Nancy-Ann Min DeParle, Administrator
Health Care Financing Administration
Department of Health and Human Services
Attn: HCFA-1006-P, P.O. Box 26688
Baltimore, MD 21207-0488
Dear Administrator DeParle:
On June 5, 1998, the Health Care Financing Administration (HCFA) published a proposed rule revising the Medicare Part B payment policies for the 1999 physician fee schedule. The proposed rule seeks to implement certain provisions of the Balanced Budget Act of 1997 and other changes. Among those changes is a new methodology for establishing relative value units (RVU) for portable x-ray/EKG set-up and transportation based on average allowed charge data. The proposal seeks to nationalize transportation and will result in severe cuts in Medicare payments for portable x-ray/EKG suppliers.
The Office of the Chief Counsel for Advocacy of the U.S. Small Business Administration was created in 1976 to represent the views and interests of small business in federal policy making activities.(1) The Chief Counsel participates in rulemakings when he deems it necessary to ensure proper representation of small business interests. In addition to these responsibilities the Chief Counsel monitors compliance with the Regulatory Flexibility Act (RFA), and works with federal agencies to ensure that their rulemaking demonstrate an analysis of the impact that their decisions will have on small businesses.
Portable X-Ray/EKG Services
Portable x-ray/EKG suppliers are technologists who operate "on-call" at all times, and transport x-rays and EKGs to sick, elderly and/or frail patients—most of whom reside in nursing homes (on a short or long term basis), and some of whom still reside in their homes. Most EKG and x-ray services are performed in doctor’s offices and hospitals, however, the portable service allows sick and elderly patients access to x-ray and EKG equipment without moving the patient and risking further injury or aggravation of their already frail condition. In addition, the portable service is less expensive for the Medicare system than sending patients to the hospital by ambulance for the same services. According to industry statistics and a GAO report, the portable services cost Medicare significantly less than it costs to transport a patient in an ambulance for a hospital x-ray(2)
Medicare has traditionally paid portable x-ray/EKG suppliers in three components: 1) the technical component which involves administering the diagnostic test; 2) the set-up component which involves setting up the equipment and preparing/positioning the patient; and 3) the transportation component which involves driving the equipment to and from nursing homes or private homes. Medicare covers 85% of these portable services. In the past, Medicare permitted the portable equipment suppliers to receive a separate locality-based transportation payment in addition to the fee for the actual test. The separate transportation payment was eliminated for ultrasound services as of January 1, 1996; and the payment for EKG services was eliminated effective January 1, 1997, but then temporarily restored by the Balanced Budget Act of 1997.
Impact Assessment: GAO Report
GAO prepared a May 1998 report on changing the transportation policy for portable equipment in response to a request by The Honorable Bill Archer, Chairman of the Ways and Means Committee, U.S. House of Representatives.(3) GAO attempted to address how HCFA’s change would affect Medicare beneficiaries and program costs. Specifically, GAO analyzed: 1) the Medicare recipients, places of service, and providers who might be affected most; 2) the number of services that would be affected by the changed policy; and 3) the effect on Medicare’s program costs. The report was inconclusive with regard to costs and savings because GAO could not determine if mobile providers would continue to supply services as a result of eliminating the transportation payments. In fact, GAO estimated the effect of a revised payment policy would range from a savings of $11 million to a cost of $9.7 million for EKG tests and a savings of $400,000 to a cost of $125,000 for ultrasound tests. The savings would only be realized if homebound beneficiaries and nursing home residents did not travel outside in Medicare-paid ambulances to receive the tests.
Whether or not mobile providers will continue to supply service is definitely an important question—but, not the only question. Neither HCFA nor GAO have adequately addressed the impact on the industry. HCFA failed to address the issue at all in its rulemaking—only referring to the changed payment in one line of a 108-page chart in the Federal Register. In other words, there was no discussion in the proposed rulemaking about the impact on the portable x-ray/EKG industry. GAO shed some insight into how the industry might be impacted, but stopped short of acknowledging that this highly unique and specialized industry will be significantly impacted—regardless of Medicare savings, regardless of how many portable x-ray/EKG providers do not currently receive a separate transportation payment, and regardless of how frequently the service is currently used. In determining impact, the focus of an analysis should not stop with making an assessment of whether suppliers will no longer provide the service or go out of business. In determining impact, there should also be an analysis of lost profits and ability to maintain competitive pricing in a regional market.
If the transportation component is removed or severely reduced, there will obviously be an impact. The Office of Advocacy has anecdotal information from one business in the industry indicating that the transportation component is the most expensive of the three components. Generally, the business owner would be reimbursed a total of $98.99 for a typical chest x-ray (inclusive of all three components). Of that amount, $70.00 goes toward the transportation component. Under the current proposal, this business owner claims that his total payment would drop to $54.48 (which represents an overall reduction of about 45%). This business owner may be able to stay in business, but at what cost? By any standards, a 45% reduction is significant.
The Regulatory Flexibility Act
When an agency determines that there is likely to be a significant economic impact on a substantial number of small entities, the agency must prepare an initial regulatory flexibility analysis (IRFA) pursuant to section 603 of the RFA. "Significant economic impact" certainly applies and was discussed in the preceding paragraphs. "Substantial number" in the context of the instant rulemaking means the number of portable x-ray/EKG providers that will be affected by the regulation. "Substantial number" is a relative term and does not mean the number of portable x-ray/EKG providers affected in relation to the number of physicians affected. Therefore, an analysis of the impact on physicians, such as the one provided by HCFA, is irrelevant. The term "substantial number" does not even mean the number of portable x-ray/EKG providers affected in relation to portable x-ray/EKG providers not affected. "Substantial number" refers to the proportion of portable x-ray/EKG providers that currently receive a separate transportation payment and will have to comply with the new requirements. Since it is more likely than not that the majority of the firms in the portable x-ray/EKG industry are "small,"(4) a substantial number of small businesses in that industry will likely be affected.
An IRFA is really a tool that agencies can use to help minimize the burden on small entities while maintaining the integrity of a regulatory scheme. The ideal is not to force agencies to abandon their regulatory objectives, but to help agencies refine those objectives and eliminate unnecessary burden on the affected industry. Once the determination has been made that a rule will have a significant economic impact on a substantial number of small entities, a careful analysis should follow. Section 603 of the RFA dictates that an IRFA must contain (among other things): a description of, and where feasible, an estimate of the number of small entities to which the proposed rule will apply; a description of the projected reporting, recordkeeping and other compliance requirements of the proposed rule, including an estimate of the classes of small entities which will be subject to the requirement; and a description of any significant alternatives to the proposed rule which accomplish the stated objectives of applicable statutes and which minimize any significant economic impacts of the proposed rule on small entities.(5) These and other elements are conspicuously missing from HCFA’s analysis with regard to portable x-ray/EKG providers.
An IRFA may have revealed that: 1) the costs of the regulation relative to portable providers outweigh the benefits (e.g., the savings to Medicare versus the chilling effect on competition); 2) portable providers simply cannot be analyzed with the same criteria as physician-operated radiology offices, and therefore, should be exempt from the instant rulemaking; or 3) other new regulations/requirements like the skilled nursing facility (SNF) prospective payment system for Part A patients and the consolidated billing requirements for Part B patients already impose cost burdens on portable providers that should be considered in calculating the reimbursement amount. It is not apparent from the proposed rule that HCFA considered these or any other options.
Conclusion/Recommendation
The Office of Advocacy recommends that HCFA publish a supplemental analysis detailing and analyzing the impact of the proposed rule on portable x-ray/EKG providers. It may not be sufficient for HCFA to publish such an analysis in the final rule because at least one court has ruled that it is impossible to have a valid or sufficient final regulatory flexibility analysis without the benefit of public notice and comment on the IRFA in a proposed rule.(6) HCFA should also give serious consideration to removing or exempting these providers from the instant rulemaking and publishing a separate rule with more relevant criteria as the basis of its reimbursement calculation.
The Office of Advocacy is prepared to assist you and your staff in your efforts to comply with the Regulatory Flexibility Act. Please do not hesitate to contact us at 202-205-6532.
Sincerely,
Jere W. Glover
Chief Counsel for Advocacy
Shawne Carter McGibbon
Asst. Chief Counsel for Advocacy
ENDNOTES
1. Regulatory Flexibility Act, 5 U.S.C. § 601, as amended by the Small Business Regulatory Enforcement Fairness Act, Pub. L. No. 104-121, 110 Stat. 866 (1996).
2. See, Center for Health Policy Studies, Analysis of the Costs and Reimbursement for Portable X-Ray Services (June 1995)(portable x-ray procedures cost Medicare one-third to one-fifth what it costs to transport the patient in an ambulance for a hospital x-ray.); See also GAO, Medicare: Impact of Changing Transportation Policy for Portable Equipment Is Uncertain (GAO/HEHS-98-82) (May 1998).
3. GAO, Supra note 2, at 2.
4. According to SBA’s definition of a "small business," a small portable x-ray/EKG provider is one with annual receipts of $5 million or less. See 13 C.F.R. § 121.201. Medicare outlays for EKGs and ultrasound services in 1995 totaled $12 million and $8 million respectively. See GAO, supra note 2, at 2. Medicare typically pays for about 85% of these services. Based on this information, it is probably safe to assume that most providers in this industry category are small.
5. See 5 U.S.C. § 603(b-c).
6. See Southern Offshore Fishing Association. v. Daley, 995 F. Supp. 1411 (M.D. Fla. 1998).