Re: CMS-1204-P – Medicare Program, Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2003 (67 Federal Register 43846), June 29, 2002

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(202) 638-1100 Phone

Friday, August 23rd 2002

Thomas A. Scully
Centers for Medicare and Medicaid Services
200 Independence Avenue, S.W., Room 445-G
Washington, DC 20201

Dear Mr. Scully:

On behalf of our nearly 5,000 member hospitals, health systems, networks and other providers of care, the American Hospital Association (AHA) is pleased to provide our comments on the proposed rule concerning payment policies under the physician fee schedule for the year 2003. Our main concern: The proposed rule includes a significantly different methodology for calculating physical therapy rates that is inconsistent with the methodology used for all other services and drastically under funds the cost of providing outpatient physical therapy.

Hospitals are concerned about the physical therapy policy because outpatient physical therapy (PT) services furnished by hospitals, rehabilitation agencies, clinics, skilled nursing facilities, and comprehensive outpatient rehabilitation facilities are paid under the physician fee schedule. Further, because only the hospital can bill for therapy services provided to hospital patients, these services are paid using the higher non-facility (office) practice expense relative value units (RVUs). Thus, the proposed rule has a direct effect on payments to hospitals and health systems that offer these services.

In the preamble to the proposed rule, CMS says, “Because we believe that most physical therapy services furnished in physicians’ offices are performed by physical therapists, we crosswalked all utilization for therapy services in the CPT 97000 series to the physical and occupational therapy practice expense pool.”  The AHA believes that the use of this “utilization crosswalk” methodology poses a number of problems. 

First, the use of the crosswalk to shift utilization data from the physician practice setting to the physical therapy private practice is inconsistent with the “top down” methodology used by CMS to calculate practice expense RVUs.  For other services, if procedures are performed by more than one specialty, the final procedure code allocation uses a weighted average of allocations for the specialties that perform the procedure, with the weights being the frequency with which each specialty performs the procedure on Medicare patients.  However, the use of the “utilization crosswalk” fails to account for the actual practice expenses incurred by those physician specialties that provide physical and occupational therapy services in their offices.  The American Medical Association’s Socioeconomic Monitoring System survey provides information about practice expenses by specialty.  It does not provide practice expense data at the procedure code level and there is no evidence to suggest that the practice expenses for PT/OT services are any different from the practice expenses of all other services provided in an office setting by any given specialty.  The departure from this methodology for PT/OT codes in the CPT 97000 series apparently occurred in 1999 when the resource-based practice expense system was put into place.  However, it was never, before this proposed rule, published by CMS and therefore, there was never any opportunity for public comment.

In addition, therapists in private practice perform only about half of physical and occupational therapy services for Medicare patients.  The other half are furnished in the offices of physicians as “incident to” services of such physicians as orthopedic surgeons, physiatrists, and internists.  These physicians have a much higher Medicare hourly allocation of practice expense than PT/OT.  As a result, the “utilization crosswalk” approach results in the arbitrary and inappropriate use of a much lower hourly practice expense rate in calculating practice expense relative value units (RVUs) for PT services.  That is, whereas PT/OT has a practice expense allocation of $40.70 per hour, it is $108 per hour for orthopedic surgeons, $94.20 per hour for physical medicine/rheumatology and $56.50 per hour for internal medicine.

Finally, the use of this altered methodology has resulted in inappropriate reductions in payments for physical and occupational therapy services.  Clearly, payments would be more consistent with the costs of providing the services if CMS did not use the “utilization crosswalk” and instead left the therapy services that are performed by each specialty in each specialty’s practice expense pool. 

The AHA strongly urges CMS to discontinue using the “utilization crosswalk” when calculating practice expense RVUs for services in the CPT 97000 code series.  Instead, CMS should use the standard “top down” methodology, taking into account the various specialties that provide these services.  This would not only be consistent with the approach used for all other services under the physician fee schedule, but also would more accurately reflect the actual practice costs for these services. 

The AHA appreciates the opportunity to comment on this important proposed regulation.  If you have questions regarding these comments, feel free to call me or Roslyne Schulman, senior associate director for policy development, at (202) 626-2273. 


Rick Pollack
Executive Vice President



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