilities As described in the CY 2019 PFS final rule, we identified an estimated 174,064 furnishing professionals (comprising radiologists, ASCs, IDTFs and hospitals) and assumed that every identified furnishing professional will choose to update their processes for the purposes of the AUC program in the same way by purchasing an automated solution to report AUC consultation information which was estimated to cost $10,000 for each furnishing professional. We update this cost to account for inflation and therefore the updated estimated cost is $10,636.07 ($10,000 adjusted for inflation to 2021 dollars) for a total estimated one-time update cost of $1,851,356,888.48 (174,064 × $10,636.07). E.

Appropriate Use Criteria for Advanced Diagnostic Imaging Services As described in the CY 2019 PFS final rule, we assumed that there may be some savings to the Medicare program due to the AUC program requirements and potential decreases in inappropriate utilization of advanced diagnostic imaging services. This assumption was based on literature describing prior Start Printed Page 65627 experiences with clinical decision support in a pilot project conducted in Minnesota, a retrospective cohort study on evidence-based clinical decision support for lumbar MRI, brain MR and sinus CT and local implementation of clinical decision support, and we estimated that savings may account for $700,000,000 savings per year. f. Summary of Delay-Attributable Changes and Discounted Rates Table 138 summarizes the substantive changes from the CY 2019 PFS final rule to the CY 2022 PFS final rule impact estimates.

The effect of a 3-year delay is approximated by applying 3 years' worth of discounting at 7 percent or 3 percent discount rates (Circular A-4, https://www.whitehouse.gov/​sites/​whitehouse.gov/​files/​omb/​assets/​regulatory_​matters_​pdf/​a-4.pdf ). 5. Removal of Selected National Coverage Determinations (NCDs) We proposed to remove two older NCDs that no longer contain clinically pertinent and current information or that involve items or services that are used infrequently by beneficiaries. Generally, proactively removing obsolete or unnecessary NCDs removes barriers to innovation and reduces burden for stakeholders and CMS.

The two NCDs fall into two impact categories. First, eliminating an NCD for items and services that were previously covered means that the item or service will no longer be automatically covered by Medicare. Instead, the coverage determinations for those items and services will be made by Medicare Administrative Contractors (MACs). Second, if the previous national coverage determination barred coverage for an item or service under title XVIII, MACs will now be able to cover the item or service if the MAC determines that such action is appropriate under the statute.

We believe that allowing local contractor flexibility in these cases better serves the needs of the Medicare program and its beneficiaries since we believe the future utilization for items and services within these policies will be limited, each affecting less than one percent of the Medicare FFS population. For the one NCD where NCD removal changes coverage from limited national coverage to MAC discretion, claims data from 2019 shows that less than one percent of the Medicare population is affected. Specifically, NCD 180.2 Enteral and Parenteral Nutrition Therapy provided coverage with limitations. Where in 2019 CMS paid 1,643,739 Medicare FFS claims for 83,551 unique beneficiaries totaling CMS payments of $356,228,606.

While we have claims data available for 2020, the data shows a decrease in claims, unique beneficiaries and total amount paid by CMS. We believe this may be due in part to the buy antibiotics flagyl. However, we do not have any information to be able to say that conclusively. The change could be due to other factors not examined here.

We estimate there will be de minimis change to 2022 payments, compared to 2019 or 2020 because, as discussed in section III.F. Of the final rule, local contractors have finalized two LCDs, effective for dates of service on or after September 5, 2021 that will continue to provide parenteral and enteral nutrition coverage for Medicare beneficiaries, after removal of NCD 180.2. Therefore, we believe that removing this NCD will not result in significant changes to payments. For the one non-covered NCD to be eliminated, Positron Emission Tomography (PET) Scans under NCD 220.6, we did not expect to find historical claims data for the non-oncologic uses of PET at issue.

We broadly noncover non-oncologic indications of PET, in other words, we required that every non-oncologic indication for PET must have its own NCD in order to receive coverage. Because this NCD provides for noncoverage on non-oncologic indications, we do not have accurate claims data to estimate total impact. However, based on the service, we expect future claims to affect less than one percent of Medicare FFS beneficiaries. As discussed in section III.F.

Of this final rule, the NCD allows coverage for diagnostic PET imaging for oncologic uses not already determined by an NCD, to be made at the discretion of local MACs. We believe that extending local contractor discretion for non-oncologic indications of PET provides an immediate avenue to potential coverage in appropriate Start Printed Page 65628 candidates and provides a framework that better serves the needs of the Medicare program and its beneficiaries. For clarity, we did not propose to change any other subsections of 220.6. Thus, the NCDs listed at 220.6.1 through 220.6.20 will not be changed by this provision.

6. Pulmonary Rehabilitation, Cardiac Rehabilitation and Intensive Cardiac Rehabilitation As discussed in section III.H., Pulmonary Rehabilitation (PR), Cardiac Rehabilitation (CR) and Intensive Cardiac Rehabilitation (ICR), of this final rule, we proposed largely conforming changes throughout §§ 410.47 (PR) and 410.49 (CR/ICR). These changes are intended to ensure consistency and accuracy in terminology, definitions and requirements where appropriate across PR and CR/ICR conditions of coverage. Specific to PR, we proposed to remove the requirement for direct physician-patient contact related to the periodic review of the patient's treatment plan because such interaction within the PR program is not necessary for all patients and can be specified, as needed, in individualized treatment plans (ITPs).

We also proposed to add coverage of PR for beneficiaries who were hospitalized with a buy antibiotics diagnosis and experience persistent symptoms, including respiratory dysfunction, for at least 4 weeks after hospital discharge. After considering public comments and additional clinical evidence, we are finalizing the revisions to improve consistency and accuracy across PR and CR/ICR conditions of coverage as proposed. We are also finalizing the removal of the PR requirement for direct physician-patient contact. We are expanding upon our proposal to cover PR for beneficiaries who were hospitalized with a buy antibiotics diagnosis and experience persistent symptoms, including respiratory dysfunction, for at least 4 weeks after hospital discharge.

We are removing the proposed hospitalization requirement and finalizing coverage of PR for beneficiaries who have had confirmed or suspected buy antibiotics and experience persistent symptoms that include respiratory dysfunction for at least 4 weeks. We did not receive public comments on the proposed impact so we use the same methodology in estimating the impact of the final expansion of coverage for PR below. In assessing the impact of these provisions, we note that the expansion of PR coverage may increase utilization. Based on the low utilization rate discussed below, we do not believe the other revisions will significantly impact utilization and the Medicare program.

To estimate the potential increase from the expansion of coverage for PR, we searched the literature for articles that evaluated the utilization rate of PR for the currently eligible diagnosis of chronic obstructive pulmonary disease (COPD) in order to determine the historical utilization trends of this service. Nishi et al. (2016) investigated the number of Medicare beneficiaries with COPD who received PR from January 1, 2003 to December 31, 2012. Their results included both individuals who had experienced hospitalizations for COPD and those who were outpatients only.

The number of unique patients with COPD who initially participated in PR during the study period was 2.6 percent in 2003 (before conditions of coverage at § 410.47 were established) and 2.88 percent in 2012 (after conditions of coverage at § 410.47 were established).[] In 2019, Spitzer, et al. Published an article based on Medicare claims data from 2012, finding that 2.7 percent of eligible Medicare beneficiaries received PR within 12 months of hospitalization with COPD.[] Using claims data from FFS Medicare beneficiaries hospitalized for COPD in 2014, Lindenauer et al. (2020) reported that only 3 percent initiated PR within 1 year of their hospital discharge.[] Taken together, this data informs us that utilization of PR in the Medicare population is very low, and that the majority of patients who avail themselves of this service do so, post hospitalization. There are limitations to applying this data to identify the utilization rate of PR to the conditions of coverage specified at § 410.47.

Most notably, some of these studies included patients whose services were billed with non-PR respiratory therapy codes (G0237, G0238 and G0239), instead of only patients whose services were billed with the PR code (G0424). But the authors also limited patient inclusion to those with a principal or secondary COPD diagnosis, so we believe this suggests that 3 percent is an upper bound for the utilization of PR currently in Medicare beneficiaries. Given that participation in PR has remained steady for many years, we do not expect this pattern to change. As such, for the purposes of this analysis, we assume that 3 percent of eligible beneficiaries under the expansion of coverage (beneficiaries who have had confirmed or suspected buy antibiotics and experience persistent symptoms that include respiratory dysfunction for at least 4 weeks) will participate in PR.

To identify the eligible beneficiaries under our provision, we first identify the number of beneficiaries who had buy antibiotics using the Preliminary Medicare buy antibiotics Data Snapshot.[] At the time of writing, the Snapshot included data from January 1, 2020 to July 24, 2021, and identified 4,656,553 total buy antibiotics cases for Medicare beneficiaries. Using Medicare FFS data from February 24, 2020 to September 27, 2020 as compared to the same time frame in 2015 through 2019, Tarazi et al. (2021) found that the buy antibiotics related mortality rate, defined as death within 60 days of buy antibiotics diagnosis, was 17.5 percent.[] To calculate the number of beneficiaries that survive buy antibiotics to be eligible for PR under our coverage expansion, we reduced 4,656,553 by 17.5 percent (814,897) to 3,841,656 beneficiaries. A paper published by the Tony Blair Institute for Global Change [] states that the buy antibiotics Symptom Study led by King's College London indicated that about 10 percent of survey participants reported symptoms (including shortness of breath and other symptoms like fatigue, headache and loss of smell) beyond a four-week recovery period.

Using this information, we estimate that the patient population we are expanding PR coverage to, those who have had confirmed or suspected buy antibiotics and experience persistent symptoms that include respiratory dysfunction for at least 4 weeks, to be 384,166 beneficiaries (3,841,656 × 0.10). Based on our assumption of utilization above, 3 percent, for the newly covered patient population, we estimate 11,525 Start Printed Page 65629 beneficiaries will receive PR (384,166 × 0.03). Medicare covers PR for a maximum of 72 sessions. Using 2018 and 2019 Medicare claims data from the Chronic Conditions Data Warehouse (CCW), beneficiaries on average completed 14 sessions of PR.

If we assume patients eligible based on our expansion of coverage will participate, on average, in the same number of sessions, we estimate the expansion of coverage will increase PR utilization by 161,350 sessions annually (11,525 beneficiaries × 14 average sessions completed per beneficiary). Claims for PR are submitted using CPT code G0424. Our analysis of Medicare claims data indicates that 97.54 percent of PR sessions are billed under the Hospital OPPS at $55.66 (national average price) for an estimated total of $8,759,815 (161,350 PR sessions × 0.9754 × $55.66). The remaining 2.46 percent of PR sessions are billed under the PFS, with 2.12 percent of PR sessions furnished in a physician's office which has a national average price of $30.36 and 0.34 percent billed by a physician when PR was furnished in a HOPD which has a national average price of $13.96.

Taken together, the estimated total for this remaining 2.46 percent of PR sessions is $111,508 ((161,350 PR sessions × 0.0212 × $30.36) + (161,350 PR sessions x 0.0034 × $13.96)). We estimate the total added cost to the Medicare program of this expansion of coverage to be $8,871,323 ($8,759,815 + $111,508) annually during and immediately following the PHE for buy antibiotics. The impact of our final rule increases the final estimate by $6,709,876 which reflects the larger patient population that will be eligible for PR. Removing the proposed hospitalization requirement increased the number of eligible beneficiaries by 290,555.

As buy antibiotics cases decline, we expect the annual impact to decrease because eligible patient populations will likely decrease. However, we are unable to estimate the longer term impact of our provisions due to the unpredictable nature of the PHE and the lack of long term data on buy antibiotics. 7. Medical Nutrition Therapy As discussed in section III.I., Medical Nutrition Therapy (MNT), of this final rule, we proposed to remove the restriction that patients only be referred to MNT by the treating physician and update the glomerular fiation rate (GFR) eligibility for patients with chronic kidney disease.

We do not anticipate any significant increase in utilization of MNT services resulting from our revisions. Despite various policy changes that could have improved use, such as increasing payment via adding work RVUs to MNT codes in 2006, approving MNT for telehealth coverage in 2005 and including registered dieticians (RDs) and nutrition professionals as telehealth distant site providers, and waiving out-of-pocket costs to beneficiaries, MNT participation remains under 2 percent of eligible beneficiaries. Based on an analysis of Medicare claims data from 2018, 2019, 2020, we identify the utilization rate of MNT services among eligible beneficiaries to be between 1.5 and 1.8 percent. Although MNT is covered by many State Medicaid programs and private insurers, use is low in the US.[] The Academy of Nutrition and Dietetics recognizes that research specific to the underuse of MNT services is scant.[] Anecdotal reports and related research on diabetes self-management training point to a multitude of reasons why utilization of the MNT services benefit have remained low.

These potential barriers include lack of awareness of MNT by patients and clinicians, inconsistent coverage for MNT services by non-Medicare payers, patient travel and time issues to receive the services and lack of availability of services from RDs who may perceive the process of Medicare enrollment/insurance credentialing and billing as being burdensome and complex.[] Of about 100,000 RDs in the US, only 1,589 submitted Medicare FFS MNT claims in 2017. One study revealed that less than half of RDs providing MNT services in an ambulatory care setting indicated they were not Medicare providers due to reasons such as perceived low reimbursement rates, not providing MNT to Medicare eligible patients, not knowing how to become a Medicare provider, and providing MNT to Medicare patients for diagnoses not covered by Medicare.[] Our revisions may increase beneficiary access to the MNT benefit and reduce primary care physician burden since we proposed that referrals can come from other physicians and not only from the physician treating the patient for their diabetes or kidney disease. Although, as discussed above, we do not expect the changes to make a significant impact on the Medicare program. We do not anticipate increased administrative burden as documentation in the medical record of any referred service is already a part of discharge planning in the hospital setting.

The changes to the GFR requirements are to conform our regulation to updated clinical standards and also do not pose a significant change. 8. Medicare Shared Savings Program a. Modifications to the Shared Savings Program Quality Reporting Requirements Under the APP and the Quality Performance Standard In section IV.A.3.d.(1)(d) of this final rule, we are extending the use of the CMS Web Interface as a collection type for the Quality Payment Program for performance years 2022, 2023, and 2024 for Shared Savings Program ACOs reporting under the APP.

In section III.J.1.c. Of this final rule, we are finalizing that in order for ACOs to meet the quality reporting requirements under the Shared Savings Program for performance year 2022 and subsequent performance years, ACOs must meet the following requirements. For performance years 2022, 2023, and 2024. An ACO must report on either.

(a) The ten CMS Web Interface measures and administer a CAHPS for MIPS survey and CMS will calculate the two claims-based measures included under the APP, or (b) The three eCQMs/MIPS CQMs and administer a CAHPS for MIPS survey and CMS will calculate the two claims-based measures included under the APP. If an ACO chooses to report the three eCQMs/MIPS CQMs, its performance on all three eCQMs/MIPS CQMs will be used for purposes of MIPS scoring under the APP. If an ACO decides to report both the ten CMS Web Interface measures and the three eCQMs/MIPS CQMs, it will receive the higher of the Start Printed Page 65630 two quality scores for purposes of the MIPS Quality performance category. For performance year 2025 and subsequent years.

The ACO must report the three eCQMs/MIPS CQMs and administer a CAHPS for MIPS survey and CMS will calculate the two claims-based measures included under the APP. Absent the related provision analyzed below to reduce the quality performance standard for PY 2023 to the 30th percentile MIPS Quality performance category score, the changes to the quality reporting requirements, including the accommodation to continue the availability of the CMS Web Interface as a reporting mechanism under the APP will likely provide an easier path for a meaningful subset of ACOs that would otherwise have faced difficulty meeting the quality performance threshold previously established in rulemaking for PY 2023. However, we estimate that nearly all such ACOs would already have met the lower 30th percentile performance standard in PY 2023 without the additional reporting flexibility. Of the relatively few, remaining ACOs that we estimate would have failed to meet the lower 30th percentile performance standard without the additional reporting flexibility, we estimate that about half (on average) will meet the quality performance standard as a result of the quality reporting flexibility adopted in this final rule, and thereby further increase shared savings payments to ACOs by about $20 million in PY 2023.

In section III.J.1.d. Of this final rule, we are finalizing, with modifications, the proposal to freeze the quality performance standard at the 30th percentile across all MIPS Quality performance category scores for performance year 2023, and to establish incentives to encourage ACOs to begin the transition to eCQM/MIPS CQM reporting in performance year 2022 and performance year 2023. The quality performance standard will increase to the 40th percentile across all MIPS Quality performance category scores for performance years 2024 and subsequent performance years. The quality performance standard is the minimum performance level ACOs must achieve in order to share in any savings earned, avoid maximum shared losses under certain payment tracks, and avoid quality-related compliance actions.

We are finalizing that, with the exception of an ACO in the first performance year of its first agreement period, an ACO will meet the quality performance standard under the Shared Savings Program by reporting quality data via the APP established under § 414.1367 according the method of submission established by CMS and for. Performance years 2022 and 2023. ++ Achieving a quality performance score that is equivalent to or higher than the 30th percentile across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring, or ++ If the ACO reports the three eCQMs/MIPS CQMs, meeting the data completeness requirement at § 414.1340 and the case minimum requirement at § 414.1380 for all three measures, and achieves a quality performance score equivalent to or higher than the 10th percentile of the performance benchmark on at least 1 of the 4 outcome measures in the APP measure set and a quality performance score equivalent to or higher than the 30th percentile of the performance benchmark on at least 1 of the 5 remaining measures in the APP measure set. Consequently, the ACO would be required to meet the performance benchmark on either 2 outcome measures (one measure at the 10th percentile and the other at the 30th percentile), or 1 outcome measure at the 10th percentile and any other measure in the APP measure set at the 30th percentile.

If the ACO (1) does not report any of the 10 CMS Web Interface measures or any of the three eCQMs/MIPS CQMs and (2) does not administer a CAHPS for MIPS survey, the ACO would not meet the quality performance standard. Performance year 2024 and subsequent performance years. Achieving a quality performance score that is equivalent to or higher than the 40th percentile across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring. If the ACO (1) does not report any of the 10 CMS Web Interface measures or any of the three eCQMs/MIPS CQMs and (2) does not administer a CAHPS for MIPS survey, the ACO would not meet the quality performance standard.

Our analysis of quality performance data reported by ACOs for performance years starting during 2019 indicates that about 20 percent of ACOs would have failed a quality performance standard defined as the 40th percentile across all MIPS Quality performance category scores. There is significant uncertainty whether PY 2023 will play out similarly to the baseline data. The fraction of ACOs that would ultimately fail to meet a higher standard in PY 2023 could change significantly if the universe of MIPS Quality performance category scores improves relative to ACOs' quality performance scores, or alternatively if ACOs, particularly ACOs at risk of failing, respond to the increased quality performance standard by boosting their performance. Utilizing a Monte Carlo approach, assuming that the simulated poor performing ACOs have a 50 percent chance of improving their quality performance beyond the 40th percentile, if CMS kept the quality performance standard at the 40th percentile, then the cost of reducing to the 30th percentile in 2023 will be $190 million (range $10 million to $370 million).

There is a wide range because slight changes in quality scoring at the low end of the distribution could render the 40th percentile more or less of an effective point of discrimination among ACOs earning shared savings. B. Modifications to Other Shared Savings Program Requirements We do not anticipate a material aggregate impact for the other changes we are finalizing as proposed related to the Shared Savings Program, specifically. Revisions to the definition of primary care services used in the Shared Savings Program's beneficiary assignment methodology (section III.J.2.

Of this final rule). Revisions to the repayment mechanism arrangement policy, including changes to the calculation and recalculation of repayment mechanism amounts (section III.J.3. Of this final rule). Revision of the requirements concerning disclosure of prior participation in the Shared Savings Program by the ACO, ACO participants, and ACO providers/suppliers, and revisions to Shared Savings Program requirements to reduce the frequency and circumstances under which ACOs submit sample ACO participant agreements and executed ACO participant agreements to CMS (section III.J.4.

Of this final rule). And revisions to the beneficiary notification requirement as it applies to ACOs under prospective assignment and ACOs under preliminary prospective assignment with retrospective reconciliation (section III.J.5. Of this final rule). However, as we note in section III.J.3.

Of this final rule, lower required repayment mechanism amounts could reduce costs for ACOs in fees charged by financial institutions for letters of credit and by insurance companies for surety bonds. We estimate that such relief, in total for all participating ACOs, could be worth $2 to $4 million annually under the approach we are finalizing (assuming a reduction of approximately $196 million in repayment mechanism amounts, in aggregate). Start Printed Page 65631 We also note that the revisions we are finalizing to the definition of primary care services used in the assignment methodology may have differing effects on a subset of participating ACOs, for example, by leading a beneficiary to be assigned to a competing ACO, for a small subset of beneficiaries. We do not anticipate such ACO-level changes will result in a net impact on program spending overall.

9. Medicare Ground Ambulance Data Collection System In section III.K. Of this final rule, we finalized our proposed changes to the Medicare Ground Ambulance Data Collection System including the proposed change to the data collection period and data reporting period for selected ground ambulance organizations in year 3, proposed revisions to the timeline for when the payment reduction for failure to report will begin and when the data will be publicly available, and proposed revisions to the Medicare Ground Ambulance Data Collection Instrument. We stated in the proposed rule that while we believed that these changes and clarifications will be well received by the ground ambulance stakeholders, we did not believe that these changes will have any substantive impact on the cost or time associated with completing the Medicare Ground Ambulance Data Collection Instrument.

We also noted in the proposed rule that the overall length of the Medicare Ground Ambulance Data Collection Instrument would be the same as previously finalized (84 FR 62888) with these changes. Additionally, some of the instructions which we proposed to add were intended to improve clarity and may therefore reduce the time the ground ambulance organizations spend addressing the questions. We did not receive any public comments on our estimated impact on the cost or time associated with completing the Medicare Ground Ambulance Data Collection Instrument. As we discussed in section III.K of this final rule, we are finalizing our proposed changes to the Medicare Ground Ambulance Data Collection System.

10. Medicare Diabetes Prevention Program Expanded Model a. Effects of Provisions Relating to the Medicare Diabetes Prevention Program Expanded Model (1) Effects on Beneficiaries We proposed to modify certain Medicare Diabetes Prevention Program (MDPP) expanded model policies to. (1) Allow CMS to remove the ongoing maintenance phase (months 13-24) of the MDPP set of services for those beneficiaries who started their first core session on or after January 1, 2022.

(2) update the performance payments for the MDPP set of services in the core and core maintenance performance periods. And (3) waive the Medicare provider enrollment application fee for all organizations enrolling as MDPP suppliers on a prospective basis. These changes will have a positive impact on beneficiaries' health by increasing the capacity of MDPP eligible organizations to enroll in Medicare as MDPP suppliers and increasing access to the MDPP set of services for beneficiaries. Eligible beneficiaries receive these services as preventive services, which require no copays or cost sharing.

These changes address MDPP supplier and beneficiary needs based upon all available monitoring and evaluation data. The changes are also responsive respond to stakeholder comments. (2) Effects on the Market Currently, more than 1,000 organizations nationally are eligible to become MDPP suppliers based on their preliminary or full CDC Diabetes Prevention Recognition Program (DPRP) status. However, only 27 percent of eligible organizations are participating in MDPP.

We anticipate that the removal of the second year of the MDPP set of services will make MDPP attractive and feasible to more MDPP eligible organizations. Not only does a 12-month MDPP services period align with that of the CDC's National DPP and the DPP model test, our data show that only 10 percent of enrolled MDPP participants continue with the Ongoing Maintenance phase sessions (Year 2), and the majority are reaching their weight loss milestone within the first 6 months of the set of MDPP services. Stakeholders report that the second year of MDPP, or the ongoing maintenance phase, is cost prohibitive due to the costs to retain beneficiaries in year 2 of the expanded model as well as the costs to deliver an additional year of the expanded model that is not supported by the CDC National DPP curriculum. The CDC's National DPP curriculum supports a 1-year program and suppliers have found it difficult to extrapolate the curriculum to a second year.

Additionally, MDPP suppliers commented that they have an increasingly difficult time making the business case for MDPP given the costs associated with the ongoing maintenance phase and the low performance payments associated with the second year. Given the low volume of participants continuing in the second year of MDPP, delivering the MDPP ongoing maintenance period creates an undue burden to MDPP suppliers. The cost to offer and deliver the sessions to a small cohort of individuals outweigh the maximum payments available from Medicare. Stakeholders have consistently commented that CMS should shorten the MDPP expanded model to 1 year, with payment levels at least equivalent to the levels provided in the DPP model test.

For example, during the DPP model test, suppliers were paid an average of $462 per beneficiary for the 1-year model test. The second year has made delivering MDPP both financially unattractive and unstainable for many of the current and eligible MDPP suppliers. Suppliers have reported that it is very difficult to engage and retain beneficiaries in a second year, and the reimbursement levels for a second year are inadequate to cover supplier costs. We proposed to shorten the MDPP service period to 1 year and increase the performance payments in the first year.

These changes respond to stakeholder feedback and may alleviate some of the difficulty retaining MDPP participants during the core maintenance phase of the expanded model. (3) Burden Related to Information Collection Requirements—No impact (a) Supplier Standards MDPP suppliers may encounter the Medicare enrollment fee during the following Medicare provider enrollment transactions. Initial enrollment. Revalidation (every 5 years for MDPP).

Or the addition of a new practice location. The provider/supplier enrollment fee for Calendar Year 2021 is $599. Although MDPP suppliers may submit a written request to CMS for a hardship exception to the application fee in accordance with § 424.514, many will not qualify and the hardship application process will simply add more burden on the organization. We have heard from the CDC as well as other stakeholders that the enrollment fee is a potential barrier to eligible MDPP suppliers who will not otherwise enroll in Medicare except for MDPP.

Approximately 39 percent of our current suppliers are non-traditional suppliers that serve their local communities and play a critical role in enrolling more diverse, equitable, and inclusive cohorts of Medicare beneficiaries to MDPP. These non-traditional suppliers include, but are not limited to YMCAs, county health departments, community health centers, and non-profit organizations that focus on health education, and otherwise will neither enroll nor be able Start Printed Page 65632 to enroll as a Medicare supplier at all if it were not for MDPP. They often serve as trusted sources of health information for their communities. However, they also represent a large number of eligible organizations who have not enrolled in Medicare as MDPP suppliers.

We anticipate that waiving the enrollment fee on a prospective basis along with the other programmatic adjustments are likely to result in more MDPP suppliers, increased beneficiary access to MDPP services, and an ongoing reduction of the incidence of diabetes in eligible Medicare beneficiaries, in both urban and rural communities. In April 2020, CMS waived all provider enrollment application fees as part of the buy antibiotics Emergency Declaration Blanket Waivers for Health Care Providers. As a result, we saw an increase in MDPP supplier enrollment. We believe that granting a waiver of the fee for MDPP suppliers to extend beyond the buy antibiotics Emergency Declaration Blanket Waiver, along with the other change to MDPP, may stimulate MDPP supplier enrollment and enhance the MDPP evaluation.

We proposed waiving the Medicare provider enrollment fee beyond buy antibiotics Emergency Declaration Blanket Waivers for Health Care Providers because the enrollment fee creates a potential barrier to MDPP supplier enrollment, beneficiary access to the program, and subsequently, our ability to evaluate MDPP. Specifically, we proposed, to waive the enrollment fee as described in section 1866(j)(2)(C)(i) and (ii) of the Act during the MDPP expanded model test phase. (b) Payment for MDPP Services Our regulations at § 414.84 specify the payments MDPP suppliers may be eligible to receive, payments for furnishing MDPP services, and meeting performance targets related to beneficiary weight loss and/or attendance. MDPP suppliers are paid by CMS by submitting claims for MDPP beneficiaries using claim form CMS-1500 ( https://www.cms.gov/​Medicare/​CMS-Forms/​CMS-Forms/​Downloads/​CMS1500.pdf ).

As a condition for payment, claims submitted by MDPP suppliers must be for services furnished to eligible beneficiaries in accordance with § 414.84(b) and (c). We have streamlined the performance payments so that they are easier to understand and suppliers receive larger payments for participants reaching attendance and weight loss performance-based milestones. For example, the attendance-based performance payments are based on a standardized per-session rate, paid after the 1st, 4th, and 9th sessions attended during the core sessions interval, and after attending the two (2) sessions during each of the core maintenance intervals. We have redistributed all the Year 2 ongoing maintenance sessions phase performance payments to certain core and core maintenance session performance payments in Year 1.

As finalized, the maximum payment of $705 over a 1-year service period is $1 more than the current maximum payment of $704 under the original 2-year payment structure. We believe eliminating the second year and its associated payments while increasing the first-year payments will result in a more financially sustainable expanded model. Increasing the first year MDPP payment amounts should not negatively affect a supplier's performance (for example, participants' weight loss). As finalized, we increased the per session payments to $35, with suppliers receiving $53 more per beneficiary who attends the 4th core session compared to current payments and $27 more than proposed.

We increased the attendance-based payments in response to stakeholder comments and maintained the 5 percent weight loss payments. Although some of the largest payments to suppliers are still driven by weight loss achievement, the maximum payment for attendance only is finalized at $455 compared to $338 proposed and $205 current. Further, in order to maintain CDC Diabetes Prevention Recognition Program (DPRP) recognition status, which is required to be an MDPP supplier, certain levels of performance metrics (for example, weight loss) must be satisfied. There is no evidence that eliminating the second-year maintenance sessions, shortening the MDPP services period to 1 year, will have any negative effects on performance of the expanded model.

(4) Effects on the Medicare Program (a) Estimated 10-Year Impact of MDPP Table 140 shows an updated estimate (in millions) for the impact on Medicare spending of two changes to the Medicare Diabetes Prevention Program (MDPP) to be implemented in 2022, with corrected assumptions. Waiving the Medicare enrollment fee for all new MDPP suppliers. And Shortening the MDPP services period to 1 year and shifting all of the Ongoing Maintenance reimbursement amounts to year one. These estimates by the CMS Office of the Actuary do not consider waiving the Medicare enrollment fee as a direct cost and assume there will be an additional 500 beneficiaries per year participating in MDPP.

The average payment for an MDPP participant will increase by $150. While the maximum payment available to an MDPP supplier is only slightly greater than the maximum payment available under the original 2-year payment structure, the second year set of MDPP services have historically been far less utilized than the first year set of services. Therefore, eliminating the second-year payments has a minimal negative effect to the assumed costs of the expanded model. In the most recent year prior to the PHE, 747 Medicare FFS beneficiaries entered MDPP.

Increasing the first-year payment amounts to suppliers and waiving the Medicare enrollment fee should increase access to MDPP, resulting in more utilization of the MDPP set of services. Starting in 2022, we can assume that 750 beneficiaries will have entered the expanded model each year without including the finalized changes. After including these changes, we will now Start Printed Page 65633 assume 1,250 beneficiaries will enter the expanded model each year. This assumption has a high level of uncertainty and we revisit it in the Sensitivity Analysis section.

Increasing the first year MDPP payment amounts should not negatively affect a supplier's performance (for example, participants' weight loss). Almost all of the increases to the payment amounts are applied after the 4th core session. Even though most of the payment increases are not tied to weight loss achievement, in order to maintain CDC Diabetes Prevention Recognition Program recognition status, which is required to be an MDPP supplier, certain levels of performance metrics (for example, weight loss) must be satisfied. There is no evidence that eliminating the second-year maintenance sessions, shortening the MDPP services period to one year, will have any negative effects on performance of the expanded model.

(b) Sensitivity Analysis Since the cost to suppliers for delivering the MDPP set of services is generally unknown, how utilization of the expanded model will be affected by the changes is highly uncertain. Table 141 shows the 10-year impact estimates (in millions) for different levels of additional beneficiary participation as a result of the changes. Finally, higher projected savings are associated with increases in beneficiary participation, while no additional beneficiaries will result in an estimated cost. The financial impacts we provided for the previously proposed payment schedule changes included errors that impacted our estimates.

Additional costs resulting from payment increases were not applied to the baseline participants. The count of 1,742 participants used to estimate future baseline participation included Medicare Advantage beneficiaries, which should have been excluded. And since there were only 747 new FFS participants in the most recent year prior to the start of the PHE, our best estimate would have assumed 250 additional FFS participants per year resulting from the previously proposed changes. b.

Alternatives Considered No alternatives were considered. The 2-year MDPP service period has depressed interest in MDPP among would-be MDPP suppliers. These actions address stakeholder comments on the barriers to MDPP expanded model success. If we do not take action, we will not be able to scale MDPP as intended, impacting Medicare beneficiary access to this expanded model.

Reducing the MDPP from a 24-to a 12-month services period, increasing the year 1 performance payments, and waiving the Medicare provider enrollment application fee not only better aligns the expanded model with the evidence that helped certify the DPP model test initially, but it will encourage eligible organizations to enroll as MDPP suppliers. C. Impact on Beneficiaries This change will have a positive impact on eligible MDPP beneficiaries, as it better aligns with the CDC's National DPP, giving both the participants and the coaches similar messaging regarding this expanded model, regardless of payer. MDPP suppliers often offer the MDPP set of services to mixed cohorts, or classes with participants who are not eligible for MDPP, but who are enrolled in a National DPP cohort.

Since MDPP generally follows the CDC's National DPP and aligns its expanded model with the CDC's DPRP Standards, it is confusing to participants, coaches, and staff when talking about a 2-year set of services to its eligible Medicare participants when the non-Medicare participants have a 1-year program. Finally, reducing the MDPP service period from 2 years to 1 year allows more cohorts to start and finish MDPP during the expanded model initial period of performance, which is expected to end in March 2023. D. Estimating Regulatory Familiarization Costs Given that we tried to align this rule as much as possible with the CDC DPRP Standards, there should be minimal regulatory familiarization costs.

This rule impacts only enrolled MDPP suppliers and eligible beneficiaries who Start Printed Page 65634 have started the MDPP expanded model or are interested in MDPP. 11. treatment Administration Services In section II.J.1. Of this final rule, we are finalizing that effective January 1, 2022, CMS will pay $30 per dose for the administration of the influenza, pneumococcal and hepatitis B flagyl treatments.

In addition, CMS will maintain the current payment rate of $40 per dose for the administration of the buy antibiotics treatments through the end of the calendar year in which the ongoing PHE ends. Effective January 1 of the year following the year in which the PHE ends, the payment rate for buy antibiotics treatment administration will be set at a rate to align with the payment rate for the administration of other Part B preventive treatments. We estimate that the policy to increase the administration cost for influenza/pneumococcal/HBV treatment services to $30 in 2022 will increase Medicare spending by roughly $250 million in CY 2022. This estimate doesn't reflect the impact of induced utilization of the treatment, or any offsetting savings resulting from averted hospitalizations for those who would now get the treatment.

This policy may encourage more health care providers to offer these services or encourage those that already offer these services to proactively identify and vaccinate more beneficiaries compared to what they might under the lower rates, which would result in further additional treatment costs. However, if more beneficiaries were vaccinated then Medicare costs associated with the treatment of influenza, pneumonia, and hepatitis B could be reduced. In order to offset the costs associated with this policy roughly 10-11K influenza-related hospitalizations would have to be averted. 12.

Medicare Provider and Supplier Enrollment Changes—Provider Enrollment As explained in section III.N. Of this final rule, we proposed changes to three of our existing revocation reasons. We proposed to expand § 424.535(a)(2) to permit revocation based on the OIG exclusion of administrative or management services personnel furnishing services payable by a Federal health care program, such as a billing specialist, accountant, or human resources specialist. We proposed to expand § 424.535(a)(13) to permit revocation of a physician's or other eligible professional's enrollment if he or she surrenders his/her Drug Enforcement Administration (DEA) certificate of registration in response to an order to show cause.

We proposed to revise the factors in § 424.535(a)(8)(ii) (which permits revocation based on a pattern or practice of submitting non-compliant claims) to better enable CMS to target shorter periods of non-compliant billing. We believe that all three of these changes will result in an increase in the number of revocations that CMS imposes. However, we believe this number will be rather small. We currently impose only a limited number of revocations under §§ 424.535(a)(2), (a)(13), and (a)(8)(ii).

Accordingly, since our expansion of these three revocation reasons will be fairly modest, we do not foresee more than a very slight increase in revocations. Table 143 outlines the number of revocations we estimate will ensue under our revocation expansions. These numbers only account for additional revocations stemming from our changes. Internal CMS data indicates that the average provider/supplier that will be affected by these regulatory expansions receives roughly $50,000 in Medicare payments each year.

(We used a similar $50,000 annual payment estimate for our provider enrollment provisions in the CY 2020 PFS final rule) (84 FR 62568)). Providers/suppliers revoked under our revocation expansions will thus not receive these payments. Hence, multiplying our $50,000 estimate by the revocation totals in Table 143 results in a projected transfer from these providers/suppliers to the Federal Government of $750,000 ($50,000 × 15 revocations). We did not receive public comments on these estimates and are therefore finalizing them as proposed.

13. Provider/Supplier Medical Review Requirements—Prepayment and Post-Payment Reviews In section III.N.2. Of this final rule, we proposed to. (1) Define key terms including “additional documentation,” “additional documentation request,” “post-payment medical review,” and “prepayment medical review;” (2) codify contractors' authority to request additional documentation for prepayment and post-payment review within established timeframes.

(3) codify timeframes for response to requests for documentation. And (4) codify result of a failure to comply with prepayment or post-payment documentation request(s) by a provider or supplier, specifically denial of payment. We do not believe these provisions involve any additional impact or burden on providers, suppliers, or States. However, we welcomed feedback from stakeholders regarding the potential costs of these provisions.

The regulations will incorporate already established key terms and definitions as well as processing requirements pertaining to prepayment and post-payment medical review into regulation. Placing this information in regulation will improve provider and supplier understanding of the medical review process and their responsibilities in complying with our review contractor's requests. Further, the regulations represent no change to medical review requirements. As such, we did not anticipate any change in the number of prepayment medical reviews, post-payment medical reviews or the number of additional documentation requests made by contractors.

We did not receive public comments on this provision, and therefore, we are finalizing as proposed. Start Printed Page 65635 14. Effect of Modifications to Medicare Coverage for Opioid Use Disorder (OUD) Treatment Services Furnished by Opioid Treatment Programs (OTPs) As discussed in section III.O of this final rule, we are finalizing our proposal to allow OTPs to continue to furnish the therapy and counseling portions of the weekly bundles, as well as any additional counseling or therapy that is billed using the add-on code, using audio-only telephone calls rather than via two-way interactive audio-video communication technology in cases where audio/video communication is not available to the beneficiary after the conclusion of the PHE for buy antibiotics, provided all other applicable requirements are met. We believe this change will facilitate broader access to these services for beneficiaries.

We are also finalizing our proposal to require that when these services are furnished using audio-only technology, practitioners certify that they had the capacity to furnish the services using two-way audio/video communication technology, but instead, used audio-only technology because audio/video communication technology was not available to the beneficiary. We believe the Part B cost impact of these final policies will be minimal, since payment for therapy and counseling is included in the bundled payment regardless of the modality used to deliver it and we do not expect that this provision will increase the frequency at which medically necessary counseling and therapy services are billed using the counseling and therapy add-on code (HCPCS code G2080). Additionally, as discussed in section III.O. Of this final rule, the FDA recently announced the approval of a new, higher dose naloxone hydrochloride nasal spray product used to treat opioid overdose and that the newly approved product delivers 8mg of naloxone.

In the CY 2021 PFS final rule (85 FR 84683 through 84685), we finalized payment for HCPCS code G2215 (Take-home supply of nasal naloxone (provision of the services by a Medicare-enrolled Opioid Treatment Program). List separately in addition to code for primary procedure). HCPCS code G2215 was priced based on an assumption of a typical case in which the beneficiary will be provided with a box of two 4mg nasal spray products. At the time of drafting the proposed rule, we did not yet have any available pricing information for this newly approved product.

However, in order to be able to make payment to OTPs under Medicare for this product, we proposed to create a new G-code describing a take-home supply of this higher dose naloxone hydrochloride nasal spray product. After considering the comments received, we are finalizing our proposal to establish a new code for a higher-dose of naloxone hydrochloride nasal spray. We will price this code as proposed. The drug component is based on the methodology at § 410.67(d)(2)(i) and the amount of the non-drug component of the code is based on the CY 2020 Medicare payment rate for CPT code 96161, as updated by the MEI.

Based on utilization of the existing naloxone codes under the OTP benefit, we believe that the cost impact of finalizing this new code will be minimal. 15. Physician Self-Referral Update The physician self-referral law provisions are discussed in section III.P. Of this final rule.

As discussed in section III.P.2. Of this final rule, we are amending the provisions of § 411.354(c)(2) identifying unbroken chains of financial relationships that constitute “indirect compensation arrangements” to ensure that a longstanding prohibition on certain per unit of service-based compensation formulas for determining charges for the rental of office space and equipment remains within the ambit of the law. This provision, which was inadvertently omitted when the definition of “indirect compensation arrangement” was revised in the December 2, 2020 final rule entitled “Modernizing and Clarifying the Physician Self-Referral Regulations” (85 FR 77492), is necessary to protect against potential abuses such as overutilization and anti-competitive behavior. We believe that most parties have continued to comply with the regulatory provisions on per unit of service-based compensation formulas for the rental (or lease) of office space and equipment as they have done since the requirements became effective on October 1, 2009.

We are also adding provisions to assist stakeholders in identifying the individual unit to be analyzed under the provisions of § 411.354(c)(2)(ii)(A)(2)(i) through (iv). We believe that the clarity provided by these provisions will facilitate compliance without adding burden. As discussed in section III.P.3. Of this final rule, we are finalizing our proposal to permit the use of the exception for preventive screening tests and treatments at § 411.355(h) for buy antibiotics treatments during such period as the treatments are not subject to CMS-mandated frequency limits, provided that all other requirements of the exception are satisfied.

We believe that this provision will ensure that the physician self-referral law will not impede the availability of critically important buy antibiotics treatments for Medicare and other patients. As discussed in section III.P.4. Of this final rule, we are finalizing our proposal to publish the Code List for Certain Designated Health Services (Code List) solely on the CMS website. Commencing after the publication of the January 1, 2022 Code List in this final rule, the Code List will be updated annually and published on the CMS website at https://www.cms.gov/​Medicare/​Fraud-and-Abuse/​PhysicianSelfReferral/​List_​of_​Codes.

No less than 30 consecutive calendar days prior to the effective date of a Code List update, we will provide advance notice of the updated Code List on the CMS website. We will also provide for a 30-day public comment period for each update using www.regulations.gov, and publish instructions for submitting comments on the CMS website. We will address all public comments that we receive through this process on the CMS website. Finally, we are revising the definition of “List of CPT/HCPCS Codes” at § 411.351 by updating the URL that indicates where the Code List is published on the CMS website.

We believe that these provisions will facilitate compliance with the physician self-referral law and allow easier access to the most up-to-date Code List. 16. Requirement for Electronic Prescribing for Controlled Substances for a Covered Part D Drug under a Prescription Drug Plan or an MA-PD Plan (section 2003 of the SUPPORT Act) In addition to the cost reflected in the Collection of Information section of this final rule, we expect that there will be an additional burden for CMS to award and work with a CMS contractor to develop a process for reviewing the PDE data to assess prescriber compliance with the regulatory provision and review and process prescriber attestations. Based on similar contracts, and conversations with the industry, in the CY 2022 PFS proposed rule, we estimated the costs of (A) development of operational strategy for the new program, (B) reviewing PDE data, and (C) prescriber case work.

We solicited stakeholder feedback on our estimate and all our assumptions. (A) Development of policy. We estimated that it would take our contractor a week of work, 40 hours, to develop the strategy for how the contractor will process the prescriber attestations. We estimated that it would take an operations manager and compliance officer working together at a combined hourly wage of $193.60/hr Start Printed Page 65636 ($120.90/hr + $72.70/hr) a full 40-hour work week to operationalize this aspect of it.

Therefore, we estimated the aggregate cost to be $7,744 (40hr * $193.60/hr). (B) Since systems already exist to collect the appropriate PDE data, in our proposed rule, we stated that our contractor would only have to review the data for compliance with the EPCS mandate. Therefore, we estimated that it would take 2 computer systems analysts each working at $95.22/hr, a week and a half of work, 60 hours. Therefore, the aggregate cost would be $5,713.20 (60 hr * $95.22/hr).

(C) We estimated that it would take 4 administrative support workers each working at $36.82/hr, 60 hours to generate the letters and disseminate them to the appropriate prescriber, which means that it would cost our contractor $2,209.20/year (60 hr * $36.82/hr) in administrative support costs. We estimated that it would be the full-time job of a customer service representative working at $37.02/hr to field prescriber inquiries about the disseminated letters. Thus, we estimated that our contractor would spend $77,001.60 ($37.02/hr * 40 * 52) on the salary of the customer service representative for this task. The aggregate impact for our contractor is 200 hours at a cost of $92,668.

We solicited comment on the accuracy of this burden estimate and on any measures that CMS can take to decrease the impact of this provision, while maintaining its utility and implementing the statutory mandate. We did not receive public comments on the burden estimates for this provision, and therefore, we are finalizing as proposed. 17. Open Payments a.

Payment Context Field for Teaching Hospitals This provision is for a mandatory freeform text context field. We have created this provision at the request of stakeholders, particularly after conversations with teaching hospitals. The teaching hospitals confirmed that the majority of their disputes arise because of a lack of information within the record and an inability to associate the payment to the correct area within their large organization, not the inaccuracy of the record itself. The benefit of this field is to give better context to the records attributed to teaching hospitals and thereby reduce the number of disputes.

For this reason, we also believe it will increase goodwill between the program's stakeholders. The cost is that reporting entities will need to collect an additional piece of information, which will increase burden. We do not believe this burden will be great because the volume of reported teaching hospital payments is much lower than the volume of physician covered recipient payments. In addition, we have created flexibility with this field so that the reporting entity can choose which piece of information is most appropriate and can be something that they already collect, such as a check number or name of the department in the hospital.

B. Optional Annual Recertification The optional annual recertification is at the request of reporting entities and will increase the availability of communication to CMS. The burden associated with this action is low because it will be a low-effort process only completed by the entities who choose to do so. C.

Defining a Physician-Owned Distributorship Since the program began in 2013, we have heard feedback that physician-owned distributorship (PODs) should be better represented in the data because the conflict of interest potentially created by PODs is at the heart of the program. We created this new definition due to the lack of an existing POD definition that would be appropriate for the program's needs. Although this is a new definition, it will only be a subset of the existing definitions of applicable manufacturer and applicable group purchasing organization. €œApplicable manufacturer—POD” and “Group purchasing organization—POD” are already “business type” choices when registering in the Open Payments system.

Therefore, this definition will not alter existing regulations beyond requiring PODs to identify themselves as such. D. Disallowing Record Deletion Without Reason We believe there is not currently language to prevent an applicable manufacturer or applicable group purchasing organization from submitting and attesting to records, then deleting the records to prevent publication. This action would be contrary to the spirit of transparency of the program.

To help ensure compliance with this requirement, we are also adding a new field that will allow entities to communicate the reason for the deletion to CMS. Since the entities will have attested to the accuracy and completeness of these records, we believe it is appropriate to confirm the reason for the deletion. We have not perceived the behavior of inappropriate deletions within the data and do not believe it will increase burden beyond the additional field when deleting a record. We are preemptively closing a potential loophole.

E. Disallow Publication Delays of General Payments The statute requires that delays are “made pursuant to product research or development agreements and clinical investigations” (1128G(c)(1)(E) of the Act). A small number of general payments are delayed annually, which we are unable to verify meet this requirement. Research payments contain the appropriate fields to ensure that the statutory provisions are being met.

We do not believe that it will be a burden for the small number of general payments to either be reported as research payments or not delayed. F. Short-Term Loans Short-term loans are not required to be reported, but they must be shorter than 91 days to meet the exception. This provision does not create burden because it only clarifies that those 90 days must be the cumulative total for a year, which is already outlined in subregulatory guidance.

We do not anticipate that this will change reporting behavior but want to explain the exception more clearly within the text of the final rule. G. Remove General Ownership Records Ownership records have special rules for reporting outlined in the statute (section 1128G(a)(2) of the Act), which are not included in the format for general records. However, there is currently a general record for reporting ownership and investment interest (Nature of Payment = 11).

We anticipate a small burden for the approximately 92 reporting entities who have previously used the general nature of payment category in order to fill out the different fields in the ownership record. This burden will allow the records to meet statutory mandates. H. Updated Contact Information Open Payments conducts regular compliance-related outreaches to reporting entities when it encounters data that may not meet program requirements.

We have found that the two contacts provided by applicable manufacturers and group purchasing organizations often become obsolete, especially if a company has not updated its contact information during the recertification process. It is crucial for the integrity of the data that we have the ability to contact entities in the case of Start Printed Page 65637 irregularities. Additionally, we believe that ensuring informal communications from CMS will reduce burden since it may prevent more formal compliance actions if the entity is unresponsive due to outdated contact information. However, we do not believe this is an issue for the majority of reporting entities, nor do we believe that keeping the contact information updated will create a large burden.

18. Updates to the Quality Payment Program In section IV.A. Of this final rule, we include our finalized policies for the Quality Payment Program. In this section, we first present the overall and incremental impacts to the number of expected QPs and associated APM Incentive Payments.

In the following sections, we estimate the overall and incremental impacts to the total MIPS eligible population and the payment impacts by practice size for the CY 2022 performance period/2024 MIPS payment year based on various finalized policies, including policies to modify MIPS eligibility, the MIPS final score and the performance threshold and additional performance threshold as discussed in sections IV.A.3.a., IV.A.3.d., IV.A.3.e., and IV.A.3.f. Of this final rule. For the MIPS payment adjustment, we ran two RIA models. A baseline and a final policies model.

The aim of the baseline model is to model the status of our population of clinicians for the CY 2022 performance period/2024 MIPS payment year if this final rule does not take effect. It therefore reflects previously finalized policies for the CY 2022 performance period/2024 MIPS payment year. Select examples of the baseline policies scheduled to start in the CY 2022 performance period/2024 MIPS payment year include the removal of the Web Interface as a collection type and the change in the performance category weights. There was no defined performance threshold or additional performance threshold, so our baseline model assumed the performance threshold and additional performance threshold used for the previous period (CY 2021 performance period/2023 MIPS payment year).

The aim of the final policies model is to estimate the incremental effect of the final policies for the CY 2022 performance period/2024 MIPS payment year on MIPS eligibility, MIPS final scores, and payment adjustments. In other words, by comparing the difference between our baseline model and our final policies model we can estimate the incremental impact of finalizing the policies contained in this final rule. Select examples of the finalized policies include, the inclusion of new MIPS eligible clinician types, the inclusion of the Web Interface as a collection type, the change in performance threshold and additional performance threshold, and the changes to the complex patient bonus. Refer to section VI.F.18.e.(2) of this final rule for the detailed methods on how we integrated the policies into the baseline and final policies models.

A. Assessing Use of 2020 Data for Estimating Future MIPS Performance In the 2022 PFS proposed rule (86 FR 39546), we stated that the RIA used the 2019 MIPS performance period data because the data for the 2020 MIPS performance period were not available in time to incorporate into the proposed rule model. We noted we would evaluate whether it is appropriate to use the 2020 performance period data to predict performance in CY 2022 for the final rule and whether adjustments would need to be made if CY 2020 performance period data are used. We have already acknowledged some data from the CY 2020 performance period is not usable.

For example, we have stated that based on our analysis of the 2020 performance period data, we could not reliably calculate scores for the cost measures that would adequately capture and reflect the performance of MIPS eligible clinicians. As a result, we reweighted the cost performance category for all MIPS eligible clinicians for the CY 2020 MIPS performance period.[] Additionally, in section IV.A.3.f.(2) of this final rule, we noted we have final score data for the CY 2020 performance period/2022 MIPS payment year available to use in our assessment of whether to use the mean or median for the performance threshold, but the data for the CY 2020 performance period/2022 MIPS payment year may be subject to change as a result of the targeted review process. However, we have also indicated that for certain purposes 2020 performance period data could be beneficial too. As discussed in section IV.A.3.e.(1)(c)(ii) of this final rule, we believe 2020 performance period data is appropriate to use for historic benchmarks in part because it is the most recent available dataset and it reflects a performance period in which clinicians were facing the PHE.

To evaluate whether the 2020 MIPS performance period data is appropriate to use to predict future performance, we considered whether the extreme and uncontrollable circumstances policy impacted submissions and data, and whether the buy antibiotics PHE impacted services provided (for example, quality measures, the number of MIPS eligible clinicians, claims). For the 2020 performance year, we applied the MIPS automatic extreme and uncontrollable circumstances policy to all individual MIPS eligible clinicians and allowed for extreme and uncontrollable applications due to the buy antibiotics PHE ( https://qpp.cms.gov/​resources/​buy antibiotics19?. €‹py=​2020 ). Due to these extreme and uncontrollable circumstances policies, not all clinicians or groups may have submitted data for the 2020 MIPS performance period.

When we evaluated whether the 2020 MIPS performance period data is appropriate to use to estimate 2022 MIPS performance period performance for MIPS eligible clinicians, we compared the 2020 MIPS performance period data to the 2019 MIPS performance period data on key metrics. Overall, we observed a decrease in the number of MIPS eligible clinicians at the individual level who exceed the low-volume threshold. We also observed a decline in data submitted by individual and group. Finally, when examining actual scores and payment information for the 2020 performance period/2022 MIPS payment year compared to the 2019 performance period/2021 MIPS payment year, we found an increase in the number of MIPS eligible clinicians receiving a neutral score.

However, our initial findings suggest the extreme and uncontrollable circumstances policy combined with the buy antibiotics PHE limit the data needed to simulate future MIPS eligible population and associated performance. Therefore, this RIA uses the 2019 MIPS performance period submissions which were used for the CY 2021 PFS final rule RIA (85 FR 85011 through 85023) and CY 2022 PFS proposed rule RIA (86 FR 39545 through 39556). We note that the findings are specific for purposes of estimating future performance for the entire population of MIPS eligible clinicians. B.

Estimated APM Incentive Payments to QPs in Advanced APMs and Other Payer Advanced APMs For payment years 2019 through 2024, through the Medicare Option, eligible clinicians with a sufficient percentage of Medicare Part B payments for covered professional services or Medicare patients through Advanced APMs will be QPs in the applicable QP performance period for a year. These QPs will receive a lump-sum APM Incentive Payment equal to 5 percent of Start Printed Page 65638 their estimated aggregate paid amounts for Medicare covered professional services furnished during the calendar year immediately preceding the payment year. Beginning in payment year 2021, in addition to the Medicare Option, eligible clinicians may become QPs through the All-Payer Combination Option. The All-Payer Combination Option allows eligible clinicians to become QPs by meeting the QP payment amount or patient count threshold through a pair of calculations that assess a combination of both Medicare Part B covered professional services furnished or patients through Advanced APMs and services furnished or patients through Other Payer Advanced APMs.

Eligible clinicians who become QPs for a year are not subject to MIPS reporting requirements and payment adjustments. Eligible clinicians who do not become QPs but meet a lower threshold to become Partial QPs for the year may elect to report to MIPS and, if they elect to report, will then be scored under MIPS and receive a MIPS payment adjustment. Partial QPs are not eligible to receive the APM Incentive Payment. If an eligible clinician does not attain either QP or Partial QP status and does not meet any other exemption category, the eligible clinician will be subject to MIPS, will report to MIPS, and will receive the corresponding MIPS payment adjustment.

Beginning in payment year 2026, the update to the PFS CF for services that are furnished by clinicians who achieve QP status for a year is 0.75 percent, while the update to the PFS CF for services that are furnished by clinicians who do not achieve QP status for a year is 0.25 percent. In addition, MIPS eligible clinicians will receive positive, neutral, or negative MIPS payment adjustments to payment for their Part B PFS services in a payment year based on performance during a prior performance period. Although the statute establishes overall payment rate and procedure parameters until 2026 and beyond, this impact analysis covers only the 2024 MIPS payment year of the Quality Payment Program. Overall, we estimate that for the 2022 QP Performance Period between 225,000 and 290,000 eligible clinicians will become QPs.

Therefore, they will be excluded them from MIPS and will qualify for the lump sum APM incentive payment in Payment Year 2024 based on 5 percent of their Part B paid amounts for covered professional services in the preceding year. These paid amounts for QPs are estimated to be between approximately $12,000 million and $15,000 million in total for the 2022 performance year. The analysis for this final rule used the 2020 third snapshot participation file. We based APM Incentive Payment Amounts on paid amounts with service dates of January 1, through September 30, 2020.

We multiplied the calculated amounts by 1.5 to approximate payment amounts for the full calendar year. We estimate that the total lump sum APM Incentive Payments will be approximately $600-750 million for the 2024 Quality Payment Program payment year. In section VI.F.18.a. Of this final rule, we projected the number of eligible clinicians that will be QPs, and thus excluded from MIPS, using several sources of information.

First, the projections are anchored in the most recently available public information on Advanced APMs. The projections reflect Advanced APMs that will be operating during the 2022 QP Performance Period as well as some Advanced APMs anticipated to be operational during the 2022 QP Performance Period. The projections also reflect an estimated number of eligible clinicians that will attain QP status through the All-Payer Combination Option. We note that the Kidney Care Choices Model and the Radiation Oncology model have been included in our analysis as we anticipate that the model will be Advanced APMs in 2022.

Additionally, we anticipate that the Maryland Primary Care Program will not be an Advanced APMs in 2022. The following APMs are expected to be Advanced APMs for the 2022 QP Performance Period. Bundled Payments for Care Improvement Advanced Model. Comprehensive Care for Joint Replacement Payment Model (CEHRT Track).

Global and Professional Direct Contracting Model. Kidney Care Choices Model (Kidney Care First. Professional Option and Global Option). Maryland Total Cost of Care Model (Care Redesign Program).

Medicare Shared Savings Program (Basic Track Level E, and the ENHANCED Track). Oncology Care Model (Two-Sided Risk Arrangements). Primary Care First (PCF) Model. Radiation Oncology model.

And, Vermont All-Payer ACO Model (Vermont Medicare ACO Initiative). We used the Participation Lists and Affiliated Practitioner Lists, as applicable, (see 81 FR 77444 through 77445 for information on the APM Participant Lists and QP determinations) on the 2020 third snapshot participation file to estimate the number of QPs, total Part B paid amounts for covered professional services, and the aggregate total of APM Incentive Payments for the 2022 QP Performance Period. We examined the extent to which Advanced APM participants will meet the QP Thresholds of having at least 50 percent of their Part B covered professional services or at least 35 percent of their Medicare beneficiaries furnished Part B covered professional services through the APM Entity. C.

Impact for the CY 2021 Performance Period/2023 MIPS Payment Year In section IV.A.3.e.(2)(a)(ii) of this final rule, we finalize our proposal to double the complex patient bonus, and to increase its cap to 10 points for the CY 2021 Performance Period/2023 MIPS Payment Year. We expect this policy to result in an increase of 3 points in the median bonus thus increasing MIPS final scores at the median by 3 points. We do not know the effects of the PHE for buy antibiotics and its effect on MIPS performance in 2021, so we did not recreate the analysis and payment distributions with the updated bonus for the CY 2021 performance period/2023 MIPS payment year (85 FR 85012 through 85019). The increase in complex patient bonus points will result in smaller payment adjustments for three reasons.

First, the resulting increase in final scores will reduce the budget neutral pool. Second, the increase in complex patient bonus points will increase the number of clinicians with scores above the performance threshold or additional performance threshold, meaning more clinicians will share in the budget neutral pool and additional $500 million for exceptional performance and potentially lower the scaling factor that is applied to the MIPS payment adjustment and additional payment adjustment. Third, the average scores of those receiving a positive or additional adjustment will be higher, which means the adjustment rates for clinicians that have scores above the performance threshold or additional performance threshold will be lower. D.

Estimated Number of Clinicians Eligible for MIPS Eligibility for the CY 2022 Performance Period/2024 MIPS Payment Year (1) Methodology To Assess MIPS Eligibility (a) Clinicians Included in the Model Prior To Applying the Low-Volume Threshold Exclusion To estimate the number of MIPS eligible clinicians for the CY 2022 performance period/2024 MIPS payment year and the effect of the final Start Printed Page 65639 policies in this final rule, we ran two models as described in section VI.F.18., a baseline model and final policies model. For the baseline and final policies models, we used the same eligibility files and approach described in the CY 2021 PFS final rule (85 FR 85013) which resulted in the inclusion of 1.6 million clinicians who had PFS claims from October 1, 2018 to September 30, 2019, as well as additional clinicians associated with a group who had at least one PFS claim from October 1, 2019, through December 31, 2019. We used the same exclusion criteria to exclude clinicians from our MIPS eligibility assessment as described in the CY 2021 PFS final rule RIA (85 FR 85013) with the following model updates. (1) In both the baseline and final policies models, we excluded practitioners in Next Generation ACOs because the Next Generation ACO model ends in the CY 2021 MIPS performance period.

(2) In both the baseline and final policies models, to determine which clinicians in the initial population of 1.6 million should be excluded as QPs, we used Advanced APM payment and patient percentages from the APM Participant List for the final snapshot date for the 2019 QP performance period. We elected to use this data source because the APM participant list for the 2019 final snapshot can reliably be used for RIA projections. From this data, we calculated the QP and Partial QP determinations as described in section of IV.A.4.c.(1)(b) of this final rule for the 2022 QP performance period for both models. (3) In the final policies model, we included in our estimated MIPS eligible population for the CY 2022 performance period/2024 MIPS payment year clinical social workers and CNMs as finalized in section IV.A.3.a.(1) of this final rule.

(4) In the final policies model, we are integrating the provision that starting with the CY 2022 MIPS performance period/2024 MIPS payment year, small practices, excluding virtual groups, must submit data as a group in any performance category to indicate that they wish to be scored as a group for Medicare Part B claims. This affects eligibility because previously a single Medicare Part B claims submission, without any other submission, started a group score. Once a group score is created, a clinician who was individually excluded from MIPS for being under the low-volume threshold, may now be eligible if the group exceeds the low-volume threshold. This policy is described at section IV.A.3.a.(3) of this rule.

(b) Assumptions Related To Applying the Low-Volume Threshold Exclusion The low-volume threshold policy may be applied at the individual (TIN/NPI) or group (TIN) levels based on how data are submitted including under the APM Entity level if the clinician is part of an APM Entity in a MIPS APM (hereafter, a MIPS APM Entity) that elects to submit to MIPS. A clinician or group that exceeds at least one but not all three low-volume threshold criteria may become MIPS eligible by electing to opt-in and subsequently submitting data to MIPS, thereby getting measured on performance and receiving a MIPS payment adjustment. For the final policies model, we describe below the estimated MIPS eligibility status and the associated PFS allowed charges of clinicians in the initial population of 1.6 million clinicians. We present in section VI.F.18.d.(1)(c) the incremental impact of the final policies from the baseline model for the CY 2022 performance period/2024 MIPS payment year on the MIPS eligible clinician population and their associated PFS allowed charges.

We applied the same assumptions presented in the CY 2021 PFS final rule RIA to apply the low-volume threshold and to understand whether clinicians participate as a group, virtual group, APM entity, or as individuals (85 FR 85013 through 85016), except for three modifications. We assumed only individuals or APM TINs that exceeded the low-volume threshold will receive an APM Performance Pathway (APP) score consistent with the policy as finalized in the CY 2021 PFS final rule (85 FR 84897).[] We assumed APM TINs that qualified for opt-in and submitted data as a TIN will also be eligible. Finally, we did not consider clinicians in groups as MIPS eligible clinicians nor start a group score for clinicians in small practices with only Medicare Part B claims submissions to reflect the policy finalized at section IV.A.3.a.(3) of this rule. Table 144 summarizes our eligibility estimates for the final policies model.

We identify approximately 212,000 clinicians [] as having “required eligibility” in Table 144. These clinicians will be MIPS eligible because they exceed the low volume threshold as individuals and are not otherwise excluded. These clinicians may ultimately choose to participate in MIPS as an individual, group, virtual group or APM entity or to not participate. Regardless of how they participate they will be considered MIPS eligible.

We estimate approximately 595,000 additional MIPS eligible clinicians will be eligible as “group eligibility” in Table 144. These clinicians belong to an APM entity, group or virtual group that meets the low-volume threshold and submits to MIPS. If they were not associated with the group submission, these clinicians would not be eligible for MIPS. Finally, we estimate about 3,000 clinicians will be eligible through “opt-in eligibility” through the “opt-in” policy for a total MIPS eligible clinician population of approximately 810,000.

This leads to an associated $67 billion allowed PFS charges estimated to be included in the CY 2022 performance period/2024 MIPS payment year. Start Printed Page 65640 Furthermore, we estimate there will be approximately 412,000 clinicians as “Potentially MIPS eligible” in Table 144. These clinicians are not MIPS eligible but could be if their practice decides to participate or they elect to opt-in. These clinicians will be included as MIPS eligible in the unlikely scenario in which all group practices elect to submit data as a group, or clinicians in a group that does not submit are eligible to opt-into MIPS individually and choose to do so.

This assumption is important because it quantifies the maximum number of MIPS eligible clinicians. When this unlikely scenario is modeled, we estimate the MIPS eligible clinician population could be as high as 1.2 million clinicians. Finally, we estimate approximately 101,000 clinicians will not be MIPS eligible because they and their group are below the low-volume threshold on all three criteria and another approximately 304,000 will not be MIPS eligible because they are categorically excluded regardless of volume or submission activity. Eligibility among many clinicians is contingent on submission to MIPS as a Start Printed Page 65641 group, virtual group or election to opt-in, therefore we will not know the number of MIPS eligible clinicians who submit until the submission period for the 2022 MIPS performance period is closed.

For this final policies model analysis, we use the estimated population of 809,593 MIPS eligible clinicians described above. (c) Estimated Impact of the Final Policies on MIPS Eligibility and PFS Allowed Charges We illustrate in Table 145 how the final policies to add clinical social workers and CNMs as MIPS eligible clinician types and the policy to require small practices to submit data as a group for a group quality performance category score as finalized in sections IV.A.3.a.(1) and IV.A.3.a.(3) of this final rule affects the estimated number of MIPS eligible clinicians. The amended regulation text that we finalized in section IV.A.3.a.(2) of this final rule does not make modify how we assess eligibility in MIPS in our final policies model. The first row in Table 145 presents the estimates from the RIA baseline model with the number of individuals that will be MIPS eligible clinicians for the 2022 performance period/2024 MIPS payment year if this rule does not take effect.

The second row presents estimates from the RIA final policies model with the incremental impact of adding the two new MIPS eligible clinician types on the number of MIPS eligible clinicians for the CY 2022 performance period/2024 MIPS payment year. As shown in Table 145, the final policies lead to a small increase in the number of MIPS eligible clinicians (1.1 percent increase) and a minimal increase in the PFS allowed charges (0.1 percent increase) for the CY 2022 performance period/2024 MIPS payment year. e. Estimated Impacts on Payments to MIPS Eligible Clinicians for the CY 2022 Performance Period/2024 MIPS Payment Year (1) Summary of Approach In sections IV.A.3.d., IV.A.3.e.

And IV.A.3.f. Of this final rule, we present several provisions which impact the measures and activities that impact the performance category scores, final score calculation, and the MIPS payment adjustment. We discuss these changes in more detail in section VI.F.18.e.(2). Of this RIA as we describe our methodology to estimate MIPS payments for the CY 2022 performance period/2024 MIPS payment year.

We then present the impact of the overall final policies on the CY 2022 performance period/2024 MIPS payment year and then compare select metrics to the baseline model, which only incorporates previously finalized policies for the CY 2022 performance period/2024 MIPS payment year. By comparing the baseline model to the final policies model, we can estimate the incremental impact of this rule's policies to the CY 2022 performance period/2024 MIPS payment year. The payment impact for a MIPS eligible clinician is based on the clinician's final score, and MIPS eligible clinicians can participate as an individual, group, virtual group, or APM Entity in the four MIPS performance categories. Quality, cost, improvement activities, and Promoting Interoperability.

As discussed in section VI.F.18. Of this final rule, we generally used data submitted for the 2019 performance period. For the cost performance category, we used the same data as the CY 2020 PFS final rule (84 FR 63169), which is primarily testing data for the cost measures. The estimated payment impacts presented in this final rule are averages by practice size weighted by Medicare utilization.

The payment impact for a MIPS eligible clinician will vary from the average and will depend on the measure submissions, scores and their performance. (2) Methodology To Assess Impact To estimate participation in MIPS for the CY 2022 performance period/2024 MIPS payment year for this final rule, we generally used 2019 MIPS performance period data for both the baseline and final policies models. Our baseline and final policies scoring models included the 801,013 and 809,593 estimated MIPS eligible clinicians, respectively, as described in section VI.F.18.d.(1) of this RIA. To estimate the impact of MIPS policies on MIPS eligible clinicians, we generally used the 2019 MIPS performance period submissions data, including data submitted for the quality, improvement activities, and Promoting Interoperability performance categories.

We supplemented this information with 2019 data available for CAHPS for MIPS and CAHPS for ACOs, testing data for the revised total per capita cost measure and Medicare Spending Per Beneficiary (MSPB) clinician measures which were finalized in the CY 2020 PFS final rule (84 FR 62969 through 62977), testing data for the new episode cost measures, administrative claims data for the new quality performance category measures, and other data sets.[] We calculated a hypothetical final score for the 2022 performance period/2024 MIPS Start Printed Page 65642 payment year for the baseline and final policies scoring models for each MIPS eligible clinician using score estimates for quality, cost, Promoting Interoperability, and improvement activities performance categories, where each are described in detail in the following subsections. (a) Methodology To Estimate the Quality Performance Category Score We estimated the quality performance category score using a methodology like the one described in the CY 2021 PFS final rule (85 FR 85016 through 85017) for baseline and final policy RIA models for the CY 2022 performance period/2024 MIPS payment year. For the baseline policies RIA model, which does not reflect the final policies for CY 2022 performance period/2024 MIPS payment year from this final rule, we made the following modifications to reflect the previously finalized policies for the CY 2022 performance period/2024 MIPS payment year for the quality performance category. As previously finalized in the CY 2021 PFS final rule (85 FR 84870 and 85 FR 84843), we removed the Web Interface as a collection type in MIPS and through the APP for the CY 2022 performance period/2024 MIPS payment year.

Although the Web Interface is to be reinstated for groups for the CY 2022 performance period/2024 MIPS payment year and ACOs for CY 2022 performance period/2024 MIPS payment year through CY 2024 performance period/2026 MIPS payment year as discussed in sections IV.A.3.d.(1)(d) and IV.A.3.c.(2)(a), respectively, the baseline model is attempting to capture the CY 2022 performance period/2024 MIPS payment year as if this provision did not exist. Therefore, the baseline model does not incorporate the Web Interface as a collection type for groups and ACOs. To estimate a quality performance category score for clinicians in groups who previously used the Web Interface as a collection type in 2019, we assumed these groups will use the other two other collection types (MIPS CQMs and eCQMs) available in the 2022 performance period/2024 MIPS payment year. We then applied the same methodology described in the CY 2021 PFS proposed rule when the removal of Web Interface as a collection type was previously proposed (85 FR 50387 through 50388) using 2019 MIPS submissions data.

To estimate a quality performance category score for ACOs, we used the same methodology described in the CY 2021 PFS proposed rule when the Web Interface was not included in the APP (85 FR 50388). • We used the published 2021 MIPS historical quality benchmarks file to identify measures subject to the topped out scoring cap that was finalized (82 FR 53721 through 53727).[] For the final policies model, we made the following modifications to the baseline model to reflect the new final policies for the 2022 performance period/2024 MIPS payment year for the quality performance category. As discussed in section IV.A.3.d.(1)(e) of this final rule, we finalized one new administrative claims measure for those for whom it is applicable. Clinician and Clinician Group Risk-standardized Hospital Admission Rates for Patients with Multiple Chronic Conditions.

To implement this policy in our final policies RIA model for the CY 2022 performance period/2024 MIPS payment year, we used testing data for this new administrative claims measure. As discussed in section IV.A.3.d.(1)(c) of this final rule, we are finalizing our proposals with modification to maintain the data completeness criteria threshold of at least 70 percent for the CY 2021, CY 2022, and CY 2023 performance periods/2023, 2024, and 2025 MIPS payment years for QCDR measures, MIPS CQMs, or eCQMs. This is not a change from our baseline model assumptions. As discussed in section IV.A.3.d.(1)(e) of this final rule, we are finalizing our proposal to establish measure substantive change criteria.

We did not make modifications to the final policies model for this policy. We scored measures using the benchmarks described below. In section IV.A.3.d.(1)(g) of this final rule, we are finalizing several changes to the CAHPS for MIPS survey. We did not incorporate these changes into our model due to the lack of data.

In Appendix 1 of this final rule, we added 4 new quality measures, removed 13 measures, and finalized 87 substantially modified measures. Consistent with prior rules, (83 FR 50053), our RIA estimates assume that clinicians who reported Medicare Part B claims, eCQM, MIPS CQM and QCDR measures that are removed would find alternate measures. Therefore, we assign points to the measures that and included them in our scoring model. • As discussed in section IV.A.3.e.(1)(c)(ii) of this final rule, we did not finalize our proposal to use performance period benchmarks for the CY 2022 performance period in accordance with § 414.1380(b)(1)(ii) as opposed to a historical benchmark.

For the final policies model, we utilized the most recent benchmark file. The 2021 MIPS performance period historic benchmarks.[] However, the 2019 performance data we are using to estimate future performance includes data on measures that do not have a benchmark in the 2021 MIPS benchmark file (either because the measure was removed or because there were significant changes). If a benchmark was not available in the 2021 MIPS performance period historic benchmark file, then we supplemented the 2021 MIPS benchmark file with the benchmarks used for the CY 2019 performance period/2021 MIPS payment year. As discussed in section IV.A.3.e.(1)(c)(iii)(A) of this final rule, we are delaying our proposal to remove the 3-point floor for each measure that can be reliably scored against the benchmark and score the measure from 1 to 10 points until the CY 2023 performance period/2025 MIPS payment year.

Similarly, we are delaying our proposal in section IV.A.3.e.(1)(c)(iii)(B) of this final rule to remove the special scoring policy of scoring 3 points for class 2 measures, except for clinicians in small practices until the CY 2023 performance period/2025 MIPS payment year. Therefore, our RIA for the CY 2022 performance period/2024 MIPS payment year re-established the 3-point floor for class 1 measures and 3 points for class 2 measures. • As discussed in section IV.A.3.e.(1)(c)(iii)(B), we are finalizing our proposed policies for scoring new measures with modifications. For measures in their first two performance periods that meet data completeness and can be reliably scored against a benchmark (class 4a measures), we will assign a floor of 7 points for measures in their first year and a floor of 5 points for measures in their second year.

For new measures in their first two performance periods that meet data completeness, but cannot be reliably scored against a benchmark because they lack a benchmark or do not meet case minimum in the program (class 4b measures), we will assign 7 points for measures in their first year and 5 points for measures in their second year. We incorporated these scoring changes into our final policies model. Because we are using 2019 MIPS performance period Start Printed Page 65643 data, we assume that measures new to MIPS in 2019 are in their first year and measures new to MIPS in 2018 are in their second year. As discussed in sections IV.A.3.e.(1)(c)(vii) and IV.A.3.e.(1)(c)(viii) of this final rule, we finalized our proposal to remove measure bonus points for reporting high priority measures and for submitting with end-to-end electronic reporting beginning in the 2022 MIPS performance period.

We incorporated these scoring changes into our final rule model for all MIPS collection types. As discussed in section IV.A.3.d.(1)(d), we are extending the Web Interface measures for the CY 2022 performance period/2024 MIPS payment year for groups and virtual groups using the existing 10 CMS Web Interface measures. To estimate the impact of this policy, we used the same methodology described in the CY 2021 PFS final rule (85 FR 85016 through 85017) using 2019 MIPS submissions data. Finally, we will extend the CMS Web Interface as a means of reporting quality under the APM Performance Pathway for Shared Savings Program ACOs for the 2022 performance period/2024 MIPS payment year through the 2024 performance period/2026 MIPS payment years as described in section IV.A.3.c.(2)(a) of this final rule.

Under the provision, Web Interface reporting will work in the same manner as for performance year 2021, where ACOs will have the option of reporting either the CMS Web Interface, the APP eCQM/MIPS CQM measure set, or both. To estimate the impact of this policy, we used the same methodology described in the CY 2021 PFS final rule RIA (85 FR 85016 through 85017) when Web Interface was retained for the APP. (b) Methodology To Estimate the Cost Performance Category Score We estimated the cost performance category score using a similar methodology described in the CY 2020 PFS final rule (84 FR 63169) with the modifications to the baseline and the final policies RIA model described in this section. In the baseline model, we refined our methodology for developing benchmarks to better reflect the previously finalized policy in CY 2017 Quality Payment Program final rule (81 FR 77308 through 77309).

We did not estimate cost improvement scoring that starts in the 2022 performance period/2024 MIPS payment year as previously finalized at § 414.1380(a)(1)(ii) and in the CY 2019 PFS final rule (83 FR 58956) since we did not have sufficient data to conduct improvement scoring, which requires 2 years of cost data to model. In the final policies model, we modified the baseline model to incorporate the provision to add five new episode-based cost performance category measures in the CY 2022 performance period/2024 MIPS payment year as described in section IV.A.3.d.(2) of this final rule, by using claims data from January 1, 2019 to December 31, 2019. Cost measures were scored if the clinicians or groups met or exceeded the case volume. 10 episodes for Melanoma Resection to align with the reporting case minimum for procedural cost measures currently in use in MIPS, 20 episodes for Sepsis to align with the reporting case minimum for acute inpatient condition cost measures currently in use in MIPS, 20 episodes for Diabetes and Asthma/COPD as used in field testing for these chronic measures, and 20 episodes for Colon Resection.

These new cost episode-based measures were calculated for both the TIN/NPI and the TIN. (c) Methodology To Estimate the Facility-Based Measurement Scoring For the baseline model, we estimated the facility-based score using the scoring policies finalized in the CY 2018 Quality Payment Program final rule (82 FR 53763) and the methodology described in the CY 2020 PFS final rule (84 FR 63169). For the final policies model, we used the methodology for the CY 2022 performance period/2024 MIPS payment year as discussed in section IV.A.3.e.(2)(b)(v)(B) of this final rule. We proposed at § 414.1380(e)(vi) that beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, the MIPS quality and cost performance category scores will be based on the facility-based measurement scoring methodology unless a clinician or group receives a higher MIPS final score through another MIPS submission.

Therefore, if a MIPS eligible clinician or a group is eligible for facility-based measurement, but they participate in MIPS as an individual or group, we used the higher final score between the facility-based scoring and MIPS submission-based scoring. (d) Methodology To Estimate the Promoting Interoperability Performance Category Score For the baseline model, we used the CY 2019 MIPS Promoting Interoperability performance period data submissions data to estimate CY 2022 MIPS performance for the Promoting Interoperability performance category. We made the following two modifications to the 2019 performance period scoring to reflect the previously finalized policy changes between the CY 2019 and CY 2021 performance periods. (1) We doubled the bonus points for clinicians who submitted the PDMP measure as described in section IV.A.3.d.(4)(c)(i) of this final rule.

And (2) we did not incorporate the Verify Opioid Treatment Agreement measure data, a measure that was finalized in the CY 2019 performance period (83 FR 59807) but removed in the CY 2020 performance period (84 FR 62994). We retained the PDMP bonus for the baseline model for continuity between the CY 2021 and 2022 performance periods and for consistency since bonuses for the quality performance category were retained for the baseline as well. Because we lacked data on who would adopt the finalized Health Information Exchange bi-directional exchange measure for the CY 2021 performance period we only used past reporting on the two existing Health Information Exchange Objective measures to estimate CY 2022 Promoting Interoperability performance. For the final policies model, we considered the following policy provisions as potential modifications to the baseline model.

In section IV.A.3.d.(4)(c)(i) of this final rule, we finalized our proposal for the PDMP measure to remain optional and at 10 points. Modifications were not made to reflect this policy in the final policies model since the baseline model already incorporated this policy. In section IV.A.3.d.(4)(c)(ii) of this final rule, we did not finalize our proposed modifications to the Provide Patients Electronic Access to Their Health Information measure. For this model, we did not make any modifications and continued to use the Provide Patients Electronic Access to Their Health Information measure that was submitted for the 2019 MIPS performance period.

• In section IV.A.3.d.(4)(c)(iii) of this final rule, we finalized to require two of the measures associated with the Public Health and Clinical Data Exchange Objective, beginning with the CY 2022 performance period. Immunization Registry Reporting. And Electronic Case Reporting. We also finalized in section IV.A.3.d.(4)(c)(iii) of this final rule to retain the Public Health Registry Reporting, Clinical Data Registry Reporting, and Syndromic Surveillance Reporting measures, and to make them optional and available for bonus points beginning with the CY 2022 performance period/2024 MIPS payment year.

We did not model these policy changes because the Promoting Start Printed Page 65644 Interoperability data we used for this analysis is based on the CY 2019 performance period when a clinician was only required to report two of the possible 5 measures for the Public Health and Clinical Data Exchange Objective. We believe incorporating this policy might artificially lower scores for the Public Health and Clinical Data Exchange Objective because there was no requirement to specifically report the Immunization Registry Reporting and Electronic Case Reporting measures in 2019. In section IV.A.3.d.(4)(d) of this final rule, we finalized the additional requirement that eligible clinicians must attest to conducting an annual assessment of the High Priority Guide of the SAFER Guides beginning with the 2022 performance period. This policy was not implemented in the final policies model as it does not affect eligibility or payment.

We included this policy in our burden calculations in section V.B.8.g.(3) of this rule. In section IV.A.3.d.(4)(g) of this final rule, we finalized changes to the attestation statements for information blocking. We did not include this policy in our model due to lack of information. In section IV.A.3.d.(4)(h)(i) of this final rule, we finalized beginning with the CY 2022 performance period/2024 MIPS payment year, we will no longer require an application for clinicians and small practices seeking to qualify for the small practice hardship exception and reweighting.

We will assign a weight of zero only in the event a small practice did not submit any data for any of the measures specified for the Promoting Interoperability performance category. This policy was implemented in the final policies model. In section IV.A.3.d.(4)(h)(ii) and IV.A.3.d.(4)(h)(iii) of this final rule, we finalized our proposal to continue the existing policy to reweight the Promoting Interoperability performance category for NPs, PAs, CRNAs, CNSs, physical therapists, occupational therapists, qualified speech-language pathologist, qualified audiologists, clinical psychologists, and registered dieticians or nutrition professionals for the CY 2022 performance period/2024 MIPS payment year. The baseline model already incorporated this policy.

In section IV.A.3.d.(4)(h)(iv), we finalized that we will apply the same Promoting Interoperability reweighting policy we adopted previously for NPs, PAs, CNSs, CRNAs, and other types of MIPS eligible clinicians to clinical social workers. This policy was implemented in the final policies model. (e) Methodology To Estimate the Improvement Activities Performance Category Score For the baseline model, we modeled the improvement activities performance category score based on CY 2019 performance period data and APM participation identified in section VI.F.18.d.(1) of this final rule. For clinicians and groups not participating in a MIPS APM, we used the CY 2019 submissions improvement activities score.

We did not model the policy finalized for the CY 2020 performance period (84 FR 62980) to require a minimum threshold of 50 percent of clinicians in a group to complete an improvement activity for the group to receive credit since we did not have data to determine the proportion of clinicians in a group that completed the improvement activity. We continued to apply the methodology described in the CY 2020 PFS final rule (84 FR 63170) to assign an improvement activities performance category score. For the APM participants identified in section VI.F.18.d.(1) of this final rule, we assigned an improvement activity performance category score of 100 percent. For the final policies model, we did not make modifications to the baseline model for the improvement activities changes finalized in section IV.A.3.d.(3) of this final rule.

The final policies are (1) revise group reporting requirements for the 50 percent threshold to address subgroups. (2) revise the timeframe for improvement activities nominated during a PHE. (3) revise the required criteria for improvement activity nominations received through the Annual Call for Activities. (4) suspend activities that raise possible safety concerns or become obsolete from the program when this occurrence happens outside of the rulemaking process.

(5) add 7 new improvement activities, modify 15 existing improvement activities, and remove 6 previously adopted improvement activities. (6) revise the “Drug Cost Transparency to include requirements for use of real-time benefit tools” improvement activity. And (7) add the buy antibiotics “Clinical Data Reporting with or without Clinical Trial” improvement activity. For policy 1, we lacked data to model the impact on improvement activities performance category.

Policies 2 and 3 are related to the call for improvement activities which does not affect the improvement activities performance category scores. Policies 4 through 7 address changes to specific improvement activities or the improvement activity inventory. We anticipate most clinicians performing improvement activities will continue to identify and report similar improvement activities from the inventory in future years. Please see section VI.F.18.g.(2)(f) of this final rule for additional details on the impact of these policy changes.

(f) Methodology To Estimate the Complex Patient Bonus Points In section IV.A.3.e.(2)(a)(iii)(B) of this final rule, we will continue to apply the complex patient bonus, with updates, for the CY 2022 performance period/2024 MIPS payment year. For the baseline model, we used the complex patient bonus information calculated for the 2019 performance period data for the CY 2022 performance period/2024 MIPS payment year, as was previously done in the CY 2021 PFS final rule (85 FR 85017). For the final policies model, we calculated the complex patient bonus using the calculation in section IV.A.3.e.(2)(a)(iii)(B) of this final rule for the CY 2022 performance period/2024 payment year. We finalized updates to the complex patient bonus for the CY 2022 performance period/2024 MIPS payment year and future MIPS performance periods/payment years to account for social and medical complexity, while still using our current established indicators of dual proportion and HCC risk scores, respectively.

Consistent with the policy for the 2022 performance period, our final policies RIA model calculated and applied the separate risk indicator complex patient bonus components methodology with a single overall cap. (g) Methodology To Estimate the Final Score We did not make changes for how we calculated the MIPS final score. Our baseline and final policies models assigned a final score for each TIN/NPI by multiplying each estimated performance category score by the corresponding performance category weight, adding the products together, multiplying the sum by 100 points, adding the complex patient bonus, and capping at 100 points. For the baseline model, we applied the performance category weights and redistribution weights finalized in the CY 2021 PFS final rule (85 FR 84913 through 84916).

For the final policies model, we modified the redistribution policy for small practices as described in section IV.A.3.e.(2)(b)(iii)(A) of this final rule. For both models, after adding any applicable bonus for complex patients, we reset any final scores that exceeded 100 points to equal 100 points. For Start Printed Page 65645 MIPS eligible clinicians who were assigned a weight of zero percent for any performance category, we redistributed the weights according to section IV.A.3.e.(2)(b)(ii) of this final rule. (h) Methodology To Estimate the MIPS Payment Adjustment For the baseline model, we applied the hierarchy as finalized in the CY 2021 PFS final rule (85 FR 84917 through 84919) to determine which final score should be used for the payment adjustment for each MIPS eligible clinician when more than one final score is available.

For the final policies model, we applied the scoring hierarchy finalized in section IV.A.3.f.(5) of this final rule. We then calculated the parameters of an exchange function in accordance with the statutory requirements related to the linear sliding scale, budget neutrality, minimum and maximum adjustment percentages, and additional payment adjustment for exceptional performance (§ 414.1405). For the baseline model, we applied the performance threshold and additional performance thresholds finalized for the CY 2021 performance period/2023 payment year (85 FR 84923), of 60 and 85, respectively. For the final policies model, we used the performance threshold of 75 points in section IV.A.3.f.(2) and the additional performance threshold of 89 points in section IV.A.3.f.(3).

We used these resulting parameters to estimate the positive or negative MIPS payment adjustment based on the estimated final score and the paid amount for covered professional services furnished by the MIPS eligible clinician. As discussed in the CY 2021 PFS final rule RIA (85 FR 85013), we adjusted the paid amount of non-engaged clinicians to equal their proportion of paid amount prior to the PHE for buy antibiotics for the baseline and final policies models. (3) Impact of Payments by Practice Size As we shift from previous MIPS transition policies by removing bonuses from the quality performance category and increasing the performance threshold and the additional performance threshold, we observe large changes between the baseline model and final policies model. First, we observe an increase in the funds available for redistribution due to the increase in clinicians with final scores below the performance threshold.

The baseline model estimates $428 million will be redistributed through BN and that $500 million will be distributed to MIPS eligible clinicians for exceptional performance. The mean and median final scores for the baseline model are 78.13 and 82.59, respectively. Our final policies model estimates that $603 million will be redistributed through BN. For clinicians who meet or exceed the additional performance threshold, an additional $360 million was estimated to be distributed.

The mean and median final scores for the final policies model are 75.21 and 79.59, respectively. In the final policies model, the estimated bonus for exceptional performance is less than the $500 million of available funding because the maximum additional payment adjustment for clinicians with exceptional performance reached 10 percent. As finalized in the 2017 QPP final rule (81 FR 77339 through 77340), we stated the maximum additional payment adjustment would be 10 percent, which is established by the statute, and that it would be multiplied by a scaling factor that cannot exceed 1.0. We reached the maximum additional payment adjustment allowed of 10 percent because the additional performance threshold is higher, and fewer clinicians performed above this higher additional performance threshold while a greater percentage of clinicians performed below the additional performance threshold.

As a result, fewer clinicians are estimated to share the funds available through the additional bonus for exceptional performance. Second, we observe an increase in the maximum positive payment adjustment. The baseline model estimates the maximum positive MIPS payment adjustment based on the budget neutral pool at 1.5 percent and the maximum positive MIPS additional payment adjustment for exceptional performance at 5.1 percent, for a combined maximum payment adjustment of 6.6 percent. The final policies model estimates the maximum MIPS positive payment adjustment based on the budget neutral pool is 4.4 percent and the maximum positive additional MIPS payment adjustment for exceptional performance bonus at 10.0 percent for a combined maximum payment adjustment of 14.4 percent.

Finally, we see narrower differences in performance across practice sizes due to the shift from MIPS transition policies. Table 146 shows the overall impact of the payment adjustments by practice size and based on whether clinicians are expected to submit data to MIPS for the final policies model. In Table 147, we present the overall impact of the baseline and the final policies models among clinicians who submit data to assess the incremental impact of the final policies. The overall proportion of clinicians receiving a positive or neutral payment adjustment decreases from 91.7 percent to 66.8 percent with the implementation of the final policies that shift away from MIPS transition policies.

In addition, we no longer observe a disproportionate number of clinicians in small practices receiving a negative payment adjustment when implementing the final policies. For the CY 2022 performance period/2024 payment year, we have policies targeted towards small practices including special scoring policies to minimize burden and facilitate small practice participation in MIPS or APMs, which we describe in section VI.F.18.g.(2)(e) of this final rule. The intention of the final policies is to provide a more equitable participation process and reduce the disparity in performance between clinicians in large and small practices. These findings and final policies reflect movement away from the transition policies implemented during the early years of MIPS and how MIPS has shifted its focus to value rather than primarily on engagement.

However, non-engagement by not submitting data to MIPS among clinicians in small practices is still a concern. Among those who we estimate will not submit data to MIPS, 86 percent are in small practices (22,475 out of 26,180 clinicians who do not submit data). We intend to continue working with stakeholders to improve engagement in MIPS among clinicians in small practices. We want to highlight we are using 2019 MIPS performance period submissions data to simulate a 2022 MIPS performance period final score, and it is likely that there will be changes that we cannot account for at this time, including services and payments disrupted by the PHE for buy antibiotics or clinicians changing behavior in response to the performance thresholds increased for the CY 2022 performance period/2024 MIPS payment year to avoid a negative payment adjustment.

It should also be noted that the estimated number of clinicians who do not submit data to MIPS may be an overestimate of non-engagement in MIPS for the CY 2022 performance period/2024 MIPS payment year. This is because the PHE for buy antibiotics may have resulted in fewer clinicians submitting data to MIPS or more clinicians electing to apply for the extreme and uncontrollable circumstances policies due to the PHE for buy antibiotics for the 2019 MIPS performance period. Therefore, engagement levels in MIPS Start Printed Page 65646 for the CY 2022 performance period/2024 MIPS payment year may differ from these reported estimates. We also note this participation data is generally based off participation for the 2019 performance period, which is associated with the CY 2019 performance period/2021 MIPS payment year and had a performance threshold of 30 points, and that participation may change for the CY 2022 performance period/2024 MIPS payment year when the performance threshold is 75 points.

Finally, the combined impact of negative and positive adjustments and the additional positive adjustments for exceptional performance as a percent of paid amount among those that do not submit data to MIPS on average was negative 8.5 percent. It was not the maximum negative payment adjustment of 9 percent because some MIPS eligible clinicians that do not submit data to MIPS can still receive a MIPS final score that is greater than 1/4 of the performance threshold (and avoid the maximum negative adjustment as stipulated by section 1848(q)(6)(A)(iv)(II) of the Act [] ) if they have sufficient claims volume to measure performance for cost measures or quality administrative claim measure, which utilizes administrative claims data and does not require separate data submission to MIPS. Start Printed Page 65647 f. Estimated Impacts on Payments to MIPS Eligible Clinicians for the CY 2023 Performance Period/2025 MIPS Payment Year We proposed for the CY 2023 MIPS Performance Period to begin transitioning to MIPS Value Pathways (MVPs) and introduce subgroup reporting in the CY 2023 MIPS performance period/2025 payment year.

As described in section IV.A.3.b.(2)(c) of this final rule, the first step in the transition plan for MVPs and subgroup reporting is to be voluntary, where eventually MVPs and subgroups will become required. Additionally, subgroups, if applicable, will have the option to report an APP. Since MVP and subgroup reporting will only begin in the CY 2023 performance period/2025 MIPS payment year, we do not have the data to report who will select MVPs and who will report through subgroups in the first year and how these clinicians will score. As discussed in section IV.A.3.b.(5) of this final rule, for MVP scoring policies, we evaluated all traditional MIPS scoring policies and maintained those that are required under section 1848(q)(2) of the Act such as requirements to measure achievement and improvement of the quality and cost of care.

We noted MVPs offer incentives in terms of requiring fewer measures and activities tied to a specialty or medical condition which can offer clinicians a more cohesive experience and that we would continue to evaluating additional incentives that align with our scoring policies and the goals of MVPs in future rulemaking. For this RIAs, we assume clinicians who elect to use MVPs and subgroups for reporting to MIPS will perform similarly to how they performed through traditional MIPS because the scoring policies are similar. We will revisit this assumption in future rulemaking as needed. As discussed in section V.B.8.e.(7)(a) of this final rule, for the purposes of estimating burden associated with the provision to implement MVP and subgroup reporting, we assume that 10 percent of MIPS eligible clinicians in the CY 2022 performance period/2024 MIPS payment year will report as MVP participants in the CY 2023 performance period/2025 MIPS payment year.

In addition, we assume that there will be 20 subgroup reporters in the CY 2023 performance period/2025 MIPS payment year. We anticipate a per respondent reduction of 3 hours and $412 dollars per CQM/QCDR quality submission, 3 hours and $336 per eCQM quality submission, and 5 hours and $717 per claims quality submission. Overall, we estimate a net reduction in burden of $7,463,145 in the quality performance category ICRs due to the introduction of MVP and subgroup reporting in the CY 2023 performance period/2025 MIPS payment year. We refer readers to section V.B.8.e.(7)(a)(iii) of this final rule for further discussion of our burden associated with MVPs and subgroups including the number of respondents.

G. Additional Impacts From Outside Payment Adjustments (1) Burden Overall In addition to policies affecting the payment adjustments, we proposed several policies that have an impact on burden in the CY 2022 and CY 2023 performance periods/2024 and 2025 MIPS payment years. In section V.B.8 of Start Printed Page 65648 this final rule, we outline estimates of the costs of data collection that includes both the effect of policy updates and adjustments due to the use of updated data sources. For each provision included in this regulation which impacts our estimate of collection burden, the incremental burden for each is summarized in Table 148.

We also provide additional burden discussions that we are not able to quantify. As discussed in the section V.B.8 of this final rule, we are setting forth our estimates for the CY 2023 performance period/2025 MIPS payment year as new burden with no currently approved estimate. To provide the reader a better sense of the differences in burden between our CY 2022 and CY 2023 performance period/2024 and 2025 MIPS payment year estimates due to changes in policy, we are presenting our CY 2023 performance period/2025 MIPS payment year estimates in Table 148 in comparison to the CY 2022 performance period/2024 MIPS payment year estimate found in the CY 2021 PFS final rule. In Table 148, we are only including our CY 2023 performance period/2025 MIPS payment year estimates for the ICRs where our estimate is different from our CY 2022 performance period/2024 MIPS payment year estimate.

Start Printed Page 65649 Start Printed Page 65650 (2) Additional Impacts to Clinicians (a) Web Interface As discussed in section IV.A.3.d.(1)(d) of this final rule, we finalized the proposal to continue the use of the CMS Web Interface measures as a collection type for groups and virtual groups with 25 or more eligible clinicians for the CY 2022 performance period/2024 MIPS payment year. We are also sunsetting the CMS Web Interface measures as a collection type for groups and virtual groups with 25 or more eligible clinicians starting with the CY 2023 performance period/2025 MIPS payment year. As discussed in section IV.A.3.c.(2)(a), we are also extending the CMS Web Interface as a means of reporting quality under the APP for Shared Savings Program ACOs for the CY 2022 performance period/2024 MIPS payment year through the CY 2024 performance period/2025 MIPS payment year. We refer readers to sections V.B.8.e.(8) and V.B.8.e.(10) of this final rule for our discussion on the estimated burden associated with the extension of the CMS Web Interface collection type in CY 2022 performance period/2024 MIPS payment year and the sunset of the CMS Web Interface collection type in the CY 2023 performance period/2025 MIPS payment year (for those not using the APP).

Additionally, we assume that the impacts associated with the sunset of CMS Web Interface measures as a collection type for groups and virtual groups with 25 or more eligible clinicians will remain the same as our discussion in the CY 2021 PFS final rule (85 FR 85020 through 85021). (b) Administrative Claims Measure As discussed in section IV.A.3.d.(1)(e), we are adding one new administrative claims measures beginning in the CY 2022 performance period/2024 MIPS payment year and for future performance periods. Clinician and Clinician Group Risk-standardized Hospital Admission Rates for Patients with Multiple Chronic Conditions. We acknowledge there are administrative burdens and related financial costs associated with each administrative claims measure that clinicians, groups, and organizations may choose to monitor.

However, because these costs can vary significantly due to organizational size, number of administrative claims measures being reported, volume of clinicians reporting each measure, and the specific methods employed to improve performance, we are unable to provide an estimate of the financial impact each clinician, group, or organization may experience. In summary, we are acknowledging that while there are no data submission requirements per § 414.1325(a)(2)(i) for administrative claim measures, there may be associated costs for clinicians and group practices to monitor new administrative claim measures. However, we are unable to quantify that impact. (c) Modifications to the Improvement Activities Inventory As discussed in section IV.A.3.d.(3)(c)(ii) of this final rule, we finalized the proposals to remove 7 previously adopted improvement activities, modify 15 existing improvement activities, and adopt 5 new improvement activities.

We refer readers to Appendix 2 of this final rule for further details. We do not believe these changes to the inventory will impact time or financial burden on stakeholders because MIPS eligible clinicians are still required to submit the same number of activities and the per response time for each activity is uniform. We do not expect these changes to the inventory to affect our currently approved information collection burden estimates in terms of neither the number of estimated respondents nor the burden per response. We anticipate most clinicians performing improvement activities, to comply with existing MIPS policies, will continue to perform the same activities under the policies in this final rule because previously finalized improvement activities continue to apply for the current and future years unless otherwise modified per rulemaking (82 FR 54175).

Most of the improvement activities in the Inventory remain unchanged for the CY 2022 performance period/2024 MIPS payment year. (d) Stakeholders Nominating Improvement Activities In section IV.A.3.d.(3)(c)(i)(B) of this rule, we finalized these proposals. (1) To revise the required criteria for improvement activity nominations received through the Annual Call for Activities. (2) changes to the timeline for improvement activities nomination during a PHE.

And (3) to suspend Start Printed Page 65651 activities that become obsolete or impacted by clinical practice guideline changes from the program when this occurrence happens outside of the rulemaking process. Regarding the provision to clarify the timeline for an improvement activity nominated during the PHE, we believe this provision will not affect our currently approved burden estimates since we believe that the number of nominations will not change, but it would make an activity available for reporting to clinicians in the same performance year it was intended to be implemented. In section IV.A.3.d.(3)(c)(i)(B)(aa) of this rule, we finalized the proposal that in order to implement a new improvement activity for a PHE during the same year as the nomination, the nomination will need to be received no later than January 5th of the nomination year to be included in a rule for notice-and-comment rulemaking during that fiscal or calendar year, a necessary precursor to implementation if it were to be finalized. As described in section V.B.8.j of this rule, we expect additional nominations may be received as a result of this provision, but we do not have any data with which to estimate what the additional number may be.

As a result, we did not make any revisions to our currently approved burden estimate. Regarding the provision to suspend activities that become obsolete or impacted by clinical practice guideline changes from the program when this occurrence happens outside of the rulemaking process, we do not anticipate additional burden for stakeholders because of the provision described above as the policy does not change requirements for the nomination of improvement activities. As described in section IV.A.3.d.(3)(c)(i)(B) of this rule, due to the provisions to add two new criteria and to increase the number of criteria stakeholders are required to meet when submitting an activity provision from a minimum of 1 to all 8 criteria, which includes the two new criteria, we proposed to revise our estimated annual information collection burden for nomination of improvement activities to 136 hours (31 nominations × 4.4 hr/nomination) at a cost of $20,355 (31 × [(2.8 hr × $114.24/hr) + (1.6 hr × $210.44/hr)]). (e) Impact on Small Practices As described in section VI.F.18.e.(3) of this final rule RIA, we found 85 percent of clinicians who did not submit data to MIPS were in small practices.

However, the estimated number of MIPS eligible clinicians who do not submit data, including those in small practices, may be smaller in the CY 2022 performance period/2024 MIPS payment year since the submission window for the 2019 performance period was impacted by the start of the PHE for buy antibiotics. CMS is committed to identifying flexibilities and options to help clinicians in small practices participate meaningfully and successfully in MIPS. Specifically, CMS finalized several policies to support clinicians in small practices once they engage with MIPS in the quality, improvement activities and Promoting Interoperability performance categories for the CY 2022 performance period/2024 MIPS payment year. Based on our RIA model findings described in section VI.F.18.e.(3) of this final rule, the final policies for the CY 2022 performance period/2024 payment year led to clinicians in small practices no longer disproportionately receiving negative payment adjustments compared to clinicians in larger sized practices.

Therefore, the combination of the special scoring policies for clinicians in small practices is expected to positively affect this group of clinicians and will hopefully encourage and improve future engagement in MIPS among clinicians in small practices. (f) Impact on Third Party Intermediaries In section IV.A.3.h. Of this rule, we finalized multiple changes to the third-party intermediary regulations at § 414.1400. Specifically, we finalized.

(1) Reorganization and consolidation of § 414.1400 generally. (2) an expansion of the general participation requirements of third-party intermediaries to third party intermediaries reporting to MIPS on behalf of APM Entities in order to align reporting requirements for all participants in MIPS. (3) a requirement that, beginning with the CY 2023 performance period/2025 MIPS payment year, QCDRs and qualified registries must support MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data. Health IT vendors must support MVPs that are applicable to the MVP participants on whose behalf they submit MIPS data.

(4) to require QCDRs, qualified registries, health IT vendors, and CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. (5) to require QCDRs and qualified registries that have never submitted data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year) through the 2020 performance period/2022 MIPS payment year, to submit a participation plan as part of their self-nomination for CY 2023. (6) a requirement that, beginning with the 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval. (7) a requirement that, beginning with the CY 2023 performance period/2025 MIPS payment year, the QCDR or qualified registry must submit a data validation plan annually, at the time of self-nomination, for CMS' approval, and may not change the plan once approved, without the prior approval of the agency.

And (8) to add a rejection criterion to state that a QCDR does not have permission to use a QCDR measure owned by another QCDR for the applicable performance period. Additionally, to provide further clarification of our current policy (84 FR 63070 through 63073), we finalized the proposal to state that if a QCDR measure owner is not approved during a given self-nomination period, any associated QCDR measures with that QCDR would also not be approved. With regard to the reorganization and consolidation of § 414.1400 generally, we do not anticipate this to require any additional effort for affected entities as the provision is to allow CMS to reorganize the existing information. For the requirements related to expanding the general participation requirements of third-party intermediaries to third party intermediaries reporting to MIPS on behalf of APM Entities in order to align reporting requirements for all participants in MIPS, we did not propose to revise our burden estimates as this requirement is not different from how third-party intermediaries currently submit data for the quality, improvement activities and Promoting Interoperability performance categories in MIPS on behalf of individual eligible clinicians and groups.

As previously discussed in section IV.A.3.h.(2)(b)(ii) of this rule, we finalized the proposal to require QCDRs, qualified registries, health IT vendors, and CAHPS for MIPS survey vendors to support subgroup reporting, beginning with the CY 2023 performance period/2025 MIPS payment year. During the MVP Town Hall held in January 2021 (85 FR 74729), we heard from third-party intermediaries that they are confident that they can make the necessary updates to allow for subgroup reporting, if they have enough time. A few vendors suggested that we add Start Printed Page 65652 subgroup reporting to the existing CEHRT requirements. Given our provision described in section IV.A.3.b.(2)(d) of this rule to delay the implementation of subgroup reporting option to the CY 2023 performance period/2025 MIPS payment year, we assume that the delay will give these entities adequate time to make the necessary updates.

We assume that there will be no additional burden that third-party intermediaries will incur to implement the subgroup reporting option. We anticipate that there may be administrative burden associated with changes in workflows to their existing systems for submission of subgroup data for the CY 2023 performance period/2025 MIPS payment year. However, given that each of these entities and their information technology systems are unique, we are unable to quantify the burden for these entities to capture and submit data on behalf of clinicians who may choose to participate as subgroups. We do not anticipate a significant impact to QCDRs and qualified registries resulting from the finalized provision to require QCDRs and qualified registries to conduct an annual data validation audit and if one or more deficiencies or data errors are identified also conduct targeted audits.

First, we are not revising our burden estimates because the finalized data validation requirements are like existing expectations which we have already accounted for the associated burden as stated in the CY 2017 Quality Payment Program final rule (81 FR 77383 through 77384) and the CY 2019 PFS final rule (83 FR 59998 through 59999). Second, we believe that the requirements for conduct of the data validation audits are aligned with methods and procedures which stakeholders currently utilize. As discussed in section IV.A.3.h.(3)(a)(i) of this rule, due to the provision to require QCDRs and qualified registries that have never submitted data since the inception of MIPS (CY 2017 performance period/2019 MIPS payment year) through the CY 2020 performance period/2022 MIPS payment year to submit a participation plan as part of their self-nomination for CY 2023 performance period/2025 MIPS payment year, we refer readers to section V.B.8.c.(2) of this rule for details on the adjusted burden. As discussed in section V.B.8.c.(2) of this rule, we are not adjusting our burden estimates due to the provision related to two new rejection criteria for QCDR measures.

(g) Assumptions &. Limitations We note several limitations to our estimates of clinicians' MIPS eligibility and participation, negative MIPS payment adjustments, and positive payment adjustments for the CY 2022 performance year/2024 MIPS payment year. Due to the PHE for buy antibiotics, we are aware that there may be changes in health care delivery and billing patterns that will impact results for the CY 2022 performance year/2024 MIPS payment year that we are not able to model with our historic data sources. The scoring model results presented in this final rule assume that CY 2019 Quality Payment Program data submissions and performance are representative of CY 2022 Quality Payment Program data submissions and performance.

The estimated performance for the CY 2022 performance year/2024 MIPS payment year using CY 2019 Quality Payment Program data may be underestimated because the performance threshold to avoid a negative payment adjustment for the 2019 MIPS performance period/2021 MIPS payment year was significantly lower (30 out of 100 points) than the performance threshold for the 2022 performance year/2024 payment year (75 out of 100). We anticipate clinicians may participate more robustly by submitting more performance categories to meet the higher performance threshold to avoid a negative payment adjustment. In our MIPS eligible clinician assumptions, we assumed that clinicians who elected to opt-in in the CY 2019 Quality Payment Program and submitted data would continue to elect to opt-in in the CY 2022 performance year/2024 MIPS payment year. It is difficult to predict, based on 2019 data, whether clinicians will elect to opt-in to participate in MIPS with the CY 2022 performance year/2024 payment year finalized policies.

In addition to the limitations described throughout the methodology sections, there are additional limitations to our estimates including. (1) To the extent that there are year-to-year changes in the data submission, volume and mix of services provided by MIPS eligible clinicians, the actual impact on total Medicare revenues will be different from those shown in Table 144. And (2) due to updates in measure specifications and new measures, our cost performance is modeled using test data that does not always overlap with CY 2019 so we may not be capturing performance for clinicians or groups that change practices or TINs between when the testing data and the 2019 performance period. Due to the limitations described, there is considerable uncertainty around our estimates that is difficult to quantify.

G. Alternatives Considered This final rule contains a range of policies, including some provisions related to specific statutory provisions. The preceding preamble provides descriptions of the statutory provisions that are addressed, identifies those policies when discretion has been exercised, presents rationale for our policies and, where relevant, alternatives that were considered. For purposes of the payment impact on PFS services of the policies contained in this final rule, we presented the estimated impact on total allowed charges by specialty.

1. Alternatives Considered for Utilization Data in PFS Ratesetting As discussed earlier in this section II.C.1 (Changes in Relative Value Unit (RVU) Impacts), our estimates of changes in Medicare expenditures for PFS services compared payment rates for CY 2021 with payment rates for CY 2022 using CY 2020 Medicare utilization. As an alternative to using CY 2020 data, we considered using CY 2019 utilization data for the purposes of determining the CY 2022 RVUs, as well as in determining the CY 2022 BN adjustment and conversion factor. We considered using CY 2019 data due to the PHE for buy antibiotics, which has impacted the delivery of health care services over the past 18 months.

Increases in remote delivery of services to reduce risk of exposure to both practitioner and patients, as well as postponement of elective procedures have resulted in a change to service utilization patterns across Medicare FFS payment systems. Specific to the PFS, overall service utilization decreased by approximately 20 percent in CY 2020 compared to CY 2019, which caused us to question whether CY 2020 data is the best available data to use for CY 2022 ratesetting. In order to determine if lower overall utilization in CY 2020 would result in differential impacts on specialties and practitioners, we modeled the PFS ratesetting process using CY 2019 utilization data. We found that the use of CY 2020 as opposed to CY 2019 data in establishing payment rates had relatively little differential impacts on payment, despite the approximately 20 percent decrease in overall service utilization.

Table 149 illustrates specialty-specific impacts for the proposed rule using CY 2019 data. Start Printed Page 65653 Start Printed Page 65654 The majority of specialties experienced shifts of less than a percent when we used CY 2019 data, as opposed to CY 2020 data, as displayed in Table 136, as the basis for setting rates. Several specialties shifted by approximately one percent. We did not detect a pattern of specialties that were notably affected by the choice of claims data, either positively or negatively.

While Pediatrics shifted from a 1 percent impact when we used CY 2020 claims data to a 5-payment impact when we used CY 2019 claims data, this shift is likely due to the smaller amount of allowed charges associated with the Pediatrics specialty. We analyzed the percentage change in total RVUs per practitioner. Using CY 2019 utilization data, Total RVUs change between −1 percent and 1 percent for 53 percent of practitioners, representing more than 48 percent of the changes in Total RUs for all practitioners, similar to the results we found when using CY 2020 claims that we discussed in section II.C.1. Variations by specialty were also similar to the results we found using CY 2020 claims and are contained in the public use file that describes the percentage change in total RVUs per practitioner.

Similar to the process described in section II.C.1. Of this final rule, we used CY 2019 claims data to estimate the CY 2021 PFS CF to be 33.6184 which reflects a BN adjustment under section 1848(c)(2)(B)(ii)(II) of the Act, which we estimated to be −0.04 using CY 2019 data, the 0.00 percent update adjustment factor specified under section 1848(d)(19) of the Act, and the expiration of the 3.75 percent fee schedule payment increase for CY 2021 provided by the CAA. The anesthesia CF, which reflects the same overall PFS adjustments with the addition of anesthesia-specific PE and MP adjustments, would shift by a similar magnitude as the PFS CF. Thus, the estimated PFS CF and anesthesia CF using CY 2019 data is slightly higher compared to using claims data for CY 2020 with an estimated difference of 0.0336 (a little less than three and half cents).

We note that the BN adjustment will be recalculated for the CY 2022 PFS final rule and the use of CY 2019 claims may or may not be higher than the use of CY 2020 claims based on which policies are ultimately finalized. Comment. We received few comments on our Alternatives Considered for Utilization Data in PFS Ratesetting. One commenter stated that they supported the use of the alternate CY 2019 claims data because it resulted in a slight improvement (approximately 1 percent) in the impact of changes in RVUs for their specialty.

A different commenter stated that practice patterns in CY 2020 were atypical as a result of the buy antibiotics flagyl and they believed that the use of 2019 claims data would be likely to more closely approximate overall PFS service utilization and costs in 2022. Response. We continued to believe that the use of CY 2020 as opposed to CY 2019 data in establishing payment rates had relatively little differential impacts on payment, despite the approximately 20 percent decrease in overall service utilization. We found that the use of CY 2020 as opposed to CY 2019 data in establishing payment rates had little differential impact on payment at the specialty, service categories, and individual services levels.

We also did not detect a pattern of specialties who were notably affected by the choice of claims data, either positively or negatively. We received few comments on this alternative considered which we believe indicates support for our use of CY 2020 claims data from the majority of commenters. After consideration of the comments, we are finalizing our continued use of CY 2020 claims data instead of the potential alternative to use CY 2019 claims data for the purposes of determining the CY 2022 RVUs as well as in determining the CY 2022 BN adjustment and conversion factor. 2.

Alternatives Considered for Split (or Shared) Visits In section II.F of this final rule, we codify our current policy allowing billing of certain “split” or “shared” E/M visits by a physician, when the visit is performed in part by both a physician and an NPP, who are in the same group and the physician performs a substantive portion of the visit. We will codify in our regulations a definition of a split (or shared) visit as an E/M visit in the facility setting that is performed in part by both a physician and NPP who are in the same group, in accordance with applicable laws and regulations, such that the E/M visit could be billed by either the physician or the NPP if it were furnished independently by only one of them in the facility setting (rather than as a split (or shared) visit). The physician or NPP who performs the substantive portion of the split (or shared) visit will bill for the visit. We are also finalizing our proposed definition of substantive portion as more than half of the total time spent by the physician and NPP.

We considered several alternative approaches. First, we considered the option of disallowing split (or shared) visit billing beginning in CY 2022. Under this alternative, in settings where payment for “incident to” services is prohibited, physicians and NPPs would only be able to bill for visits they furnish in their entirety under their own NPI. Such a policy would be administratively simple, and reduce the likelihood of paying significantly more than the actual resource costs incurred.

When physicians and practitioners furnish services in facility settings, they do not ordinarily incur the cost of clinical staff or other PE costs involved in furnishing the services. When the physician bills for an E/M visit, in accordance with section 1833(a)(1)(N) of the Act, the Medicare Part B payment is equal to 80 percent of the payment basis under the PFS which, under section 1848(a)(1) of the Act, is the lesser of the actual charge or the full fee schedule Start Printed Page 65655 amount for the service. In contrast, if the NPP bills for it, in accordance with section 1833(a)(1)(O) of the Act, the Medicare Part B payment is equal to 80 percent of the lesser of the actual charge or 85 percent of the fee schedule rate. Because of this payment differential and the lower resource costs associated with E/M visits performed partly by a physician and partly by an NPP, it could be argued that the physician should not be able to bill for such a visit and be paid at the higher fee schedule amount.

Our proposal was informed by our belief that longstanding clinical practice relies substantially upon shared visits between physicians and NPPs in facility settings. To avoid the potential disruption in this common medical practice approach, we did not propose to disallow billing for split (or shared) visits. Comment. We received public comments confirming that it would be disruptive of current practice patterns to disallow split (or shared) visit billing.

We did not receive public data indicating specifically how often split (or shared) visits occur. Response. After consideration of the public comments, we are finalizing a policy to continue allowing billing of split (or shared) visits under specified conditions. We will require a modifier on claims for these types of visits, as proposed, to help inform future policy in this area.

We also considered several alternatives for how to define the substantive portion of a split (or shared) visit. We considered defining “substantive portion” as any face-to-face portion of the split (or shared) visit, consistent with our current definition. We did not believe it would be appropriate to consider just any portion of the visit—with or without direct patient contact— as a substantive portion. For instance, we did not believe it would be appropriate to consider a brief or trivial interaction, with or without direct patient contact, such as where the physician merely “pokes their head” into the room, to be a substantive portion of the visit.

We did not believe it would be appropriate to permit a physician to bill for a visit if they do not substantially participate in the visit, given that physicians are paid under the PFS at a higher rate than NPPs. Therefore, we proposed to define “substantive portion” as more than half of the total time spent by the physician or NPP. Another alternative we considered, but did not propose, was to utilize the medical decision making (MDM) to define substantive portion. We did not propose this approach because MDM is not easily attributed to a single physician or NPP when the work is shared, because MDM is not necessarily quantifiable and can depend on patient characteristics.

We believed that time is a more precise factor than MDM to use as a basis for deciding which practitioner performs the substantive portion of the visit. We believed that using the time spent by each practitioner furnishing the split (or shared) visit would provide a more precise metric than potentially finding a way to parse MDM between the physician and the NPP. We also considered defining substantive portion as performance of the history and/or physical exam, which are key components of certain E/M visits. Given recent changes in the CPT E/M Guidelines, history and physical exam are no longer necessarily included in all E/M visits, because for office/outpatient E/M visits, the visit level can now be selected based on either MDM or time, and history and exam are performed only as medically appropriate.

Also, the CPT Editorial Panel is considering removing history and physical exam as key visit components for institutional visits, similar to the changes already made for office/outpatient E/M visits. Accordingly, defining “substantive portion” as any key component including history or exam did not seem to be a viable approach. Lastly, we considered not defining substantive portion and instead leaving determinations regarding the substantive portion to MAC and/or medical review discretion. However, this approach would impose a significant burden on MACs to assess individual cases and could lead to too much regional variation in payment.

We solicited public comment to help inform what we consider to be the “substantive portion” of a split (or shared) visit in institutional settings and assist us in consideration of our definition of “substantive portion”. We received public comments to help inform what we consider to be the “substantive portion” of a split (or shared) visit in institutional settings and assist us in consideration of our definition of “substantive portion.” We refer readers to section II.F. Of this final rule with comment period for a complete discussion of the public comments on this topic and our responses, summarized below. Comment.

The commenters agreed that the individual who performs the substantive portion should bill for the visit. Approximately half of the commenters supported our proposal, believing that it was appropriate and would provide a clear rule. However, approximately half of the public comments recommended alternative definitions of substantive portion, including. A lower percentage of time (25 to 30 percent of the total time) (several comments).

MDM (several comments). Some portion of MDM (several comments). Choice of MDM or time, for example, based on whichever is used to select visit level (several comments). One of the three key components of history, exam, or MDM, at least until the AMA completes changes for E/M visit coding and the CPT E/M Guidelines that the commenters expect for 2023 (several comments).

Some combination of the above, for example, more than half of the MDM or more than half of total time (several comments). Working with the CPT Editorial Panel to develop a policy (several comments). These commenters were concerned about a perceived devaluation of the medical decision-making portion of visits, disruptions to current practice patterns, and administrative burdens associated with timing each of the practitioner's contribution to the visit. Response.

Regarding recommendations to consider the substantive portion to be a lower percentage of time, having reviewed our current policy, we do not believe that the higher physician payment rate under the PFS should be made when a physician performs less than half of the visit, such as a quarter or a third of the total time or less than half of the MDM. We do not think that MDM is necessarily the most critical or central component of E/M visits, and it is not the only service component being paid for. PFS payment rates incorporate and assume a certain amount of physician time per visit, reflected in the assigned RVUs and reflected annually in our physician time files. PFS payment rates reflect the typical amount of time spent on visits, and the Act requires us to reflect both time and intensity of work (physician and practitioner) in our payment rates.

We do not believe this in any way devalues the unique education, training, experience, or expertise of physicians, but rather that both time and expertise are important and included in payment under the PFS. We continue to believe that MDM cannot be readily attributed to only the physician or the NPP, or definitively divided between them. We believe the commenters overestimate the administrative burden Start Printed Page 65656 of tracking and attributing time, given the advent of EHRs and new E/M visit coding structures. However, we understand that an adjustment period may be needed to establish systems to track and attribute time for split (or shared) visits, especially since the coding for E/M visits in many facility settings will not use MDM or time to distinguish visit levels until 2023.

Therefore, we are finalizing our definition of substantive portion for split (or shared) visits as proposed (more than half of the total time spent by the physician and NPP performing the split (or shared) visit) beginning January 1, 2023. However, we are modifying our proposed policy for one transitional year. For CY 2022, except for critical care visits, the substantive portion will be defined as one of the three key components (history, exam, or MDM), or more than half of the total time spent by the physician and NPP performing the split (or shared) visit). In other words, for CY 2022, the practitioner who spends more than half of the total time, or performs the history, exam, or MDM can be considered to have performed the substantive portion and can bill for the split (or shared) E/M visit.

We wish to be clear that practitioners can still use MDM to select visit level for the E/M split (or shared) visit, as proposed. We also are clarifying that when one of the three key components is used as the substantive portion in CY 2022, the practitioner who bills the visit must perform that component in its entirety in order to bill (see section II.F.1.c.1. Of this final rule for a more detailed discussion). For visits that are already timed (that is, critical care services), the choice to use more than half of the total time, or performance of the history, exam, or MDM will not apply.

For critical care visits, starting in CY 2022, the substantive portion will be more than half of the total time, as proposed. We will continue to review and consider any future changes by the AMA/CPT Editorial Panel to the CPT E/M Guidelines for split (or shared) visits. We also intend to monitor the claims data for split (or shared) visits, to better understand how frequently practitioners use or rely upon this billing construct. We considered disallowing split (or shared) billing in critical care, SNF and nursing facility (NF) visits, as well as new patient and initial patient visits.

We require certain SNF/NF visits to be provided entirely by a physician, but we believed we should allow split (or shared) visit billing for other visits that can be split (or shared) in these settings. (We refer readers to our Conditions of Participation in 42 CFR 483.30 for information regarding the SNF/NF visits that are required to be performed in their entirety by a physician. That regulation requires that certain SNF/NF visits must be furnished directly and solely by a physician). However, we believed current clinical practice generally allows sharing of critical care visits by appropriately trained and qualified practitioners, and we solicited comment on this belief and this alternative considered.

We proposed to allow split (or shared) visit billing in critical care because we believe the practice of medicine has evolved towards a more team-based approach to care, and greater integration in the practice of physicians and NPPs, particularly when care is furnished by clinicians in the same group in the facility setting. Given this evolution in medical practice, the concerns that may have been present when we issued current policy may no longer be as relevant. We understand that there have been changes in the practice of medicine over the past several years, some facilitated by the advent of EHRs and other systems, toward a more team-based approach to care. There has also been an increase in alternative payment models that employ a more team-based approach to care.

Comment. We received many comments on our proposals for allowed settings of care, all in support of those proposals. Response. We thank the commenters for their support.

After consideration of the public comments, we are finalizing as proposed. We proposed to allow split (or shared) visits for both new and established patients as well as initial and subsequent visits. After conducting an internal review, including consulting our medical officers, we believed that the practice of medicine has evolved toward a more team-based approach to care, and greater integration in the practice of physicians and NPPs, particularly when care is furnished by practitioners in the same group in the facility setting. Given this evolution in medical practice, the concerns that may have been present when we issued the manual instructions may no longer be as relevant.

We understand that there have been changes in the practice of medicine over the past several years, some facilitated by the advent of EHRs and other systems, toward a more team-based approach to care. There has also been an increase in alternative payment models that employ a more team-based approach to care. In considering and reevaluating our policy, we saw no reason to preclude the physician or NPP from billing for split (or shared) visits for a new patient, in addition to an established patient, or for initial and subsequent split (or shared) visits. Therefore, we proposed to permit the physician or NPP to bill for split (or shared) visits for both new and established patients, as well as for initial and subsequent visits.

We believed this approach is also consistent with the CPT E/M Guidelines for split (or shared) visits, which does not exclude these types of visits from being billed when furnished as split (or shared) services. Comment. We received many comments on this proposal, all in support of it. Response.

We thank the commenters for their support. After consideration of public comments, we are finalizing as proposed. 3. Alternatives Considered for Requiring Certain Manufacturers To Report Drug Pricing Information for Part B (§§ 414.802, 414.806) This provision implements new statutory requirements under sections 1847A and 1927 of the Act, as amended by section 401 of the CAA (for the purposes of this section of this final rule, hereinafter is referred to as “section 401”).

These new requirements will improve the accuracy of reported prices and limit the use of WAC-based pricing. As discussed in section III.D.1. Of this final rule, section 1847A(c)(6)(A) of the Act incorporates the definition of manufacturer at section 1927(k)(5) of the Act, but permits the Secretary to exempt repackagers from the definition of manufacturer, as determined appropriate, for purposes of section 1847A(f)(2) of the Act. We considered whether to implement the flexibility afforded by the statute.

However, implementing the flexibility afforded by the statute could potentially lead to a gap in the ASP reporting requirements, meaning that ASPs could be distorted to the extent that certain sales are carved out of the reporting requirement through the use of repackagers. As discussed previously in this RIA, we are unable to quantitatively estimate the impacts of this provision. We welcomed comments on our approach, and on the alternative relative to. (1) The likely costs or savings (to manufacturers, beneficiaries, the government, and other stakeholders).

And (2) any other related impacts of this provision. Start Printed Page 65657 4. Alternatives Considered for the MDPP Expanded Model Emergency Policy For the MDPP Expanded Model Emergency Policy, no alternatives were considered. The 2-year MDPP service period has depressed interest in MDPP among would-be MDPP suppliers.

These actions address stakeholder comments on the barriers to MDPP expanded model success. If we do not take action, we will not be able to scale MDPP as intended, impacting Medicare beneficiary access to this program. Reducing the MDPP from a 24- to a 12-month services period, increasing the year 1 performance payments, and waiving the Medicare provider enrollment application fee not only better aligns the model with the evidence that helped certify the DPP model test initially, but it will encourage eligible organizations to enroll as MDPP suppliers. 5.

Alternatives Considered for the Quality Payment Program We view the performance threshold as a critical factor affecting the distribution of payment adjustments in the Quality Payment Program. We ran a separate final policies RIA model based on the actual mean for the CY 2019 performance period/2021 MIPS payment year with a performance threshold of 86 and an additional performance threshold of 92 points, which are potential values that may be used for the CY 2022 performance period/2024 MIPS payment year. The model with a performance threshold of 86 and additional performance threshold of 92 has the same mean and median final score as our policies RIA model since the performance threshold does not change the final score. We estimate that $ 907 million will be redistributed through BN.

For clinicians who meet or exceed the additional performance threshold, an additional $241 million was distributed. The maximum positive payment adjustment will be 18.2 percent prior to the maximum additional payment adjustment and 28.2 percent after considering the MIPS maximum positive payment adjustment and the additional MIPS payment adjustment for exceptional performance. In addition, 74.0 percent of MIPS eligible clinicians will receive a negative payment adjustment among those that submit data. We report the findings for the baseline model which describes the impact for the CY 2022 performance period/2024 MIPS payment year if this regulation did not exist.

The baseline model has a final score mean of 78.13 and median of 82.59. We estimate that $428 million will be redistributed through BN. There will be a maximum payment adjustment of 6.6 percent after considering the MIPS payment adjustment and the additional MIPS payment adjustment for exceptional performance. In addition, 8.3 percent of MIPS eligible clinicians will receive a negative payment adjustment among those that submit data.

H. Impact on Beneficiaries We do not believe these provisions will have a negative impact on beneficiaries given overall PFS BN. 1. Requiring Certain Manufacturers To Report Drug Pricing Information for Part B (§§ 414.802, 414.806) Section 1927(b)(3)(A)(iii) of the Act requires manufacturers with a Medicaid drug rebate agreement to report ASP data consistent with the information required for such reporting at section 1847A of the Act.

Some manufacturers without Medicaid drug rebate agreements voluntarily submit ASP data for their single source drugs or biologicals that are payable under Part B, however other manufacturers without Medicaid drug rebate agreements do not voluntarily submit such data. Without manufacturer reported ASP data, CMS cannot calculate the ASP payment limit, and consequently, payment is typically based on Wholesale Acquisition Cost (WAC). Consistent with section 1847A(c)(3) of the Act and our regulations at § 414.804(a)(2), the ASP is net of price concessions. However, consistent with the definition of WAC at section 1847A(c)(6)(B) of the Act, the WAC is not net of price concessions and is thus nearly always, and sometimes significantly, higher than ASP.

Drugs with payment allowances based on WAC may have greater “spreads” between acquisition costs and payment than drugs for which there is an ASP-based payment allowance, which, in turn, may. (1) Incent the use of the drug based on its spread rather than on purely clinical considerations. (2) result in increased payments under Medicare Part B. And (3) result in increased beneficiary cost sharing.

This provision implements new statutory requirements under sections 1847A and 1927 of the Act, as amended by section 401 of Division CC, Title IV of the CAA, 2021. These new requirements will improve the accuracy of reported payment limits and limit the use of WAC-based pricing. For single source drugs, these changes may result in lower payment limits because, typically, the WAC plus 3 percent is higher than ASP plus 6 percent. This then translates to cost savings for both the government and beneficiaries, who will pay coinsurance on a lesser amount.

However, for the reason stated earlier in this RIA (see section VI.G.4. Of this final rule), we are unable to predict the magnitude of this effect. Similarly, payment limits for multiple source drugs could increase or decrease, and we are unable to predict the direction or magnitude of specific or aggregate effects at this time. 2.

Determination of ASP for Certain Self-Administered Drug Products Although we are unable to quantify the total magnitude of the potential savings, these changes have the potential to substantially reduce program expenditures and beneficiary coinsurance. The OIG's July 2020 report (discussed in section III.D.2. Of this final rule) determined that the inclusion of self-administered versions of certolizumab and abatacept in their respective volume-weighted, average ASPs, alone, has resulted in $173 million in additional Medicare beneficiary coinsurance between 2014 and 2018. The regulatory changes have the potential to result in decreased payment limits for identified billing and payment codes and could, in turn, substantially reduce beneficiary coinsurance.

Since section 405 of Division CC, Title IV of the CAA, 2021 directs CMS to implement the statutory changes at section 1847A(g)(3) of the Act beginning on July 1, 2021, these potential savings may be observed within the year. 3. Medicare Diabetes Prevention Program Expanded Model Emergency Policy This change will have a positive impact on eligible MDPP beneficiaries, as it better aligns with the CDC's National DPP, giving both the participants and the coaches similar messaging around this program, regardless of payer. MDPP suppliers often offer the MDPP set of services to mixed cohorts, or classes with participants who are not eligible for MDPP, but who are enrolled in a National DPP cohort.

Since MDPP generally follows the CDC's National DPP and aligns its program with the CDC's DPRP Standards, it is confusing to participants, coaches, and staff when talking about a 2-year program to its eligible Medicare participants when the non-Medicare participants have a 1-year program. Finally, reducing the MDPP service period from 2 years to one (1) year allows more cohorts to start and finish MDPP during the expanded Start Printed Page 65658 model initial period of performance, which ends in March 2023. 4. Quality Payment Program There are several changes in this rule that are expected to have a positive effect on beneficiaries.

In general, we believe that many of these changes, including the MVP and subgroup provisions, will lead to more meaningful and relevant data being available to beneficiaries on the type and scope of care provided by clinicians on the compare tool. Additionally, beneficiaries could use the publicly reported information on clinician performance in subgroups to identify and choose clinicians in multispecialty groups relevant to their care needs. Consequently, we anticipate this will improve the quality and value of care provided to Medicare beneficiaries. For example, several of the new measures include patient-reported outcome-based measures, which may be used to help patients make more informed decisions about treatment options.

Patient-reported outcome-based measures provide information on a patient's health status from the patient's point of view and may also provide valuable insights on factors such as quality of life, functional status, and overall disease experience, which may not otherwise be available through routine clinical data collection. Patient-reported outcome-based measured are factors frequently of interest to patients when making decisions about treatment. K. Estimating Regulatory Familiarization Costs If regulations impose administrative costs on private entities, such as the time needed to read and interpret this rule, we should estimate the cost associated with regulatory review.

Due to the uncertainty involved with accurately quantifying the number of entities that will review the rule, we assumed that the total number of unique commenters on this year's rule will be the number of reviewers of last year's rule. We acknowledge that this assumption may understate or overstate the costs of reviewing this rule. It is possible that not all commenters will review this year's rule in detail, and it is also possible that some reviewers will choose not to comment on the rule. For these reasons we thought that the number of commenters will be a fair estimate of the number of reviewers of last year's rule.

We also recognized that different types of entities are in many cases affected by mutually exclusive sections of this rule, and therefore for the purposes of our estimate we assume that each reviewer reads approximately 50 percent of the rule. Using the wage information from the BLS for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing this rule is $114.24 per hour, including overhead and fringe benefits https://www.bls.gov/​oes/​current/​oes_​nat.htm. Assuming an average reading speed, we estimate that it will take approximately 8.0 hours for the staff to review half of this rule. For each facility that reviews the rule, the estimated cost is $913.92 (8.0 hours × $114.24).

Therefore, we estimated that the total cost of reviewing this regulation is $32,380,186 ($885.92 × 35,430 reviewers on this year's proposed rule). J. Accounting Statement As required by OMB Circular A-4 (available at http://www.whitehouse.gov/​omb/​circulars/​a004/​a-4.pdf ), in Tables 150 and 151 (Accounting Statements), we have prepared an accounting statement. This estimate includes growth in incurred benefits from CY 2021 to CY 2022 based on the FY 2022 President's Budget baseline.

K. Conclusion The analysis in the previous sections, together with the remainder of this preamble, provided an initial Regulatory Flexibility Analysis. The previous analysis, together with the preceding portion of this preamble, provides an RIA. In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget.

Chiquita Brooks-LaSure, Administrator of the Centers for Medicare &. Medicaid Services, approved this document on October 28, 2021. Start List of Subjects 42 CFR Part 403 Grant programs—healthHealth insuranceHospitalsIntergovernmental relationsMedicareReporting and recordkeeping requirements 42 CFR Part 405 Administrative practice and procedureDiseasesHealth facilitiesHealth insuranceHealth professionsMedical devicesMedicareReporting and recordkeeping requirementsRural areasX-rays 42 CFR Part 410 DiseasesHealth facilitiesHealth professionsLaboratoriesMedicareReporting and recordkeeping requirementsRural areasX-rays 42 CFR Part 411 DiseasesMedicareReporting and recordkeeping requirements 42 CFR Part 414 Administrative practice and procedureBiologicsDiseasesDrugsHealth facilitiesHealth professionsMedicareReporting and recordkeeping requirements 42 CFR Part 415 Health facilitiesHealth professionsMedicareReporting and recordkeeping requirements 42 CFR Part 423 Administrative practice and procedureEmergency medical servicesHealth facilitiesHealth maintenance organizations (HMO)Health professionalsMedicarePenaltiesPrivacyReporting and recordkeeping requirements 42 CFR Part 424 Emergency medical servicesHealth facilitiesHealth professionsMedicareReporting and recordkeeping requirements 42 CFR Part 425 Administrative practice and procedureHealth facilitiesHealth professionsMedicareReporting and recordkeeping requirements End List of Subjects For the reasons set forth in the preamble, the Centers for Medicare &. Medicaid Services amends 42 CFR chapter IV as set forth below.

Start Part End Part Start Amendment Part1. The authority citation for part 403 continues to read as follows. End Amendment Part Start Authority 42 U.S.C. 1302, and 1395hh.

End Authority Start Amendment Part2. In § 403.902— End Amendment Part Start Amendment Parta. Amend the definition of “Ownership or investment interest” by adding paragraphs (3)(vi) and (vii). End Amendment Part Start Amendment Partb.

Add a definition for “Physician-owned distributorship” in alphabetical order. And End Amendment Part Start Amendment Partc. Revise the definition of “Short term medical supply or device loan”. End Amendment Part The additions and revision read as follows.

Definitions. * * * * * Ownership or investment interest * * * (3) * * * (vi) A titular ownership or investment interest that excludes the ability or right to receive the financial benefits of ownership or investment, including, but not limited to, the distribution of profits, dividends, proceeds of sale, or similar returns on investment. Or (vii) An interest in an entity that arises from an employee stock ownership plan (ESOP) that is qualified under section 401(a) of the Internal Revenue Code of 1986. * * * * * Physician-owned distributorship , for the purposes of determining the existence of a reportable ownership or investment interest under this subpart, means an entity that.

(1) Meets the definition of an applicable manufacturer or applicable group purchasing organization as defined in this section, and (2) Meets at least one of the following two conditions. (i) Has a minimum of 5 percent direct or indirect ownership or investment interest in the applicable manufacturer or applicable group purchasing organization held by a physician or a physician's immediate family member, or (ii) A physician or a physician's immediate family member receives compensation from the applicable manufacturer or group purchasing organization in the form of a commission, return on investment, profit sharing, profit distribution, or other remuneration directly or indirectly derived from the sale or distribution of devices by the applicable manufacturer or group purchasing organization in which the physician or physician's immediate family member has ownership. (3) This physician owned distributor definition does not apply for purposes of any other laws or regulations, including, but not limited to, section 1877 of the Act, the regulations at 42 CFR part 411, subpart J, section 1128B of the Act, or the regulations at 42 CFR 1001.952. * * * * * Short term medical supply or device loan means the loan of a covered device or a device under development, or the provision of a limited quantity of medical supplies for a short-term trial period, not to exceed a loan period of 90 cumulative days per calendar year or a quantity of 90 cumulative days of average daily use per calendar year, to permit evaluation of the device or medical supply by the covered recipient.

* * * * * Start Amendment Part3. Amend § 403.904 by adding paragraph (a)(3) to read as follows. End Amendment Part Reports of payments or other transfers of value to covered recipients. (a) * * * (3) An applicable manufacturer or applicable group purchasing organization that has reported payments or transfers of value under the scope of this section may not remove, delete, or alter any record/(s) unless an error is discovered in the information that had been furnished, or the record is otherwise believed to meet exceptions for reporting.

* * * * * Start Amendment Part4. Amend § 403.908 by revising paragraph (c)(3) and adding paragraph (c)(4) to read as follows. End Amendment Part Procedures for electronic submission of reports. * * * * * (c) * * * (3) During registration, applicable manufacturers and applicable group purchasing organizations must name two points of contact with appropriate contact information.

These points of contact must be updated for 2 years following record submission. (4) An applicable manufacturer or applicable group purchasing organization that meets the definition of physician-owned distributorship as defined in § 403.902 must identify its status as a physician-owned distributorship when registering or recertifying. * * * * * Start Part End Part Start Amendment Part5. The authority citation for part 405 continues to read as follows.

End Amendment Part Start Authority 42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k). End Authority Start Amendment Part6. Amend § 405.902 by adding definitions for “Additional documentation”, “Additional documentation request (ADR)”, “Post-payment medical review”, and “Prepayment medical review” in alphabetical order to read as follows.

End Amendment Part Start Printed Page 65660 Definitions. * * * * * Additional documentation means any information requested by a contractor when conducting a prepayment review or post-payment review. Additional documentation request (ADR) means a contractor's initial documentation request in reviewing claims selected for prepayment review or post-payment review. * * * * * Post-payment medical review (or post-payment review) means a review that occurs after payment is made on the selected claim to determine whether the initial determination for payment was appropriate.

Prepayment medical review (or prepayment review) means a review that occurs before an initial determination for payment is made on the selected claim to determine whether payment should be made. * * * * * Start Amendment Part7. Add § 405.903 to read as follows. End Amendment Part Prepayment review.

(a) A contractor may select a claim(s) for prepayment review. (b) In conducting a prepayment review, a contractor may issue additional documentation requests to a provider or supplier. (1) A provider or supplier will be provided 45 calendar days to submit additional documentation in response to a contractor's request, except as stated in paragraph (b)(2) and (c) of this section. (2) A contractor may accept documentation received after 45-calendar days for good cause.

Good cause means situations such as natural disasters, interruptions in business practices, or other extenuating circumstances that the contractor deems good cause in accepting the documentation. (c) A provider or supplier will be provided 30 calendar days to submit additional documentation in response to a UPIC's request for additional documentation. A UPIC may accept documentation received after the 30 calendar days for good cause. Good cause means situations such as natural disasters, interruptions in business practices, or other extenuating circumstances that the UPIC deems good cause in accepting the documentation.

(d) A contractor's prepayment review will result in an initial determination under § 405.920. Start Amendment Part8. Add §§ 405.929 and 405.930 under the undesignated ceneter heading “Initial Determinations” in subpart I to read as follows. End Amendment Part Post-payment review.

(a) A contractor may select a claim(s) for post-payment review, which is conducted under the reopening authority in § 405.980. (b) In conducting a post-payment review, a contractor may issue an additional documentation request to a provider or supplier. (1) A provider or supplier will be provided 45 calendar days to submit additional documentation in response to a contractor's request, except as stated in paragraph (b)(2) and (c) of this section. (2) A contractor may accept documentation received after 45 calendar days for good cause.

Good cause means situations such as natural disasters, interruptions in business practices, or other extenuating circumstances that the contractor deems good cause in accepting the documentation. (c) A provider or supplier will be provided 30 calendar days to submit additional documentation in response to a UPIC's request for additional documentation. A UPIC may accept documentation received after 30 calendar days for good cause. Good cause means situations such as natural disasters, interruptions in business practices, or other extenuating circumstances that the UPIC deems good cause in accepting the documentation.

(d) The outcome of a contractor's review will result in either no change to the initial determination or a revised determination under § 405.984. Failure to respond to additional documentation request. If a contractor gives a provider or supplier notice and time to respond to an additional documentation request and the provider or supplier does not provide the additional documentation in a timely manner, the contractor has authority to deny the claim. Start Amendment Part9.

Amend § 405.986 by revising the paragraph (a) subject heading to read as follows. End Amendment Part Good cause for reopening. (a) Establishing good cause for reopening. * * * * * * * * Start Amendment Part10.

Amend § 405.2411 by— End Amendment Part Start Amendment Parta. Revising paragraph (b)(2). End Amendment Part Start Amendment Partb. Redesignating paragraph (b)(3) as (b)(4).

And End Amendment Part Start Amendment Partc. Adding a new paragraph (b)(3). End Amendment Part The revision and addition read as follows. Scope of benefits.

* * * * * (b) * * * (2) Covered when furnished during a Part A stay in a skilled nursing facility only when provided by a physician, nurse practitioner, physician assistant, certified nurse midwife or clinical psychologist employed or under contract with the RHC or FQHC at the time the services are furnished. (3) Inclusive of hospice attending physician services, and are covered when furnished during a patient's hospice election only when provided by an RHC/FQHC physician, nurse practitioner, or physician assistant designated by the patient as his or her attending physician and employed or under contract with the RHC or FQHC at the time the services are furnished. And * * * * * Start Amendment Part11. Amend § 405.2446 by revising paragraph (c) to read as follows.

End Amendment Part Scope of services. * * * * * (c) FQHC services are covered when provided in outpatient settings only, including a patient's place of residence, which may be a skilled nursing facility or a nursing facility, other institution used as a patient's home, or are hospice attending physician services furnished during a hospice election. * * * * * Start Amendment Part12. Amend § 405.2462— End Amendment Part Start Amendment Parta.

By revising paragraphs (a) and (b). End Amendment Part Start Amendment Partb. By redesignating paragraphs (c) through (g) as paragraphs (e) through (i), respectively. End Amendment Part Start Amendment Partc.

By adding new paragraphs (c) and (d). And End Amendment Part Start Amendment Partd. In newly redesignated paragraph (e) introductory text, by removing the reference “paragraph (d)” and adding in its place “paragraph (f)”. End Amendment Part The revisions and additions read as follows.

Payment for RHC and FQHC services. (a) Payment to independent RHCs that are authorized to bill under the reasonable cost system. (1) RHCs that are authorized to bill under the reasonable cost system are paid on the basis of an all-inclusive rate, subject to a payment limit per visit determined in paragraph (b) of this section, for each beneficiary visit for covered services. This rate is determined by the Medicare Administration Contractor (MAC), in accordance with this subpart and general instructions issued by CMS.

(2) The amount payable by the MAC for a visit is determined in accordance with paragraphs (i)(1) and (2) of this section. Start Printed Page 65661 (b) RHC payment limit per visit. (1) In establishing limits on payment for rural health clinic services provided by rural health clinics the limit for services provided prior to April 1, 2021. (i) In 1988, after March 31, at $46 per visit.

And (ii) In a subsequent year (before April 1, 2021), at the limit established for the previous year increased by the percentage increase in the Medicare Economic Index (MEI) (as defined in section 1842(i)(3) of the Act) applicable to primary care services (as defined in section 1842(i)(4) of the Act) furnished as of the first day of that year. (2) In establishing limits on payment for rural health services furnished on or after April 1, 2021, by rural health clinics or any rural health clinic that is enrolled on or after January 1, 2021 under section 1866(j) of the Act), the limit for services provided. (i) In 2021, after March 31, at $100 per visit. (ii) In 2022, at $113 per visit.

(iii) In 2023, at $126 per visit. (iv) In 2024, at $139 per visit. (v) In 2025, at $152 per visit. (vi) In 2026, at $165 per visit.

(vii) In 2027, at $178 per visit. And (viii) In 2028, at $190 per visit. (ix) In a subsequent year, at the limit established for the previous year increased by the percentage increase in MEI applicable to primary care services furnished as of the first day of such year. (3) In establishing limits on payment for rural health services furnished on or after April 1, 2021, by provider-based rural health clinics as described in section (c)(4) of this part, the limit for services provided.

(i) In 2021, after March 31, at an amount equal to the greater of. (A) For rural health clinics that had an all-inclusive rate established for services furnished in 2020— ( 1 ) The all-inclusive rate applicable to the rural health clinic for services furnished in 2020, increased by the percentage increase in the MEI applicable to primary care services furnished as of the first day of 2021, or ( 2 ) The payment limit per visit applicable in paragraph (b)(2) of this section. (B) For rural health clinics that did not have an all-inclusive rate established for services furnished in 2020— ( 1 ) The all-inclusive rate applicable to the rural health clinic for services furnished in 2021, or ( 2 ) The payment limit per visit applicable in paragraph (b)(2) of this section. (ii) In a subsequent year, at an amount equal to the greater of.

(A) The amount established under paragraph (b)(3)(i)(A) or (B) of this section, as applicable for the previous year, increased by the percentage increase in MEI applicable to primary care services furnished as of the first day of such subsequent year, or (B) The payment limit per visit applicable under paragraph (b)(2) of this section for such subsequent year. (c) Payment to provider-based RHCs that are authorized to bill under the reasonable cost system. (1) An RHC that is authorized to bill under the reasonable cost system is paid in accordance with parts 405 and 413 of this subchapter, as applicable, if the RHC is— (i) An integral and subordinate part of a hospital, skilled nursing facility or home health agency participating in Medicare (that is, a provider of services). And (ii) Operated with other departments of the provider under common licensure, governance and professional supervision.

(2) An RHC, described in paragraph (c)(1) of this section, is paid on the basis of an all-inclusive rate, subject to a payment limit per visit, described in paragraphs (b)(1) and (2) of this section, for each beneficiary visit for covered services when in a hospital with greater than 50 beds as determined in § 412.105(b) of this subchapter. This all-inclusive rate is determined by the MAC, in accordance with this subpart and general instructions issued by CMS. The amount payable by the MAC for a visit is determined in accordance with paragraphs (i)(1) and (2) of this section. (3) Prior to April 1, 2021, an RHC, described in paragraph (c)(1) of this section, is paid on the basis of an all-inclusive rate and is not subject to a payment limit per visit described in paragraphs (b)(1) and (2) of this section for each beneficiary visit for covered services when in a hospital with less than 50 beds as determined in § 412.105(b) of this subchapter.

This all-inclusive rate is determined by the MAC, in accordance with this subpart and general instructions issued by CMS. The amount payable by the MAC for a visit is determined in accordance with paragraphs (i)(1) and (2) of this section. (4) On or after April 1, 2021, an RHC, described in paragraph (c)(1) of this section, is paid on the basis of an all-inclusive rate, subject to a payment limit per visit, described in paragraph (b)(3) of this section, for each beneficiary visit for covered services when it meets the specified qualifications in paragraph(d) of this section. This all-inclusive rate is determined by the MAC, in accordance with this subpart and general instructions issued by CMS.

The amount payable by the MAC for a visit is determined in accordance with paragraphs (i)(1) and (2) of this section. (d) Specified qualifications. A provider-based rural health clinic must meet the following qualifications to have a payment limit per visit established in accordance with paragraph (b)(3) of this section. (1) As of December 31, 2020, was in a hospital with less than 50 beds (as determined in § 412.105(b) of this subchapter) and after December 31, 2020, in a hospital that continues to have less than 50 beds (not taking into account any increase in the number of beds pursuant to a waiver during the buy antibiotics Public Health Emergency (PHE)).

And one of the following circumstances. (i) As of December 31, 2020, was enrolled under section 1866(j) of the Act (including temporary enrollment during the buy antibiotics PHE). Or (ii) Submitted an application for enrollment under section 1866(j) of the Act (or a request for temporary enrollment during the buy antibiotics PHE) that was received not later than December 31, 2020. (2) [Reserved] * * * * * Start Amendment Part13.

Amend § 405.2463 by revising paragraphs (a)(1)(i) introductory text and (b)(3) introductory text to read as follows. End Amendment Part What constitutes a visit. (a) * * * (1) * * * (i) Face-to-face encounter (or, for mental health disorders only, an encounter that meets the requirements under paragraph (b)(3) of this section) between an RHC patient and one of the following. * * * * * (b) * * * (3) Visit—Mental health.

A mental health visit is a face-to-face encounter or an encounter furnished using interactive, real-time, audio and video telecommunications technology or audio-only interactions in cases where the patient is not capable of, or does not consent to, the use of video technology for the purposes of diagnosis, evaluation or treatment of a mental health disorder, including an in-person mental health service furnished within 6 months prior to the furnishing of the telecommunications service and that an in-person mental health service (without the use of telecommunications technology) must be provided at least every 12 months while the beneficiary Start Printed Page 65662 is receiving services furnished via telecommunications technology for diagnosis, evaluation, or treatment of mental health disorders, unless, for a particular 12-month period, the physician or practitioner and patient agree that the risks and burdens outweigh the benefits associated with furnishing the in-person item or service, and the practitioner documents the reasons for this decision in the patient's medical record, between an RHC or FQHC patient and one of the following. * * * * * Start Amendment Part14. Amend § 405.2466 by revising paragraph (b)(1)(iv) to read as follows. End Amendment Part Annual reconciliation.

* * * * * (b) * * * (1) * * * (iv) For RHCs and FQHCs, payment for pneumococcal, influenza, and buy antibiotics treatment and their administration is 100 percent of Medicare reasonable cost. * * * * * Start Amendment Part15. Amend § 405.2469 by revising paragraph (d) to read as follows. End Amendment Part FQHC supplemental payments.

* * * * * (d) Per visit supplemental payment. A supplemental payment required under this section is made to the FQHC when a covered face-to-face encounter or an encounter furnished using interactive, real-time, audio and video telecommunications technology or audio-only interactions in cases where beneficiaries do not wish to use or do not have access to devices that permit a two-way, audio/video interaction for the purposes of diagnosis, evaluation or treatment of a mental health disorder occurs between a MA enrollee and a practitioner as set forth in § 405.2463. Additionally, there must be an in-person mental health service furnished within 6 months prior to the furnishing of the telecommunications service and that an in-person mental health service (without the use of telecommunications technology) must be provided at least every 12 months while the beneficiary is receiving services furnished via telecommunications technology for diagnosis, evaluation, or treatment of mental health disorders, unless, for a particular 12-month period, the physician or practitioner and patient agree that the risks and burdens outweigh the benefits associated with furnishing the in-person item or service, and the practitioner documents the reasons for this decision in the patient's medical record. Start Part End Part Start Amendment Part16.

The authority citation for part 410 continues to read as follows. End Amendment Part Start Authority 42 U.S.C. 1302, 1395m, 1395hh, 1395rr, and 1395ddd. End Authority Start Amendment Part17.

Amend § 410.33 by— End Amendment Part Start Amendment Parta. Revising paragraphs (c) and (g)(6)(i) and (ii). End Amendment Part Start Amendment Partb. Redesignating paragraphs (g)(8)(i) through (iii) as paragraphs (g)(8)(i)(A) through (C), respectively.

And End Amendment Part Start Amendment Partc. Adding paragraphs (g)(8)(i) introductory text and (g)(8)(ii). And End Amendment Part Start Amendment Partd. Revising paragraph (g)(9).

End Amendment Part The revisions and additions read as follows. Independent diagnostic testing facility. * * * * * (c) Nonphysician personnel. (1) Except as otherwise stated in paragraph (c)(2) of this section, any nonphysician personnel used by the IDTF to perform tests must demonstrate the basic qualifications to perform the tests in question and have training and proficiency as evidenced by licensure or certification by the appropriate State health or education department.

In the absence of a State licensing board, the technician must be certified by an appropriate national credentialing body. The IDTF must maintain documentation available for review that these requirements are met. (2) For services that do not require direct or in-person beneficiary interaction, treatment, or testing, any nonphysician personnel used by the IDTF to perform the tests must meet all applicable State licensure requirements for doing so. If there are any applicable State licensure requirements, the IDTF must maintain documentation available for review that these requirements are met.

* * * * * (g) * * * (6) * * * (i) Except as otherwise stated in paragraph (g)(6)(ii) of this section, have a comprehensive liability insurance policy of at least $300,000 per location that covers both the place of business and all customers and employees of the IDTF. The policy must be carried by a nonrelative-owned company. Failure to maintain required insurance at all times will result in revocation of the IDTF's billing privileges retroactive to the date the insurance lapsed. IDTF suppliers are responsible for providing the contact information for the issuing insurance agent and the underwriter.

In addition, the IDTF must— (A) Ensure that the insurance policy must remain in force at all times and provide coverage of at least $300,000 per incident. And (B) Notify the CMS designated contractor in writing of any policy changes or cancellations. (ii) Paragraph (g)(6)(i) of this section does not apply to IDTFs that only perform services that do not require direct or in-person beneficiary interaction, treatment, or testing. * * * * * (8) * * * (i) Except as otherwise stated in paragraph (g)(8)(ii) of this section, answer, document, and maintain documentation of a beneficiary's written clinical complaint at the physical site of the IDTF.

(For mobile IDTFs, this documentation would be stored at their home office.) This includes, but is not limited to, the following. * * * * * (ii) Paragraph (g)(8)(i) of this section does not apply to IDTFs that only perform services that do not require direct or in-person beneficiary interaction, treatment, or testing. (9) Openly post these standards for review by patients and the public. (This requirement does not apply to IDTFs that only perform services that do not require direct or in-person beneficiary interaction, treatment, or testing.) * * * * * Start Amendment Part18.

Amend § 410.37 by adding paragraph (j) to read as follows. End Amendment Part Colorectal cancer screening tests. Conditions for and limitations on coverage. * * * * * (j) Expansion of coverage of colorectal cancer screening tests.

Effective January 1, 2022, colorectal cancer screening tests include a planned screening flexible sigmoidoscopy or screening colonoscopy that involves the removal of tissue or other matter or other procedure furnished in connection with, as a result of, and in the same clinical encounter as the screening test. Start Amendment Part19. Amend § 410.47— End Amendment Part Start Amendment Parta. In paragraph (a), by revising the definitions of “Individualized treatment plan”, “Medical director”, Outcomes assessment”, “Physician prescribed exercise”, “Psychosocial assessment”, and “Supervising physician”.

End Amendment Part Start Amendment Partb. By revising paragraphs (b) through (e). End Amendment Part Start Amendment Partc. By removing paragraph (f).

And End Amendment Part Start Amendment Partd. By redesignating paragraph (g) as paragraph (f). End Amendment Part The revisions read as follows. Start Printed Page 65663 Pulmonary rehabilitation program.

Conditions of coverage. (a) * * * Individualized treatment plan means a written plan tailored to each individual patient that includes all of the following. (i) A description of the individual's diagnosis. (ii) The type, amount, frequency, and duration of the items and services furnished under the plan.

(iii) The goals set for the individual under the plan. Medical director means the physician who oversees the pulmonary rehabilitation program at a particular site. Outcomes assessment means an evaluation of progress as it relates to the individual's rehabilitation which includes the following. (i) Evaluations, based on patient-centered outcomes, which must be measured by the physician or program staff at the beginning and end of the program.

Evaluations measured by program staff must be considered by the physician in developing and/or reviewing individualized treatment plans. (ii) Objective clinical measures of exercise performance and self-reported measures of shortness of breath and behavior. * * * * * Physician-prescribed exercise means aerobic exercise combined with other types of exercise (such as conditioning, breathing retraining, step, and strengthening) as determined to be appropriate for individual patients by a physician. Psychosocial assessment means an evaluation of an individual's mental and emotional functioning as it relates to the individual's rehabilitation or respiratory condition which includes an assessment of those aspects of an individual's family and home situation that affects the individual's rehabilitation treatment, and psychosocial evaluation of the individual's response to and rate of progress under the treatment plan.

* * * * * Supervising physician means a physician that is immediately available and accessible for medical consultations and medical emergencies at all times items and services are being furnished to individuals under pulmonary rehabilitation programs. (b) General rule —(1) Covered conditions. Medicare Part B covers pulmonary rehabilitation for beneficiaries. (i) With moderate to very severe COPD (defined as GOLD classification II, III and IV), when referred by the physician treating the chronic respiratory disease.

(ii) Who have had confirmed or suspected buy antibiotics and experience persistent symptoms that include respiratory dysfunction for at least four weeks. (iii) Additional medical indications for coverage for pulmonary rehabilitation may be established through a national coverage determination (NCD). (2) Components. Pulmonary rehabilitation must include all of the following.

(i) Physician-prescribed exercise during each pulmonary rehabilitation session. (ii) Education or training that is closely and clearly related to the individual's care and treatment which is tailored to the individual's needs and assists in achievement of goals toward independence in activities of daily living, adaptation to limitations and improved quality of life. Education must include information on respiratory problem management and, if appropriate, brief smoking cessation counseling. (iii) Psychosocial assessment.

(iv) Outcomes assessment. (v) An individualized treatment plan detailing how components are utilized for each patient. The individualized treatment plan must be established, reviewed, and signed by a physician every 30 days. (3) Settings.

(i) Medicare Part B pays for pulmonary rehabilitation in the following settings. (A) A physician's office. (B) A hospital outpatient setting. (ii) All settings must have the following.

(A) A physician immediately available and accessible for medical consultations and emergencies at all times when items and services are being furnished under the program. This provision is satisfied if the physician meets the requirements for direct supervision for physician office services, at § 410.26 of this subpart. And for hospital outpatient services at § 410.27 of this subpart. (B) The necessary cardio-pulmonary, emergency, diagnostic, and therapeutic life-saving equipment accepted by the medical community as medically necessary (for example, oxygen, cardiopulmonary resuscitation equipment, and defibrillator) to treat chronic respiratory disease.

(c) Medical director standards. The physician responsible for a pulmonary rehabilitation program is identified as the medical director. The medical director, in consultation with staff, is involved in directing the progress of individuals in the program and must possess all of the following. (1) Expertise in the management of individuals with respiratory pathophysiology.

(2) Cardiopulmonary training in basic life support or advanced cardiac life support. (3) Be licensed to practice medicine in the State in which the pulmonary rehabilitation program is offered. (d) Supervising physician standards. Physicians acting as the supervising physician must possess all of the following.

(1) Expertise in the management of individuals with respiratory pathophysiology. (2) Cardiopulmonary training in basic life support or advanced cardiac life support. (3) Be licensed to practice medicine in the State in which the pulmonary rehabilitation program is offered. (e) Limitations on coverage.

The number of pulmonary rehabilitation sessions are limited to a maximum of 2 1-hour sessions per day for up to 36 sessions over up to 36 weeks with the option for an additional 36 sessions over an extended period of time if approved by the Medicare Administrative Contractor. * * * * * Start Amendment Part20. Amend § 410.49— End Amendment Part Start Amendment Parta. In paragraph (a), by revising the definition of “Medical director”, revising paragraph (i) in the definition of “Outcomes assessment”, and revising the definition of “Physician-prescribed exercise”.

And End Amendment Part Start Amendment Partb. By revising paragraphs (b)(1) introductory text, (b)(2) introductory text, (b)(2)(ii), (b)(3)(i) introductory text, (d) introductory text, (e) introductory text, and (f). End Amendment Part The revisions read as follows. Cardiac rehabilitation program and intensive cardiac rehabilitation program.

Conditions of coverage. (a) * * * Medical director means the physician who oversees the cardiac rehabilitation or intensive cardiac rehabilitation program at a particular site. Outcomes assessment * * * (i) Evaluations, based on patient-centered outcomes, which must be measured by the physician or program staff at the beginning and end of the program. Evaluations measured by program staff must be considered by the physician in developing and/or reviewing individualized treatment plans.

* * * * * Start Printed Page 65664 Physician-prescribed exercise means aerobic exercise combined with other types of exercise (such as strengthening and stretching) as determined to be appropriate for individual patients by a physician. * * * * * (b) * * * (1) Covered conditions. Medicare Part B covers cardiac rehabilitation and intensive cardiac rehabilitation for beneficiaries who have experienced one or more of the following. * * * * * (2) Components.

Cardiac rehabilitation and intensive cardiac rehabilitation must include all of the following. * * * * * (ii) Cardiac risk factor modification, including education, counseling, and behavioral intervention, tailored to the individual's needs. * * * * * (3) * * * (i) Medicare Part B pays for cardiac rehabilitation and intensive cardiac rehabilitation in the following settings. * * * * * (d) Medical director standards.

The physician responsible for a cardiac rehabilitation program or intensive cardiac rehabilitation program is identified as the medical director. The medical director, in consultation with staff, is involved in directing the progress of individuals in the program and must possess all of the following. * * * * * (e) Supervising physician standards. Physicians acting as the supervising physician must possess all of the following.

* * * * * (f) Limitations on coverage —(1) Cardiac rehabilitation. The number of cardiac rehabilitation sessions are limited to a maximum of 2 1-hour sessions per day for up to 36 sessions over up to 36 weeks with the option for an additional 36 sessions over an extended period of time if approved by the Medicare Administrative Contractor. (2) Intensive cardiac rehabilitation. Intensive cardiac rehabilitation sessions are limited to 72 1-hour sessions (as defined in section 1848(b)(5) of the Act), up to 6 sessions per day, over a period of up to 18 weeks.

Start Amendment Part21. Amend § 410.59 by revising paragraph (a)(4)(iii)(B) and adding paragraphs (a)(4)(iv) and (v) to read as follows. End Amendment Part Outpatient occupational therapy services. Conditions.

(a) * * * (4) * * * (iii) * * * (B) Except as provided in paragraph (a)(4)(iv) of this section, furnishes a portion of a service, or in the case of a 15-minute (or other time interval) timed code, a portion of a unit of service separately from the part furnished by the occupational therapist such that the minutes for that portion of a service (or unit of a service) furnished by the occupational therapist assistant exceed 10 percent of the total minutes for that service (or unit of a service). (iv) Paragraph (a)(4)(iii)(B) of this section does not apply when determining whether the prescribed modifier applies to the last 15-minute unit of a service billed for a patient on a treatment day when the occupational therapist provides more than the midpoint of a 15-minute timed code, that is, 8 or more minutes, regardless of any minutes for the same service furnished by the occupational therapy assistant. (v) Where there are two remaining 15-minute units to bill of the same service, and the occupational therapist and occupational therapy assistant each provided between 9 and 14 minutes of the service with a total time of at least 23 minutes and no more than 28 minutes, one unit of the service is billed with the prescribed modifier for the minutes furnished by the occupational therapy assistant and one unit is billed without the prescribed modifier for the service provided by the occupational therapist. * * * * * Start Amendment Part22.

Amend § 410.60 by revising paragraph (a)(4)(iii)(B) and adding paragraphs (a)(4)(iv) and (v) to read as follows. End Amendment Part Outpatient physical therapy services. Conditions. (a) * * * (4) * * * (iii) * * * (B) Except as provided in paragraph (a)(4)(iv) of this section, furnishes a portion of a service, or in the case of a 15-minute (or other time interval) timed code, a portion of a unit of service separately from the part furnished by the physical therapist such that the minutes for that portion of a service (or unit of a service) furnished by the physical therapist assistant exceed 10 percent of the total minutes for that service (or unit of a service).

(iv) Paragraph (a)(4)(iii)(B) of this section does not apply when determining whether the prescribed modifier applies to the last 15-minute unit of a service billed for a patient on a treatment day, when the physical therapist provides more than the midpoint of a 15-minute timed code, that is, 8 or more minutes, regardless of any minutes for the same service furnished by the physical therapist assistant. (v) Where there are two remaining 15-minute units to bill of the same service, and the physical therapist and physical therapist assistant each provided between 9 and 14 minutes of the service with a total time of at least 23 minutes, one unit of the service is billed with the prescribed modifier for the minutes furnished by the physical therapist assistant and one unit is billed without the prescribed modifier for the service provided by the physical therapist. * * * * * Start Amendment Part23. Amend § 410.67— End Amendment Part Start Amendment Parta.

In paragraph (b), by revising paragraphs (3) and (4) in the definition of “Opioid use disorder treatment service”. End Amendment Part Start Amendment Partb. By revising paragraphs (d)(4)(ii) and (iii) and (d)(5). And End Amendment Part Start Amendment Partc.

By adding paragraph (d)(6). End Amendment Part The revisions and addition read as follows. Medicare coverage and payment of Opioid use disorder treatment services furnished by Opioid treatment programs. * * * * * (b) * * * Opioid use disorder treatment service * * * (3) Substance use counseling by a professional to the extent authorized under State law to furnish such services including services furnished via two-way interactive audio-video communication technology, as clinically appropriate, and in compliance with all applicable requirements.

During a Public Health Emergency, as defined in § 400.200 of this chapter, or for services furnished after the end of such emergency, in cases where audio/video communication technology is not available to the beneficiary, the counseling services may be furnished using audio-only telephone calls if all other applicable requirements are met. (4) Individual and group therapy with a physician or psychologist (or other mental health professional to the extent authorized under State law), including services furnished via two-way interactive audio-video communication technology, as clinically appropriate, and in compliance with all applicable requirements. During a Public Health Emergency, as defined in § 400.200 of this chapter, or for services furnished after the end of such emergency, in cases where audio/video communication technology is not available to the beneficiary, the therapy Start Printed Page 65665 services may be furnished using audio-only telephone calls if all other applicable requirements are met. * * * * * (d) * * * (4) * * * (ii) The payment amounts for the non-drug component of the bundled payment for an episode of care, the adjustments for counseling or therapy, intake activities, periodic assessments, and the non-drug component of the adjustment for take-home supplies of opioid antagonist medications will be geographically adjusted using the Geographic Adjustment Factor described in § 414.26 of this subchapter.

(iii) The payment amounts for the non-drug component of the bundled payment for an episode of care, the adjustments for counseling or therapy, intake activities, periodic assessments, and the non-drug component of the adjustment for take-home supplies of opioid antagonist medications will be updated annually using the Medicare Economic Index described in § 405.504(d) of this subchapter. (5) Payment for medications delivered, administered or dispensed to a beneficiary as part of the bundled payment or an adjustment to the bundled payment under paragraph (d)(4)(i) of this section is considered a duplicative payment if a claim for delivery, administration or dispensing of the same medications for the same beneficiary on the same date of service was also separately paid under Medicare Part B or Part D. CMS will recoup the duplicative payment made to the opioid treatment program. (6) For purposes of the adjustment to the bundled payment under paragraph (d)(4)(i)(A) of this section, after the end of the Public Health Emergency as defined in § 400.200 of this chapter, when services are furnished using audio-only technology the practitioner must certify, in a form and manner specified by CMS, that they had the capacity to furnish the services using two-way, audio/video communication technology, but used audio-only technology because audio/video communication technology was not available to the beneficiary.

* * * * * Start Amendment Part24. Add § 410.72 to read as follows. End Amendment Part Registered dietitians' and nutrition professionals' services. (a) Definition.

Registered dietitians and nutrition professionals. Meet the qualifications at § 410.134. (b) Covered registered dietitian and nutrition professional services. Medicare Part B covers.

(1) Coverage condition. Medical nutrition therapy (MNT) services as defined at § 410.130 under the conditions of coverage at § 410.132. (2) Other services. Registered dietitians and nutrition professionals may also provide diabetes self-management (DSMT) services if they are or represent an accredited DSMT entity and have an order from a physician or qualified nonphysician practitioner who is treating the patient's diabetic condition.

(3) Limits on MNT and DSMT. (i) DSMT and MNT cannot be furnished to a patient on the same date of service, and (ii) MNT and DSMT services cannot be furnished incident to the professional services of a physician or nonphysician practitioner service. (c) Limitations. The following services are not registered dietitian or nutrition professional services for purposes of billing Medicare Part B.

(1) Services furnished by a registered dietitian or nutrition professional to an inpatient of a Medicare-participating hospital. (2) Services furnished by a registered dietitian or nutrition professional to an inpatient of a Medicare-participating SNF. (3) Services furnished by a registered dietitian or nutrition professional to a patient in a Medicare-participating ESRD facility in accordance with the limitation on coverage of MNT service listed at § 410.132(b)(1). (d) Professional services.

Registered dietitians and nutrition professionals can be paid for professional services only when the services have been directly performed by them. (e) Telehealth services. MNT and DSMT services may be provided as telehealth services (meeting the requirements in § 410.78) when registered dietitians or nutrition professionals act as distant site practitioners. (f) Restrictions.

The services of a registered dietitian or nutrition professional are provided on an assignment-related basis, and a registered dietitian or nutrition professional may not charge a beneficiary in excess of the amounts permitted under 42 CFR 424.55. If a beneficiary has made payment for a service in excess of these limits, the registered dietitian or nutrition professional must refund the full amount of the impermissible charge to the beneficiary. Start Amendment Part25. Amend § 410.74 by revising paragraphs (a)(2)(v) and (d)(2) to read as follows.

End Amendment Part Physician assistants' services. (a) * * * (2) * * * (v) Prior to January 1, 2022, furnishes services that are billed by the employer of a physician assistant. And * * * * * (d) * * * (2) The services of a physician assistant are provided on an assignment-related basis, and the physician assistant may not charge a beneficiary in excess of the amounts permitted under 42 CFR 424.55. If a beneficiary has made payment for a service in excess of these limits, the physician assistant must refund the full amount of the impermissible charge to the beneficiary.

* * * * * Start Amendment Part26. Amend § 410.75 by revising paragraph (e)(2) to read as follows. End Amendment Part Nurse practitioners' services. * * * * * (e) * * * (2) The services of a nurse practitioner are provided on an assignment-related basis, and the nurse practitioner may not charge a beneficiary in excess of the amounts permitted under 42 CFR 424.55.

If a beneficiary has made payment for a service in excess of these limits, the nurse practitioner must refund the full amount of the impermissible charge to the beneficiary. * * * * * Start Amendment Part27. Amend § 410.76 by revising paragraph (e)(2) to read as follows. End Amendment Part Clinical nurse specialists' services.

* * * * * (e) * * * (2) The services of a clinical nurse specialist are provided on an assignment-related basis, and the clinical nurse specialist may not charge a beneficiary in excess of the amounts permitted under 42 CFR 424.55. If a beneficiary has made payment for a service in excess of these limits, the clinical nurse specialist must refund the full amount of the impermissible charge to the beneficiary. * * * * * Start Amendment Part28. Amend § 410.77 by revising paragraph (d)(2) to read as follows.

End Amendment Part Certified nurse-midwives' services. Qualifications and conditions. * * * * * (d) * * * (2) The services of a certified nurse-midwife are provided on an assignment-related basis, and the certified nurse-midwife may not charge a beneficiary in excess of the amounts permitted under 42 CFR 424.55. If a beneficiary has made Start Printed Page 65666 payment for a service in excess of these limits, the certified nurse-midwife must refund the full amount of the impermissible charge to the beneficiary.

* * * * * Start Amendment Part29. Amend 410.78 by revising paragraph (a)(3) and adding paragraphs (b)(3)(xiii) and (xiv) and (b)(4)(iv)(D) to read as follows. End Amendment Part Telehealth services. (a) * * * (3) Interactive telecommunications system means, except as otherwise provided in this paragraph, multimedia communications equipment that includes, at a minimum, audio and video equipment permitting two-way, real-time interactive communication between the patient and distant site physician or practitioner.

For services furnished for purposes of diagnosis, evaluation, or treatment of a mental health disorder to a patient in their home, interactive telecommunications may include two-way, real-time audio-only communication technology if the distant site physician or practitioner is technically capable to use an interactive telecommunications system as defined in the previous sentence, but the patient is not capable of, or does not consent to, the use of video technology. A modifier designated by CMS must be appended to the claim for services described in this paragraph to verify that these conditions have been met. * * * * * (b) * * * (3) * * * (xiii) A rural emergency hospital (as defined in section 1861(kkk)(2) of the Act), for services furnished on or after January 1, 2023. (xiv) The home of a beneficiary for the purposes of diagnosis, evaluation, and/or treatment of a mental health disorder for services furnished on or after the first day after the end of the PHE as defined in our regulation at § 400.200 except as otherwise provided in this paragraph.

Payment will not be made for a telehealth service furnished under this paragraph unless the following conditions are met. (A) The physician or practitioner has furnished an item or service in-person, without the use of telehealth, for which Medicare payment was made (or would have been made if the patient were entitled to, or enrolled for, Medicare benefits at the time the item or service is furnished) within 6 months prior to the initial telehealth service. (B) The physician or practitioner has furnished an item or service in-person, without the use of telehealth, at least once within 12 months of each subsequent telehealth service described in this paragraph, unless, for a particular 12-month period, the physician or practitioner and patient agree that the risks and burdens associated with an in-person service outweigh the benefits associated with furnishing the in-person item or service, and the practitioner documents the reason(s) for this decision in the patient's medical record. (C) The requirements of paragraphs (b)(3)(xiv)(A) and (B) may be met by another physician or practitioner of the same specialty and subspecialty in the same group as the physician or practitioner who furnishes the telehealth service, if the physician or practitioner who furnishes the telehealth service described under this paragraph is not available.

(4) * * * (iv) * * * (D) Services furnished on or after the first day after the end of the PHE as defined in our regulation at § 400.200 for the purposes of diagnosis, evaluation, and/or treatment of a mental health disorder. Payment will not be made for a telehealth service furnished under this paragraph unless the physician or practitioner has furnished an item or service in person, without the use of telehealth, for which Medicare payment was made (or would have been made if the patient were entitled to, or enrolled for, Medicare benefits at the time the item or service is furnished) within 6 months prior to the initial telehealth service and within 6 months of any subsequent telehealth service. * * * * * Start Amendment Part30. Amend § 410.79 by revising paragraphs (c)(1)(ii) and (e)(3)(v)(C) to read as follows.

End Amendment Part Medicare Diabetes Prevention Program expanded model. Conditions of coverage. * * * * * (c) * * * (1) * * * (ii) An MDPP beneficiary is eligible for the first ongoing maintenance session interval only if the beneficiary. (A) Starts his or her first core session on or before December 31, 2021.

(B) Attends at least one in-person core maintenance session during the final core maintenance session interval. And (C) Achieves or maintains the required minimum weight loss at a minimum of one in-person core maintenance session during the final core maintenance session interval. * * * * * (e) * * * (3) * * * (v) * * * (C) Beneficiaries who began the set of MDPP services between January 1, 2021 and December 31, 2021 and who are in the second year of the set of MDPP services as of the start of an applicable 1135 waiver event, whose in-person sessions are suspended due to the applicable 1135 waiver event, and who elect not to continue with MDPP services virtually can elect to attend ongoing maintenance sessions. And may restart the ongoing maintenance session interval in which they were participating at the start of the applicable 1135 waiver event or may resume with the most recent attendance session of record.

* * * * * Start Amendment Part31. Amend § 410.105 by revising paragraph (d)(3)(ii) and adding paragraphs (d)(3)(iii) and (iv) to read as follows. End Amendment Part Requirements for coverage of CORF services. * * * * * (d) * * * (3) * * * (ii) Except as provided in paragraph (d)(3)(iii) of this section, furnishes a portion of a service, or in the case of a 15-minute (or other time interval) timed code, a portion of a unit of service, separately from the part furnished by the physical or occupational therapist such that the minutes for that portion of a service (or unit of a service) exceed 10 percent of the total time for that service (or unit of a service).

(iii) Paragraph (d)(3)(ii) of this section does not apply when determining whether the prescribed modifier applies to the last 15-minute unit of a service billed for a patient on a treatment day when the physical or occupational therapist provides more than the midpoint of a 15-minute timed code, that is, 8 or more minutes, regardless of any minutes for the same service furnished by the physical therapist assistant or occupational therapy assistant. (iv) Where there are two remaining 15-minute units to bill of the same service and the physical therapist and the physical therapist assistant or the occupational therapist and the occupational therapy assistant, as applicable, each provided between 9 and 14 minutes, with a total time of at least 23 minutes, one unit of the service is billed with the prescribed modifier for the minutes furnished by the physical therapist assistant or occupational therapy assistant and one unit is billed without the prescribed modifier for the service provided by the Start Printed Page 65667 physical therapist or occupational therapist. Start Amendment Part32. Amend § 410.130 by revising the definition of “Chronic renal insufficiency” and removing the definition of “Treating physician”.

End Amendment Part The revision reads as follows. Definitions. * * * * * Chronic renal insufficiency means the stage of renal disease associated with a reduction in renal function not severe enough to require dialysis or transplantation (glomerular fiation rate [GFR] 15-59 ml/min/1.73m 2 ). * * * * * Start Amendment Part33.

Amend § 410.132 by revising paragraphs (a), (b)(5), and (c) to read as follows. End Amendment Part Medical nutrition therapy. (a) Conditions for coverage of MNT services. Medicare Part B pays for MNT services provided by a registered dietitian or nutrition professional as defined in § 410.134 when the beneficiary is referred for the service by a physician.

(b) * * * (5) An exception to the maximum number of hours in paragraphs (b)(2), (3), and (4) of this section may be made when a physician determines that there is a change of diagnosis, medical condition, or treatment regimen related to diabetes or renal disease that requires a change in MNT during an episode of care. (c) Referrals. Referral may only be made by a physician when the beneficiary has been diagnosed with diabetes or renal disease as defined in this subpart with documentation noted by a referring physician in the beneficiary's medical record. Start Amendment Part34.

Amend § 410.150 by revising paragraph (b)(15) to read as follows. End Amendment Part To whom payment is made. * * * * * (b) * * * (15)(i) Prior to January 1, 2022, to the qualified employer of a physician assistant for professional services furnished by the physician assistant and for services and supplies provided 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. (ii) Effective on or after January 1, 2022, payment is made to a physician assistant for professional services furnished by a physician assistant 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 professional services of the physician assistant. * * * * * Start Amendment Part35. Amend § 410.152 by revising paragraphs (l) introductory text and (l)(5) to read as follows. End Amendment Part Amounts of payment.

* * * * * (l) Amount of payment. Preventive services. Except as provided otherwise in this paragraph, Medicare Part B pays 100 percent of the Medicare payment amount established under the applicable payment methodology for the service furnished by a provider or supplier for the following preventive services. * * * * * (5) Colorectal cancer screening tests (excluding barium enemas).

(i) For the colorectal cancer screening tests described in § 410.37(j), Medicare Part B pays at the specified percentage as follows. (A) 80 percent for CY 2022. (B) 85 percent for CY 2023 through 2026. (C) 90 percent for 2027 through 2029.

(D) 100 percent beginning January 1, 2030. (ii) [Reserved] * * * * * Start Part End Part Start Amendment Part36. The authority citation for part 411 continues to read as follows. End Amendment Part Start Authority 42 U.S.C.

1302, 1395w-101 through 1395w-152, 1395hh, and 1395nn. End Authority Start Amendment Part37. Amend § 411.351 by revising the definition of “List of CPT/HCPCS Codes” to read as follows. End Amendment Part Start Amendment Part38.

Amend § 411.354 by revising paragraphs (c)(2)(ii)(A) through (C) to read as follows. End Amendment Part Financial relationship, compensation, and ownership or investment interest. * * * * * (c) * * * (2)* * * (ii) * * * (A)( 1 ) The referring physician (or immediate family member) receives aggregate compensation from the person or entity in the chain with which the physician (or immediate family member) has a direct financial relationship that varies with the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS. And ( 2 ) The amount of compensation that the physician (or immediate family member) receives per individual unit— ( i ) Is not fair market value for items or services actually provided.

( ii ) Could increase as the number or value of the physician's referrals to the entity furnishing DHS increases, or could decrease as the number or value of the physician's referrals to the entity decreases. ( iii ) Could increase as the amount or value of the other business generated by the physician for the entity furnishing DHS increases, or could decrease as the amount or value of the other business generated by the physician for the entity furnishing DHS decreases. Or ( iv ) Is payment for the lease of office space or equipment or for the use of premises or equipment. (B) For purposes of applying paragraph (c)(2)(ii)(A)( 2 ) of this section, the individual unit is.

( 1 ) Item, if the physician (or immediately family member) is compensated solely per item provided. ( 2 ) Service, if the physician (or immediate family member) is compensated solely per service provided, which includes arrangements where the “service” provided includes both items and services. ( 3 ) Time, if the conditions of paragraph (c)(2)(ii)(B)(1) or ( 2 ) of this section are not met. (C) If the financial relationship between the physician (or immediate family member) and the person or entity Start Printed Page 65668 in the chain with which the referring physician (or immediate family member) has a direct financial relationship is an ownership or investment interest, the nonownership or noninvestment interest closest to the referring physician (or immediate family member) is used to determine whether the aggregate compensation varies with the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS and whether the amount of compensation that the physician (or immediate family member) receives per individual unit meets the conditions in paragraph (c)(2)(ii)(A)( 2 ) of this section.

(For example, if a referring physician has an ownership interest in company A, which owns company B, which has a compensation arrangement with company C, which has a compensation arrangement with entity D that furnishes DHS, we would look to the aggregate compensation between company B and company C for purposes of this paragraph (c)(2)(ii). * * * * * Start Amendment Part39. Amend § 411.355 by revising paragraph (h) to read as follows. End Amendment Part General exceptions to the referral prohibition related to both ownership/investment and compensation.

* * * * * (h) Preventive screening tests and treatments. (1) Preventive screening tests and treatments that meet the following conditions. (i) The preventive screening test or treatment is listed on the List of CPT/HCPCS Codes as a code to which the exception in this paragraph is applicable. (ii) The preventive screening test or treatment is covered by Medicare.

(iii) The preventive screening test or treatment is subject to a CMS-mandated frequency limit. (2) During such period as the treatment is not subject to a CMS-mandated frequency limit, paragraph (h)(1)(iii) of this section does not apply to a buy antibiotics treatment identified on the List of CPT/HCPCS Codes as a code to which the exception in this paragraph is applicable. * * * * * Start Part End Part Start Amendment Part40. The authority citation for part 414 continues to read as follows.

End Amendment Part Start Authority 42 U.S.C. 1302, 1395hh, and 1395rr(b)(l). End Authority Start Amendment Part41. Amend § 414.64 by revising paragraph (a) to read as follows.

End Amendment Part Payment for medical nutrition therapy. (a) Payment under the physician fee schedule. Medicare payment for medical nutrition therapy is made under the physician fee schedule in accordance with subpart B of this part. Payment to nonphysician professionals, as specified in paragraph (b) of this section, is 80 percent (or 100 percent if such services are recommended with a grade of A or B by the United States Preventive Services Task Force for any indication or population and are appropriate for the individual) of the lesser of the actual charges or 85 percent of the physician fee schedule amount.

* * * * * Start Amendment Part42. Amend § 414.84— End Amendment Part Start Amendment Parta. By revising paragraphs (b)(1)(i). End Amendment Part Start Amendment Partb.

In paragraph (b)(1)(ii), by removing the reference “CY 2018” and adding in its place the reference “CY 2022”. End Amendment Part Start Amendment Partc. By revising paragraph (b)(2)(i). End Amendment Part Start Amendment Partd.

In paragraph (b)(2)(ii), by removing the reference CY 2018” and adding in its place the reference “CY 2022”. End Amendment Part Start Amendment Parte. By revising paragraph (b)(3)(i). End Amendment Part Start Amendment Partf.

In paragraph (b)(3)(ii), by removing the reference “CY 2018” and adding in its place the reference “CY 2022”. End Amendment Part Start Amendment Partg. By revising paragraph (b)(4)(i)(A). End Amendment Part Start Amendment Parth.

In paragraph (b)(4)(i)(B), by removing the reference “CY 2018” and adding in its place the reference “CY 2022”. End Amendment Part Start Amendment Parti. By revising paragraph (b)(4)(ii)(A). End Amendment Part Start Amendment Parth.

In paragraph (b)(4)(ii)(B), by removing the reference “CY 2018” and adding in its place the reference “CY 2022”. And End Amendment Part Start Amendment Partj. By revising paragraphs (b)(5), (b)(6)(i), (b)(7)(i) and (ii), and (c). End Amendment Part The revisions read as follows.

Payment for MDPP Services. * * * * * (b) * * * (1) * * * (i) For a first core session furnished January 1, 2022, through December 31, 2022 the amount is $35. * * * * * (2) * * * (i) For the fourth core session furnished January 1, 2022, through December 31, 2022 the amount is $105. * * * * * (3) * * * (i) For the ninth core session furnished January 1, 2022, through December 31, 2022 the amount is $175.

* * * * * (4) * * * (i) * * * (A) For a second core maintenance session January 1, 2022, through December 31, 2022 the amount is $93. * * * * * (ii) * * * (A) For a second core maintenance session January 1, 2022, through December 31, 2022 the amount is $75. * * * * * (5) Performance Goal 5. Attends two ongoing maintenance sessions and maintains the required minimum weight loss during an ongoing maintenance session interval.

For an MDPP beneficiary who attends his or her first core session on or before December 31, 2021, CMS makes a performance payment to an MDPP supplier if an MDPP beneficiary attends two ongoing maintenance sessions during an ongoing maintenance session interval, achieves attendance at that second ongoing maintenance session upon attendance at an ongoing maintenance session furnished by that supplier, and achieves or maintains the required minimum weight loss as measured in-person during an ongoing maintenance session furnished during the applicable ongoing maintenance session interval. CMS makes this performance payment to an MDPP supplier only once per MDPP beneficiary per ongoing maintenance session interval. The amount of this performance payment is determined as follows. (i) For a second ongoing maintenance session furnished in interval 1 (months 13-15 of the MDPP services period), January 1, 2022, through December 31, 2022, the amount is $52.

(ii) For a second ongoing maintenance session furnished in interval 2 (months 16-18 of the MDPP services period), January 1, 2022, through December 31, 2022, the amount is $52. (iii) For a second ongoing maintenance session furnished in interval 3 (months 19-21 of the MDPP services period), January 1, 2022, through December 31, 2022, the amount is $53. (iv) For a second ongoing maintenance session furnished in interval 4 (months 22-24 of the MDPP services period), January 1, 2022, through December 31, 2022 the amount is $53. (v) For a second ongoing maintenance session furnished during a subsequent year.

The performance payment amount specified in this paragraph, adjusted as specified in paragraph (d) of this section. (6) * * * (i) For a core session or core maintenance session, as applicable, furnished January 1, 2022, through December 31, 2022, the amount is $169. * * * * * (7) * * * (i) For a core session or core maintenance session, as applicable, Start Printed Page 65669 furnished January 1, 2022, through December 31, 2022, the amount is $35. (ii) For a core session or core maintenance session, as applicable, furnished during a calendar year subsequent to CY 2018.

The performance payment amount specified in this paragraph, adjusted as specified in paragraph (d) of this section. (c) Bridge payment. CMS makes a bridge payment to an MDPP supplier only for a core session or core maintenance session furnished to an MDPP beneficiary who has previously received MDPP services from a different MDPP supplier. An MDPP supplier that has previously been paid either a bridge payment or a performance payment for an MDPP beneficiary is not eligible to be paid a bridge payment for that beneficiary.

A bridge payment is made only on an assignment-related basis in accordance with § 424.55 of this subchapter, and MDPP suppliers must accept the Medicare allowed charge as payment in full and may not bill or collect from the beneficiary any amount. CMS will make a bridge payment only to an MDPP supplier that complies with all applicable enrollment and program requirements, and only for MDPP services furnished by an eligible coach, on or after his or her coach eligibility start date and, if applicable, before his or her coach eligibility end date. As a condition of payment, the MDPP supplier must report the NPI of the coach who furnished the session on the claim for the MDPP session. The amount of the bridge payment is determined as follows.

(1) For core session or core maintenance session, as applicable, furnished January 1, 2022, through December 31, 2022, the amount is $35. (2) For core session and core maintenance session, as applicable, furnished during a calendar year subsequent to CY 2022. The bridge payment amount specified in this paragraph, adjusted as specified in paragraph (d) of this section. * * * * * Start Amendment Part43.

Amend § 414.626 by revising paragraphs (b)(1) and (f) to read as follows. End Amendment Part Data reporting by ground ambulance organizations. * * * * * (b) * * * (1) Within 30 days of the date that CMS notifies a ground ambulance organization under paragraph (c)(3) of this section that it has selected the ground ambulance organization to report data under this section, the ground ambulance organization must select a data collection period that corresponds with its annual accounting period and provide the start date of that data collection period to CMS or its contractor. * * * * * (f) Public availability of data.

Beginning in 2024, and at least once every 2 years thereafter, CMS will post on its website data that it collected under this section, including but not limited to summary statistics and ground ambulance organization characteristics. * * * * * Start Amendment Part44. Amend § 414.802 by revising the definition of “Drug” to read as follows. End Amendment Part Definitions.

* * * * * Drug means a drug or a biological, and for purposes of applying section 1847A(f) of the Act, includes an item, service, supply, or product that is payable under Medicare Part B as a drug or biological. * * * * * Start Amendment Part45. Section 414.806 is revised to read as follows. End Amendment Part Penalties associated with misrepresentation and the failure to submit timely and accurate ASP data.

(a) Misrepresentation. Section 1847A(d)(4)(A) of the Act specifies the penalties associated with misrepresentations in the reporting of the manufacturer's average sales price for a drug as defined at § 414.802. (b) Failure to provide timely information or the submission of false information. (1) For a manufacturer that has entered into and has in effect a rebate agreement under section 1927 of the Act, section 1927(b)(3)(C) of the Act specifies the penalties associated with a manufacturer's failure to submit timely information or the submission of false information.

(2) For a manufacturer that has not entered into and does not have in effect a rebate agreement under section 1927 of the Act, sections 1847A(d)(4)(B) and (C) of the Act specify the penalties associated with a manufacturer's failure to submit timely information or the submission of false information. Start Amendment Part46. Amend § 414.904 by adding paragraph (d)(4) to read as follows. End Amendment Part Average sales price as the basis for payment.

* * * * * (d) * * * (4) Payment adjustment for certain drugs for which there is a self-administered version —(i) In general. Except as provided in paragraphs (d)(4)(ii) and (iii) of this section, if the Inspector General identifies a drug or biological product in a study described in section 1847A(g)(1) of the Act, the Secretary must apply the payment limit for the applicable billing and payment code as specified in paragraph (d)(4)(iv) of this section, beginning with the first day of the second quarter after such study is publicly available. The methodology described in this paragraph will be recalculated each quarter thereafter, except when conditions described in paragraph (d)(4)(ii) are met. (ii) Exception.

The adjustment described in paragraph (d)(4)(i) of this section does not apply to the payment limit for a billing and payment code for a quarter if, at the time that ASP calculations are finalized for such quarter, the drug in the dosage form described by the billing and payment code is included by the FDA on the drug shortage list in effect under section 506E of the Federal Food, Drug, and Cosmetic Act. (iii) Special rule for certain billing and payment codes. Effective July 1, 2021, for a billing and payment code described under section 1847A(g)(3) of the Act, the payment limit for the applicable billing and payment code must be determined as described in paragraph (d)(4)(iv) of this section, and the exception specified at paragraph (d)(4)(ii) of this section does not apply. (iv) Lesser-of methodology.

For purposes of this section, the payment limit is the lesser of. (A) The payment limit determined under section 1847A of the Act for such billing and payment code if each National Drug Code for such product so identified under section 1847A(g)(1) of the Act were excluded from such determination. And (B) The payment limit otherwise determined under section 1847A of the Act for such billing and payment code without application of section 1847A(g) of the Act. (v) NDC changes.

For an Inspector General-identified National Drug Code, as described under section 1847A(g)(1) or (3) of the Act, for which the manufacturer has redesignated the National Drug Code (without changes to the dosage form), the application of the lesser-of methodology described in this paragraph must use manufacturer-reported ASP data associated with the redesignated National Drug Code in the same manner as the one originally identified by the Inspector General. * * * * * Start Amendment Part47. Amend § 414.1300 by revising paragraphs (a)(2) and (3) to read as follows. End Amendment Part Start Printed Page 65670 Basis and scope.

(a) * * * (2) Section 1848(k)—Quality Reporting System. (3) Section 1848(m)—Incentive Payments for Quality Reporting. * * * * * Start Amendment Part48. Amend § 414.1305— End Amendment Part Start Amendment Parta.

By revising the definitions of “Collection type” and “Meaningful EHR user for MIPS”. End Amendment Part Start Amendment Partb. In the definition of “MIPS determination period”, by revising paragraph (2). End Amendment Part Start Amendment Partc.

In the definition of “MIPS eligible clinician”, by revising the introductory text, paragraph (2) introductory text, and adding paragraph (3). End Amendment Part Start Amendment Partd. By adding the definitions of “Multispecialty group”, “MVP participant”, “Population health measure”, “QCDR measure”, “Single specialty group”, “Special status” and “Subgroup” in alphabetical order. And End Amendment Part Start Amendment Parte.

By revising the definition of “Submission type”. End Amendment Part The revisions and additions read as follows. Definitions. * * * * * Collection type means a set of quality measures with comparable specifications and data completeness criteria, as applicable, including, but not limited to.

Electronic clinical quality measures (eCQMs). MIPS clinical quality measures (MIPS CQMs). QCDR measures. Medicare Part B claims measures.

CMS Web Interface measures (except as provided in paragraph (1) of this definition, for the CY 2017 through CY 2022 performance periods/2019 through 2024 MIPS payment years). The CAHPS for MIPS survey. And administrative claims measures. (1) For the CY 2021 through CY 2024 performance periods/2023 through 2026 MIPS payment years, collection types include CMS Web Interface measures for APM Entities reporting through the APM Performance Pathway in accordance with § 414.1367.

(2) [Reserved] * * * * * Meaningful EHR user for MIPS means a MIPS eligible clinician who possesses CEHRT, uses the functionality of CEHRT, reports on applicable objectives and measures specified for the Promoting Interoperability performance category for a performance period in the form and manner specified by CMS, does not knowingly and willfully take action (such as to disable functionality) to limit or restrict the compatibility or interoperability of CEHRT, and engages in activities related to supporting providers with the performance of CEHRT. * * * * * MIPS determination period means. * * * (2) Subject to § 414.1310(b)(1)(iii), an individual eligible clinician, group, or APM Entity group that is identified as not exceeding the low-volume threshold or as having special status, as applicable, during the first segment of the MIPS determination period will be identified as such for the applicable MIPS payment year regardless of the results of the second segment of the MIPS determination period. An individual eligible clinician, group, or APM Entity group for which the unique billing TIN and NPI combination is established during the second segment of the MIPS determination period will be assessed based solely on the results of such segment.

MIPS eligible clinician as identified by a unique billing TIN and NPI combination used to assess performance, means any of the following (except as excluded under § 414.1310(b)). * * * * * (2) For the 2021 through 2023 MIPS payment years. * * * * * (3) For the 2024 MIPS payment year and future years. (i) A clinician described in paragraph (2) of this definition.

(ii) A clinical social worker (as defined in section 1861(hh)(1) of the Act). (ii) A certified nurse midwife (as defined in section 1861(gg)(2) of the Act). And (vii) A group that includes such clinicians. * * * * * Multispecialty group means a group that consists of two or more specialty types.

MVP participant means an individual MIPS eligible clinician, multispecialty group, single-specialty group, subgroup, or APM Entity that is assessed on an MVP in accordance with § 414.1365 for all MIPS performance categories. For the CY 2026 performance period/2028 MIPS payment year and future years, MVP Participant means an individual MIPS eligible clinician, single-specialty group, subgroup, or APM Entity that is assessed on an MVP in accordance with § 414.1365 for all MIPS performance categories. * * * * * Population health measure means a quality measure that indicates the quality of a population or cohort's overall health and well-being, such as access to care, clinical outcomes, coordination of care and community services, health behaviors, preventive care and screening, health equity, or utilization of health services. * * * * * QCDR measure means a quality measure that is submitted by a QCDR and approved by CMS under § 414.1400.

QCDR measures consist of. (1) Measures that are not included in the MIPS final list of quality measures described in § 414.1330(a)(1) for the applicable MIPS payment year. And (2) Measures that are included in the MIPS final list of quality measures described in § 414.1330(a)(1) for the applicable MIPS payment year, but have undergone substantive changes, as determined by CMS. * * * * * Single specialty group means a group that consists of one specialty type.

* * * * * Special status means that a MIPS eligible clinician. (1) Meets the definition of an ASC-based MIPS eligible clinician, facility-based MIPS eligible clinician, hospital-based MIPS eligible clinician, non-patient facing MIPS eligible clinician, or is in a small practice. Or (2) Is located in an HPSA or rural area. Subgroup means a subset of a group which contains at least one MIPS eligible clinician and is identified by a combination of the group TIN, subgroup identifier, and each eligible clinician's NPI.

Submission type means the mechanism by which the submitter type submits data to CMS, including, but not limited to. (1) Direct. (2) Log in and upload. (3) Log in and attest.

(4) Medicare Part B claims. And (5) CMS Web Interface (except as provided in paragraph (5)(i) of this definition, for the CY 2017 through CY 2022 performance periods/2019 through 2024 MIPS payment years). (i) For the CY 2021 through CY 2024 performance periods/2023 through 2026 MIPS payment years, submission types include the CMS Web Interface for APM Entities reporting through the APM Performance Pathway in accordance with § 414.1367. (ii) [Reserved] * * * * * Start Amendment Part49.

Amend § 414.1310 by revising paragraph (e)(1) to read as follows. End Amendment Part Applicability. * * * * * (e) * * * Start Printed Page 65671 (1) Except as provided under §§ 414.1315(a)(2), 414.1317(b), 414.1318(b), and 414.1370(f)(2) each MIPS eligible clinician in the group receives a final score based on the group's combined performance assessment. * * * * * Start Amendment Part50.

Amend § 414.1317 by revising paragraph (b)(2) to read as follows. End Amendment Part APM Entity groups. * * * * * (b) * * * (2) Performance category weights. The cost performance category weight is zero percent of the final score for an APM Entity.

The performance category reweighting scenarios under § 414.1380(c)(2) apply to an APM Entity. * * * * * Start Amendment Part51. Section 414.1318 is added to subpart O to read as follows. End Amendment Part Subgroups.

(a) Eligibility and special status —(1) General. Except as provided under paragraph (a)(2) of this section, for a MIPS payment year, determinations of meeting the low-volume threshold criteria and special status for subgroups are determined at the group level in accordance with §§ 414.1305 and 414.1310. (2) Exclusions. An individual eligible clinician or group that elects to participate in MIPS as a MIPS eligible clinician in accordance with § 414.1310(b)(1)(iii)(A) or (b)(2) is not eligible to participate in a subgroup.

(b) Final score. Except as provided under § 414.1317(b), each MIPS eligible clinician in the subgroup receives a final score based on the subgroup's combined performance assessment. (c) Subgroup reporting requirements. For individual eligible clinicians to participate in MIPS as a subgroup, all of the following requirements must be met.

(1) Individual eligible clinicians that elect to participate in MIPS as a subgroup must aggregate their quality and improvement activities performance data across the subgroup's identifier. (2) Individual eligible clinicians that elect to participate in MIPS as a subgroup will have their performance assessed at the subgroup level across all the MIPS performance categories based on an MVP in accordance with § 414.1365 and on the APM Performance Pathway in accordance with § 414.1367, as applicable. Subgroups that are MVP Participants must adhere to an election process described in § 414.1365(b). Start Amendment Part52.

Amend § 414.1320 by— End Amendment Part Start Amendment Parta. Redesignating paragraphs (d) through (g) as paragraphs (e) through (h), respectively. And End Amendment Part Start Amendment Partb. Adding a new paragraph (d).

End Amendment Part The addition reads as follows. MIPS performance period. * * * * * (d) For purposes of the CY 2020 performance period/2022 MIPS payment year, the performance period for. (1) The quality and cost performance categories are the full calendar year (January 1 through December 31) that occurs 2 years prior to the applicable MIPS payment year.

(2) The improvement activities performance categories are a minimum of a continuous 90-day period within the calendar year that occurs 2 years prior to the applicable MIPS payment year, up to and including the full calendar year. * * * * * Start Amendment Part53. Amend § 414.1325 by revising paragraph (c)(1) to read follows. End Amendment Part Data submission requirements.

* * * * * (c) * * * (1) For the quality performance category, the direct. Login and upload. Medicare Part B claims (beginning with the CY 2019 MIPS performance period/2021 MIPS payment year, for small practices only). And CMS Web Interface (for groups consisting of 25 or more eligible clinicians, a third party intermediary submitting on behalf of a group) submission type.

* * * * * Start Amendment Part54. Amend § 414.1340 revising paragraphs (a)(3) and (b)(3) to read as follows. End Amendment Part Data completeness criteria for the quality performance category. (a) * * * (3) At least 70 percent of the MIPS eligible clinician or group's patients that meet the measure's denominator criteria, regardless of payer for MIPS payment years 2022, 2023, 2024, and 2025.

* * * * * (b) * * * (3) At least 70 percent of the applicable Medicare Part B patients seen during the performance period to which the measure applies for MIPS payment years 2022, 2023, 2024, and 2025. * * * * * Start Amendment Part55. Amend § 414.1350 by revising paragraph (c)(4) and adding paragraph (c)(6) to read as follows. End Amendment Part Cost performance category.

* * * * * (c) * * * (4) For the procedural episode-based measures specified beginning with the CY 2019 performance period/2021 MIPS payment year, the case minimum is 10, unless otherwise specified for individual measures. Beginning with the CY 2022 performance period/2024 MIPS payment year, the case minimum for Colon and Rectal Resection procedural episode-based measure is 20 episodes. * * * * * (6) For the chronic condition episode-based measures specified beginning with the CY 2022 performance period/2024 MIPS payment year, the case minimum is 20. * * * * * Start Amendment Part56.

Amend § 414.1360 by revising paragraph (a)(2) to read as follows. End Amendment Part Data submission criteria for the improvement activities performance category. (a) * * * (2) Groups and virtual groups. Beginning with the 2022 performance year, each improvement activity for which groups and virtual groups submit a yes response in accordance with paragraph (a)(1) of this section must be performed by at least 50 percent of the NPIs that are billing under the group's TIN or virtual group's TINs or that are part of the subgroup, as applicable.

And the NPIs must perform the same activity during any continuous 90-day period within the same performance year. * * * * * Start Amendment Part57. Section 414.1365 is added to subpart O to read as follows. End Amendment Part MIPS Value Pathways.

(a) General. (1) Beginning with the CY 2023 MIPS performance period/2025 MIPS payment year, CMS uses MVPs included in the MIPS final inventory of MVPs established by CMS through rulemaking to assess performance for the quality, cost, improvement activities, and Promoting Interoperability performance categories. (2) [Reserved] (b) MVP/Subgroup registration. (1) To report an MVP, an MVP Participant must register for the MVP, and if applicable, as a subgroup during a period that begins on April 1 and ends on November 30 of the applicable CY performance period or a later date specified by CMS.

To report the CAHPS for MIPS survey associated with an MVP, a group, subgroup or APM Entity must complete their registration by June 30 of such performance period or a later date specified by CMS. Start Printed Page 65672 (2) At the time of registration, the MVP Participant must submit the following information, as applicable. (i) Each MVP Participant must select an MVP, 1 population health measure included in the MVP, and any outcomes-based administrative claims measure on which the MVP Participant intends to be scored. (ii) Each subgroup must submit a list of each TIN/NPI associated with the subgroup and a plain language name for the subgroup.

(c) MVP reporting requirement s—(1) Quality. Except as provided in paragraph (c)(1)(i) of this section, an MVP Participant must select and report, if applicable, 4 quality measures, including 1 outcome measure (or, if an outcome measure is not available, 1 high priority measure), included in the MVP, excluding the population health measure required under paragraph (c)(4)(ii) of this section. (i) Paragraph (c)(1) introductory text of this section does not apply to a small practice that reports on an MVP that includes fewer than 4 Medicare Part B claims measures, provided that the small practice reports each such measure that is applicable. (ii) [Reserved] (2) Cost.

An MVP Participant is scored on the cost measures included in the MVP that they select and report. (3) Improvement activities. An MVP Participant who reports an MVP, must report one of the following. (i) Two medium-weighted improvement activities.

(ii) One high-weighted improvement activity. (iii) Participation in a certified or recognized patient-centered medical home (PCMH) or comparable specialty practice, as described at § 414.1380(b)(3)(ii). (4) Foundational layer —(i) Promoting interoperability. An MVP Participant is required to meet the Promoting Interoperability performance category reporting requirements described at § 414.1375(b).

(A) For the CY 2023 and 2024 performance periods/2025 and 2026 MIPS payment years, an MVP Participant that is a subgroup is required to submit its affiliated group's data for the Promoting Interoperability performance category. (B) [Reserved] (ii) Population health measures. Each MVP Participant is scored on 1 population health measure in accordance with paragraph (d)(1) of this section. (d) MVP scoring —(1) General.

An MVP Participant that is not an APM Entity is scored on measures and activities included in the MVP in accordance with paragraphs (d)(1) through (3) of this section. An MVP Participant that is an APM Entity is scored on measures and activities included in the MVP in accordance with § 414.1317(b). (2) Performance standards. Unless otherwise indicated in this paragraph (d), the performance standards described at § 414.1380(a)(1)(i) through (iv) apply to the measures and activities included in the MVP.

(3) Performance categories. An MVP Participant is scored under MIPS in four performance categories. (i) Quality performance category. Except as provided in paragraphs (d)(3)(i)(A)(1) and (d)(3)(i)(B) of this section, the quality performance category score for MVP Participants is calculated in accordance with § 414.1380(b)(1) based on measures included in the MVP.

(A) Population health measures. Except as provided in paragraph (d)(3)(i)(A)( 1 ) of this section, each selected population health measure that does not have a benchmark or meet the case minimum requirement is excluded from the MVP participant's total measure achievement points and total available measure achievement points. ( 1 ) Subgroups are scored on each selected population health measure that does not have a benchmark or meet the case minimum requirement based on their affiliated group score, if available. If the subgroup's affiliated group score is not available, each such measure is excluded from the subgroup's total measure achievement points and total available measure achievement points.

( 2 ) [Reserved] (B) Outcomes-based administrative claims measures. MVP Participants receive zero measure achievement points for each selected outcomes-based administrative claims measure that does not have a benchmark or meet the case minimum requirement. (ii) Cost performance category. The cost performance category score is calculated for an MVP Participant using the methodology at § 414.1380(b)(2)(i) through (v) and the cost measures included in the MVP that they select and report.

(iii) Improvement activities performance category. The improvement activities performance category score is calculated based on the submission of high- and medium-weighted improvement activities. MVP Participants will receive 20 points for each medium-weighted improvement activity and 40 points for each high-weighted improvement activity required under § 414.1360 on which data is submitted in accordance with § 414.1325 or for participation in a certified or recognized patient-centered medical home (PCMH) or comparable specialty practice, as described at § 414.1380(b)(3)(ii). (iv) Promoting interoperability performance category.

The Promoting Interoperability performance category score is calculated for an MVP Participant using the methodology at § 414.1380(b)(4), except as provided in paragraph (d)(3)(iv)(A) of this section. (A) If a subgroup does not submit its affiliated group's data for the Promoting Interoperability performance category, the subgroup will receive a score of zero for the Promoting Interoperability performance category. (B) [Reserved] (e) Final score calculation. The final score is calculated for an MVP Participant using the methodology at § 414.1380(c), unless otherwise indicated in this paragraph (e).

(1) MVP performance category weights. For an MVP Participant that is not an APM Entity, the final score is calculated using the performance category weights described at § 414.1380(c)(1). For an MVP Participant that is an APM Entity, the final score is calculated using the performance category weights described at § 414.1317(b). (2) Reweighting MVP performance categories —(i) General reweighting.

For an MVP Participant that is not an APM Entity, in accordance with paragraph (e)(2)(iii) of this section, a scoring weight different from the weights described at § 414.1380(c)(1) will be assigned to a performance category, and its weight as described at § 414.1380(c)(1) will be redistributed to another performance category or categories, in the circumstances described at § 414.1380(c)(2)(i)(A)(2) through (9) and § 414.1380(c)(2)(i)(C). For an MVP Participant that is an APM Entity, the performance category weights will be redistributed in accordance with § 414.1317(b). (ii) Subgroups. For an MVP Participant that is a subgroup, any reweighting applied to its affiliated group will also be applied to the subgroup.

In addition, if reweighting is not applied to the affiliated group, the subgroup may receive reweighting in the following circumstances independent of the affiliated group. (A) A subgroup may submit an application to CMS demonstrating that it was subject to extreme and uncontrollable circumstances and receive reweighting in accordance with § 414.1380(c)(2)(i)(A)(6) and (c)(2)(i)(C)(2). In the event that a Start Printed Page 65673 subgroup submits data for a performance category, the scoring weight described at § 414.1380(c)(1) would be applied and its weight would not be redistributed. (B) A subgroup will receive reweighting if CMS determines, based on information known to the agency prior to the beginning of the relevant MIPS payment year, that data for the subgroup are inaccurate, unusable or otherwise compromised due to circumstances outside of the control of the subgroup and its agents, in accordance with § 414.1380(c)(2)(i)(A)(9) and (c)(2)(i)(C)(10).

(iii) Reweighting scenarios. For an MVP Participant that is not an APM Entity, a scoring weight different from the weights described at § 414.1380(c)(1) will be assigned to a performance category, and its weight as described at § 414.1380(c)(1) will be redistributed to another performance category or categories, in accordance with § 414.1380(c)(2)(ii). For an MVP Participant that is an APM Entity, the performance category weights will be redistributed in accordance with § 414.1317(b). (3) Facility-based scoring.

If an MVP Participant, that is not an APM Entity, is eligible for facility-based scoring, a facility-based score also will be calculated in accordance with § 414.1380(e). (4) Complex patient bonus. A complex patient bonus will be added to the final score for an MVP Participant in accordance with § 414.1380(c)(3). Start Amendment Part58.

Amend § 414.1375— End Amendment Part Start Amendment Parta. By revising paragraph (b)(2)(ii). End Amendment Part Start Amendment Partb. By revising the paragraph (b)(3) subject heading.

End Amendment Part Start Amendment Partc. By revising paragraph (b)(3)(ii) introductory text. And End Amendment Part Start Amendment Partc. Adding paragraph (b)(3)(iii).

End Amendment Part The revisions and addition read as follows. Promoting Interoperability (PI) performance category. * * * * * (b) * * * (2) * * * (ii) Beginning with the 2021 MIPS payment year. (A) Report that the MIPS eligible clinician completed the actions included in the Security Risk Analysis measure during the year in which the performance period occurs.

(B) For each required measure, as applicable, report the numerator (of at least one) and denominator, or yes/no statement, or an exclusion for each measure that includes an option for an exclusion. And (C) Beginning with the 2024 MIPS payment year, report that the MIPS eligible clinician completed the actions included in the SAFER Guides measure during the year in which the performance period occurs. (3) Engaging in activities related to supporting providers with the performance of CEHRT. Support for health information exchange and the prevention of information blocking.

Actions to limit or restrict the compatibility or interoperability of CEHRT. * * * * * * * * (ii) Support for health information exchange and the prevention of information blocking. For the 2019, 2020, 2021, 2022, and 2023 MIPS payment years, the MIPS eligible clinician must attest to CMS that he or she— * * * * * (iii) Actions to limit or restrict the compatibility or interoperability of CEHRT. Beginning with the 2024 MIPS payment year, the MIPS eligible clinician must attest to CMS that he or she— (A) Did not knowingly and willfully take action (such as to disable functionality) to limit or restrict the compatibility or interoperability of certified EHR technology.

(B) [Reserved] Start Amendment Part59. Amend § 414.1380 by— End Amendment Part Start Amendment Parta. Revising paragraphs (b)(1)(i) introductory text and(b)(1)(i)(A)( 1 ). End Amendment Part Start Amendment Partb.

Adding paragraphs (b)(1)(i)(A)( 3 ) and (b)(1)(i)(C). End Amendment Part Start Amendment Partc. Revising paragraphs (b)(1)(iii), (b)(1)(v)(A) introductory text, and (b)(1)(v)(B) introductory text. End Amendment Part Start Amendment Partd.

Adding paragraph (b)(1)(v)(B)( 1 )( iii ). End Amendment Part Start Amendment Parte. Revising paragraphs (b)(1)(vi)(C) introductory text, (b)(1)(vi)(C)( 4 ), (b)(1)(vi)(E), (b)(1)(vii) introductory text, (b)(1)(vii)(A), (b)(2)(iii) introductory text, and (b)(2)(v) introductory text. End Amendment Part Start Amendment Partf.

Adding paragraphs (b)(2)(v)(A) and (B). End Amendment Part Start Amendment Partg. Revising paragraph (b)(4)(ii) introductory text and (b)(4)(ii)(C). End Amendment Part Start Amendment Parth.

Revising the table in paragraph (c) introductory text. End Amendment Part Start Amendment Parti. Revising paragraph (c)(2)(i)(A)( 4 ). End Amendment Part Start Amendment Partj.

Removing and reserving paragraph (c)(2)(i)(A)( 5 ). End Amendment Part Start Amendment Partk. Revising paragraphs (c)(2)(i)(C)( 9 ), (c)(2)(ii)(A), and (c)(2)(ii)(F). End Amendment Part Start Amendment Partl.

Adding paragraph (c)(2)(ii)(G). And End Amendment Part Start Amendment Partm. Revising paragraphs (c)(3) and (e)(6)(iv) through (vi). End Amendment Part The revisions and additions read as follows.

Scoring. * * * * * (b) * * * (1) * * * (i) Measure achievement points. For the CY 2017 through 2021 performance periods/2019 through 2023 MIPS payment years, MIPS eligible clinicians receive between 3 and 10 measure achievement points (including partial points) for each measure required under § 414.1335 on which data is submitted in accordance with § 414.1325 that has a benchmark at paragraph (b)(1)(ii) of this section, meets the case minimum requirement at paragraph (b)(1)(iii) of this section, and meets the data completeness requirement at § 414.1340 and for each administrative claims-based measure that has a benchmark at paragraph (b)(1)(ii) of this section and meets the case minimum requirement at paragraph (b)(1)(iii) of this section. Except as provided under paragraph (b)(1)(i)(C) of this section, beginning with the CY 2023 performance period/2025 MIPS payment year, MIPS eligible clinicians receive between 1 and 10 measure achievement points (including partial points) for each such measure.

The number of measure achievement points received for each such measure is determined based on the applicable benchmark decile category and the percentile distribution. MIPS eligible clinicians receive zero measure achievement points for each measure required under § 414.1335 on which no data is submitted in accordance with § 414.1325. MIPS eligible clinicians that submit data in accordance with § 414.1325 on a greater number of measures than required under § 414.1335 are scored only on the required measures with the greatest number of measure achievement points. Beginning with the CY 2019 performance period/2021 MIPS payment year, MIPS eligible clinicians that submit data in accordance with § 414.1325 on a single measure via multiple collection types are scored only on the data submission with the greatest number of measure achievement points.

(A) * * * ( 1 ) Except as provided in paragraphs (b)(1)(i)(A)( 2 ) and ( 3 ) of this section, for the CY 2017 through 2021 MIPS performance periods/2019 through 2023 MIPS payment years, MIPS eligible clinicians receive 3 measure achievement points for each submitted measure that meets the data completeness requirement, but does not have a benchmark or meet the case minimum requirement. Beginning with the CY 2022 performance period/2024 MIPS payment year, MIPS eligible clinicians other than small practices receive 0 measure achievement points Start Printed Page 65674 for each such measure, and small practices receive 3 measure achievement points for each such measure. * * * * * ( 3 ) Beginning with the CY 2023 performance period/2025 MIPS payment year, MIPS eligible clinicians receive 7 measure achievement points for each submitted measure in its first year in MIPS and 5 measure achievement points for each submitted measure in its second year in MIPS that meets the data completeness requirement, but does not have a benchmark or meet the case minimum requirement. * * * * * (C) New measures.

Beginning with the CY 2023 performance period/2025 MIPS payment year, for each measure required under § 414.1335 on which data is submitted in accordance with § 414.1325 that has a benchmark at paragraph (b)(1)(ii) of this section, meets the case minimum requirement at paragraph (b)(1)(iii) of this section, and meets the data completeness requirement at § 414.1340, a MIPS eligible clinician receives between 7 and 10 measure achievement points (including partial points) for each such measure in its first year in MIPS and between 5 and 10 measure achievement points for each such measure in its second year in MIPS. * * * * * (iii) Minimum case requirements. Except as otherwise specified in the MIPS final list of quality measures described in § 414.1330(a)(1), the minimum case requirement is 20 cases. (v) * * * (A) High priority measures.

Subject to paragraph (b)(1)(v)(A)( 1 ) of this section, for the CY 2017 through 2021 MIPS performance periods/2019 through 2023 MIPS payment years, MIPS eligible clinicians receive 2 measure bonus points for each outcome and patient experience measure and 1 measure bonus point for each other high priority measure. Beginning with the 2021 MIPS payment year, MIPS eligible clinicians do not receive such measure bonus points for CMS Web Interface measures. * * * * * (B) End-to-end electronic reporting. Subject to paragraph (b)(1)(v)(B)( 1 ) of this section, for the CY 2017 through 2021 MIPS performance periods/2019 through 2023 MIPS payment years, MIPS eligible clinicians receive 1 measure bonus point for each measure (except claims-based measures) submitted with end-to-end electronic reporting for a quality measure under certain criteria determined by the Secretary.

( 1 ) * * * ( iii ) Beginning in the 2024 MIPS payment year, MIPS eligible clinicians will no longer receive measure bonus for submitting using end-to-end electronic reporting. * * * * * (vi) * * * (C) The improvement percent score is assessed at the performance category level for the quality performance category and included in the calculation of the quality performance category score as described in paragraph (b)(1)(vii) of this section. * * * * * ( 4 ) Beginning with the CY 2018 performance period/2020 MIPS payment year, we will assume a quality performance category achievement percent score of 30 percent if a MIPS eligible clinician earned a quality performance category score less than or equal to 30 percent in the previous year. * * * * * (E) For the purpose of improvement scoring methodology, the term “improvement percent score” means the score that represents improvement for the purposes of calculating the quality performance category score as described in paragraph (b)(1)(vii) of this section.

* * * * * (vii) Quality performance category score. A MIPS eligible clinician's quality performance category score is the sum of all the measure achievement points assigned for the measures required for the quality performance category criteria plus the measure bonus points in paragraph (b)(1)(v) of this section. The sum is divided by the sum of total available measure achievement points. The improvement percent score in paragraph (b)(1)(vi) of this section is added to that result.

The quality performance category score cannot exceed 100 percentage points. (A) For each measure that is submitted, if applicable, and impacted by significant changes or errors prior to the applicable data submission deadline at § 414.1325(e), performance is based on data for 9 consecutive months of the applicable CY performance period. If such data are not available or CMS determines that they may result in patient harm or misleading results, the measure is excluded from a MIPS eligible clinician's total measure achievement points and total available measure achievement points. For purposes of this paragraph (b)(1)(vii)(A), “significant changes or errors” means changes to or errors in a measure that are outside the control of the clinician and its agents and that CMS determines may result in patient harm or misleading results.

Significant changes or errors include, but are not limited to, changes to codes (such as ICD-10, CPT, or HCPCS codes) or the active status of codes, the inadvertent omission of codes or inclusion of inactive or inaccurate codes, or changes to clinical guidelines or measure specifications. CMS will publish on the CMS website a list of all measures scored under this paragraph (b)(1)(vii)(A) as soon as technically feasible, but by no later than the data submission deadline at § 414.1325(e)(1). * * * * * (2) * * * (iii) The cost performance category score is the sum of the following, not to exceed 100 percent. * * * * * (v) A cost performance category score is not calculated if a MIPS eligible clinician or group is not attributed any cost measures for the performance period because the clinician or group has not met the minimum case volume specified by CMS for any of the cost measures or a benchmark has not been created for any of the cost measures that would otherwise be attributed to the clinician or group.

(A) Beginning with the 2024 MIPS payment year, if data used to calculate a score for a cost measure are impacted by significant changes during the performance period, such that calculating the cost measure score would lead to misleading or inaccurate results, then the affected cost measure is excluded from the MIPS eligible clinician's or group's cost performance category score. For purposes of this paragraph (b)(2)(v)(A), “significant changes” are changes external to the care provided, and that CMS determines may lead to misleading or inaccurate results. Significant changes include, but are not limited to, rapid or unprecedented changes to service utilization, and will be empirically assessed by CMS to determine the extent to which the changes impact the calculation of a cost measure score that reflects clinician performance. (B) [Reserved] * * * * * (4) * * * (ii) Beginning with the 2019 performance period/2021 MIPS payment year, a MIPS eligible clinician's Promoting Interoperability performance category score equals the sum of the scores for each of the required measures and any applicable bonus scores, not to exceed 100 points.

* * * * * Start Printed Page 65675 (C) Each optional measure is worth five or ten bonus points, as specified by CMS. * * * * * (c) * * * Table 1 to Paragraph (c) Introductory TextFor the 2019 MIPS payment year:Final score = [(quality performance category score × quality performance category weight) + (cost performance category score × cost performance category weight) + (improvement activities performance category score × improvement activities performance category weight) + (Promoting Interoperability performance category score × Promoting Interoperability performance category weight)], not to exceed 100 points.For the 2020 MIPS payment year:Final score = [(quality performance category score × quality performance category weight) + (cost performance category score × cost performance category weight) + (improvement activities performance category score × improvement activities performance category weight) + (Promoting Interoperability performance category score × Promoting Interoperability performance category weight)] × 100 + [the complex patient bonus + the small practice bonus], not to exceed 100 points.Beginning with the 2021 MIPS payment year:Final score = [(quality performance category score × quality performance category weight) + (cost performance category score × cost performance category weight) + (improvement activities performance category score × improvement activities performance category weight) + (Promoting Interoperability performance category score × Promoting Interoperability performance category weight)] × 100 + the complex patient bonus, not to exceed 100 points. * * * * * (2) * * * (i) * * * (A) * * * ( 4 ) For the Promoting Interoperability performance category. ( i ) For the 2021 through 2024 MIPS payment years, the MIPS eligible clinician is a physical therapist, occupational therapist, clinical psychologist, qualified audiologist, qualified speech-language pathologist, or a registered dietitian or nutrition professional.

In the event that a MIPS eligible clinician submits data for the Promoting Interoperability performance category, the scoring weight specified in paragraph (c)(1) of this section will be applied and its weight will not be redistributed. ( ii ) For the 2019 through 2024 MIPS payment years, the MIPS eligible clinician is a nurse practitioner, physician assistant, clinical nurse specialist, or certified registered nurse anesthetist. In the event that a MIPS eligible clinician submits data for the Promoting Interoperability performance category, the scoring weight specified in paragraph (c)(1) of this section will be applied and its weight will not be redistributed. ( iii ) For the 2024 MIPS payment year, the MIPS eligible clinician is a clinical social worker.

In the event that a MIPS eligible clinician submits data for the Promoting Interoperability performance category, the scoring weight specified in paragraph (c)(1) of this section will be applied and its weight will not be redistributed. * * * * * (C) * * * ( 9 ) For the 2020 MIPS payment year through the 2023 MIPS payment year the MIPS eligible clinician demonstrates through an application submitted to CMS that they are in a small practice as defined in § 414.1305, and overwhelming barriers prevent them from complying with the requirements for the Promoting Interoperability performance category. Beginning with the 2024 MIPS payment year the MIPS eligible clinician is in a small practice as defined in § 414.1305. * * * * * (ii) * * * (A) For the 2019 MIPS payment year.

Table 2 to Paragraph (c)(2)(ii)(A)Performance category (%)Weighting for the 2019 MIPS payment year (%)Reweight scenario if no promoting interoperability performance category score (%)Reweight scenario if no quality performance category score (%)Reweight scenario if no improvement activities performance category score (%)Quality6085075Cost0000Improvement Activities1515500Promoting Interoperability2505025 * * * * * (F) Except as provided in paragraph (c)(2)(ii)(G) of this section, beginning with the 2024 MIPS payment year. Table 7 to Paragraph (c)(2)(ii)(F)Reweighting scenarioQuality (%)Cost (%)Improvement activities (%)Promoting interoperability (%)No Reweighting Needed:Scores for all four performance categories30301525No Cost5501530Start Printed Page 65676No Promoting Interoperability5530150No Quality0301555No Improvement Activities4530025No Cost and no Promoting Interoperability850150No Cost and no Quality001585No Cost and no Improvement Activities700030No Promoting Interoperability and no Quality050500No Promoting Interoperability and no Improvement Activities703000No Quality and no Improvement Activities030070 (G) For small practices beginning with the 2024 MIPS payment year. Table 8 to Paragraph (c)(2)(ii)(G)Reweighting scenarioQuality (%)Cost (%)Improvement activities (%)Promoting interoperability (%)No Reweighting Needed:Scores for all four performance categories30301525No Cost5501530No Promoting Interoperability4030300No Quality0301555No Improvement Activities4530025No Cost and no Promoting Interoperability500500No Cost and no Quality001585No Cost and no Improvement Activities700030No Promoting Interoperability and no Quality050500No Promoting Interoperability and no Improvement Activities703000No Quality and no Improvement Activities030070 * * * * * (3) Complex patient bonus. For the CY 2020, 2021, 2022, and 2023 MIPS payment years and associated performance periods, provided that a MIPS eligible clinician, group, virtual group or APM Entity submits data for at least one MIPS performance category for the applicable performance period for the MIPS payment year, a complex patient bonus will be added to the final score for the MIPS payment year, as stated in paragraphs (c)(3)(i) through (iv) of this section.

Beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, provided that a MIPS eligible clinician, group, subgroup, virtual group or APM Entity submits data for at least one MIPS performance category for the applicable performance period for the MIPS payment year, a complex patient bonus will be added to the final score for the MIPS payment year, if applicable, as described in paragraphs (c)(3)(v) through (viii) of this section. (i) For the CY 2020, 2021, 2022, and 2023 MIPS payment years and associated performance periods, for MIPS eligible clinicians and groups, the complex patient bonus is calculated as follows. [The average HCC risk score assigned to beneficiaries (pursuant to the HCC risk adjustment model established by CMS pursuant to section 1853(a)(1) of the Act) seen by the MIPS eligible clinician or seen by clinicians in a group] + [the dual eligible ratio × 5]. (ii) For the CY 2020, 2021, 2022, and 2023 MIPS payment years and associated performance periods, for APM Entities and virtual groups, the complex patient bonus is calculated as follows.

[The beneficiary weighted average HCC risk score for all MIPS eligible clinicians, and if technically feasible, TINs for models and virtual groups which rely on complete TIN participation within the APM Entity or virtual group, respectively] + [the average dual eligible ratio for all MIPS eligible clinicians, and if technically feasible, TINs for models and virtual groups which rely on complete TIN participation, within the APM Entity or virtual group, respectively, × 5]. (iii) For the 2020, 2021, 2022, and 2023 MIPS payment years and associated performance periods, the complex patient bonus cannot exceed 5.0 except as provided in paragraph (c)(3)(iv) of this section. (iv) For the 2022 and 2023 MIPS payment years and associated performance periods, the complex patient bonus is calculated pursuant to paragraphs (c)(3)(i) and (ii) of this section, and the resulting numerical value is then multiplied by 2.0. The complex patient bonus cannot exceed 10.0.

(v) Beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, the complex patient bonus is limited to MIPS eligible clinicians, groups, subgroups, APM Entities, and virtual groups with a risk indicator at or above the risk indicator calculated median. To determine the median for the respective risk indicator (HCC and dual proportion), risk indicators associated with the final score assigned to a clinician from the most recent prior performance period, for all those who have submitted data for at least one MIPS performance category or are facility-based, are used. (vi) Beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, for MIPS eligible clinicians, groups, and subgroups, the complex patient bonus components are calculated as follows for the specific Start Printed Page 65677 risk indicators. Medical complex patient bonus component = 1.5 + 4 * associated HCC standardized score calculated with the average HCC risk score assigned to beneficiaries (pursuant to the HCC risk adjustment model established by CMS pursuant to section 1853(a)(1) of the Act) seen by the MIPS eligible clinician or seen by clinicians in a group or subgroup.

Social complex patient bonus component = 1.5 + 4 * associated dual proportion standardized score. The components are added together to calculate one overall complex patient bonus. A standardized score for each risk indicator is determined based on the mean and standard deviation of the raw risk indicator score and provides a standardized measurement of how far each risk score is from the mean. (raw risk indicator score−risk indicator mean)/risk indicator standard deviation.

(vii) Beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, for APM Entities and virtual groups, the complex patient bonus components are calculated as follows for the specific risk indicators. Medical complex patient bonus component = 1.5 + 4 * the beneficiary weighted average HCC risk standardized score for all MIPS eligible clinicians, and if technically feasible, TINs for models and virtual groups which rely on complete TIN participation within the APM Entity or virtual group, respectively. Social complex patient bonus component = 1.5 + 4 * the average dual proportion standardized score for all MIPS eligible clinicians, and if technically feasible, TINs for models and virtual groups which rely on complete TIN participation, within the APM Entity or virtual group, respectively. The components are added together to calculate one overall complex patient bonus.

A standardized score for each risk indicator is determined based on the mean and standard deviation of the raw risk indicator score and provides a standardized measurement of how far each risk score is from the mean. (raw risk indicator score−risk indicator mean)/risk indicator standard deviation. (viii) Beginning with the CY 2022 MIPS performance period/CY 2024 MIPS payment year, the complex patient bonus cannot exceed 10.0 and cannot be below 0.0. * * * * * (e) * * * (6) * * * (iv) Quality.

The quality performance category score is established by determining the percentile performance of the facility in the value-based purchasing program for the specified year as described in paragraph (e)(1) of this section and awarding a score associated with that same percentile performance in the MIPS quality performance category score for those MIPS-eligible clinicians who are not eligible to be scored using facility-based measurement for the MIPS payment year. A clinician or group receiving a facility-based performance score will not earn improvement points based on prior performance in the MIPS quality performance category (v) Cost. The cost performance category score is established by determining the percentile performance of the facility in the value-based purchasing program for the specified year as described in paragraph (e)(1) of this section and awarding a score associated with that same percentile performance in the MIPS cost performance category score for those MIPS eligible clinicians who are not eligible to be scored using facility-based measurement for the MIPS payment year. A clinician or group receiving a facility-based performance score will not earn improvement points based on prior performance in the MIPS cost performance category.

(A) Other cost measures. MIPS eligible clinicians who are scored under facility-based measurement are not scored on cost measures described in paragraph (b)(2) of this section. (B) [Reserved] (vi) Use of score from facility-based measurement. The MIPS quality and cost performance category scores will be based on the facility-based measurement scoring methodology described in paragraph (e)(6) of this section unless.

(A) For the CY 2019 MIPS performance period/2021 MIPS payment year, through the CY 2021 MIPS performance period/2023 MIPS payment year, a clinician or group receives a higher combined MIPS quality and cost performance category score through another MIPS submission. (B) Beginning with the CY 2022 MIPS performance period/2024 MIPS payment year, a clinician or group receives a higher MIPS final score through another MIPS submission. Start Amendment Part60. Amend § 414.1395 by revising paragraph (c) to read as follows.

End Amendment Part Public reporting. * * * * * (c) New measures and activities. (1) CMS does not publicly report any data on new quality or cost measure for the first 2 years in which it is in the program, after which CMS evaluates the measure to determine whether it is suitable for public reporting under paragraph (b) of this section. (2) CMS does not publicly report any MVP data on new improvement activity or Promoting Interoperability measure, objective, or activity included in an MVP for the first year in which it is included in the MVP.

* * * * * Start Amendment Part61. Revise § 414.1400 to read as follows. End Amendment Part Third party intermediaries. (a) General.

(1) MIPS data may be submitted on behalf of a MIPS eligible clinician, group, virtual group, subgroup, or APM Entity by any of the following third party intermediaries. (i) QCDR. (ii) Qualified registry. (iii) Health IT vendor.

Or (iv) CMS-approved survey vendor. (2) Third party intermediary approval criteria— (i) To be approved as a third party intermediary, an entity must agree to meet the applicable requirements of this section, including, but not limited to, the following. (A) A third party intermediary's principle place of business and retention of any data must be based in the U.S. (B) If the data is derived from CEHRT, a QCDR, qualified registry, or health IT vendor must be able to indicate its data source.

(C) All data must be submitted in the form and manner specified by CMS. (D) If the clinician chooses to opt-in in accordance with § 414.1310, the third party intermediary must be able to transmit that decision to CMS. (E) The third party intermediary must provide services throughout the entire performance period and applicable data submission period. (F) Prior to discontinuing services to any MIPS eligible clinician, group, virtual group, subgroup, or APM Entity during a performance period, the third party intermediary must support the transition of such MIPS eligible clinician, group, virtual group, subgroup, or APM Entity to an alternate third party intermediary, submitter type, or, for any measure on which data has been collected, collection type according to a CMS approved a transition plan.

(ii) The determination of whether to approve an entity as a third party intermediary for a MIPS payment year may take into account. (A) Whether the entity failed to comply with the requirements of this section for any prior MIPS payment year for which it was approved as third party intermediary. And (B) Whether the entity provided inaccurate information regarding the Start Printed Page 65678 requirements of this subpart to any eligible clinician. (iii) Beginning with the 2023 MIPS payment year, third party intermediaries must attend and complete training and support sessions in the form and manner, and at the times, specified by CMS.

(3) All data submitted to CMS by a third party intermediary on behalf of a MIPS eligible clinician, group, virtual group, subgroup, or APM Entity must be certified by the third party intermediary as true, accurate, and complete to the best of its knowledge. Such certification must be made in a form and manner and at such time as specified by CMS. (b) Additional requirements for QCDRs and qualified registries —(1) General. (i) Beginning with the CY 2021 performance period/2023 MIPS payment year, QCDRs and qualified registries must be able to submit data for all of the following MIPS performance categories.

(A) Quality, except. (1) The CAHPS for MIPS survey. And (2) For qualified registries, QCDR measures. (B) Improvement activities.

And (C) Promoting Interoperability, if the eligible clinician, group, virtual group, or subgroup is using CEHRT, unless the third party intermediary's MIPS eligible clinicians, groups, virtual groups, or subgroups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)(4)(i) through (iii) or (c)(2)(i)(C)(1) through (7) or (c)(2)(i)(C)(9). (ii) Beginning with the CY 2023 performance period/2025 MIPS payment year, QCDRs and qualified registries must support MVPs that are applicable to the MVP participant on whose behalf they submit MIPS data. QCDRs and qualified registries may also support the APP. (2) Self-nomination.

For the CY 2018 and 2019 performance periods/2020 and 2021 MIPS payment years, entities seeking to qualify as a QCDR or qualified registry must self-nominate September 1 until November 1 of the CY preceding the applicable performance period. For the CY 2020 performance period/2022 MIPS payment year and future years, entities seeking to qualify as a QCDR or qualified registry must self-nominate during a 60-day period during the CY preceding the applicable performance period (beginning no earlier than July 1 and ending no later than September 1). Entities seeking to qualify as a QCDR or qualified registry for a performance period must provide all information required by CMS at the time of self-nomination and must provide any additional information requested by CMS during the review process. For the CY 2019 performance period/2021 MIPS payment year and future years, existing QCDRs and qualified registries that are in good standing may attest that certain aspects of their previous year's approved self-nomination have not changed and will be used for the applicable performance period.

(3) Conditions for approval. (i) Beginning with the CY 2020 performance period/2022 MIPS payment year, the QCDR or qualified registry must have at least 25 participants by January 1 of the year prior to the applicable performance period. (ii) If an entity seeking to qualify as a QCDR or qualified registry uses an external organization for purposes of data collection, calculation, or transmission, it must have a signed, written agreement with the external organization that specifically details the responsibilities of the entity and the external organization. The written agreement must be effective as of September 1 of the year preceding the applicable performance period.

(iii) Beginning with the CY 2021 performance period/2023 MIPS payment year, the QCDR or qualified registry must provide performance feedback to their clinicians and groups at least 4 times a year, and provide specific feedback to their clinicians and groups on how they compare to other clinicians who have submitted data on a given measure within the QCDR or qualified registry. Exceptions to this requirement may occur if the QCDR or qualified registry submits notification to CMS within the performance period promptly within the month of realization of the impending deficiency and provides sufficient rationale as to why they do not believe they would be able to meet this requirement (for example, if the QCDR does not receive the data from their clinician until the end of the performance period). (iv) Beginning with the CY 2023 performance period/2025 MIPS payment year, the QCDR or qualified registry must submit a data validation plan annually, at the time of self-nomination for CMS' approval and may not change the plan once approved without the prior approval of the agency. (v) Beginning with the CY 2021 performance period/2023 MIPS payment year, the QCDR or qualified registry must conduct annual data validation audits in accordance with this paragraph (b)(3)(v).

(A) The QCDR or qualified registry must conduct data validation for the payment year prior to submitting any data for that payment year to CMS for purposes of the MIPS program. (B) The QCDR or qualified registry must conduct data validation on data for each performance category for which it will submit data, including if applicable the Quality, Improvement Activities, and Promoting Interoperability performance categories. (C) The QCDR or qualified registry must conduct data validation on data for each submitter type for which it will submit data, including MIPS eligible clinicians, groups, virtual groups, subgroups, APM entities, voluntary participants, and opt-in participants, if applicable. (D) The QCDR or qualified registry must use clinical documentation (provided by the clinicians they are submitting data for) to validate that the action or outcome measured actually occurred or was performed.

(E) The QCDR or qualified registry must conduct each data validation audit using a sampling methodology that meets the following requirements. (1) Uses a sample size of at least 3 percent of the TIN/NPIs for which the QCDR or qualified registry will submit data to CMS, except that if a 3 percent sample size would result in fewer than 10 TIN/NPIs, the QCDR or qualified registry must use a sample size of at least 10 TIN/NPIs, and if a 3 percent sample size would result in more than 50 TIN/NPIs, the QCDR or qualified registry may use a sample size of 50 TIN/NPIs. (2) Uses a sample that includes at least 25 percent of the patients of each TIN/NPI in the sample, except that the sample for each TIN/NPI must include a minimum of 5 patients and does not need to include more than 50 patients. (F) Each QCDR or qualified registry data validation audit must include the following.

(1) Verification of the eligibility status of each eligible clinician, group, virtual group, subgroup, opt-in participant, and voluntary participant. (2) Verification of the accuracy of TINs and NPIs. (3) Calculation of reporting and performance rates. (4) Verification that only the MIPS quality measures and QCDR measures, as applicable, that are relevant to the performance period will be used for MIPS submission.

(G) In a form and manner and by a deadline specified by CMS, the QCDR or qualified registry must report the results of each data validation audit, including the overall data deficiencies or data error rate, the types of deficiencies or data errors discovered, the percentage of clinicians impacted by any deficiency or Start Printed Page 65679 error, and, how and when each deficiency or data error type was corrected. (1) QCDRs and qualified registries must conduct validation on the data they intend to submit for the MIPS performance period and provide the results of the executed data validation plan by May 31st of the year following the performance period. (2) [Reserved] (vi) Beginning with the CY 2021 performance period/2023 MIPS payment year, the QCDR or qualified registry must conduct targeted audits in accordance with this paragraph (b)(3)(vi). (A) If a data validation audit under paragraph (b)(3)(v) of this section identifies one or more deficiency or data error, the QCDR or qualified registry must conduct a targeted audit into the impact and root cause of each such deficiency or data error for that MIPS payment year.

(B) The QCDR or qualified registry must conduct any required targeted audits for the MIPS payment year and correct any deficiencies or data errors identified through such audit prior to the submission of data for that MIPS payment year. (C) The QCDR or qualified registry must conduct the targeted audit using the sampling methodology that meets the requirements described in paragraph (b)(3)(iv)(E) of this section. The sample for the targeted audit must not include data from the sample used for the data validation audit in which the deficiency or data error was identified. (D) In a form and manner and by a deadline specified by CMS, the QCDR or qualified registry must report the results of each targeted audit, including the overall deficiency or data error rate, the types of deficiencies or data errors discovered, the percentage of clinicians impacted by each deficiency or data error, and how and when each deficiency or data error type was corrected.

(vii) For the CY 2023 performance period/2025 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for any of the 2019 through 2023 MIPS payment years must submit a participation plan for CMS' approval. The participation plan must include the QCDR and/or qualified registry's detailed plans about how the QCDR or qualified registry intends to encourage clinicians to submit MIPS data to CMS through the QCDR or qualified registry. (viii) Beginning with the CY 2024 performance period/2026 MIPS payment year, a QCDR or qualified registry that was approved but did not submit any MIPS data for either of the 2 years preceding the applicable self-nomination period must submit a participation plan for CMS' approval. This participation plan must include the QCDR's and/or qualified registry's detailed plans about how the QCDR or qualified registry intends to encourage clinicians to submit MIPS data to CMS through the QCDR or qualified registry.

(4) QCDR measures for the quality performance category—(i) QCDR measure self-nomination requirements. For the CY 2018 performance period/2020 MIPS payment year and future years, at the time of self-nomination an entity seeking to become a QCDR must submit the following information for any measure it intends to submit for the payment year. (A) For MIPS quality measures, the entity must submit specifications including the MIPS measure IDs and specialty-specific measure sets, as applicable. (B) For QCDR measures, the entity must submit for CMS-approval measure specifications including.

Name/title of measures, NQF number (if NQF- endorsed), descriptions of the denominator, numerator, and when applicable, denominator exceptions, denominator exclusions, risk adjustment variables, and risk adjustment algorithms. In addition, no later than 15 calendar days following CMS approval of any QCDR measure specifications, the entity must publicly post the measure specifications for that QCDR measure (including the CMS- assigned QCDR measure ID) and provide CMS with a link to where this information is posted. (ii) QCDR measure submission requirements. A QCDR must include the CMS-assigned QCDR measure ID when submitting data on any QCDR measure to CMS.

(iii) QCDR measure approval criteria. (A) QCDR measure requirements for approval are. ( 1 ) QCDR measures that are beyond the measure concept phase of development. ( 2 ) QCDR measures that address significant variation in performance.

( 3 ) Beginning with the CY 2022 performance period/2024 MIPS payment year, all QCDR measures must meet face validity. To be approved for the CY 2023 performance period/2025 MIPS payment year, all QCDR measures must meet face validity for the initial MIPS payment year for which it is approved. For subsequent years after being initially approved, all QCDR measures must be fully developed and tested, with complete testing results at the clinician level, prior to submitting the QCDR measure at the time of self-nomination. ( i ) To be included in an MVP for the CY 2022 performance period/2024 MIPS payment year and future years, a QCDR measure must be fully tested.

( ii ) [Reserved] ( 4 ) Beginning with the CY 2022 performance period/2023 MIPS payment year, QCDRs are required to collect data on a QCDR measure, appropriate to the measure type, prior to submitting the QCDR measure for CMS consideration during the self-nomination period. ( 5 ) Beginning with the CY 2020 performance period/2022 MIPS payment year, CMS may provisionally approve the individual QCDR measures for 1 year with the condition that QCDRs address certain areas of duplication with other approved QCDR measures or MIPS quality measures in order to be considered for the program in subsequent years. If such areas of duplication are not addressed, CMS may reject the duplicative QCDR measure. (B) QCDR measure considerations for approval include, but are not limited to.

( 1 ) Measures that are outcome-based rather than clinical process measures. ( 2 ) Measures that address patient safety and adverse events. ( 3 ) Measures that identify appropriate use of diagnosis and therapeutics. ( 4 ) Measures that address the domain of care coordination.

( 5 ) Measures that address the domain for patient and caregiver experience. ( 6 ) Measures that address efficiency, cost, and resource use. ( 7 ) Beginning with the CY 2021 performance period/2023 MIPS payment year - ( i ) That QCDRs link their QCDR measures as feasible to at least one cost measure, improvement activity, or an MVP at the time of self-nomination. ( ii ) In cases where a QCDR measure does not have a clear link to a cost measure, improvement activity, or an MVP, CMS would consider exceptions if the potential QCDR measure otherwise meets the QCDR measure requirements and considerations.

( 8 ) Beginning with the CY 2020 performance period/2022 MIPS payment year CMS may consider the extent to which a QCDR measure is available to MIPS eligible clinicians reporting through QCDRs other than the QCDR measure owner for purposes of MIPS. If CMS determines that a QCDR measure is not available to MIPS eligible clinicians, groups, and virtual groups reporting through other QCDRs, CMS may not approve the measure. ( 9 ) Greater consideration is given to measures for which QCDRs. Start Printed Page 65680 (i) Conducted an environmental scan of existing QCDR measures.

MIPS quality measures. Quality measures retired from the legacy Physician Quality Reporting System (PQRS) program. And ( ii ) Utilized the CMS Quality Measure Development Plan Annual Report and the Blueprint in the CMS Measures Management System to identify measurement gaps prior to measure development. ( 10 ) Beginning with the CY 2020 performance period/2022 MIPS payment year, CMS places greater preference on QCDR measures that meet case minimum and reporting volumes required for benchmarking after being in the program for 2 consecutive CY performance periods.

Those that do not, may not continue to be approved. ( i ) Beginning with the CY 2020 performance period/2022 MIPS payment year, in instances where a QCDR believes the low-reported QCDR measure that did not meet benchmarking thresholds is still important and relevant to a specialist's practice, that the QCDR may develop and submit a QCDR measure participation plan for our consideration. This QCDR measure participation plan must include the QCDR's detailed plans and changes to encourage eligible clinicians and groups to submit data on the low-reported QCDR measure for purposes of the MIPS program. ( ii ) [Reserved] (C) Beginning with the CY 2021 performance period/2023 MIPS payment year, QCDR measures may be approved for 2 years, at CMS discretion by attaining approval status by meeting QCDR measure considerations and requirements.

Upon annual review, CMS may revoke a QCDR measure's second year approval, if the QCDR measure is found to be. Topped out. Duplicative of a more robust measure. Reflects an outdated clinical guideline.

Or if the QCDR self-nominating the QCDR measure is no longer in good standing. (iv) QCDR measure rejection criteria. Beginning with the CY 2020 performance period/2022 MIPS payment year, QCDR measure rejection considerations include, but are not limited to. (A) QCDR measures that are duplicative or identical to other QCDR measures or MIPS quality measures that are currently in the program.

(B) QCDR measures that are duplicative or identical to MIPS quality measures that have been removed from MIPS through rulemaking. (C) QCDR measures that are duplicative or identical to quality measures used under the legacy Physician Quality Reporting System (PQRS) program, which have been retired. (D) QCDR measures that meet the topped out definition as described at § 414.1305. (E) QCDR measures that are process-based, with consideration to whether the removal of the process measure impacts the number of measures available for a specific specialty.

(F) Whether the QCDR measure has potential unintended consequences to a patient's care. (G) Considerations and evaluation of the measure's performance data, to determine whether performance variance exists. (H) QCDR measures that split a single clinical practice or action into several QCDR measures. (I) QCDR measures that are “check-box” with no actionable quality action.

(J) QCDR measures that do not meet the case minimum and reporting volumes required for benchmarking after being in the program for 2 consecutive years. (K) QCDR measures with clinician attribution issues, where the quality action is not under the direct control of the reporting clinician. (L) QCDR measures that focus on rare events or “never events” in the measurement period. (M) QCDR does not have permission to use a QCDR measure owned by another QCDR for the applicable performance period.

(N) If a QCDR measure owner is not approved or is not in good standing, any associated QCDR measures will not be approved. (c) Additional requirements for Health IT vendors. (1) Beginning with the CY 2021 performance period/2023 MIPS payment year, health IT vendors must be able to submit data for the MIPS performance categories as follows. (i) Health IT vendors that support MVPs must be able to submit data for all of the MIPS performance categories.

(A) Quality, except. ( 1 ) The CAHPS for MIPS survey. And ( 2 ) QCDR measures. (B) Improvement activities.

And (C) Promoting Interoperability, if the eligible clinician, group, virtual group, or subgroup is using CEHRT, unless. ( 1 ) The third party intermediary's MIPS eligible clinicians, groups, virtual groups, or subgroups fall under the reweighting policies at § 414.1380(c)(2)(i)(A)( 4 )( i ) through ( iii ) or (c)(2)(i)(C)( 1 ) through ( 7 ) or (c)(2)(i)(C)( 9 ). ( 2 ) [Reserved] (ii) Health IT vendors that do not support MVPs must be able to submit data for at least one of the MIPS performance categories described in paragraphs (c)(1)(i) of this section. (iii) Beginning with the CY 2023 performance period/2025 MIPS payment year, Health IT vendors must support MVPs that are applicable to the MVP participant on whose behalf they submit MIPS data.

Health IT vendors may also support the APP. (2) [Reserved] (d) Additional requirements for CMS-approved survey vendors. (1) CMS-approved survey vendors may submit data on the CAHPS for MIPS survey for the MIPS quality performance category. (2) Entities seeking to be a CMS-approved survey vendor for any MIPS performance period must submit a survey vendor application to CMS in a form and manner specified by CMS for each MIPS performance period for which it wishes to transmit such data.

The application and any supplemental information requested by CMS must be submitted by deadlines specified by CMS. For an entity to be a CMS-approved survey vendor, it must meet the following criteria. (3) The entity must have sufficient experience, capability, and capacity to accurately report CAHPS data, including. (i) At least 3 years of experience administering mixed-mode surveys (that is, surveys that employ multiple modes to collect date), including mail survey administration followed by survey administration via Computer Assisted Telephone Interview (CATI).

(ii) At least 3 years of experience administering surveys to a Medicare population. (iii) At least 3 years of experience administering CAHPS surveys within the past 5 years. (iv) Experience administering surveys in English and at least one other language for which a translation of the CAHPS for MIPS survey is available. (v) Use equipment, software, computer programs, systems, and facilities that can verify addresses and phone numbers of sampled beneficiaries, monitor interviewers, collect data via CATI, electronically administer the survey and schedule call-backs to beneficiaries at varying times of the day and week, track fielded surveys, assign final disposition codes to reflect the outcome of data collection of each sampled case, and track cases from mail surveys through telephone follow-up activities.

And (vi) Employment of a program manager, information systems specialist, call center supervisor and mail center supervisor to administer the survey. Start Printed Page 65681 (4) The entity has certified that it has the ability to maintain and transmit quality data in a manner that preserves the security and integrity of the data. (5) The entity has successfully completed, and has required its subcontractors to successfully complete, vendor training(s) administered by CMS or its contractors. (6) The entity has submitted a quality assurance plan and other materials relevant to survey administration, as determined by CMS, including cover letters, questionnaires and telephone scripts.

(7) The entity has agreed to participate and cooperate, and has required its subcontractors to participate and cooperate, in all oversight activities related to survey administration conducted by CMS or its contractors. (8) The entity has sent an interim survey data file to CMS that establishes the entity's ability to accurately report CAHPS data. (e) Remedial action and termination of third party intermediaries. (1) If CMS determines that a third party intermediary has ceased to meet one or more of the applicable criteria for approval, has submitted a false certification under paragraph (a)(3) of this section, or has submitted data that are inaccurate, unusable, or otherwise compromised, CMS may take one or more of the following remedial actions after providing written notice to the third party intermediary.

(i) Require the third party intermediary to submit a corrective action plan (CAP) by a date specified by CMS. The CAP must address the following issues, unless different or additional information is specified by CMS. (A) The issues that contributed to the non-compliance. (B) The impact to individual clinicians, groups, or virtual groups, regardless of whether they are participating in the program because they are MIPS eligible, voluntary participating, or opting in to participating in the MIPS program.

(C) The corrective actions to be implemented by the third party intermediary to ensure that the non-compliance has been resolved and will not recur in the future. (D) The detailed timeline for achieving compliance with the applicable requirements. (ii) Publicly disclose the entity's data error rate on the CMS website until the data error rate falls below 3 percent. (2) CMS may immediately or with advance notice terminate the ability of a third party intermediary to submit MIPS data on behalf of a MIPS eligible clinician, group, or virtual group for one or more of the following reasons.

(i) CMS has grounds to impose remedial action. (ii) CMS has not received a CAP within the specified time-period or the CAP is not accepted by CMS. Or (iii) The third party intermediary fails to correct the deficiencies or data errors by the date specified by CMS. (3) Contains data inaccuracies affecting the third party intermediary's total clinicians may lead to remedial action/termination of the third party intermediary for future program year(s) based on CMS discretion.

(4) For purposes of this paragraph (e), CMS may determine that submitted data are inaccurate, unusable, or otherwise compromised, including but not limited to, if the submitted data. (i) Includes, without limitation, TIN/NPI mismatches, formatting issues, calculation errors, or data audit discrepancies. (ii) [Reserved] (f) Auditing of entities submitting MIPS data. Any third party intermediary must comply with the following procedures as a condition of its qualification and approval to participate in MIPS as a third party intermediary.

(1) The entity must make available to CMS the contact information of each MIPS eligible clinician or group on behalf of whom it submits data. The contact information must include, at a minimum, the MIPS eligible clinician or group's practice phone number, address, and, if available, email. (2) The entity must retain all data submitted to CMS for purposes of MIPS for 6 years from the end of the MIPS performance period. (3) For the purposes of auditing, CMS may request any records or data retained for the purposes of MIPS for up to 6 years from the end of the MIPS performance period.

Start Amendment Part62. Amend § 414.1405 by adding paragraphs (b)(9), (d)(7), and (g) to read as follows. End Amendment Part Payment. * * * * * (b) * * * (9) Pursuant to the methodology established at paragraph (g) of this section, the performance threshold for the 2024 MIPS payment year is 75 points.

The prior period used to determine the performance threshold is the 2019 MIPS payment year. * * * * * (d) * * * (7) The additional performance threshold for the 2024 MIPS payment year is 89 points. * * * * * (g) Performance threshold methodology. For each of the 2024, 2025, and 2026 MIPS payment years, the performance threshold is the mean of the final scores for all MIPS eligible clinicians from a prior period as specified under paragraph (b) of this section.

Start Amendment Part63. Amend § 414.1430 by— End Amendment Part Start Amendment Parta. Revising paragraph (a)(1)(iii). End Amendment Part Start Amendment Partb.

Adding paragraphs (a)(1)(iv). End Amendment Part Start Amendment Partc. Removing the second occurrence of paragraph (a)(2)(ii). End Amendment Part Start Amendment Partd.

Adding paragraphs (a)(2)(iii) and (iv). And End Amendment Part Start Amendment Parte. Revising paragraphs (b)(1)(i)(A) and (B) and (b)(2)(i)(A) and (B). End Amendment Part The revisions and additions read as follows.

Qualifying APM participant determination. QP and partial QP thresholds. (a) * * * (1) * * * (iii) 2023 and 2024. 50 percent.

(iv) 2025 and later. 75 percent. (2) * * * (iii) 2023 and 2024. 50 percent.

(iv) 2025 and later. 75 percent. * * * * * (b) * * * (1) * * * (i) * * * (A) 2021 through 2024. 50 percent.

(B) 2025 and later. 75 percent. * * * * * (2) * * * (i) * * * (A) 2021 through 2024. 35 percent.

(B) 2025 and later. 50 percent. * * * * * Start Amendment Part64. Amend § 414.1450 by revising paragraph (c) introductory text to read as follows.

End Amendment Part APM incentive payment. * * * * * (c) APM Incentive Payment recipient. CMS will pay the APM Incentive Payment amount for a payment year to a solvent TIN or TINs associated with the QP, identified based on Medicare Part B claims submitted for covered professional services during the base period or payment year, according to this section. If no TIN or TINs with which the QP has an association can be identified at a step, CMS will move to the next and successive steps listed in paragraphs (c)(1) through (8) of this section until CMS identifies a TIN or TINs with which the QP is associated, and to which CMS will make the APM Start Printed Page 65682 Incentive Payment.

If more than one TIN is identified at a step, the payment will be proportionately divided among the TINs according to the relative total paid amounts for Part B covered professional services paid to each TIN for services provided during the base year. * * * * * Start Part End Part Start Amendment Part65. The authority citation for part 415 continues to read as follows. End Amendment Part Start Authority 42 U.S.C.

1302 and 1395hh. End Authority Start Amendment Part66. Section 415.140 is added to subpart D to read as follows. End Amendment Part Conditions for payment.

Split (or shared) visits. (a) Definitions. For purposes of this section, the following definitions apply. Facility setting for purposes of this section means institutional settings in which payment for services and supplies furnished incident to a physician or practitioner's professional services is prohibited under § 410.26(b)(1) of this subchapter.

Split (or shared) visit means an evaluation and management (E/M) visit in the facility setting that is performed in part by both a physician and a nonphysician practitioner who are in the same group, in accordance with applicable law and regulations such that the service could be could be billed by either the physician or nonphysician practitioner if furnished independently by only one of them. Substantive portion means more than half of the total time spent by the physician and nonphysician practitioner performing the split (or shared) visit, except as otherwise provided in this paragraph. For visits other than critical care visits furnished in calendar year 2022, substantive portion means one of the three key components (history, exam or medical decision-making) or more than half of the total time spent by the physician and nonphysician practitioner performing the split (or shared) visit. (b) Conditions of payment.

For purposes of this section, the following conditions of payment apply. (1) Substantive portion of split (or shared) visit. In general, payment is made to the physician or nonphysician practitioner who performs the substantive portion of the split (or shared) visit. (2) Medical record documentation.

Documentation in the medical record must identify the physician and nonphysician practitioner who performed the visit. The individual who performed the substantive portion of the visit (and therefore bills for the visit) must sign and date the medical record. (3) Claim modifier. The designated modifier must be included on the claim to identify that the service was a split (or shared) visit.

Start Part End Part Start Amendment Part67. The authority citation for part 423 continues to read as follows. End Amendment Part Start Authority 42 U.S.C. 1302, 1306, 1395w-101 through 1395w-152, and 1395hh.

End Authority Start Amendment Part68. Amend § 423.160 by revising paragraph (a)(5) to read as follows. End Amendment Part Standards for electronic prescribing. (a) * * * (5) Beginning on January 1, 2021, prescribers must, except in the circumstances described in paragraphs (a)(5)(i) through (iv) of this section, conduct prescribing for at least 70 percent of their Schedule II, III, IV, and V controlled substances that are Part D drugs electronically using the applicable standards in paragraph (b) of this section.

Prescriptions written for a beneficiary in a long-term care facility will not be included in determining compliance until January 1, 2025. Compliance actions against prescribers who do not meet the compliance threshold based on prescriptions written for a beneficiary in a long-term care facility will commence on or after January 1, 2025. Compliance actions against prescribers who do not meet the compliance threshold based on other prescriptions will commence on or after January 1, 2023. Prescribers will be exempt from this requirement in the following situations.

(i) Prescriber and dispensing pharmacy are the same entity. (ii) Prescriber issues 100 or fewer controlled substance prescriptions for Part D drugs per calendar year as determined using CMS claims data as of December 31st of the preceding year. (iii) Prescriber has an NCPDP database address in the geographic area of an emergency or disaster declared by a Federal, State, or local government entity. (iv) Prescriber has received a CMS-approved waiver because the prescriber is unable to conduct electronic prescribing of controlled substances (EPCS) due to circumstances beyond the prescriber's control.

* * * * * Start Part End Part Start Amendment Part69. The authority for part 424 continues to read as follows. End Amendment Part Start Authority 42 U.S.C. 1302 and 1395hh.

End Authority Start Amendment Part70. Amend § 424.205 by redesignating paragraphs (b)(5) and (6) as paragraphs (b)(6) and (7), respectively, and adding new paragraph (b)(5). End Amendment Part The addition reads as follows. Requirements for Medicare Diabetes Prevention Program suppliers.

* * * * * (b) * * * (5) The Medicare provider enrollment application fee does not apply to all Medicare Diabetes Prevention Program (MDPP) suppliers that submit an enrollment application on or after January 1, 2022. * * * * * Start Amendment Part71. Amend § 424.502 by revising the definition of “Institutional provider” to read as follows. End Amendment Part Definitions.

* * * * * Institutional provider means any provider or supplier that submits a paper Medicare enrollment application using the CMS-855A, CMS-855B (not including physician and nonphysician practitioner organizations), CMS-855S, or an associated internet-based PECOS enrollment application. * * * * * Start Amendment Part72. Amend § 424.530 by revising paragraphs (a)(2) introductory text and (a)(11)(i) to read as follows. End Amendment Part Denial of enrollment in the Medicare program.

(a) * * * (2) Provider or supplier conduct. The provider or supplier, or any owner, managing employee, authorized or delegated official, medical director, supervising physician, or other health care or administrative or management services personnel furnishing services payable by a Federal health care program, of the provider or supplier is— * * * * * (11) * * * (i) A physician or other eligible professional's Drug Enforcement Administration (DEA) Certificate of Registration to dispense a controlled substance is currently suspended or revoked or is surrendered in response to an order to show cause. * * * * * Start Amendment Part73. Amend § 424.535 by revising paragraphs (a)(2) introductory text, Start Printed Page 65683 (a)(8)(ii), (a)(13)(i), and (e) to read as follows.

End Amendment Part Revocation of enrollment in the Medicare program. (a) * * * (2) Provider or supplier conduct. The provider or supplier, or any owner, managing employee, authorized or delegated official, medical director, supervising physician, or other health care or administrative or management services personnel furnishing services payable by a Federal health care program, of the provider or supplier is— * * * * * (8) * * * (ii) CMS determines that the provider or supplier has a pattern or practice of submitting claims that fail to meet Medicare requirements. In making this determination, CMS considers, as appropriate or applicable, the following.

(A) The percentage of submitted claims that were denied during the period under consideration. (B) Whether the provider or supplier has any history of final adverse actions and the nature of any such actions. (C) The type of billing non-compliance and the specific facts surrounding said non-compliance (to the extent this can be determined). (D) Any other information regarding the provider or supplier's specific circumstances that CMS deems relevant to its determination.

* * * * * (13) * * * (i) A physician or other eligible professional's Drug Enforcement Administration (DEA) Certificate of Registration to dispense a controlled substance is currently suspended or revoked or is surrendered in response to an order to show cause. * * * * * (e) Reversal of revocation. If the revocation was due to adverse activity (sanction, exclusion, or felony) against the provider's or supplier's owner, managing employee, authorized or delegated official, medical director, supervising physician, or other health care or administrative or management services personnel furnishing services payable by a Federal health care program, the revocation may be reversed if the provider or supplier terminates and submits proof that it has terminated its business relationship with that individual within 30 days of the revocation notification. * * * * * Start Amendment Part74.

Amend § 424.545 in paragraph (b) by removing the reference “§ 405.374” and adding in its place the reference “§ 424.546”. End Amendment Part Start Amendment Part75. Add § 424.546 to read as follows. End Amendment Part Deactivation rebuttals.

(a) Rebuttal submittal period. (1) If a provider or supplier receives written notice from CMS or its contractor that the provider's or supplier's billing privileges are to be or have been deactivated under § 424.540, the provider or supplier has 15 calendar days from the date of the written notice to submit a rebuttal to CMS as permitted under § 424.545(b). (2) CMS may, at its discretion, extend the 15-day time-period referenced in paragraph (a)(1) of this section. (b) Rebuttal requirements.

A rebuttal submitted pursuant to this section and § 424.545(b) must. (1) Be in writing. (2) Specify the facts or issues about which the provider or supplier disagrees with the deactivation's imposition and/or the effective date, and the reasons for disagreement. (3) Submit all documentation the provider or supplier wants CMS to consider in its review of the deactivation.

(4) Be submitted in the form of a letter that is signed and dated by the individual supplier (if enrolled as an individual physician or nonphysician practitioner), the authorized official or delegated official (as those terms are defined in 42 CFR 424.502), or a legal representative (as defined in 42 CFR 498.10). If the legal representative is an attorney, the attorney must include a statement that he or she has the authority to represent the provider or supplier. This statement is sufficient to constitute notice of such authority. If the legal representative is not an attorney, the provider or supplier must file with CMS written notice of the appointment of a representative.

This notice of appointment must be signed and dated by, as applicable, the individual supplier, the authorized official or delegated official, or a legal representative. (c) Waiver of rebuttal rights. The provider's or supplier's failure to submit a rebuttal that is both timely under paragraph (a) of this section and fully compliant with all of the requirements of paragraph (b) of this section constitutes a waiver of all rebuttal rights under this section and § 424.545(b). (d) CMS review.

Upon receipt of a timely and compliant deactivation rebuttal, CMS reviews the rebuttal to determine whether the imposition of the deactivation and/or the designated effective date are correct. (e) Imposition. Nothing in this section or in § 424.545(b) requires CMS to delay the imposition of a deactivation pending the completion of the review described in paragraph (d) of this section. (f) Initial determination.

A determination made under this section is not an initial determination under § 498.3(b) of this chapter and therefore not appealable. Start Part End Part Start Amendment Part76. The authority citation for part 425 continues to read as follows. End Amendment Part Start Authority 42 U.S.C.

1302, 1306, 1395hh, and 1395jjj. End Authority Start Amendment Part77. Amend § 425.116 by revising paragraph (c) to read as follows. End Amendment Part Agreements with ACO participants and ACO providers/suppliers.

* * * * * (c) Submission of agreements. The ACO must submit an executed ACO participant agreement for each ACO participant that it requests to add to its list of ACO participants in accordance with § 425.118. The agreements may be submitted in the form and manner set forth in § 425.204(c)(6) or as otherwise specified by CMS. Start Amendment Part78.

Amend § 425.204 by revising paragraphs (b), (c)(6), (f)(4)(ii)(A) and (B), (f)(4)(iii) introductory text, and (f)(4)(iii)(A) and adding paragraph (f)(4)(v) to read as follows. End Amendment Part Content of the application. * * * * * (b) Prior participation. Upon request by CMS during the application cycle, the ACO must submit information regarding prior participation in the Medicare Shared Savings Program by the ACO, its ACO participants, or its ACO providers/suppliers, including such information as may be necessary for CMS to determine whether to approve an ACO's application in accordance with § 425.224(b).

(c) * * * (6) Upon request by CMS during the application cycle or at any point during an agreement period, the ACO must submit documents demonstrating that its ACO participants, ACO providers/suppliers, and other individuals or entities performing functions or services related to ACO activities are required to comply with the requirements of the Shared Savings Program. Upon such a request, the evidence to be submitted must include, without limitation, sample or form agreements and, in the case of ACO participant agreements, the first and signature page(s) of each executed ACO participant agreement. Start Printed Page 65684 CMS may request all pages of an executed ACO participant agreement to confirm that it conforms to the sample form agreement submitted by the ACO. The ACO must certify that all of its ACO participant agreements comply with the requirements of this part.

* * * * * (f) * * * (4) * * * (ii) * * * (A) One-half percent of the total per capita Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiaries, based on expenditures and the number of assigned beneficiaries for the most recent calendar year for which 12 months of data are available. (B) One percent of the total Medicare Parts A and B fee-for-service revenue of its ACO participants, based on revenue for the most recent calendar year for which 12 months of data are available, and based on the ACO's number of assigned beneficiaries for the most recent calendar year for which 12 months of data are available. (iii) CMS recalculates the ACO's repayment mechanism amount for the second and each subsequent performance year in the agreement period in accordance with paragraph (f)(4)(ii) of this section based on the certified ACO participant list for the relevant performance year, except that the number of assigned beneficiaries used in the calculations is the number of beneficiaries assigned to the ACO at the beginning of the relevant performance year under § 425.400(a)(2)(i) (for ACOs under preliminary prospective assignment with retrospective reconciliation) or § 425.400(a)(3)(i) (for ACOs under prospective assignment). (A) If the recalculated repayment mechanism amount exceeds the existing repayment mechanism amount by at least $1,000,000, CMS notifies the ACO in writing that the amount of its repayment mechanism must be increased to the recalculated repayment mechanism amount.

* * * * * (v)(A) An ACO that established a repayment mechanism to support its participation in a two-sided model beginning on July 1, 2019, January 1, 2020, or January 1, 2021, may elect to decrease the amount of its repayment mechanism if the repayment mechanism amount for performance year 2022, as recalculated pursuant to paragraph (f)(4)(iii) of this section, is less than the existing repayment mechanism amount. (B) CMS will notify the ACO in writing if the ACO may elect to decrease the amount of its repayment mechanism pursuant to this paragraph (f)(4)(v). The ACO must submit such election, and revised repayment mechanism documentation, in a form and manner and by a deadline specified by CMS. CMS will review the revised repayment mechanism documentation and may reject the election if the repayment mechanism documentation does not comply with the requirements of this paragraph (f).

* * * * * Start Amendment Part79. Amend § 425.312 by revising paragraph (a)(2)(ii) and adding paragraph (a)(2)(iii) to read as follows. End Amendment Part Beneficiary notifications. (a) * * * (2) * * * (ii) In the case of an ACO that has selected preliminary prospective assignment with retrospective reconciliation, by the ACO or ACO participant providing each fee-for-service beneficiary with a standardized written notice prior to or at the first primary care visit of the performance year in the form and manner specified by CMS.

(iii) In the case of an ACO that has selected prospective assignment, by the ACO or ACO participant providing each prospectively assigned beneficiary with a standardized written notice prior to or at the first primary care visit of the performance year in the form and manner specified by CMS. * * * * * Start Amendment Part80. Amend § 425.400 by— End Amendment Part Start Amendment Parta. Revising paragraph (c)(1)(v) introductory text.

End Amendment Part Start Amendment Partb. Adding paragraph (c)(1)(vi). And End Amendment Part Start Amendment Partc. Revising paragraphs (c)(2)(i) introductory text, (c)(2)(i)(A)(2), and (c)(2)(ii).

End Amendment Part The revisions and addition read as follows. General. * * * * * (c) * * * (1) * * * (v) For the performance year starting on January 1, 2021. * * * * * (vi) For the performance year starting on January 1, 2022, and subsequent performance years as follows.

(A) CPT codes. ( 1 ) 96160 and 96161 (codes for administration of health risk assessment). ( 2 ) 99201 through 99215 (codes for office or other outpatient visit for the evaluation and management of a patient). ( 3 ) 99304 through 99318 (codes for professional services furnished in a nursing facility.

Professional services or services reported on an FQHC or RHC claim identified by these codes are excluded when furnished in a SNF). ( 4 ) 99319 through 99340 (codes for patient domiciliary, rest home, or custodial care visit). ( 5 ) 99341 through 99350 (codes for evaluation and management services furnished in a patient's home for claims identified by place of service modifier 12). ( 6 ) 99354 and 99355 (add-on codes, for prolonged evaluation and management or psychotherapy services beyond the typical service time of the primary procedure.

When the base code is also a primary care service code under this paragraph (c)(1)(vi)). ( 7 ) 99421, 99422, and 99423 (codes for online digital evaluation and management). ( 8 ) 99424, 99425, 99426, and 99427 (codes for principal care management services). ( 9 ) 99437, 99487, 99489, 99490 and 99491 (codes for chronic care management).

( 10 ) 99439 (code for non-complex chronic care management). ( 11 ) 99483 (code for assessment of and care planning for patients with cognitive impairment). ( 12 ) 99484, 99492, 99493 and 99494 (codes for behavioral health integration services). ( 13 ) 99495 and 99496 (codes for transitional care management services).

( 14 ) 99497 and 99498 (codes for advance care planning. Services identified by these codes furnished in an inpatient setting are excluded). (B) HCPCS codes. ( 1 ) G0402 (code for the Welcome to Medicare visit).

( 2 ) G0438 and G0439 (codes for the annual wellness visits). ( 3 ) G0442 (code for alcohol misuse screening service). ( 4 ) G0443 (code for alcohol misuse counseling service). ( 5 ) G0444 (code for annual depression screening service).

( 6 ) G0463 (code for services furnished in ETA hospitals). ( 7 ) G0506 (code for chronic care management). ( 8 ) G2010 (code for the remote evaluation of patient video/images). ( 9 ) G2012 and G2252 (codes for virtual check-in).

( 10 ) G2058 (code for non-complex chronic care management). ( 11 ) G2064 and G2065 (codes for principal care management services). ( 12 ) G2212 (code for prolonged office or other outpatient visit for the evaluation and management of a patient). Start Printed Page 65685 ( 13 ) G2214 (code for psychiatric collaborative care model).

(C) Primary care service codes include any CPT code identified by CMS that directly replaces a CPT code specified in paragraph (c)(1)(vi)(A) of this section or a HCPCS code specified in paragraph (c)(1)(vi)(B) of this section, when the assignment window (as defined in § 425.20) for a benchmark or performance year includes any day on or after the effective date of the replacement code for payment purposes under FFS Medicare. (2)(i) Except as otherwise specified in paragraph (c)(2)(i)(A)(2) of this section, when the assignment window (as defined in § 425.20) for a benchmark or performance year includes any month(s) during the buy antibiotics Public Health Emergency defined in § 400.200 of this chapter, in determining beneficiary assignment, we use the primary care service codes identified in paragraph (c)(1) of this section, and additional primary care service codes as follows. (A) * * * (2) 99441, 99442, and 99443 (codes for telephone evaluation and management services). These codes are used in determining beneficiary assignment as specified in paragraphs (c)(2)(i) and (ii) of this section and until they are no longer payable under Medicare fee-for-service payment policies as specified under section 1834(m) of the Act and §§ 410.78 and 414.65 of this subchapter.

* * * * * (ii) Except as otherwise specified in paragraph (c)(2)(i)(A)(2) of this section, the additional primary care service codes specified in paragraph (c)(2)(i) of this section are applicable to all months of the assignment window (as defined in § 425.20), when the assignment window includes any month(s) during the buy antibiotics Public Health Emergency defined in § 400.200 of this chapter. Start Amendment Part81. Amend § 425.512 by— End Amendment Part Start Amendment Parta. Revising paragraphs (a)(2) and (3).

End Amendment Part Start Amendment Partb. Redesignating paragraph (a)(4) as paragraph (a)(5). End Amendment Part Start Amendment Partc. Adding a new paragraph (a)(4).

End Amendment Part Start Amendment Partd. Revising newly redesignated paragraph (a)(5). And End Amendment Part Start Amendment Parte. Revising paragraphs (b)(2)(i) and (ii) and (b)(3)(i) and (ii).

End Amendment Part The revisions and addition read as follows. Determining the ACO quality performance standard for performance years beginning on or after January 1, 2021. (a) * * * (2) For the first performance year of an ACO's first agreement period under the Shared Savings Program. If the ACO reports data via the APP and meets the data completeness requirement at § 414.1340 of this subchapter and the case minimum requirement at § 414.1380 of this subchapter on the measures specified in this paragraph (a)(2) for the applicable performance year, the ACO will meet the quality performance standard.

(i) For performance years 2022, 2023, and 2024. The ten CMS Web Interface measures or the three eCQMs/MIPS CQMs, and the CAHPS for MIPS survey. (ii) For performance year 2025 and subsequent performance years. The three eCQMs/MIPS CQMs and the CAHPS for MIPS survey.

(3) For performance year 2021. (i) Except as specified in paragraph (a)(2) of this section, CMS designates the quality performance standard as the ACO reporting quality data via the APP established under § 414.1367 of this subchapter, according to the method of submission established by CMS and achieving a quality performance score that is equivalent to or higher than the 30th percentile across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring. (ii) If an ACO does not report any of the ten CMS Web Interface measures or any of the three eCQMs/MIPS CQMs and does not administer a CAHPS for MIPS survey under the APP, the ACO will not meet the quality performance standard. (4) For performance years 2022 and 2023.

(i) Except as specified in paragraph (a)(2) of this section, CMS designates the quality performance standard as the ACO reporting quality data via the APP established under § 414.1367 of this subchapter according to the method of submission established by CMS and either. (A) Achieving a quality performance score that is equivalent to or higher than the 30th percentile across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring, or (B) If the ACO reports the three eCQMs/MIPS CQMs in the APP measure set, meeting the data completeness requirement at § 414.1340 of this subchapter and the case minimum requirement at § 414.1380 of this subchapter for all three eCQMs/MIPS CQMs, achieving a quality performance score equivalent to or higher than the 10th percentile of the performance benchmark on at least one of the four outcome measures in the APP measure set and a quality performance score equivalent to or higher than the 30th percentile of the performance benchmark on at least one of the remaining five measures in the APP measure set. (ii) If an ACO does not report any of the ten CMS Web Interface measures or any of the three eCQMs/MIPS CQMs and does not administer a CAHPS for MIPS survey under the APP, the ACO will not meet the quality performance standard. (5) For performance year 2024 and subsequent performance years.

(i) Except as specified in paragraph (a)(2) of this section, CMS designates the quality performance standard as the ACO reporting quality data via the APP established under § 414.1367 of this subchapter, according to the method of submission established by CMS and achieving a quality performance score that is equivalent to or higher than the 40th percentile across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring. (ii) If an ACO does not report any of the three eCQMs/MIPS CQMs and does not administer a CAHPS for MIPS survey under the APP, the ACO will not meet the quality performance standard. (b) * * * (2) * * * (i) For performance years 2021, 2022, and 2023, the ACO's minimum quality performance score is set to the equivalent of the 30th percentile MIPS Quality performance category score across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring, for the relevant performance year. (ii) For performance year 2024 and subsequent performance years, the ACO's minimum quality performance score is set to the equivalent of the 40th percentile MIPS Quality performance category score across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring, for the relevant performance year.

(3) * * * (i) For performance years 2021, 2022, and 2023, CMS will use the higher of the ACO's quality performance score or the equivalent of the 30th percentile MIPS Quality performance category score across all MIPS Quality performance category scores, excluding entities/providers eligible for facility-based scoring, for the relevant performance year. (ii) For performance year 2024 and subsequent performance years, CMS will use the higher of the ACO's quality performance score or the equivalent of the 40th percentile MIPS Quality performance category score across all MIPS Quality performance category Start Printed Page 65686 scores, excluding entities/providers eligible for facility-based scoring, for the relevant performance year. * * * * * Start Signature Xavier Becerra, Secretary, Department of Health and Human Services. End Signature The following appendices will not appear in the Code of Federal Regulations.

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CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-PBILLING CODE 4120-01-CBILLING CODE 4120-01-P[FR Doc. 2021-23972 Filed 11-2-21. 8:45 am]BILLING CODE 4120-01-P.

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HH is predominantly caused by the HFE p.C282Y genetic variant (1). The UK has the second highest prevalence of this mutation worldwide, with >350,000 people being HFE p.C282Y homozygotes (two copies of buy flagyl online fast delivery the mutation). HH is easily identifiable with simple clinical iron tests, and preventative treatment with venesection is safe and effective.

However, symptoms of HH often present as tiredness and fatigue which may be misdiagnosed as the usual signs of ageing or diagnosed late in the course of disease after irreparable damage has occurred. A major challenge is buy flagyl online fast delivery identifying at-risk patients early. Our research has shown a huge excess of liver cancer in HH, with 7.2% of males p.C282Y homozygotes predicted to develop liver cancer by age 75 compared to just 0.6% in those without HH mutations.

However, penetrance is variable with not buy flagyl online fast delivery all individuals with high risk HH genotypes developing these outcomes. Furthermore, the disease burden is thought to be less in women, who have partial protection from menstrual blood losses, but this is unclear and risks in those using contraception to stop menstruation and risk after menopause needs clarifying. In preliminary work we buy flagyl online fast delivery are finding a big role for other genetic variants and environmental factors in modifying disease outcomes within p.C282Y homozygotes.

The project will take the field forward substantially by leveraging data from the UK Biobank (combining genetics and electronic medical records in ~500,000 people) to increase our understanding of patient variability, informing efforts to identify and appropriately treat those with the highest risk. The studentship will appeal to students with a background in epidemiology, statistics, data science, mathematics, genetics, nursing, etc. Skills in quantitative scientific approaches and data analysis would be buy flagyl online fast delivery an advantage.

The student will work with a supervisory team with experience in HH research. The team have published on HH in high impact journals buy flagyl online fast delivery including the BMJ and JAMA. The direction of the PhD is flexible and can be partially moulded to suit the strengths and interests of the successful candidate.

Entry Requirements Applicants for this studentship must have buy flagyl online fast delivery obtained, or be about to obtain, a First or Upper Second Class UK Honours degree, or the equivalent qualifications gained outside the UK, in an appropriate area of science or technology. Background knowledge/skills in epidemiology, genetics, statistics or data science is desirable. If English is not your first language you will need to meet the required level (Profile C) as per our guidance at https://www.exeter.ac.uk/pg-research/apply/english/.