Change in participating physician agreements. Physicians are normally given a period of time before the start of the calendar year to sign a participation agreement for the coming calendar year. In order to make an informed decision on whether to sign the agreement, a physician should know what the Medicare payments will be for the services he furnishes and the upper limit on what he is permitted to charge a patient if he does not sign the agreement.

Because the adjustments in the prevailing charges would not be effective until April 1, 1990, and information about the adjustments will not likely be available before January 1, the bill revises the normal sign-up period for 1990. Physicians would be given a sign-up period prior to April 1, 1990, after the adjustments in prevailing charges and recalculation of the physician's MAAC limits have been made. The normal sign-up during November 1989 would be eliminated. Since section 4002 would essentially result in a 3month freeze in the current fees, and since there would only be a 3month period before the fees changed, it does not seem necessary to go through that sign-up period. Current participation agreements would be extended for 3 months, but physicians with a current agreement who wished to terminate it on January 1, 1990, would be given the opportunity to do so. Physicians who do not have a current agreement would not be given an opportunity to sign one just for the 3-month period January through March 1990. They would have to await the sign-up period for April 1990.

Various other technical and conforming changes are made in the bill, including adjustments in payments to other health care practitioners whose payment methodologies are dependent on payments for physician services.

The committee recognizes that the reform set forth in this section is by no means the panacea for solving all the concerns being raised about the Medicare program or the health care delivery system. We must continue to pursue a coordinated approach that entails improved policies on graduate medical education and health manpower, along with enhanced research on technology assessment, quality assurance and the effectiveness and appropriateness of health care services. We also need improvements in peer review and utilization review. The committee intends to continue reviewing and seeking improvements in these related areas of health policy.

Sec. 4002-Freeze in Medicare Economic Index during 1990

The Medicare economic index is essentially an inflation adjustment that acts as a restraint on the extent to which the "prevailing charges" recognized by Medicare as reasonable may increase from year to year. It was initially enacted by the Congress in 1972 and is based on the costs of a representative set of inputs, including salaries and earnings, that go into furnishing physician services.

The MEI is normally calculated each year by the Secretary and is announced in October of each year for the following year. During the last 5 years, however, the Congress has been statutorily establishing MEI increases lower than would otherwise be the case, as a means of achieving budget savings. The Congressional Budget Office estimates that, in the absence of Congressional action, the

MEI for 1990 would allow a 5.3 percent increase in prevailing charges.

The committee bill would eliminate the MEI increase for calendar year 1990. This is the principal Medicare savings item in the committee bill, in response to the instructions in the budget resolution for fiscal year 1990.

The committee is interested in pursuing fundamental reform in Medicare payments for physician services, as set forth in section 4001, as expeditiously as possible. This provision, eliminating the MEI for 1990, is the simplest and most straightforward means of achieving savings. The committee has voiced displeasure in the past at provisions such as this and has previously attempted a different, more targeted approach to combining savings measures with efforts to achieve policy objectives. In this instance, however, this provision allows the Secretary to pursue the implementation of payment reform without the distraction of first implementing complicated savings provisions. The payment reform provisions, which would be implemented in a budget neutral manner, would promote the policy goals of increasing the payments for undervalued services and reducing those for over-valued services, thereby improving the mix and distribution of services.

Taken in conjunction with the payment reform provision in section 4001, this provision would result in a 3 month freeze on all fees, from January 1 through March 31, 1990. Fees would then be adjusted under the payment reform.

As noted previously, in the description for section 4001, physicians who currently have participating physician agreements due to expire on December 31, 1989, would be given an opportunity to become a non-participating physician on that date, under the terms of section 4001. If the physician did not request that his participation agreement be terminated, it would be extended through March 31. All physicians would be given a new opportunity prior to April 1 to sign a participation agreement, but the sign-up period due in November 1989 would be eliminated.

Sec. 4003-Payment for Radiology Services

The Omnibus Budget Reconciliation Act of 1987 called for the Secretary, in consultation with the physician groups affected, to establish a relative value scale and a fee schedule for radiologists' services. These tasks have been completed and the fee schedule was implemented earlier this year. While many aspects of the fee schedule have been implemented in a satisfactory way, two problems have arisen that are addressed in this provision.

The committee, in initiating the fee schedule proposal in 1987, anticipated that the Secretary would develop a method of adjusting the fee schedule to reflect geographical differences in the cost of furnishing services, in a manner similar to that set forth in section 4001 of this bill. This was not done. Rather, the conversion factors used to derive the fee schedule in each area were based on prior charges submitted by physicians practicing in the area. As a result, the fee schedule incorporated undesirable geographical variations that existed prior to the fee reform.

The committee bill would require the Secretary to calculate a national average conversion factor and to adjust that factor by the

geographical indexes developed under section 4001. This reform of the radiology fee schedule would be phased in over 2 years, by setting the fee schedule amounts in 1990 at half the difference between what they would have been under this method of geographic adjustment and what they would have been under the current fee schedule. In 1991, they would be fully adjusted in accordance with the geographic indices set forth in section 4001. The provision would be implemented in a budget neutral way. Thus, in both years, the conversion factor is to be calculated by the Secretary so that total payments under this provision are the same as they would have been in the absence of this change.

A second concern is that nuclear physicians have been subjected to an inordinate decrease under the new fee schedule. The committee is advised that the fee schedule did not adequately account for the differing manner in which nuclear physicians furnish services subject to the fee schedule. The committee is also advised that efforts are being made by the Secretary, the radiologists, and the nuclear physicians to resolve this matter. The committee bill would exempt nuclear physicians from the fee schedule for 1 year, in order to permit a resolution to be worked out.

Sec. 4004—Payment for Anesthesiology Services

Anesthesiology fee schedule. Anesthesiology services are currently paid by Medicare under a unique system. Services are assigned "base units", which vary according to the complexity and risk involved in each procedure. In addition, the time spent caring for the patient is counted, typically in 15 minute time units. (Thirty minute time units are used if an anesthesiologist is supervising a nurse anesthetist who is not employed by the anesthesiologist.) The actual charge for anesthesiology services is calculated by adding the base units and time units together, and the multiplying the sum of those by a conversion factor. The Omnibus Budget Reconciliation Act of 1987 required the Secretary to develop a uniform relative value guide for base units under this system, which would be consistently applied throughout the country with appropriate conversions factors.

The time element of this methodology is currently counted in whole units and is always rounded upward. Thus, if the anesthesiologist spends any portion of a time unit with the patient, a whole time unit is counted. Under this approach, for example, any amount of time between 16 minutes and 30 minutes would be counted as two time units. This clearly inflates the time units and the corresponding charges for these services.

The committee bill would require that time be counted using fractional time units, based on the actual time spent on patient care. For example, 16 minutes would be counted as one and onefifteenth time units, rather than two whole time units.

CRNA fee schedule. The Omnibus Budget Reconciliation Act of 1986 included a provision, which originated in this committee, authorizing payments for certified registered nurse anesthetists under a fee schedule. Among the other statutory elements applicable to this fee schedule were the requirements that the fee schedule be based on the costs incurred by hospitals in employing CRNA's and that adjustments be made in the fee schedule, as necessary, to

achieve budget neutrality compared to what payments would be in the absence of this reform.

The Secretary has developed the CRNA fee schedule and has published it for public comment. Because of the budget neutrality requirement, the conversion factors used in the fee schedule are considerably lower than was expected, in comparison to hospital costs.

The committee bill would raise the conversion factors, to make them more commensurate with the data from the hospital cost reports.

The bill would also preclude a surgeon from billing for the medical direction of a CRNA. This practice is currently permitted by some of the Medicare contractors, but not by others. The Department of Health and Human Services has proposed having all contractors conform by not permitting such billing. The committee concurred with the reasoning that a physician should not be billing for anesthesia supervisory services performed simultaneously with furnishing surgical procedures.

In addition, the bill would extend and expand the authority of small rural hospitals to be reimbursed for employing a CRNA. Under current law, if the CRNA (or CRNA's) employed by the hospital agrees not to file a claim under the fee schedule, a hospital that previously received cost reimbursement can elect to continue that arrangement. This permits the hospital to retain the services of the CRNA, even though the number of services performed at the hospital is too few to generate sufficient revenues under the fee schedule to support a CRNA. The current provision is limited, however, to hospitals performing 250 or fewer procedures requiring anesthesia services per year and it would expire at the end of 1991. These limitations have hindered the ability of some rural hospitals to sustain access to surgical procedures. The committee bill would increase the qualifying threshold to 500 procedures per year and would make the provision permanent.

Sec. 4005-Payment for Pathology Services

Pathology services are currently reimbursed under the reasonable charge methodology generally applicable to other physician services. There have been a number of serious concerns raised, however, regarding the appropriateness of those charges, because of various legislative and regulatory revisions implemented over the last few years. The Omnibus Budget Reconciliation Act of 1987 contained a provision, which was initiated by this committee, requiring the Secretary, in consultation with physicians performing pathology services, to develop a relative value scale and a fee schedule for pathology services. The provision did not authorize the Secretary to implement the fee schedule. Rather, it required him to report to the Congress, which would then have to enact further enabling legislation before the fee schedule could be implemented.

The Secretary has developed a fee schedule for pathology services, based on the reasonable charges for pathology services contained in Medicare claims data. This fee schedule is currently under review by the physician community, prior to submission to the Congress. Meanwhile, the Harvard research project developing a resource-based relative value scale, described above in section

4001, has surveyed some of these pathology services and concluded that further review is necessary before satisfactory results are available.

The committee bill would authorize implementation of the fee schedule on January 1, 1989, and would also require that geographic adjustments in a national fee schedule be made in a manner comparable to that made under section 4001. The committee recognizes that further analysis and development of this fee schedule may be necessary between now and the date of implementation. The committee intends to review carefully the response of the physician community to the Secretary's proposed fee schedule and to monitor the issues closely before implementation. The committee urges the physicians who would be affected by this fee schedule to work closely with the Secretary and the Physician Payment Review Commission to develop a relative value scale that reflects its best judgment of the relative resource costs of these services. Sec. 4006-Waiver of Liability Limiting Recoupment in Certain

Cases

During the middle 1980's, the Health Care Financing Administration (HCFA) required all Medicare carriers to adopt a nationally uniform system of coding known as the HCFA Common Procedure Coding System (HCPCS). The carriers had previously been using a variety of different coding systems for processing claims for physician services. Most carriers were able to convert to the new system without encountering serious problems with inappropriate payments. However, the conversion did cause problems in some instances, particularly when it was not clear what new code was the most appropriate substitute for the prior code.

When this problem arose in the State of Texas, the carrier implemented statewide fees, rather than different fees in each of the carrier locales, for some services for a substantial period of time. HCFA later concluded that this was incorrect and that a overpayments had been made in a significant number of cases. HCFA has been seeking recoupment of these overpayments.

The committee bill would preclude this recoupment, whether it was attempted by means of a direct recoupment action against a physician or beneficiary or by withholding funds from payments that are subsequently due the physician or beneficiary. The bill would accomplish this by applying the provisions of section 1870(c) of the Social Security Act to these cases. Under that provision, the physicians and patients who received overpayments under the statewide fee schedule, during a specified period of time, would be deemed to be "without fault" and, therefore, a successful recoupment procedure could not against them under section 1870. The committee believes that the Secretary should also make reasonable efforts to repay those individuals from whom a recoupment has already been effected.

Subpart 2-Payment for Other Services

Sec. 4011-Durable Medical Equipment

The Omnibus Budget Reconciliation Act of 1987 contained a comprehensive reform of the methodology used under Medicare to pay