cms final rule increased medicaid primary care rates.pdf

8/10/2019 CMS Final Rule Increased Medicaid Primary Care Rates.pdf

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66670 Federal Register / Vol. 77, No. 215 / Tuesday, November 6, 2012/ Rules and Regulations

DEPARTMENT OF HEALTH ANDHUMAN SERVICES

Centers for Medicare & MedicaidServices

42 CFR Part 438, 441, and 447

[CMS2370F]

RIN 0938AQ63

Medicaid Program; Payments forServices Furnished by Certain PrimaryCare Physicians and Charges forVaccine Administration Under theVaccines for Children Program

AGENCY: Centers for Medicare &Medicaid Services (CMS), HHS.

ACTION: Final rule.

SUMMARY: This final rule implementsMedicaid payment for primary careservices furnished by certain physicians

in calendar years (CYs) 2013 and 2014at rates not less than the Medicare ratesin effect in those CYs or, if greater, thepayment rates that would be applicablein those CYs using the CY 2009Medicare physician fee scheduleconversion factor. This minimumpayment level applies to specifiedprimary care services furnished by aphysician with a specialty designationof family medicine, general internalmedicine, or pediatric medicine, andalso applies to services rendered bythese provider types paid by Medicaidmanaged care plans contracted by statesto provide the primary care services. Italso provides for 100 percent federalfinancial participation (FFP) for anyincrease in payment above the amountsthat would be due for these servicesunder the provisions of the approvedMedicaid state plan, as of July 1, 2009.In other words, there will not be anyadditional cost to states for paymentsabove the amount required by the 2009rate methodology. In this final rule, wespecify which services and types ofphysicians qualify for the minimumpayment level in CYs 2013 and 2014,

and the method for calculating thepayment amount and any increase forwhich increased federal funding is due.

In addition, this final rule will updatethe interim regional maximum fees thatproviders may charge for theadministration of pediatric vaccines tofederally vaccine-eligible childrenunder the Pediatric Immunization

Distribution Program, more commonlyknown as the Vaccines for Children(VFC) program.

DATES: The provisions of this final ruleare effective on January 1, 2013.

FOR FURTHER INFORMATION CONTACT:Mary Cieslicki, (410) 7864576, orLinda Tavener, (410) 7863838, forissues related to payments for primarycare physicians.

Mary Beth Hance, (410) 7864299, forissues related to charges for theadministration of pediatric vaccines.

SUPPLEMENTARY INFORMATION:

I. Executive Summary and Background

A. Executive Summary

1. Purpose

This final rule implements sections1902(a)(13), 1902(jj), 1905(dd) and1932(f) of the Social Security Actdirecting payment by state Medicaidagencies of at least the Medicare rates ineffect in CYs 2013 and 2014 or, ifhigher, the rate using the CY 2009conversion factor (CF) for primary careservices furnished by a physician witha specialty designation of familymedicine, general internal medicine, orpediatric medicine. Also, this final ruleimplements the statutory paymentprovisions uniformly across all statesand defines, for purposes of enhancedfederal match, eligible primary carephysicians, identifies eligible primarycare services, and specifies how theincreased payment should becalculated. Finally, this rule providesgeneral guidelines for implementing theincreased payment for primary careservices delivered by managed careplans.

This final rule also provides updatesto vaccine rates that have not beenupdated since the VFC program wasestablished in 1994.

2. Summary of the Major Provisions

a. Payments to Physicians for PrimaryCare Services

This final rule will implementMedicaid payment for primary careservices furnished by certain physiciansin calendar years (CYs) 2013 and 2014at rates not less than the Medicare ratesin effect in those CYs or, if greater, thepayment rates that will be applicable inthose CYs using the CY 2009 conversionfactor (CF). It will also provide for a 100percent federal matching rate for anyincrease in payment above the amountsthat were due for these services underthe provisions of the state plan as of July1, 2009. In other words, there will not

be any additional cost to states forpayments above the amount required by

the 2009 rate methodology.

b. Vaccine Administration Under theVaccines for Children (VFC) Program

This final rule updates the regionalmaximum fees that providers maycharge for the administration ofpediatric vaccines to federally vaccine-eligible children under the PediatricImmunization Distribution Program,more commonly known as the Vaccinesfor Children (VFC) program. Theformula used to determine the updatedrates used the Medicare Economic Index(MEI) which is a price index used by

CMS as part of the updates to Medicarephysician payments. We believe theMEI is the best tool to update these rates

because: (1) It reflects input priceinflation faced by physicians inclusiveof the time period when the nationalaverage was established in 1994; and (2)we believe that input prices associatedwith this specific type of physician-provided service are consistent withoverall input prices. The MEI was mostrecently updated at the end of 2011.

3. Summary of the Costs and Benefits

Provision description Total costs Total benefits

Payments to Physiciansfor Primary CareServices.

The overall economic impact of this final rule is an estimated $5.600billion in CY 2013 and $5.745 billion in CY 2014 (in constant 2012dollars). In CY 2013, the federal cost for Medicaid and CHIP is ap-proximately $5.835 billion with $235 million in state savings. In CY2014, the federal cost for Medicaid and CHIP is approximately$6.055 billion with $310 million in state savings. The associatedimpact of this final rule requiring states to reimburse specified phy-sicians for vaccine administration at the lesser of the Medicare rateor the VFC regional maximum during CYs 2013 and 2014, is esti-mated at an additional $975 million in federal costs. Specifically,this reflects federal costs for CYs 2013 and 2014 of $495 millionand $480 million, respectively.

The overall benefit of this rule is the expectedincrease in provider participation by primarycare physicians resulting in better access toprimary and preventive health services byMedicaid beneficiaries.

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identifying the amounts by which MCOsmust increase existing payments toprimary care providers, and anyadditional capitation costs to the stateattributable to such required increasesin existing payments. We also proposedto extend this same treatment to PIHPsand PAHPs through regulations at part438, to the extent that primary care

provider payments are made by theseentities.

We solicited comments on how bestto implement through regulation theprovision that managed care plans payprimary care providers at the Medicarerate for primary care services, consistentwith those paid on a FFS basis.Additionally, we solicited commentsfrom states and other stakeholders onthe best way to adequately identify theincrease in managed care capitationpayments made by the state that isattributable to the increased providerpayment, for the purpose of claiming100 percent FFP. We were particularlyinterested in ensuring that primary carephysicians receive the benefit of theincreased payment. Section 1932(f) ofthe Act, as amended by the AffordableCare Act, requires that the managed carecontracts pay providers at the applicableMedicare rate levels. We proposed toreview managed care contracts to ensurethat this requirement is imposed onmanaged care plans by the state. Wealso proposed to require managed careplans to report to the state the paymentsmade to physicians under this provisionto justify any adjustments to thecapitation rates paid by the state underthe contract. In proposing this approach,we were mindful of balancing the needfor adequate documentation of thepayment with the administrative burdenit places on states and managed careplans. We requested comment on theseprovisions and additional suggestionson how to ensure that managed careplans provide the necessary data to thestate, as well as how to ensure andmonitor that managed care plansappropriately pass on to physicians theportion of the increased capitation ratethat is attributable to the primary care

rate increase.This final rule also addresses

identification of the rate differentialeligible for 100 percent federal matchingfunds for vaccine administration, as setforth in section 1905(dd) of the Act. In2011, the vaccine administration billingcodes were changed so it is not possibleto track the Medicaid state plan rate inCY 2009 directly to the rates applicablein CYs 2013 and 2014. We requestedcomment on our proposal for imputingthe CY 2009 rate.

c. Medicare Payment to Primary CareProviders

Medicare provides health insurancecoverage to people who are aged 65 andover, people with disabilities or peoplewho meet other special criteria, undertitle XVIII of the Act. For institutionalcare, such as hospital and nursing homecare, Medicare makes payments toproviders using prospective paymentsystems. Payment for physiciansservices under Medicare is based on theMPFS. The MPFS assigns relative valueunits (RVUs) for each procedure, as wellas geographic practice cost indices(GPCIs) for geographic variations inpayments, and a global CF, whichconverts relative value units (RVUs) intodollars. Individual fee scheduleamounts for the MPFS are the productof the geographic adjustment, RVUs,and CF. Site of service (for example,physician office or outpatient hospital)is reflected as an adjustment to the

RVUs. We generally issue the MPFSfinal rule for the subsequent calendaryear on or before November 1st eachyear. The MPFS final rule includes theRVUs and CF for the upcoming calendaryear, which permits the calculation ofrates. Updates may occur throughout theyear, but normally occur quarterly.

2. Vaccine Administration Under theVaccines for Children (VFC) Program

The Omnibus Budget ReconciliationAct of 1993 (OBRA 1993), (Pub. L. 10366), created the Vaccines for Children(VFC) Program, which became effective

October 1, 1994. Section 13631 of OBRA1993 added section 1902(a)(62) to theAct to require that states provide for aprogram for the purchase anddistribution of pediatric vaccines toprogram-registered providers for theimmunization of vaccine-eligiblechildren in accordance with section1928 of the Act. Section 1928 of the Actrequires each state to establish a VFCProgram (which may be administered bythe state Department of Health) underwhich certain specified groups ofchildren are entitled to receive qualifiedpediatric immunizations without charge

for the cost of the vaccine.Under the VFC Program, a provider,in administering a qualified pediatricvaccine to a federally vaccine-eligiblechild, may not impose a charge for thecost of the vaccine. Section1928(c)(2)(C)(ii) of the Act allows aprovider to impose a fee for theadministration of a qualified pediatricvaccine as long as the fee, in the caseof a federally vaccine-eligible child,does not exceed the costs of suchadministration (as determined by theSecretary based on actual regional costs

for such administration). However, aprovider may not deny administrationof a qualified pediatric vaccine to avaccine-eligible child due to theinability of the childs parents or legalguardian to pay the administration fee.

This regulation updates theadministration fee for the first timesince the VFC program began in 1994.

We requested comments on themethodology used to calculate theadministration fee update as well as theimpact of the updated administrationfee on uninsured and underinsuredVFC-eligible children.

II. Summary of Proposed Provisionsand Analysis of and Response to PublicComments

On May 11, 2012, we published aproposed rule (77 FR 27671) in theFederal Register entitled MedicaidProgram; Payments for ServicesFurnished by Certain Primary CarePhysicians and Charges for VaccineAdministration under the Vaccines forChildren Program.

We received a total of 171 commentsfrom states, advocacy groups, healthcare providers, employers, healthinsurers, health care associations, aswell as individual citizens. Thecomments ranged from general supportfor the proposed provisions to specificquestions or comments regarding theproposed changes.

The following are brief summaries ofeach proposed provision, summaries ofthe public comments received, and ourresponses to those public comments:

General Comments

Comment: Several commentersquestioned whether the provisions ofthis rule apply to services paid underthe Childrens Health InsuranceProgram (CHIP). CHIP programs can bestructured as expansions of the statesMedicaid program, as separate CHIPprograms, or as a combination of aMedicaid expansion program and aseparate CHIP program.

Response: The statute applies to feefor service and managed care paymentsmade for services provided to Medicaid

beneficiaries. Therefore, this ruleapplies only to CHIP Medicaidexpansion programs since beneficiariesin such programs are Medicaid-eligible.CHIP stand-alone programs are noteligible for 100 percent FFP andphysicians providing services tochildren in those programs are noteligible for higher payment at theMedicare rate by operation of theserules. At state option, states may aligntheir CHIP payment rates for primarycare providers with these Medicaidpayment provisions.



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66673Federal Register / Vol. 77, No. 215 / Tuesday, November 6, 2012/ Rules and Regulations

Comment: Many commenterssuggested that the rule be modified tospecifically require that states collectand report to CMS data that would helpthe Congress determine whether or notto extend the provision beyond 2014.

Response: We agree and have revised 447.400(d) accordingly, as described

below.

Comment: Many commenters believethat the budget impact estimatesunderestimate the time and resourcesfor states to undertake the significantcoding and related systems work,conduct the necessary analyses anddevelop policies, implement theregulation as part of regular operationsand maintain compliance with theregulation as proposed in the proposedrule.

Response: We are sensitive to stateconcerns about the difficulty ofimplementing some of the provisions ofthe proposed rule and have modifiedthis final rule to limit the administrative

burden on states to the extent possible.We will also provide technicalassistance to states as they implementthe requirements of this rule to helpminimize the administrative burden.

Comment: Several commenters statedthat the proposed rule is contrary tocurrent state and federal efforts toincentivize the entire health caredelivery system to move away fromvolume-based reimbursement andwould force states to relinquish savingsin Medicaid efficiencies that havealready been put into place. Onecommenter disagreed with our

determination that each individualservice code must be reimbursed at theMedicare payment level and believedthat states should be permitted toincrease total payments in the aggregate,with flexibility to determine how thosepayments are distributed. Thecommenter recommended that, at aminimum, a value-based option forimplementing the increase be added tothe final rule. Several commenterssuggested that the final rule permitstates to develop methodologies tocalculate the aggregate value of theprimary care rate increase across all

qualified providers and services and touse non fee for service paymentmechanisms to deliver that aggregateincrease equitably to eligible providers.

Response: The statute requires thatstate plans provide for payment forprimary care services * * * at a rate notless than 100 percent of the paymentrate that applies to such services andphysicians under part B of title XVIII* * * Since the Medicare paymentrate reimburses services individually,we continue to believe that thislanguage precludes aggregated payments

not specific to the service andphysician. However, this does notpreclude states from creating incentivepayments or penalties based onperformance measures. While we

believe the Congress intended thepayment levels to rise to Medicarepayments, there is no prohibition onstates having incentives/penalties

external to the rates under traditionalfee-for-service or managed care deliverysystems.

Comment: One commenter askedabout the applicability of the rule toservices provided under section 1115demonstration waivers.

Response: This final rule implementsthe statutory payment provisionsuniformly across the states regardless ofthe authority under which a statesMedicaid program operates. Specifiedprimary care services delivered byeligible primary care physicians must bereimbursed at the enhanced rate. Weintend to continue a dialogue withstates with waivers through theimplementation process.

A. Payments to Physicians for PrimaryCare Services

1. Primary Care Services Furnished byPhysicians With Specified Specialty andSubspecialty ( 447.400)

a. Specified Specialties andSubspecialties

Section 1902(a)(13)(C) of the Actspecifies that physicians with aspecialty designation of familymedicine, general internal medicine,

and pediatric medicine qualify asprimary care providers for purposes ofincreased payment. We proposed thatservices provided by subspecialistswithin the primary care categoriesdesignated in the statute would alsoqualify for higher payment. Thesesubspecialists would be recognized inaccordance with the American Board ofMedical Specialties (ABMS)designations. For example, a pediatriccardiologist would qualify for paymentif he or she rendered one of thespecified primary care services by virtueof that physicians subspecialty within

the qualifying specialty of pediatricmedicine. Additionally, we proposed amethod for states to use in identifyingpractitioners who may receive theincreased payment.

Under the proposed rule, states wererequired to establish a system to requirephysicians to identify to the Medicaidagency their specialty or subspecialty

before an increased payment was made.For program integrity purposes, the statewould be required to confirm the self-attestation of the physician beforepaying claims from that provider at the

higher Medicare rate. We proposed thatthis be done either by verifying that thephysician was Board certified in aneligible specialty or subspecialty orthrough a review of a physicianspractice characteristics.

Specifically, for a physician whoattested that he or she was an eligibleprimary care specialist or subspecialist

but who was not Board certified(including those who are Board-eligible,

but not certified), we required that areview of the physicians billing history

be performed by the Medicaid agency.We proposed that at least 60 percent ofthe codes billed by the physician for allof CY 2012 be for the E&M codes andvaccine administration codes specifiedin this regulation. For a new physicianwho enrolled during either CY 2013 orCY 2014 and who attested that he or shewas within one of the eligiblespecialties or subspecialties and whowas not Board certified we proposed

that, following the end of the CY inwhich enrollment occurs, the statewould review the physicians billinghistory to confirm that 60 percent ofcodes billed during the CY ofenrollment were for primary careservices eligible for payment undersections 1902(a)(13)(C) and 1902(jj) ofthe Act.

Comment: Most commenterssupported the inclusion ofsubspecialists. However, somecommenters requested that CMS permitpayment for subspecialists recognized

by Boards outside of the ABMS,pointing out that other Boards are just

as relevant. In particular, commentersnoted that osteopaths, who arerecognized as physicians underMedicaid regulations, are licensed bytheir own specialty Board and areexcluded under the provisions of theproposed rule.

Response: We agree and have revisedthe rule to include physiciansrecognized by the American Board ofPhysician Specialties (ABPS) and theAmerican Osteopathic Association(AOA), as well as the American Boardof Medical Specialties. These are themajor, nationally recognized physician

Boards.Comment: Many commentersdisagreed with the inclusion ofsubspecialists. The commenters statedthat the proposed rule would createdisincentives for delivery of primarycare services in the most appropriatesettings, and posed a threat withregard to states ability to meet thestatutory requirements of section1902(a)(30) of the Act, which requiresthat payments under the state plan beconsistent with economy, efficiency andquality of care. The commenters stated



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that the proposal would add 44additional specialty designations to thelist of physicians eligible to receivehigher payments without a rationalcorrelation to the subspecialists that do,or that might as a result of thetemporary payment increase, deliverprimary care. Commenters believed thatthis provision of the proposed rule

would actually work against anexpansion in true primary care.

One commenter stated that states willnot be able to sustain increased paymentafter 2014 because the proposed rulewould result in payments that are sowidely distributed across the deliverysystem as to make the impact of theincrease extremely difficult to evaluate.This, in turn, would hamper statesability to demonstrate cost savingsnecessary to gain approval from theirlegislatures for continued higherpayment.

One commenter noted that CMS saidit was particularly swayed by argumentsthat pediatric subspecialists provideprimary care services in deciding toextend higher payment to allsubspecialists. The commenter believesthat the absence of a justification forincluding subspecialists does not lead tothe conclusion that all subspecialistsshould be included. Rather, the decisionto expand to other subspecialists should

be based on an analysis of whetherincreasing payment rates is likely toimprove access to primary care servicesfor Medicaid beneficiaries. Since statesare in the best position to make thatassessment, the commenter urged CMS

to permit states the flexibility todetermine which approach best meetsthe needs of its beneficiaries.

Several commenters were concernedthat including subspecialists will addunwarranted costs. The commentersencouraged CMS to adhere moreclosely to the intent of the law and onlyqualify true primary care physicians forthis increased payment. Several statedthat the regulation exceeds the authoritygranted in the Affordable Care Act,which they believed limits thecategories of providers to physicianswith specialty designations of family

medicine, general internal medicine, orpediatric medicine.Response: We continue to believe that

the statute supports inclusion ofsubspecialists related to the threespecialty categories designated in thestatute and disagree that extendingpayments to subspecialists will dilutethe impact of the regulation onMedicaid beneficiary access to primarycare or result in unwarranted costs.The American Academy of Pediatricscited the importance of pediatricsubspecialists, particularly

neonatologists, as a source of primarycare services. The Web site of theAmerican Academy of FamilyPhysicians notes that primary careservices can be delivered outside anoffice setting and that physicians whoare not trained in the primary carespecialties of family medicine, generalinternal medicine or general pediatrics

may sometimes provide patient careservices that are usually delivered byprimary care physicians. This rule onlyprovides for higher payment tosubspecialists to the degree that theyactually furnish the E&M codesspecified in the regulation and,consequently, will not result in coststhat are for services that are not properlyconsidered primary care. Therefore, wecontinue to believe that allsubspecialists related to the threespecialty categories designated in thestatute should be eligible for higherpayment to the extent that they provide

covered E&M services.Comment: Other commentersindicated that the proposed rule, whileproperly recognizing E&M codesprovided in emergency departments,unfairly excluded the majority ofemergency physicians who are eithernot Board certified or are certified inemergency medicine. Other commentersurged that obstetricians andgynecologists (OB/GYNs) be included

because of the important role they playin providing primary care to women.

Response: The statute provides forhigher payment of services furnished bya physician with a primary specialty

designation of family medicine, generalinternal medicine or pediatricmedicine. Therefore, although werecognize the role that other specialtyphysicians play in providing primarycare services, the authority does notexist to extend the payment to othercategories of physicians, including OB/GYNs.

Comment: While some commentersstrongly supported the proposed rulerequirements that Medicaid agenciesverify self-attestations with evidence ofBoard certification or practice history(60 percent of codes billed in a prior

period were to be for E&M codesspecified in the proposed rule), otherscited both requirements asadministratively burdensome and asrequiring major and costlymodifications to state processes andsystems. They indicated that states havedifferent enrollment and claimsprocessing capacity and may not be ableto identify all provider subspecialties orreimburse a different rate bysubspecialty. Commenters suggestedthat states be permitted to use theirexisting enrollment processes, usually

self-attestation alone, to identify whichphysicians qualify for payment, or to bepermitted to use Medicares NPIdesignation, which is also based on self-attestation. One commenter suggestedthat self-attestation could be verifiedwith a random audit by the Medicaidagency.

Some commenters stated that

permitting self-attestation to be verifiedwith evidence of Board certificationalone creates an inequity. This is

because many traditional primary careproviders who are not Board certifiedand do not reach the 60 percentthreshold of E&M codes billed will beexcluded from increased payment infavor of subspecialists who providerelatively few primary care services.

One commenter disagreed with ourdecision to base the 60 percent claimsverification threshold on the Medicareprimary care incentive programthreshold, stating that the Congresscould have imposed a similarrequirement on Medicaid, but did not.They do not believe it is appropriate todesignate any threshold of claimsverification. They also suggestedpermitting non-Board certifiedphysicians to qualify if they completedan approved residency in any of thethree designated primary care physicianspecialties. Other commenters suggestedusing allowed charges as the thresholdto parallel the Medicare primary carepayment or services paid, rather than

billed, asserting that data on rejectedclaims is not readily available.

One commenter suggested that states

be permitted to define eligiblephysicians based on enrollment criteriafor existing state primary care programs.Another commenter suggested thatstates be given flexibility to rely onmethods that already exist within eachstates payment systems, such asrequiring eligible providers to bill witha unique modifier.

One commenter also asked that weclarify procedures for the identificationof qualifying out-of-state providers,suggesting that the home statesverification be used.

Response: We agree that there is

variation among states for providerenrollment procedures and MedicaidManagement Information System(MMIS) capabilities. We acknowledgethat many states have existing programsdesigned to increase the availability ofprimary care services and that thoseprograms may differ from the provisionsof the proposed rule. We alsoacknowledge that permitting self-attestation to be verified with evidenceof Board certification alone creates aninequity in that Board certifiedphysicians who provide few primary



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care services will be eligible for higherpayment while non-Board certifiedphysicians who provide many primarycare services but not enough to meet the60 percent threshold will be excluded.We continue to believe that there must

be uniform, auditable standards for theidentification of eligible physicians andthat Board certification and claims

history are appropriate standards.However, we acknowledge the concernsregarding the significant administrative

burden of this requirement. Therefore,this rule removes the requirement thatthe State Medicaid agency verify theself-attestation of all physicians byconfirming Board certification or anappropriate claims history. Instead, thisrule requires that physicians self-attestthat they are either Board certified infamily medicine, general internalmedicine, or pediatric medicine or asubspecialty within those specialties orthat that sixty percent of all Medicaid

services they bill, or provide in amanaged care environment, are for thespecified E&M and vaccineadministration codes. This rule alsoclarifies that states may defer to the statewhere the physicians practice is locatedwith respect to a determination of aphysicians eligibility for higherpayment.

For the threshold itself, we often useMedicare program standards indeveloping policy for the Medicaidprogram, and we believe that it isappropriate to apply the 60 percentthreshold applicable to the Medicareprimary care incentive payment to the

Medicaid payment as well.Comment: One commenter suggested

that the proposed 447.400(a) beamended to add a subsection to definewhat is meant by self-attestation of aspecialty or subspecialty designation.

Response: We believe that themeaning of self-attestation is generallyunderstood in this context as both thestates and managed care organizationscredential providers. Therefore, we donot agree that an amendment to 447.400(a) is necessary.

Comment: Commenters questionedwhether the process for identifying

eligible providers was the same acrossdelivery systems and if states withMCOs, PIHPs or PAHPs could rely onthe definition of primary care providerestablished through the managed carecontract. Commenters suggested that the

broad definition of primary careprovider proposed by the proposed rulewould reward providers that do notfocus their practice on primary care.

Response: We recognize that thedefinition of a primary care providerunder existing managed care contractsmay, in some instances, be more or less

targeted than that proposed under thisrule. The contract definition may alsoexceed the scope of those primary carephysicians that qualify for this payment.However, section 1902(a)(13)(C) of theAct, as amended by the Affordable CareAct, specifies that physicians with aspecialty designation of familymedicine, general internal medicine,

and pediatric medicine qualify asprimary care providers for the purposesof the increased payment rate. Theproposed rule clarified that qualifiedproviders include subspecialists relatedto the three designated provider practicetypes. Therefore, we must require thatthe same approach apply to identifyingeligible providers reimbursed undermanaged care delivery systems.

Comment: A commenter noted thatsome physicians have more than oneidentifier and asked if separateinformation on both identificationswould be necessary if the physician

receives differing rates based on theidentification number used.

Response: This is an operational issuebeyond the scope of this rule.

Comment: A commenter suggestedthat non-contracted providers thatdeliver primary care services tomanaged care enrollees that have apermissible out-of-network encountershould not be eligible for payment at theMedicare rate.

Response: We disagree. Section1932(f) of the Act, as amended by theAffordable Care Act, requires thatmanaged care contracts pay designated

providers for the provision ofdesignated services at the Medicare rate.Further, there are no exceptions made inthe statute to the minimum paymentrequirement for services provided out ofnetwork. If a Medicaid beneficiaryreceives eligible services out-of-networkfrom a provider covered by this rule, thereimbursement rate must also align withthe requirements stated herein.

Comment: One commenter stated thatnot all subspecialists providing servicesthrough managed care delivery systemshave the expertise to function as aprimary care provider.

Response: This rule does not createnew requirements for primary careproviders. Rather, it assures payment ofthe Medicare rate for services that thesubspecialist bills within the E&M andvaccine administration code rangespecified in the rule.

Comment: One commenter asked ifthe intent of the managed care paymentis to include subspecialties such asotolaryngology, ophthalmology orurology and also stated that the paymentshould be limited to subspecialists thatdirectly serve primary care needs.

Response: The intent of the managedcare payment is to reimburse at theMedicare rate only those primary caresubspecialists and related subspecialistsdesignated in this rule and only for theE&M and vaccine administration coderange specified in the rule.

Summary of Final Policy: This finalrule provides for higher payment in

both the fee for service and managedcare settings to physicians practicingwithin the scope of practice of medicineor osteopathy with a specialtydesignation of family medicine, generalinternal medicine and pediatricmedicine. It also provides for higherpayment for subspecialists related tothose specialty categories as recognized

by the American Board of MedicalSpecialties, American OsteopathicAssociation and the American Board ofPhysician Specialties. Lists ofspecialists and subspecialists can befound at the respective Board Web sites

which are: www.abms.org,www.osteopathic.org and www.abps.org.This rule removes the requirement thatthe state Medicaid agency verify theself-attestation of all physicians byconfirming Board certification or anappropriate claims history. However, inthe absence of an industry-widedefinition of primary care physicianwe believe it is necessary to impose auniform standard to identify suchproviders. Therefore, this rule requiresthat physicians self-attest that they areeither Board certified in familymedicine, general internal medicine, orpediatric medicine or a subspecialty

related to those specialties or that 60sixty percent of all Medicaid servicesthey bill, or provide in a managed careenvironment, are for the specified E&Mand vaccine administration codes.

State Medicaid agencies may payphysicians based on their self-attestation alone or in conjunction withany other provider enrollmentrequirements that currently exist in thestate. However, if a state relies on self-attestation it must annually review astatistically valid sample of physicianswho have self-attested that they areeligible primary care physicians to

ensure that the physician is either Boardcertified in an eligible specialty orsubspecialty or that 60 percent of claimseither billed or paid are for eligible E&Mcodes. In the case of services providedthrough a managed care deliverysystem, states will be given flexibility inthe manner in which they perform thisverification. We expect states to workwith the health plans to determine anappropriate verification methodology.

We recognize that data may not bereadily available on rejected claims,making services paid a more appropriate

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comply, the state has been requiringindependent enrollment ofnonphysician practitioners, wherepossible under state law.

Many commenters expressed concernwith the requirement that services be

billed under the physicians billingnumber. They indicated that manystates have billing and oversight policies

and procedures designed to elicitdesirable policy goals or analyses, butwhich will also make it administrativelydifficult for nonphysician providers toreceive the higher Medicare rate. Theyalso stated that some states requirecertain nonphysician providers toobtain and bill under their own providernumber, even when being supervised bya physician, and that the definition of aphysician at 440.50 does not specifythat services must be billed under thephysicians number. Anothercommenter indicated that, in manysituations, the billing entity is often a

legal entity, not a practitioner. In thecase of a group practice, the claimwould most likely be billed under thepractice number and not the physiciansnumber.

Another commenter stressed thatstates have varying definitions ofphysician supervision and suggestedthat CMS defer to state rules on thispoint. Commenters suggested that CMSpermit various kinds of arrangements oragreements between physicians andindependently billing nonphysicianpractitioners so that primary careservices such as those provided bynurse practitioners and physician

assistants at commercial emergencyfacilities could receive increasedreimbursement.

Response: We acknowledge thevariation in billing practices andrequirements among states. Therefore,this rule removes the requirement thatservices be billed under the physicians

billing number. We also acknowledgethat states have varying requirementswith regard to services provided underthe supervision of a physician.However, by specifying in the statutethat services be furnished by physicians,we believe that the Congress clearly

intended that there be direct physicianinvolvement in the services provided.Therefore, while deferring to staterequirements, this rule assumes arelationship in which the physician hasprofessional oversight or responsibilityfor the services provided by thepractitioners under his or hersupervision. This precludes the types ofarrangements in which independentnurse managed clinics or otherpractitioners enter into arms-lengtharrangements with physicians forpurposes of establishing a relationship

that leads to higher payment of thepractitioner services.

Comment: CMS was asked to clarifyin the final rule that services provided

by all advanced practice clinicians,including nurse midwives, providingservices under the supervision of aphysician will be eligible for higherpayment.

Response: Eligible services providedby all advanced practice cliniciansproviding services within their statescope of practice under the supervisionof an eligible physician will be eligiblefor higher payment. This includes thosenot specifically mentioned in theproposed rule, such as nurse midwives.

Comment: CMS was asked to clarifywhether services provided by advancedpractice clinicians under thesupervision of a physician will be billedat 100 percent of the Medicarephysician rate, or the practitioner rate,since many states reimburse servicesprovided by supervised nonphysicianpractitioners at a percentage of thephysician fee schedule rate.

Response: The statute provides for100 percent FFP on the difference

between the Medicaid rates paid as ofJuly 1, 2009 and the applicableMedicare rates in CYs 2013 and 2014.Therefore, if the state plan in 2009reimbursed services provided bynonphysician practitioners under thesupervision of a physician at apercentage of the physician fee schedulerate, that same practice must becontinued in CYs 2013 and 2014. If astate reimbursed all physician services

at a single rate in 2009, it shouldcontinue to reimburse in that manner inCYs 2013 and 2014.

Summary of Final Policy: This ruleprovides for higher payment for servicesprovided by eligible physiciansreimbursed pursuant to a physician feeschedule. Higher payment is notavailable for physicians who arereimbursed through a FQHC, RHC orhealth department/clinic encounter orvisit rate or as part of a nursing facilityper diem rate.

This rule provides for higher paymentfor services provided under the personal

supervision of eligible physicians by alladvanced practice clinicians. Inrecognition of state efforts to enrolladvanced practice clinicians in theMedicaid program and to require themto use their own Medicaid number, thisrule removes the requirement thatservices be billed under the physicians

billing number. However, it requiresthat the physician have professionaloversight or responsibility for theservices provided by the practitionersunder his or her supervision. This rulealso provides that the state reimburse

for services provided by advancedpractice clinicians in 2013 and 2014 inthe manner in which it reimbursed forthose services as of July 1, 2009. If thestate reimbursed for services actuallyrendered by supervised advancedpractice clinicians at a percentage of thephysician fee schedule rate, it shouldcontinue to do so in 2013 and 2014.

c. Eligible Primary Care Services( 447.400(b))

We proposed that HealthcareCommon Procedure Coding System(HCPCS) (E&M) codes 99201 through99499 and vaccine administration codes90460, 90461, 90471, 90472, 90473 and90474 or their successors will be eligiblefor higher payment and FFP. Thesecodes are specified by the statute andinclude those primary care E&M codesnot reimbursed by Medicare.

Specifically, we proposed to includeas primary care services the following

E&M codes that are not reimbursed byMedicare: New Patient/Initial Comprehensive

Preventive Medicinecodes 99381through 99387;

Established Patient/PeriodicComprehensive Preventive Medicinecodes 99391 through 99397;

Counseling Risk Factor Reductionand Behavior Change Interventioncodes 99401 through 99404, 99408,99409, 99411, 99412, 99420 and 99429;

E&M/Non Face-to-Face physicianServicecodes 99441 through 99444.

Comment: Most commenters weresupportive of the range of E&M codes

identified for higher payment and of theinclusion of codes not reimbursed byMedicare. Two commenters suggestedexpanding the list of covered codes toinclude HCPCS G codes and twosuggested permitting states to designateadditional codes at their discretion. Twocommenters suggested extending higherpayment to all codes billed by a primarycare pediatrician, pediatricsubspecialist, or surgical specialist.

Some commenters stated that some ofthe codes identified by CMS are notviewed by the industry as constitutingprimary care. These include thefollowing: Hospital Observation Careand Inpatient Consultation codes forinpatient services provided by the non-admitting physician (9921799220,9922499226, 9925199255, 9923199233); Consultations (9924199245,9925199255); Emergency DepartmentServices (9928199288); and CriticalCare Services (9929199292).Commenters stated that some arerendered in settings not known forprimary care delivery such as intensivecare units and emergency departments.They believe that inclusion of those



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those codes to the specified E&M codes.States will also be required to identifyall codes in use and eligible for higherpayment as well as those codes addedsince 2009 for which the base rate will

be $0. States will be given flexibility indeveloping a methodology to identifythe base payment under managed caredelivery systems.

2. Amount of Required MinimumPayments ( 447.405)

Section 1902(a)(13)(C) of the Actrequires payment not less than theamount that applies under the MPFS inCYs 2013 and 2014 or, if greater, thepayment rate that would be applicableif the 2009 CF were used to calculate theMPFS.

a. Use of Fee Schedule AmountApplicable to the Geographic Locationof Service

We proposed that states use the MPFSrate applicable to the site of service andgeographic location of the service atissue. The Medicare Part B rates vary bygeographic location and site of service.For example, rates are higher forservices provided in an office setting asopposed to the outpatient hospitalsetting. We proposed that states would

be required to use the MPFS paymentamounts applicable to the site of serviceand geographic location because we

believed these are integral to the MPFSpayment system. Individual feeschedule amounts for the MPFS are theproduct of the geographic adjustment,relative value units (RVUs), and

conversion factor (CF) that convertsadjusted RVUs into dollar amounts. Siteof service is reflected as an adjustmentto the RVUs used to set the rate.

We proposed that states be required touse the MPFS as published by CMS.Medicare primary care incentivepayments made under section 1833 ofthe Act, as amended by section 5501 ofthe Affordable Care Act, would not beincluded. Section 5501(a) of theAffordable Care Act amended the statuteto provide for incentive payments for asubset of the codes covered by thisregulation. The payments are not made

as increases in fee schedule amountsand are not reflected in the MPFS.

Overarching and Fee for ServiceComments

Comment: Most commenters stronglyurged that states not be required torecognize Medicare place of service andgeographic adjusters since Medicaidpayment systems do not make thesesame adjustments. One commenter saidthat the use of geographic adjustmentswould perpetuate geographic inequitiesin payment that have resulted from the

current method of specifying paymentlocales and for calculating geographicpractice cost indices (GPCIs) in theMedicare program. As alternatives,commenters suggested that states bepermitted or required to: use only onegeographic or place of service scheduleor to use weighted average rates; pay atthe highest geographic rate in the state

and; use a bench-mark statewideMedicare fee schedule or a national feeschedule set by CMS or otherwisedetermined by the state.

Response: We have considered thecomments and the suggestions in lightof the clear intent of the statute toenhance Medicaid beneficiary access tocare through higher physicianpayments. In the interests ofadministrative simplification, the finalrule does not require that states makesite of service adjustments. Many stateshave instituted measures designed toreduce inappropriate use by

beneficiaries of emergency departmentsfor non-emergent services. We believethat the higher payment for primary careservices provided for in this rule willencourage physician participation andwill improve beneficiary access toservices provided in the communitysetting. Therefore, this rule providesthat states may reimburse all codes atthe Medicare office rate as an alternativeto making site of service adjustments.

For geographic adjustments, the finalrule additionally permits states to eithermake all appropriate geographicadjustments made by Medicare, or todevelop rates based on the mean over all

counties for each of the E&M codesspecified in this rule. In identifying thisalternative, we balanced the desire onthe part of states for administrativesimplicity against the need to ensurethat providers are reimbursed inaccordance with the requirements of thestatute. There are seventeen states thathave multiple Medicare localities and ofthose seventeen, ten have only twolocalities. We reviewed variousformulas utilizing the mean and medianof rates. Our goal was to most closelymatch the rates that would be generatedunder the actual Medicare locality fee

schedules. By using a single feeschedule based on the mean over allcounties, the majority of states will seea reduction of less than two percent.States that will experience a largerimpact can elect to use the actualMedicare locality adjusted fee schedule.The required state plan amendment forthese changes must describe themethodology the state has chosen.

Comment: A number of commentersasked that CMS clarify that theincreased payment to physicians may bemade as a lump sum payment rather

than as an add-on to the rate, pointingout that Medicares primary carepayment is paid as a lump sum on aquarterly basis.

Response: The higher payments maybe made as either add-ons to existingrates or as lump sum payments. Toensure that physicians receive the

benefit of higher payments in a timely

manner, lump sum payments should bemade no less frequently than quarterly.

Comment: One commenter stated thatCMS needs to clarify the specificprocedures and guidelines regardinghow states and health plans shouldreprocess claims for supplementalpayment to providers if the statechooses to provide increased paymentsretroactively.

Response: Because MMIS capabilitiesand payment processes vary by stateand between health plans, we arepermitting flexibility in the specifics ofhow these tasks are accomplished.

Comment: A number of commenterssuggested that the MPFS be defined asincluding the primary care incentivepayment authorized for the Medicareprogram by the statute (as amended bysection 5501of the Affordable Care Act)to make up for the fact thatpediatricians, in particular, do notreceive payments under the Medicareprimary care incentive program. Thesecommenters disagreed with CMSsinterpretation that the statute precludesthe inclusion of these payments.

Response: As noted in the proposedrule, payments under section 5501 ofthe Affordable Care Act are not made as

increases in fee schedule amounts andare not reflected in the MPFS.Therefore, this final rule requires thatthose payments be excluded whencalculating the appropriated 2013 and2014 Medicare fee schedule rates.

Comment: Many commenters askedthat states be given flexibility toimplement the program in phases, ifnecessary, and to make changes to ratesretrospectively. They pointed out thatthe Medicare RVUs for the subsequentcalendar year are not published untilNovember, which does not give statesenough time to incorporate the

Medicare payment rates into feeschedules and contracts by January 1,2013.

Response: We acknowledge that stateswill not have information on the final2013 Medicare RVUs and on finalregulatory requirements for the primarycare payments until late in 2012.However, we do not have the authorityto permit states to implement higherpayments in phases. The statuterequires that higher payment be madefor services furnished on or after

January 1, 2013. However, under



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regulations at 430.20, states have untilMarch 31, 2013 to submit a State PlanAmendment (SPA) that is effective on

January 1, 2013. Additionally, it iscommon practice for states changingreimbursement rates to make retroactiveadjustments to claims after a SPA has

been approved. This procedure providesadditional time for states to make

system changes to reflect this final ruleand the November 2012 publication ofthe Medicare 2013 RVUs.

Comment: One commenter stated thatthe final rule needs to clarify that the

billing entity for the primary careprovider must receive the higherpayment. This comment was made inthe context of salaried physiciansworking for a county provider.

Response: If services delivered by thecounty employed physician are actuallyreimbursed under the Medicaid stateplan as physician services rather thanclinic services, then the physician mustreceive the increased payment. If, as acondition of employment, the physicianagrees to accept a fixed salary amountthen we expect an appropriateadjustment to the salary to reflect theincrease in payment. We cautiongovernmental providers that services ofa physician may be delivered under avariety of Medicaid benefit categoriesand that services offered by a countyrun clinic, in general, do not qualify forthe enhanced federal match.

Comments Specific to Managed Care

Comment: CMS received manycomments on the minimum payment

requirement, ranging from concern thatprimary care providers would notactually receive higher payment toconcern that monitoring paymentdistribution would be unduly

burdensome for MCOs, PIHPs andPAHPs. One commenter suggested thatCMS consider a MCO, PIHP or PAHPsobligation to have been met if the healthplans contracts with provider groupsallowed for the increased payment.Another commenter suggested thatstates should be required to enactcontract amendments that allow fullpass through of the rate increase to

primary care providers and describehow the MCO, PIHP or PAHP willverify, in the aggregate, the delivery ofprimary care services at the averageenhanced rate.

Response: We recognize that statesmanaged care contracts with MCOs,PIHPs, and PAHPs vary and that, as aconsequence, provider agreements varyas well. We continue to require thatqualified providers receive the higherpayment but in deference to thesevarying arrangements, we do not specifyhow this requirement must be met. We

emphasize that in order for states to gainCMS regional office approval of theirmanaged care contracts they mustdemonstrate that the higher paymentwill actually be passed on for servicesfurnished by the primary carephysicians designated in statute.

Comment: Some commenters urgedCMS to provide flexibility to the states

through their contracts with MCOs,PIHPs and PAHPs, to identify anappropriate and reasonable approach topassing through the increased paymentwhen capitated amounts are inclusive ofprimary and specialty care services.Otherwise, tailoring each physiciangroup increase will be administrativelycomplex, costly, and contrary to theintent of the rule. Another commentersuggested that no administrative/documentation of payment should berequired for the following deliveryarrangements: (1) Health plan withexclusive contract with a single medical

group in a specific geographic area toprovide or arrange for professionalmedical services for the enrollees of theplan; (2) delivery system whereMedicaid enrollees are notdistinguished from others in terms ofaccess to the same providers andservices; and (3) physicians are paidsalaries and receive a capitation ratewithout regard to payment source.

Response: We are sensitive to theissue of administrative burden and areproviding flexibility to states withrespect to the identification of therequired payment in a managed care

environment. As specified in 438.804,the states shall receive approval of twomethodologies, contract amendments,and rate certifications to implement thisrule, and CMS will focus on thereasonableness and accuracy of themethods proposed by the state.

Comment: One commenter stated thatthe rule needs to clearly specify that aplan must increase payment tophysicians in a managed careenvironment to meet the minimumpayment standard even if a state is noteligible for 100 percent FFP for someportion of the increase (as in the casewhere a state has reduced payment rates

below 2009 levels).Response: We agree that this payment

increase must take place regardless ofwhether some portion of the increase isnot funded with 100 percent FFP.

Comment: A commenter states thatthe proposed rule fails to ensure thatCMS or primary care physicians candetermine whether or not the minimumpayment requirement has been met. Wewere urged to require state leveltransparency in the implementation ofthe primary care payment increase.

Response: We understand thatmanaged care payment is notnecessarily transparent with respect toindividual payment for certain servicesand require MCOs to supply encounterdata to states. We expect that encounterdata will be sufficient for the states toundertake verification activities.Additionally, MCOs, PIHPs and PAHPs

are required by regulation and contractto ensure that eligible primary careproviders receive the appropriate rateincrease for primary care servicesrendered.

Comment: A commenter suggestedthat CMS needs to consider holdingharmless health plans if the practicewith which the primary care provider isaffiliated fails to pass along theincreased reimbursement to the affectedproviders.

Response: MCOs, PIHPs and PAHPsare required by regulation and contractto ensure that eligible primary careproviders receive the appropriate rateincrease for primary care servicesrendered. The structure of the healthplans provider network does notmitigate this responsibility.

Comment: One commenter indicatedthat, to the extent low income healthpools (LIHPs) are included in the rule,a specific methodology would berequired for PIHPs and MCOs to identifypayment amounts. The data source forpaid claims data would be from eachindividual LIHP because the LIHPs arenot paid by a particular states fiscalintermediary.

Response: We will not respond to

state-specific comments in this rule, butwill continue to work with states toaddress specific issues that may ariseduring the implementation process.

Comment: A commenter stated thatmethodologies used to developcapitation rates to assure the minimumpayment need not be grounded in E&Mcodes, but could be more broadlydefined by primary care services ascurrently defined by the state formanaged care. The approach outlined inthe proposed rule is problematic forthese reasons: most states do not useE&M codes as basis to develop andadjust cap rates; and, due to variationsin MCO, PIHP and PAHP paymentmethods, such as partial capitation, andthe relative completeness of datasubmitted by providers, states do notconsistently receive data necessary toaffirm that specific E&M services have

been delivered at the Medicare FFS rate.The commenter suggested that analternative approach would be to allowstates to define a methodology toestimate: (1) Aggregate volume and

baseline payment rate of primary careservices expected to be delivered to all



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managed care beneficiaries by PCPs; and(2) the differential aggregate paymentassociated with increasing payment upto average Medicare levels. Thismethodology, asserts the commenter,would allow for existing assumptionsand methodologies states use to developtheir capitation rates. States would passthrough associated capitation

adjustment on a per month basis to theirMCOs, PIHPs and PAHPs and use theassociated financial transactioninformation to provide the necessaryCMS 64 documentation for federalmatch.

Another commenter suggested theadditional Medicare fee schedulepayments be beyond the scope of therisk portion of the MCO, PIHP or PAHPcontract. This would allow the amountclaimed by the state at 100 percent FFPto be based on calculations made fromretrospective review of encounter data.

Response: We will consider thesesuggestions during our review of statesrate setting documentation and MCO,PIHP and PAHP contracts. As statedthroughout this rule, we are notprescribing a particular approach todelivering the enhanced payment toeligible primary care providers but themethod must deliver an accurate servicepayment to eligible providers. However,where MCOs, PIHPs or PAHPs pay theircontracted primary care providers on afee-for-service basis, it is reasonable toexpect that they will use the sameapproach to delivering the enhancedpayment (that is, modifying their claimssystems to reflect the 2013 and 2014

Medicare rates for eligible E&M codesfor eligible providers) as the state willuse to pay its fee-for-service providers.

Comment: A commenter stated thatMCOs, PIHPs and PAHPs should not berequired to make enhanced payments ona retroactive basis and observed that itis administratively complex to analyzeservice level claims to verify increasedpayment. Another commenter asked ifthere would be retroactivereconciliation when additional fundingin the capitation rates differs from theactual cost of providing services.

Response: We agree that meeting the

minimum payment standard set instatute can be administrativelyburdensome but emphasize that statesmust assure that MCOs, PIHPs andPAHPs are reimbursing servicesprovided through managed care at theMedicare rate for the specified primarycare services. This will be accomplishedthrough review and approval by theCMS regional offices of states managedcare contracts. We believe the secondcommenter is asking about the effect onreconciliation when the actual cost ofprimary care services differs from the

projected cost as expressed through themanaged care rate. This question will beaddressed on a case by case basisthrough our review of the managed carecontracts and states methods foridentifying the rate differential.

Comment: A commenter stated thatCMS should clarify that a mandatorypayment rate does not equate to a

mandatory payment and that healthplans should retain the ability to denyclaims for reasons unrelated to payment.

Response: We agree that a providershould be reimbursed the mandatorypayment rate only when he or she hasdelivered services in accordance withthe managed care contract and Medicaidrequirements.

Comment: Some commenters believethat the proposed rule conflicts with 438.6(c)(3)(i) which requires thatactuarially sound rates be based onutilization and cost data derived fromthe Medicaid population because the2009 cost data may not reflect theamount paid to the provider since MCOcontracts are risk arrangements.

Response: The rule is not in conflictwith the regulation at 438.6(c)(3)(i)

because the state has flexibility within 438.6(c)(3) to use various sources ofdata to establish base costs andutilization trends including FFS data,MCO financial data or a combination of

both.Summary of Final Policy: This final

rule removes the proposed requirementthat states make site of service andgeographic adjustments in paying at theapplicable 2013 and 2014 Medicare

rates. In the interests of administrativesimplification, states need not make siteof service adjustments but mayreimburse all codes at the Medicareoffice rate, as opposed to the facilityrate. With respect to geographicadjustments, states must either make allappropriate geographic adjustmentsmade by Medicare, or may develop arate based on the mean over all countiesfor each of the E&M codes specified inthis rule. The required state planamendment for these changes mustdescribe the methodology the state haschosen. These requirements apply to fee

for service and managed care deliverysystems. Payments may be made asadjustments to rates or, if on a lumpsum basis, no less frequently thanquarterly. The 2013 and 2014 Medicarerate is defined as excluding paymentsmade under section 5501 of theAffordable Care Act. Higher paymentmust be made for services provided onor after January 1, 2013, but existingstate plan amendment proceduresprovide states with some flexibility inthe timing of the payments. Flexibilityin regard to timing of payment is

extended to managed care deliverysystems.

b. Payment for Services Unique toMedicaid

For services reimbursed by Medicaidbut not Medicare, we proposed thatpayment would be made under a feeschedule developed by CMS and issued

prior to the beginning of CYs 2013 and2014. We proposed that rates for non-Medicare reimbursed services would beestablished using the Medicare CF ineffect in CYs 2013 and 2014 (or the CY2009 CF, if higher) and the RVUsrecommended by the American MedicalAssociations (AMA) Specialty SocietyRelative Value Update Committee (RUC)and published by CMS for CYs 2013 and2014. We solicited comments fromstates and others on the mostappropriate way to set payment rates forservices not reimbursed by Medicare.

Comment: Most commenters strongly

supported CMSs proposedmethodology for developing rates forcodes not reimbursed by Medicare. Onecommenter suggested establishing ratesfor codes not reimbursed by Medicareusing the same standards applied inDeficit Reduction Act of 2005

benchmark state plans (for example,Federal Employee Health BenefitPayment rates, State Employee HealthBenefit Coverage).

Response: For purposes of uniformityand to lessen the administrative burdenon states, this final rule specifies thatwe will develop the rates for E&M codesnot reimbursed by Medicare.

Comment: A commenter requestedthat CMS make the fee scheduleavailable to the states at a minimum offive months prior to January 1, 2013.

Response: We will develop this feeschedule and will make it publiclyavailable. We are committed to makingthis information available as quickly aspossible prior to January 1 of CYs 2013and 2014. We understand that statesneed this and all other informationtimely to be able to administerpayments appropriately.

Comment: One commenter urged thatstates be given the choice to use any

Medicare conversion factor that hasbeen in effect for at least three months.Response: The statute requires that

states use the 2013 or 2014 Medicarerates or, if greater, the rate that would

be applicable if the conversion factor forthe year involved were the conversionfactor for 2009. There is no flexibilitywith respect to this requirement.

Summary of Final Policy: We willdevelop and publish rates for eligibleE&M codes not reimbursed by Medicare.In determining the 2013 and 2014 rates,we will use the 2009 conversion factor,



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if that factor in conjunction with the2013 and 2014 RVUs results in rates thatare higher than if the 2013 and 2014conversion factors were used. The ratesfor Medicaid primary care services notreimbursed by Medicare must beincorporated into managed carecontracts for those services covered bythe contract.

c. Updates to Medicare Part B FeeSchedule

We recognized the potential formultiple updates to the MPFS in CYs2013 and 2014. Those rates arepublished by CMS on or beforeNovember 1st of the preceding calendaryear, but are subject to periodicadjustments or updates throughout thecalendar year. In addition, the MedicarePart B rates vary by geographic locationand site of service.

We proposed that states have theoption of complying with the

requirements of section 1902(a)(13)(C)of the Act by either adopting annualrates or by using a methodology toupdate rates to reflect changes made byMedicare during the year. That is, statescould adopt the MPFS in effect at the

beginning of CYs 2013 and 2014 (or, ifthe CY 2009 CF is higher, the CY 2013or CY 2014 RVUs multiplied by the CY2009 MPFS CF), and apply those ratesthroughout the applicable calendar yearwithout adjustments or updates. Usingthis methodology, mid-year updatesmade to the MPFS during the respectivecalendar year would not be reflected in

Medicaid payments. Alternatively, astate could elect to adjust Medicaidpayments to reflect mid-year updatesmade to the MPFS, but the statesmethodology would have to specify thetiming for such adjustments.

Comment: Most commenters agreedthat states should be given thisflexibility. One commenterrecommended that states be prohibitedfrom changing rates throughout the year

because this would cause confusion andundue burden to providers. Anothercommenter suggested that states should

be required to use the fee schedule

published in November of the precedingcalendar year. One commentersuggested that states be required toupdate rates every 6 months, whileanother suggested that states be requiredto use any rate that had been in effectfor at least 3 months. A number ofcommenters urged that states berequired to make all adjustments as theMedicare fee schedule changes, pointingout that changes in the SGR afterNovember could result in States using alower fee schedule, thereby avoidinghigher physician payments.

Response: We are sensitive both toconcerns that requiring that states makemultiple changes would be anadministrative burden and to concernsthat changes in the SGR could result inlower payments. We believe that thestatutory requirement to use the 2009Medicare conversion factor if it wouldresult in higher Medicare rates in 2013

and 2014 was intended to offset thepotential negative impact of changes inthe SGR. Therefore, this final rulepermits states flexibility in determiningwhether to, and how often to, updaterates to conform to changes in theMPFS.

Summary of Final Policy: This finalrule permits states flexibility indetermining whether to, and how oftento, update rates to conform to changesin the MPFS. This applies to fee forservice and managed care payment.

3. State Plan Requirements (447.410)

We proposed to require that statessubmit a SPA to reflect the fee schedulerate increases for eligible primary carephysicians under section 1902(a)(13)(A)of the Act. The purpose of thisrequirement was to assure that whenstates make the increasedreimbursement to physicians, they havestate plan authority to do so and theyhave notified physicians of the changein reimbursement as required by federalregulations.

Comment: Commenters agreed thatstates should be required to amend theirstate plans. Many commenters askedthat CMS develop a SPA template or, if

not, specify the contents of the requiredSPA (for example, assurances required,specificity regarding use of the MPFS,covered codes).

Response: We will provide states witha SPA template. The template willrequire that states indicate: (1) Whetherthey will make site of serviceadjustments or reimburse all codes atthe Medicare rate applicable to theoffice setting; (2) whether they willmake all Medicare locality adjustmentsor develop a statewide rate per code thatreflects the mean value over all countiesof the Medicare rate; (3) identify the

manner in which the state will makehigher payment (that is, as a feeschedule or aggregate supplementalpayment; and (4) describe the codeswhich will be paid by the state at thehigher rates and the codes that have

been added to the fee schedule since2009. If states do not use HIPAAcompliant codes, the SPA must alsoprovide a crosswalk to the covered E&Mcodes.

Comment: Many commenters askedthat CMS clarify that state plan rules at 447.256(c) apply, meaning that the

SPA may be effective on the first day ofthe calendar quarter in which it issubmitted, giving states until March 31,2013 to submit a SPA.

Response: Yes, those requirementsapply.

Comment: A number of commentersasked that CMS permit states to submitSPAs that will automatically sunset

higher payments made pursuant to thisrule on December 31, 2014.

Response: We will permit sunsetdates. The state and CMS must ensurethat, in cases where a sunset date isemployed, the rates that the state willrevert to after December 31, 2014 areclearly described in the plan and thatpublic notice for the SPA makes it clearthat higher payments will end as of thatdate.

Comment: One commenter asked ifstates will be permitted to applyexisting payment limitations, conditionsand policies to the selected procedure

codes.Response: All limitations, conditionsand policies that applied to the codeprior to January 1, 2013 can be appliedto the code after that date.

Comment: One commenter pointedout that CMS often takes 90 days ormore to review and approve SPAs andasked whether the state should wait toimplement the rate increase until theSPA is approved.

Response: The statute requires thatstates make higher payments forservices provided on or after January 1,2013. Our policy dictates that FFP is notavailable for services provided pursuant

to an unapproved SPA. Therefore, as isthe case with all rate changes, states caneither make the higher payments tophysicians and wait to submit claims forFFP until the SPA is approved, or canpay physicians at the 2012 Medicaidstate plan rates and make supplementalpayments once the SPA is approved.

Comment: One commenter believesthat public access to the SPA isimportant to ensuring provideparticipation and suggested amendingthe proposed state plan requirement at 447.410 to indicate that the state mustmake this information accessible to the

public through a Web site or otherreasonable means.Response: Public notice of changes in

state plan methodologies in Medicaid isalready required at 447.205. Inaddition, copies of approved state planamendments are available through stateMedicaid agencies.

Comment: Several commentersrecommended that we require states tonotify health plans and providers withina specified timeframe after approval ofthe SPA. One commenter stated thatclarification is needed regarding



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obligations and responsibilities forMCOs managing the Medicaid programin a state that does not yet have anapproved SPA by January 1, 2013.

Response: The SPA will describemethods and procedures relative to feefor service payments. The status of theSPA will not affect a states ability tonegotiate with managed care

organizations. Notification to MCOs andproviders of changes necessitated bythis rule will be handled throughnormal procedures and processes by thestate.

Summary of Final Policy: We willdevelop a SPA template for use by statesin implementing the requirements ofthis final rule. SPAs should besubmitted and will be reviewed inaccordance with existing federalrequirements at 447.256 (and byreference 430.20). States may applyexisting payment limitations andpolicies to services paid pursuant to thisrule. Managed care payment policies arenot affected by this provision.

4. Availability of Federal FinancialParticipation (FFP) (447.415)

Section 1905(dd) of the Act allowsstates to receive 100 percent FFP forexpenditures equal to the difference

between the Medicaid state plan rate forprimary care services in effect on July 1,2009, and the Medicare rates in effect inCYs 2013 and 2014 or, if greater, thepayment rate that would be applicableusing the CY 2009 Medicare CF. Toclaim the enhanced federal match, statesmust make payments to specified

physicians at the appropriate MPFS rateand must develop a method ofidentifying both the rate differential andeligible physicians for servicesreimbursed on an FFS for service basisand through managed care plans. Statesmust be able to document the difference

between the July 1, 2009 Medicaid rateand the applicable Medicare rate forspecified providers that is claimable atthe 100 percent matching rate. Thisrequirement applies also to servicesprovided to individuals eligible for bothMedicaid and Medicare. This meansthat increased FFP will be available also

for higher Medicaid payments forMedicare cost sharing for individualswho are eligible for both programs.

Comment: A number of statesindicated that they have lowered ratessince July 1, 2009. Under the provisionsof the proposed rule, they will not beeligible for 100 percent FFP for thedifference between the 2009 rate andtheir current, lower, rates and asked forrelief in the final rule. One commentersuggested that such states be permittedto present the case to CMS for approvalof 100 percent funding for the total

increase when it can be shown that thestate did not make such a decrease withany expectation or intent that it would

be used to restore rates.Response: The statute provides for

100 percent FFP for the differencebetween the July 1, 2009 Medicaid stateplan rates and the appropriate 2013 and2014 Medicare rates. States that lowered

physician rates after 2009 will receiveFFP at the states regular FMAP rate forthe difference between the lowered ratesand the Medicaid rates in effect as of

July 1, 2009. We have no authority togrant requests for exemptions from thisrequirement.

Comment: One commenter asked thatthe final rule clarify that providers haveno less than 12 months from the date ofSPA approval to file a claim. Thatcommenter also asked that the final ruleconfirm that the state will receive 100percent FFP for claims for servicesrendered during CYs 2013 and 2014

even if they are adjudicated after 2014.Response: This rule does not changeMedicaid timely claims submission andpayment requirements. Section 447.45applies to all claims submitted underthis rule, that is, 100 percent FFP will

be available for services providedbetween January 1, 2013 and December31, 2014 that are processed inaccordance with these requirements.

Comment: Two commenters indicatedthat the rule does not address systemchanges that states will need to make.One commenter noted that states willnot have time to submit AdvancedPlanning Documents (APDs) for CMS

prior approval for enhanced FFP forthose changes. The commentersrequested that CMS grant retroactiveprior approval for such APDs.

Response: We do not grantretroactive prior approvals of APDs.However, we will work with states topromptly facilitate system changesnecessitated by this final rule.

Comment: One commenter suggestedthat CMS phase down the increasedpayment to primary care practitioners(PCPs) in the same manner as matchingfor the expansion populations under theAffordable Care Act. They believe that

a precipitous drop in the PCP paymentincrease could create access issues.Response: The statute does not permit

such a phase-down.Comment: One state asked how

services eligible for both regular FFPand 100 percent FFP will be reported toCMS.

Response: We will provide states withreporting instructions before the end ofthe first calendar quarter of 2013. Thisguidance will be provided for both feefor service and managed care deliverysystems.

Comment: One commenter wanted toknow if primary care case management(PCCM) fees paid in either the baselineperiod or in 2013 and 2014 should beincluded in the calculation of the ratedifferential.

Response: We clarify that PCCMpayment is outside the calculation ofthe rate differential.

Comment: A number of commentersasked if the 100 percent FFP is based onactual, documented expenditures or

based on the actuarial per member permonth (PMPM) assumptions built intoadjusted capitation rates, includingnonclaim components.

Response: States can claim 100percent FFP based on the CMSapproved methodology for identifyingthe rate differential. Depending on the

best data available this may result in animputed payment differential that is

based on actual claims or actuarialassumptions.

Comment: One commenter askedwhether state and local taxes associatedwith the increased fee schedule would

be eligible for the enhanced match.Response: Enhanced federal matching

funds are available only for thedifference in payment between theMedicaid state plan rate in effect July 1,2009 and the applicable Medicare ratesin CYs 2013 and 2014. If the nonfederalshare of the rate in effect during the

baseline period was funded by state andlocal taxes then that portion of thepayment would continue to be matchedat the states regular FFP. This appliesto FFS and managed care

reimbursement.Comment: We received a request for

clarification as to whether an increase inmanaged care premiums for thefollowing non-claim related componentswould be eligible for 100 percent FFP:the Federal Health Insurer Fee,premium related taxes imposed bystates, underwriting gain andadministrative expenses.

Response: We are clarifying that non-claim related costs are excluded forpurposes of 100 percent FFP. Thestatute narrowly defines the scope of theenhanced match to the differential

between the Medicare rate and 2009baseline rate for the direct provision ofspecified primary care servicesdelivered by eligible primary careproviders.

Summary of Final Policy: States willreceive 100 percent FFP for thedifference between the July 1, 2009Medicaid state plan rates and theappropriate CY 2013 and 2014 Medicarerates. States that lowered physicianrates after 2009 will receive FFP at thestates regular FFP rate for the difference

between the lowered rates and the



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Medicaid rate in effect as of July 1,2009. Medicaid timely claimssubmission and payment requirementsat 447.45 apply to all claims submittedunder this rule, that is 100 percent FFPwill be available for services provided

between January 1, 2013 and December31, 2014 that are processed inaccordance with these requirements. No

phase-down of higher payments or FFPis permitted. Enhanced federal match isavailable for the payment differential inmanaged care.

a. FFP in Payments for IndividualsEligible for Both Medicare and Medicaid

When a service is provided to anindividual who is eligible for Medicareand Medicaid, Medicare reimburses thephysician 80 percent of its fee schedulerate while Medicaid covers the cost-sharing amounts. Currently, states havetwo options for such paymentsconsistent with section 1902(n) of the

Act. A state may pay the provider thefull amount necessary to result inaggregate payment to the provider equalto the MPFS rate (the full Medicare costsharing amount), or only the amount (ifany) to result in aggregate paymentequal to the states Medicaid rate. Forexample, under the second option, if theMedicare allowed amount is $100 andthe Medicaid rate is $75, then Medicarepays 80 percent of the allowed amount,or $80, and there is no additionalamount paid by Medicaid. Historically,most states have chosen to payproviders only up to the lower Medicaid

rate.In CYs 2013 and 2014, the Medicaidrate for primary care services by thespecified physicians will equal theMedicare rate. As a result, thesephysicians should receive payment upto the full Medicare rate for primarycare services and 100 percent FFP will

be available for the full amount of theMedicare cost sharing amount thatexceeds the amount that would have

been payable under the state plan ineffect on July 1, 2009.

Comment: Most commenters weresupportive of these provisions of the

rule. A number of commenters indicatedthat payment of crossover claims posesa significant administrative challenge

because not all states enrollment andadjudication processes mirrorMedicares and they may have limitedability to capture all details needed oncrossover claims to limit payment bysubspecialty. One commenter suggestedthat CMS require 100 percent of suchclaims to be paid by Medicare. Anothercommenter noted that the proposed ruledoes not require states to pay costsharing amounts.

Response: The Medicaid requirementsapplicable to claims for services for

beneficiaries who are dually eligible forMedicaid and Medicare are not changed

by this rule. States must comply with allrequirements for payment of claims forservices provided to Medicaid

beneficiaries who are also eligible forMedicare.

Comment: One commenterrecommended that states that enter intoDuals Special Needs Plans (DSNPs) berequired to amend contracts to ensurethat providers receive the enhancedrate. Currently, these contracts providefor $0 cost sharing as they are associatedwith the Medicaid rate.

Response: DSNPs are Medicaremanaged care plans and are not subjectto the requirements of this rule.However, states are responsible forensuring that payments for Medicaidenrollees of DSNPs reflect theappropriate payment increase.

Comment: One commenterrecommended that CMS permit states todevelop a methodology to identify whatthe difference in the capitation ratewould be for crossover claims and toclaim enhanced FFP for the difference,similar to the process proposed formanaged care at 438.804.

Response: We agree that a state musthave the ability to identify the 2009

baseline rate for primary care servicesand the managed care rate differentialeligible for 100 percent FFP. We willpermit a state up to 3 months after

January 1 of CY 2013 to submit themethodologies for our review and

approval as specified in 438. Weexpect this methodology to account formanaged care payment for servicesdelivered to all beneficiaries covered byMedicaid, including beneficiaries inCHIP Medicaid expansion programs andthose beneficiaries also eligible forMedicare.

Summary of Final Policy: This ruledoes not in any way negate the need forstates to comply with all Medicaidrequirements applicable to payment forservices provided to Medicaid

beneficiaries who are also duallyeligible for Medicare. In managed care

environments, states will be grantedflexibility in determining the portion ofthe capitated payment that is related tosuch beneficiaries. However, themethodology must be approved by CMS.

b. Identifying the July 1, 2009 PaymentRate

For the purpose of identifying thedifferential between the Medicaid rateand the Medicare rate, we proposed todefine the Medicaid rate under theapproved Medicaid state plan as thefinal rate paid to a provider inclusive of

all supplemental or increased paymentspaid to that provider. For example,many states currently pay physiciansaffiliated with academic medical centersthe Medicaid state plan rate plus asupplemental amount that togetherequal the average amount paid bycommercial third party payers.Therefore, in calculating the rate

differential, these states woulddetermine the CY 2009 rate inclusive ofany supplemental payment.

Comment: The majority ofcommenters requested that incentivepayments, bonus payments andperformance-based supplementalpayments be excluded from thedefinition of the base payment.

Response: Incentive payments, bonuspayments and performance-basedsupplemental payments are only paid tothose certain physicians who meetspecified goals or criteria. They are notpart of the statewide fee schedule ratesand we agree that they should beexcluded from the determination of the2009 base rate.

Comment: Many commenters urgedCMS to exclude other supplementalpayments made on a lump sum basisfrom the definition of the base rate,pointing out the administrative burdenof linking thos