42 USC 1395w4 - Payment for physicians services

(a) Payment based on fee schedule 

(1) In general 
Effective for all physicians services (as defined in subsection (j)(3) of this section) furnished under this part during a year (beginning with 1992) for which payment is otherwise made on the basis of a reasonable charge or on the basis of a fee schedule under section 1395m (b) of this title, payment under this part shall instead be based on the lesser of
(A) the actual charge for the service, or
(B) subject to the succeeding provisions of this subsection, the amount determined under the fee schedule established under subsection (b) of this section for services furnished during that year (in this subsection referred to as the fee schedule amount).

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(2) Transition to full fee schedule 

(A) Limiting reductions and increases to 15 percent in 1992 

(i) Limit on increase In the case of a service in a fee schedule area (as defined in subsection (j)(2) of this section) for which the adjusted historical payment basis (as defined in subparagraph (D)) is less than 85 percent of the fee schedule amount for services furnished in 1992, there shall be substituted for the fee schedule amount an amount equal to the adjusted historical payment basis plus 15 percent of the fee schedule amount otherwise established (without regard to this paragraph).
(ii) Limit in reduction In the case of a service in a fee schedule area for which the adjusted historical payment basis exceeds 115 percent of the fee schedule amount for services furnished in 1992, there shall be substituted for the fee schedule amount an amount equal to the adjusted historical payment basis minus 15 percent of the fee schedule amount otherwise established (without regard to this paragraph).
(B) Special rule for 1993, 1994, and 1995 
If a physicians service in a fee schedule area is subject to the provisions of subparagraph (A) in 1992, for physicians services furnished in the area
(i) during 1993, there shall be substituted for the fee schedule amount an amount equal to the sum of
(I) 75 percent of the fee schedule amount determined under subparagraph (A), adjusted by the update established under subsection (d)(3) of this section for 1993, and
(II) 25 percent of the fee schedule amount determined under paragraph (1) for 1993 without regard to this paragraph;
(ii) during 1994, there shall be substituted for the fee schedule amount an amount equal to the sum of
(I) 67 percent of the fee schedule amount determined under clause (i), adjusted by the update established under subsection (d)(3) of this section for 1994 and as adjusted under subsection (c)(2)(F)(ii) of this section and under section 13515(b) of the Omnibus Budget Reconciliation Act of 1993, and

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(II) 33 percent of the fee schedule amount determined under paragraph (1) for 1994 without regard to this paragraph; and
(iii) during 1995, there shall be substituted for the fee schedule amount an amount equal to the sum of
(I) 50 percent of the fee schedule amount determined under clause (ii) adjusted by the update established under subsection (d)(3) of this section for 1995, and
(II) 50 percent of the fee schedule amount determined under paragraph (1) for 1995 without regard to this paragraph.
(C) Special rule for anesthesia and radiology services 
With respect to physicians services which are anesthesia services, the Secretary shall provide for a transition in the same manner as a transition is provided for other services under subparagraph (B). With respect to radiology services, 109 percent and 9 percent shall be substituted for 115 percent and 15 percent, respectively, in subparagraph (A)(ii).
(D) “Adjusted historical payment basis” defined 

(i) In general In this paragraph, the term adjusted historical payment basis means, with respect to a physicians service furnished in a fee schedule area, the weighted average prevailing charge applied in the area for the service in 1991 (as determined by the Secretary without regard to physician specialty and as adjusted to reflect payments for services with customary charges below the prevailing charge or other payment limitations imposed by law or regulation) adjusted by the update established under subsection (d)(3) of this section for 1992.
(ii) Application to radiology services In applying clause (i) in the case of physicians services which are radiology services (including radiologist services, as defined in section 1395m (b)(6) of this title), but excluding nuclear medicine services that are subject to section 6105(b) of the Omnibus Budget Reconciliation Act of 1989, there shall be substituted for the weighted average prevailing charge the amount provided under the fee schedule established for the service for the fee schedule area under section 1395m (b) of this title.
(iii) Nuclear medicine services In applying clause (i) in the case of physicians services which are nuclear medicine services, there shall be substituted for the weighted average prevailing charge the amount provided under section 6105(b) of the Omnibus Budget Reconciliation Act of 1989.
(3) Incentives for participating physicians and suppliers 
In applying paragraph (1)(B) in the case of a nonparticipating physician or a nonparticipating supplier or other person, the fee schedule amount shall be 95 percent of such amount otherwise applied under this subsection (without regard to this paragraph). In the case of physicians services (including services which the Secretary excludes pursuant to subsection (j)(3) of this section) of a nonparticipating physician, supplier, or other person for which payment is made under this part on a basis other than the fee schedule amount, the payment shall be based on 95 percent of the payment basis for such services furnished by a participating physician, supplier, or other person.
(4) Special rule for medical direction 

(A) In general 
With respect to physicians services furnished on or after January 1, 1994, and consisting of medical direction of two, three, or four concurrent anesthesia cases, the fee schedule amount to be applied shall be equal to one-half of the amount described in subparagraph (B).
(B) Amount 
The amount described in this subparagraph, for a physicians medical direction of the performance of anesthesia services, is the following percentage of the fee schedule amount otherwise applicable under this section if the anesthesia services were personally performed by the physician alone:
(i) For services furnished during 1994, 120 percent.
(ii) For services furnished during 1995, 115 percent.
(iii) For services furnished during 1996, 110 percent.
(iv) For services furnished during 1997, 105 percent.
(v) For services furnished after 1997, 100 percent.
(b) Establishment of fee schedules 

(1) In general 
Before November 1 of the preceding year, for each year beginning with 1998, the Secretary shall establish, by regulation, fee schedules that establish payment amounts for all physicians services furnished in all fee schedule areas (as defined in subsection (j)(2) of this section) for the year. Except as provided in paragraph (2), each such payment amount for a service shall be equal to the product of
(A) the relative value for the service (as determined in subsection (c)(2) of this section),
(B) the conversion factor (established under subsection (d) of this section) for the year, and
(C) the geographic adjustment factor (established under subsection (e)(2) of this section) for the service for the fee schedule area.
(2) Treatment of radiology services and anesthesia services 

(A) Radiology services 
With respect to radiology services (including radiologist services, as defined in section 1395m (b)(6) of this title), the Secretary shall base the relative values on the relative value scale developed under section 1395m (b)(1)(A) of this title, with appropriate modifications of the relative values to assure that the relative values established for radiology services which are similar or related to other physicians services are consistent with the relative values established for those similar or related services.
(B) Anesthesia services 
In establishing the fee schedule for anesthesia services for which a relative value guide has been established under section 4048(b) of the Omnibus Budget Reconciliation Act of 1987, the Secretary shall use, to the extent practicable, such relative value guide, with appropriate adjustment of the conversion factor, in a manner to assure that the fee schedule amounts for anesthesia services are consistent with the fee schedule amounts for other services determined by the Secretary to be of comparable value. In applying the previous sentence, the Secretary shall adjust the conversion factor by geographic adjustment factors in the same manner as such adjustment is made under paragraph (1)(C).
(C) Consultation 
The Secretary shall consult with the Physician Payment Review Commission and organizations representing physicians or suppliers who furnish radiology services and anesthesia services in applying subparagraphs (A) and (B).
(3) Treatment of interpretation of electrocardiograms 
The Secretary
(A) shall make separate payment under this section for the interpretation of electrocardiograms performed or ordered to be performed as part of or in conjunction with a visit to or a consultation with a physician, and
(B) shall adjust the relative values established for visits and consultations under subsection (c) of this section so as not to include relative value units for interpretations of electrocardiograms in the relative value for visits and consultations.
(4) Special rule for imaging services 

(A) In general 
In the case of imaging services described in subparagraph (B) furnished on or after January 1, 2007, if
(i) the technical component (including the technical component portion of a global fee) of the service established for a year under the fee schedule described in paragraph (1) without application of the geographic adjustment factor described in paragraph (1)(C), exceeds
(ii) the Medicare OPD fee schedule amount established under the prospective payment system for hospital outpatient department services under paragraph (3)(D) of section 1395l (t) of this title for such service for such year, determined without regard to geographic adjustment under paragraph (2)(D) of such section,

the Secretary shall substitute the amount described in clause (ii), adjusted by the geographic adjustment factor described in paragraph (1)(C), for the fee schedule amount for such technical component for such year.

(B) Imaging services described 
For purposes of subparagraph (A), imaging services described in this subparagraph are imaging and computer-assisted imaging services, including X-ray, ultrasound (including echocardiography), nuclear medicine (including positron emission tomography), magnetic resonance imaging, computed tomography, and fluoroscopy, but excluding diagnostic and screening mammography.
(c) Determination of relative values for physicians’ services 

(1) Division of physicians’ services into components 
In this section, with respect to a physicians service:
(A) “Work component” defined 
The term work component means the portion of the resources used in furnishing the service that reflects physician time and intensity in furnishing the service. Such portion shall
(i) include activities before and after direct patient contact, and
(ii) be defined, with respect to surgical procedures, to reflect a global definition including pre-operative and post-operative physicians services.
(B) “Practice expense component” defined 
The term practice expense component means the portion of the resources used in furnishing the service that reflects the general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising practice expenses.
(C) “Malpractice component” defined 
The term malpractice component means the portion of the resources used in furnishing the service that reflects malpractice expenses in furnishing the service.
(2) Determination of relative values 

(A) In general 

(i) Combination of units for components The Secretary shall develop a methodology for combining the work, practice expense, and malpractice relative value units, determined under subparagraph (C), for each service in a manner to produce a single relative value for that service. Such relative values are subject to adjustment under subparagraph (F)(i) and section 13515(b) of the Omnibus Budget Reconciliation Act of 1993.
(ii) Extrapolation The Secretary may use extrapolation and other techniques to determine the number of relative value units for physicians services for which specific data are not available and shall take into account recommendations of the Physician Payment Review Commission and the results of consultations with organizations representing physicians who provide such services.
(B) Periodic review and adjustments in relative values 

(i) Periodic review The Secretary, not less often than every 5 years, shall review the relative values established under this paragraph for all physicians services.
(ii) Adjustments
(I) In general The Secretary shall, to the extent the Secretary determines to be necessary and subject to subclause (II), adjust the number of such units to take into account changes in medical practice, coding changes, new data on relative value components, or the addition of new procedures. The Secretary shall publish an explanation of the basis for such adjustments.
(II) Limitation on annual adjustments Subject to clauses (iv) and (v), the adjustments under subclause (I) for a year may not cause the amount of expenditures under this part for the year to differ by more than $20,000,000 from the amount of expenditures under this part that would have been made if such adjustments had not been made.
(iii) Consultation The Secretary, in making adjustments under clause (ii), shall consult with the Medicare Payment Advisory Commission and organizations representing physicians.
(iv) Exemption of certain additional expenditures from budget neutrality The additional expenditures attributable to
(I) subparagraph (H) shall not be taken into account in applying clause (ii)(II) for 2004;
(II) subparagraph (I) insofar as it relates to a physician fee schedule for 2005 or 2006 shall not be taken into account in applying clause (ii)(II) for drug administration services under the fee schedule for such year for a specialty described in subparagraph (I)(ii)(II); and
(III) subparagraph (J) insofar as it relates to a physician fee schedule for 2005 or 2006 shall not be taken into account in applying clause (ii)(II) for drug administration services under the fee schedule for such year.
(v) Exemption of certain reduced expenditures from budget-neutrality calculation The following reduced expenditures, as estimated by the Secretary, shall not be taken into account in applying clause (ii)(II):
(I) Reduced payment for multiple imaging procedures Effective for fee schedules established beginning with 2007, reduced expenditures attributable to the multiple procedure payment reduction for imaging under the final rule published by the Secretary in the Federal Register on November 21, 2005 (42 CFR 405, et al.) insofar as it relates to the physician fee schedules for 2006 and 2007.
(II) OPD payment cap for imaging services Effective for fee schedules established beginning with 2007, reduced expenditures attributable to subsection (b)(4).
(C) Computation of relative value units for components 
For purposes of this section for each physicians service
(i) Work relative value units The Secretary shall determine a number of work relative value units for the service based on the relative resources incorporating physician time and intensity required in furnishing the service.
(ii) Practice expense relative value units The Secretary shall determine a number of practice expense relative value units for the service for years before 1999 equal to the product of
(I) the base allowed charges (as defined in subparagraph (D)) for the service, and
(II) the practice expense percentage for the service (as determined under paragraph (3)(C)(ii)),

and for years beginning with 1999 based on the relative practice expense resources involved in furnishing the service. For 1999, such number of units shall be determined based 75 percent on such product and based 25 percent on the relative practice expense resources involved in furnishing the service. For 2000, such number of units shall be determined based 50 percent on such product and based 50 percent on such relative practice expense resources. For 2001, such number of units shall be determined based 25 percent on such product and based 75 percent on such relative practice expense resources. For a subsequent year, such number of units shall be determined based entirely on such relative practice expense resources.

(iii) Malpractice relative value units The Secretary shall determine a number of malpractice relative value units for the service for years before 2000 equal to the product of
(I) the base allowed charges (as defined in subparagraph (D)) for the service, and
(II) the malpractice percentage for the service (as determined under paragraph (3)(C)(iii)),

and for years beginning with 2000 based on the malpractice expense resources involved in furnishing the service.

(D) “Base allowed charges” defined 
In this paragraph, the term base allowed charges means, with respect to a physicians service, the national average allowed charges for the service under this part for services furnished during 1991, as estimated by the Secretary using the most recent data available.
(E) Reduction in practice expense relative value units for certain services 

(i) In general Subject to clause (ii), the Secretary shall reduce the practice expense relative value units applied to services described in clause (iii) furnished in
(I) 1994, by 25 percent of the number by which the number of practice expense relative value units (determined for 1994 without regard to this subparagraph) exceeds the number of work relative value units determined for 1994,
(II) 1995, by an additional 25 percent of such excess, and
(III) 1996, by an additional 25 percent of such excess.
(ii) Floor on reductions The practice expense relative value units for a physicians service shall not be reduced under this subparagraph to a number less than 128 percent of the number of work relative value units.
(iii) Services covered For purposes of clause (i), the services described in this clause are physicians services that are not described in clause (iv) and for which
(I) there are work relative value units, and
(II) the number of practice expense relative value units (determined for 1994) exceeds 128 percent of the number of work relative value units (determined for such year).
(iv) Excluded services For purposes of clause (iii), the services described in this clause are services which the Secretary determines at least 75 percent of which are provided under this subchapter in an office setting.
(F) Budget neutrality adjustments 
The Secretary
(i) shall reduce the relative values for all services (other than anesthesia services) established under this paragraph (and, in the case of anesthesia services, the conversion factor established by the Secretary for such services) by such percentage as the Secretary determines to be necessary so that, beginning in 1996, the amendment made by section 13514(a) of the Omnibus Budget Reconciliation Act of 1993 would not result in expenditures under this section that exceed the amount of such expenditures that would have been made if such amendment had not been made, and
(ii) shall reduce the amounts determined under subsection (a)(2)(B)(ii)(I) of this section by such percentage as the Secretary determines to be required to assure that, taking into account the reductions made under clause (i), the amendment made by section 13514(a) of the Omnibus Budget Reconciliation Act of 1993 would not result in expenditures under this section in 1994 that exceed the amount of such expenditures that would have been made if such amendment had not been made.
(G) Adjustments in relative value units for 1998 

(i) In general The Secretary shall
(I) subject to clauses (iv) and (v), reduce the practice expense relative value units applied to any services described in clause (ii) furnished in 1998 to a number equal to 110 percent of the number of work relative value units, and
(II) increase the practice expense relative value units for office visit procedure codes during 1998 by a uniform percentage which the Secretary estimates will result in an aggregate increase in payments for such services equal to the aggregate decrease in payments by reason of subclause (I).
(ii) Services covered For purposes of clause (i), the services described in this clause are physicians services that are not described in clause (iii) and for which
(I) there are work relative value units, and
(II) the number of practice expense relative value units (determined for 1998) exceeds 110 percent of the number of work relative value units (determined for such year).
(iii) Excluded services For purposes of clause (ii), the services described in this clause are services which the Secretary determines at least 75 percent of which are provided under this subchapter in an office setting.
(iv) Limitation on aggregate reallocation If the application of clause (i)(I) would result in an aggregate amount of reductions under such clause in excess of $390,000,000, such clause shall be applied by substituting for 110 percent such greater percentage as the Secretary estimates will result in the aggregate amount of such reductions equaling $390,000,000.
(v) No reduction for certain services Practice expense relative value units for a procedure performed in an office or in a setting out of an office shall not be reduced under clause (i) if the in-office or out-of-office practice expense relative value, respectively, for the procedure would increase under the proposed rule on resource-based practice expenses issued by the Secretary on June 18, 1997 (62 Federal Register 33158 et seq.).
(H) Adjustments in practice expense relative value units for certain drug administration services beginning in 2004 

(i) Use of survey data In establishing the physician fee schedule under subsection (b) of this section with respect to payments for services furnished on or after January 1, 2004, the Secretary shall, in determining practice expense relative value units under this subsection, utilize a survey submitted to the Secretary as of January 1, 2003, by a physician specialty organization pursuant to section 212 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 if the survey
(I) covers practice expenses for oncology drug administration services; and
(II) meets criteria established by the Secretary for acceptance of such surveys.
(ii) Pricing of clinical oncology nurses in practice expense methodology If the survey described in clause (i) includes data on wages, salaries, and compensation of clinical oncology nurses, the Secretary shall utilize such data in the methodology for determining practice expense relative value units under subsection (c) of this section.
(iii) Work relative value units for certain drug administration services In establishing the relative value units under this paragraph for drug administration services described in clause (iv) furnished on or after January 1, 2004, the Secretary shall establish work relative value units equal to the work relative value units for a level 1 office medical visit for an established patient.
(iv) Drug administration services described The drug administration services described in this clause are physicians services
(I) which are classified as of October 1, 2003, within any of the following groups of procedures: therapeutic or diagnostic infusions (excluding chemotherapy); chemotherapy administration services; and therapeutic, prophylactic, or diagnostic injections;
(II) for which there are no work relative value units assigned under this subsection as of such date; and
(III) for which national relative value units have been assigned under this subsection as of such date.
(I) Adjustments in practice expense relative value units for certain drug administration services beginning with 2005 

(i) In general In establishing the physician fee schedule under subsection (b) of this section with respect to payments for services furnished on or after January 1, 2005 or 2006, the Secretary shall adjust the practice expense relative value units for such year consistent with clause (ii).
(ii) Use of supplemental survey data
(I) In general Subject to subclause (II), if a specialty submits to the Secretary by not later than March 1, 2004, for 2005, or March 1, 2005, for 2006, data that includes expenses for the administration of drugs and biologicals for which the payment amount is determined pursuant to section 1395u (o) of this title, the Secretary shall use such supplemental survey data in carrying out this subparagraph for the years involved insofar as they are collected and provided by entities and organizations consistent with the criteria established by the Secretary pursuant to section 212(a) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999.
(II) Limitation on specialty Subclause (I) shall apply to a specialty only insofar as not less than 40 percent of payments for the specialty under this subchapter in 2002 are attributable to the administration of drugs and biologicals, as determined by the Secretary.
(III) Application This clause shall not apply with respect to a survey to which subparagraph (H)(i) applies.
(J) Provisions for appropriate reporting and billing for physicians’ services associated with the administration of covered outpatient drugs and biologicals 

(i) Evaluation of codes The Secretary shall promptly evaluate existing drug administration codes for physicians services to ensure accurate reporting and billing for such services, taking into account levels of complexity of the administration and resource consumption.
(ii) Use of existing processes In carrying out clause (i), the Secretary shall use existing processes for the consideration of coding changes and, to the extent coding changes are made, shall use such processes in establishing relative values for such services.
(iii) Implementation In carrying out clause (i), the Secretary shall consult with representatives of physician specialties affected by the implementation of section 1395w–3a of this title or section 1395w–3b of this title, and shall take such steps within the Secretarys authority to expedite such considerations under clause (ii).
(iv) Subsequent, budget neutral adjustments permitted Nothing in subparagraph (H) or (I) or this subparagraph shall be construed as preventing the Secretary from providing for adjustments in practice expense relative value units under (and consistent with) subparagraph (B) for years after 2004, 2005, or 2006, respectively.
(3) Component percentages 
For purposes of paragraph (2), the Secretary shall determine a work percentage, a practice expense percentage, and a malpractice percentage for each physicians service as follows:
(A) Division of services by specialty 
For each physicians service or class of physicians services, the Secretary shall determine the average percentage of each such service or class of services that is performed, nationwide, under this part by physicians in each of the different physician specialties (as identified by the Secretary).
(B) Division of specialty by component 
The Secretary shall determine the average percentage division of resources, among the work component, the practice expense component, and the malpractice component, used by physicians in each of such specialties in furnishing physicians services. Such percentages shall be based on national data that describe the elements of physician practice costs and revenues, by physician specialty. The Secretary may use extrapolation and other techniques to determine practice costs and revenues for specialties for which adequate data are not available.
(C) Determination of component percentages 

(i) Work percentage The work percentage for a service (or class of services) is equal to the sum (for all physician specialties) of
(I) the average percentage division for the work component for each physician specialty (determined under subparagraph (B)), multiplied by
(II) the proportion (determined under subparagraph (A)) of such service (or services) performed by physicians in that specialty.
(ii) Practice expense percentage For years before 2002, the practice expense percentage for a service (or class of services) is equal to the sum (for all physician specialties) of
(I) the average percentage division for the practice expense component for each physician specialty (determined under subparagraph (B)), multiplied by
(II) the proportion (determined under subparagraph (A)) of such service (or services) performed by physicians in that specialty.
(iii) Malpractice percentage For years before 1999, the malpractice percentage for a service (or class of services) is equal to the sum (for all physician specialties) of
(I) the average percentage division for the malpractice component for each physician specialty (determined under subparagraph (B)), multiplied by
(II) the proportion (determined under subparagraph (A)) of such service (or services) performed by physicians in that specialty.
(D) Periodic recomputation 
The Secretary may, from time to time, provide for the recomputation of work percentages, practice expense percentages, and malpractice percentages determined under this paragraph.
(4) Ancillary policies 
The Secretary may establish ancillary policies (with respect to the use of modifiers, local codes, and other matters) as may be necessary to implement this section.
(5) Coding 
The Secretary shall establish a uniform procedure coding system for the coding of all physicians services. The Secretary shall provide for an appropriate coding structure for visits and consultations. The Secretary may incorporate the use of time in the coding for visits and consultations. The Secretary, in establishing such coding system, shall consult with the Physician Payment Review Commission and other organizations representing physicians.
(6) No variation for specialists 
The Secretary may not vary the conversion factor or the number of relative value units for a physicians service based on whether the physician furnishing the service is a specialist or based on the type of specialty of the physician.
(d) Conversion factors 

(1) Establishment 

(A) In general 
The conversion factor for each year shall be the conversion factor established under this subsection for the previous year (or, in the case of 1992, specified in subparagraph (B)) adjusted by the update (established under paragraph (3)) for the year involved (for years before 2001) and, for years beginning with 2001, multiplied by the update (established under paragraph (4)) for the year involved.
(B) Special provision for 1992 
For purposes of subparagraph (A), the conversion factor specified in this subparagraph is a conversion factor (determined by the Secretary) which, if this section were to apply during 1991 using such conversion factor, would result in the same aggregate amount of payments under this part for physicians services as the estimated aggregate amount of the payments under this part for such services in 1991.
(C) Special rules for 1998 
Except as provided in subparagraph (D), the single conversion factor for 1998 under this subsection shall be the conversion factor for primary care services for 1997, increased by the Secretarys estimate of the weighted average of the three separate updates that would otherwise occur were it not for the enactment of chapter 1 of subtitle F of title IV of the Balanced Budget Act of 1997.
(D) Special rules for anesthesia services 
The separate conversion factor for anesthesia services for a year shall be equal to 46 percent of the single conversion factor established for other physicians services, except as adjusted for changes in work, practice expense, or malpractice relative value units.
(E) Publication and dissemination of information 
The Secretary shall
(i) cause to have published in the Federal Register not later than November 1 of each year (beginning with 2000) the conversion factor which will apply to physicians services for the succeeding year, the update determined under paragraph (4) for such succeeding year, and the allowed expenditures under such paragraph for such succeeding year; and
(ii) make available to the Medicare Payment Advisory Commission and the public by March 1 of each year (beginning with 2000) an estimate of the sustainable growth rate and of the conversion factor which will apply to physicians services for the succeeding year and data used in making such estimate.
(2) Repealed. Pub. L. 105–33, title IV, § 4502(b), Aug. 5, 1997, 111 Stat. 433 
(3) Update for 1999 and 2000 

(A) In general 
Unless otherwise provided by law, subject to subparagraph (D) and the budget-neutrality factor determined by the Secretary under subsection (c)(2)(B)(ii) of this section, the update to the single conversion factor established in paragraph (1)(C) for 1999 and 2000 is equal to the product of
(i) 1 plus the Secretarys estimate of the percentage increase in the MEI (as defined in section 1395u (i)(3) of this title) for the year (divided by 100), and
(ii) 1 plus the Secretarys estimate of the update adjustment factor for the year (divided by 100),

minus 1 and multiplied by 100.

(B) Update adjustment factor 
For purposes of subparagraph (A)(ii), the update adjustment factor for a year is equal (as estimated by the Secretary) to
(i) the difference between
(I)  the sum of the allowed expenditures for physicians services (as determined under subparagraph (C)) for the period beginning April 1, 1997, and ending on March 31 of the year involved, and
(II)  the amount of actual expenditures for physicians services furnished during the period beginning April 1, 1997, and ending on March 31 of the preceding year; divided by
(ii) the actual expenditures for physicians services for the 12-month period ending on March 31 of the preceding year, increased by the sustainable growth rate under subsection (f) of this section for the fiscal year which begins during such 12-month period.
(C) Determination of allowed expenditures 
For purposes of this paragraph and paragraph (4), the allowed expenditures for physicians services for the 12-month period ending with March 31 of
(i) 1997 is equal to the actual expenditures for physicians services furnished during such 12-month period, as estimated by the Secretary; or
(ii) a subsequent year is equal to the allowed expenditures for physicians services for the previous year, increased by the sustainable growth rate under subsection (f) of this section for the fiscal year which begins during such 12-month period.
(D) Restriction on variation from medicare economic index 
Notwithstanding the amount of the update adjustment factor determined under subparagraph (B) for a year, the update in the conversion factor under this paragraph for the year may not be
(i) greater than 100 times the following amount: (1.03 + (MEI percentage/100)) 1; or
(ii) less than 100 times the following amount: (0.93 + (MEI percentage/100)) 1,

where MEI percentage means the Secretarys estimate of the percentage increase in the MEI (as defined in section 1395u (i)(3) of this title) for the year involved.

(4) Update for years beginning with 2001 

(A) In general 
Unless otherwise provided by law, subject to the budget-neutrality factor determined by the Secretary under subsection (c)(2)(B)(ii) of this section and subject to adjustment under subparagraph (F), the update to the single conversion factor established in paragraph (1)(C) for a year beginning with 2001 is equal to the product of
(i) 1 plus the Secretarys estimate of the percentage increase in the MEI (as defined in section 1395u (i)(3) of this title) for the year (divided by 100); and
(ii) 1 plus the Secretarys estimate of the update adjustment factor under subparagraph (B) for the year.
(B) Update adjustment factor 
For purposes of subparagraph (A)(ii), subject to subparagraph (D) and the succeeding paragraphs of this subsection, the update adjustment factor for a year is equal (as estimated by the Secretary) to the sum of the following:
(i) Prior year adjustment component An amount determined by
(I) computing the difference (which may be positive or negative) between the amount of the allowed expenditures for physicians services for the prior year (as determined under subparagraph (C)) and the amount of the actual expenditures for such services for that year;
(II) dividing that difference by the amount of the actual expenditures for such services for that year; and
(III) multiplying that quotient by 0.75.
(ii) Cumulative adjustment component An amount determined by
(I) computing the difference (which may be positive or negative) between the amount of the allowed expenditures for physicians services (as determined under subparagraph (C)) from April 1, 1996, through the end of the prior year and the amount of the actual expenditures for such services during that period;
(II) dividing that difference by actual expenditures for such services for the prior year as increased by the sustainable growth rate under subsection (f) of this section for the year for which the update adjustment factor is to be determined; and
(III) multiplying that quotient by 0.33.
(C) Determination of allowed expenditures 
For purposes of this paragraph:
(i) Period up to April 1, 1999 The allowed expenditures for physicians services for a period before April 1, 1999, shall be the amount of the allowed expenditures for such period as determined under paragraph (3)(C).
(ii) Transition to calendar year allowed expenditures Subject to subparagraph (E), the allowed expenditures for
(I) the 9-month period beginning April 1, 1999, shall be the Secretarys estimate of the amount of the allowed expenditures that would be permitted under paragraph (3)(C) for such period; and
(II) the year of 1999, shall be the Secretarys estimate of the amount of the allowed expenditures that would be permitted under paragraph (3)(C) for such year.
(iii) Years beginning with 2000 The allowed expenditures for a year (beginning with 2000) is equal to the allowed expenditures for physicians services for the previous year, increased by the sustainable growth rate under subsection (f) of this section for the year involved.
(D) Restriction on update adjustment factor 
The update adjustment factor determined under subparagraph (B) for a year may not be less than 0.07 or greater than 0.03.
(E) Recalculation of allowed expenditures for updates beginning with 2001 
For purposes of determining the update adjustment factor for a year beginning with 2001, the Secretary shall recompute the allowed expenditures for previous periods beginning on or after April 1, 1999, consistent with subsection (f)(3) of this section.
(F) Transitional adjustment designed to provide for budget neutrality 
Under this subparagraph the Secretary shall provide for an adjustment to the update under subparagraph (A)
(i) for each of 2001, 2002, 2003, and 2004, of 0.2 percent; and
(ii) for 2005 of +0.8 percent.
(5) Update for 2004 and 2005 
The update to the single conversion factor established in paragraph (1)(C) for each of 2004 and 2005 shall be not less than 1.5 percent.
(6) Update for 2006 
The update to the single conversion factor established in paragraph (1)(C) for 2006 shall be 0 percent.
(7) Conversion factor for 2007 

(A) In general 
The conversion factor that would otherwise be applicable under this subsection for 2007 shall be the amount of such conversion factor divided by the product of
(i) 1 plus the Secretarys estimate of the percentage increase in the MEI (as defined in section 1395u (i)(3) of this title) for 2007 (divided by 100); and
(ii) 1 plus the Secretarys estimate of the update adjustment factor under paragraph (4)(B) for 2007.
(B) No effect on computation of conversion factor for 2008 
The conversion factor under this subsection shall be computed under paragraph (1)(A) for 2008 as if subparagraph (A) had never applied.
(8) Update for a portion of 2008 

(A) In general 
Subject to paragraph (7)(B), in lieu of the update to the single conversion factor established in paragraph (1)(C) that would otherwise apply for 2008, for the period beginning on January 1, 2008, and ending on June 30, 2008, the update to the single conversion factor shall be 0.5 percent.
(B) No effect on computation of conversion factor for the remaining portion of 2008 and 2009 
The conversion factor under this subsection shall be computed under paragraph (1)(A) for the period beginning on July 1, 2008, and ending on December 31, 2008, and for 2009 and subsequent years as if subparagraph (A) had never applied.
(e) Geographic adjustment factors 

(1) Establishment of geographic indices 

(A) In general 
Subject to subparagraphs (B), (C), (E), (F)[1] and (G), the Secretary shall establish
(i) an index which reflects the relative costs of the mix of goods and services comprising practice expenses (other than malpractice expenses) in the different fee schedule areas compared to the national average of such costs,
(ii) an index which reflects the relative costs of malpractice expenses in the different fee schedule areas compared to the national average of such costs, and
(iii) an index which reflects 1/4 of the difference between the relative value of physicians work effort in each of the different fee schedule areas and the national average of such work effort.
(B) Class-specific geographic cost-of-practice indices 
The Secretary may establish more than one index under subparagraph (A)(i) in the case of classes of physicians services, if, because of differences in the mix of goods and services comprising practice expenses for the different classes of services, the application of a single index under such clause to different classes of such services would be substantially inequitable.
(C) Periodic review and adjustments in geographic adjustment factors 
The Secretary, not less often than every 3 years, shall, in consultation with appropriate representatives of physicians, review the indices established under subparagraph (A) and the geographic index values applied under this subsection for all fee schedule areas. Based on such review, the Secretary may revise such index and adjust such index values, except that, if more than 1 year has elasped[2] since the date of the last previous adjustment, the adjustment to be applied in the first year of the next adjustment shall be 1/2 of the adjustment that otherwise would be made.
(D) Use of recent data 
In establishing indices and index values under this paragraph, the Secretary shall use the most recent data available relating to practice expenses, malpractice expenses, and physician work effort in different fee schedule areas.
(E) Floor at 1.0 on work geographic index 
After calculating the work geographic index in subparagraph (A)(iii), for purposes of payment for services furnished on or after January 1, 2004, and before July 1, 2008, the Secretary shall increase the work geographic index to 1.00 for any locality for which such work geographic index is less than 1.00.
(G)  1 Floor for practice expense, malpractice, and work geographic indices for services furnished in Alaska 
For purposes of payment for services furnished in Alaska on or after January 1, 2004, and before January 1, 2006, after calculating the practice expense, malpractice, and work geographic indices in clauses (i), (ii), and (iii) of subparagraph (A) and in subparagraph (B), the Secretary shall increase any such index to 1.67 if such index would otherwise be less than 1.67.
(2) Computation of geographic adjustment factor 
For purposes of subsection (b)(1)(C) of this section, for all physicians services for each fee schedule area the Secretary shall establish a geographic adjustment factor equal to the sum of the geographic cost-of-practice adjustment factor (specified in paragraph (3)), the geographic malpractice adjustment factor (specified in paragraph (4)), and the geographic physician work adjustment factor (specified in paragraph (5)) for the service and the area.
(3) Geographic cost-of-practice adjustment factor 
For purposes of paragraph (2), the geographic cost-of-practice adjustment factor, for a service for a fee schedule area, is the product of
(A) the proportion of the total relative value for the service that reflects the relative value units for the practice expense component, and
(B) the geographic cost-of-practice index value for the area for the service, based on the index established under paragraph (1)(A)(i) or (1)(B) (as the case may be).
(4) Geographic malpractice adjustment factor 
For purposes of paragraph (2), the geographic malpractice adjustment factor, for a service for a fee schedule area, is the product of
(A) the proportion of the total relative value for the service that reflects the relative value units for the malpractice component, and
(B) the geographic malpractice index value for the area, based on the index established under paragraph (1)(A)(ii).
(5) Geographic physician work adjustment factor 
For purposes of paragraph (2), the geographic physician work adjustment factor, for a service for a fee schedule area, is the product of
(A) the proportion of the total relative value for the service that reflects the relative value units for the work component, and
(B) the geographic physician work index value for the area, based on the index established under paragraph (1)(A)(iii).
(f) Sustainable growth rate 

(1) Publication 
The Secretary shall cause to have published in the Federal Register not later than
(A) November 1, 2000, the sustainable growth rate for 2000 and 2001; and
(B) November 1 of each succeeding year the sustainable growth rate for such succeeding year and each of the preceding 2 years.
(2) Specification of growth rate 
The sustainable growth rate for all physicians services for a fiscal year (beginning with fiscal year 1998 and ending with fiscal year 2000) and a year beginning with 2000 shall be equal to the product of
(A) 1 plus the Secretarys estimate of the weighted average percentage increase (divided by 100) in the fees for all physicians services in the applicable period involved,
(B) 1 plus the Secretarys estimate of the percentage change (divided by 100) in the average number of individuals enrolled under this part (other than Medicare+Choice plan enrollees) from the previous applicable period to the applicable period involved,
(C) 1 plus the Secretarys estimate of the annual average percentage growth in real gross domestic product per capita (divided by 100) during the 10-year period ending with the applicable period involved, and
(D) 1 plus the Secretarys estimate of the percentage change (divided by 100) in expenditures for all physicians services in the applicable period (compared with the previous applicable period) which will result from changes in law and regulations, determined without taking into account estimated changes in expenditures resulting from the update adjustment factor determined under subsection (d)(3)(B) or (d)(4)(B) of this section, as the case may be,

minus 1 and multiplied by 100.

(3) Data to be used 
For purposes of determining the update adjustment factor under subsection (d)(4)(B) of this section for a year beginning with 2001, the sustainable growth rates taken into consideration in the determination under paragraph (2) shall be determined as follows:
(A) For 2001 
For purposes of such calculations for 2001, the sustainable growth rates for fiscal year 2000 and the years 2000 and 2001 shall be determined on the basis of the best data available to the Secretary as of September 1, 2000.
(B) For 2002 
For purposes of such calculations for 2002, the sustainable growth rates for fiscal year 2000 and for years 2000, 2001, and 2002 shall be determined on the basis of the best data available to the Secretary as of September 1, 2001.
(C) For 2003 and succeeding years 
For purposes of such calculations for a year after 2002
(i) the sustainable growth rates for that year and the preceding 2 years shall be determined on the basis of the best data available to the Secretary as of September 1 of the year preceding the year for which the calculation is made; and
(ii) the sustainable growth rate for any year before a year described in clause (i) shall be the rate as most recently determined for that year under this subsection.

Nothing in this paragraph shall be construed as affecting the sustainable growth rates established for fiscal year 1998 or fiscal year 1999.

(4) Definitions 
In this subsection:
(A) Services included in physicians’ services 
The term physicians services includes other items and services (such as clinical diagnostic laboratory tests and radiology services), specified by the Secretary, that are commonly performed or furnished by a physician or in a physicians office, but does not include services furnished to a Medicare+Choice plan enrollee.
(B) Medicare+Choice plan enrollee 
The term Medicare+Choice plan enrollee means, with respect to a fiscal year, an individual enrolled under this part who has elected to receive benefits under this subchapter for the fiscal year through a Medicare+Choice plan offered under part C of this subchapter, and also includes an individual who is receiving benefits under this part through enrollment with an eligible organization with a risk-sharing contract under section 1395mm of this title.
(C) Applicable period 
The term applicable period means
(i) a fiscal year, in the case of fiscal year 1998, fiscal year 1999, and fiscal year 2000; or
(ii) a calendar year with respect to a year beginning with 2000;

as the case may be.

(g) Limitation on beneficiary liability 

(1) Limitation on actual charges 

(A) In general 
In the case of a nonparticipating physician or nonparticipating supplier or other person (as defined in section 1395u (i)(2) of this title) who does not accept payment on an assignment-related basis for a physicians service furnished with respect to an individual enrolled under this part, the following rules apply:
(i) Application of limiting charge No person may bill or collect an actual charge for the service in excess of the limiting charge described in paragraph (2) for such service.
(ii) No liability for excess charges No person is liable for payment of any amounts billed for the service in excess of such limiting charge.
(iii) Correction of excess charges If such a physician, supplier, or other person bills, but does not collect, an actual charge for a service in violation of clause (i), the physician, supplier, or other person shall reduce on a timely basis the actual charge billed for the service to an amount not to exceed the limiting charge for the service.
(iv) Refund of excess collections If such a physician, supplier, or other person collects an actual charge for a service in violation of clause (i), the physician, supplier, or other person shall provide on a timely basis a refund to the individual charged in the amount by which the amount collected exceeded the limiting charge for the service. The amount of such a refund shall be reduced to the extent the individual has an outstanding balance owed by the individual to the physician.
(B) Sanctions 
If a physician, supplier, or other person
(i) knowingly and willfully bills or collects for services in violation of subparagraph (A)(i) on a repeated basis, or
(ii) fails to comply with clause (iii) or (iv) of subparagraph (A) on a timely basis,

the Secretary may apply sanctions against the physician, supplier, or other person in accordance with paragraph (2) of section 1395u (j) of this title. In applying this subparagraph, paragraph (4) of such section applies in the same manner as such paragraph applies to such section and any reference in such section to a physician is deemed also to include a reference to a supplier or other person under this subparagraph.

(C) Timely basis 
For purposes of this paragraph, a correction of a bill for an excess charge or refund of an amount with respect to a violation of subparagraph (A)(i) in the case of a service is considered to be provided on a timely basis, if the reduction or refund is made not later than 30 days after the date the physician, supplier, or other person is notified by the carrier under this part of such violation and of the requirements of subparagraph (A).
(2) “Limiting charge” defined 

(A) For 1991 
For physicians services of a physician furnished during 1991, other than radiologist services subject to section 1395m (b) of this title, the limiting charge shall be the same percentage (or, if less, 25 percent) above the recognized payment amount under this part with respect to the physician (as a nonparticipating physician) as the percentage by which
(i) the maximum allowable actual charge (as determined under section 1395u (j)(1)(C) of this title as of December 31, 1990, or, if less, the maximum actual charge otherwise permitted for the service under this part as of such date) for the service of the physician, exceeds
(ii) the recognized payment amount for the service of the physician (as a nonparticipating physician) as of such date.

In the case of evaluation and management services (as specified in section 1395u (b)(16)(B)(ii) of this title), the preceding sentence shall be applied by substituting 40 percent for 25 percent.

(B) For 1992 
For physicians services furnished during 1992, other than radiologist services subject to section 1395m (b) of this title, the limiting charge shall be the same percentage (or, if less, 20 percent) above the recognized payment amount under this part for nonparticipating physicians as the percentage by which
(i) the limiting charge (as determined under subparagraph (A) as of December 31, 1991) for the service, exceeds
(ii) the recognized payment amount for the service for nonparticipating physicians as of such date.
(C) After 1992 
For physicians services furnished in a year after 1992, the limiting charge shall be 115 percent of the recognized payment amount under this part for nonparticipating physicians or for nonparticipating suppliers or other persons.
(D) Recognized payment amount 
In this section, the term recognized payment amount means, for services furnished on or after January 1, 1992, the fee schedule amount determined under subsection (a) of this section (or, if payment under this part is made on a basis other than the fee schedule under this section, 95 percent of the other payment basis), and, for services furnished during 1991, the applicable percentage (as defined in section 1395u (b)(4)(A)(iv) of this title) of the prevailing charge (or fee schedule amount) for nonparticipating physicians for that year.
(3) Limitation on charges for medicare beneficiaries eligible for medicaid benefits 

(A) In general 
Payment for physicians services furnished on or after April 1, 1990, to an individual who is enrolled under this part and eligible for any medical assistance (including as a qualified medicare beneficiary, as defined in section 1396d (p)(1) of this title) with respect to such services under a State plan approved under subchapter XIX of this chapter may only be made on an assignment-related basis and the provisions of section 1396a (n)(3)(A) of this title apply to further limit permissible charges under this section.
(B) Penalty 
A person may not bill for physicians services subject to subparagraph (A) other than on an assignment-related basis. No person is liable for payment of any amounts billed for such a service in violation of the previous sentence. If a person knowingly and willfully bills for physicians services in violation of the first sentence, the Secretary may apply sanctions against the person in accordance with section 1395u (j)(2) of this title.
(4) Physician submission of claims 

(A) In general 
For services furnished on or after September 1, 1990, within 1 year after the date of providing a service for which payment is made under this part on a reasonable charge or fee schedule basis, a physician, supplier, or other person (or an employer or facility in the cases described in section 1395u (b)(6)(A) of this title)
(i) shall complete and submit a claim for such service on a standard claim form specified by the Secretary to the carrier on behalf of a beneficiary, and
(ii) may not impose any charge relating to completing and submitting such a form.
(B) Penalty 

(i) With respect to an assigned claim wherever a physician, provider, supplier or other person (or an employer or facility in the cases described in section 1395u (b)(6)(A) of this title) fails to submit such a claim as required in subparagraph (A), the Secretary shall reduce by 10 percent the amount that would otherwise be paid for such claim under this part.
(ii) If a physician, supplier, or other person (or an employer or facility in the cases described in section 1395u (b)(6)(A) of this title) fails to submit a claim required to be submitted under subparagraph (A) or imposes a charge in violation of such subparagraph, the Secretary shall apply the sanction with respect to such a violation in the same manner as a sanction may be imposed under section 1395u (p)(3) of this title for a violation of section 1395u (p)(1) of this title.
(5) Electronic billing; direct deposit 
The Secretary shall encourage and develop a system providing for expedited payment for claims submitted electronically. The Secretary shall also encourage and provide incentives allowing for direct deposit as payments for services furnished by participating physicians. The Secretary shall provide physicians with such technical information as necessary to enable such physicians to submit claims electronically. The Secretary shall submit a plan to Congress on this paragraph by May 1, 1990.
(6) Monitoring of charges 

(A) In general 
The Secretary shall monitor
(i) the actual charges of nonparticipating physicians for physicians services furnished on or after January 1, 1991, to individuals enrolled under this part, and
(ii) changes (by specialty, type of service, and geographic area) in
(I)  the proportion of expenditures for physicians services provided under this part by participating physicians,
(II)  the proportion of expenditures for such services for which payment is made under this part on an assignment-related basis, and
(III)  the amounts charged above the recognized payment amounts under this part.
(B) Report 
The Secretary shall, by not later than April 15 of each year (beginning in 1992), report to the Congress information on the extent to which actual charges exceed limiting charges, the number and types of services involved, and the average amount of excess charges and information regarding the changes described in subparagraph (A)(ii).
(C) Plan 
If the Secretary finds that there has been a significant decrease in the proportions described in subclauses (I) and (II) of subparagraph (A)(ii) or an increase in the amounts described in subclause (III) of that subparagraph, the Secretary shall develop a plan to address such a problem and transmit to Congress recommendations regarding the plan. The Medicare Payment Advisory Commission shall review the Secretarys plan and recommendations and transmit to Congress its comments regarding such plan and recommendations.
(7) Monitoring of utilization and access 

(A) In general 
The Secretary shall monitor
(i) changes in the utilization of and access to services furnished under this part within geographic, population, and service related categories,
(ii) possible sources of inappropriate utilization of services furnished under this part which contribute to the overall level of expenditures under this part, and
(iii) factors underlying these changes and their interrelationships.
(B) Report 
The Secretary shall by not later than April 15,[3] of each year (beginning with 1991) report to the Congress on the changes described in subparagraph (A)(i) and shall include in the report an examination of the factors (including factors relating to different services and specific categories and groups of services and geographic and demographic variations in utilization) which may contribute to such changes.
(C) Recommendations 
The Secretary shall include in each annual report under subparagraph (B) recommendations
(i) addressing any identified patterns of inappropriate utilization,
(ii) on utilization review,
(iii) on physician education or patient education,
(iv) addressing any problems of beneficiary access to care made evident by the monitoring process, and
(v) on such other matters as the Secretary deems appropriate.

The Medicare Payment Advisory Commission shall comment on the Secretarys recommendations and in developing its comments, the Commission shall convene and consult a panel of physician experts to evaluate the implications of medical utilization patterns for the quality of and access to patient care.

(h) Sending information to physicians 
Before the beginning of each year (beginning with 1992), the Secretary shall send to each physician or nonparticipating supplier or other person furnishing physicians services (as defined in subsection (j)(3) of this section) furnishing physicians services under this part, for services commonly performed by the physician, supplier, or other person, information on fee schedule amounts that apply for the year in the fee schedule area for participating and non-participating physicians, and the maximum amount that may be charged consistent with subsection (g)(2) of this section. Such information shall be transmitted in conjunction with notices to physicians, suppliers, and other persons under section 1395u (h) of this title (relating to the participating physician program) for a year.
(i) Miscellaneous provisions 

(1) Restriction on administrative and judicial review 
There shall be no administrative or judicial review under section 1395ff of this title or otherwise of
(A) the determination of the adjusted historical payment basis (as defined in subsection (a)(2)(D)(i) of this section),
(B) the determination of relative values and relative value units under subsection (c) of this section, including adjustments under subsections (c)(2)(F), (c)(2)(H), and (c)(2)(I) of this section and section 13515(b) of the Omnibus Budget Reconciliation Act of 1993,
(C) the determination of conversion factors under subsection (d) of this section, including without limitation a prospective redetermination of the sustainable growth rates for any or all previous fiscal years,
(D) the establishment of geographic adjustment factors under subsection (e) of this section, and
(E) the establishment of the system for the coding of physicians services under this section.
(2) Assistants-at-surgery 

(A) In general 
Subject to subparagraph (B), in the case of a surgical service furnished by a physician, if payment is made separately under this part for the services of a physician serving as an assistant-at-surgery, the fee schedule amount shall not exceed 16 percent of the fee schedule amount otherwise determined under this section for the global surgical service involved.
(B) Denial of payment in certain cases 
If the Secretary determines, based on the most recent data available, that for a surgical procedure (or class of surgical procedures) the national average percentage of such procedure performed under this part which involve the use of a physician as an assistant at surgery is less than 5 percent, no payment may be made under this part for services of an assistant at surgery involved in the procedure.
(3) No comparability adjustment 
For physicians services for which payment under this part is determined under this section
(A) a carrier may not make any adjustment in the payment amount under section 1395u (b)(3)(B) of this title on the basis that the payment amount is higher than the charge applicable, for comparable services and under comparable circumstances, to the policyholders and subscribers of the carrier,
(B) no payment adjustment may be made under section 1395u (b)(8) of this title, and
(C) section 1395u (b)(9) of this title shall not apply.
(j) Definitions 
In this section:
(1) Category 
For services furnished before January 1, 1998, the term category means, with respect to physicians services, surgical services, and all physicians services other than surgical services (as defined by the Secretary and including anesthesia services), primary care services (as defined in section 1395u (i)(4) of this title), and all other physicians services. The Secretary shall define surgical services and publish such definition in the Federal Register no later than May 1, 1990, after consultation with organizations representing physicians.
(2) Fee schedule area 
The term fee schedule area means a locality used under section 1395u (b) of this title for purposes of computing payment amounts for physicians services.
(3) Physicians’ services 
The term physicians services includes items and services described in paragraphs (1), (2)(A), (2)(D), (2)(G), (2)(P) (with respect to services described in subparagraphs (A) and (C) of section 1395x (oo)(2) of this title), (2)(R) (with respect to services described in subparagraphs (B), (C), and (D) of section 1395x (pp)(1) of this title), (2)(S), (2)(W), (2)(AA), (3), (4), (13), (14) (with respect to services described in section 1395x (nn)(2) of this title), and (15) of section 1395x (s) of this title (other than clinical diagnostic laboratory tests and, except for purposes of subsections (a)(3), (g), and (h) of this section[4] such other items and services as the Secretary may specify).
(4) Practice expenses 
The term practice expenses includes all expenses for furnishing physicians services, excluding malpractice expenses, physician compensation, and other physician fringe benefits.
(k) Quality reporting system 

(1) In general 
The Secretary shall implement a system for the reporting by eligible professionals of data on quality measures specified under paragraph (2). Such data shall be submitted in a form and manner specified by the Secretary (by program instruction or otherwise), which may include submission of such data on claims under this part.
(2) Use of consensus-based quality measures 

(A) For 2007 

(i) In general For purposes of applying this subsection for the reporting of data on quality measures for covered professional services furnished during the period beginning July 1, 2007, and ending December 31, 2007, the quality measures specified under this paragraph are the measures identified as 2007 physician quality measures under the Physician Voluntary Reporting Program as published on the public website of the Centers for Medicare & Medicaid Services as of December 20, 2006, except as may be changed by the Secretary based on the results of a consensus-based process in January of 2007, if such change is published on such website by not later than April 1, 2007.
(ii) Subsequent refinements in application permitted The Secretary may, from time to time (but not later than July 1, 2007), publish on such website (without notice or opportunity for public comment) modifications or refinements (such as code additions, corrections, or revisions) for the application of quality measures previously published under clause (i), but may not, under this clause, change the quality measures under the reporting system.
(iii) Implementation Notwithstanding any other provision of law, the Secretary may implement by program instruction or otherwise this subsection for 2007.
(B) For 2008 and 2009 

(i) In general For purposes of reporting data on quality measures for covered professional services furnished during 2008 and 2009, the quality measures specified under this paragraph for covered professional services shall be measures that have been adopted or endorsed by a consensus organization (such as the National Quality Forum or AQA), that include measures that have been submitted by a physician specialty, and that the Secretary identifies as having used a consensus-based process for developing such measures. Such measures shall include structural measures, such as the use of electronic health records and electronic prescribing technology.
(ii) Proposed set of measures Not later than August 15 of each of 2007 and 2008, the Secretary shall publish in the Federal Register a proposed set of quality measures that the Secretary determines are described in clause (i) and would be appropriate for eligible professionals to use to submit data to the Secretary in 2008 or 2009, as applicable. The Secretary shall provide for a period of public comment on such set of measures.
(iii) Final set of measures Not later than November 15 of each of 2007 and 2008, the Secretary shall publish in the Federal Register a final set of quality measures that the Secretary determines are described in clause (i) and would be appropriate for eligible professionals to use to submit data to the Secretary in 2008 or 2009, as applicable.
(3) Covered professional services and eligible professionals defined 
For purposes of this subsection:
(A) Covered professional services 
The term covered professional services means services for which payment is made under, or is based on, the fee schedule established under this section and which are furnished by an eligible professional.
(B) Eligible professional 
The term eligible professional means any of the following:
(i) A physician.
(ii) A practitioner described in section 1395u (b)(18)(C) of this title.
(iii) A physical or occupational therapist or a qualified speech-language pathologist.
(4) Use of registry-based reporting 
As part of the publication of proposed and final quality measures for 2008 under clauses (ii) and (iii) of paragraph (2)(B), the Secretary shall address a mechanism whereby an eligible professional may provide data on quality measures through an appropriate medical registry (such as the Society of Thoracic Surgeons National Database), as identified by the Secretary.
(5) Identification units 
For purposes of applying this subsection, the Secretary may identify eligible professionals through billing units, which may include the use of the Provider Identification Number, the unique physician identification number (described in section 1395l (q)(1) of this title), the taxpayer identification number, or the National Provider Identifier. For purposes of applying this subsection for 2007, the Secretary shall use the taxpayer identification number as the billing unit.
(6) Education and outreach 
The Secretary shall provide for education and outreach to eligible professionals on the operation of this subsection.
(7) Limitations on review 
There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, of the development and implementation of the reporting system under paragraph (1), including identification of quality measures under paragraph (2) and the application of paragraphs (4) and (5).
(8) Implementation 
The Secretary shall carry out this subsection acting through the Administrator of the Centers for Medicare & Medicaid Services.
(l) Physician Assistance and Quality Initiative Fund 

(1) Establishment 
The Secretary shall establish under this subsection a Physician Assistance and Quality Initiative Fund (in this subsection referred to as the Fund) which shall be available to the Secretary for physician payment and quality improvement initiatives, which may include application of an adjustment to the update of the conversion factor under subsection (d).
(2) Funding 

(A) Amount available 

(i) In general Subject to clause (ii), there shall be available to the Fund the following amounts:
(I) For expenditures during 2008, an amount equal to $150,500,000.
(II) For expenditures during 2009, an amount equal to $24,500,000.
(III) For expenditures during 2013, an amount equal to $4,960,000,000.
(ii) Limitations on expenditures
(I) 2008 The amount available for expenditures during 2008 shall be reduced as provided by subparagraph (A) of section 225 (c)(1) and section 524 of the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2008 (division G of the Consolidated Appropriations Act, 2008).
(II) 2009 The amount available for expenditures during 2009 shall be reduced as provided by subparagraph (B) of such section 225 (c)(1).
(III) 2013 The amount available for expenditures during 2013 shall only be available for an adjustment to the update of the conversion factor under subsection (d) for that year.
(B) Timely obligation of all available funds for services 
The Secretary shall provide for expenditures from the Fund in a manner designed to provide (to the maximum extent feasible) for the obligation of the entire amount available for expenditures, after application of subparagraph (A)(ii), during
(i) 2008 for payment with respect to physicians services furnished during 2008;
(ii) 2009 for payment with respect to physicians services furnished during 2009; and
(iii) 2013 for payment with respect to physicians services furnished during 2013.
(C) Payment from Trust Fund 
The amount specified in subparagraph (A) shall be available to the Fund, as expenditures are made from the Fund, from the Federal Supplementary Medical Insurance Trust Fund under section 1395t of this title.
(D) Funding limitation 
Amounts in the Fund shall be available in advance of appropriations in accordance with subparagraph (B) but only if the total amount obligated from the Fund does not exceed the amount available to the Fund under subparagraph (A). The Secretary may obligate funds from the Fund only if the Secretary determines (and the Chief Actuary of the Centers for Medicare & Medicaid Services and the appropriate budget officer certify) that there are available in the Fund sufficient amounts to cover all such obligations incurred consistent with the previous sentence.
(E) Construction 
In the case that expenditures from the Fund are applied to, or otherwise affect, a conversion factor under subsection (d) for a year, the conversion factor under such subsection shall be computed for a subsequent year as if such application or effect had never occurred.
[1] So in original. No subpar. (F) has been enacted.
[2] So in original. Probably should be “elapsed”.
[3] So in original. The comma probably should not appear.
[4] So in original. Probably should be followed by a comma.