| Page Range | 70669-71680 | |
| FR Document |
| Page and Subject | |
|---|---|
| 80 FR 70680 - Schedules of Controlled Substances: Placement of Eluxadoline Into Schedule IV | |
| 80 FR 71677 - Termination of Emergency With Respect to the Actions and Policies of Former Liberian President Charles Taylor | |
| 80 FR 70834 - Sunshine Act Meeting | |
| 80 FR 70864 - In the Matter of Riverdale Mining Inc., and Tresoro Mining Corp., Order of Suspension of Trading | |
| 80 FR 70862 - In the Matter of Tirex Corporation, Order of Suspension of Trading | |
| 80 FR 70782 - Sunshine Act Meeting | |
| 80 FR 70752 - Foreign-Trade Zone (FTZ) 277-Western Maricopa County, Arizona; Authorization of Production Activity; The Cookson Company, Inc. (Rolling Steel Doors); Goodyear, Arizona | |
| 80 FR 70802 - Sunshine Act Meeting | |
| 80 FR 70751 - Foreign-Trade Zone (FTZ) 76-Bridgeport, Connecticut; Notification of Proposed Production Activity; MannKind Corporation (Inhalable Insulin); Danbury, Connecticut | |
| 80 FR 70752 - Foreign-Trade Zone 119-Minneapolis/St. Paul, Minnesota; Application for Subzone; CNH Industrial America LLC; Benson, Minnesota | |
| 80 FR 70754 - Polyethylene Terephthalate Film, Sheet, and Strip From the People's Republic of China: Final Results of Administrative Review; 2013-2014 | |
| 80 FR 70808 - Medicare Program; CY 2016 Inpatient Hospital Deductible and Hospital and Extended Care Services Coinsurance Amounts | |
| 80 FR 70756 - Multilayered Wood Flooring From the People's Republic of China: Final Results of Changed Circumstances Review | |
| 80 FR 70758 - Circular Welded Carbon Quality Steel Pipe From the People's Republic of China: Notice of Court Decision Not in Harmony With Final Determination and Amended Final Determination Under Section 129 of the Uruguay Round Agreements Act | |
| 80 FR 70881 - Fee Schedule for the Transfer of U.S. Treasury Book-Entry Securities Held on the National Book-Entry System | |
| 80 FR 70831 - Johnson-O'Malley Program | |
| 80 FR 70752 - Impact of the Implementation of the Chemical Weapons Convention (CWC) on Legitimate Commercial Chemical, Biotechnology, and Pharmaceutical Activities Involving “Schedule 1” Chemicals (Including Schedule 1 Chemicals Produced as Intermediates) Through Calendar Year 2015 | |
| 80 FR 70811 - Medicare Program; Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible Beginning January 1, 2016 | |
| 80 FR 70718 - Scrapie in Sheep and Goats | |
| 80 FR 70830 - Notice of Opportunity for Public Comment on the Dietary Supplement Label Database | |
| 80 FR 70805 - Medicare Program; CY 2016 Part A Premiums for the Uninsured Aged and for Certain Disabled Individuals Who Have Exhausted Other Entitlement | |
| 80 FR 70718 - Approval of Regional Haze BART Alternative Measure: Washington | |
| 80 FR 70781 - Release of Draft Control Techniques Guidelines for the Oil and Natural Gas Industry | |
| 80 FR 70755 - Hydrofluorocarbon Blends and Components Thereof From the People's Republic of China: Postponement of Preliminary Determination of Antidumping Duty Investigation | |
| 80 FR 70687 - Safety Zone; Unknown Substance in the Vicinity of Kelley's Island Shoal, Lake Erie; Kelley's Island, OH | |
| 80 FR 70768 - Privacy Act of 1974; Computer Matching Program Between the Department of Education and the Department of Justice | |
| 80 FR 70697 - Tamarind Seed Gum, 2-Hydroxypropyl Ether Polymer; Tolerance Exemption | |
| 80 FR 70717 - Fisheries of the Exclusive Economic Zone Off Alaska; Yellowfin Sole for Vessels Participating in the BSAI Trawl Limited Access Fishery in the Bering Sea and Aleutian Islands Management Area | |
| 80 FR 70884 - Notice of Meeting Cancellation-Correction | |
| 80 FR 70843 - Proposal Review Panel for Computing and Communication Foundations; Notice of Meeting | |
| 80 FR 70843 - Business and Operations Advisory Committee; Notice of Meeting | |
| 80 FR 70865 - Petition for Waiver of Compliance | |
| 80 FR 70807 - Agency Information Collection Activities: Proposed Collection; Comment Request | |
| 80 FR 70810 - Agency Information Collection Activities: Submission for OMB Review; Comment Request | |
| 80 FR 70779 - Swan Lake North Hydro LLC; Notice of Application Tendered for Filing With the Commission and Soliciting Additional Study Requests | |
| 80 FR 70778 - Public Service Company of Oklahoma: Notice of Filing | |
| 80 FR 70778 - Jordan Whittaker; Notice of Preliminary Permit Application Accepted for Filing and Soliciting Comments, Motions To Intervene, and Competing Applications | |
| 80 FR 70774 - Consolidated Irrigation Company; Notice of Surrender of Preliminary Permit | |
| 80 FR 70779 - Blackstone Hydro, Inc.; Notice of Intent To File License Application, Filing of Pre-Application Document, Approving Use of the Traditional Licensing Process | |
| 80 FR 70777 - Oryx Southern Delaware Oil Gathering and Transport LLC; Notice of Petition for Declaratory Order | |
| 80 FR 70779 - Drury, Scott D.; Notice of Filing | |
| 80 FR 70772 - Notice of Petition for Enforcement | |
| 80 FR 70774 - East Texas Electric Cooperative, Inc., Sam Rayburn Electric Cooperative, Inc., Tex-La Electric Cooperative of Texas, Inc. v. Entergy Texas, Inc., Entergy Texas, Inc. v. East Texas Electric Cooperative, Inc., Sam Rayburn Electric Cooperative, Inc., Tex-La Electric Cooperative of Texas, Inc.; Notice of Filing | |
| 80 FR 70771 - Columbia Gas Transmission, LLC; Notice of Request Under Blanket Authorization | |
| 80 FR 70771 - Tennessee Gas Pipeline Company, L.L.C.; Notice of Application | |
| 80 FR 70775 - Total Peaking Services, LLC; Notice of Intent To Prepare an Environmental Assessment for the Proposed Vaporization Capacity Increase and Bog Compressor Project, and Request for Comments on Environmental Issues | |
| 80 FR 70777 - Combined Notice of Filings #2 | |
| 80 FR 70774 - Industrial Energy Users-Ohio, Complainant, v. The Ohio Power Company and PJM Interconnection, LLC, Respondents: Notice of Complaint | |
| 80 FR 70780 - Combined Notice of Filings #1 | |
| 80 FR 70773 - Combined Notice of Filings #1 | |
| 80 FR 70841 - Notice of Information Collection | |
| 80 FR 70826 - Agency Information Collection Activities: Submission to OMB for Review and Approval; Public Comment Request | |
| 80 FR 70829 - Submission for OMB Review; 30-Day Comment Request Scientific Information Reporting System (SIRS) NIGMS | |
| 80 FR 70675 - Export Administration Regulations: Removal of Special Comprehensive License Provisions | |
| 80 FR 70836 - Notice Pursuant to the National Cooperative Research and Production Act of 1993-TeleManagement Forum | |
| 80 FR 70837 - Notice Pursuant to the National Cooperative Research and Production Act of 1993-Silicon Integration Initiative, Inc. | |
| 80 FR 70836 - Notice Pursuant to the National Cooperative Research and Production Act of 1993-OpenDaylight Project, Inc. | |
| 80 FR 70846 - Rare Element Resources, Inc.; Bear Lodge Project | |
| 80 FR 70835 - Notice Pursuant to the National Cooperative Research and Production Act of 1993-High Density Packaging User Group International, Inc. | |
| 80 FR 70850 - Preparing and Reviewing Licensing Applications for Instrumentation and Control Systems for Non-Power Reactors | |
| 80 FR 70843 - Sodium Iodide-131 Patient Release Information Collection | |
| 80 FR 70804 - Commission To Eliminate Child Abuse and Neglect Fatalities; Announcement of Meetings | |
| 80 FR 70827 - Meeting of the Secretary's Advisory Committee on Human Research Protections | |
| 80 FR 70676 - Amendment to the Export Administration Regulations to Add XBS Epoxy System to the List of 0Y521 Series; Technical Amendment to Update Other 0Y521 Items | |
| 80 FR 70754 - President's Export Council; Meeting of the President's Export Council | |
| 80 FR 70770 - Melvin R. Sampson Hatchery, Yakima Basin Coho Project | |
| 80 FR 70747 - Availability of FSIS Compliance Guidelines for Allergens and Ingredients of Public Health Concern: Identification, Prevention and Control, and Declaration Through Labeling | |
| 80 FR 70840 - Labor Certification Process for the Temporary Employment of Aliens in Agriculture in the United States: Adverse Effect Wage Rate for Range Occupations Through 2016 | |
| 80 FR 70760 - Multistakeholder Process To Promote Collaboration on Vulnerability Research Disclosure | |
| 80 FR 70783 - Federal Reserve Bank Services | |
| 80 FR 70838 - Agency Information Collection Activities; Proposed eCollection eComments Requested; Extension Without Change, of a Previously Approved Collection Federal Coal Lease Request | |
| 80 FR 70840 - Agency Information Collection Activities; Submission for OMB Review; Comment Request; Disclosures for Participant Directed Individual Account Plans | |
| 80 FR 70751 - Generic Clearance for Questionnaire Pretesting Research | |
| 80 FR 71617 - Mark William Andrew Holder, M.D.; Decision and Order | |
| 80 FR 70765 - Privacy Act of 1974; System of Records | |
| 80 FR 70750 - Deschutes Provincial Advisory Committee | |
| 80 FR 70866 - Coordinated Remedy Order With Annex A; Coordinated Remedy Program Proceeding | |
| 80 FR 70762 - Procurement List; Addition and Deletion | |
| 80 FR 70761 - Procurement List; Proposed Additions | |
| 80 FR 70874 - Hazardous Materials: California and Los Angeles County Requirements Applicable to the On-Site Handling and Transportation of Hazardous Materials | |
| 80 FR 70767 - Privacy Act of 1974; System of Records | |
| 80 FR 70838 - Agency Information Collection Activities; Proposed eCollection eComments Requested; Acquisition 360 Survey | |
| 80 FR 70827 - The National Advisory Council on the National Health Service Corps; Notice for Request for Nominations | |
| 80 FR 70881 - Proposed Collection; Comment Request for Form 8611 | |
| 80 FR 70680 - Transitional Amendments To Satisfy the Market Rate of Return Rules for Hybrid Retirement Plans | |
| 80 FR 70879 - Agency Information Collection Activities: Information Collection Renewal; Submission for OMB Review; Market Risk | |
| 80 FR 70669 - Oranges and Grapefruit Grown in Lower Rio Grande Valley in Texas; Decreased Assessment Rate | |
| 80 FR 70694 - Air Plan Approval; Michigan; Sewage Sludge Incinerators State Plan and Small Municipal Waste Combustors Negative Declaration for Designated Facilities and Pollutants | |
| 80 FR 70727 - Air Plan Approval; Michigan; Sewage Sludge Incinerators State Plan and Small Municipal Waste Combustors Negative Declaration for Designated Facilities and Pollutants | |
| 80 FR 70689 - Approval and Promulgation of Implementation Plans; Arizona; Phased Discontinuation of Stage II Vapor Recovery Program | |
| 80 FR 70721 - Approval of Air Quality State Implementation Plans (SIP); State of Nebraska; Infrastructure SIP Requirements for the 2008 Ozone National Ambient Air Quality Standard in Regards to Section 110(a)(2)(D)(i)(I)-Prongs 1 and 2 | |
| 80 FR 70883 - Proposed Collection; Comment Request for Form 6781 | |
| 80 FR 70883 - Proposed Collection; Comment Request for Schedule C-EZ (Form 1040) | |
| 80 FR 70882 - Proposed Collection; Comment Request for Form 5304-SIMPLE, Form 5305-SIMPLE, and Notice 98-4 | |
| 80 FR 70782 - Information Collection Being Reviewed by the Federal Communications Commission | |
| 80 FR 70880 - Agency Information Collection Activities: Information Collection Revision; Comment Request; Domestic First Lien Residential Mortgage Data | |
| 80 FR 70834 - Certain Beverage Brewing Capsules, Components Thereof, and Products Containing the Same; Commission Determination To Review in Part a Final Initial Determination Finding No Violation; Schedule for Briefing on the Issues Under Review and on Remedy, the Public Interest, and Bonding | |
| 80 FR 71649 - Fisheries of the Exclusive Economic Zone Off Alaska; Bering Sea and Aleutian Islands Management Area; American Fisheries Act; Amendment 111 | |
| 80 FR 70728 - Independent Living Services and Centers for Independent Living | |
| 80 FR 70851 - New Postal Product | |
| 80 FR 70750 - Yakutat Resource Advisory Committee | |
| 80 FR 70860 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Price List to Modify Certain Fees for Transactions that Remove Liquidity from the Exchange | |
| 80 FR 70852 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a Principles-Based Approach To Prohibit the Misuse of Material Nonpublic Information by Lead Market Makers (“LMMs”) by Deleting Rule 6.83 | |
| 80 FR 70857 - Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of Amendments Nos. 1 and 2 and Order Granting Accelerated Approval of a Proposed Rule Change to List and Trade Shares of the ProShares Managed Futures Strategy ETF of the ProShares Trust Under BATS Rule 14.11 on BATS Exchange, Inc. | |
| 80 FR 70851 - Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Withdrawal of a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Adopt New Rule 8.17 To Provide a Process for an Expedited Suspension Proceeding and Rule 12.15 To Prohibit Layering and Spoofing on BATS Exchange, Inc. | |
| 80 FR 70856 - Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX Rule 521 | |
| 80 FR 70862 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish an Examination Fee for the Securities Trader Qualification Examination (Series 57) | |
| 80 FR 70802 - Granting of Request for Early Termination of the Waiting Period Under the Premerger Notification Rules | |
| 80 FR 70821 - Center for Devices and Radiological Health: Experiential Learning Program; General Training Program | |
| 80 FR 70833 - Sugar From Mexico | |
| 80 FR 70822 - Drugs for Human Use; Drug Efficacy Study Implementation; Nitroglycerin Transdermal Systems; Withdrawal of Hearing Request; Withdrawal of Applications; Final Resolution of Hearing Requests Regarding Transdermal Systems Under Docket | |
| 80 FR 70842 - Arts Advisory Panel Meetings | |
| 80 FR 70820 - Eighth Annual Sentinel Initiative; Public Workshop; Request for Comments | |
| 80 FR 70839 - Notice of Lodging of Proposed Amendment to Consent Decree Under the Comprehensive Environmental Repsonse, Compensation, and Liability Act | |
| 80 FR 70679 - National Environmental Policy Act; Environmental Assessments for Tobacco Products; Categorical Exclusions; Correction | |
| 80 FR 70825 - Request for Nominations for Voting Members on a Public Advisory Committee; Tobacco Products Scientific Advisory Committee | |
| 80 FR 70825 - Gastroenterology and Urology Devices Panel of the Medical Devices Advisory Committee; Amendment of Notice | |
| 80 FR 70762 - Agency Information Collection Activities; Proposed Collection; Comment Request; Third Party Testing of Children's Products | |
| 80 FR 70759 - Marine Mammals; File No. 17952 | |
| 80 FR 70760 - Marine Mammals; File No. 17670 | |
| 80 FR 70830 - National Institute of Allergy and Infectious Diseases; Notice of Closed Meeting | |
| 80 FR 70828 - National Institute of Diabetes and Digestive and Kidney Diseases; Notice of Closed Meetings | |
| 80 FR 70828 - National Institute on Minority Health and Health Disparities; Notice of Closed Meeting | |
| 80 FR 70830 - Prospective Grant of Exclusive License: Development of Cripto-1 Point of Care (POC) Tests and Kits for the Detection of Cancer | |
| 80 FR 70700 - Endangered and Threatened Wildlife and Plants; Removal of the Delmarva Peninsula Fox Squirrel From the List of Endangered and Threatened Wildlife | |
| 80 FR 70674 - IFR Altitudes; Miscellaneous Amendments | |
| 80 FR 70671 - Regulatory Capital Rules; Enhanced Prudential Standards for Bank Holding Companies and Foreign Banking Organizations; Correction | |
| 80 FR 71387 - Crowdfunding | |
| 80 FR 70832 - Moose-Wilson Corridor Comprehensive Management Plan, Draft Environmental Impact Statement, Grand Teton National Park, Wyoming | |
| 80 FR 70885 - Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2016 |
Agricultural Marketing Service
Animal and Plant Health Inspection Service
Food Safety and Inspection Service
Forest Service
Census Bureau
Foreign-Trade Zones Board
Industry and Security Bureau
International Trade Administration
National Oceanic and Atmospheric Administration
National Telecommunications and Information Administration
Bonneville Power Administration
Federal Energy Regulatory Commission
Centers for Medicare & Medicaid Services
Food and Drug Administration
Health Resources and Services Administration
National Institutes of Health
Coast Guard
Fish and Wildlife Service
Indian Affairs Bureau
National Park Service
Antitrust Division
Drug Enforcement Administration
Employment and Training Administration
National Endowment for the Arts
Federal Aviation Administration
Federal Railroad Administration
National Highway Traffic Safety Administration
Pipeline and Hazardous Materials Safety Administration
Bureau of the Fiscal Service
Comptroller of the Currency
Internal Revenue Service
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
To subscribe to the Federal Register Table of Contents LISTSERV electronic mailing list, go to http://listserv.access.thefederalregister.org and select Online mailing list archives, FEDREGTOC-L, Join or leave the list (or change settings); then follow the instructions.
Agricultural Marketing Service, USDA.
Interim rule with request for comments.
This rule implements a recommendation from the Texas Valley Citrus Committee (Committee) for a decrease in the assessment rate established for the 2015-16 and subsequent fiscal periods from $0.11 to $0.08 per 7/10-bushel carton or equivalent of oranges and grapefruit handled under the marketing order (order). The Committee locally administers the order, and is comprised of producers and handlers of oranges and grapefruit operating within the area of production. Assessments upon orange and grapefruit handlers are used by the Committee to fund reasonable and necessary expenses of the program. The fiscal period begins August 1 and ends July 31. The assessment rate will remain in effect indefinitely unless modified, suspended, or terminated.
Effective November 17, 2015. Comments received by January 15, 2016, will be considered prior to issuance of a final rule.
Interested persons are invited to submit written comments concerning this rule. Comments must be sent to the Docket Clerk, Marketing Order and Agreement Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; Fax: (202) 720-8938; or Internet:
Abigail Campos, Marketing Specialist, or Christian D. Nissen, Regional Director, Southeast Marketing Field Office, Marketing Order and Agreement Division, Specialty Crops Program, AMS, USDA; Telephone: (863) 324-3375, Fax: (863) 291-8614, or Email:
Small businesses may request information on complying with this regulation by contacting Jeffrey Smutny, Marketing Order and Agreement Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491, Fax: (202) 720-8938, or Email:
This rule is issued under Marketing Agreement and Order No. 906, as amended (7 CFR part 906), regulating the handling of oranges and grapefruit grown in the Lower Rio Grande Valley in Texas, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”
The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Orders 12866, 13563, and 13175.
This rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order now in effect, orange and grapefruit handlers are subject to assessments. Funds to administer the order are derived from such assessments. It is intended that the assessment rate as issued herein will be applicable to all assessable oranges and grapefruit beginning August, 1, 2015, and continue until amended, suspended, or terminated.
The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. Such handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.
This rule decreases the assessment rate established for the Committee for the 2015-16 and subsequent fiscal periods from $0.11 to $0.08 per 7/10-bushel carton or equivalent of oranges and grapefruit handled.
The Texas orange and grapefruit marketing order provides authority for the Committee, with the approval of USDA, to formulate an annual budget of expenses and collect assessments from handlers to administer the program. The members of the Committee are producers and handlers of Texas oranges and grapefruit. They are familiar with the Committee's needs and with the costs for goods and services in their local area and are thus in a position to formulate an appropriate budget and assessment rate. The assessment rate is formulated and discussed in a public meeting. Thus, all directly affected persons have an opportunity to participate and provide input.
For the 2014-15 and subsequent fiscal periods, the Committee recommended, and USDA approved, an assessment rate that would continue in effect from fiscal period to fiscal period unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Committee or other information available to USDA.
The Committee met on June 24, 2015, and unanimously recommended 2015-16 expenditures of $701,148 and an assessment rate of $0.08 per 7/10-bushel carton or equivalent of oranges and
The major expenditures recommended by the Committee for the 2015-16 year include $600,248 for the Mexican fruit fly control program, $77,200 for management and compliance, and $23,700 for operating expenses. Budgeted expenses for these items in 2014-15 were $503,000, $175,000, and $21,500, respectively.
The assessment rate recommended by the Committee was derived by dividing anticipated expenses by expected shipments of Texas oranges and grapefruit. Orange and grapefruit shipments for the 2015-16 year are estimated at 8 million 7/10-bushel cartons or equivalent, which should provide $640,000 in assessment income. Income derived from handler assessments, along with interest income and funds from the Committee's authorized reserve, will be adequate to cover budgeted expenses. Income in the reserve (currently around $230,000) will be kept within the maximum permitted by the order (approximately one fiscal period's expenses as stated in § 906.35).
The assessment rate established in this rule will continue in effect indefinitely unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Committee or other available information.
Although this assessment rate is effective for an indefinite period, the Committee will continue to meet prior to or during each fiscal period to recommend a budget of expenses and consider recommendations for modification of the assessment rate. The dates and times of Committee meetings are available from the Committee or USDA. Committee meetings are open to the public and interested persons may express their views at these meetings. USDA will evaluate Committee recommendations and other available information to determine whether modification of the assessment rate is needed. Further rulemaking will be undertaken as necessary. The Committee's 2015-16 budget and those for subsequent fiscal periods will be reviewed and, as appropriate, approved by USDA.
Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) has considered the economic impact of this rule on small entities. Accordingly, AMS has prepared this initial regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf.
There are approximately 170 producers of oranges and grapefruit in the production area and 13 handlers subject to regulation under the marketing order. Small agricultural producers are defined by the Small Business Administration as those having annual receipts less than $750,000, and small agricultural service firms are defined as those whose annual receipts are less than $7,000,000 (13 CFR 121.201).
According to Committee data and information from the National Agricultural Statistics Service, the weighted average grower price for Texas citrus during the 2013-14 season was around $13.89 per box and total shipments were near 7.4 million boxes. Using the weighted average price and shipment information, and assuming a normal distribution, the majority of growers would have annual receipts of less than $750,000. In addition, based on available information, the majority of handlers have annual receipts of less than $7,000,000 and could be considered small businesses under SBA's definition. Thus, the majority of Texas citrus producers and handlers may be classified as small entities.
This rule decreases the assessment rate established for the Committee and collected from handlers for the 2015-16 and subsequent fiscal periods from $0.11 to $0.08 per 7/10-bushel carton or equivalent of Texas citrus. The Committee unanimously recommended 2015-16 expenditures of $701,148 and an assessment rate of $0.08 per 7/10-bushel carton or equivalent handled. The assessment rate of $0.08 is $0.03 lower than the 2014-2015 rate. The quantity of assessable oranges and grapefruit for the 2015-16 fiscal period is estimated at 8 million 7/10-bushel cartons or equivalent. Thus, the $0.08 rate should provide $640,000 in assessment income. Income derived from handler assessments along with interest income and funds from Committee's authorized reserve, will be adequate to cover budgeted expenses.
The major expenditures recommended by the Committee for the 2015-16 year include $600,248 for the Mexican fruit fly control program, $77,200 for management and compliance, and $23,700 for operating expenses. Budgeted expenses for these items in 2014-15 were $503,000, $175,000, and $21,500, respectively.
The recommended 2015-16 expenditures include decreases in the amount budgeted for educational outreach and compliance. The Committee considered proposed expenses and recommended decreasing the assessment rate to more closely align assessment income to the lower budget.
Prior to arriving at this budget and assessment rate, the Committee considered information from various sources, such as the Committee's Budget and Personnel Committee and the Market Development Committee. Alternative expenditure levels were discussed by these groups, based upon the relative value of various activities to the Texas citrus industry. Based on estimated shipments, the recommended assessment rate of $0.08 should provide $640,000 in assessment income. The Committee determined that the assessment revenue, along with funds from reserves and interest income, would be adequate to cover budgeted expenses for the 2015-16 fiscal period.
A review of historical information and preliminary information pertaining to the upcoming fiscal period indicates that the average grower price for the 2015-16 season could be around $13.00 per 7/10-bushel carton or equivalent of oranges and grapefruit. Therefore, the estimated assessment revenue for the 2015-16 fiscal period, as a percentage of total grower revenue would be around 0.6 percent.
This action decreases the assessment obligation imposed on handlers. Assessments are applied uniformly on all handlers, and decreasing the assessment rate reduces the burden on handlers.
The Committee's meeting was widely publicized throughout the Texas citrus industry and all interested persons were invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, the June 24, 2015, meeting was a public meeting. All entities, both large and small, were able to express views on this issue. Interested persons are invited to submit comments on this interim rule, including the regulatory
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the order's information collection requirements have been previously approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0189 Generic Fruit Crops. No changes in those requirements are necessary as a result of this action. Should any changes become necessary, they would be submitted to OMB for approval.
This action imposes no additional reporting or recordkeeping requirements on either small or large Texas orange and grapefruit handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.
AMS is committed to complying with the E-Government Act, to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.
USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.
A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at:
After consideration of all relevant material presented, including the information and recommendation submitted by the Committee and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.
Pursuant to 5 U.S.C. 553, it is also found and determined upon good cause that it is impracticable, unnecessary, and contrary to the public interest to give preliminary notice prior to putting this rule into effect, and that good cause exists for not postponing the effective date of this rule until 30 days after publication in the
Grapefruit, Marketing agreements, Oranges, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, 7 CFR part 906 is amended as follows:
7 U.S.C. 601-674.
On and after August, 1, 2015, an assessment rate of $0.08 per 7/10-bushel carton or equivalent is established for oranges and grapefruit grown in the Lower Rio Grande Valley in Texas.
Board of Governors of the Federal Reserve System.
Final rule; correcting amendment.
The Board of Governors of the Federal Reserve System (Board) published a final rule in the
The corrections are effective November 16, 2015, except that instructions 10.b and 10.f amending 12 CFR 208.43 are effective January 1, 2018.
Benjamin McDonough, Special Counsel, (202) 452-2036, Julie Anthony, Counsel, (202) 475-6682, or Mark Buresh, Senior Attorney, (202) 452-5270, Legal Division, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW., Washington, DC 20551. Telecommunications Device for the Deaf (TDD) users may contact (202) 263-4869.
The Board is correcting errors in and deleting certain expired transitional requirements from the final rule that was published in the
Accounting, Agriculture, Banks, Banking, Confidential business information, Consumer protection, Crime, Currency, Global systemically important bank, Insurance, Investments, Mortgages, Reporting and recordkeeping requirements, Securities.
Administrative practice and procedure, Banks, Banking, Holding companies, Reporting and recordkeeping requirements, Securities.
Administrative practice and procedure, Banks, banking, Federal Reserve System, Holding companies, Reporting and recordkeeping requirements, Securities.
Administrative practice and procedure, Banks, Banking, Federal Reserve System, Holding companies, Nonbank financial companies supervised by the Board, Reporting and recordkeeping requirements, Securities, Stress testing.
For the reasons set forth in the preamble, chapter II of title 12 of the Code of Federal Regulations is amended as follows:
12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a, 371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1833(j), 1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1882, 2901-2907, 3105, 3310, 3331-3351, 3353, and 3905-3909; 15 U.S.C. 78b, 78l(b), 78l(i), 780-4(c)(5), 78q, 78q-1, 78w, 1681s, 1681w, 6801 and 6805; 31 U.S.C. 5318; 42 U.S.C. 4012a, 4104b, 4106, and 412
(e)
The revisions read as follows:
(a)
(1) Total Risk-Based Capital Measure: The total risk-based capital ratio;
(2) Tier 1 Risk-Based Capital Measure: The tier 1 risk-based capital ratio;
(3) Common Equity Tier 1 Capital Measure: The common equity tier 1 risk-based capital ratio; and
(4) Leverage Measure:
(i) The leverage ratio; and
(ii) With respect to an advanced approaches bank, on January 1, 2018, and thereafter, the supplementary leverage ratio.
(b)
12 U.S.C. 248(a), 321-338a, 481-486, 1462a, 1467a, 1818, 1828, 1831n, 1831o, 1831p-l, 1831w, 1835, 1844(b), 1851, 3904, 3906-3909, 4808, 5365, 5368, 5371.
(1) A top-tier savings and loan holding company that is:
(i) An institution that meets the requirements of section 10(c)(9)(C) of HOLA (12 U.S.C. 1467a(c)(9)(C)); and
(ii) As of June 30 of the previous calendar year, derived 50 percent or more of its total consolidated assets or 50 percent of its total revenues on an enterprise-wide basis (as calculated under GAAP) from activities that are not financial in nature under section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k));
(c) * * *
(3)
(ii) Non-qualifying capital instruments includable in tier 1 capital are subject to a limit of 25 percent of tier 1 capital elements, excluding any nonqualifying capital instruments and after applying all regulatory capital deductions and adjustments to tier 1 capital.
(iii) Non-qualifying capital instruments that are not included in tier 1 as a result of the limitation in paragraph (c)(3)(ii) of this section are includable in tier 2 capital.
12 U.S.C. 1844(b), 3106 and 3108, 1817(j)(13), 1818(b), 1831i, 1972, 3310, 3331-3351 and 3353; 12 U.S.C. 3901,
12 U.S.C. 321-338a, 1467a(g), 1818, 1831p-1, 1844(b), 1844(c), 5361, 5365, 5366.
(e) * * *
(2)
(B) A U.S. intermediate holding company may choose to comply with subpart E of 12 CFR part 217.
(C) Notwithstanding 12 CFR 217.100(b), if a bank holding company is a subsidiary of a foreign banking organization that is subject to this section and the bank holding company is subject to subpart E of 12 CFR part 217, the bank holding company, with the Board's prior written approval, may elect not to comply with subpart E of 12 CFR part 217.
(ii)
(3)
(ii)
(A) Policies and procedures establishing risk-management governance, risk-management procedures, and risk-control infrastructure for the U.S. intermediate holding company; and
(B) Processes and systems for implementing and monitoring compliance with such policies and procedures, including:
(
(
(
(
(iii)
(iv)
(A) Include at least one member having experience in identifying, assessing, and managing risk exposures of large, complex financial firms; and
(B) Have at least one member who:
(
(
(v) The U.S. intermediate holding company must take appropriate measures to ensure that it implements the risk management policies for the U.S. intermediate holding company and it provides sufficient information to the U.S. risk committee to enable the U.S. risk committee to carry out the responsibilities of this subpart.
(4)
(5)
Federal Aviation Administration (FAA), DOT.
Final rule.
This amendment adopts miscellaneous amendments to the required IFR (instrument flight rules) altitudes and changeover points for certain Federal airways, jet routes, or direct routes for which a minimum or maximum en route authorized IFR altitude is prescribed. This regulatory action is needed because of changes occurring in the National Airspace System. These changes are designed to provide for the safe and efficient use of the navigable airspace under instrument conditions in the affected areas.
Richard A. Dunham, Flight Procedure Standards Branch (AMCAFS-420), Flight Technologies and Programs Division, Flight Standards Service, Federal Aviation Administration, Mike Monroney Aeronautical Center, 6500 South MacArthur Blvd. Oklahoma City, OK. 73169 (Mail Address: P.O. Box 25082 Oklahoma City, OK. 73125) telephone: (405) 954-4164.
This amendment to part 95 of the Federal Aviation Regulations (14 CFR part 95) amends, suspends, or revokes IFR altitudes governing the operation of all aircraft in flight over a specified route or any portion of that route, as well as the changeover points (COPs) for Federal airways, jet routes, or direct routes as prescribed in part 95.
The specified IFR altitudes, when used in conjunction with the prescribed changeover points for those routes, ensure navigation aid coverage that is adequate for safe flight operations and free of frequency interference. The reasons and circumstances that create the need for this amendment involve matters of flight safety and operational efficiency in the National Airspace System, are related to published aeronautical charts that are essential to the user, and provide for the safe and efficient use of the navigable airspace. In addition, those various reasons or circumstances require making this amendment effective before the next scheduled charting and publication date of the flight information to assure its timely availability to the user. The effective date of this amendment reflects those considerations. In view of the close and immediate relationship between these regulatory changes and safety in air commerce, I find that notice and public procedure before adopting this amendment are impracticable and contrary to the public interest and that good cause exists for making the amendment effective in less than 30 days.
The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Airspace Navigation (air).
Accordingly, pursuant to the authority delegated to me by the Administrator, part 95 of the Federal Aviation Regulations (14 CFR part 95) is amended as follows effective at 0901 UTC, December 10, 2015.
49 U.S.C. 106(g), 40103, 40106, 40113, 40114, 40120, 44502, 44514, 44719, 44721.
Bureau of Industry and Security, Commerce.
Final rule; correcting amendment.
The Bureau of Industry and Security (BIS) publishes this final rule to amend the Export Administration Regulations (EAR) Supplement that lists “Information Collection Requirements Under the Paperwork Reduction Act: OMB Control Numbers” to remove certain citations related to Special Comprehensive Licenses listed under Collection number 0607-0152. This final rule is precipitated by an error contained in a final rule published on August 26, 2015 that resulted in the retention of these citations. This action will ensure the accurate and complete implementation of the purposes of the August 26, 2015 final rule: To remove all Special Comprehensive License provisions and related provisions from the EAR.
This rule is effective November 16, 2015.
Thomas Andrukonis, Director, Export Management and Compliance, Office of Exporter Services, Bureau of Industry and Security, by telephone at (202) 482-6396 or by email at
On August 26, 2015, the Bureau of Industry and Security (BIS) published the final rule “Export Administration Regulations: Removal of Special Comprehensive License Provisions” (80 FR 51725), effective September 25, 2015. In that rule, BIS amended the Export Administration Regulations (EAR) by removing the Special Comprehensive License (SCL) provisions and made conforming amendments.
The August 26 rule included amendatory instructions to revise or remove certain Collection numbers in Supplement No. 1 to part 730 (Information Collection Requirements Under the Paperwork Reduction Act: OMB Control Numbers). However, the amendatory instruction erroneously identified Collection number “0607-0152” as Collection number “0694-0152,” and as a result, the entry for Collection number 0607-0152 was not amended. In this final rule, BIS amends the Supplement by revising Collection number “0607-0152” to remove references to “§§ 752.7(b) and 752.15(a)” under the “Reference in the EAR” Column as originally intended. This correction will ensure the accurate and complete implementation of the purposes of the August 26, 2015 final rule: To remove all the SCL provisions and related provisions from the EAR.
Although the Export Administration Act expired on August 20, 2001, the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 8, 2013, 78 FR 16129 (March 13, 2013) and as extended by the Notice of August 7, 2015, 80 FR 48233 (August 11, 2015), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act. BIS continues to carry out the provisions of the Export Administration Act, as appropriate and to the extent permitted by law, pursuant to Executive Order 13222 as amended by Executive Order 13637.
1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. This rule has been determined to be a not significant regulatory action for purposes of Executive Order 12866.
2. This rule does not contain an information collection subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
3. This rule does not contain policies with Federalism implications as that term is defined under Executive Order 13132.
4. The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed
The provision of the Administrative Procedure Act (5 U.S.C. 553) requiring a 30-day delay in effectiveness is also waived for good cause. (5 U.S.C. 553(d)(3)). The correction contained in this final rule is merely a technical correction necessitated by a typographical error in a previously published rule, for which a notice, comment and delay were completed. The revisions made in this rule are technical corrections which should be in place as soon as possible to avoid confusion caused by the incorrect inclusion of references to sections of the EAR removed by the August 26, 2015 rule in OMB Collection number 0607-0152 in Supplement No. 1 to part 730. This change is necessary to ensure immediate, accurate and complete implementation of the purposes of the August 26, 2015 final rule.
Further, no other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this final rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule under the Administrative Procedure Act or by any other law, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601
Administrative practice and procedure, Advisory committees, Exports, Reporting and recordkeeping requirements, Strategic and critical materials.
For the reasons stated in the preamble, part 730 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows:
50 U.S.C. app. 2401
Bureau of Industry and Security, Commerce.
Interim final rule with request for comments.
In this interim final rule, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to make certain items subject to the EAR and to impose on those items a license requirement for export and reexport to all destinations, except Canada. Specifically, this rule classifies the specified XBS Epoxy System under Export Control Classification Number (ECCN) 0C521 on the Commerce Control List (CCL). As described in the final rule that established the 0Y521 series and that
This rule is effective November 16, 2015. Comments must be received by January 15, 2016. Comments requested on the addition of the 0C521 item only.
You may submit comments by any of the following methods:
•
• By mail or delivery to Regulatory Policy Division, Bureau of Industry and Security, U.S. Department of Commerce, Room 2099B, 14th Street and Pennsylvania Avenue NW., Washington, DC 20230. Refer to RIN 0694-AG70.
Michael Rithmire, Electronics and Materials Division, Office of National Security and Technology Transfer Controls by phone at (202) 482-6105 or by email at
BIS established the ECCN 0Y521 series to identify items that warrant control on the CCL but are not yet identified in an existing ECCN (77 FR 22191, April 13, 2012). Items are added to the ECCN 0Y521 series by the Department of Commerce, with the concurrence of the Departments of Defense and State, upon a determination that an item should be controlled because it provides at least a significant military or intelligence advantage to the United States or because foreign policy reasons justify such control. The ECCN 0Y521 series is a temporary holding classification with a limitation that while an item is temporarily classified under ECCN 0Y521, the U.S. Government works to adopt a control through the relevant multilateral regime(s), to determine an appropriate longer-term control over the item, or that the item does not warrant control on the CCL.
Items classified under ECCN 0Y521, including the item identified in this interim final rule as an 0C521 item, remain so-classified for one year from the date a final rule identifying the item is published in the
The license requirements and policies for the ECCN 0Y521 series appear in § 742.6(a)(7) of the EAR. ECCN 0Y521 items are subject to a nearly worldwide license requirement (
In this rule, BIS amends the EAR to make the specified XBS Epoxy System subject to the EAR and impose a license requirement on the item. This item is being added to the 0Y521 series pursuant to a determination by the Department of Commerce, with the concurrence of the Departments of State and Defense, that the item should be controlled because it provides a significant military or intelligence advantage to the United States or because foreign policy reasons justify such controls. The specified XBS Epoxy System is classified under ECCN 0C521 No. 1. The control, which appears in the table found in Supplement No. 5 to part 774 of the EAR, covers an Epoxy system designed to obfuscate critical technology components against X-ray and terahertz microscopy imaging attempts.
License applications for this item may be submitted through SNAP-R in accordance with § 748.6 of the EAR. Exporters are directed to include detailed descriptions and technical specifications with the license application, and identify the item as 0C521.
In this rule, BIS also removes references to aircraft wing folding systems “software” and related “technology” listed, prior to this rule, as entries No. 3 0D521 and No. 2 0E521, respectively, in Supplement No. 5 to part 774. The references to these items are obsolete because, in accordance with procedure established in the April 13, 2012, final rule, the U.S. Government adopted a control through the relevant multilateral regime(s), which determined an appropriate longer-term control over the item. The wing fold system “software” is now controlled by ECCN 9D001, and the “technology” is controlled by ECCN 9E003.j on the CCL. A final rule published in the
The rule is being issued in interim final form because while the
Although the Export Administration Act expired on August 20, 2001, the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 8, 2013, 78 FR 16129 (March 13, 2013) and as extended by the Notice of August 7, 2015, 80 FR 48233 (August 11, 2015), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act. BIS continues to carry out the provisions of the Export Administration Act, as appropriate and to the extent permitted by law, pursuant to Executive Order 13222 as amended by Executive Order 13637.
1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distribute impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been determined to be not significant for purposes of Executive Order 12866.
2. Notwithstanding any other provision of law, no person is required to respond to, nor is subject to a penalty for failure to comply with, a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
3. This rule does not contain policies with Federalism implications as that term is defined under E.O. 13132.
4. The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring prior notice, the opportunity for public comment and a delay in effective date are inapplicable because this regulation involves a military or foreign affairs function of the United States (
Further, BIS finds good cause to waive the 30-day delay in effectiveness under 5 U.S.C. 553(d)(3). Immediate implementation of these changes will allow BIS to prevent exports of these items to users and for uses that pose a national security threat to the United States or its allies. If BIS delayed this rule to allow for a 30-day delay in effectiveness, the resulting delay in implementation would afford an opportunity for the export of these items to users and uses that pose such a national security threat, thereby undermining the purpose of the rule. BIS also finds good cause to waive the 30-delay in effectiveness for the implementation of the amendment to remove items because the amendment will assist in clarifying the current status of the wing folding technology and software, eliminating any possible confusion. Furthermore, the amendment is not a substantive change. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601
Exports, Reporting and recordkeeping requirements.
Accordingly, part 774 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows:
50 U.S.C. app. 2401
The following table lists items subject to the EAR that are not listed elsewhere in the CCL, but which the Department of Commerce, with the concurrence of the Departments of Defense and State, has
Food and Drug Administration, HHS.
Final rule; correction.
The Food and Drug Administration (FDA or we) is correcting the preamble to a final rule that appeared in the
The document published with technical errors in reference numbers cited in the document. This document corrects those errors. We are placing a corrected copy of the rule in the docket.
Effective on November 16, 2015.
Katherine Collins, Center for Tobacco Products, Food and Drug Administration, Document Control Center, Bldg. 71, Rm. G335, 10903 New Hampshire Ave., Silver Spring, MD 20993-0002, 877-287-1373,
FDA is correcting the preamble to the September 24, 2015 (80 FR 57531), final rule entitled, “National Environmental Policy Act; Environmental Assessments for Tobacco Products; Categorical Exclusions.” The document published with three technical errors in reference numbers cited in the document. This document corrects those errors. We are correcting reference 2 and adding new reference 3. We are also placing a corrected copy of the rule in the docket.
In FR Doc. 2015-24219, appearing on page 57531 in the
1. On page 57533, in the second column, under the Response for Comment 1, add “(Ref. 3)” at the end of the second sentence.
2. On page 57535, in the first column, under section IX, “2. Statement of RADM David Ashley, Ph.D. and Hoshing Chang, Ph.D., ‘Impact of Tobacco Products on the Environment.’ ” is corrected to read “2. ‘Final Regulatory Impact Analysis,’ Food and Drug Administration, available at
3. On page 57535, in the first column, under section IX, add “3. Statement of RADM David Ashley, Ph.D. and Hoshing Chang, Ph.D., ‘Impact of Tobacco Products on the Environment.’
In notice document 2015-28718, beginning on page 69861 in the issue of Thursday, November 12, 2015, make the following correction:
On page 69861, in the first column, in the eighteenth and nineteenth lines from the bottom, “December 17, 2015” should read “December 14, 2015”.
Internal Revenue Service (IRS), Treasury.
Final regulations.
This document contains final regulations that provide guidance regarding certain amendments to applicable defined benefit plans. Applicable defined benefit plans are defined benefit plans that use a lump sum-based benefit formula, including cash balance plans and pension equity plans, as well as other plans that have formulas with an effect similar to a lump sum-based benefit formula. These final regulations relate to previously issued final regulations that specify permitted interest crediting rates for purposes of the requirement that an applicable defined benefit plan not provide for interest credits (or equivalent amounts) at an effective rate that is greater than a market rate of return. These final regulations permit a plan sponsor of an applicable defined benefit plan that does not comply with the market rate of return requirement to amend the plan in order to change to an interest crediting rate that is permitted under the previously issued final hybrid plan regulations without violating the anti-cutback rules of section 411(d)(6). These regulations affect sponsors, administrators, participants, and beneficiaries of these plans.
Neil S. Sandhu or Linda S.F. Marshall at (202) 317-6700 (not a toll-free number).
This document contains amendments to the Income Tax Regulations (26 CFR part 1) under sections 411(a)(13) and 411(b)(5) of the Internal Revenue Code (Code).
Generally, a defined benefit pension plan must satisfy the minimum vesting standards of section 411(a) and the accrual requirements of section 411(b) in order to be qualified under section 401(a) of the Code. Sections 411(a)(13) and 411(b)(5), which modify the minimum vesting standards of section 411(a) and the accrual requirements of section 411(b), were added to the Code by section 701(b) of the Pension Protection Act of 2006, Public Law 109-280 (120 Stat. 780 (2006)) (PPA '06). Sections 411(a)(13) and 411(b)(5) and certain related effective date provisions were subsequently amended by the Worker, Retiree, and Employer Recovery Act of 2008, Public Law 110-458 (122 Stat. 5092 (2008)) (WRERA '08).
Under section 411(b)(5)(B)(i), a statutory hybrid plan is treated as failing to satisfy the requirements of section 411(b)(1)(H) (which provides that the rate of an employee's benefit accrual must not be reduced because of the attainment of any age) if the terms of the plan provide any interest credit (or an equivalent amount) for any plan year at a rate that is in excess of a market rate of return. Section 411(b)(5)(B)(i) is generally effective for plan years beginning after December 31, 2007.
Section 411(d)(6) provides generally that a plan does not satisfy section 411 if an amendment to the plan decreases a participant's accrued benefit. For this purpose, a plan amendment that has the effect of eliminating or reducing an early retirement benefit or a retirement-type subsidy or eliminating an optional form of benefit with respect to benefits attributable to service before the amendment is treated as reducing accrued benefits.
Sections 204(b)(5)(B)(i) and 204(g) of the Employee Retirement Income Security Act of 1974, Public Law 93-406 (88 Stat. 829 (1974)), as amended (ERISA), contain rules that are parallel to sections 411(b)(5)(B)(i) and 411(d)(6), respectively. Under section 101 of Reorganization Plan No. 4 of 1978 (43 FR 47713), the Secretary of the Treasury has interpretive jurisdiction over the subject matter addressed in these final regulations for purposes of ERISA, as well as the Code. Thus, these final regulations apply for purposes of sections 411(b)(5)(B)(i) and 411(d)(6) of the Code, as well as for purposes of sections 204(b)(5)(B)(i) and 204(g) of ERISA.
Section 1.411(d)-4, A-2(b)(1), of the Income Tax Regulations provides, in part, that the Commissioner may, consistent with the provisions of § 1.411(d)-4, provide for the elimination or reduction of section 411(d)(6) protected benefits that have already accrued to the extent that such elimination or reduction is necessary to permit compliance with other requirements of section 401(a). The Commissioner may exercise this authority only through the publication of revenue rulings, notices, and other documents of general applicability.
Section 1.411(d)-4, A-2(b)(2)(i), provides that a plan may be amended to eliminate or reduce a section 411(d)(6) protected benefit, within the meaning of § 1.411(d)-4, A-1, if the following three requirements are met: The amendment constitutes timely compliance with a change in law affecting plan qualification; there is an exercise of section 7805(b) relief by the Commissioner; and the elimination or reduction of the section 411(d)(6) protected benefit is made only to the extent necessary to enable the plan to continue to satisfy the requirements for qualified plans.
Final regulations (TD 9505) (2010 final hybrid plan regulations) were published by the Treasury Department and the IRS in the
Interest crediting rates can be broadly characterized as either investment-based rates or rates that are not investment-based rates. An investment-based rate is a rate of return provided by actual investments, taking into account the return attributable to any change in the value of the underlying investments. A rate of return that is based on the rate of return for an index that measures the change in the value of investments can also be considered to be an investment-based rate. Rates that are not investment-based rates are either fixed rates of interest or bond-based rates (such as yields to maturity of bonds).
Section 1.411(b)(5)-1(d)(3) and (d)(4) sets forth permitted rates that are not investment-based rates, such as the third segment rate described in section 417(e)(3)(D) or 430(h)(2)(C)(iii), the yield on 30-year Treasury Constant Maturities, and a fixed 6 percent rate of interest. Section 1.411(b)(5)-1(d)(5) sets forth permitted investment-based rates, such as the rate of return on certain regulated investment companies (RICs), as defined in section 851, and the rate of return on plan assets. As provided in § 1.411(b)(5)-1(d)(6), certain annual (or more frequent) floors are permitted in combination with the bond-based rates and cumulative floors (in excess of the cumulative zero floor required under section 411(b)(5)(i)(II)) are permitted in combination with either the bond-based rates or the investment-based rates.
Section 1.411(b)(5)-1(e)(3) provides that the right to future interest credits determined in the manner specified under the plan and not conditioned on future service is a factor that is used to determine the participant's accrued benefit for purposes of section 411(d)(6). Accordingly, section 411(d)(6) protection applies not only to interest credits that have already been credited but also to future interest credits that are not conditioned on future service.
Proposed hybrid plan transition regulations (REG-111839-13) (2014 proposed regulations) were published by the Treasury Department and the IRS in the
Written comments in response to the 2014 proposed regulations were received, and a public hearing was held on January 9, 2015. After consideration of the comments received, the provisions in the 2014 proposed regulations are adopted by this Treasury decision, subject to a number of changes that are summarized in this preamble.
A number of commenters requested that the regulations provide for sufficient time for plan sponsors to implement amendments pursuant to these regulations to change a plan's interest crediting rate to a permissible rate. In addition, these commenters pointed out that these amendments are often interrelated with amendments required to comply with the 2014 final hybrid plan regulations, and that plan sponsors often consider and implement all of the required amendments at the same time. In response to these comments, these final regulations delay the applicability date of certain provisions under sections 411(a)(13) and 411(b)(5) in the final hybrid plan regulations, including those provisions that provide a list of interest crediting rates and combinations of rates that satisfy the requirement of section 411(b)(5)(B)(i) that the plan not provide an effective rate of return in excess of a market rate of return. Under these regulations, these provisions are generally effective for plan years that begin on or after January 1, 2017.
Prior to the first day of the first plan year that begins on or after January 1, 2017, a plan that uses an interest crediting rate that is not permitted under the final hybrid plan regulations must be amended to change to an interest crediting rate that is permitted under those regulations. Although a plan is permitted to be amended to change the interest crediting rate with respect to benefits that have not yet accrued, an amendment that reduces the interest crediting rate with respect to benefits that have already accrued would ordinarily be impermissible under section 411(d)(6).
In order to resolve the conflict between the market rate of return rules of section 411(b)(5)(B)(i) and the anti-cutback rules of section 411(d)(6), these regulations permit a plan with a noncompliant interest crediting rate to be amended with respect to benefits that have already accrued so that its interest crediting rate complies with the market rate of return rules. If the applicable requirements of these regulations are satisfied, such an amendment is permitted with respect to benefits that have already accrued, but only with respect to interest credits that are credited for interest crediting periods that begin on or after the later of the effective date of the amendment or the date the amendment is adopted (the applicable amendment date within the meaning of § 1.411(d)-3(g)(4)).
Like the 2014 proposed regulations, these regulations permit amendments that bring the plan into compliance by changing the specific feature that causes the plan's interest crediting rate to be noncompliant, while not changing other features of the existing rate. If the noncompliant interest crediting rate has more than one noncompliant feature, then each noncompliant feature must be addressed separately in the prescribed manner. Examples are included to illustrate the application of these rules.
The standard in these final regulations for resolving this conflict between section 411(d)(6) and section 411(b)(5)(B)(i) is generally comparable to the standard under the rules of § 1.411(d)-4, A-2(b)(1) and (b)(2)(i) with respect to the Commissioner's exercise of authority to resolve a conflict between section 411(d)(6) and another qualification requirement under section 401(a). The Treasury Department and the IRS believe this approach is the most appropriate manner to resolve the conflict between the market rate of return rules of section 411(b)(5)(B)(i) and the anti-cutback rules of section 411(d)(6).
If a noncompliant rate involves one or more variable rates or a variable rate together with a fixed rate, it is not
A number of commenters specifically requested that the rules in the transition regulations permit any noncompliant bond-based rate to be capped at the third segment rate. The Treasury Department and the IRS agree that this is an appropriate approach. Accordingly, an additional option has been added in each case involving bond-based rates so that any noncompliant variable rate that is not an investment-based rate (including the greater of two or more non-investment based variable rates) may be capped at the third segment rate. If this approach is used, the third segment rate cap would have to satisfy the rules that apply to the use of the third segment rate as an interest crediting rate. Thus, the cap could be any of the third segment rates that may be used as an interest crediting rate and the cap would have to use a permissible lookback month and stability period. Note, however, that if any noncompliant composite rate is limited so that it does not exceed a third segment rate cap, that limit would also apply with respect to any annual fixed minimum rate that is part of the noncompliant composite rate. Therefore, the annual interest crediting rate (taking into account the cap) could be lower than the otherwise applicable fixed minimum rate.
A special rule has been added to the regulations to clarify that an amendment to correct a noncompliant feature that provides for a greater interest crediting rate than the specific amendment set forth in the regulations also does not violate section 411(d)(6). Thus, for example, in any case in which it is permissible to address a noncompliant rate by capping the rate at the third segment rate, it would also be permissible to address the noncompliant rate simply by switching to the third segment rate. Similarly, an amendment to switch to the third segment rate together with a permitted fixed minimum rate would be permissible.
These final regulations also provide flexibility with respect to noncompliant investment-based rates. In particular, if a plan credits interest using a noncompliant investment-based rate and there is no permitted investment-based rate with similar risk and return characteristics as the plan's impermissible rate, then, as an alternative to the specified corrective amendment that was in the proposed regulations, an amendment to switch to the third segment rate with a 4 percent fixed minimum rate is permitted. The regulations also clarify the specified corrective amendment that was in the proposed regulations by providing that it is permissible in such a case to switch to a permitted investment-based rate that is otherwise similar to the plan's impermissible investment-based rate but without the risk and return characteristics of the impermissible rate that caused it to be impermissible (generally requiring the use of a rate that is less volatile than the plan's impermissible investment-based rate but is otherwise similar to that rate).
The preamble to the 2014 final hybrid plan regulations contained a discussion of statutory hybrid plans that permit participants to choose from among a menu of hypothetical investment options. Because of the significant concerns relating to the use of these plan designs, the Treasury Department and the IRS continue to study the issues raised in the preamble to the 2014 final hybrid plan regulations related to these plans, and it is possible that the Treasury Department and the IRS will conclude that such plan designs are not permitted. Nevertheless, the Treasury Department and the IRS understand that some of these plans contain one or more hypothetical investment options that provide for a rate of return that is not permitted under the final hybrid plan regulations. A special rule is included in these regulations in order to address the noncompliance that results from the availability of at least one hypothetical investment option that provides for an impermissible rate of return. This special rule provides that the rules of these final regulations may be applied separately to correct each impermissible hypothetical investment option. Alternatively, with respect to such a plan that permitted a participant to choose an interest crediting rate from among a menu of hypothetical investment options on September 18, 2014, pursuant to plan provisions that were adopted on or before September 18, 2014, this special rule provides that the entire menu of investment options may be treated as an impermissible investment-based rate for which there is no permitted investment-based rate with similar risk and return characteristics (so that the rule of § 1.411(b)(5)-1(e)(3)(vi)(C)(
The preamble to the 2014 proposed regulations specifically requested comments as to an amendment to bring a plan into compliance if the plan credits interest using a composite rate that is an investment-based rate of return with an impermissible annual (or more frequent) fixed or variable rate. Many commenters requested flexibility to choose among options in such a case because there is no single correction that is the best correction for all cases. The Treasury Department and the IRS agree that, for this type of interest crediting rate, no single correction method is the most appropriate method for all cases. Therefore, the final regulations provide that it is permissible either to eliminate the fixed minimum rate (or any variable non-investment based rate) and eliminate any reduction to the investment-based rate, or to switch to the third segment rate (preserving any fixed minimum rate to the maximum extent permitted).
In response to comments inquiring about the treatment of plans that provide for a cumulative floor (such as, for example, in order to comply with section 411(d)(6) in connection with a prior amendment to change the plan's interest crediting rate on accrued pay credits), the regulations provide for a special rule that applies with respect to a participant under a plan that takes into account a minimum rate of return that applies less frequently than annually or that determines the participant's benefit as of the annuity
In response to comments as to the permissibility of rounding interest crediting rates and the need for the regulations to provide section 411(d)(6) relief for plans that use an impermissible rounding rule, the regulations provide for a rounding rule and also provide for section 411(d)(6) relief for transitional amendments to comply with this rounding rule. Under the rounding rule, a plan is not treated as failing to meet the requirement that a plan not credit interest at a rate that exceeds a market rate of return merely because the plan determines interest credits for an interest crediting period by rounding the calculated interest rate or rate of return. Under this rule, an annual rate may be rounded to the nearest multiple of 25 basis points (or a smaller rounding interval). If a plan provides for the crediting of interest more frequently than annually, then the rounding interval must not exceed a pro-rata portion of 25 basis points. Notwithstanding the preceding sentence, a plan is permitted to round to the nearest basis point regardless of the length of the interest crediting period.
Several commenters identified the need for section 411(d)(6) relief for plans that provide for rules that apply upon plan termination that do not comply with the plan termination rules in the final hybrid plan regulations. In response to these comments, the regulations provide for section 411(d)(6) relief for transitional amendments made to enable a plan to comply with the plan termination rules in the final hybrid plan regulations.
In response to the comment request included in the 2014 proposed regulations with respect to all aspects of those proposed rules, the Department of Treasury and the IRS received a number of comments with respect to provisions of the 2014 final hybrid plan regulations instead of the 2014 proposed regulations. These final regulations delay the applicability date of certain provisions in the 2014 final hybrid plan regulations (and provide for a special delayed applicability date for collectively bargained plans), but do not otherwise address comments on provisions of the 2014 final hybrid plan regulations.
These regulations generally apply to plan amendments made on or after September 18, 2014 (or an earlier date as elected by the taxpayer), and they do not apply for amendments made on or after the first day of the first plan year that begins on or after January 1, 2017. However, for collectively bargained plans, these regulations continue to apply for amendments made before the first day of the first plan year that begins on or after January 1, 2019, unless the last collective bargaining agreement ratified on or before November 13, 2015 expires before January 1, 2019, in which case these regulations cease to apply to amendments made on or after the first day of the first plan year that begins on or after the later of the date on which the last applicable collective bargaining agreement expires or January 1, 2017.
Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because these regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.
The principal authors of these regulations are Neil S. Sandhu and Linda S.F. Marshall, Office of Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and the Treasury Department participated in the development of these regulations.
Income taxes, Reporting and recordkeeping requirements.
Accordingly, 26 CFR part 1 is amended as follows:
26 U.S.C. 7805 * * *
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(B)
(
(
(
(
The additions and revisions read as follows:
(d) * * *
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(iv) * * *
(A) * * * In addition, a plan is permitted to round the calculated interest rate or rate of return in accordance with paragraph (d)(1)(iv)(E) of this section.
(E)
(e) * * *
(3) * * *
(vi)
(B)
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(C)
(
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(D)
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(ii)
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(ii)
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(ii)
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(ii)
(i)
(ii)
(i)
(ii)
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(ii)
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(ii)
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(ii)
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(ii)
(i)
(ii)
(B)
(vii)
(f) * * *
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Coast Guard, DHS.
Temporary final rule.
The Coast Guard is establishing a temporary safety zone in the waters of the Lake Erie in the vicinity of Kelley's Island Shoal, OH. This zone is intended to restrict vessels from a portion of Lake Erie due to the presence of an unknown substance emanating from an unknown vessel. This temporary safety zone is necessary to protect people and vessels from the hazards associated with this event.
This rule is effective without actual notice from November 16, 2015 until 8 p.m. November 24, 2015. For the purposes of enforcement, actual notice will be used from 2 p.m. October 25, 2015, until November 16, 2015.
Documents indicated in this preamble as being available in the docket are part of docket USCG-2015-0994 and are available online by going to
If you have questions on this temporary final rule, contact or email LT Jennifer Disco, U.S. Coast Guard Marine Safety Unit Toledo, telephone (419) 418-6000, email
The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency, for good cause, finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because doing so would be impracticable. The Coast Guard received notification of the unknown substance emanating from an unknown vessel on the evening of October 23, 2015. Thus, waiting for a notice and comment period to run would inhibit the Coast Guard from protecting the public and vessels from the possible hazards associated with this unknown substance.
Under 5 U.S.C. 553(d)(3), The Coast Guard finds that good cause exists for making this temporary rule effective less than 30 days after publication in the
The Coast Guard is issuing this rule under authority in 33 U.S.C. 1231, 33 CFR 1.05-1 and 160.5; and Department of Homeland Security Delegation No. 0170.1. The Captain of the Port Detroit (COTP) has determined that a temporary safety zone is necessary to ensure the safety of vessels from the unknown hazards associated with this substance. Such hazards include the possibility of an inhalation hazard that may cause death or serious bodily harm.
Establishing a safety zone to control vessel movements around the location of the unknown substance will help ensure the safety of persons and property during assessment and response activities and help minimize the associated risks. Therefore, this rule will remain in place for the time stated herein but will be canceled if response activities cease before 24 November 2015.
This rule establishes a safety zone from 2 p.m. on October 25, 2015 until 8 p.m. on November 24, 2015. The safety zone will encompass all U.S. navigable waters of Lake Erie within a 1000 foot radius of 41°38′21″ N., 82°29′35″ W. (NAD 83).
Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the COTP or a designated representative. Vessel operators must contact the COTP or his on-scene representative to obtain permission to transit through this safety zone. The COTP or his on-scene representative may be contacted via VHF Channel 16.
We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on these statutes and executive orders.
This rule is not a significant regulatory action under section 3(f) of E.O. 12866, Regulatory Planning and Review, as supplemented by E.O. 13563, Improving Regulation and Regulatory Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of E.O. 12866 or under section 1 of E.O. 13563. The Office of Management and Budget has not reviewed it under those Orders.
We conclude that this rule is not a significant regulatory action because we anticipate that it will have minimal impact on the economy, will not interfere with other agencies, will not adversely alter the budget of any grant or loan recipients, and will not raise any novel legal or policy issues. The safety zone created by this rule will be relatively small and enforced for a relatively short duration, and it is designed to minimize the impact on navigation. Moreover, under certain conditions, vessels may still transit through the safety zone when permitted by the COTP.
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule would not have a significant economic impact on a substantial number of small entities.
This rule will affect the following entities, some of which might be small entities: The owners or operators of vessels intending to transit or anchor in designated portions of Lake Erie from 2 p.m. on October 25, 2015 until 8 p.m. on November 24, 2015.
This safety zone will not have a significant economic impact on a substantial number of small entities for the reasons cited in the
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule so that they can better evaluate its effects on them. If this rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the
This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).
A rule has implications for federalism under E.O. 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and determined that this rule does not have implications for federalism.
Also, this rule does not have tribal implications under E.O. 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such expenditure, we do discuss the effects of this rule elsewhere in this preamble.
We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded this action is one of a category of actions which do not individually or cumulatively have a significant effect on the human environment. This rule involves the establishment of a safety zone and is therefore categorically excluded from further review under paragraph 34(g) of Figure 2-1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the
This rule will not cause a taking of private property or otherwise have taking implications under E.O. 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.
This rule meets applicable standards in sections 3(a) and 3(b)(2) of E.O. 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.
We have analyzed this rule under E.O. 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.
This action is not a “significant energy action” under E.O. 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.
Harbors, Marine Safety, Navigation (water), Reporting and record keeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:
33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Department of Homeland Security Delegation No. 0170.1.
(a)
(b)
(c)
(2) The safety zone is closed to all vessel traffic, except as may be permitted by the COTP, via the Command Center, or his designated on-scene representative.
(3) The “on-scene representative” of the COTP is any Coast Guard commissioned, warrant or petty officer or a Federal, State, or local law enforcement officer designated by or assisting the COTP to act on his behalf.
(4) Vessel operators must contact the COTP via the Command Center to obtain permission to enter or operate within the safety zone. The COTP may be contacted via VHF Channel 16 or at 313-568-9560. Vessel operators given permission to enter or operate in the safety zone must comply with all directions given to them by the COTP, via the Sector Command Center or his on-scene representative.
Environmental Protection Agency (EPA).
Final rule.
The Environmental Protection Agency (EPA) is taking final action to approve a state implementation plan (SIP) revision from the Arizona Department of Environmental Quality related to the removal of “Stage II” vapor recovery equipment at gasoline dispensing facilities in the Phoenix-Mesa area. Specifically, the EPA is approving a SIP revision that eliminates the requirement to install and operate such equipment at new gasoline dispensing facilities, and that provides for the phased removal of such equipment at existing gasoline dispensing facilities from October 2016 through September 2018. The EPA has
This final rule is effective on December 16, 2015.
The EPA has established docket number EPA-R09-OAR-2014-0256 for this action. The index to the docket is available electronically at
Jeffrey Buss, Office of Air Planning, U.S. Environmental Protection Agency, Region 9, (415) 947-4152, email:
Throughout this document, the terms “we,” “us,” and “our” refer to the EPA.
On September 2, 2015 (80 FR 53086), we proposed this action and provided for a 30-day comment period. On that same date, we issued a direct final rule (80 FR 53001) taking final action effective November 2, 2015 but indicated that, if we received adverse comments by the end of the comment period, we would publish a withdrawal of the direct final rule in the
We received timely adverse comments, and on October 27, 2015 (80 FR 65660), we withdrew the direct final rule. In today's action, we provide our responses to the public comments and take final action based on the proposal published on September 2, 2015.
In our September 2, 2015 proposed rule (80 FR 53086), we directed commenters to the direct final rule for a detailed rationale for the proposed approval of the SIP revision. As such, the following paragraphs summarize the background information and evaluation included in the direct final rule also published on September 2, 2015 (80 FR 53001).
Under the Clean Air Act (CAA or “Act”), the EPA has promulgated national ambient air quality standards (NAAQS or “standards”) for certain pervasive air pollutants. The NAAQS are concentration levels the attainment and maintenance of which EPA has determined to be requisite to protect public health (
Ozone is one of the air pollutants for which the EPA has established NAAQS.
Under the CAA, the EPA is also responsible for designating areas of the country as attainment, nonattainment, or unclassifiable for the various NAAQS. We classified the “Phoenix metropolitan area,” defined by the Maricopa Association of Governments' (MAGs') urban planning area boundary (but later revised to exclude the Gila River Indian Community, as a “Moderate,” and later “Serious,” nonattainment area for the 1-hour ozone standard. We have designated a larger geographic area, referred to as the “Phoenix-Mesa” area,
States with “nonattainment” areas are required to submit revisions to their SIPs that include a control strategy necessary to demonstrate how the area will attain the NAAQS. As “Moderate,” and later “Serious,” nonattainment for the 1-hour ozone standard, the State of Arizona was required under CAA section 182(b)(3) to submit a SIP revision that requires the use of “Stage II” vapor recovery systems at gasoline dispensing facilities (GDFs) located within the Phoenix metropolitan area.
The 1990 amended CAA anticipates that, over time, Stage II vapor recovery requirements at GDFs would be replaced by “onboard refueling vapor recovery” (ORVR) systems that the EPA was to establish for new motor vehicles under CAA section 202(a)(6). ORVR consists of an activated carbon canister installed in a motor vehicle. The carbon canister captures gasoline vapors during refueling. There the vapors are captured by the activated carbon in the canister. When the engine is started, the vapors are drawn off of the activated carbon and into the engine where they are burned as fuel. In 1994, the EPA promulgated its ORVR standards,
Recognizing that, over time, the number of vehicles with ORVR as a percentage of the overall motor vehicle fleet would increase with the turnover of older models not equipped with ORVR with newer models equipped with ORVR, CAA section 202(a)(6) permits the EPA to promulgate a determination that ORVR is in “widespread use” throughout the motor vehicle fleet and to revise or waive Stage II vapor recovery requirements for Serious, Severe and Extreme ozone nonattainment areas. The EPA made the determination that ORVR systems are in “widespread use” in the nation's motor vehicle fleet in 2012. 77 FR 28772, May 16, 2012; and 40 CFR 51.126. In the wake of the EPA's “widespread use” determination, states, such as Arizona, that were required to implement Stage II vapor recovery programs under CAA section 182(b)(3) are now permitted to remove the requirement from their SIPs under certain circumstances.
On August 7, 2012, the EPA released its “Guidance on Removing Stage II Gasoline Vapor Control Programs from State Implementation Plans and Assessing Comparable Measures”
In light of EPA's national “widespread use” determination allowing states to revise their SIPs to remove Stage II vapor recovery requirements and the potential for a disbenefit from continuation of the Stage II vapor recovery program, MAG developed emissions estimates based on information from the EPA's Stage II guidance and based on Phoenix-area-specific motor vehicle fleet data to determine the impact of continuation of the program and the impact of the phased removal of Stage II vapor recovery in the Phoenix-Mesa area. The emissions estimates demonstrated that the emissions reduction benefit from the Stage II vapor recovery program would continue to provide marginal but diminishing emissions reductions through 2017 and that the disbenefit from continuation of the Stage II vapor recovery program would begin in 2018 and increase in the years thereafter. See table 1 on page 53005 of the direct final rule.
In response to these findings, the Arizona Legislature adopted changes in the specific statutory provisions establishing the Stage II vapor recovery program to eliminate the requirement to install Stage II equipment at new GDFs and to provide for a phased decommissioning process to remove Stage II equipment at existing GDFs beginning in October 2016 and ending in September 2018.
Subsequent to legislative action, on September 2, 2014, ADEQ submitted a SIP revision, titled “MAG State Implementation Plan Revision for the Removal of Stage II Vapor Recovery Controls in the Maricopa Eight-Hour Ozone Nonattainment Area” (“Stage II Vapor Recovery SIP Revision” or “SIP Revision”), including the statutory revisions and related emissions impact documentation.
After review of the SIP Revision, on September 2, 2015 (80 FR 53086), the EPA proposed approval based on the following conclusions:
• ADEQ has met the procedural requirements for SIP revisions under section 110(l);
• Pursuant to the EPA's determination of “widespread use” (of ORVR systems in the motor vehicle fleet), states are allowed to rescind Stage II vapor recovery control requirements in their SIPs if doing so is consistent with the general SIP revision requirements of CAA section 110(l) and section 193;
• CAA section 193 does not apply to this particular SIP revision because the Stage II vapor recovery controls were not in effect prior to the 1990 CAA Amendments;
• MAG's year-by-year estimates of areawide VOC emissions with and
• MAG's emissions estimates conclude that the temporary emissions increases due to the SIP Revision (relative to the scenario in which Stage II requirements remain fully implemented) will occur during years 2014 through 2017 and will range from 0.015 metric tons per day (mtpd) to 0.031 mtpd, and that beginning in 2018 and increasing in magnitude thereafter, the SIP Revision will result in fewer VOC emissions than would otherwise have occurred if Stage II requirements were to remain fully implemented in the Phoenix-Mesa area (due to the incompatibility of ORVR-equipped vehicles and vacuum-assist Stage II technologies);
• The temporary increases in VOC emissions during years 2014 through 2017 due to the SIP Revision would represent an approximate 0.002 percent to 0.005 percent increase in the overall VOC emissions inventory in the Phoenix-Mesa area;
• The SIP Revision would not interfere with reasonable further progress or attainment of the ozone NAAQS for the purposes of CAA section 110(l) because: (1) The increases in VOC emissions from 2014 through 2017 would have negligible impacts on ozone concentrations in the area; (2) the schedule for the phase-out of Stage II controls under the SIP Revision will maintain most of the emissions reductions benefits associated with Stage II control through 2017; (3) the scheduled phase-out will reduce the emissions increase (due to ORVR and Stage II incompatibilities) that would otherwise be expected in 2018 but would not entirely avoid an emissions increase in that year because some existing GDFs will not yet have removed Stage II controls by the beginning of the 2018 ozone season; and (4) the phase-out of Stage II controls by the end of the 2018 ozone season will support longer-term regional efforts to attain or maintain the ozone standards in the Phoenix-Mesa area.
For further information about the SIP Revision and our corresponding evaluation, please see the direct final rule (80 FR 53001, September 2, 2015).
In response to September 2, 2015 proposed rule, we received four comments. In the following paragraphs, we provide our responses to these comments.
Moreover, as described further in our direct final rule at 53004, with certain types of vacuum-assist Stage II control systems, the limited compatibility between ORVR and some configurations of this Stage II hardware may ultimately result in an area-wide emissions disbenefit. This is because the Stage II controls pull air into the underground tank instead of gasoline vapors when both vacuum-assist Stage II control and ORVR are active during refueling, increasing the pressure in the underground tank and causing venting of excess emission into the air. The Phoenix-Mesa ozone nonattainament area is an area where the vast majority of Stage II systems that have been installed use vacuum assist technologies, and MAG has estimated that 2018 is the first year in which the disbenefit from implementation of Stage II controls would occur if Stage II control requirements were to remain in place given the motor vehicle fleet in the Phoenix-Mesa area. The disbenefit (
Thus, from the perspective of summertime ozone conditions in the Phoenix-Mesa area, the issue is not whether to remove the Stage II vapor recovery equipment but when and how. The state has submitted a SIP revision
We believe that the two-year decommissioning process established by the state minimizes the temporary adverse effect of increased VOC emissions (
Rather, as described on pages 53004 and 53004 of the direct final rule, we evaluated the SIP revision for compliance with CAA section 110(l), which prohibits the EPA from approving a SIP revision if that revision would interfere with any applicable requirement concerning reasonable further progress towards, or attainment of, any of the NAAQS, or any applicable requirement of the CAA. In this instance, because the Stage II SIP revision would affect VOC emissions, and because VOC is a precursor to ozone, we focused on ozone NAAQS impacts. Ozone is a regional pollutant and thus our evaluation of the SIP revision is appropriately based on area-wide VOC emissions estimates and considers those emissions in the context of regional, not local, ozone concentrations.
Lastly, deferral by the EPA of action on the Stage II SIP revision is not appropriate because CAA section 110(k)(2) establishes a deadline of at most 18 months from the date a SIP revision is submitted for the EPA to take final action. Moreover, we have concluded that the two-year decommissioning process established by the state would minimize the temporary adverse impact on regional VOC emissions while avoiding the longer term disbenefit associated with implementation of Stage II vapor recovery controls at GDFs in the Phoenix-Mesa area. Deferral by the state of the two-year decommissioning process would be less advantageous from a regional ozone perspective because it would only serve to lengthen the period in which the area would experience the disbenefit from Stage II vapor recovery due to the increasing percentage of motor vehicles with ORVR and accompanying incompatibilities with the Stage II vapor recovery equipment.
Under CAA section 110(k) and for the reasons set forth in our September 2, 2015 direct final rule and summarized above, the EPA is taking final action to approve the Stage II Vapor Recovery SIP Revision submitted by ADEQ on September 2, 2014 to provide for the phased removal of “Stage II” vapor recovery equipment at GDFs in the Phoenix-Mesa area. Specifically, the EPA is approving a SIP revision that eliminates the requirement to install and operate such equipment at new GDFs, and that provides for the phased removal of such equipment at existing GDFs from October 2016 through September 2018.
The EPA is approving this SIP revision because Stage II vapor recovery controls are no longer a SIP requirement under CAA section 182(b)(3) due to EPA's “widespread use determination” for ORVR. Additionally, we are approving this SIP revision because the temporary incremental increase in VOC emissions from 2014 through 2017 would not interfere with reasonable further progress toward, or attainment of, any of the NAAQS, and because this SIP revision avoids the longer-term VOC emissions increases associated with continued implementation of Stage II controls in the Phoenix-Mesa area. As part of this final action, the EPA is approving the specific statutory provisions that provide for the phase-out of Stage II controls in Area A,
In this rule, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of certain sections of House Bill 2128 amending various sections of the Arizona Revised Statutes related to stage II vapor recovery systems in Area A, effective April 22, 2014, as described in the amendments to 40 CFR part 52 set forth below. The EPA has made, and will continue to make, these documents generally available electronically through
Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);
• does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and
• does not provide the EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, this rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it impose substantial direct costs on tribal governments or preempt tribal law.
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by January 15, 2016. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements (see section 307(b)(2)).
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
Chapter I, title 40 of the Code of Federal Regulations is amended as follows:
42 U.S.C. 7401
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(171) The following plan was submitted on September 2, 2014 by the Governor's designee.
(i) Incorporation by reference.
(A) Arizona Department of Environmental Quality.
(
(ii) Additional materials.
(A) Arizona Department of Environmental Quality.
(
Environmental Protection Agency (EPA).
Direct final rule.
The Environmental Protection Agency (EPA) is approving Michigan's State Plan to control air pollutants from “Sewage Sludge Incinerators” (SSI). The Michigan Department of Environmental Quality (MDEQ) submitted the State Plan on September 21, 2015. The State Plan is consistent with the Emission Guidelines (EGs) promulgated by EPA on March 21, 2011. This approval means that EPA finds that the State Plan meets applicable Clean Air Act (Act) requirements for subject SSI units. Once effective, this approval also makes the State Plan Federally enforceable. EPA is also notifying the public that we have received from Michigan a negative declaration for Small Municipal Waste Combustors (SMWC). The MDEQ submitted its negative declaration on
This direct final rule will be effective January 15, 2016, unless EPA receives adverse comments by December 16, 2015. If adverse comments are received, EPA will publish a timely withdrawal of the direct final rule in the
Submit your comments, identified by Docket ID No. EPA-R05-OAR-2015-0701, by one of the following methods:
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Margaret Sieffert, Environmental Engineer, Environmental Protection Agency, Region 5, 77 West Jackson Boulevard (AT-18J), Chicago, Illinois 60604, (312) 353-1151,
Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA. This
Section 111(d) of the Act requires that EPA develop regulations providing that states must submit to EPA plans establishing standards of performance for certain existing sources of pollutants when a standard of performance would apply to the existing source if it were a new source, and if the pollutants are noncriteria pollutants (
EPA promulgated new source performance standards and EGs for SMWCs on December 6, 2000, (64 FR 76349, 65 FR 76377). The standards and EGs are codified at 40 CFR part 60, subparts AAAA and BBBB, respectively. Thus, states were required to develop plans for existing SMWCs, pursuant to sections 111(d) and 129 of the Act and 40 CFR part 60, subpart B.
EPA promulgated new source performance standards and EGs for SSIs on March 21, 2011, (76 FR 15372). The standards and EGs are codified at 40 CFR part 60, subparts LLLL and MMMM, respectively. Thus, states were required to develop plans for existing SSIs, pursuant to sections 111(d) and 129 of the Act and 40 CFR part 60, subpart B.
A SMWC unit is defined in 40 CFR 60.1550, as any device that has the capacity to combust at least 35 tons per day of municipal solid waste but no more than 250 tons per day of municipal solid waste or refuse derived fuel. The designated facilities to which the EGs apply are existing SMWC units that commenced construction on or before August 30, 1999.
A SSI unit is defined in 40 CFR 60.5250 as any device that combusts sewage sludge for the purpose of reducing the volume of the sewage sludge by removing combustible matter. The designated facilities to which the EGs apply are existing SSI units that commenced construction on or before October 14, 2010. 40 CFR 60.5060.
Under section 129(b)(2) of the Act and the EGs at 40 CFR part 60, subpart MMMM, States with SSIs must submit to EPA plans that implement the EGs. The plans, which must be at least as protective as the EGs, become Federally enforceable when EPA approves them. 42 U.S.C. 7411(d)(2). If the state fails to submit a satisfactory plan, the Administrator must promulgate a Federal plan for implementation and enforcement.
40 CFR part 60, subpart B contains general provisions applicable to the adoption and submittal of state plans for
On September 21, 2015, MDEQ submitted its SSI State Plan. The State's final rule became effective on May 20, 2015. The public hearing for the State Plan was on August 19, 2015. The plan includes State rule R 336.1972, “Emission standards for existing sewage sludge incineration units,” and R 336.1902 “Adoption of standards by reference,” which contain emission standards for existing SSI.
On July 27, 2015, MDEQ submitted its SMWC negative declaration, in which it certifies that there are no SMWC units currently operating in Michigan.
The State SSI plan submittal is based on the Federal SSI EGs. As set forth in section 129 of the Act and in 40 CFR part 60, subparts B and MMMM, the State Plan addresses the nine minimum required elements, as follows:
1. An inventory of affected SSI units, including those that have ceased operation but have not been dismantled. Michigan has provided this along with the shutdown notices for four facilities and the operating permits for the remaining three affected facilities in Michigan.
2. An inventory of the emissions from affected SSI units. Michigan has provided this.
3. Compliance schedules for each affected SSI unit. Michigan has provided a compliance schedule with a compliance date of March 21, 2016.
4. Emission limits, emission standards, operator training and qualification requirements and operating limits for affected SSI units that are at least as protective as the EGs. Michigan has provided this.
5. Performance testing, recordkeeping and reporting and requirements. Michigan has provided this.
6. Certification that the hearing on the state plan was held, a list of witnesses and their organizational affiliations, if any, appearing at the hearing, and a brief written summary of each presentation or written submission. Michigan has provided the required certification and other information, including a summary of the one comment it received.
7. A provision for State progress reports to EPA. Michigan has stated that it will submit an annual report that will include updates to the inventory, removing sources that have shut down, adding any new sources, and identifying any sources that have met increments of progress. The annual report will also include any enforcement activities initiated against designated facilities and submission of technical reports on all performance testing on designated facilities, including updated emissions inventories.
8. Identification of enforceable state mechanisms that the State selected for implementing the EGs. Michigan has provided a detailed list which identified the enforceable mechanisms.
9. A demonstration of the State's legal authority to carry out the SSI State Plan. Michigan has provided a detailed list which demonstrated that it has such legal authority. This includes the legal authority to incorporate by reference federal emission guidelines provisions, as confirmed by a Michigan Attorney General's Opinion letter dated May 27, 2015.
EPA evaluated the SSI State Plan and related information submitted by Michigan for consistency with the Act, EPA regulations and policy. For the reasons discussed above, EPA has determined that the State Plan meets all applicable requirements and, therefore, is approvable.
EPA is approving the State Plan which Michigan submitted on September 21, 2015, for the control of emissions from existing SSI sources in the State. EPA is also providing the public with notice of, and amending 40 CFR part 62 to reflect, EPA's receipt of Michigan's negative declaration for SMWC facilities.
The EPA Administrator continues to retain authority for several tasks, as provided in 40 CFR 60.5050 and as stated in the cover letter of the State Plan.
EPA is publishing this approval action without prior proposal because the Agency views this as a non-controversial action and anticipates no adverse comments. However, in the proposed rules section of this
This action is not a “significant regulatory action” under the terms of Executive Order 12866 (58 FR 51735, October 4, 1993) and therefore is not subject to review by the Office of Management and Budget under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011). For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting Federal requirements and merely notifies the public of EPA receipt of a negative declaration from an air pollution control agency without any existing SMWC units in its state. This action imposes no requirements beyond those imposed by the state. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
In reviewing section 111(d)/129 plan submissions, EPA's role is to approve State choices, provided that they meet the criteria of the Act. With regard to negative declarations for designated facilities received by EPA from states, EPA's role is to notify the public of the receipt of such negative declarations and revise 40 CFR part 62 accordingly. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a section 111(d)/129 plan submission or negative declaration for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a section 111(d)/129 plan or negative declaration submission, to use VCS in place of a section 111(d)/129 plan or negative declaration submission that otherwise satisfies the provisions of the Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The Congressional Review Act, 5 U.S.C. 801
Under Section 307(b)(1) of the Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by January 15, 2016. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action approving Michigan's section 111(d)/129 plan for SSI sources or negative declaration for SMWC units may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2)).
Environmental protection, Administrative practice and procedure, Air pollution control, Intergovernmental relations, Reporting and recordkeeping requirements, Sewage sludge incinerators, Small municipal waste combustors.
40 CFR part 62 is amended as follows:
42 U.S.C. 7401
On September 21, 2015, Michigan submitted a State Plan for implementing the emission guidelines for Sewage Sludge Incinerators (SSI). The enforceable mechanism for this State Plan is a State rule codified in R 336.1972, “Emission standards for existing sewage sludge incineration units,” and R 336.1902 “Adoption of standards by reference.” The State's final rule became effective on May 20, 2015.
The Michigan State Plan for existing Sewage Sludge Incinerators (SSI) applies to all SSIs for which construction commenced on or before October 14, 2010 or for which a modification was commenced on or before September 21, 2011 primarily to comply with this rule.
The Federal effective date of the Michigan State Plan for existing Sewage Sludge Incinerators is January 15, 2016.
On July 27,2015, the Michigan Department of Environmental Quality submitted a negative declaration letter to EPA certifying that there are no existing Small Municipal Waste Combustors (SMWC) units in the State of Michigan subject to the emissions guidelines at 40 CFR part 60, subpart BBBB.
Environmental Protection Agency (EPA).
Final rule.
This regulation establishes an exemption from the requirement of a tolerance for residues of tamarind seed gum, 2-hydroxypropyl ether polymer (CAS Reg. No. 68551-04-2) when used as an inert ingredient in a pesticide chemical formulation. Lamberti USA, Incorporated submitted a petition to EPA under the Federal Food, Drug, and Cosmetic Act (FFDCA), requesting an exemption from the requirement of a tolerance. This regulation eliminates the need to establish a maximum permissible level for residues of tamarind seed gum, 2-hydroxypropyl ether polymer on food or feed commodities.
This regulation is effective November 16, 2015. Objections and requests for hearings must be received on or before January 15, 2016, and must be filed in accordance with the instructions provided in 40 CFR part 178 (see also Unit I.C. of the
The docket for this action, identified by docket identification (ID) number EPA-HQ-OPP-2015-0421, is available at
Susan Lewis, Registration Division (7505P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001; main telephone number: (703) 305-7090; email address:
You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:
• Crop production (NAICS code 111).
• Animal production (NAICS code 112).
• Food manufacturing (NAICS code 311).
• Pesticide manufacturing (NAICS code 32532).
You may access a frequently updated electronic version of 40 CFR part 180 through the Government Printing Office's e-CFR site at
Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2015-0421 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before January 15, 2016. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).
In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2015-0421, by one of the following methods.
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Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at
In the
Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an exemption from the requirement for a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the exemption is “safe.” Section 408(c)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and use in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing an exemption from the requirement of a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue . . .” and specifies factors EPA is to consider in establishing an exemption.
EPA establishes exemptions from the requirement of a tolerance only in those cases where it can be shown that the risks from aggregate exposure to pesticide chemical residues under reasonably foreseeable circumstances will pose no appreciable risks to human health. In order to determine the risks from aggregate exposure to pesticide inert ingredients, the Agency considers the toxicity of the inert in conjunction with possible exposure to residues of the inert ingredient through food, drinking water, and through other exposures that occur as a result of pesticide use in residential settings. If EPA is able to determine that a finite tolerance is not necessary to ensure that there is a reasonable certainty that no harm will result from aggregate exposure to the inert ingredient, an exemption from the requirement of a tolerance may be established.
Consistent with FFDCA section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this
1. The polymer is not a cationic polymer nor is it reasonably anticipated to become a cationic polymer in a natural aquatic environment.
2. The polymer does contain as an integral part of its composition the atomic elements carbon, hydrogen, and oxygen.
3. The polymer does not contain as an integral part of its composition, except as impurities, any element other than those listed in 40 CFR 723.250(d)(2)(ii).
4. The polymer is neither designed nor can it be reasonably anticipated to substantially degrade, decompose, or depolymerize.
5. The polymer is manufactured or imported from monomers and/or reactants that are already included on the TSCA Chemical Substance Inventory or manufactured under an applicable TSCA section 5 exemption.
6. The polymer is not a water absorbing polymer with a number average molecular weight (MW) greater than or equal to 10,000 daltons.
7. The polymer does not contain certain perfluoroalkyl moieties consisting of a CF3- or longer chain length as specified in 40 CFR 723.250(d)(6).
Additionally, the polymer also meets as required the following exemption criteria specified in 40 CFR 723.250(e).
8. The polymer's minimum number average MW is greater than or equal to 10,000 daltons. The polymer contains less than 2% oligomeric material below MW 500 and less than 5% oligomeric material below MW 1,000.
Thus, tamarind seed gum, 2-hydroxypropyl ether polymer meets the criteria for a polymer to be considered low risk under 40 CFR 723.250. Based on its conformance to the criteria in this unit, no mammalian toxicity is anticipated from dietary, inhalation, or dermal exposure to tamarind seed gum, 2-hydroxypropyl ether polymer.
For the purposes of assessing potential exposure under this exemption, EPA considered that tamarind seed gum, 2-hydroxypropyl ether polymer could be present in all raw and processed agricultural commodities and drinking water, and that non-occupational non-dietary exposure was possible. The number average MW of tamarind seed gum, 2-hydroxypropyl ether polymer is 10,000 daltons. Generally, a polymer of this size would be poorly absorbed through the intact gastrointestinal tract or through intact human skin. Since tamarind seed gum, 2-hydroxypropyl ether polymer conform to the criteria that identify a low-risk polymer, there are no concerns for risks associated with any potential exposure scenarios that are reasonably foreseeable. The Agency has determined that a tolerance is not necessary to protect the public health.
Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.”
EPA has not found tamarind seed gum, 2-hydroxypropyl ether polymer to share a common mechanism of toxicity with any other substances, and tamarind seed gum, 2-hydroxypropyl ether polymer does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that tamarind seed gum, 2-hydroxypropyl ether polymer does not have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's Web site at
Section 408(b)(2)(C) of FFDCA provides that EPA shall apply an additional tenfold margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the data base unless EPA concludes that a different margin of safety will be safe for infants and children. Due to the expected low toxicity of tamarind seed gum, 2-hydroxypropyl ether polymer, EPA has not used a safety factor analysis to assess the risk. For the same reasons the additional tenfold safety factor is unnecessary.
Based on the conformance to the criteria used to identify a low-risk polymer, EPA concludes that there is a reasonable certainty of no harm to the U.S. population, including infants and children, from aggregate exposure to residues of tamarind seed gum, 2-hydroxypropyl ether polymer.
There are no existing tolerance exemptions for tamarind seed gum, 2-hydroxypropyl ether polymer.
An analytical method is not required for enforcement purposes since the Agency is establishing an exemption from the requirement of a tolerance without any numerical limitation.
In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint United Nations Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level.
The Codex has not established a MRL for tamarind seed gum, 2-hydroxypropyl ether polymer.
Accordingly, EPA finds that exempting residues of tamarind seed gum, 2-hydroxypropyl ether polymer from the requirement of a tolerance will be safe.
This action establishes a tolerance under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501
Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
This action directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000) do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1501
This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note).
Pursuant to the Congressional Review Act (5 U.S.C. 801
Environmental protection, Administrative practice and procedure, Agricultural commodities, Pesticides and pests, Reporting and recordkeeping requirements.
Therefore, 40 CFR chapter I is amended as follows:
21 U.S.C. 321(q), 346a and 371.
Fish and Wildlife Service, Interior.
Final rule.
The best available scientific and commercial data indicate that the Delmarva Peninsula fox squirrel (
This rule removes the Delmarva fox squirrel from the List throughout its range, including the experimental population designated for Assawoman Wildlife Management Area in Delaware. It also announces the availability of a post-delisting monitoring plan for the subspecies.
This rule is effective December 16, 2015.
This final rule and the post-delisting monitoring plan are available on the Internet at
Field Office Supervisor, Genevieve LaRouche, by telephone at 410-573-4573; or Cherry Keller, Wildlife Biologist, at 410-573-4532, or by email
On September 23, 2014, the Service published a proposed rule (79 FR 56686) to remove the Delmarva Peninsula fox squirrel, commonly called and hereafter referred to as the Delmarva fox squirrel (DFS), from the List of Endangered and Threatened Wildlife (List). In the proposed rule, we solicited information and comments from the public and scientific experts for 60 days, ending November 24, 2014. Later in this document, we discuss comments we received. For more information on previous Federal actions concerning the Delmarva fox squirrel, refer to the proposed rule available at
The Delmarva fox squirrel (
As a member of the Order Rodentia, the DFS has a life history with good potential for population increase. For example, females breed at 1 year of age, litter sizes range from two to four young, some females have potential for two litters in 1 year, and lifespans can reach 6 to 7 years in the wild. Den sites are frequently found in tree cavities, but leaf nests may also be used. Home ranges of the DFS vary considerably but are typically 12 to 16 hectares (ha) (30 to 40 acres (ac)), and individual home ranges overlap (Flyger and Smith 1980; entire, Paglione 1996; entire, Pednault-Willett 2002, p. 109). Densities range from 0.36 to 1.29 DFS per ha (0.15 to 0.5 DFS per ac), averaging 0.82 DFS per ha (0.33 DFS per ac) (Paglione 1996, p. 28; Pednault-Willett 2002, pp. 85-104).
Historically, this subspecies had a patchy distribution throughout most of the Delmarva Peninsula and into southern Pennsylvania, but by the time of its listing in 1967 (32 FR 4001; March 11, 1967), remnant populations occurred in only four Maryland counties (Taylor 1976, entire); this range contraction was most likely caused by land use changes and hunting. When the subspecies was listed, its distribution had been reduced to only 10 percent of the Delmarva Peninsula. After listing, the hunting season for this subspecies was closed, and recovery efforts focused on expanding the squirrel's distribution through translocations. In addition, new populations have been discovered since the time of listing (particularly since more intensive search efforts were initiated), and there are now many more areas of forest known to be occupied by the DFS.
The squirrel's current occupied range is defined as the area within 4.8 kilometers (km) (3 miles (mi)) of credible DFS sightings. As of the 2012 status review for the DFS, this covered 28 percent of the Delmarva Peninsula, including 10 of the 14 peninsular counties (8 counties in Maryland and 1 each in Delaware and Virginia) and 54,543 ha (134,778 ac) of occupied forest (USFWS 2012, based on 2010 data). Since that time, new sightings have continued to occur and an updated overview of its range as of 2013 is provided below in Table 1. An additional population discovered in Worcester County, Maryland, is the first population found there that was not a result of a translocation. Figure 1 shows range changes between the time of the 1993 recovery plan and the present decade.
We have not made any substantive changes in this final rule based on the comments that we received during the public comment period on the September 23, 2014, proposed rule (79 FR 56686), but we have added or corrected text to clarify the information that was presented. This information and other clarifications have been incorporated into this final rule as discussed below in Summary of Comments and Recommendations.
In the proposed rule published on September 23, 2014 (79 FR 56686), we requested that all interested parties submit written comments on the proposal by November 24, 2014. We also solicited peer review of the scientific basis for the proposal (see
During the public comment period for the proposed rule, we received a total of 129 comment letters. Of these, 74 provided substantive comments that we address below, including one letter from the State of Maryland and comments from two peer reviewers. Both peer reviewers asked for additional detail on the life history of this subspecies, which we have provided in the supplemental documents that can be found at
The State of Delaware also intends to keep this subspecies on its State list of endangered and threatened species, and no hunting of the DFS will be allowed after delisting. The State has written a management plan for the DFS (DNREC 2014) that calls for adding two additional DFS populations in the State, likely through translocations.
In the State of Virginia, all DFSs are currently on the Chincoteague National Wildlife Refuge, where they will not be hunted. The State has evaluated locations for potential translocations of DFSs in the future, but any future translocated populations are not expected to be subject to hunting. Enhancement of DFS populations in Virginia would be primarily aimed at restoring the native fauna of Virginia.
Some concerns about the current range of the DFS likely stem from a frequently quoted reason for listing, “the species was listed because it declined to 10 percent of its historical range” (USFWS 1993, p. 1). However, the substantial population decline as evidenced by that range decline is the actual reason for the listing. In 1944, the DFS was found in seven counties (Dozier and Hall 1944), but by 1967, it was known to occur in only four counties; thus, the decline would have been apparent and reasonably concerning to many biologists at the time of listing.
The Hilderbrand et al. (2007) PVA model indicates that a population of 130 animals would have a 95 percent chance of persisting for 100 years. This threshold, also called a minimum viable population (MVP), provides a useful benchmark of extinction risk. It should not be mistaken for a recovery goal but is, rather, a population size with an associated extinction risk based on the life history of the DFS before assessing additional threats. This PVA includes variations in adult and juvenile survival, the number of young produced per year, and variability in environmental effects.
Using this model, we estimate that the known occupied forest within the range of the DFS contains a total population that is 171 times the MVP and that, even under the worst-case scenarios for threats, including inundation of areas up to 0.6 meters (m) (2 feet (ft)) above sea level due to sea level rise, we would still have a total population that is 145 times the MVP. Further, our analysis indicates that the rangewide population would comprise at least 15 subpopulations broadly distributed across the Delmarva Peninsula. After considering the conservation imperatives of habitat availability, habitat connectivity, population resiliency and redundancy, and genetic and/or ecological representation, we concluded that the risk of extinction is low, even under a worst-case scenario, and that the current population is sufficiently abundant and well distributed to withstand foreseeable threats.
Sea level rise is likely to result in more frequent flooding and storm and tidal surges, with gradual deterioration of habitat at the shoreline edges. It is therefore likely that individual animals will need to shift their home range inland and that the overall population will shift inland as well. The ability of DFSs to shift their home ranges in response to habitat change has already been demonstrated as individual animals moved to new areas following clearcuts in portions of their home ranges (Paglione 1996); we note that clearcutting is a more rapid and dramatic habitat alteration than would be expected from flooding or storm surges.
In terms of available habitat for the DFS to move into following storm events and/or sea level rise, we evaluated the rangewide availability and connectivity of forest patches in the 2012 status review (USFWS 2012) by mapping the connectivity of forest patches relative to dispersal of DFS subpopulations (USFWS 2012, figures 9 and 10). After quantitative analysis of habitat that could be lost due to sea level rise and development (USFWS 2012, table 7), we concluded that even if all potentially affected habitat was lost immediately, remaining DFS populations would still be sufficiently abundant and well distributed to alleviate the risk of extinction.
With regard to the connectivity needed to allow DFSs to move to more upland habitats, we recognize that sea-level rise can widen rivers and increase obstacles to DFS movement, especially from west to east in southern Dorchester County. However, even with maximum projected inundation, DFSs could disperse from southern Dorchester without crossing streams. In addition, southern Dorchester County would still contain about 2,400 to 3,200 ha (6,000 to 8,000 ac) of suitable occupied habitat, supporting at least six times the MVP. Given this, we predict long-term population viability in these areas of Dorchester County.
Notwithstanding our conclusion that the recovery criteria for the DFS, as required under section 4(f) of the Act, have been met, this is not the requisite analysis for determining the appropriate listing status of the species. Rather, listing determinations must be made in accordance with sections 4(a)(1) and 4(b) of the Act. Section 4(a)(1) requires that the Secretary determine whether a species is endangered or threatened because of one or more of five threat factors, while section 4(b) requires that the determination be made “solely on the basis of the best scientific and commercial data available.” Thus, any determination to delist a species must be based on the best information available at the time of the determination and the results of the five-factor analysis, notwithstanding any information in the recovery plan.
Although meeting recovery criteria is not essential for determining a species' listing status, our most recent status review (USFWS 2012) led us to the conclusion that all recovery criteria for the DFS, including criterion 6, have been met. Criterion 6 states that “mechanisms that ensure perpetuation of suitable habitat at a level sufficient to allow for desired distribution [must be] in place and implemented within all counties in which the species occurs.” Our analysis showed that there are many State and Federal laws and land protection programs in place that actively protect land at the present time and will continue to do so into the future. A detailed table and map of the land protected by these programs in each county is provided for each county in the 2012 status review (USFWS 2012, table 5 and figure 7). These protective mechanisms are also presented in our analysis of Factor D (USFWS 2012, pp. 38-39), with a detailed description of each program provided in appendix D of the same document. These data clearly portray the adequacy of these regulatory mechanisms.
We consider it highly likely that a DFS population will persist on Chincoteague NWR for the foreseeable future, although there may be a shift in the habitats that are occupied. Nonetheless, even if the Chincoteague population were to be lost, this would not cause a rangewide risk of extinction (USFWS 2012, table 7).
“
These statements are intended to convey that although new information had become available since 1993, the recovery criteria were still considered adequate for assessing DFS recovery progress. With regard to criteria addressing the five listing factors, the lack of specific threats-based criteria is typical of recovery plans at that time and does not preclude a separate five-factor analysis (see Comment 7, above). Significantly, since the two status reviews analyze both the recovery criteria and the five listing factors, each review constitutes a complete assessment of the status of the species (USFWS 2007; USFWS 2012). Overall, the two status reviews and the September 23, 2014, proposed rule (79 FR 56686) are based on the best available information on the biology of the DFS and the threats to its long-term viability.
The rangewide population estimates in the 2007 and 2012 reviews differ only slightly (19,265 versus 22,368 animals, respectively), but as described in the 2012 review, the two estimates were based on different survey methods. Light detection and ranging (LiDAR) data, which allow us to distinguish between mature forests and other forested areas, were not available for the 2007 status review. We were able to use a more refined and conservative approach in the 2012 review and estimated the rangewide population using only occupied mature forest. Both estimates are intended to provide a general measure of the rangewide population size (USFWS 2007, p. 8; USFWS 2012 p. 20).
It should also be noted that in the 2007 review, we concluded that DFS recovery was imminent. We indicated that a final listing recommendation was pending while we obtained and analyzed LiDAR data, and that, if new information continued to support our finding that DFS habitat availability and connectivity were likely to persist over the foreseeable future, we would recommend initiation of delisting when the LiDAR analysis was completed (USFWS 2007, p. 27).
In accordance with our peer review policy published on July 1, 1994 (59 FR 34270), we solicited expert opinion from five independent scientists with expertise that included familiarity with the DFS and its habitat, biological needs, and threats. We received responses from two of the peer reviewers.
We reviewed comments received from the peer reviewers for substantive issues and new information regarding the status of the DFS. The peer reviewers generally concurred with our methods and conclusions and considered the scientific information to be correct and the analyses to be sound. However, both reviewers identified parts of the document that could be strengthened. Peer reviewer comments are addressed below and incorporated as appropriate into the final rule or supplemental documents, available at
Consideration of zoning was not included in our analysis specifically because zoning restrictions can be changed, making projections based on this source of information less certain. Further, we took a cautious approach in considering future development by projecting complete loss of any DFS-occupied habitat within a “Smart Growth” area that was not otherwise protected. (“Smart Growth” is a theory of land development that concentrates new development and redevelopment in areas that have existing or planned infrastructure to avoid sprawl.) Currently, DFSs inhabit blocks of forest within the Smart Growth areas of both Cambridge and Easton in Maryland. Although limited monitoring shows that DFSs have been persisting in these woodlands over many years and may be able to continue doing so in the future, our analysis assumes loss based on lack of ensured habitat protection.
Section 4(f) of the Act directs us to develop and implement recovery plans for the conservation and survival of endangered and threatened species unless we determine that such a plan will not promote the conservation of the species. Recovery plans are not regulatory documents and are instead intended to establish goals for long-term conservation of a listed species; define criteria that are designed to indicate when the threats facing a species have been removed or reduced to such an extent that the species may no longer need the protections of the Act; and provide guidance to our Federal, State, and other governmental and nongovernmental partners on methods to minimize threats to listed species. There are many paths to accomplishing recovery of a species, and recovery may be achieved without all criteria being fully met. For example, one or more criteria may have been exceeded while other criteria may not have been accomplished, yet the Service may judge that, overall, the threats have been minimized sufficiently, and that the species is robust enough to reclassify or delist the species. In other cases, recovery opportunities may have been recognized that were not known at the time the recovery plan was finalized. These opportunities may be used instead of methods identified in the recovery plan.
Likewise, information on the species that was not known at the time of the recovery plan may become available. The new information may change the extent that criteria need to be met for recognizing recovery of the species. Recovery of species is a dynamic process requiring adaptive management that may, or may not, fully follow the guidance provided in a recovery plan.
Despite the guidance provided by recovery plans, determinations to remove species from the List must be made in accordance with sections 4(a)(1) and 4(b) of the Act. Section 4(a)(1) requires that the Secretary determine if a species is endangered or threatened because of one or more of five threat factors. Section 4(b) of the Act requires that the determination be made “solely on the basis of the best scientific and commercial data available.”
Although recovery criteria, as mentioned above, help guide recovery efforts and should always be consulted when considering a change in the status of a listed species, the ultimate determination of whether to reclassify or delist a species must be made in accordance with statutory standards, and recovery criteria can neither substitute for nor pre-empt section 4(a)(1) requirements. Ultimately, a decision to remove a species from the
The most recent DFS recovery plan was approved by the Service on June 8, 1993 (USFWS 1993, entire), and updated on October 31, 2003 (USFWS 2003, entire). The plan states that “the long-range objective of the DFS recovery program is to restore this endangered species to a secure status within its former range.” The plan provides three criteria for reclassifying the DFS from endangered to threatened status. It then provides four additional criteria to be considered in conjunction with the first three for delisting the DFS.
A discussion of the extent to which each recovery criterion has been met is provided in the proposed rule (79 FR 56686; September 23, 2014). This discussion is summarized below.
(1) DFS range and distribution: The geographic information system (GIS) maintained for the DFS documents a significant increase in the area occupied by the DFS since the 1993 recovery plan was issued (see Figure 1, above). Records of DFS sightings by knowledgeable observers and, in particular, the use of trap and camera surveys have greatly improved our ability to determine which forest tracts are occupied by the DFS and monitor continued presence.
(2) Population persistence: Persistence of DFS populations over the recovery period has been evaluated through comparison of occupancy over time, including a survey conducted in 1971 and repeated in 2001, and a second analysis comparing occupancy from 1990 through 2010 (Table 2). These studies are summarized in the proposed rule (79 FR 56686; September 23, 2014) and status review (USFWS 2012, pp. 15-17).
As indicated in Table 2, DFSs continued to persist in the vast majority of woodlots where they were known to occur in 1990, and their presence was newly documented in an additional 13,042 ha (32,227 ac) in all three States through 2010 (USFWS 2012, p. 8). Although some of these discoveries are likely to be occurrences that were previously present but undetected, anecdotal information indicates that several new localities represent true range expansion (see, for example, USFWS 2012, figure 4). Using the 2010 figures for occupied forest in all three States, as well as maps of mature forest and density estimates of the DFS available from various studies, we estimate that the total population of the DFS is now about 20,000 animals across an expanded range (USFWS 2012, p. 21).
(3) Population viability: A DFS population viability analysis (PVA) developed by Hilderbrand et al. (2007, entire) modeled the extinction probabilities of different-sized populations and determined that a population with 65 females, or 130 animals total, had a 95 percent chance of persisting for 100 years. This value, also called a minimum viable population (MVP), was used to gauge extinction risk by projecting how many populations of this size are likely to remain present in a given portion of the current DFS range (USFWS 2012, pp. 18-20; also see
The PVA also estimated that 75 percent of a given DFS population would have the ability to disperse to areas within 4 km (2.5 mi) (Hilderbrand et al. 2007, p. 73), and thus animals in forested tracts within this distance would be likely to interbreed; these interbreeding groups are defined as subpopulations. The analysis indicated that approximately 85 percent of DFSs are found in four large, narrowly separated subpopulations that could expand to become even more connected. Each of these subpopulations contains populations estimated to be several times the MVP minimum and have a high likelihood of population persistence. Overall, the rangewide population, estimated at between 17,000 and 20,000 animals, contains more than 100 times the MVP.
(4) Effects of timber harvest: Two major studies of the effects of timber harvest on the DFS (Paglione 1996, entire; Bocetti and Pattee 2003, entire) suggest that the subspecies is fairly tolerant of timber harvest, although specific impacts depend on the size, location, and landscape context of the harvest. Small clearcuts within a surrounding forest showed relatively little impact on the DFS, with individual squirrels shifting their home ranges into adjacent habitat, whereas harvest of more isolated forest peninsulas forced DFSs to move greater distances (Paglione 1996). Findings from the long-term Bocetti and Pattee (2003) study lead to the general conclusion that the DFS can tolerate timber harvests and can continue to occupy forested mosaics of mature and regenerating stands. In addition, both studies suggest that the DFS has high site fidelity and tends to shift home ranges rather than abandon a site in response to disturbance.
(5) Habitat availability: An analysis of LiDAR data provided by the State of Maryland enabled an inventory of mature forest suitable for the DFS throughout most of the squirrel's range (USFWS 2012, Appendix E). As of 2004, LiDAR mapping had identified 175,656
Although the amount and location of mature forest will change over time with timber harvest and forest growth, these data provide good baseline information about the availability and distribution of suitable habitat. Mature forest is often found in riparian zones (USFWS 2012, figure 8) that can provide connected habitat for DFS dispersal and colonization of new areas. LiDAR mapping also showed large tracts of mature forest distributed in upland areas throughout the Maryland portion of the subspecies' range. Given that most DFS populations occur in Maryland and, further, that unoccupied but suitable habitat is found both along the coast and inland elsewhere on the Delmarva Peninsula, we can infer from this habitat inventory that there is ample unoccupied mature forest to enable further expansion of the DFS' rangewide population.
(6) Habitat connectivity: Lookingbill et al. (2010, entire) conducted a GIS analysis of the connectivity between 400-ha (175-ac) forest patches on the Delmarva Peninsula (although the DFS is not a forest interior obligate and does not require forest blocks this large). Study results show high connectivity of forest blocks in the southern Maryland portion of the squirrel's range, indicating few obstacles to DFS dispersal throughout this area. Two major forest corridors were identified for DFS dispersal out of Dorchester County, Maryland, one of which is already occupied by the DFS (a third dispersal corridor not identified by the model is also DFS-occupied). Observations of DFS movement through a wide range of habitats, in conjunction with the results of this connectivity model and the map of LiDAR-defined mature forests, indicate that there is sufficient habitat availability and connectivity for further DFS range expansion.
We also have collected data to better understand rangewide population trends. The distribution data that document an expanded range and population persistence within that range as described under criterion 1, above, are much better indicators of DFS recovery. Although DFS populations in isolated areas (such as on small islands) are vulnerable to extirpation, all available population data for the DFS indicate that the range has expanded and populations are persisting within the range, and that this recovery criterion has been met.
Post-release trapping results (Therres and Willey 2002, entire), along with more recent trapping and camera surveys, indicate continued presence of 11 of 16 translocated colonies (69 percent) for more than 20 years (USFWS 2012, table 1, p. 83). Further, in several of these areas, DFSs have dispersed well beyond the initial release site.
This success rate is higher than is typically found for similar translocation efforts for other endangered species (see Fischer and Lindenmayer 2000, p. 5), although the success rate is generally higher for mammals and wild source populations (Wolf et al. 1996, p. 1146). Further, despite some initial concerns about the genetic diversity of the translocated populations, subsequent analysis indicated that their genetic diversity was comparable to that of their source populations (Lance et al. 2003, entire). These data indicate that this criterion has been met.
By 2007, eight new populations had been identified that did not result from translocations (USFWS 2007, figure 2), expanding the range toward the east. Notably, a colony discovered in Sussex County, Delaware, represents the first population found in that State since the time of listing that was not a result of a translocation. Since 2007, additional occupied forest has been discovered between some of these new populations, thus improving their long-term likelihood of survival (USFWS 2012, figure 3). We therefore conclude that this recovery criterion has been met.
Section 4 of the Act and its implementing regulations (50 CFR part 424) set forth the procedures for listing species, reclassifying species, or removing species from listed status. “Species” is defined in section 3 of the Act as any species or subspecies of fish or wildlife or plants, and any distinct vertebrate population segment of fish or wildlife that interbreeds when mature (16 U.S.C. 1532(16)). A species may be determined to be an endangered or threatened species based on one or more factors described in section 4(a)(1) of the Act: (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; or (E) other natural or manmade factors affecting its continued existence.
We must consider these same factors in delisting a species, and we must show that the best available scientific and commercial data indicate that the species is neither endangered nor threatened because: (1) It is extinct; (2) it has recovered and is no longer endangered or threatened (as is the case with the DFS); and/or (3) the original scientific data used at the time of listing classification were in error (50 CFR 424.11(d)). Determining whether a species is recovered requires evaluation of both the threats currently facing the species and the threats that are reasonably likely to affect the species in the foreseeable future following delisting and removal or reduction of the Act's protections.
A species is endangered for purposes of the Act if it is in danger of extinction throughout all or a significant portion of its range (SPR) and is threatened if it is likely to become endangered within the foreseeable future throughout all or a significant portion of its range. The word “range” in these definitions refers to the range in which the species currently exists. Although the term “foreseeable future” is left undefined, for the purposes of this rule, we regard foreseeable future as the extent to which, given available data, we can reasonably anticipate events or effects, or extrapolate threat trends, such that reliable predictions can be made concerning the future status of the DFS. In conducting this analysis, our general approach was to review past threat trends and the DFS' response, followed by a prediction of future trends. With some exceptions, we used a time frame of approximately 40 years for both past and future trend analyses; this time period also allowed use of available data to make more reliable projections despite the inherent uncertainties attached to predicting the future.
In the following five-factor analysis, we evaluate the status of the DFS throughout its entire range. We then address the question of whether the DFS is endangered or threatened in any significant portion of its range. Note that information discussed in detail in the September 23, 2014, proposed rule (79 FR 56686) and/or the 2012 status review (USFWS 2012, pp. 26-44) is summarized for each factor below.
Here we considered habitat changes caused by residential development, sea level rise, and commercial timber harvest, as well as the habitat-related effects on DFS population and rangewide viability, with the exception of development or timber harvest effects on the population on Chincoteague NWR, as it is completely protected from these activities; we did, however, address the impact of sea level rise on this population.
The Delmarva Peninsula is basically a rural landscape, but the human population has increased since the DFS was listed, as shown by Maryland Department of Planning data discussed in the September 23, 2014, proposed rule (79 FR 56686) (see Maryland Department of Planning 2008a, 2008b, and 2011b). Despite the past—and continuing—growth, the majority of the Delmarva Peninsula's land base remains rural, with approximately 47 percent agricultural land, 36 percent forest, 9 percent wetlands, and only 7 percent developed land (USFWS 2012, table 2).
Further, since listing, a variety of State laws and programs have been put in place to counteract the rate of development across the State (USFWS 2012, appendix D), including the Maryland Forest Conservation Act and Maryland Critical Area Law. In addition, the Maryland Environmental Trust, Maryland Agricultural Land Protection Fund, and Maryland Rural Legacy Program used easements to permanently protect about 3,642 ha per year (9,000 ac per year) of private lands between 2000 and 2008, enhancing protection of DFS habitat (USFWS 2012, chart 4).
Overall, approximately 30 percent of DFS-occupied forest lands, widely distributed across the subspecies' range, is protected from development (USFWS 2012, table 5). Additional acres of protected forest outside the current range of the DFS provide areas for further expansion (USFWS 2012, figure 7). Overall, the 15,995 ha (39,524 ac) of occupied forest protected from development could support a DFS population 45 times the MVP (based on Hilderbrand et al. 2007, entire). However, because 70 percent of DFS-occupied forest occurs on private land that remains legally unprotected from development, future losses from development are likely.
We assessed the potential threat of DFS habitat loss stemming from future development by overlaying the acres of existing occupied forest with areas projected to be lost to development, including: (1) Smart Growth areas (excluding the acres that are protected by easement), (2) areas where development projects are already planned, and (3) areas that are projected to be lost by 2030 if Smart Growth policies are not implemented (USFWS 2012, figure 11). Overall, 3 percent (2,283 ha or 5,643 ac) of the forest area currently occupied by the DFS is anticipated to be lost to development by 2030. This relatively low rate of projected loss can be attributed to the likelihood that most future development on the Delmarva Peninsula will occur outside the current range of the DFS. Future development within the current range is expected to primarily affect two small, isolated DFS subpopulations where extirpation is already probable. Together these subpopulations constitute less than 0.5 percent of the total viable population; thus, their loss would have a negligible effect on the rangewide extinction risk for the DFS. Although information on development projections past 2030 is not available at this time, we consider it likely that development on the Delmarva Peninsula will continue to be concentrated near large towns outside the range of the DFS, with some scattered development within the subspecies' range.
Conversely, we also anticipate continued expansion of DFS populations, including expansion onto Chesapeake Forest lands (which are now owned and managed by the State of Maryland), noting that some occupancy on these lands has already
The Delmarva Peninsula is a low-lying landform, and sea level rise in the Chesapeake Bay can flood and kill shoreline forests that provide habitat for the DFS. However, the DFS does not occur exclusively in coastal habitats, which moderates its vulnerability to this threat, and GIS analysis indicates that over 80 percent of the current range would remain even after a projected inundation of coastal areas by 0.61 m (2 ft); see the discussion below.
Regarding sea level rise in the past, the forces of land subsidence and sea level rise have resulted in a long history of island loss and formation in the Chesapeake Bay. In the last century, these forces combined to produce a relative sea level rise in the Chesapeake Bay region of approximately 0.3 m (1 ft) per 100 years (National Wildlife Federation 2008, p. 2).
Loss of some forest areas in southern Dorchester County, Maryland, is already apparent at the lowest elevations where trees have been killed by saltwater intrusion from recent hurricanes. Although we cannot precisely estimate how much occupied habitat has been lost in the past 40 years, LiDAR analysis of forest height and canopy cover has identified at least 68 ha (170 ac) at the edge of coastal marshes that are now standing dead trees.
Hurricanes contribute to forest loss as sea levels rise, with saltwater moving farther into forested areas during associated storm surges. However, hurricanes and intense storms have always been part of the weather in this region, and there is no evidence that they pose a problem
In terms of future effects of sea level rise and climate change, sea level rise in the Chesapeake Bay is certain to continue, and the rate of change is likely to be even higher than in the past (National Wildlife Federation 2008, pp. 16-17; Sallenger et al. 2012, entire; Boesch et al. 2013, entire). To determine the extent of DFS-occupied forest that may be lost through the combined effects of sea level rise and subsidence (
Our GIS analysis, in which we overlaid this inundation scenario with DFS-occupied forest, indicated that the most severe effects of sea level rise on the DFS by 2050 will be seen in the southwestern portion of Dorchester County, Maryland (USFWS 2012, figure 12). Here, 9,332 ha (23,060 ac) of currently occupied forest would either be lost or remain only on isolated islands (USFWS 2012, figure 12). In addition, 4,409 ha (10,897 ac) of habitat along the remaining southern edge of the county would eventually deteriorate, causing DFSs to move inland. The ability of DFSs to move into connected habitat likely reduces the effects on this subspecies due to forest losses at the coastal marsh fringe; we nonetheless recognize this as habitat loss. Other projected forest losses include scattered patches throughout the range, including some losses in the range of the Chincoteague population (USFWS 2012, figure 12).
Even if the predicted habitat losses from sea level rise in southwestern Dorchester County were to occur immediately, the area's remaining 23,632 ha (58,398 ac) of occupied habitat would continue to support a highly abundant DFS population with a negligible risk of extinction. Moreover, the habitat in the northeastern portion of this area is connected to existing occupied forest farther inland (USFWS 2012, figure 9) into which DFSs could move. In particular, a large tract of State-owned forest that will soon become sufficiently mature to allow for DFS expansion connects the Dorchester DFS subpopulation to forest tracts in Caroline and Sussex Counties (USFWS 2012, figure 10). Although sea level rise may cause streams and rivers to widen and pose more of a barrier in the future, forested corridors will still be available to provide DFSs with access to habitat in the inland portions of Dorchester County.
Given our current understanding of DFS habitat use, dispersal, and population dynamics, the expected DFS response to deterioration of coastal woodlands from sea level rise is the gradual movement of some DFSs to more inland areas. The DFS is known to travel across areas of marsh and can move at least 40 to 50 m (131 to 164 ft) between forested islands and may also move across frozen marsh in the winter. We acknowledge that despite the squirrel's ability to move, isolation and loss of some individuals is likely to occur. Nonetheless, we conclude that habitat loss due to sea level rise will not be a limiting factor to the future viability of this subspecies.
The 0.61-m (2-ft) inundation scenario does not play out the same in parts of the range outside southwestern Dorchester County. In the series of small peninsulas in northwestern Dorchester County called the “neck region,” this scenario results in shrinkage of available habitat but does not create islands, and leaves habitat for the DFS to move into (USFWS 2012, figure 12). This is also the case in other portions of the squirrel's range near the Chesapeake Bay and the Atlantic Coast. Some additional small areas of occupied habitat may be lost, but the gradual loss can be accommodated by shifts in DFS home ranges to adjacent but currently unoccupied habitat.
The most coastal population of the DFS is a translocated population introduced in 1968 to Chincoteague NWR, a barrier island in Virginia that could be severely affected by sea level rise (National Wildlife Federation 2008, p. 69). The refuge's draft Comprehensive Conservation Plan (available at
It is not clear how climate change effects may alter the nature of the forests of the Delmarva Peninsula. However, as the DFS occurs in pine, hardwood, and mixed hardwood forests, with a preference for mixed forests with diverse tree species, any effects on the species composition of these forests are unlikely to become a significant threat for the squirrel.
Overall, DFS distribution has increased in the past 40 years even with
Having determined that neither development nor sea level alone threatens the DFS with rangewide extinction, we conducted a spatial analysis to examine how these most pervasive stressors might interact (USFWS 2012, figure 5 and table 7).
As of 2010, 54,429 ha (134,496 ac) of habitat supported 22 DFS subpopulations, (USFWS 2012, table 7), and 95 percent of the occupied forest contains the 11 largest subpopulations, which are highly likely to remain demographically viable. Even with projected losses from both development and sea level rise, and not accounting for potential discovery of additional occupied habitat, over 95 percent of the DFS-occupied forest would continue to support these most viable subpopulations. Thus, the combined effects of these threats do not pose an extinction risk to the DFS.
Unlike development and sea level rise, timber harvest does not result in permanent loss of habitat. Further, as noted under
Short-rotation pine forestry involves harvesting stands at approximately 25 years of age for pulp and other fiber products, precluding their suitability as DFS habitat. In the past, two large corporations managed for short-rotation pine on the Delmarva Peninsula; however, these industries have effectively left the Peninsula. In 1999, the State of Maryland acquired 23,471 ha (58,000 ac) of these lands, collectively administered as the Chesapeake Forest Lands and comprising scattered parcels throughout the southern four Maryland counties (USFWS 2012, figure 13). Another 4,202 ha (10,384 ac) of forest land previously owned and managed for short-rotation pine are now owned by the State of Delaware. All these lands will now be protected from development and managed for sustainable sawtimber harvest and wildlife habitat objectives. Moreover, DFS management has been integrated into the Sustainable Forest Management Plan for Chesapeake Forest Lands prepared by Maryland's Department of Natural Resources (Maryland DNR 2013, pp. 92-96), which identifies a total of 17,618 ha (43,535 ac) as DFS Core Areas and DFS Future Core Areas. Overall, these land acquisitions represent a future of protected forest areas managed for sawtimber where the DFS can survive and grow in numbers, substantially removing the threat posed by short-rotation pine management on the lower Delmarva Peninsula.
Harvest rate estimates for both the 2007 and 2012 status review (USFWS 2007, pp. 17-20; USFWS 2012, table 6) indicated that harvests in more recent years have been substantially less than in previous years (generally prior to 2005) (USFWS 2012, table 6). For instance, in the four southern Maryland counties, the average annual harvest dropped from approximately 1,050 ha (2,594 ac) prior to 2005, to approximately 303 ha (749 ac) since then. The average size of harvested stands in these counties has also decreased, from an average of 22 ha (54 ac) to an average of 15 ha (36 ac). This is also the case in Delaware; in Sussex County, the annual harvest rate in the last 4 years was half of what was generally harvested between 1998 and 2005, with the same holding true for the size of individual harvest areas.
Among other reasons for these reductions, economic pressures have resulted in the closure of several sawmills on the Delmarva Peninsula. The market for timber has declined dramatically, with low prices acting as a disincentive to harvesting. As discussed below, reduced harvest levels are likely to continue in the future.
Although it is very difficult to predict future market forces, trends in fragmentation and parcelization in the Chesapeake Bay region (Sprague et al. 2006, pp. 22-24) suggest that future timber harvests might remain smaller in size and occur less frequently. Parcelization is the subdivision of large blocks of land into multiple ownerships, with a consequent tendency to shift from forest management to management for aesthetics and wildlife values. In Maryland, 45 percent of woodland owners own less than 20 ha (50 ac) of woods (U.S. Department of Agriculture, 2012). Given general sizes of timber harvests, these woodlands may be too small for future harvests and are more likely to be managed for aesthetics and wildlife.
This ownership pattern also reflects the gentrification of the eastern shore of Maryland, with landowners becoming less likely to be farmers or foresters and more likely to be commuters or retirees who do not use their properties for income. This trend is expected to continue into the future (see
Overall, the forest land transfers in Maryland and Delaware, in conjunction with available data on harvest rates across the range of the squirrel, suggest that timber harvest does not pose an extinction risk for the DFS.
The current range of the DFS spans coastal and interior areas of the Delmarva Peninsula where DFSs inhabit diverse wetland and upland forest types, suggesting that DFS populations will continue to remain resilient to a variety of habitat-related effects. Further, the distribution of these habitats provides for redundancy of populations, which reduces the risk of catastrophic loss. We recognize that habitat losses may occur in some areas, primarily from residential development and sea level rise, but we expect the DFS population to remain at or above recovered levels, and, moreover, we do not expect such habitat losses to prevent overall expansion of the range in the future.
Overhunting has been posited as a factor in the original decline of this subspecies. Squirrel hunting was common in the early and middle decades of the 20th century, and hunting of the DFS in small, isolated woodlots or narrow riparian corridors could have resulted in local extirpations. Taylor (1976, p. 51) noted that the DFS remained present on large agricultural estates where hunting was not allowed, suggesting that these areas
By 1972, hunting of DFS was banned through state regulations. Removal of hunting pressure may have been one factor in the renewed population growth and expansion of the squirrel's range to its current extent. Coincidentally, squirrel hunting has declined in popularity in recent decades; nationwide, squirrel hunting declined by about 40 percent between 1991 and 2001, and by an additional 20% between 2001 and 2011 (DOI 1991 p. 70; DOI 2001, p. 57; DOI 2011, p. 60). Recent records of squirrel hunters specifically are not available for Maryland but the number of small game hunters in Maryland (pursuing squirrels, rabbits and/or quail) declined from 64,000 to 35,000 between 1991 and 2011 (DOI 1991, p. 113; DOI 2011, p. 102). Hunting gray squirrels will continue to some extent, and though some hunters may mistake DFS for gray squirrels, this is likely a rare situation that has not prevented the DFS from expanding over the last 40 years.
Regarding hunting in the future, discussions with our State partners indicate that DFS management after delisting would be conducted very cautiously and that a hunting season would not be initiated in the immediate future. We recognize that a restricted hunt could be conducted at sites where DFSs are abundant without causing a population decline, and that State management agencies have the capability to implement careful hunting restrictions and population management; the reopening of the black bear (
We nonetheless foresee only limited individual interest in reinitiating a DFS hunt, coupled with strong public attitudes against hunting DFSs and, more generally, recreational hunting (Duda and Jones 2008, p. 183). Given public sentiment, the declining interest in squirrel hunting, and the restrictions that we expect would be imposed on a renewed hunting program, hunting is highly unlikely to pose an extinction risk to the DFS in the foreseeable future.
Each of these types of threat is summarized below.
Reports of disease in the DFS are uncommon. Although other subspecies of eastern fox squirrels are known to carry diseases such as mange and rabies, there is no documentation of these diseases in the DFS, and there is no evidence or suspicion of disease-related declines in any local population (USFWS 2012, pp. 37-38).
Although the advent of white-nose syndrome affecting bats (Blehert et al. 2009, entire) and chytrid fungus affecting amphibians (Daszak et al. 1999, entire) demonstrates the uncertainty surrounding novel disease events, the life-history traits of the DFS tend to make them less susceptible to these types of epizootics. Delmarva fox squirrels do not congregate in large numbers where disease can easily spread through a population. Further, the DFS is patchily distributed across its range, which makes it more difficult for disease to spread across populations, and DFSs are not migratory and do not inhabit the types of environment (as with aquatic species) where pathogens can readily disperse.
Overall, there currently is no evidence of disease-related declines or any indication that DFSs are particularly susceptible to disease outbreaks, and we conclude that disease is neither a current nor a future extinction risk for this subspecies.
Predators of the DFS include the red fox (
Changes in numbers of certain predators may cause some fluctuations in DFS numbers at a site (for instance, a DFS population may decline when red fox numbers increase), but these types of events are sporadic and localized. Conversely, although bald eagle numbers have dramatically increased in the Chesapeake Bay region over the past 40 years and eagles have been known to take DFSs, they still prey primarily on fish. And while feral dogs and cats may occasionally take DFSs, such predation is not a rangewide threat. The DFS population has increased over the last 40 years despite ongoing predation, and we conclude that predation at these levels is not a current or future extinction risk for this subspecies.
Several laws established in Maryland over the past 40 years provide substantial protections for DFS habitat (USFWS 2012, appendix D). The Maryland Critical Areas Act of 1984 designates all areas within 304.8 m (1,000 ft) of high tide as Critical Areas and, as amended, prohibits development and forest clearing within 60.96 m (200 ft) of streams and the Chesapeake Bay. These areas serve as both breeding habitat and dispersal corridors for DFSs. The Maryland Forest Conservation Act of 1991 requires that when a forested area is cleared and converted to other land uses, other forest areas must be protected in perpetuity or, alternatively, replanted to offset these losses. Additionally, the State-implemented portions of the Clean Water Act (33 U.S.C. 1251
Several State programs in Maryland, including its Agricultural Land Protection Fund, Environmental Trust, and Rural Legacy Program, encourage voluntary conservation easements that protect lands from development. Collectively, these programs now protect 79,066 ha (195,377 ac) of private lands within the DFS' range. Similar programs in Delaware protect an additional 12,677 ha (31,327 ac) in Sussex County (USFWS 2012, table 3).
Although in Delaware and Virginia the DFS occurs primarily on Federal and State lands, regulatory protections affecting private lands allow for continued DFS range expansion. For example, Delaware's Agricultural Land Protection Program and Forest Legacy Program now protect more than 12,677 ha (31,327 ac) in Sussex County, much of which is or could be occupied by the DFS. The Virginia DFS population is completely protected on Chincoteague NWR. If needed, State-owned lands or private lands, or both, protected by land trusts would provide suitable habitat for future translocations.
Overall, many State laws and programs that protect the DFS and its habitat have been enacted or strengthened in the last 40 years, and it is likely that this State protection will continue. Currently, these regulatory mechanisms, together with other factors that address population and habitat trends, have substantially reduced threats to the DFS. We thus conclude that existing regulatory mechanisms are adequate in terms of reducing extinction risks for the DFS.
The level of risk posed by each of the following factors is assessed below.
Forest pest infestations can affect forest health and its ability to provide suitable habitat for the DFS. Gypsy moth
Southern pine bark beetle (
Overall, an analysis of forest pests in the Chesapeake Bay watershed found that most areas on the Eastern Shore where DFSs occur have a relatively low likelihood of insect infestations, with 3.8 to 10 percent of this area considered to be at risk (Sprague et al. 2006, p. 87). Although emergence of new forest pests is to be expected, Maryland's Forest Health Monitoring Program conducts surveys to map and report forest pest problems (Maryland Department of Agriculture, Forest Pest Management, 2012, entire). Forest pest outbreaks are likely to recur and may increase if the climate warms as projected; however, this threat appears to be localized and sporadic and, with existing programs to monitor and treat forest pest outbreaks, we conclude that this is not an extinction risk factor for the DFS.
Vehicle strikes are a relatively common source of DFS mortality. Similarly to other species, the probability of DFSs being hit by vehicles is dependent on the DFS' density and proximity of roads to habitat. Vehicle strikes of DFSs tend to be reported more frequently in areas where DFSs are abundant, even if traffic levels are relatively low (
Overall, most DFS populations across the subspecies' range continue to remain stable or are increasing in numbers despite these localized events, and we conclude that vehicle strikes alone are not a pervasive threat or extinction factor for this subspecies.
A summary of the five-factor analysis discussed above is provided in Table 3. Based on our analysis, we conclude that no single factor or combination of factors poses a risk of extinction to the DFS now or in the foreseeable future.
We have carefully assessed the best scientific and commercial information available regarding past, present, and future threats to the long-term viability of the DFS. The current range of the DFS spans the northern and southern portions of the Delmarva Peninsula, comprising all three States, and extends from coastal areas to the interior of the Delmarva Peninsula. The DFS inhabits a variety of forest types, from hardwood-dominated to pine-dominated forests and from wetland to upland forests, indicating an underlying genetic variability or behavioral plasticity that should enhance the subspecies' ability to adapt to changing environmental conditions. Its relatively wide distribution also provides redundancy of occupied forest across the landscape, which further reduces extinction risk, and its continued occupancy of woodlots over the past 20 to 30 years and the success of translocation efforts indicate considerable resilience to stochastic events. We thus expect the rangewide population of the DFS not only to remain at recovery levels but to grow and continue to occupy the full complement of landscapes and forest types on the Delmarva Peninsula.
The Act defines “endangered species” as any species that is “in danger of extinction throughout all or a significant portion of its range,” and “threatened species” as any species that is “likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range.” The term “species” includes “any subspecies of fish or wildlife or plants, and any distinct population segment [DPS] of any species of vertebrate fish or wildlife which interbreeds when mature.” As a subspecies, the DFS has both met the recovery criteria we consider for delisting, and the analysis of existing and potential risks shows that the range and distribution of the subspecies is sufficient to withstand all foreseeable threats to its long-term viability. Thus, after assessing the best available information, we have determined that the DFS is no longer in danger of extinction throughout all of its range, nor is it likely to become threatened with endangerment in the foreseeable future.
Having determined the status of the DFS throughout all of its range, we next examine whether the subspecies is in danger of extinction in a significant portion of its range. Under the Act and our implementing regulations, a species may warrant listing if it is in danger of extinction or likely to become so throughout all or a significant portion of its range, as stated above. We published a final policy interpreting the phrase “significant portion of its range” (79 FR 37578; July 1, 2014). This policy states that: (1) If a species is found to be endangered or threatened throughout a significant portion of its range, the entire species is listed as an endangered species or a threatened species,
The SPR policy is applied to all status determinations, including analyses for the purposes of making listing, delisting, and reclassification determinations. The procedure for analyzing whether any portion is an SPR is similar, regardless of the type of status determination we are making. The first step in our analysis of the status of a species is to determine its status throughout all of its range. If we determine that the species is in danger of extinction, or likely to become so in the foreseeable future, throughout all of its range, we list the species as an endangered (or threatened) species and no SPR analysis will be required. If the species is neither in danger of extinction, nor likely to become so, throughout all of its range, we determine whether the species is in danger of extinction or likely to become so throughout a significant portion of its range. If it is, we list the species as an endangered species or a threatened species, respectively; if it is not, we conclude that listing of the species is not warranted.
When we conduct an SPR analysis, we first identify any portions of the species' range that warrant further consideration. The range of a species can theoretically be divided into portions in an infinite number of ways. However, there is no purpose to analyzing portions of the range that are not reasonably likely to be both significant and endangered or threatened. To identify only those portions that warrant further consideration, we determine whether there is substantial information indicating that (1) the portions may be significant and (2) the species may be in danger of extinction in those portions or likely to become so within the foreseeable future. We emphasize that answering these questions in the affirmative is not a determination that the species is endangered or threatened throughout a significant portion of its range—rather, it is a step in determining whether a more detailed analysis of the issue is required. In practice, a key part of this analysis is whether the threats are geographically concentrated in some way. If the threats to the species are affecting it uniformly throughout its range, no portion is likely to warrant further consideration. Moreover, if any concentration of threats apply only to portions of the range that clearly do not meet the biologically based definition of “significant” (
If we identify any portions that may be both (1) significant and (2) endangered or threatened, we engage in a more detailed analysis to determine whether these standards are indeed met. The identification of an SPR does not create a presumption, prejudgment, or other determination as to whether the species in that identified SPR is endangered or threatened. We must go through a separate analysis to determine whether the species is endangered or threatened in the SPR. To determine whether a species is endangered or threatened throughout an SPR, we will use the same standards and methodology that we use to determine if a species is endangered or threatened throughout its range.
Depending on the biology of the species, its range, and the threats it faces, it may be more efficient to address the “significant” question first, or the status question first. Thus, if we determine that a portion of the range is not “significant,” we do not need to determine whether the species is endangered or threatened there. Conversely, if we determine that the species is not endangered or threatened in a portion of its range, we do not need to determine if that portion is “significant.”
Having determined that the DFS does not meet the definition of endangered or threatened throughout its range, we considered whether there are any significant portions of its range in which it is in danger of extinction or likely to become so. The full discussion regarding this analysis, summarized here, is provided in the September 23, 2014, proposed rule (79 FR 56686).
Applying the process described above, we evaluated the range of the DFS to determine if any area could be considered a significant portion of its range. Based on examination of the relevant information on the biology and life history of the DFS, we determined that there are no separate areas of the range that are significantly different from others or that are likely to be of greater biological or conservation importance than any other areas. We next examined whether any threats are geographically concentrated in some way that would indicate the subspecies could be in danger of extinction, or likely to become so, in that area. Through our review of threats to the subspecies, we identified some areas where DFSs are likely to be extirpated, including areas in Queen Anne's County, Maryland, where DFS distribution is scattered and relatively isolated by roads and water, and where future development is anticipated. We thus considered whether this area in the northern portion of the range may warrant further consideration as a significant portion of its range.
The forest area currently occupied by DFSs that is projected to be lost to development by 2030 would affect two small populations in Queen Anne's County that together constitute less than 0.5 percent of the rangewide population; however, five large DFS subpopulations are expected to remain viable across the northern portion of the current range. Additionally, Queen Anne's County's landscape does not represent a unique habitat type or ecological setting for the subspecies. Thus, the areas expected to be lost due to development would not appreciably reduce the long-term viability of the subpopulation in the northern portion of the range, much less imperil the DFS in the remainder of its range. Therefore, we have determined that this portion of the DFS' range does not meet the definition of SPR under the 2014 policy.
We also anticipate loss of DFS-occupied forests from sea level rise in Dorchester County, Maryland, on the southwestern periphery of the habitat supporting the largest subpopulation of DFS. However, these losses do not threaten either the subpopulation or the subspecies with a risk of extinction, as there is ample unoccupied and sufficiently connected habitat for displaced squirrels to colonize; this is bolstered by their ability to readily colonize new areas evidenced by successful expansion of DFS translocations. In addition, we anticipate the continued presence of mixed pine/hardwood forests adjacent to marsh and open water in Dorchester
These are the only two portions of the range that we identified as meriting analysis as to their significance and level of endangerment in conformance with the 2014 SPR policy. Finding that the potential losses in small areas of Queen Anne's County would not cause cascading vulnerability and do not constitute unique areas that are not represented elsewhere in the subspecies' range, and finding that loss of areas in Dorchester County to sea level rise would not diminish the continued viability of the Dorchester subpopulation or cause the remainder of the subspecies to be in danger of extinction or likely to become so, we do not consider this subspecies to be endangered or threatened in any significant portion of its range. Further, having not found the basis for an SPR determination on grounds of either significance or threat, we also find that a DPS analysis is not warranted.
The subspecies' current and projected resiliency, redundancy, and representation should enable it to remain at recovered population levels throughout all of its range, and even expand its range, over the foreseeable future. Having assessed the best scientific and commercial data available and determined that the DFS is no longer endangered or threatened throughout all or a significant portion of its range and is not it likely to become so in the foreseeable future, we are removing this subspecies from the List under the Act.
Section 4(g)(1) of the Act requires us, in cooperation with the States, to implement a monitoring program for not less than 5 years for all species that have been recovered and delisted. The purpose of post-delisting monitoring (PDM) is to verify that a species remains secure from risk of extinction after the protections of the Act are removed by developing a program that detects the failure of any delisted species to sustain itself. If, at any time during the monitoring period, data indicate that protective status under the Act should be reinstated, we can initiate listing procedures, including, if appropriate, emergency listing under section 4(b)(7) of the Act.
This rule announces availability of the final PDM plan for the DFS. Public and peer review comments on the draft PDM plan have been addressed in the body of the plan and are summarized in the plan's appendix. The plan can be accessed at:
The PDM plan for the DFS builds upon and continues the research conducted while the DFS was listed. In general, the plan directs the Service and State natural resource agencies to (1) continue to map all DFS sightings and occupied forest to delineate the distribution and range, and (2) assess the occupancy of DFS in a sample of forest tracts to estimate the relative persistence of DFS populations versus extirpations across the range.
The PDM plan identifies measurable management thresholds and responses for detecting and reacting to significant changes in the DFS's protected habitat, distribution, and ability to remain at recovered population levels. If declines are detected equaling or exceeding these thresholds, the Service, along with other post-delisting monitoring participants, will investigate causes, including consideration of habitat changes, stochastic events, or any other significant evidence. Results will be used to determine if the DFS warrants expanded monitoring, additional research, additional habitat protection, or resumption of Federal protection under the Act.
This final rule revises 50 CFR 17.11(h) to remove the Delmarva Peninsula fox squirrel from the List of Endangered and Threatened Wildlife (List). It also revises 50 CFR 17.11(h) and 50 CFR 17.84(a) to remove the listing and regulations, respectively, for the nonessential experimental population of Delmarva Peninsula fox squirrels at Assawoman Wildlife Management Area in Sussex County, Delaware. The prohibitions and conservation measures provided by the Act, particularly through sections 7 and 9, no longer apply to this subspecies. Federal agencies are no longer required to consult with the Service under section 7 of the Act in the event that activities they authorize, fund, or carry out may affect the DFS. The take exceptions identified in 50 CFR 17.84(a)(2) for the experimental population of the DFS are also removed. There is no critical habitat designated for the DFS.
We have determined that environmental assessments and environmental impact statements, as defined under the authority of the National Environmental Policy Act of 1969 (42 U.S.C. 4321
In accordance with the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments” (59 FR 22951), Executive Order 13175, and the Department of the Interior's manual at 512 DM 2, we readily acknowledge our tribal trust responsibilities. We have determined that there are no tribal lands affected by this rule.
A complete list of all references cited in this final rule is available at
The primary authors of this final rule are staff members of the Chesapeake Bay Field Office (see
Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements, Transportation.
Accordingly, we amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as set forth below:
16 U.S.C. 1361-1407; 1531-1544; 4201-4245, unless otherwise noted.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; closure.
NMFS is prohibiting directed fishing for yellowfin sole in the Bering Sea and Aleutian Islands management area (BSAI) for vessels participating in the BSAI trawl limited access fishery. This action is necessary to prevent exceeding the 2015 allocation of yellowfin sole total allowable catch for vessels participating in the BSAI trawl limited access fishery in the BSAI.
Effective 1200 hrs, Alaska local time (A.l.t.), November 11, 2015, through 2400 hrs, A.l.t., December 31, 2015.
Steve Whitney, 907-586-7228.
NMFS manages the groundfish fishery in the BSAI according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
The 2015 allocation of yellowfin sole total allowable catch for vessels participating in the BSAI trawl limited access fishery in the BSAI is 16,165 metric tons (mt) as established by the final 2015 and 2016 harvest specifications for groundfish in the BSAI (80 FR 11919, March 5, 2015). In accordance with § 679.20(d)(1)(i), the Administrator, Alaska Region, NMFS (Regional Administrator), has determined that the 2015 allocation of yellowfin sole total allowable catch for vessels participating in the BSAI trawl limited access fishery in the BSAI will soon be reached. Therefore, the Regional Administrator is establishing a directed fishing allowance of 16,065 mt, and is setting aside the remaining 100 mt as incidental catch. In accordance with § 679.20(d)(1)(iii), the Regional Administrator finds that this directed fishing allowance has been reached. Consequently, NMFS is prohibiting directed fishing for yellowfin sole for vessels participating in the BSAI trawl limited access fishery in the BSAI.
After the effective date of this closure the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.
This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the closure of directed fishing for yellowfin sole by vessels fishing in the BSAI trawl limited access fishery in the BSAI. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of November 9, 2015.
The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.
This action is required by § 679.20 and is exempt from review under Executive Order 12866.
16 U.S.C. 1801
Animal and Plant Health Inspection Service, USDA.
Proposed rule; reopening of comment period.
We are reopening the comment period for our proposed rule that would revise completely the scrapie regulations, which concern the risk groups and categories established for individual animals and for flocks, the use of genetic testing as a means of assigning risk levels to animals, movement restrictions for animals found to be genetically less susceptible or resistant to scrapie, and recordkeeping requirements. This action will allow interested persons additional time to prepare and submit comments.
The comment period for the proposed rule published on September 10, 2015 (80 FR 54660-54692) is reopened. We will consider all comments that we receive on or before December 9, 2015.
You may submit comments by either of the following methods:
•
•
Supporting documents and any comments we receive on this docket may be viewed at
Dr. Diane Sutton, National Scrapie Program Coordinator, Sheep, Goat, Cervid & Equine Health Center, Surveillance, Preparedness and Response Services, VS, APHIS, 4700 River Road, Unit 43, Riverdale, MD 20737-1235; (301) 851-3509.
On September 10, 2015, we published in the
Comments on the proposed rule were required to be received on or before November 9, 2015. We are reopening the comment period on Docket No. APHIS-2007-0127 for an additional 30 days until December 9, 2015. We will also consider all comments received between November 9, 2015, and the date of this notice. This action will allow interested persons additional time to prepare and submit comments.
7 U.S.C. 8301-8317; 7 CFR 2.22, 2.80, and 371.4.
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve a Best Available Retrofit Technology (BART) alternative measure for the BP Cherry Point Refinery located near Ferndale, Washington. The BART alternative measure increases the oxides of nitrogen (NO
Comments must be received on or before December 16, 2015.
Submit your comments, identified by Docket ID No. EPA-R10-OAR-2015-0398, by one of the following methods:
•
•
•
•
Steve Body at (206) 553-0782,
Throughout this document, wherever “we”, “us” or “our” are used, it is intended to refer to the EPA.
In the Clean Air Act (CAA) Amendments of 1977, Congress established a program to protect and improve visibility in the Nation's national parks and wilderness areas. See CAA section 169A. Congress amended the visibility provisions in the CAA in 1990 to focus attention on the problem of regional haze. See CAA section 169B. The EPA promulgated regional haze regulations (RHR) in 1999 to implement sections 169A and 169B of the CAA. These regulations require states to develop and implement plans to ensure reasonable progress toward improving visibility in mandatory Class I Federal areas 1
Regional haze is impairment of visual range or colorization caused by air pollution, principally fine particulate, produced by numerous sources and activities, located across a broad regional area. The sources include but are not limited to, major and minor stationary sources, mobile sources, and area sources including non-anthropogenic sources. These sources and activities may emit fine particles (PM
The RHR requires each state's regional haze implementation plan to contain emission limitations representing BART and schedules for compliance with BART for each source subject to BART, unless the state demonstrates that an emissions trading program or other alternative measure will achieve greater reasonable progress toward natural visibility conditions.
The RHR contains provisions whereby a state may choose to implement an alternative measure as an alternative to BART if the state can demonstrate that the alternative measure achieves greater reasonable progress toward achieving natural visibility conditions than would be achieved through the installation, operation and maintenance of BART. The requirements for alternative measures are established at 40 CFR 51.308(e)(2). As explained in the RHR, the state must demonstrate that all necessary emission reductions will take place during the first long term strategy period (
On December 22, 2010, Washington submitted to the EPA for approval a
On May 8, 2015, the State submitted a revision to the 2010 RH SIP that includes a BART alternative measure for the BP Cherry Point Refinery. This BART alternative measure is contained in Administrative Order 7836, Revision 2-Inclusion of BART Alternative, dated May 13, 2015 (Revision 2). The BART alternative measure would revise the BART emission limits in Conditions 2.6.1.2 and 2.7.1 of the original BART Order that apply to the R1-Heater and R1-Boiler, respectively, and are currently incorporated by reference into the Federally-approved SIP for Washington. The current Federally-approved Condition 2.6.1.2 limits NO
To offset the NO
Revision 2 also: (1) Adds language clarifying that when an emission unit subject to BART is decommissioned and permanently taken out of service, the BART emission limits no longer apply to that unit and, (2) allows the State to revise the monitoring, recordkeeping, and reporting requirements through issuance of a regulatory order, rather than through a revision of the BART order, provided the revised monitoring, recordkeeping, and reporting provide equal or better information on the compliance status of the emission unit in question.
The EPA evaluated the emission reductions associated with the BART alternative measure. The BART alternative measure revises the 24-hour maximum mass emission limit for the R-1 Heater, but does not revise the concentration limit for this unit. The concentration limit remains 26 parts per million by volume, dry basis, corrected to 7 percent oxygen, based on a 24-hour rolling average. However, Washington requests approval to revise the Federally-approved NO
The increase in the allowable mass NO
These are emission reductions that are achieved at the same location and for the same visibility impairing pollutant, NO
The EPA believes the BART alternative measure submitted by Washington as a SIP revision meets the requirements of 40 CFR 51.308(e)(2) and proposes to approve it.
Condition 9 of Revision 2 is a new provision that states the BART requirements for an emission unit specifically listed in Revision 2 do not apply after the BP Cherry Point Refinery has certified in writing to Washington and the local air pollution authority that the named BART emission unit “has been permanently taken out of service and dismantled.” The State explains in its submittal that any replacement unit would be subject to new source review and would not be subject to BART. Ecology's SIP meets the requirements for new source review under 40 CFR 51.307 and will ensure that new subject sources will not have an adverse impact on visibility and will be consistent with making reasonable further progress towards the national visibility goal, as applicable. See WAC 173-400-117.
Although not a BART requirement on the BP Cherry Point Refinery, this condition results in a clear statement that BART requirements no longer apply to an emission unit once subject to BART that has been permanently taken out of service and dismantled. The EPA therefore proposes to approve Condition 9.
As discussed above, Revision 2 includes a provision authorizing the State to revise the monitoring, recordkeeping, and reporting requirements in Revision 2 in a regulatory order. See Revision 2, Condition 10. Washington explains that any revised monitoring, recordkeeping, and reporting requirements approved by the State under Condition 10 will need to be submitted to, and approved by, the EPA as a SIP revision in order to become the applicable federally-enforceable monitoring, recordkeeping, and reporting requirements. Thus, in the interim, both sets of monitoring, recordkeeping, and reporting requirements apply to the source and must be included in the Title V permit. The EPA agrees with this assessment.
The EPA proposes to approve the BART alternative measure for the BP Cherry Point Refinery located near Ferndale, Washington by incorporating by reference the conditions of Revision 2 identified below. The EPA proposes to remove the BP Cherry Point Refinery, BART Compliance Order No. 7836 currently in the Federally approved SIP at 40 CFR 52.2470(d) and replace it with provisions of the BP Cherry Point Refinery, BART Compliance Order No. 7836 Revision 2. The EPA is also proposing to approve new Condition 9 of the BART Compliance Order 7836 Revision 2 relating to decommissioned units. The conditions of the BP BART Compliance Order Revision 2 that are proposed for incorporation by reference are:
Condition 1: 1.1, 1.1.1, 1.2, 1.2.1, 1.2.2;
Condition 2: 2.1, 2.1.1, 2.1.2, 2.1.3, 2.1.4, 2.1.5, 2.2, 2.2.1, 2.2.2, 2.3, 2.3.1, 2.3.2, 2.4, 2.4.1, 2.4.2, 2.4.2.1, 2.5, 2.5.1, 2.5.1.1, 2.5.1.2, 2.5.2, 2.5.3, 2.5.4, 2.6, 2.6.1, 2.6.2, 2.6.3, 2.7, 2.7.1, 2.7.2, 2.7.3, 2.7.4, 2.8, 2.8.1, 2.8.2, 2.8.3, 2.8.4, 2.8.5, 2.8.6;
Condition 3, 3.1, 3.1.1, 3.1.2, 3.2, 3.2.1, 3.2.2, 3.2.3, 3.2.4;
Condition 4, 4.1, 4.1.1, 4.1.1.1, 4.1.1.2, 4.1.1.3, 4.1.1.4;
Condition 5, 5.1, 5.2;
Condition 6, 6.1, 6.2, 6.3;
Condition 7; and
Condition 9.
In accordance with requirements of 1 CFR 51.5, the EPA is proposing to revise our incorporation by reference located in 40 CFR 52.2470(d)—“EPA-Approved State Source-Specific Requirements—Washington” to reflect the proposed approval of the BART alternative measure for the BP Cherry Point Refinery and the provision relating to decommissioned units. Due to the fact that the conditions in the original BART Order were renumbered in Revision 1, which was not submitted as a SIP revision, the EPA is proposing to remove the original IBR entry for “BP Cherry Point Refinery” in its entirety and incorporate in its place the specified conditions of Revision 2 included in the docket for this action. The end result is that all of the conditions in the Original BART order remain in the SIP (but with different numbers) except as discussed above with respect to the BART alternative measure and the addition of Condition 9. The EPA has made, and will continue to make, these documents generally available electronically through
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);
• does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and
• does not provide the EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, this rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because it will not impose substantial direct costs on tribal governments or preempt tribal law. The SIP is not approved to apply in Indian reservations in the State or to any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction.
Environmental protection, Air pollution control, Incorporation by reference, Nitrogen dioxide, Ozone, Particulate matter, Reporting and recordkeeping requirements, Sulfur oxides, Volatile organic compounds.
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve elements of a State Implementation Plan (SIP) submission from the State of Nebraska addressing the applicable requirements of Clean Air Act (CAA) section 110 for the 2008 National Ambient Air Quality Standards (NAAQS) for Ozone (O
Specifically, EPA is proposing to approve Nebraska's SIP as it relates to section 110 (a)(2)(D)(i)(I) prongs 1 and 2, for the 2008 O
Comments must be received on or before December 16, 2015.
Submit your comments, identified by Docket ID No. EPA-R07-OAR-2015-0710, to
Publicly available docket materials are available either electronically in
Mr. Gregory Crable, Air Planning and Development Branch, U.S. Environmental Protection Agency, Region 7, 11201 Renner Boulevard, Lenexa, KS 66219;
Throughout this document whenever “we,” “us,” or “our” is used, we refer to EPA. This section provides additional information by addressing the following questions:
Section 110(a)(1) of the CAA requires, in part, that states make a SIP submission to EPA to implement, maintain and enforce each of the NAAQS promulgated by EPA after reasonable notice and public hearings. Section 110(a)(2) includes a list of specific elements that such infrastructure SIP submissions must address. SIPs meeting the requirements of sections 110(a)(1) and (2) are to be submitted by states within three years after promulgation of a new or revised NAAQS. These SIP submissions are commonly referred to as “infrastructure” SIPs.
On March 12, 2008, EPA promulgated a revised NAAQS for ozone based on 8-hour average concentrations. The level of the 2008 8-hour ozone NAAQS (hereafter the 2008 O
For the 2008 O
EPA is acting upon the February 11, 2013, SIP submission from Nebraska that addresses the infrastructure requirements of CAA sections 110(a)(1) and 110(a)(2) for the 2008 O
EPA has historically referred to these SIP submissions made for the purpose of satisfying the requirements of CAA sections 110(a)(1) and 110(a)(2) as “infrastructure SIP” submissions. Although the term “infrastructure SIP” does not appear in the CAA, EPA uses the term to distinguish this particular type of SIP submission from submissions that are intended to satisfy other SIP requirements under the CAA, such as “nonattainment SIP” or “attainment plan SIP” submissions to address the nonattainment planning requirements of part D of title I of the CAA, “regional haze SIP” submissions required by EPA rule to address the visibility protection requirements of CAA section 169A, and nonattainment new source review permit program submissions to address the permit requirements of CAA, title I, part D.
Section 110(a)(1) addresses the timing and general requirements for
The following examples of ambiguities illustrate the need for EPA to interpret some section 110(a)(1) and section 110(a)(2) requirements with respect to infrastructure SIP submissions for a given new or revised NAAQS. One example of ambiguity is that section 110(a)(2) requires that “each” SIP submission must meet the list of requirements therein, while EPA has long noted that this literal reading of the statute is internally inconsistent and would create a conflict with the nonattainment provisions in part D of title I of the Act, which specifically address nonattainment SIP requirements.
Another example of ambiguity within sections 110(a)(1) and 110(a)(2) with respect to infrastructure SIPs pertains to whether states must meet all of the infrastructure SIP requirements in a single SIP submission, and whether EPA must act upon such SIP submission in a single action. Although section 110(a)(1) directs states to submit “a plan” to meet these requirements, EPA interprets the CAA to allow states to make multiple SIP submissions separately addressing infrastructure SIP elements for the same NAAQS. If states elect to make such multiple SIP submissions to meet the infrastructure SIP requirements, EPA can elect to act on such submissions either individually or in a larger combined action.
Ambiguities within sections 110(a)(1) and 110(a)(2) may also arise with respect to infrastructure SIP submission requirements for different NAAQS. Thus, EPA notes that not every element of section 110(a)(2) would be relevant, or as relevant, or relevant in the same way, for each new or revised NAAQS. The states' attendant infrastructure SIP submissions for each NAAQS therefore could be different. For example, the monitoring requirements that a state might need to meet in its infrastructure SIP submission for purposes of section 110(a)(2)(B) could be very different for different pollutants, for example, because the content and scope of a state's infrastructure SIP submission to meet this element might be very different for an entirely new NAAQS than for a minor revision to an existing NAAQS.
EPA notes that interpretation of section 110(a)(2) is also necessary when EPA reviews other types of SIP submissions required under the CAA. Therefore, as with infrastructure SIP submissions, EPA also has to identify and interpret the relevant elements of section 110(a)(2) that logically apply to these other types of SIP submissions. For example, section 172(c)(7) requires that attainment plan SIP submissions required by part D have to meet the “applicable requirements” of section 110(a)(2). Thus, for example, attainment plan SIP submissions must meet the requirements of section 110(a)(2)(A) regarding enforceable emission limits and control measures and section 110(a)(2)(E)(i) regarding air agency resources and authority. By contrast, it is clear that attainment plan SIP submissions required by part D would not need to meet the portion of section 110(a)(2)(C) that pertains to the PSD program required in part C of title I of the CAA, because PSD does not apply to a pollutant for which an area is designated nonattainment and thus subject to part D planning requirements. As this example illustrates, each type of SIP submission may implicate some elements of section 110(a)(2) but not others.
Given the potential for ambiguity in some of the statutory language of section 110(a)(1) and section 110(a)(2), EPA believes that it is appropriate to interpret the ambiguous portions of section 110(a)(1) and section 110(a)(2) in the context of acting on a particular SIP submission. In other words, EPA assumes that Congress could not have
Historically, EPA has elected to use guidance documents to make recommendations to states for infrastructure SIPs, in some cases conveying needed interpretations on newly arising issues and in some cases conveying interpretations that have already been developed and applied to individual SIP submissions for particular elements.
As an example, section 110(a)(2)(E)(ii) is a required element of section 110(a)(2) for infrastructure SIP submissions. Under this element, a state must meet the substantive requirements of section 128, which pertain to state boards that approve permits or enforcement orders and heads of executive agencies with similar powers. Thus, EPA reviews infrastructure SIP submissions to ensure that the state's SIP appropriately addresses the requirements of section 110(a)(2)(E)(ii) and section 128. The 2013 Guidance explains EPA's interpretation that there may be a variety of ways by which states can appropriately address these substantive statutory requirements, depending on the structure of an individual state's permitting or enforcement program (
As another example, EPA's review of infrastructure SIP submissions with respect to the PSD program requirements in sections 110(a)(2)(C), (D)(i)(II), and (J) focuses upon the structural PSD program requirements contained in part C and EPA's PSD regulations. Structural PSD program requirements include provisions necessary for the PSD program to address all regulated sources and New Source Review (NSR) pollutants, including greenhouse gases (GHGs). By contrast, structural PSD program requirements do not include provisions that are not required under EPA's regulations at 40 CFR 51.166 but are merely available as an option for the state, such as the option to provide grandfathering of complete permit applications with respect to the 2012 PM
For other section 110(a)(2) elements, however, EPA's review of a state's infrastructure SIP submission focuses on assuring that the state's SIP meets basic structural requirements. For example, section 110(a)(2)(C) includes,
With respect to certain other issues, EPA does not believe that an action on a state's infrastructure SIP submission is necessarily the appropriate type of action in which to address possible deficiencies in a state's existing SIP. These issues include: (i) Existing provisions related to excess emissions from sources during periods of startup, shutdown, or malfunction that may be contrary to the CAA and EPA's policies addressing such excess emissions (“SSM”); (ii) existing provisions related to “director's variance” or “director's discretion” that may be contrary to the CAA because they purport to allow revisions to SIP-approved emissions limits while limiting public process or not requiring further approval by EPA; and (iii) existing provisions for PSD programs that may be inconsistent with current requirements of EPA's “Final NSR Improvement Rule,” 67 FR 80186 (December 31, 2002), as amended by 72 FR 32526 (June 13, 2007) (“NSR Reform”). Thus, EPA believes it may approve an infrastructure SIP submission without scrutinizing the totality of the existing SIP for such potentially deficient provisions and may approve the submission even if it is aware of such existing provisions.
EPA's approach to review of infrastructure SIP submissions is to identify the CAA requirements that are
For example, EPA's 2013 Guidance gives simpler recommendations with respect to carbon monoxide than other NAAQS pollutants to meet the visibility requirements of section 110(a)(2)(D)(i)(II), because carbon monoxide does not affect visibility. As a result, an infrastructure SIP submission for any future new or revised NAAQS for carbon monoxide need only state this fact in order to address the visibility prong of section 110(a)(2)(D)(i)(II).
Finally, EPA believes that its approach with respect to infrastructure SIP requirements is based on a reasonable reading of sections 110(a)(1) and 110(a)(2) because the CAA provides other avenues and mechanisms to address specific substantive deficiencies in existing SIPs. These other statutory tools allow EPA to take appropriately tailored action, depending upon the nature and severity of the alleged SIP deficiency. Section 110(k)(5) authorizes EPA to issue a “SIP call” whenever the Agency determines that a state's SIP is substantially inadequate to attain or maintain the NAAQS, to mitigate interstate transport, or to otherwise comply with the CAA.
EPA Region 7 received Nebraska's infrastructure SIP submission for the 2008 O
On March 12, 2008, the EPA revised the levels of the primary and secondary 8-hour ozone standards from 0.08 parts per million (ppm) to 0.075 ppm (73 FR 16436). The CAA requires states to submit, within three years after promulgation of a new or revised standard, SIPs meeting the applicable “infrastructure” elements of sections 110(a)(1) and (2). One of these applicable infrastructure elements, CAA section 110(a)(2)(D)(i), requires SIPs to contain “good neighbor” provisions to prohibit certain adverse air quality effects on neighboring states due to interstate transport of pollution. There are four sub-elements (or prongs) within CAA section 110(a)(2)(D)(i). This action addresses the first two sub-elements of the good neighbor provisions, at CAA section 110(a)(2)(D)(i)(I). These sub-elements require that each SIP for a new or revised standard contain adequate provisions to prohibit any source or other type of emissions activity within the state from emitting air pollutants that will “contribute significantly to nonattainment” or “interfere with maintenance” of the applicable air quality standard in any other state. We note that the EPA has addressed the interstate transport requirements of CAA section 110(a)(2)(D)(i)(I) for the eastern portion of the United States in several past regulatory actions.
In CSAPR, the EPA used detailed air quality analyses to determine whether an eastern state's contribution to downwind air quality problems was at or above specific thresholds. If a state's contribution did not exceed the specified air quality screening threshold, the state was not considered “linked” to identified downwind nonattainment and maintenance receptors and was therefore not considered to significantly contribute or interfere with maintenance of the standard in those downwind areas. If a state exceeded that threshold, the state's
In CSAPR, the EPA proposed an air quality screening threshold of one percent of the applicable NAAQS and requested comment on whether one percent was appropriate.
In the final CSAPR, the EPA determined that one percent was a reasonable choice considering the combined downwind impact of multiple upwind states in the eastern United States, the health effects of low levels of fine particulate matter and ozone pollution, and the EPA's previous use of a one-percent threshold in CAIR. The EPA used a single “bright line” air quality threshold equal to one percent of the 1997 8-hour ozone standard, or 0.08 ppm.
On August 4, 2015, the EPA issued a Notice of Data Availability (NODA) containing air quality modeling data that applies the CSAPR approach to contribution projections for the year 2017 for the 2008 8-hour ozone NAAQS.
The modeling data released in the NODA on July 23, 2015, is the most up-to-date information the EPA has developed to inform our analysis of upwind state linkages to downwind air quality problems. For purposes of evaluating Nebraska's interstate transport SIP with respect to the 2008 8-hour ozone standard, the EPA is proposing that states whose contributions are less than one percent to downwind nonattainment and maintenance receptors are considered non-significant. The modeling indicates that Nebraska's largest contribution to any projected downwind nonattainment site is 0.51 ppb and Nebraska's largest contribution to any projected downwind maintenance-only site is 0.36 ppb. 80 FR 46271.
The State of Nebraska submitted a SIP on February 11, 2013. The SIP states that Nebraska does not contribute significantly to nonattainment in, or interfere with maintenance by, any other state with regards to the 2008 O
The EPA notes that the modeling Nebraska relies upon was conducted by EPA in 2011, for purposes of evaluating upwind state contributions and downwind air quality problems as to a prior, less-stringent ozone NAAQS, and that the modeling evaluated a 2012 compliance year. Accordingly, the fact that this modeling showed downwind contribution less than one percent of the 2008 ozone NAAQS is not necessarily dispositive of Nebraska's obligations under section 110(a)(2)(D)(i)(I).
Based on the modeling data and the information and analysis provided in Nebraska's SIP, EPA is proposing to approve Nebraska's interstate transport SIP for purposes of meeting the CAA section 110(a)(2)(D)(i)(I) requirements as to the 2008 ozone standard. The EPA's modeling confirms the results of the State's analysis: Nebraska does not significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone standard in any other state.
Based upon review of the state's infrastructure SIP submission for the 2008 O
We are hereby soliciting comment on this proposed action. Final rulemaking will occur after consideration of any comments.
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:
• Is not a “significant regulatory action” under the terms of Executive Order 12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011).
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).
The statutory authority for this action is provided by section 110 of the CAA, as amended (42 U.S.C. 7410).
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Ozone, Reporting and recordkeeping requirements.
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) is proposing to approve
Comments must be received on or before December 16, 2015.
Submit your comments, identified by Docket ID No. EPA-R05-OAR-2015-0071, by one of the following methods:
1.
2.
3.
4.
5.
Please see the direct final rule which is located in the Rules section of this
Margaret Sieffert, Environmental Engineer, Environmental Protection Agency, Region 5, 77 West Jackson Boulevard (AT-18J), Chicago, Illinois 60604, (312) 353-1151,
In the Rules section of this
Administration for Community Living, HHS.
Proposed rule.
This proposed rule would implement the Workforce Innovation and Opportunity Act enacted on July 22, 2014 and reflects the transfer of Independent Living Services and Centers for Independent Living programs from the Department of Education to the Department of Health and Human Services. The previous regulations were issued by the Department of Education. This proposed rule will consolidate the Independent Living (IL) regulations into a single part, align the regulations with the current statute and HHS policies, and will provide guidance to IL grantees.
Comments are due on or before January 15, 2016.
You may submit comments in one of following ways (no duplicates, please): Written comments may be submitted through any of the methods specified below. Please do not submit duplicate comments.
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Molly Burgdorf, Administration for Community Living, telephone (202) 357-3411 (Voice). This is not a toll-free number.
The Workforce Innovation and Opportunity Act (“WIOA,” Pub. L. 113-128), signed into law on July 22, 2014, included significant changes to title VII of the Rehabilitation Act of 1973. WIOA transfers the Independent Living Services and Centers for Independent Living programs authorized under chapter 1, title VII of the Rehabilitation Act of 1973 (Rehabilitation Act or Act), as amended by WIOA (Pub. L. 113-128) from the Rehabilitation Services Administration (RSA), U.S. Department of Education (ED), to the Administration for Community Living (ACL), U.S. Department of Health and Human Services (HHS). WIOA also transferred the National Institute on Disability, Independent Living, and Rehabilitation Research, and the Assistive Technology Act programs to ACL.
ACL was established as an Operating Division within HHS in 2012. ACL focuses on the shared interests of both older adults and people with disabilities, while acknowledging and continuing to address the unique needs and differences across the populations served. As an agency, we strive to ensure that all Americans, regardless of age or disability, can make their own choices and live, learn and work in their communities with the services and supports they need to be fully participating and contributing members of society. The transferred Independent Living (IL) programs make important contributions to the work of ACL in unique ways, and they also align with the mission of ACL to maximize the independence, well-being and health of individuals with disabilities across the lifespan, and their families and caregivers.
As part of the transfer, the Administrator of ACL (Administrator) is issuing new regulations for the programs that implement changes made by WIOA in accordance with section 12 of the Rehabilitation Act, as amended, 29 U.S.C. 709(e), and section 491(f) of WIOA, 42 U.S.C. 3515e(f). This notice of proposed rulemaking applies to the Independent Living programs. It proposes new regulations that implement the transition of the Independent Living programs, including the Independent Living Services and the Centers for Independent Living, to ACL. While the proposed regulations retain many of the provisions in the Department of Education regulations, they also include new provisions to implement changes made to the programs by WIOA and to replace references to Department of Education procedures and regulations with references to procedures and regulations applicable to Department of Health and Human Services programs. Existing Department of Education Independent Living program regulations found at 34 CFR parts 364, 365, and 366 remain in effect until such time as the proposed HHS regulations become final.
Independent Living (IL) empowers individuals with disabilities to live independently in their communities assisted by two federal programs: Independent Living Services (ILS) and Centers for Independent Living (referred to as CILs or Centers).
Authorized under Title VII, chapter 1, part B of the Rehabilitation Act, as amended by WIOA, the Independent Living Services (ILS) Program provides formula grants, based primarily on population, to States for the purpose of funding, directly and/or through grant or contractual arrangements a number of activities. These activities include:
1. Supporting the operation of Statewide Independent Living Councils (SILCs);
2. Providing IL services to individuals with significant disabilities, particularly those in unserved areas of the State;
3. Demonstrating ways to expand and improve IL services;
4. Supporting the operation of CILs that comply with the standards and assurances of section 725;
5. Increasing the capacity of public or nonprofit organizations and other entities to develop comprehensive approaches or systems for providing IL services;
6. Conducting studies and analyses, developing model policies and procedures, and presenting information, approaches, strategies, findings, conclusions, and recommendations to federal, State and local policymakers to enhance IL services;
7. Training service providers and individuals with disabilities on the IL philosophy; and
8. Providing outreach to populations that are unserved or underserved by IL programs, including minority groups and urban and rural populations.
To be eligible for financial assistance, States are required to establish and maintain a SILC and to submit an approvable State Plan for Independent Living (SPIL) jointly developed by the chairperson of the SILC and the directors of the Centers for Independent Living, with input from individuals with disabilities and other stakeholders throughout the State. The SPIL must be signed by the SILC chairperson acting on behalf of and at the direction of the SILC, the director of the designated State entity (DSE), and not less than 51 percent of the directors of CILs in the State.
Authorized under title VII, chapter 1, part C of the Rehabilitation Act, as amended by WIOA, the Centers for Independent Living Program provides grants to consumer-controlled, community-based, cross-disability, nonresidential, private nonprofit agencies for the provision of an array of IL services to individuals with significant disabilities. At a minimum, Centers funded by the program are required to provide the following five IL core services:
1. Information and referral;
2. IL skills training;
3. Peer counseling;
4. Individual and systems advocacy; and
5. Services that facilitate transition from nursing homes and other institutions to home and community based residences with the necessary supports and services, provide assistance to those at risk of entering institutions, and facilitate transition of youth to postsecondary life.
Centers also may provide, among others: Services related to securing housing or shelter; personal assistance services; transportation, including referral and assistance, mobility training, rehabilitation technology; and other services consistent with 29 U.S.C. 705(18), including those necessary to improve the ability of individuals with significant disabilities to function independently in the family or community and/or to continue in employment. The Rehabilitation Act establishes a set of activities along with standards and assurances that must be met by the Centers. To continue receiving CIL program funding, eligible Centers must demonstrate minimum compliance with the following evaluation standards: Promotion of the IL philosophy; provision of IL services on a cross-disability basis; support for the development and achievement of IL goals chosen by the consumer; efforts to increase the availability of quality community options for IL; provision of IL core services; resource development activities to secure other funding sources; and community capacity-building activities. Centers' levels of compliance with the standards are assessed based on compliance indicators.
A population-based formula determines the total funding available for discretionary grants to Centers in each State. Subject to the availability of appropriations as required by statute, ACL provides continuation funding to existing Centers at the same level of funding they received the prior fiscal year, including a cost-of-living increase, as long as they meet the standards and assurances, or are taking appropriate action to address identified deficiencies though a corrective action plan. Funding for new Centers in a State is awarded on a competitive basis, based on the State's priority designation of unserved or underserved areas in the SPIL and the availability of sufficient additional funds within the State. There are currently 354 Centers for
As discussed above, a State must establish and maintain a Statewide Independent Living Council (referred to as a SILC or Council) in order to be eligible for IL and CIL funding. Although SILCs are not funded directly by the federal government, they are an important partner in implementing the ILS and CIL programs in a State. The SILCs are composed of a majority of people with disabilities and include other independent living stakeholders. SILC members are generally appointed by the Governor of the State, except in the case of a State that, under State law, vests authority for the administration of the activities carried out under the IL programs in an entity other than the Governor (such as one or more houses of the State legislature or an independent board), the chief officer of that entity would appoint SILC members. The chairperson of the SILC, and the directors of the Centers for Independent Living in the State jointly develop the State Plan for Independent Living (referred to as SPIL or State plan) after receiving public input from individuals with disabilities and other stakeholders throughout the State. The SILC monitors, reviews and evaluates the implementation of the SPIL.
A SPIL has already been approved in each State through fiscal year 2016. The law remains unchanged that the SPIL continues to govern the provision of IL services in the State. Each State is expected to continue its support, including specified obligations, under the approved SPIL. Any amendments to the SPIL, reflecting either a change based on the WIOA amendments or any material change in State law, organization, policy or agency operations that affect the administration of the SPIL, must be developed and signed in accordance with section 704(a)(2) of the Rehabilitation Act, as amended. SPIL amendments must be submitted by the State to ACL for approval.
WIOA requires ACL to publish minimum compliance indicators for CILs and SILCs before July 22, 2015. (See section 706(b) of the Rehabilitation Act, 29 U.S.C. 796d-1(b), as amended.) Section 706(c) of the Rehabilitation Act continues to require compliance reviews of CILs funded under section 722 and reviews of State entities funded under section 723 of the Rehabilitation Act. Until the new minimum compliance indicators are published, the IL staff at ACL will continue to conduct compliance reviews and make final decisions on any proposed corrective actions and/or technical assistance related to compliance reviews, in accordance with current compliance indicators. Grantees must also continue to submit annual performance reports (referred to as the 704 Report). ACL is in the process of reviewing related instruments and instructions in light of changes under WIOA. Proposed changes and new indicators will be published in the
As previously discussed, WIOA transferred the Independent Living Programs to ACL and created a new Independent Living Administration within the agency, adding section 701A of the Rehabilitation Act, 29 U.S.C. 796-1. WIOA also made a number of other changes. WIOA amended section 702 of the Act, 29 U.S.C. 796a, to insert the definition of Administrator as the Administrator of the Administration for Community Living in the U.S. Department of Health and Human Services. The responsibilities of the Administrator are set forth in amended section 706, 29 U.S.C. 796d-1.
New section 702 of the Act also amended the definition of a CIL and requires that CILs provide, at a minimum, independent living core services for individuals with significant disabilities, regardless of age or income.
WIOA amended section 7(17) of the Act, to add a new fifth core service to the definition of independent living core services. Other relevant amendments to the definition section include the addition of a new section 7(42), definition of youth with a disability.
WIOA also amends section 704 of the Act, 42 U.S.C. 796c, which describes requirements for the State Plan. The law now requires that the SPIL be developed jointly by the chairperson of the Statewide Independent Living Council (SILC) and the directors of the Centers for Independent Living, after receiving public input from individuals with disabilities and other stakeholders throughout the State. The SPIL is to be signed by the SILC chairperson acting for and at the direction of the SILC, the director of the designated State entity (DSE), and not less than 51 percent of the CILs in the state. The law also requires that the SPIL address working relationships and collaboration between CILs and other entities performing similar work. Finally, the SPIL is required to describe strategies for providing independent living services on a statewide basis, to the greatest extent possible.
As part of the amendments to section 704 of the Act, the DSE is responsible to receive, account for and distribute funds based on the SPIL, provide administrative support for programs under Title VII B, maintain records, and provide information or assurances to the Administrator. Section 704(c)(5) adds a cap of 5 percent of the funds received by the State for any fiscal year under Independent Living Services that the DSE may retain to perform these services.
WIOA made several amendments to section 705 of the Act, 29 U.S.C. 796d, regarding the Statewide Independent Living Council. Amended section 705 (b)(2) requires that voting members of the SILC include, in a state in which one or more CILs are run by, or in conjunction with, the governing bodies of American Indian tribes located on Federal or State reservations, at least one representative of the director of such Centers. It also removes the term limit for a CIL director appointed to the SILC if there is only one CIL within the State. Amended section 705(c)(2) permits the SILC to engage in new activities in addition to the original duties outlined in section 705(c)(1). However, the amended section 705(c) also provides that the SILC may not provide independent living services directly to individuals with significant disabilities or manage such services. The SILC may work with CILs to coordinate services with public and private entities in order to improve services provided to individuals with disabilities, and may now also conduct resource development activities. SILCs must prepare a resource plan in conjunction with the designated State entity.
WIOA requires that between 1.8 percent and 2 percent of funds be set aside for technical assistance and training for SILCs. The law also amends section 713 of the Act, 29 U.S.C. 796e-2, to provide that States may not use more than 30 percent of the funds received under chapter 1, part B, of the Rehabilitation Act for the SILC resource plan unless the State plan specifies a greater percentage is needed.
Finally, WIOA modifies section 706(c) of the Act, 29 U.S.C. 796d-1(c) to eliminate the requirement that
U.S. Department of Education (ED) regulations governing the Independent Living Program are found at 34 CFR parts 364, 365, and 366. Part 364 sets forth regulations addressing State Independent Living Services and Centers for Independent Living: General Provisions; part 365 sets forth regulations addressing State Independent Living Services; and part 366 sets forth regulations addressing Centers for Independent Living. ACL proposes to consolidate the IL regulations into one new part, 45 CFR part 1329. We further propose to eliminate regulations applicable specifically to ED processes, as well as to eliminate duplicative language or language no longer applicable in the existing ED regulations. We propose to eliminate regulatory language that does not add further interpretation to the statutory language. Unless otherwise noted, the proposed changes in in this notice of proposed rulemaking represent changes to implement WIOA, including the transfer of the programs from ED to HHS.
We propose to create a Subpart A of the new 45 CFR part 1329 that will address General Provisions for the IL programs.
Proposed § 1329.1 sets out the programs covered by the new Part. Proposed § 1329.2 sets out their purpose as defined in Section 701 of the Act, 29 U.S.C. 796.
In considering the purpose of the Act and the changes made under WIOA, we wish to highlight ACL's interpretation that the IL programs promote a philosophy of person-centeredness in keeping with the mission of ACL and with the policy of the Department of Health and Human Services. On June 6, 2014, HHS issued guidance on implementing Section 2402(a) of the Affordable Care Act. Section 2402(a) of the Affordable Care Act requires the Secretary to ensure all States receiving federal funds develop service systems that are responsive to the needs and choices of beneficiaries receiving home and community-based long-term services (HCBS), maximize independence and self-direction, provide support coordination to assist with a community-supported life, and achieve a more consistent and coordinated approach to the administration of policies and procedures across public programs providing HCBS. Because so much of the work done by IL programs involves these same principles, we believe it is important to clarify that the June 2014 guidance, including person-centered planning requirements,
Proposed § 1329.3 replaces the ED regulations specified in 34 CFR 364.3 with references to other HHS regulations that govern the activities of the Independent Living programs.
Proposed § 1329.4 is the Definitions section.
Proposed § 1329.4 defines terms used in the regulations. We propose to include statutory definitions when we believe the terms to be significant enough to warrant repetition in the regulations. We propose to incorporate some definitions from the existing ED regulations at 34 CFR 364.4. We propose modifications to other definitions to reflect WIOA changes or to modernize the terms.
ACL proposes to amend the existing regulatory definition of independent living core services by adding the new fifth core service to the previous definition. The four original core services are information and referral services; independent living skills training; peer counseling, including cross-disability peer counseling; individual and systems advocacy.
The new fifth core service has three components, each of which must be met to fulfill the fifth core service. It requires CILs to (1) facilitate the transition of individuals with significant disabilities from nursing homes and other institutions to home and community-based residences, with the requisite supports and services; (2) provide assistance to individuals with significant disabilities who are at risk of entering institutions so that the individuals remain in the community; and (3) facilitate the transition of youth who are individuals with significant disabilities, who were eligible for individualized education programs (IEPs) under Section 614(d) of the Individuals with Disabilities Education Act, and who have completed their secondary education or otherwise left school to postsecondary life.
We recognize that the fifth core service of promoting full access to community living and postsecondary life is an important addition to the core services. We acknowledge that through various Medicaid and State-specific programs, including partnerships with other programs administered by ACL, many CILs have experience and existing services consistent with one or more of the three components. To achieve the right balance between clarity and flexibility in implementing the new core service, ACL is considering the appropriate level of detail. We invite comment on whether the proposed language is sufficiently specific, or if more information is needed to successfully implement this new requirement. Under our proposed approach, we have chosen not to define the terms “institution,” “home and community-based residences,” and “at risk of institutionalization” at this time. We propose, however, to define “youth with a significant disability” and related terms around youth transition to postsecondary education.
In considering whether to define the term “institution,” we looked at a variety of existing Medicare and Medicaid definitions, including the definitions at Sections 1819(a) and 1862(e)(1) of the Social Security Act, and 42 CFR 416.201, 441.301(c)(5), and 441.710(a)(2). These definitions include hospitals, skilled nursing facilities, Medicaid nursing facilities, and Intermediate Care Facilities for Individuals with Intellectual Disabilities (ICF/IID) services. They also include a definition consistent with settings that are not “community based” for Section 1915(c) home and community based waivers and for Section 1915(i) State plan home and community based services. We are concerned, however, that defining “institution” based on the Medicare and Medicaid model may not be broad enough to encompass all institutions with which CILs may work, including juvenile detention centers, jails and prisons. We seek public comment on whether to include a definition and, if so, the suitability of applying Medicare and Medicaid definitions to the fifth core service.
We also considered definitions of “home and community-based residences” and “at risk” of institutionalization. We determined not to define these terms at this time, but
CILs that provide youth transition services to a broader group of youth with significant disabilities beyond the populations covered under the youth transition prong of the new fifth core service (in Section (17)(E)(iii) of the Act) have the option of continuing to do so, but such services would be included as IL services, rather than as “core services” for purposes of the 704 report, and provision of those services would not satisfy the core services requirement. ACL proposes to define a youth with a significant disability as an individual with a significant disability who (i) is not younger than 14 years of age; and (ii) is not older than 24 years of age. This definition is based on the definition of “individual with a significant disability” in Section 7(21), 29 U.S.C. 705(21) and “youth with a disability” in Section 7(42) of the Act, 29 U.S.C. 705(42).
We further propose to define the term “completed their secondary education” to mean that an eligible youth has received a diploma; has received a certificate of completion for high school or other equivalent document marking the completion of participation in high school; has reached age 18, even if he or she is still receiving services in accordance with an individualized education program developed under the IDEA; or has exceeded the age of eligibility for IDEA services.
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Section 706 of the Act, 29 U.S.C. 796d-1, discusses the responsibilities of the Administrator with regard to oversight of the IL programs. Specifically, WIOA requires the development and publication of indicators of minimum compliance for CILs, consistent with the standards set forth in Section 725 of the Act, 29 U.S.C. 796f-4, and indicators of minimum compliance for SILCs. WIOA did not amend Section 706(c), which requires annual compliance reviews of 15 percent of CILs and, to the extent necessary to determine compliance with the requirements of Section 723(f) and (g) of the Act, 29 U.S.C. 796f-2, one-third of designated State entities. WIOA deleted the requirement that the CILs and State entities reviewed be chosen on a random basis and we propose to amend the regulations accordingly. We invite comment on the criteria and selection process for compliance reviews going forward, given this change.
ACL proposes to require Centers to demonstrate minimum compliance consistent with Section 725, for the following: Promotion of the IL philosophy; provision of IL services on a cross-disability basis; support for the development and achievement of IL goals chosen by the consumer; efforts to increase the availability of quality community options for IL; provision of IL core services; resource development activities to secure other funding sources; and community capacity-building activities. ACL will continue to monitor programs based on the standards and indicators set forth in the statute as we re-evaluate and develop protocols that meet the requirements of the Act.
In addition to compliance reviews, each CIL and State is required to file an annual performance report, known as the 704 Report, which describes its work and how the CIL or State is meeting the goals and requirements of the Act. This requirement is set forth in proposed § 1329.6. ACL is currently in the process of reviewing the 704 reports. However, for this year, CILs and States are expected to complete the 704 instrument that they have used in the past. We will issue guidance as to how the reports are to be filed. We are considering changes to the 704 Report for future years. The 704 Reports are subject to the Paperwork Reduction Act of 1995 (PRA), and interested stakeholders will have an opportunity to comment on any future revisions to the report through the PRA clearance process.
The existing IL regulations at 34 CFR 366.39 through 366.46, include an enforcement and appeals process for the CILs funded under Part C of Chapter 1 of Title VII of the Rehabilitation Act. There is no corresponding process in the existing ED independent living regulations for the designated State entities administering Part B funds in accordance with the State Plan, as authorized by Part B of Chapter 1 of Title VII. In determining the appropriate approach for enforcement and appeals, ACL reviewed the existing Department of Education regulations and the regulations applicable to ACL programs funded under the Older Americans Act (OAA), 45 CFR part 1321, and the Developmental Disabilities and Bill of Rights Act (DD Act) regulations, 45 CFR part 1385. The NPRM proposes to utilize a version of the process from the existing IL regulations modified to account for the new administrative structure of the programs. This approach, intended to create a uniform, clear and relatively simple process, best meets the needs of the CILs, has the advantage of offering a procedure that is familiar to the programs, and is not as intricate, formal or lengthy as those in current ACL rules.
Under the proposed rule, if the Director of the Independent Living Administration (ILA) determines that a Center is not in compliance with the standards and assurances of a grant received from ACL, the Director notifies the Center that the Center is out of compliance and may be subject to enforcement action, including termination of funds. ACL will continue to make reasonable efforts to work with the Center to provide technical assistance in accordance with the procedures in the Notice of Award terms and conditions and any applicable subsequent guidance, to correct any deficiencies and to resolve compliance concerns before taking enforcement action. ACL also proposes a two-step preliminary appeals process where there is the imminent threat of termination or withholding of funds: First to the Director of the Independent Living Administration and then to the Administrator of ACL.
The proposed rule requires a Center found out of compliance to develop a corrective action plan. ACL could provide technical assistance in developing and implementing the corrective action plan and would monitor its implementation. If the Center fails to submit an approvable plan or ACL determines that the Center is otherwise out of compliance, even with the plan, the Administrator may take steps to enforce the corrective action plan or to terminate funding. If the determination by the Administrator is a type of determination described in 45 CFR part 16, Appendix A, Paragraph C, subparagraphs (a)(1)-(4), it would be subject to review by the Departmental Appeals Board (DAB).
We include the enforcement and appeals process in the General Provisions part of these proposed regulations because we propose a parallel process for the Part B grants. We also propose a two-step preliminary appeals process for the Part B grants where there is the imminent threat of termination or withholding of funds, first to the Director of the ILA and then to the Administrator of ACL. We believe such a process is necessary because there may be situations in which a State is out of compliance with the requirements of its grant or of these regulations. For example, Section 704 of the Rehabilitation Act requires that, “[t]o be eligible to receive financial assistance . . . , a State shall submit to the Administrator, and obtain approval of, a State plan developed and signed in accordance with [Section 704] . . . .” WIOA added the requirement that the State plan (SPIL) must be signed by not less than 51 percent of the CILs in the State. If a State submits a SPIL that does not comply with the 51 percent signature requirement, ACL wants to ensure that a process exists whereby ACL can provide technical assistance to the State to help bring it into compliance.
As indicated above, ACL may not provide any funds to a State that does not have an approved plan. ACL will work with States to resolve issues that may result in the disallowance or denial of funding. However, should these efforts be unsuccessful, we believe the State should have an appeals process through which it may appeal a decision to disallow or deny funds that would otherwise be provided to a State in accordance with an approved plan.
Because we intend to create a uniform process for Part B and Part C grants, we also propose in these regulations to allow a State to file an appeal with the DAB concerning the four types of determinations set forth in 45 CFR part 16, appendix A, paragraph C, subparagraphs (a)(1) through (4). We further propose that the procedures in 45 CFR part 16 apply to appeals by a State.
We solicit comments about our proposed process and whether additional details need to be included in regulation. As indicated, we intend to utilize technical assistance to help resolve issues before they reach the appeals stage, and are interested in the role that other informal types of dispute resolution and mediation might play in compliance and enforcement, and how such dispute resolution and mediations might be conducted. We note that mediation is already included as an option for determinations that are appealed to the DAB, 45 CFR 16.18.
Because the processes we propose are new, particularly with regard to Part B funds, we are considering the issuance of sub-regulatory guidance to provide additional detail. Such an approach provides ACL and stakeholders with the opportunity to determine the processes that allow Centers and States to come into compliance quickly, while giving ACL the authority to take enforcement actions if the need arises.
Proposed Subpart B of proposed 45 CFR part 1329 sets forth requirements for the designated State entity (DSE), the Statewide Independent Living Council (SILC), and the State Plan for Independent Living (SPIL). It incorporates some of the regulatory language from 34 CFR part 364 and Part 365. ACL proposes to simplify language and processes, to eliminate duplication of language specified in the Act, and to implement and clarify changes made by WIOA.
Proposed § 1329.10 discusses the authorized use of funds for independent living (IL) services as set forth in the Act. WIOA amended Section 713(b)(1) of the Act to add that a State may use funds to provide independent living services to individuals with significant disabilities, “particularly those in unserved areas of the State.” This section includes the new statutory requirement that that States may not use more than 30 percent of the funds received under Chapter 1, Part B, of the Rehabilitation Act for the SILC resource plan unless the approved State plan specifies a greater percentage is needed. This new requirement is also reflected in § 1329.15(c)(3). We propose to add the phrase “particularly to those in unserved areas of the State” to the previous regulatory language at 34 CFR part 365.
In proposed § 1329.11 we describe the designated State entity (DSE) as the entity identified by the State and named in the State plan. We propose that the DSE must submit to the Administrator and receive approval of a State plan in order to receive funding under the Act.
Proposed § 1329.12 defines the role of the DSE as those services identified in Sections 704(c)(1) through (5) of the Act. These services were unchanged by WIOA. However, WIOA added Section 704(c)(5), stipulating that the DSE may not retain “more than five (5) percent of the funds received by the State for any fiscal year under Subpart 2 for the performance of the services outlined in paragraphs (1) through (4).” We propose in § 1329.12 that the 5 percent administrative cap apply only to the Part B funds allocated to the State and to the State's required 10 percent Part B match. We further propose that the five (5) percent cap not apply to program income funds, including, but not limited to, payments provided to a State from the Social Security Administration for assisting Social Security beneficiaries and recipients to achieve employment outcomes.
In implementing the new requirement, the proposed language in the rule adopts an interpretation that the “funds received by the State” include the Part B and State matching funds only, rather than applying the 5 percent cap on administrative funds allocated to the DSE to all federal funds, and other program income, supporting the Independent Living Services program. The cap limits the funds a DSE can retain for administrative purposes in order to ensure that the Part B (State Independent Living) funds are primarily used to support the State's independent living programs and give the SILC sufficient resources to carry out required duties. We think it is consistent with the administrative cap requirement that the required State match be treated on an equal basis with the Part B funds received under this section. This creates consistency in accounting for funds that are inextricably linked to the funds provided under the Part B program, and should be treated the same way as the federal award of Part B funds. However, because program income funds are “received by the State” through means other than an appropriation under Part B, we believe those funds should be treated differently and should not be included in the administrative cap.
Proposed § 1329.13 references the allotment of funds for IL services in accordance with statutory provisions. It also proposes that if a State plan designates more than one entity to administer the State plan, including a
Proposed § 1329.13(d) implements new Section 711A of the Act, which was added by WIOA. WIOA requires the Administrator to reserve between 1.8 percent and 2 percent of Part B appropriated funds to provide for training and technical assistance to SILCs. The proposed regulation authorizes the technical assistance to be provided directly or through grants, contracts, or cooperative agreements in accordance with Section 711A. ACL intends to provide further information about SILC technical assistance and training in any funding vehicle which makes funds available under Section 711A.
Proposed § 1329.14 describes the requirements for the establishment and maintenance of a Statewide Independent Living Council (SILC). We propose that a State must establish a SILC that meets the requirements of Section 705 of the Act, including composition and appointment of members, in order to receive funding.
WIOA made a number of amendments to the composition of the SILC. WIOA removes the requirement for a director of a project carried out under Section 121 (the American Indian Vocational Rehabilitation Services Program) to be a required SILC member. WIOA added the requirement that, in States with one or more CILs run by or in conjunction with the governing bodies of American Indian tribes located on Federal or State reservations, at least one representative of the directors of such Centers serve as a voting member of the SILC. We ask for comments whether additional directions are needed to implement this provision consistent with the definition of a Center in Section 702 of the Act. For example, we seek information about what types of CIL-Tribal relationships currently exist that would meet this definition, and to what extent might the current CIL-Tribal relationships meet the requirement of CILs “run by” or “run in conjunction with” the governing bodies of American Indian tribes located on Federal or State reservations.
In proposed § 1329.14(b), ACL proposes to further strengthen the independence of the SILC by requiring that the SILC be independent of and autonomous from the DSE and all other State agencies.
Proposed § 1329.15 describes the duties of the SILC with reference to Section 705 of the Act and incorporates several changes made by WIOA. We propose to clarify in § 1329.15(b) that the SILC may provide contact information for the nearest appropriate CIL, and that sharing of such information does not constitute the direct provision of independent living services. WIOA amended Section 713 of the Act to add new language that limits the share of Part B funds that may be provided to the SILC resource plan. We propose in § 1329.15(c) to incorporate and clarify this change.
The resource plan, as required under Section 705(e) of the Act, is a document that is separate from the SPIL and that describes how resources necessary and sufficient to carry out the functions of the SILC, will be made available. The WIOA amendment to Section 713 provides that not more than 30 percent of the funds allocated to the State may be used for the resource plan, unless the SPIL specifies that a greater percentage is needed.
Because Section 713 refers to funds received under Part B, we propose to include the State's required 10 percent Part B match in calculating the 30 percent cap to provide the resources in its resource plan.
The proposed regulation states that the percentage allocated to the resource plan in each State is based on the amount of Part B funds actually needed (
We have not defined what is meant by funds necessary and sufficient to carry out the functions of the SILC. We seek comments on whether a definition is necessary, including the process for making that determination.
Proposed § 1329.15(d) requires the SILC, as appropriate, to coordinate activities with other entities in the State that provide services similar to or complementary to independent living services. ACL recognizes that many SILCs, as well as many CILs, already coordinate activities with other entities, including Area Agencies on Aging, Protection and Advocacy programs, Long-Term Care Ombudsman Programs, Aging and Disability Resource Centers, and other organizations funded by ACL, other federal agencies, and States. Some SILCs may choose to coordinate with private entities providing similar services. We have chosen not to include a list of all such entities so as to provide SILCs with the maximum flexibility to work with entities in their state to serve individuals with significant disabilities.
Proposed § 1329.16 describes the authorities of the SILC to conduct discretionary activities as described in the State Plan. The proposed rule requires coordination with the CILs. Again, we have chosen not to define how a SILC should engage in coordination, recognizing that such efforts depend on the needs and requirements in each State.
Proposed § 1329.17 sets forth the requirements for the State Plan for
WIOA changed the requirements for joint development of the State Plan, and we propose to implement the new requirements in the proposed regulations. Section 704(a)(2) of the Act, 29 U.S.C. 796c(a)(2), was amended to require that the State plan be developed jointly by the chairperson of the SILC and the directors of the Centers for Independent Living in the State, after receiving public input from individuals with disabilities and other stakeholders throughout the State. While WIOA eliminated the required role of the designated State entity (formerly the designated State unit) in development of the State plan, it does not preclude DSE input in the development of the SPIL in collaboration with the SILC and CILs, and ACL would encourage such input. Proposed § 1329.17(d) makes this change.
WIOA also amended Section 704(a)(2) to require that the SPIL be signed by the chairperson of the SILC acting on behalf of and at the direction of the Council; the director of the DSE; and by not less than 51 percent of the directors of the Centers for Independent Living in that State. We propose in § 1329.17(d)(2)(iii), and (iv) to define a CIL for purposes of signing the SPIL as any consumer-controlled, community-based, cross-disability, nonresidential, private nonprofit agency for individuals with significant disabilities, regardless of funding source, that is designed and operated within a local community by individuals with disabilities; and provides an array of IL services, including, at a minimum, independent living core services and complies with the standards set out in Section 725(b) and provides and complies with the assurances in Section 725(c) of the Act and § 1329.5 of these regulations. We seek comments on this approach.
On a related issue regarding what type of entity constitutes a CIL for SPIL signature purposes, proposed § 1329.17(d)(2)(iii) counts the “legal entity” that may receive more than one grant as the entity included in determining the 51 percent, rather than looking at individual grants. For example, an agency that receives multiple Part C grant awards serving different geographical locations and operated by one governing board and that has one director would constitute a single CIL for SPIL signature purposes, rather than labeling each Part C grant awarded to that agency a stand-alone Center for Independent Living. ACL's intent is that the proposed change will add clarity and simplify the signature process. We seek comments on this proposal as well, including whether this change should be implemented and the problems, if any, this interpretation would create. If the proposed language should be implemented in this instance, should it also be applied more broadly across the IL programs? What are the possible implications for the 704 Reporting process?
Additional proposed regulatory language related to the SPIL in proposed § 1329.17 primarily mirrors Section 704 of the Act and existing regulatory language in 34 CFR part 364, with technical changes, and requirements for effective communication and access for individuals with disabilities, as required under existing law, including Section 504 of the Rehabilitation Act and the Americans with Disabilities Act as amended.
Subpart C of part 1329 of the regulations concerns the Centers for Independent Living. The proposed regulations are derived from and consolidate existing regulations in 34 CFR part 366. ACL proposes to simplify language and processes and to eliminate duplication of language. We invite comment on the need for additional clarity in these regulatory sections.
Proposed § 1329.20 refers to the definition of a CIL and eligible agency in § 1329.4 of the regulations, and includes Rehabilitation Act citations regarding the Part C allotment to States and the funding formula to CILs.
Proposed § 1329.21 outlines the conditions CILs which currently receive Part C funds have to meet in order to receive continuation funding. It also addresses continuation funding requirements for States that receive Part C funds under Section 723 (currently, Minnesota and Massachusetts) and Section 724 (currently American Samoa) of the Act.
Proposed § 1329.22 discusses competitive awards to new Centers for Independent Living in accordance with the requirements of Sections 722(d) of the Act, 29 U.S.C. 796f-1, 796f-2. It stipulates that such awards are provided to the most qualified applicant based on the selection criteria established by the Administrator consistent with Section 722(d) of the Act; subject to the availability of funds; and in accordance with the order of priorities in Section 722(e) of the Act and the State Plan's design for statewide network of Centers.
Proposed § 1329.23 addresses the periodic reviews of CILs to verify compliance with the standards and assurances in Section 725(b) and (c) of the Act and the grant terms and conditions, in accordance with Sections 706(c), 722(g) and 723(g) of the Act and guidance set forth by the Administrator.
Proposed § 1329.24 sets forth the requirement that the Administrator reserve between 1.8 percent and 2 percent of appropriated funds to provide, either directly or through grants, contracts, or cooperative agreements, training and technical assistance to CILs. The proposed regulation states that the training and technical assistance shall be in accordance with Section 721(b) of the Act. ACL intends to provide further guidance in any funding opportunity announcement related to training and technical assistance for CILs.
Executive Order 12866 requires that regulations be drafted to ensure that they are consistent with the priorities and principles set forth in Executive Order 12866. The Department has determined that this rule is consistent with these priorities and principles. Executive Order 12866 encourages agencies, as appropriate, to provide the public with meaningful participation in the regulatory process. The rule implements the Workforce Innovation and Opportunity Act enacted on July 22, 2014. In developing the final rule, we will consider input received from the public, including stakeholders.
The Secretary certifies under 5 U.S.C. 605(b), the Regulatory Flexibility Act (Pub. L. 96-354), that this regulation will not have a significant economic impact on a substantial number of small entities. The small entities that would be affected by these proposed regulations are States and Centers
The ILS Program provides formula grants to States for the purpose of funding a number of activities, directly and/or through grant or contractual arrangements. To be eligible for financial assistance, States are required to establish a designated State entity, State Independent Living Council and to submit an approvable three-year State Plan for Independent Living (SPIL) jointly developed by the chairperson of the SILC and the directors of the CILs in the State and signed by the chairperson of the SILC, not less than 51 percent of the directors of the CILs in the state, and the director of the designated State entity (DSE). The signature requirement of not less than 51 percent of CIL directors is a new requirement under WIOA. While this requirement does increase the amount of time a State may need to prepare an approvable SPIL, the statute provides no flexibility in implementing the new requirement. We are not able to estimate the amount of additional time the 51 percent signatory requirement will add to the SPIL development and approval process at the State level given that this is a new requirement. We are soliciting comments from affected States on this issue.
The CILs program provides grants to consumer-controlled, community-based, cross-disability, nonresidential, private nonprofit agencies for the provision of IL services to individuals with significant disabilities. WIOA expanded the previous definition of core IL services, specified in Section 7(17) of the Act, to include a fifth core service. Specifically, Centers funded by the program must now provide services that facilitate transition from nursing homes and other institutions to the community, provide assistance to those at risk of entering institutions, and facilitate transition of youth to postsecondary life. Currently there are 354 CILs that receive federal funding under this program.
WIOA did not include any additional funding for the provision of this new fifth core service, but rather assumed that CILs would reallocate existing grant money to ensure the appropriate provision of all services required under Title VII of the Rehabilitation Act. Since successful transition is a process that requires sustained efforts and supports over a long-term period, and the CILs were aware of the changes under the law before officially tracking these efforts as core services, we do not currently have a clear picture of the impact of the changes under WIOA on the programs, though we are applying the closest applicable data to the estimates in this analysis. We hope to conduct a more throughout analysis when we are able to collect updated data and specifically request comments on the impact of the change.
Analysis of Fiscal Year (FY) 2014 data available in the required annual performance reports (704 Report) indicates that CILs are providing services that are same or similar to the new fifth core service to one or more consumers. For purposes of this analysis, we looked at three specific categories of data currently captured in the 704 Annual Performance Report that we believe most accurately match the three components of the fifth core service.
Based on this analysis, we believe that many CILs currently have staff capable of providing the new fifth core service. However, due to the lack of additional funding, compliance with this statutory change may require CILs to re-examine their individual budgets, staffing plans, and consumer needs in order to reallocate funding to ensure the appropriate provisions of services as required by the Rehabilitation Act. We estimate that this analysis will require approximately 10-15 hours of time for each CIL director. We proposed to use the upper end of the time estimate (15 hours) for purposes of estimating the total impact of this statutory requirement. Therefore, we estimate the amount of compliance analysis time for CIL directors to total 5,310 hours.
To estimate the average hourly wage for a CIL director, we examined data compiled by the IL Net (a collaborative project of Independent Living Research Utilization (ILRU), the National Council on Independent Living (NCIL), and the Association of Programs for Rural Independent Living (APRIL)) and Bureau of Labor Statistics (BLS) data. According to a 2003 National Survey of Salaries and Work Experience of Center for Independent Living Directors, compiled by IL Net, the most common annual salary range for CIL directors in 2002 was between $41,000 and $45,000. This equates to an average hourly salary
As noted previously, we have interpreted recent 704 Reports as indicating that many CILs currently have staff capable of providing the new fifth core service. However, as shown in the table above, a substantial number of CILs do not yet provide the newly required services and therefore would potentially incur costs in order to comply with this proposed rule.
WIOA continues to require annual onsite compliance reviews of at least 15 percent of CILs that receive funding under section 722 of the Act and at least one-third of designated state units that receive funds under section 723 of the Act. The only change made by WIOA was to eliminate the requirement that CILs subject to compliance reviews be selected randomly. ACL is not proposing any changes to the compliance review process in this regulation. We do not anticipate any additional burden on grantees as a result of the compliance and review process, including the development of additional corrective action plans in response to such reviews. While ACL is proposing to establish a new appeals process for States where there is the imminent threat of termination or withholding of funds, we anticipate that the process will be utilized infrequently based on past experience of the Independent Living Services programs. The process is designed to provide additional protection against the termination of funding. Therefore, we do not expect that funds will be terminated more or less frequently.
The allocation of 1.8 to 2 percent of Part B funds to training and technical assistance for SILCs is a new requirement under WIOA. We have limited available data regarding the impact on programs of this provision and therefore request comment on this aspect of the analysis.
The 5 percent administrative cap on the DSE and 30 percent ceiling on the SILC resource plan (absent a different amount with justification in the SPIL) are also new statutory requirements. The NPRM adopts a narrow interpretation of the 5 percent administrative cap, limiting its application to “Part B” funds only, rather than applying the 5 percent cap on administrative funds allocated to the DSE to all federal funds supporting the Independent Living Services. Additional funding sources include Social Security reimbursements, Vocational Rehabilitation program Innovation and Expansion (I&E) funds, and other public or private funds. The NPRM avoids a broader application of the cap in an attempt to avoid creating too great a disincentive to State agencies to serve as DSEs, given the more limited role of the DSEs in decision-making (as they no longer have a statutory role in the development of the SPIL). Our intent is to effectuate the limitation as required under the law, while helping ensure retention of DSEs for the Part B programs. We request comment on the impacts of this and other potential approaches.
Although we believe that the approach of the proposed rule best serves the purposes of the law, we considered a regulatory scheme requiring an alternative treatment of the Part B State matching funds. In the proposed rule, funds used to meet the required 10 percent state match are treated the same as funds “received by the State” under Part B.
To better understand the implications of this decision, consider the five percent administrative cap on the DSE's use of Part B funds for administrative purposes in § 1329.12(a)(5), for example. The proposed regulatory language mandates that WIOA's 5 percent cap on funds for DSE administrative expenses applies only to the Part B funds allocated to the State and to the State's required 10 percent Part B match. It does not apply to other program funds, including, but not limited to, payments provided to a State from the Social Security Administration for assisting Social Security beneficiaries and recipients to achieve employment outcomes, any other federal funds, or to other funds allocated by the State for IL purposes. Treating the issue in this way makes more Part B funds available for IL services and SPIL activities, while retaining sufficient funds to permit the DSE to accomplish its responsibilities and oversight requirements for ILS program funds under the law. One key advantage of this approach is minimizing disruptions to the ILS program from potential DSE decisions to relinquish the program due to insufficient resources to fulfill the WIOA-related fiscal oversight/administrative support responsibilities. For context, on average, 10-15 percent of DSE funding was spent on administrative costs prior to WIOA, though this must be considered along with the more limited role the DSE now plays under the law as amended.
A narrower interpretation of this provision would be to apply it to Part B funds only, without the state match. Not only would this approach severely limit the funds available for fulfillment of DSE responsibilities under the law, it would also create some potential accounting burdens for programs, as State funds provided as a result of the ILS program's State matching requirement have traditionally been treated similarly to Federal Part B funds. It would also be inconsistent with prior accounting practices regarding the 10% State match for Part B funding, which existed prior to WIOA.
The broadest interpretation would include all federal funds supporting the ILS program, including Social Security reimbursements and Innovation and Expansion funds from the Title I (Vocational Rehabilitation) program in the cap, which would broaden the pot of monies allocated for administrative costs of the DSE, which on its face seems counter to the change in the law capping the available percentage for these purposes at a relatively low amount.
The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501
This NPRM makes no revisions to the 704 reporting instruments, the Section 704 Annual Performance Report (Parts I and II). ACL is currently convening workgroups to recommend and implement changes to the 704 reporting instruments. These changes will be subject to the public comment process under the PRA before they are finalized.
The SPIL encompasses the activities planned by the State to achieve its specified independent living objectives and reflects the State's commitment to comply with all applicable statutory and regulatory requirements during the three years covered by the plan. A SPIL has already been approved in each State through fiscal year 2016. (State Plan for Independent Living and Center for Independent Living Programs, OMB Control Number 1820-0527.) The law remains unchanged that the SPIL continues to govern the provision of IL services in the State. Each State is expected to continue its support, including specified obligations, for an approved SPIL. Any amendments to the SPIL, reflecting either a change based on the WIOA amendments or any material change in State law, organization, policy, or agency operations that affect the administration of the SPIL, must be developed in accordance with Section 704(a)(2) of the Rehabilitation Act, as amended. SPIL amendments must be submitted by the State to ACL for approval.
WIOA changed the content of the SPIL to the extent that the SPIL must describe how the State will provide independent living services that promote full access to community life for individuals with significant disabilities and describe strategies for providing independent living services on a statewide basis, to the greatest extent possible. The SPIL must also include a justification for any funding allocation of Part B funds above 30% for the SILC's resource plan. We solicit comments on any information we should consider regarding the potential impact of these changes.
We anticipate that such changes may, on average, increase the amount of time to develop the SPIL by five (5) hours. There are 57 SPILs, one for each state, the District of Columbia, and the six territories. Assuming the same hourly cost of $57.66 discussed in the Regulatory Impact Analysis above, we therefore estimate the cost of the changes to be $16,433.1 (57 SPILs × $57.66/hour × 5 hours). We solicit comments on any information we should consider regarding the potential impact of these changes.
The Section 704 Annual Performance Report (Parts I and II) are the reporting instruments used to collect information required by the Act, as amended by WIOA, related to the use of Part B and Part C funds. Sections 704(m)(4)(D), 706(d), 704(c)(3) and (4), and 725(c) of the Rehabilitation Act, as amended, and these proposed regulations require CILs and DSEs to submit an annual performance report (704 report) to ACL to receive funding. This proposed regulation simply transfers the statutorily required annual reporting from the Department of Education Regulations to the Department of Health and Human Services (HHS) regulations. No additional reporting requirements are being added to the current OMB approved 704 report at this time. (Section 704 Annual Performance Report (Parts I and II), OMB Control Number 1820-0606).
Prior to WIOA, an effort was underway to make formal changes to the 704 reporting instruments. The passage of WIOA in July 2014 put those efforts on hold until late 2014. ACL is currently convening workgroups to recommend and implement changes to the 704 reporting instruments, and these changes will be subject to the public comment process under the PRA before they are finalized. Key steps in ACL's current and projected timeline on the process include an external workgroup webinar, held April 1, 2015, to share the status of 704 revision efforts and invite feedback on specific issues. It is ACL's goal to publish the revised reporting instruments for comment in
Updating the 704 reporting instruments (Parts I and II) will require changes to include the new fifth core service under WIOA. We propose definitions for some of the terms in the fifth core service in this NPRM, and request comments on other areas that need more detail, as well as the burdens on programs of implementing this required core service. Assuming revised 704 reports include reporting on the new fifth core service, we estimate that providing the information will take approximately 1 hour per 704 Report. We estimate the total number of 704 Reports filed annually to be 412.
Section 706 of the Rehabilitation Act continues to require reviews of CILs funded under Section 722 and reviews of state entities funded under Section 723 of the Rehabilitation Act. Therefore, ACL will continue to conduct compliance reviews and make final decisions on any proposed corrective actions and/or technical assistance related to compliance reviews of a CIL's grants.
In Section 706(b), 29 U.S.C. 796d-1(b), WIOA requires the Administrator to develop and publish in the
Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded Mandates Act) requires that a covered agency prepare a budgetary impact statement before promulgating a rule that includes any Federal mandate that may result in expenditures by State, local, or Tribal governments, in the
If a covered agency must prepare a budgetary impact statement, Section 205 further requires that it select the most cost-effective and least burdensome alternatives that achieves the objectives of the rule and is consistent with the statutory requirements. In addition, Section 203 requires a plan for informing and advising any small government entities that may be significantly or uniquely impacted by a rule.
ACL has determined that this rulemaking does not result in the expenditure by State, local, and Tribal governments in the aggregate, or by the private sector of more than $100 million in any one year. The total FY 2015 budget for the Independent Living Services and Centers for Independent Living programs authorized under Chapter 1, Title VII of the Rehabilitation Act of 1973 (Rehabilitation Act or Act), as amended by WIOA (Pub. L. 113-128) is $101,183,000. We do not anticipate that the rule will impact the majority of the budget for these programs.
This proposed rule is not a major rule as defined in 5 U.S.C. 804(2).
Section 654 of the Treasury and General Government Appropriations Act of 1999 requires Federal agencies to determine whether a policy or regulation may affect family well-being. If the agency's conclusion is affirmative, then the agency must prepare an impact assessment addressing seven criteria specified in the law. These proposed regulations do not have an impact on family well-being as defined in the legislation.
Executive Order 13132 on “federalism” was signed August 4, 1999. The purposes of the Order are: “. . . to guarantee the division of governmental responsibilities between the national government and the States that was intended by the Framers of the Constitution, to ensure that the principles of federalism established by the Framers guide the executive departments and agencies in the formulation and implementation of policies, and to further the policies of the Unfunded Mandates Reform Act . . .”
The Department certifies that this rule does not have a substantial direct effect on States, on the relationship between the Federal government and the States, or on the distribution of power and responsibilities among the various levels of government.
ACL is not aware of any specific State laws that would be preempted by the adoption of the regulation.
Centers for independent living, Compliance, Enforcement and appeals, Independent living services, Persons with disabilities, Reporting.
For the reasons discussed in the preamble, the Administration for Community Living, Department of Health and Human Services, proposes to add part 1329 to title 45, chapter XIII, subchapter C, of the Code of Federal Regulations to read as follows:
29 U.S.C. 709; 42 U.S.C. 3515e.
This part includes general requirements applicable to the conduct of the following programs authorized under title VII, chapter 1 of the Rehabilitation Act of 1973, as amended:
(a) Independent Living Services (ILS), title VII, chapter 1, part B (29 U.S.C. 796e to 796e-3).
(b) The Centers for Independent Living (CIL), title VII, chapter 1, part C (29 U.S.C. 796f to 796f-6).
The purpose of title VII of the Act is to promote a philosophy of independent living (IL), including a philosophy of consumer control, peer support, self-help, self-determination, equal access, and individual and system advocacy, in order to maximize the leadership, empowerment, independence, and productivity of individuals with disabilities, and to promote the integration and full inclusion of individuals with disabilities into the mainstream of American society by:
(a) Providing financial assistance to States for providing, expanding, and improving the provision of IL services;
(b) Providing financial assistance to develop and support statewide networks of Centers for Independent Living (Centers or CILs)
(c) Providing financial assistance to States, with the goal of improving the independence of individuals with disabilities, for improving working relationships among—
(1) State Independent Living Services;
(2) Centers for Independent Living;
(3) Statewide Independent Living Councils (SILCs or Councils) established under section 705 of the Act (29 U.S.C. 796d);
(4) State vocational rehabilitation (VR) programs receiving assistance under Title 1 of the Act;
(5) State programs of supported employment services receiving assistance under Title VI of the Act;
(6) Client assistance programs (CAPs) receiving assistance under section 112 of the Act (29 U.S.C. 732);
(7) Programs funded under other titles of the Act;
(8) Programs funded under other Federal laws; and
(9) Programs funded through non-Federal sources with the goal of improving the independence of individuals with disabilities.
Several other regulations apply to all activities under this part. These include but are not limited to:
(a) 45 CFR part 16—Procedures of the Departmental Grant Appeals Board.
(b) 45 CFR part 46—Protection of Human Subjects.
(c) 45 CFR part 75—Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Award.
(d) 45 CFR part 80—Nondiscrimination under Programs Receiving Federal Assistance through the Department of Health and Human Services—Effectuation of title VI of the Civil Rights Act of 1964.
(e) 45 CFR part 81—Practice and Procedures—Practice and Procedure for Hearings under Part 80 of this title.
(f) 45 CFR part 84—Nondiscrimination on the Basis of Handicap in Programs and Activities Receiving Federal Financial Assistance.
(g) 45 CFR part 86—Nondiscrimination on the Basis of Sex in Education Programs and Activities Receiving or Benefiting from Federal Financial Assistance.
(h) 45 CFR part 91—Nondiscrimination on the Basis of Age in Programs or Activities Receiving Federal Financial Assistance from HHS.
(i) 45 CFR part 93—New restrictions on Lobbying.
(j) 2 CFR part 376—Nonprocurement Debarment and Suspension
(k) 2 CFR part 382—Requirements for Drug-Free Workplace (Financial Assistance)
For the purposes of this part, the following definitions apply:
(1) Involve representing an individual—
(i) Before private entities or organizations, government agencies (whether State, local, or Federal), or in a court of law (whether State or Federal); or
(ii) In negotiations or mediation, in formal or informal administrative proceedings before government agencies (whether State, local, or Federal), or in legal proceedings in a court of law; and
(2) Be on behalf of—
(i) A single individual, in which case it is individual advocacy;
(ii) A group or class of individuals, in which case it is
(iii) Oneself, in which case it is
(1) Is designed and operated within a local community by individuals with disabilities;
(2) Provides an array of IL services as defined in section 7(18) of the Act, including, at a minimum, independent living core services as defined in section 7(17); and
(3) Complies with the standards set out in Section 725(b) and provides and complies with the assurances in section 725(c) of the Act and § 1329.5 of these regulations.
(1) Information and referral services;
(2) Independent Living skills training;
(3) Peer counseling, including cross-disability peer counseling;
(4) Individual and systems advocacy;
(5) Services that—
(i) Facilitate the transition of individuals with significant disabilities from nursing homes and other institutions to home and community-based residences, with the requisite supports and services;
(ii) Provide assistance to individuals with significant disabilities who are at risk of entering institutions so that the individuals may remain in the community; and
(iii) Facilitate the transition of youth who are individuals with significant disabilities, who were eligible for individualized education programs under section 614(d) of the Individuals with Disabilities Education Act (20 U.S.C. 1414(d)), and who have completed their secondary education or otherwise left school, to postsecondary life.
(1) Has a physical or mental impairment that substantially limits one or more major life activities of such individual;
(2) Has a record of such an impairment; or
(3) Is regarded as having such an impairment, as described in section 3(3) of the Americans with Disabilities Act of 1990 (42 U.S.C. 12102(3)).
(1) Incidental to the overall operation of the Center;
(2) Necessary so that the individual may receive an IL service; and
(3) Limited to a period not to exceed eight weeks during any six-month period.
(1) Is not younger than 14 years of age; and
(2) Is not older than 24 years of age.
To be eligible to receive funds under this part, a Center must comply with the standards in section 725(b) and assurances in section 725(c) of the Act, with the indicators of minimum compliance established by the Administrator in accordance with section 706 of the Act, and the requirements contained in the terms and conditions of the grant award.
(a) The Center must submit a performance report in a manner and at a time described by the Administrator, consistent with section 704(m)(4)(D) of the Act, 29 U.S.C. 796c(m)(4)(d).
(b) The DSE must submit a report in a manner and at a time described by the Administrator, consistent with section 704(c)(4) of the Act, 29 U.S.C. 796c(c)(4).
(c) The Administrator may require such other reports as deemed necessary to carry out the responsibilities set forth in section 706 of the Act, 29 U.S.C. 796d-1.
(a)
(2) The Director may offer technical assistance to the Center to develop a corrective action plan or to take such other steps as are necessary to come into comply with the standards and assurances.
(3) The Center may request a preliminary appeal to the Director in a form and manner determined by the Administrator. The Director shall review the appeal request and provide written notice of the determination within a timely manner.
(4) Where there is an imminent threat of termination or withholding of funds, the Center may appeal an unfavorable decision by the Director to the Administrator within a time and manner established by the Administrator. The Administrator shall review the appeal request and provide written notice of the determination within a timely manner.
(5) The Administrator may take steps to enforce a corrective action plan or to terminate funding if the Administrator determines that the Center remains out of compliance.
(6) Written notice of the determination by the Administrator shall constitute a final determination for purposes of 45 CFR part 16. A Center that receives such notice, which would result in termination or withholding of funds, may appeal to the Departmental Appeals Board pursuant to the provisions of 45 CFR part 16.
(7) A Center that is administered by the State under Section 723 of the Act must first exhaust any State process before going through the process described in paragraphs (a)(1) through (6) of this section.
(b)
(2) The Director may offer technical assistance to the State to develop a corrective action plan or to take such
(3) Where there is an imminent threat of termination or withholding of funds, the State may seek an appeal consistent with the steps set forth in paragraphs (a)(3) and (4) of this section.
(4) The Administrator may take steps to enforce statutory or regulatory requirements or to terminate funding if the Administrator determines that the State remains out of compliance.
(5) Written notice of the determination by the Administrator shall constitute a final determination for purposes of 45 CFR part 16 with regard to the types of determinations set forth in 45 CFR part 16, appendix A, section C, paragraphs (a)(1) through (4). A State that receives such notice that would result in termination or withholding of funds may appeal to the Departmental Appeals Board pursuant to the provisions of 45 CFR part 16.
(a) The State, after reserving funds under section 13(d) for SILC training and technical assistance:
(1) May use funds received under this part to support the SILC resource plan described in section 705(e) of the Act but may not use more than 30 percent of the funds unless an approved SPIL so specifies pursuant to § 1329.15(c);
(2) May retain funds under section 704(c)(5) of the Act; and
(3) Shall distribute the remainder of the funds received under this part in a manner consistent with the approved State plan for the activities described in paragraph (b) of this section.
(b) The State may use the remainder of the funds described in paragraph (a)(3) of this section to—
(1) Provide to individuals with significant disabilities the independent living (IL) services required by section 704(e) of the Act, particularly those in unserved areas of the State;
(2) Demonstrate ways to expand and improve IL services;
(3) Support the operation of Centers for Independent Living (Centers) that are in compliance with the standards and assurances in section 725 (b) and (c) of the Act;
(4) Support activities to increase the capacities of public or nonprofit agencies and organizations and other entities to develop comprehensive approaches or systems for providing IL services;
(5) Conduct studies and analyses, gather information, develop model policies and procedures, and present information, approaches, strategies, findings, conclusions, and recommendations to Federal, State, and local policy makers in order to enhance IL services for individuals with significant disabilities;
(6) Train individuals with disabilities and individuals providing services to individuals with disabilities, and other persons regarding the IL philosophy; and
(7) Provide outreach to populations that are unserved or underserved by programs under title VII of the Act, including minority groups and urban and rural populations.
(a) Any designated State entity (DSE) identified by the State pursuant to section 704(c) is eligible to apply for assistance under this part in accordance with section 704 of the Act, 29 U.S.C. 796c.
(b) To receive financial assistance under Parts B and C of chapter 1 of title VII, a State shall submit to the Administrator and obtain approval of a State plan that meets the requirements of section 704 of the Act, 29 U.S.C. 796c.
(c) Allotments to states are determined in accordance with section 711 of the Act, 29 U.S.C. 796e.
(a) A DSE that applies for and receives assistance must:
(1) Receive, account for, and disburse funds received by the State under Part B and Part C in a State under section 723 of the Act based on the state plan;
(2) Provide administrative support services for a program under Part B and for CILs under Part C when administered by the State under section 723 of the Act, 29 U.S.C. 796f-2;
(3) Keep such records and afford such access to such records as the Administrator finds to be necessary with respect to the programs;
(4) Submit such additional information or provide such assurances as the Administrator may require with respect to the programs; and
(5) Retain not more than 5 percent of the funds received by the State for any fiscal year under Part B, for the performance of the services outlined in paragraphs (a)(1) through (4) of this section. For purposes of these regulations, the 5 percent cap on funds for administrative expenses applies only to the Part B funds allocated to the State and to the State's required 10 percent Part B match. It does not apply to other program income funds, including, but not limited to, payments provided to a State from the Social Security Administration for assisting Social Security beneficiaries and recipients to achieve employment outcomes, any other federal funds, or to other funds allocated by the State for IL purposes.
(b) The DSE must also carry out its other responsibilities under the Act, including, but not limited to, arranging for the delivery of IL services under Part B of the Act, and for the necessary and sufficient resources needed by the SILC to fulfill its statutory duties and authorities, as authorized in the approved State Plan.
(c) Fiscal and accounting requirements: The DSE must adopt fiscal control and fund accounting procedures as may be necessary to ensure the proper disbursement of and accounting for federal funds provided to CILs, SILCs, and/or other services providers under the ILS program. The DSE must comply with all applicable federal and state laws and regulations, including those in 45 CFR parts 75.
(a) The allotment of Federal funds for State IL services for each State is computed in accordance with the requirements of section 711(a)(1) of the Act.
(b) Notwithstanding paragraph (a) of this section, the allotment of Federal funds for Guam, American Samoa, the United States Virgin Islands, and the Commonwealth of the Northern Mariana Islands is computed in accordance with section 711(a)(2) of the Act.
(c) If the State plan designates a State agency or unit of a State agency to administer the part of the plan under which State IL services are provided for individuals who are blind and a separate or different State agency or unit of a State agency to administer the rest of the plan, the division of the State's allotment between these two units is a matter for State determination, consistent with the State plan.
(d) The Administrator shall reserve between 1.8 percent and 2 percent of appropriated funds to provide, either directly or through grants, contracts, or cooperative agreements, training and technical assistance to SILCs. Training and technical assistance funds shall be administered in accordance with section 711A of the Act.
(a) To be eligible to receive assistance under this part, each state shall establish and maintain a SILC that meets the requirements of section 705 of
(b) The SILC shall not be established as an entity within a State agency, including the DSE. The SILC shall be independent of and autonomous from the DSE and all other State agencies.
(a) The duties of the SILC are those set forth in section 705(c), (d), and (e) of the Act.
(1) The SILC shall develop of the SPIL in accordance with guidelines developed by the Administrator.
(2) The SILC shall monitor, review and evaluate the implementation of the SPIL on a regular basis as determined by the SILC and set forth in the SPIL.
(3) The SILC shall meet regularly, and ensure that such meetings are open to the public and sufficient advance notice of such meetings is provided;
(4) The SILC shall submit to the Administrator such periodic reports as the Administrator may reasonably request, and keep such records, and afford such access to such records, as the Administrator finds necessary to verify the information in such reports; and
(5) The SILC shall, as appropriate, coordinate activities with other entities in the State that provide services similar to or complementary to independent living services, such as entities that facilitate the provision of or provide long-term community-based services and supports.
(b) In carrying out the duties under this section, the SILC may provide contact information for the nearest appropriate CIL. Sharing of such information shall not constitute the direct provision of independent living services as defined in section 705(c)(3) of the Act.
(c) The SILC, in conjunction with the DSE, shall prepare a plan for the provision of resources, including staff and personnel that are necessary and sufficient to carry out the functions of the SILC.
(1) The resource plan amount shall be commensurate, to the extent possible, with the estimated costs related to SILC fulfilment of its duties and authorities consistent with the approved State Plan.
(2) Such resources may consist of Part B funds, State matching funds, Innovation and Expansion (I & E) funds authorized by 29 U.S.C. 721(a)(18), and other public and private sources.
(3) In accordance with § 1329.10(a)(1), no more than 30 percent of the State's allocation of Part B and Part B State matching funds may be used to fund the resource plan, unless the approved SPIL provides that more than 30 percent is needed and justifies the greater percentage.
(4) No conditions or requirements may be included in the SILC's resource plan that may compromise the independence of the SILC.
(5) The SILC is responsible for the proper expenditure of funds and use of resources that it receives under the resource plan.
(6) A description of the SILC's resource plan must be included in the State plan.
(d) As appropriate, the SILC shall coordinate activities with other entities in the State that provide services similar to or complementary to independent living services, such as entities that facilitate the provision of or provide long-term community-based services and supports, to better serve individuals with significant disabilities and help achieve the purpose of section 701 of the Act.
(e) The SILC shall, consistent with State law, supervise and evaluate its staff and other personnel as may be necessary to carry out its functions under this section.
(a) The SILC may conduct the following discretionary activities, as authorized and described in the approved State Plan:
(1) Work with Centers for Independent Living to coordinate services with public and private entities to improve services provided to individuals with disabilities;
(2) Conduct resource development activities to support the activities described in the approved SPIL and/or to support the provision of independent living services by Centers for Independent Living; and
(3) Perform such other functions, consistent with the purpose of this part and comparable to other functions described in section 705(c) of the Act, as the Council determines to be appropriate and authorized in the approved SPIL.
(b) In undertaking the foregoing duties and authorities, the SILC shall:
(1) Coordinate with the CILs in order to avoid conflicting or overlapping activities within the CILs' established service areas;
(2) Not engage in activities that constitute the direct provision of IL services to individuals, including the IL core services; and
(3) Comply with Federal prohibitions against lobbying.
(a) The State may use funds received under Part B to support the Independent Living Services program and to meet its obligation under the Act, including the section 704(e) requirements that apply to the provision of independent living services. The State plan must stipulate that the State will provide IL services, directly and/or through grants and contracts, with Federal, State or other funds, and must describe how and to whom those funds will be disbursed for this purpose.
(b) In order to receive financial assistance under this part, a State shall submit to the Administrator a State plan for independent living.
(1) The State plan must contain, in the form prescribed by the Administrator, the information set forth in section 704 of the Act, including designation of an Agency to serve as the designated State entity, and such other information requested by the Administrator.
(2) The State plan must contain the assurances set forth in section 704(m) of the Act.
(3) The State plan must be signed in accordance with the provisions of this part.
(4) The State plan must be submitted 90 days before the completion date of the proceeding plan, and otherwise in the time frame and manner prescribed by the Administrator.
(5) The State plan must be approved by the Administrator.
(c) The State plan must cover a period of not more than three years and must be amended whenever necessary to reflect any material change in State law, organization, policy, or agency operations that affects the administration of the State plan.
(d) The State plan must be jointly—
(1) Developed by the chairperson of the SILC, and the directors of the CILs, after receiving public input from individuals with disabilities and other stakeholders throughout the State; and
(2) Signed by the—
(i) Chairperson of the SILC, acting on behalf of and at the direction of the SILC;
(ii) The director of the DSE; and
(iii) Not less than 51 percent of the directors of the CILs in the State. For purposes of this provision, if a legal entity that constitutes the “CIL” has multiple Part C grants considered as separate Centers for all other purposes, for SPIL signature purposes, it is only considered as one Center.
(e) In States where DSE duties are shared with a separate State agency authorized to administer vocational rehabilitation (VR) services for individuals who are blind, the State plan must be signed by the:
(1) Director of the DSE;
(2) Director of the separate State agency authorized to provide VR services for individuals who are blind;
(3) Chairperson of the SILC, acting on behalf of and at the direction of the SILC; and
(4) Not less than 51 percent of the directors of the CILs in the State.
(f) Periodic review and revision. The State plan must provide for the review and revision of the plan, not less than once every three years, to ensure the existence of appropriate planning, financial support and coordination, and other assistance to meet the requirements of section 704(a) of the Act.
(g)
(2) The requirement in paragraph (g)(1) of this section may be met by holding public meetings before a preliminary draft State plan is prepared or by providing a preliminary draft State plan for comment at the public meetings, as appropriate.
(3) To meet the public input standard of paragraph (g) of this section, a public meeting requires:
(i) Accessible, appropriate and sufficient notice provided at least 30 days prior to the public meeting through various media available to the general public, such as Web sites, newspapers and public service announcements, and through specific contacts with appropriate constituency groups.
(ii) All notices, including notices published on a Web site, and other written materials provided at or prior to public meetings must be available upon request in accessible formats.
(h) The State plan must identify those provisions that are State-imposed requirements. For purposes of this section, a State-imposed requirement includes any State law, regulation, rule, or policy relating to the DSE's administration or operation of IL programs under Title VII of the Act, including any rule or policy implementing any Federal law, regulation, or guideline that is beyond what would be required to comply with the regulations in this part.
(i) The State plan must address how the specific requirements in the Act and in paragraph (g) of this section will be met.
State allotments of Part C, funds shall be based on section 721(c) of the Act, and distributed to Centers within the State in accordance with the order of priorities in sections 722(e) and 723(e) of the Act.
(a) In any State in which the Administrator has approved the State plan required by section 704 of the Act, an eligible agency funded under Part C in fiscal year 2015 may receive a continuation award in FY 2016 or a succeeding fiscal year if the Center has—
(1) Complied during the previous project year with the standards and assurances in section 725 of the Act and the terms and conditions of its grant; and
(2) Submitted an approvable annual performance report demonstrating that the Center meets the indicators of minimum compliance referenced in in § 1329.5.
(b) If an eligible agency administers more than one Part C grant, each of the Center grants must meet the requirements of paragraph (a) of this section to receive a continuation award.
(c) A designated State entity (DSE) that operated a Center in accordance with section 724(a) of the Act in fiscal year (FY) 2015 is eligible to continue receiving assistance under this part in FY 2016 or a succeeding fiscal year if, for the fiscal year for which assistance is sought—
(1) No nonprofit private agency submits and obtains approval of an acceptable application under section 722 or 723 of the Act to operate a Center for that fiscal year before a date specified by the Administrator; or
(2) After funding all applications so submitted and approved, the Administrator determines that funds remain available to provide that assistance.
(d) A Center operated by the DSE under section 724(a) of the Act must comply with paragraphs (a), (b), and (c) of this section to receive continuation funding, except for the requirement that the Center be a private nonprofit agency.
(e) A designated State entity that administered Part C funds and awarded grants directly to Centers within the State under section 723 of the Act in fiscal year (FY) 2015 is eligible to continue receiving assistance under section 723 in FY 2016 or a succeeding fiscal year if the Administrator determines that the amount of State funding earmarked by the State to support the general operation of Centers during the preceding fiscal year equaled or exceeded the amount of federal funds allotted to the State under section 721(c) of the Act for that fiscal year.
(f) A DSE may apply to administer Part C funds under section 723 in the time and in the manner that the Administrator may require, consistent with section 723(a)(1)(A) of the Act.
(g) Grants awarded by the DSE under section 723 of the Act are subject to the requirements of paragraphs (a) and (b) of this section and the order of priorities in section 723(e) of the Act, unless the DSE and the SILC jointly agree on another order of priorities.
(a) Subject to the availability of funds and in accordance with the order of priorities in section 722(e) of the Act and the State Plan's design for the statewide network of Centers, an eligible agency may receive Part C funding as a new Center for Independent Living in a State, if the eligible agency:
(1) Submits to the Administrator an application at the time and manner required in the funding opportunity announcement (FOA) issued by the Administrator which contains the information and meets the selection criteria established by the Administrator in accordance with section 722(d) of the Act;
(2) Proposes to serve a geographic area that has been designated as a priority unserved or underserved in the State Plan for Independent Living and that is not served by an existing Part C-funded Center; and
(3) Is determined by the Administrator to be the most qualified applicant to serve the designated priority area consistent with the State plan setting forth the design of the State for establishing a statewide network of Centers for independent living.
(b) An existing Part C-funded Center may apply to serve the designated unserved or underserved areas if it proposes the establishment of a separate and complete Center (except that the governing board of the existing center may serve as the governing board of the new Center) at a different geographical
(c) An eligible agency located in a bordering State may be eligible for a new CIL award if the Administrator determines, based on the submitted application, that the agency:
(1) Is the most qualified applicant meeting the requirements in paragraphs (a) and (b) of this section; and
(2) Has the expertise and resources necessary to serve individuals with significant disabilities who reside in the bordering State, in accordance with the requirements of the Act and these regulations.
(d) If there are insufficient funds under the State's allotment to fund a new Center, the Administrator may—
(1) Use the excess funds in the State to assist existing Centers consistent with the State plan; or
(2) Reallot these funds in accordance with section 721(d) of the Act.
(a) Centers receiving Part C funding shall be subject to periodic reviews, including on-site reviews, in accordance with sections 706(c), 722(g), and 723(g) of the Act and guidance set forth by the Administrator, to verify compliance with the standards and assurances in section 725(b) and (c) of the Act and the grant terms and conditions. The Administrator shall annually conduct reviews of at least 15 percent of the Centers.
(b) A copy of each review under this section shall be provided, in the case of section 723(g), by the director of the DSE to the Administrator and to the SILC, and in the case of section 722(g), by the Administrator to the SILC and the DSE.
The Administrator shall reserve between 1.8% and 2% of appropriated funds to provide training and technical assistance to Centers through grants, contracts or cooperative agreements, consistent with section 721(b) of the Act. The training and technical assistance funds shall be administered in accordance with section 721(b) of the Act.
This document was received for publication by the Office of the Federal Register on November 9, 2015.
Food Safety and Inspection Service, USDA.
Notice of availability.
The Food Safety and Inspection Service (FSIS) is announcing the availability of an updated version of the Agency's compliance guidelines for controlling hazards posed by allergens and other ingredients of public health concern. The guidelines provide recommendations for identifying hazards when conducting a hazard analysis and for preventing and controlling hazards through a hazard analysis and critical control point (HACCP) plan or Sanitation standard operating procedures (SOPs) or other prerequisite programs with respect to these substances.
A downloadable version of the revised compliance guide is available to view and print at [
For further information contact Daniel Engeljohn, Assistant Administrator, Office of Policy and Program Development, FSIS, U.S. Department of Agriculture, 1400 Independence Avenue SW., Washington, DC 20250-3700, (202) 205-0495.
On April 21, 2014, FSIS published a
The Agency explained that it was issuing the guidelines to provide meat and poultry establishments with recommendations on how to identify hazards with respect to allergens and other ingredients of public health concern when conducting their hazard analysis, how to prevent and control these hazards through HACCP plans, Sanitation SOPs, or other prerequisite programs, and how to properly declare allergens in product. The guidelines also provided information on proper procedures for processing, handling, storing, and labeling a product with an allergenic ingredient or ingredient of public health concern.
In addition, the Agency explained that the guidelines represent the best practice recommendations of FSIS, based on scientific and practical considerations, and that the recommendations are not requirements. FSIS said that by following the guidelines, establishments would be likely to ensure that product labels declare all ingredients, as required in the regulations, and that the product would not contain undeclared allergens or other undeclared ingredients. FSIS recommended that establishments consider incorporating the guidelines in their HACCP plan or Sanitation SOPs or other prerequisite programs.
FSIS has updated the guidelines to include numbered appendices for diagrams, checklists, and supplemental information to simplify locating these references. In response to the comments discussed below, FSIS updated the guidelines by:
• Clarifying, on pages 2 and 4, that the focus of the document is on FSIS-regulated establishments, state-regulated establishments, and operations where all or part of the premises meet the “food processing plant” definition, as defined in the Food and Drug Administration's (FDA) “2013 Food Code”;
• clarifying, in Section 1.2, page 5, that sulfur-based preservatives (sulfites), lactose, FD&C Yellow 5 (Tartrazine), gluten, and monosodium glutamate (MSG) are ingredients of concern that may result in adverse reactions in certain susceptible individuals, yet they are not considered allergens;
• revising the “What is a letter of guarantee (LOG)?” box on page 8, and adding a paragraph on page 9 to clarify and describe a LOG, the difference between a LOG and a Certificate of Analysis (COA), and the communication and coordination between an establishment and its suppliers that FSIS recommends when an establishment relies on LOGs;
• adding “Allergenic Ingredients and Foods,” a listing of allergenic ingredients and foods that may contain allergenic ingredients, as a resource (Appendix 6);
• adding “Tips for Avoiding Your Allergen,” published by Food Allergy Research and Education (FARE) to the “References and Resources” section (Appendix 7); and
• adding FSIS Directive 8080.1, “Recall of Meat and Poultry Products,” to the ”References and Resources” section (Appendix 7).
In addition, in Section 2.1, FSIS edited the text to emphasize the purpose of a hazard analysis and a hazard identification. Under Section 2.3, FSIS edited the third paragraph to delete that an establishment include storage in its HACCP system because that guidance is included in the first paragraph of this section. Also, in Section 2.3, FSIS added the recommendation that an establishment conduct simulations with inaccurate product labels to test system, checklists, and procedures as a step to prevent mislabeling during packing, labeling, and storage of the final product.
FSIS received a total of seven comments in response to the April 2014
In addition, FSIS Directive 8080.1, “Recall of Meat and Poultry Products,” lists factors considered by the FSIS Recall Committee when evaluating the public health significance of an undeclared ingredient in a meat or poultry product. The directive lists the questions and other factors that the Agency considers. Although the Directive provides instructions to FSIS personnel, the questions that the FSIS recall committee considers will be helpful to industry also. Therefore, the Directive has been added to the “References and Resources” section (Appendix 7).
When establishments conduct allergen testing of ingredients, FSIS encourages communication with the supplier. Also, FSIS recommends that establishments hold or control product tested for allergens until they receive results, although doing so is not required. Establishments should design their food safety system within their available resources to take all necessary and practical steps to ensure that only safe product enters commerce.
The compliance guidelines provide recommendations, not requirements, to establishments for identifying hazards when conducting a hazard analysis and for preventing and controlling hazards with respect to allergens and other ingredients of public health concern through the implementation of HACCP plans, sanitation SOPs, or other prerequisite programs. The guidelines were edited to clarify that the document consists of recommendations, not requirements.
Public awareness of all segments of rulemaking and policy development is important. Consequently, FSIS will announce this
FSIS also will make copies of this publication available through the FSIS Constituent Update, which is used to provide information regarding FSIS policies, procedures, regulations,
No agency, officer, or employee of the USDA shall, on the grounds of race, color, national origin, religion, sex, gender identity, sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, or political beliefs, exclude from participation in, deny the benefits of, or subject to discrimination any person in the United States under any program or activity conducted by the USDA.
To file a complaint of discrimination, complete the USDA Program Discrimination Complaint Form, which may be accessed online at
Send your completed complaint form or letter to USDA by mail, fax, or email:
U.S. Department of Agriculture, Director, Office of Adjudication, 1400 Independence Avenue SW., Washington, DC 20250-9410.
(202) 690-7442
Persons with disabilities who require alternative means for communication (Braille, large print, audiotape, etc.), should contact USDA's TARGET Center at (202) 720-2600 (voice and TDD).
Forest Service, USDA.
Notice of meeting.
The Yakutat Resource Advisory Committee (RAC) will meet in Yakutat, Alaska. The committee is authorized under the Secure Rural Schools and Community Self-Determination Act (the Act) and operates in compliance with the Federal Advisory Committee Act. The purpose of the committee is to improve collaborative relationships and to provide advice and recommendations to the Forest Service concerning projects and funding consistent with Title II of the Act. RAC information can be found at the following Web site
The meeting will be held December 10 & 11, 2015 from 6 p.m. to 8 p.m.
All RAC meetings are subject to cancellation. For status of meeting prior to attendance, please contact the person listed under
The meeting will be held at the Kwaan Conference Room, 712 Ocean Cape Drive, Yakutat, Alaska. Send written comments to Lee A. Benson,c/o Forest Service, USDA, P.O. Box 327, Yakutat, AK 99689, electronically to
Written comments may be submitted as described under
Lee A. Benson, District Ranger by phone at (907) 784-3359 or via email at
Individuals who use telecommunication devices for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-800-877-8339 between 8:00 a.m. and 8:00 p.m., Eastern Standard Time, Monday through Friday.
The purpose of the meeting is to: Review current and completed projects. We will also review proposals submitted for 2016 and 2017 project years.
The meeting is open to the public. The agenda will include time for people to make oral statements of three minutes or less. Individuals wishing to make an oral statement should request in writing by December 2, 2015 to be scheduled on the agenda. Anyone who would like to bring related matters to the attention of the committee may file written statements with the committee staff before or after the meeting. Written comments and requests for time to make oral comments must be sent to Lee A. Benson, District Ranger, P.O. Box 327, Yakutat, AK 99689 by email to
Forest Service, USDA.
Notice of meeting.
The Deschutes Provincial Advisory Committee (PAC) will meet in Bend, Oregon. The committee is authorized pursuant to the implementation of E-19 of the Record of Decision and operates in compliance with the Federal Advisory Committee Act. The purpose of the committee is to provide advice and make recommendations to promote a better integration of forest management activities between Federal and non-Federal entities to ensure that such activities are complementary. PAC information can be found at the following Web site:
The meeting will be held on December 15, 2015, from 9:00 a.m. to 3:00 p.m.
All PAC meetings are subject to cancellation. For status of meeting prior to attendance, please contact the person listed under
The meeting will be held at the Deschutes National Forest Headquarters Office, Ponderosa Conference Room, 63095 Deschutes Market Road, Bend, Oregon.
Written comments may be submitted as described under
Beth Peer, PAC Coordinator, by phone at 541-383-4769 or via email at
Individuals who use telecommunication devices for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-800-877-8339 between 8:00 a.m. and 8:00 p.m., Eastern Standard Time, Monday through Friday.
The purpose of the meeting is to:
1. Review past work of sustainable recreation working group;
2. Determine primary elements of a sustainable recreation focus item;
3. Presentation of recent scientific findings concerning fire history in mixed conifer forests in central Oregon; and
4. Plan potential field trips for coming year.
The meeting is open to the public. The agenda will include time for people to make oral statements of three minutes or less. Individuals wishing to make an oral statement should request in writing by December 1, 2015, to be scheduled on the agenda. Anyone who would like to bring related matters to the attention of the committee may file written statements with the committee staff before or after the meeting. Written comments and requests for time to make oral comments must be sent to Beth Peer, Deschutes PAC Coordinator, 63095 Deschutes Market Road, Bend, Oregon, 97701; by email to
U.S. Census Bureau, Commerce.
Notice.
The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)).
To ensure consideration, written comments must be submitted on or before January 15, 2016.
Direct all written comments to Jennifer Jessup, Departmental Paperwork Clearance Officer, Department of Commerce, Room 6616, 14th and Constitution Avenue NW., Washington, DC 20230 (or via the Internet at
Requests for additional information or copies of the information collection instrument(s) and instructions should be directed to Jennifer Hunter Childs, U.S. Census Bureau, 4600 Silver Hill Road, Washington, DC 20233-9150, (202) 603-4827 (or via the Internet at
The Census Bureau plans to request an extension of the current OMB approval to conduct a variety of small-scale questionnaire pretesting activities under this generic clearance. A block of hours will be dedicated to these activities for each of the next three years. OMB will be informed in writing of the purpose and scope of each of these activities, as well as the time frame and the number of burden hours used. The number of hours used will not exceed the number set aside for this purpose.
This research program will be used by the Census Bureau and survey sponsors to improve questionnaires and procedures, reduce respondent burden, and ultimately increase the quality of data collected in the Census Bureau censuses and surveys. The clearance will be used to conduct pretesting of decennial, demographic, and economic census and survey questionnaires prior to fielding them. Pretesting activities will involve one of the following methods for identifying measurement problems with the questionnaire or survey procedure: Cognitive interviews, focus groups, respondent debriefing, behavior coding of respondent/interviewer interaction, and split panel tests.
Any of the following methods may be used: Mail, telephone, face-to-face; paper-and-pencil, CATI, CAPI, Internet, or IVR.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden (including hours and cost) of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.
MannKind Corporation (MannKind), an operator of FTZ 76, submitted a notification of proposed production activity to the FTZ Board for its facilities in Danbury, Connecticut, within FTZ 76. The notification conforming to the requirements of the regulations of the FTZ Board (15 CFR 400.22) was received on October 29, 2015.
A separate application for subzone designation at the MannKind facilities was submitted and will be processed under Section 400.31 of the FTZ Board's regulations (Doc. S-147-2015). The facilities are used for the production of inhalable insulin. Pursuant to 15 CFR 400.14(b), FTZ activity would be limited to the specific foreign-status material and specific finished product described in the submitted notification (as described below) and subsequently authorized by the FTZ Board.
Production under FTZ procedures could exempt MannKind from customs duty payments on the foreign-status ingredient used in export production. On its domestic sales, MannKind would be able to choose the duty rate during customs entry procedures that applies to inhalable insulin (duty-free) for the foreign-status ingredient, fumaryl diketopiperazone (duty rate—6.5%). Customs duties also could possibly be deferred or reduced on foreign-status production equipment.
A copy of the notification will be available for public inspection at the Office of the Executive Secretary, Foreign-Trade Zones Board, Room 21013, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230-0002, and in the “Reading Room” section of the FTZ Board's Web site, which is accessible via
For further information, contact Diane Finver at
On July 13, 2015, The Cookson Company, Inc. submitted a notification of proposed production activity to the Foreign-Trade Zones (FTZ) Board for its facility within FTZ 277—Site 11, in Goodyear, Arizona.
The notification was processed in accordance with the regulations of the FTZ Board (15 CFR part 400), including notice in the
An application has been submitted to the Foreign-Trade Zones (FTZ) Board by the Greater Metropolitan Area Foreign Trade Zone Commission, grantee of FTZ 119, requesting subzone status for the facilities of CNH Industrial America LLC in Benson, Minnesota. The application was submitted pursuant to the provisions of the Foreign-Trade Zones Act, as amended (19 U.S.C. 81a-81u), and the regulations of the FTZ Board (15 CFR part 400). It was formally docketed on November 9, 2015.
The proposed subzone would consist of the following sites:
In accordance with the FTZ Board's regulations, Camille Evans of the FTZ Staff is designated examiner to review the application and make recommendations to the Executive Secretary.
Public comment is invited from interested parties. Submissions shall be addressed to the FTZ Board's Executive Secretary at the address below. The closing period for their receipt is December 28, 2015. Rebuttal comments in response to material submitted during the foregoing period may be submitted during the subsequent 15-day period to January 11, 2016.
A copy of the application will be available for public inspection at the Office of the Executive Secretary, Foreign-Trade Zones Board, Room 21013, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230-0002, and in the “Reading Room” section of the FTZ Board's Web site, which is accessible via
For further information, contact Camille Evans at
Bureau of Industry and Security, Commerce.
Notice of inquiry.
The Bureau of Industry and Security (BIS) is seeking public comments on the impact that implementation of the Chemical Weapons Convention (CWC), through the Chemical Weapons Convention Implementation Act (CWCIA) and the Chemical Weapons Convention Regulations (CWCR), has had on commercial activities involving “Schedule 1” chemicals during calendar year 2015. The purpose of this notice of inquiry is to collect information to assist BIS in its preparation of the annual certification to the Congress on whether the legitimate commercial activities and interests of chemical, biotechnology, and pharmaceutical firms are being harmed by such implementation. This certification is required under Condition 9 of Senate Resolution 75, April 24, 1997, in which the Senate gave its advice and consent to the ratification of the CWC.
Comments must be received by December 16, 2015.
You may submit comments by any of the following methods (please refer to RIN 0694-XC028 in all comments and in the subject line of email comments):
•
•
•
• By mail or delivery to Regulatory Policy Division, Bureau of Industry and
For questions on the Chemical Weapons Convention requirements for “Schedule 1” chemicals, contact Douglas Brown, Treaty Compliance Division, Office of Nonproliferation and Treaty Compliance, Bureau of Industry and Security, U.S. Department of Commerce, Phone: (202) 482-1001. For questions on the submission of comments, contact Willard Fisher, Regulatory Policy Division, Office of Exporter Services, Bureau of Industry and Security, U.S. Department of Commerce, Phone: (202) 482-2440.
In providing its advice and consent to the ratification of the Convention on the Prohibition of the Development, Production, Stockpiling, and Use of Chemical Weapons and Their Destruction, commonly called the Chemical Weapons Convention (CWC or “the Convention”), the Senate included, in Senate Resolution 75 (S. Res. 75, April 24, 1997), several conditions to its ratification. Condition 9, titled “Protection of Advanced Biotechnology,” calls for the President to certify to Congress on an annual basis that “the legitimate commercial activities and interests of chemical, biotechnology, and pharmaceutical firms in the United States are not being significantly harmed by the limitations of the Convention on access to, and production of, those chemicals and toxins listed in Schedule 1.” On July 8, 2004, President Bush, by Executive Order 13346, delegated his authority to make the annual certification to the Secretary of Commerce.
The CWC is an international arms control treaty that contains certain verification provisions. In order to implement these verification provisions, the CWC established the Organization for the Prohibition of Chemical Weapons (OPCW). The CWC imposes certain obligations on countries that have ratified the Convention (
“Schedule 1” chemicals consist of those toxic chemicals and precursors set forth in the CWC “Annex on Chemicals” and in Supplement No. 1 to part 712 of the Chemical Weapons Convention Regulations (CWCR) (15 CFR parts 710-722). The CWC identified these toxic chemicals and precursors as posing a high risk to the object and purpose of the Convention.
The CWC (Part VI of the “Verification Annex”) restricts the production of “Schedule 1” chemicals for protective purposes to two facilities per State Party: A single small-scale facility (SSSF) and a facility for production in quantities not exceeding 10 kg per year. The CWC Article-by-Article Analysis submitted to the Senate in Treaty Doc. 103-21 defined the term “protective purposes” to mean “used for determining the adequacy of defense equipment and measures.” Consistent with this definition and as authorized by Presidential Decision Directive (PDD) 70 (December 17, 1999), which specifies agency and departmental responsibilities as part of the U.S. implementation of the CWC, the Department of Defense (DOD) was assigned the responsibility to operate these two facilities. Although this assignment of responsibility to DOD under PDD-70 effectively precluded commercial production of “Schedule 1” chemicals for protective purposes in the United States, it did not establish any limitations on “Schedule 1” chemical activities that are not prohibited by the CWC. However, DOD does maintain strict controls on “Schedule 1” chemicals produced at its facilities in order to ensure accountability for such chemicals, as well as their proper use, consistent with the object and purpose of the Convention.
The provisions of the CWC that affect commercial activities involving “Schedule 1” chemicals are implemented in the CWCR (see 15 CFR 712) and in the Export Administration Regulations (EAR) (see 15 CFR 742.18 and 15 CFR 745), both of which are administered by the Bureau of Industry and Security (BIS). Pursuant to CWC requirements, the CWCR restrict commercial production of “Schedule 1” chemicals to research, medical, or pharmaceutical purposes (the CWCR prohibit commercial production of “Schedule 1” chemicals for “protective purposes” because such production is effectively precluded per PDD-70, as described above—see 15 CFR 712.2(a)). The CWCR also contain other requirements and prohibitions that apply to “Schedule 1” chemicals and/or “Schedule 1” facilities. Specifically, the CWCR:
(1) Prohibit the import of “Schedule 1” chemicals from States not Party to the Convention (15 CFR 712.2(b));
(2) Require annual declarations by certain facilities engaged in the production of “Schedule 1” chemicals in excess of 100 grams aggregate per calendar year (
(3) Provide for government approval of “declared Schedule 1” facilities (15 CFR 712.5(f));
(4) Provide that “declared Schedule 1” facilities are subject to initial and routine inspection by the Organization for the Prohibition of Chemical Weapons (15 CFR 712.5(e) and 716.1(b)(1));
(5) Require 200 days advance notification of establishment of new “Schedule 1” production facilities producing greater than 100 grams aggregate of “Schedule 1” chemicals per calendar year (15 CFR 712.4);
(6) Require advance notification and annual reporting of all imports and exports of “Schedule 1” chemicals to, or from, other States Parties to the Convention (15 CFR 712.6, 742.18(a)(1) and 745.1); and
(7) Prohibit the export of “Schedule 1” chemicals to States not Party to the Convention (15 CFR 742.18(a)(1) and (b)(1)(ii)).
For purposes of the CWCR (see 15 CFR 710.1), “production of a Schedule 1 chemical” means the formation of “Schedule 1” chemicals through chemical synthesis, as well as processing to extract and isolate “Schedule 1” chemicals produced biologically. Such production is understood, for CWCR declaration purposes, to include intermediates, by-products, or waste products that are produced and consumed within a defined chemical manufacturing sequence, where such intermediates, by-products, or waste products are chemically stable and therefore exist for a sufficient time to make isolation from the manufacturing stream possible, but where, under normal or design operating conditions, isolation does not occur.
In order to assist in determining whether the legitimate commercial activities and interests of chemical, biotechnology, and pharmaceutical
All comments must be submitted to one of the addresses indicated in this notice. The Department requires that all comments be submitted in written form.
The Department encourages interested persons who wish to comment to do so at the earliest possible time. The period for submission of comments will close on December 16, 2015. The Department will consider all comments received before the close of the comment period. Comments received after the end of the comment period will be considered if possible, but their consideration cannot be assured. The Department will not accept comments accompanied by a request that a part or all of the material be treated confidentially because of its business proprietary nature or for any other reason. The Department will return such comments and materials to the persons submitting the comments and will not consider them. All comments submitted in response to this notice will be a matter of public record and will be available for public inspection and copying.
The Office of Administration, Bureau of Industry and Security, U.S. Department of Commerce, displays public comments on the BIS Freedom of Information Act (FOIA) Web site at
International Trade Administration, U.S. Department of Commerce.
Notice of an open meeting.
The President's Export Council (Council) will hold a meeting to deliberate on recommendations related to promoting the expansion of U.S. exports. Topics may include: The Administration's trade agenda, Safe Harbor, infrastructure investment, workforce readiness, access to capital for microbusinesses and SMEs, and export control reform. The final agenda will be posted at least one week in advance of the meeting on the President's Export Council Web site at
December 3, 2015 at 9:30 a.m. (ET).
The President's Export Council meeting will be broadcast via live webcast on the Internet at
Tricia Van Orden, Executive Secretary, President's Export Council, Room 4043, 1401 Constitution Avenue NW., Washington, DC 20230, telephone: 202-482-5876, email:
Press inquiries should be directed to the International Trade Administration's Office of Public Affairs, telephone: 202-482-3809.
Submit statements electronically to Tricia Van Orden, Executive Secretary, President's Export Council via email:
Send paper statements to Tricia Van Orden, Executive Secretary, President's Export Council, Room 4043, 1401 Constitution Avenue NW., Washington, DC 20230.
Statements will be posted on the President's Export Council Web site (
Enforcement and Compliance, International Trade Administration, Department of Commerce.
On August 12, 2015, the Department of Commerce (the “Department”) published the preliminary results and partial rescission of the 2013-2014 administrative review of the antidumping duty order on polyethylene terephthalate film, sheet, and strip (“PET film”) from the People's Republic of China (“PRC”), in accordance with section 751(a)(1)(B) of
Jonathan Hill, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-3518.
On August 12, 2015, the Department published the
The products covered by the order are all gauges of raw, pre-treated, or primed PET film, whether extruded or co-extruded. Excluded are metalized films and other finished films that have had at least one of their surfaces modified by the application of a performance-enhancing resinous or inorganic layer more than 0.00001 inches thick. Also excluded is roller transport cleaning film which has at least one of its surfaces modified by application of 0.5 micrometers of SBR latex. Tracing and drafting film is also excluded. PET film is classifiable under subheading 3920.62.00.90 of the Harmonized Tariff Schedule of the United States (“HTSUS”). While HTSUS subheadings are provided for convenience and customs purposes, our written description of the scope of the order is dispositive.
In the
No party commented on the
The Department determines that Green Packing is part of the PRC-wide entity.
The Department will determine, and CBP shall assess, antidumping duties on all appropriate entries covered by this review.
The following cash deposit requirements will be effective upon publication of the final results of this administrative review for all shipments of the subject merchandise from the PRC entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided by section 751(a)(2)(C) of the Act: (1) For previously investigated or reviewed PRC and non-PRC exporters which are not under review in this segment of the proceeding but which have separate rates, the cash deposit rate will continue to be the exporter-specific rate published for the most recent period; (2) for all PRC exporters of subject merchandise that have not been found to be entitled to a separate rate, including Green Packing, the cash deposit rate will be the PRC-wide rate of 76.72 percent; and (3) for all non-PRC exporters of subject merchandise which have not received their own rate, the cash deposit rate will be the rate applicable to the PRC exporter(s) that supplied that non-PRC exporter. These deposit requirements, when imposed, shall remain in effect until further notice.
This notice serves as a final reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this POR. Failure to comply with this requirement could result in the Department's presumption that reimbursement of antidumping duties has occurred and the subsequent assessment of doubled antidumping duties.
This notice also serves as a reminder to parties subject to the administrative protective order (“APO”) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely notification of the destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation.
We are issuing and publishing these results and this notice in accordance with sections 751(a)(1) and 777(i) of the Act.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Dennis McClure or Elizabeth Eastwood at (202) 482-5973 and (202) 482-3874, respectively; AD/CVD Operations, Enforcement and Compliance, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230.
On July 22, 2015, the Department of Commerce (the Department) published a notice of initiation of antidumping duty investigation of hydrofluorocarbon blends and components thereof from the People's Republic of China.
The period of investigation is October 1, 2014, through March 31, 2015.
Section 733(c)(1)(A) of the Act permits the Department to postpone the time limit for the preliminary determination if it receives a timely request from the petitioner for postponement. The Department may postpone the preliminary determination under section 733(c)(1) of the Act no later than the 190th day after the date on which the administering authority initiates an investigation.
On October 28, 2015, American HFC Coalition and its individual members,
Because the petitioners' request was timely and provided reasons for the request, and since the Department finds no compelling reasons to deny the request, the Department is postponing the deadline for the preliminary determination in accordance with section 733(c)(1)(A) of the Act and 19 CFR 351.205(b)(2) and (e) by 50 days to January 21, 2016. The deadline for the final determination will continue to be 75 days after the date of the preliminary determination unless postponed at a later date.
This notice is issued and published pursuant to section 733(c)(2) of the Act and 19 CFR 351.205(f)(1).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
On September 24, 2015, the Department of Commerce (the “Department”) published its preliminary results of a changed circumstances review
Krisha Hill, AD/CVD Operations, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-4037.
On March 13, 2015, the Department of Commerce (the “Department”) initiated a changed circumstance review to determine whether Sino-Maple, an exporter of subject merchandise to the United States, is the successor-in-interest to Jiafeng for purposes of the AD order on MLWF from the PRC.
Multilayered wood flooring is composed of an assembly of two or
All multilayered wood flooring is included within the definition of subject merchandise, without regard to: Dimension (overall thickness, thickness of face ply, thickness of back ply, thickness of core, and thickness of inner plies; width; and length); wood species used for the face, back and inner veneers; core composition; and face grade. Multilayered wood flooring included within the definition of subject merchandise may be unfinished (
The core of multilayered wood flooring may be composed of a range of materials, including but not limited to hardwood or softwood veneer, particleboard, medium-density fiberboard, high-density fiberboard (“HDF”), stone and/or plastic composite, or strips of lumber placed edge-to-edge.
Multilayered wood flooring products generally, but not exclusively, may be in the form of a strip, plank, or other geometrical patterns (
Imports of the subject merchandise are provided for under the following subheadings of the Harmonized Tariff Schedule of the United States (“HTSUS”): 4412.31.0520; 4412.31.0540; 4412.31.0560; 4412.31.2510; 4412.31.2520; 4412.31.3175; 4412.31.4040; 4412.31.4050; 4412.31.4060; 4412.31.4070; 4412.31.4075; 4412.31.4080; 4412.31.5125; 4412.31.5135; 4412.31.5155; 4412.31.5165; 4412.31.5175; 4412.31.6000; 4412.31.9100; 4412.32.0520; 4412.32.0540; 4412.32.0560; 4412.32.0565; 4412.32.0570; 4412.32.2510; 4412.32.2520; 4412.32.2525; 4412.32.2530; 4412.32.3125; 4412.32.3135; 4412.32.3155; 4412.32.3165; 4412.32.3175; 4412.32.3185; 4412.32.5600; 4412.39.1000; 4412.39.3000; 4412.39.4011; 4412.39.4012; 4412.39.4019; 4412.39.4031; 4412.39.4032; 4412.39.4039; 4412.39.4051; 4412.39.4052; 4412.39.4059; 4412.39.4061; 4412.39.4062; 4412.39.4069; 4412.39.5010; 4412.39.5030; 4412.39.5050; 4412.94.1030; 4412.94.1050; 4412.94.3105; 4412.94.3111; 4412.94.3121; 4412.94.3131; 4412.94.3141; 4412.94.3160; 4412.94.3171; 4412.94.4100; 4412.94.5100; 4412.94.6000; 4412.94.7000; 4412.94.8000; 4412.94.9000; 4412.94.9500; 4412.99.0600; 4412.99.1020; 4412.99.1030; 4412.99.1040; 4412.99.3110; 4412.99.3120; 4412.99.3130; 4412.99.3140; 4412.99.3150; 4412.99.3160; 4412.99.3170; 4412.99.4100; 4412.99.5100; 4412.99.5105; 4412.99.5115; 4412.99.5710; 4412.99.6000; 4412.99.7000; 4412.99.8000; 4412.99.9000; 4412.99.9500; 4418.71.2000; 4418.71.9000; 4418.72.2000; 4418.72.9500; and 9801.00.2500.
While HTSUS subheadings are provided for convenience and customs purposes, the written description of the subject merchandise is dispositive.
Because no party submitted a case brief in response to the Department's
Based on these final results, we will instruct U.S. Customs and Border Protection to collect estimated ADs for all shipments of subject merchandise exported by Sino-Maple and entered, or withdrawn from warehouse, for consumption on or after the publication date of this notice in the
This notice serves as a final reminder to parties subject to administrative protective order (“APO”) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of the return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a sanctionable violation.
We are issuing and publishing this final results notice in accordance with sections 751(b) and 777(i) of the Tariff Act of 1930, as amended, and 19 CFR 351.216.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
On October 22, 2015, the United States Court of International Trade (CIT or Court) issued final judgment in
Cara Lofaro, Office IV, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-5720.
On July 22, 2008, the Department published AD and countervailing duty (CVD) orders on CWP imports from the PRC.
On July 31, 2012, the Department issued its Final Section 129 Determination. In that determination, the Department found that an adjustment was warranted to the AD rates on CWP imports from the PRC to account for remedies that overlap those imposed by the CVD order.
Following the final disposition of litigation related to the Final Section 129 Determination regarding the CVD investigation of CWP from the PRC, in which the Department found no basis for making an adjustment to the companion AD rates under Section 777(A)(f) of the Tariff Act of 1930, as amended (the Act),
In its decision in
Because there is now a final court decision with respect to the Department's Final Section 129 Determination regarding the AD investigation of CWP from the PRC, the Department is amending the Final Section 129 Determination, as implemented, regarding an adjustment to the AD cash deposit rates. The revised AD cash deposit rates are as follows:
Unless the applicable cash deposit rates have been superseded by cash deposit rates calculated in an intervening administrative review of the AD order on CWP from the PRC, the Department will instruct U.S. Customs and Border Protection to require a cash deposit for estimated AD duties at the rate noted above for each specified exporter and producer combination, for entries of subject merchandise, entered or withdrawn from warehouse, for consumption, on or after November 2, 2015.
This notice is issued and published in accordance with sections 516A(e) and 777(i)(1) of the Act and section 129(c)(2)(A) of the Uruguay Round Agreements Act.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; issuance of permit amendment.
Notice is hereby given that a major amendment to Permit No. 17952-01 has been issued to Daniel P. Costa, Ph.D., Department of Biology and Institute of Marine Sciences, University of California, Santa Cruz, CA 95064.
The permit amendment and related documents are available for review upon written request or by appointment in the Permits and Conservation Division, Office of Protected Resources, NMFS, 1315 East-West Highway, Room 13705, Silver Spring, MD 20910; phone (301) 427-8401; fax (301) 713-0376.
Amy Sloan or Rosa L. González, (301) 427-8401.
On August 17, 2015, notice was published in the
Permit No. 17952 authorized long-term research on California sea lions to study their foraging, diving, energetics, food habits, and at sea distribution through capture, sampling, and tagging California sea lions throughout their U.S. range (California, Oregon and Washington). The permit also authorized harassment of California sea lions, harbor seals (
Permit No. 17952-02, issued on September 30, 2015, includes authorization to (1) add remote darting as an approved capture method with use of various sedative drugs for adult and juvenile California sea lions, (2) increase incidental harassment takes of non-target California sea lions, (3) include incidental harassment takes for the Eastern stock of Steller sea lions (
In compliance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; issuance of permit amendment.
Notice is hereby given that a major amendment to Permit No. 17670-02 has been issued to NMFS Northeast Fisheries Science Center, 166 Water Street, Woods Hole, MA 02543 (Responsible Party: William Karp, Ph.D.).
The permit amendment and related documents are available for review upon written request or by appointment in the Permits and Conservation Division, Office of Protected Resources, NMFS, 1315 East-West Highway, Room 13705, Silver Spring, MD 20910; phone (301) 427-8401; fax (301) 713-0376.
Amy Sloan or Rosa L. González, (301) 427-8401.
On July 10, 2015, notice was published in the
Permit No. 17670-00 authorized takes of gray, harbor, harp, and hooded seals in waters within or proximal to the U.S. EEZ from North Carolina northward to Maine, during conduct of stock assessment research, including estimation of distribution and abundance, determination of stock structure, habitat requirements, foraging ecology, health assessment and effects of natural and anthropogenic factors. Types of take include harassment during shipboard, skiff, and aircraft transect and photo-identification surveys, and scat collection; and, capture with tissue sampling and instrument or tag attachment. A limited number of research-related mortality is also allowed, as well as world-wide import and export of pinniped samples. A minor amendment (Permit No. 17670-01) authorized sampling of pinniped carcasses aboard commercial fishing vessels. An additional minor amendment (Permit No. 17670-02) authorized nail clipping and fecal loop sampling during permitted captures.
Permit No. 17670-03, issued September 28, 2015, includes authorization to increase the number and frequency of gray and harbor seal harassment and capture takes annually during research, add use of unmanned aircraft systems to survey seals, increase the number of biopsy samples taken (from one to two), increase the number of gray and harbor seal samples imported/exported annually, and allow euthanasia in the event sick or injured seals are inadvertently captured. The permit expires April 30, 2018.
In compliance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321
National Telecommunications and Information Administration, U.S. Department of Commerce.
Notice of open meeting.
The National Telecommunications and Information Administration (NTIA) will convene a meeting of a multistakeholder process concerning the collaboration between security researchers and software and system developers and owners to address security vulnerability disclosure on December 2, 2015.
The meeting will be held on December 2, 2015 from 10:30 a.m. to 4:30 p.m., Eastern Time. See Supplementary Information for details.
The meeting will be held at the 20 F Street NW Conference Center, 20 F Street NW., Washington, DC 20001.
Allan Friedman, National Telecommunications and Information Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Room 4725, Washington, DC 20230; telephone (202) 482-4281; email;
Committee for Purchase From People Who Are Blind or Severely Disabled.
Proposed additions to the Procurement List.
The Committee is proposing to add products to the Procurement List that will be furnished by nonprofit agencies employing persons who are blind or have other severe disabilities.
Committee for Purchase From People Who Are Blind or Severely Disabled, 1401 S. Clark Street, Suite 715, Arlington, Virginia 22202-4149.
Barry S. Lineback, Telephone: (703) 603-7740, Fax: (703) 603-0655, or email
This notice is published pursuant to 41 U.S.C. 8503(a)(2) and 41 CFR 51-2.3. Its purpose is to provide interested persons an opportunity to submit comments on the proposed actions.
If the Committee approves the proposed additions, the entities of the Federal Government identified in this notice will be required to procure the products listed below from nonprofit agencies employing persons who are blind or have other severe disabilities.
The following products are proposed for addition to the Procurement List for production by the nonprofit agencies listed:
Committee for Purchase From People Who Are Blind or Severely Disabled.
Addition to and deletion from the Procurement List.
This action adds a service to the Procurement List that will be provided by nonprofit agency employing persons who are blind or have other severe disabilities, and deletes a service from the Procurement List previously furnished by such agency.
Committee for Purchase From People Who Are Blind or Severely Disabled, 1401 S. Clark Street, Suite 715, Arlington, Virginia 22202-4149.
Barry S. Lineback, Telephone: (703) 603-7740, Fax: (703) 603-0655, or email
On 10/2/2015 (80 FR 59740-59741), the Committee for Purchase From People Who Are Blind or Severely Disabled published notice of proposed addition to the Procurement List.
After consideration of the material presented to it concerning capability of qualified nonprofit agency to provide the service and impact of the additions on the current or most recent contractors, the Committee has determined that the service listed below is suitable for procurement by the Federal Government under 41 U.S.C. 8501-8506 and 41 CFR 51-2.4.
I certify that the following action will not have a significant impact on a substantial number of small entities. The major factors considered for this certification were:
1. The action will not result in any additional reporting, recordkeeping or other compliance requirements for small entities other than the small organization that will furnish the service to the Government.
2. The action will result in authorizing small entities to furnish the service to the Government.
3. There are no known regulatory alternatives which would accomplish the objectives of the Javits-Wagner-O'Day Act (41 U.S.C. 8501-8506) in connection with the service proposed for addition to the Procurement List.
Accordingly, the following service is added to the Procurement List:
On 10/2/2015 (80 FR 59740-59741), the Committee for Purchase From People Who Are Blind or Severely Disabled published notice of proposed deletion from the Procurement List.
After consideration of the relevant matter presented, the Committee has determined that the service listed below is no longer suitable for procurement by the Federal Government under 41 U.S.C. 8501-8506 and 41 CFR 51-2.4.
I certify that the following action will not have a significant impact on a substantial number of small entities. The major factors considered for this certification were:
1. The action will not result in additional reporting, recordkeeping or other compliance requirements for small entities.
2. The action may result in authorizing small entities to furnish the service to the Government.
3. There are no known regulatory alternatives which would accomplish the objectives of the Javits-Wagner-O'Day Act (41 U.S.C. 8501-8506) in connection with the service deleted from the Procurement List.
Accordingly, the following service is deleted from the Procurement List:
Consumer Product Safety Commission.
Notice.
As required by the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the Consumer Product Safety Commission (“CPSC” or “Commission”) requests comments on a proposed extension of approval of a collection of information for Third Party Testing of Children's Products, approved previously under OMB Control No. 3041-0159. The Commission will consider all comments received in response to this notice before requesting an extension of this collection of information from the Office of Management and Budget (“OMB”).
Submit written or electronic comments on the collection of information by January 15, 2016.
You may submit comments, identified by Docket No. CPSC-2010-0038, by any of the following methods:
Robert H. Squibb, Consumer Product Safety Commission, 4330 East West Highway, Bethesda, MD 20814; (301) 504-7815, or by email to:
CPSC seeks to renew the following currently approved collection of information:
•
•
The testing rule establishes requirements for manufacturers to conduct initial third party testing and certification of children's products, testing when there has been a material change in the product, continuing testing (periodic testing), and guarding against undue influence. A final rule on
The component part rule is a companion to the testing rule that is intended to reduce third party testing burdens by providing all parties involved in the required testing and certifying of children's products the flexibility to conduct or rely upon testing where it is the easiest and least expensive. Certification of a children's product can be based upon one or more of the following: (a) Component part testing; (b) component part certification; (c) another party's finished product testing; or (d) another party's finished product certification.
Records required by the testing rule and the rule on selecting representative samples appear in 16 CFR 1107.26. Required records include a certificate, and records documenting third party testing and related sampling plans. These requirements largely overlap the recordkeeping requirements in the component part rule, codified at 16 CFR 1109.5(g). Duplicate recordkeeping is not required; records need to be created and maintained only once to meet the applicable recordkeeping requirements. The component part rule also requires records that enable tracing a product or component back to the entity that had a product tested for compliance, and also requires attestations of due care to ensure test result integrity.
• Each product and the shipping container must have a permanent label or marking that identifies the name and address (city, state, and zip code) of the manufacturer, distributor, or seller.
• A permanent code mark or other product identification shall be provided on the infant carrier and its package or shipping container, if multiple packaging is used. The code will identify the date (month and year) of manufacture and permit future identification of any given model.
OMB has assigned control numbers for the estimated burden to comply with marking and labeling requirements in each section 104 rule. With this renewal, CPSC is moving the marking and labeling burden requirements for section 104 rules into the collection of information for Third Party Testing of Children's Products. The paperwork burdens associated with the section 104 rules are appropriately included in the collection for Third Party Testing of Children's Products because all of the section 104 products are also required to be third party tested. Having all of the burden hours under one collection for children's products provides one OMB control number and eases the administrative burden of renewing multiple collections. CPSC will discontinue using the OMB control numbers currently assigned to individual section 104 rules. The discontinued OMB control numbers are listed in Table 1.
Because we do not know how many companies participate in component part testing and supply test reports or certifications to other certifiers in the supply chain, we have no concrete data to estimate the recordkeeping and third party disclosure requirements in the component part rule. Likewise, no clear method exists for estimating the number of finished product certifiers who conduct their own component part testing. In the component part rulemaking, we suggested that the recordkeeping burden for the
In addition to recordkeeping, the component part rule requires third party disclosure of test reports and certificates, if any, to a certifier who intends to rely on such documents to issue its own certificate. Without data, allocation of burden estimation between the recordkeeping and third party disclosure requirements is difficult. However, based on our previous analysis, we continue to estimate that creating and maintaining records accounts for approximately 90 percent of the burden, while the third party disclosure burden is much less, perhaps approximately 10 percent. Therefore, if we continue to use the estimate that component part testing will amount to about 10 percent of the burden estimated for the testing rule, then the hour burden of the component part rule is estimated to be about 540,000 hours total annually (10% of 5.4 million hours); allocating 486,000 hours for recordkeeping and 54,000 hours for third party disclosure.
The Commission solicits written comments from all interested persons about the proposed renewal of this collection of information. The Commission specifically solicits information relevant to the following topics:
Office of the Secretary of Defense, DoD.
Notice to alter a System of Records.
The Office of the Secretary of Defense proposes to alter a new system of records, DHRA 10 DoD, entitled “Defense Sexual Assault Advocate Certification Program” to track the certification of SARC and SAPR VAs. Information will be used to review, process, and report on the status of SARC and SAPR VA certification to Congress.
Comments will be accepted on or before December 16, 2015. This proposed action will be effective the day following the end of the comment period unless comments are received which result in a contrary determination.
You may submit comments, identified by docket number and title, by any of the following methods:
*
*
Ms. Cindy Allard, Chief, OSD/JS Privacy Office, Freedom of Information Directorate, Washington Headquarters Service, 1155 Defense Pentagon, Washington, DC 20301-1155, or by phone at (571) 372-0461.
The Office of the Secretary of Defense notices for systems of records subject to the Privacy Act of 1974 (5 U.S.C. 552a), as amended, have been published in the
Defense Sexual Assault Advocate Certification Program (July 11, 2012, 77 FR 40861).
Delete entry and replace with “National Organization for Victim Assistance, 510 King Street, Suite 424, Alexandria, VA 22314-3132.
Back-up: Suntrust Bank, 515 King Street, Alexandria, VA 22314-3157.”
Delete entry and replace with “Applicant's first name, middle initial, and last name; position type (Sexual Assault Response Coordinator (SARC) or Sexual Assault Prevention Representative Victim Advocate (SAPR VA)); Service/DoD affiliation and status; grade/rank; installation/command; work email address and telephone number; official military address of applicant and applicant's SARC (commanding officer, street, city, state, ZIP code, country); position level (Level I, II, III, or IV); certificates of training; date of application; verification of sexual assault victim advocacy experience (position, dates, hours, supervisor; name, title, and work telephone number of verifier); evaluation of sexual assault victim experience (description of
Delete entry and replace with “10 U.S.C. 136, Under Secretary of Defense for Personnel and Readiness; DoD Directive 6495.01, Sexual Assault Prevention and Response (SAPR) Program; DoD Instruction 6495.02, Sexual Assault Prevention and Response (SAPR) Program Procedures; and Directive-type Memorandum (DTM) 14-001, Defense Sexual Assault Advocate Certification Program (D-SAACP).”
Delete entry and replace with “In addition to those disclosures generally permitted in accordance with 5 U.S.C. 552a(b) of the Privacy Act of 1974, as amended, the records contained herein may specifically be disclosed outside the DoD as a routine use pursuant to 5 U.S.C. 552a(b)(3) as follows:
To the Department of Justice Office for Victims of Crime and Training Technical Assistance Center for the purpose of verifying certified SARCs and SAPR VAs for participation in Advance Military Sexual Assault Advocate Training.
If a system of records maintained by a DoD Component to carry out its functions indicates a violation or potential violation of law, whether civil, criminal, or regulatory in nature, and whether arising by general statute or by regulation, rule, or order issued pursuant thereto, the relevant records in the system of records may be referred, as a routine use, to the agency concerned, whether federal, state, local, or foreign, charged with the responsibility of investigating or prosecuting such violation or charged with enforcing or implementing the statute, rule, regulation, or order issued pursuant thereto.
A record from a system of records maintained by a DoD Component may be disclosed as a routine use to a federal, state, or local agency maintaining civil, criminal, or other relevant enforcement information or other pertinent information, such as current licenses, if necessary to obtain information relevant to a DoD Component decision concerning the hiring or retention of an employee, the issuance of a security clearance, the letting of a contract, or the issuance of a license, grant, or other benefit.
A record from a system of records maintained by a DoD Component may be disclosed to a federal agency, in response to its request, in connection with the hiring or retention of an employee, the issuance of a security clearance, the reporting of an investigation of an employee, the letting of a contract, or the issuance of a license, grant, or other benefit by the requesting agency, to the extent that the information is relevant and necessary to the requesting agency's decision on the matter.
Disclosure from a system of records maintained by a DoD Component may be made to a congressional office from the record of an individual in response to an inquiry from the congressional office made at the request of that individual.
A record from a system of records subject to the Privacy Act and maintained by a DoD Component may be disclosed to the Office of Personnel Management (OPM) concerning information on pay and leave, benefits, retirement deduction, and any other information necessary for the OPM to carry out its legally authorized government-wide personnel management functions and studies.
A record from a system of records maintained by a DoD Component may be disclosed as a routine use to the National Archives and Records Administration for the purpose of records management inspections conducted under authority of 44 U.S.C. 2904 and 2906.
A record from a system of records maintained by a DoD Component may be disclosed as a routine use to the Merit Systems Protection Board, including the Office of the Special Counsel for the purpose of litigation, including administrative proceedings, appeals, special studies of the civil service and other merit systems, review of OPM or component rules and regulations, investigation of alleged or possible prohibited personnel practices; including administrative proceedings involving any individual subject of a DoD investigation, and such other functions, promulgated in 5 U.S.C. 1205 and 1206, or as may be authorized by law.
A record from a system of records maintained by a Component may be disclosed to appropriate agencies, entities, and persons when (1) The Component suspects or has confirmed that the security or confidentiality of the information in the system of records has been compromised; (2) the Component has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Component or another agency or entity) that rely upon the compromised information; and (3) the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Components efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm.
The DoD Blanket Routine Uses set forth at the beginning of the Office of the Secretary of Defense (OSD) compilation of systems of records notices may apply to this system. The complete list of DoD blanket routine uses can be found Online at:
Delete entry and replace with “Paper file folders and electronic storage media.”
Delete entry and replace with “First and last name and/or D-SAACP ID number.”
Delete entry and replace with “Records are maintained in a controlled
Delete entry and replace with “Temporary, Destroy when 5 years old.”
Delete entry and replace with “Sexual Assault Prevention and Response Office, ATTN: D-SAACP Manager, 4800 Mark Center Drive, Alexandria, VA 22350-1500.”
Delete entry and replace with “Individuals seeking to determine whether information about themselves is contained in this system of records should address written inquiries to the Sexual Assault Prevention and Response Office, ATTN: D-SAACP Manager, 4800 Mark Center Drive, Alexandria, VA 22350-1500.
Signed, written requests should contain first and last name and/or D-SAACP ID number.”
Delete entry and replace with “Individuals seeking access to records about themselves contained in this system should address written inquiries to the OSD/Joint Staff Freedom of Information Act, Requester Service Center, Office of Freedom of Information, 1155 Defense Pentagon, Washington, DC 20301-1155.
Signed, written requests should contain first and last name, D-SAACP ID number, and the name and number of this system of records notice.”
National Guard Bureau, DoD.
Notice to add a new System of Records.
The National Guard Bureau proposes to add a new system of records INGB 009, entitled “National Guard Family Program Volunteers,” to document and manage volunteer activities including recruitment, training, recognition and support for eligible individuals who donate their services to the National Guard Family Program.
Comments will be accepted on or before December 16, 2015. This proposed action will be effective the day following the end of the comment period unless comments are received which result in a contrary determination.
You may submit comments, identified by docket number and title, by any of the following methods:
*
*
Ms. Jennifer Nikolaisen, 111 South George Mason Drive, AH2, Arlington, VA 22204-1373 or telephone: (703) 601-6884.
The National Guard Bureau notices for systems of records subject to the Privacy Act of 1974 (5 U.S.C. 552a), as amended, have been published in the
The proposed system report, as required by 5 U.S.C. 552a(r) of the Privacy Act of 1974, as amended, was submitted on October 23, 2015, to the House Committee on Oversight and Government Reform, the Senate Committee on Governmental Affairs, and the Office of Management and Budget (OMB) pursuant to paragraph 4c of Appendix I to OMB Circular No. A-130, “Federal Agency Responsibilities for Maintaining Records About Individuals,” dated February 8, 1996 (February 20, 1996, 61 FR 6427).
National Guard Family Program Volunteers.
National Guard Bureau (NGB) Family Program, 111 South George Mason Drive, Arlington Hall 2, Arlington, VA 22204-1373.
Any individual that volunteers to participate in the National Guard Family Program.
Individual's name, mailing address, email address, telephone numbers, DoD ID Number, date of birth, gender, qualifications/skills, interests, program surveys, recommendation letters, volunteer awards, volunteer hours, volunteer services provided, start and completion date of volunteer service, volunteer training and incidental reimbursement expenses, sponsor name, background suitability check determination and completion date, employment and education information.
For individuals under the age of 18 the following additional data may be in the record: Parental consent letter, report card, medication dispensation permission, health history including allergies, dietary restrictions, emergency contact information, signatures authorizing program/training participation and emergency treatment.
Note: This system of records contains individually identifiable health information. The DoD Health Information Privacy Regulation (DoD 6025.18-R) issued pursuant to the Health Insurance Portability and Accountability Act of 1996, applies to most such health information. DoD 6025.18-R may place additional procedural requirements on the uses
10 U.S.C. 10502, Chief of the National Guard Bureau: Appointment; adviser on National Guard matters; grade; succession; 10 U.S.C. 10503, Functions of National Guard Bureau: Charter; 10 U.S.C. 1588, Authority to accept certain voluntary services; DoDD 5105.77, National Guard Bureau (NGB); DoD Instruction 1100.21, Voluntary Services in the Department of Defense; and National Guard Regulation 600-12/Air National Guard Instruction 36-3009, National Guard Family Program.
To document and manage volunteer activities including recruitment, training, recognition and support for eligible individuals who donate their services to the National Guard Family Program.
In addition to those disclosures generally permitted under 5 U.S.C. 552a(b) of the Privacy Act of 1974, as amended, the records contained therein may specifically be disclosed outside the DoD as a routine use pursuant to 5 U.S.C. 552a(b)(3) as follows:
The DoD Blanket Routine Uses set forth at the beginning of the National Guard Bureau's compilation of systems of records notices may apply to this system. The complete list of DoD blanket routine uses can be found online at:
Paper files and electronic storage media.
Records are retrieved by the full name of volunteer in Joint Service Support (JSS).
Records are maintained in monitored or controlled areas accessible only to authorized personnel. Electronic records are protected by software programs that are password protected or restricted from access through use of the Common Access Card (CAC) by National Guard personnel that have a need-to-know in the performance of their official duties.
Disposition pending (treat as permanent until the National Archives and Records Administration has approved the retention and disposal schedule).
National Guard Bureau (NGB) Family Program, 111 South George Mason Drive, Arlington Hall 2, Arlington, VA 22204-1373.
Individuals seeking to determine whether this system of records contains information about themselves should address written inquiries to National Guard Bureau (NGB), Manpower and Personnel Directorate (J1), Family Programs; 111 South George Mason Drive, Arlington Hall 2, Arlington, VA 22204-1373.
Written requests must include the individual's DoD ID number or their name and date of birth, and full mailing address to receive a response.
In addition, the requester must provide a notarized statement or an unsworn declaration made in accordance with 28 U.S.C. 1746, in the following format:
If executed outside the United States: `I declare (or certify, verify, or state) under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on (date). (Signature)'.
If executed within the United States, its territories, possessions, or commonwealths: `I declare (or certify, verify, or state) under penalty of perjury that the foregoing is true and correct. Executed on (date). (Signature)'.
Individuals seeking access to information about themselves contained in this system of records should address written inquiries to National Guard Bureau (NGB), Manpower and Personnel Directorate (J1), Family Programs; 111 South George Mason Drive, Arlington Hall 2, Arlington, VA 22204-1373.
Written requests must include the individual's DoD ID number or their name and date of birth, and full mailing address to receive a response.
In addition, the requester must provide a notarized statement or an unsworn declaration made in accordance with 28 U.S.C. 1746, in the following format:
If executed outside the United States: `I declare (or certify, verify, or state) under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on (date). (Signature)'.
If executed within the United States, its territories, possessions, or commonwealths: `I declare (or certify, verify, or state) under penalty of perjury that the foregoing is true and correct. Executed on (date). (Signature)'.
The National Guard Bureau's rules for accessing records, and for contesting contents, and appealing initial agency determinations are published at 32 CFR part 329 or may be obtained from the system manager.
Information is collected directly from the individual when registering as a volunteer.
None.
Department of Education.
Notice.
This document provides notice of the continuation of a computer matching program between the Department of Education and the Department of Justice. The continuation is effective on the date in paragraph 5.
Section 421(a)(1) of the Controlled Substances Act (21 U.S.C. 862(a)(1)) includes provisions regarding the judicial denial of Federal benefits. Section 421 of the Controlled Substances Act, which was originally enacted as section 5301 of the Anti-Drug Abuse Act of 1988, and which was amended and redesignated as section 421 of the Controlled Substances Act by section 1002(d) of the Crime Control Act of 1990, Public Law 101-647 (hereinafter referred to as “section 5301”), authorizes Federal and State judges to deny certain Federal benefits (including student financial assistance under title IV of the Higher Education Act of 1965, as amended (HEA)) to individuals convicted of drug trafficking or possession of a controlled substance.
In order to ensure that HEA student financial assistance is not awarded to individuals subject to denial of benefits under court orders issued pursuant to section 5301, the Department of Justice and the Department of Education
For the purpose of ensuring that HEA student financial assistance is not awarded to individuals denied benefits by court orders issued under the Denial of Federal Benefits Program, the Department of Education must continue to obtain from the Department of Justice identifying information regarding individuals who are the subject of section 5301 denial of benefits court orders. The purpose of this notice is to announce the continued operation of the computer matching program and to provide certain required information concerning the computer matching program.
In accordance with the Privacy Act of 1974 (5 U.S.C. 552a), as amended by the Computer Matching and Privacy Protection Act of 1988 (Pub. L. 100-503), the Office of Management and Budget (OMB) Guidelines on the Conduct of Matching Programs (54 FR 25818, June 19, 1989), and OMB Circular A-130, the following information is provided:
1.
The Department of Education (ED) and the Department of Justice (DOJ).
2.
The purpose of this matching program is to ensure that the requirements of section 421 of the Controlled Substances Act (originally enacted as section 5301 of the Anti-Drug Abuse Act of 1988, Pub. L. 100-690, 21 U.S.C. 853a, which was amended and redesignated as section 421 of the Controlled Substances Act by section 1002(d) of the Crime Control Act of 1990, Pub. L. 101-647) (hereinafter referred to as “section 5301”) are met.
DOJ is the lead contact agency for information related to section 5301 violations and, as such, provides this data to ED. ED seeks access to the information contained in the DOJ Denial of Federal Benefits Clearinghouse System (DEBARS) database that is authorized under section 5301 for the purpose of ensuring that HEA student financial assistance is not awarded to individuals subject to denial of benefits under court orders issued pursuant to the Denial of Federal Benefits Program.
3.
Under section 5301, ED must deny Federal benefits to any individual upon whom a Federal or State court order has imposed a penalty denying eligibility for those benefits. Student financial assistance under the HEA is a Federal benefit and under section 5301, ED must, in order to meet its obligations under the HEA, have access to information about individuals who have been declared ineligible under section 5301.
While DOJ provides information under section 5301 about individuals who are ineligible for Federal benefits to the General Services Administration (GSA) for inclusion in GSA's List of Parties Excluded from Federal Procurement and Nonprocurement Programs, DOJ and ED have determined that matching against the DOJ database is more efficient and effective than matching against the GSA List. The DOJ database has specific information about the HEA programs for which individuals are ineligible, as well as the expiration of the debarment period, making the DOJ database more complete than the GSA List. Both of these elements are essential for a successful match.
4.
ED receives data from the DOJ DEBARS system that is used to match title IV, HEA applicant data in ED's Central Processing System (Federal Student Aid Application File (18-11-01)). ED will use the Social Security number (SSN), date of birth, and the first two letters of an applicant's last name for the match.
The DOJ DEBARS system contains the names, SSNs, dates of birth, and other identifying information regarding individuals convicted of Federal or State offenses involving drug trafficking or possession of a controlled substance who have been denied Federal benefits by Federal or State courts. This system of records also contains information concerning the specific program or programs for which benefits have been denied, as well as the duration of the period of ineligibility. DOJ will make available for the matching program the records of only those individuals who have been denied Federal benefits under one or more of the title IV, HEA programs.
5.
The matching program will be effective on the latest of the following three dates: (A) December 20, 2015; (B) thirty (30) days after notice of the matching program has been published in the
The matching program will continue for 18 months after the effective date of the CMA and may be extended for an additional 12 months thereafter, if the conditions specified in 5 U.S.C. 552a(o)(2)(D) have been met.
6.
Individuals wishing to comment on this matching program or obtain additional information about the program, including requesting a copy of the computer matching agreement between ED and DOJ, may contact Marya Dennis, Management and Program Analyst, U.S. Department of Education, Federal Student Aid, Union Center Plaza, 830 First Street NE., Washington, DC 20202-5454. Telephone: (202) 377-3385.
Individuals with disabilities can obtain this document in an accessible format (
You may also access documents of the Department published in the
5 U.S.C. 552a; 21 U.S.C. 862(a)(1).
Bonneville Power Administration (BPA), Department of Energy (DOE).
Notice of Intent to prepare an Environmental Impact Statement (EIS) and notice of floodplain and wetlands assessment.
In accordance with the National Environmental Policy Act (NEPA), BPA intends to prepare an EIS to determine whether to fund the Confederated Tribes of the Yakama Nation's proposal to construct and operate a hatchery for coho salmon in the upper Yakima basin.
The Melvin R. Sampson Hatchery would involve construction of a hatchery on 50 acres of land owned by the Yakama Nation in Kittitas County, Washington. Hatchery operations would include collection of adult coho for broodstock at the existing Roza and Sunnyside dams, incubation and rearing of up to 200,000 juvenile coho salmon, and release of smolts into the Yakima and Naches rivers.
Coho were extirpated from the Yakima basin by the early 1980s. The proposal would augment anadromous fish populations available for harvest and aid natural spawning of coho in the Yakima basin.
With this Notice of Intent, BPA is initiating the public scoping process for the EIS. BPA is requesting comments about potential environmental impacts that should be considered as an EIS is prepared.
In accordance with DOE floodplain and wetland regulations, BPA will analyze impacts to floodplain and wetlands as well as measures to avoid or minimize potential effects. The assessment will be included in the EIS.
Written comments are due to the address below no later than January 4, 2016. Comments may also be made at the scoping meeting to be held on December 9, 2015 at the addresses below.
Comments on the proposed scope of the Draft EIS and requests to be placed on the project mailing list may be mailed by letter to Bonneville Power Administration, Public Affairs Office—DKE-7, P.O. Box 3621, Portland, OR 97208-3621, or sent by fax to 503-230-4019. You may also call BPA's toll-free comment hotline at 1-800-622-4519 and leave a message (please include the name of the project), or submit comments online at
On Wednesday, December 9, 2015, a scoping meeting will be held from 6:00 p.m. to 8:00 p.m. at the Hal Holmes Community Center, 209 N. Ruby Street, Ellensburg, Washington 98926. At this informal open-house meeting, BPA will provide project information and maps and will make members of the project team available to answer questions and accept verbal and written comments.
Dave Goodman, Environmental Protection Specialist, Bonneville Power Administration, KEC-4, P.O. Box 3621, Portland, OR 97208-3621; toll-free telephone 1-800-282-3713; direct telephone 503-230-4764; or email
BPA's funding of the Yakama Nation's project would support efforts to protect, mitigate, and enhance fish and wildlife affected by the development and operation of the Federal Columbia River Power System in the mainstem Columbia River and its tributaries under the Pacific Northwest Electric Power Planning and Conservation Act of 1980 (Act) (16 U.S.C. 839b(h)(10)). The Act requires BPA to fund fish and wildlife protection, mitigation, and enhancement actions consistent with the Northwest Power and Conservation Council's (Council) Fish and Wildlife Program and the purposes of the Act. Under this program, the Council makes recommendations to BPA concerning which fish and wildlife projects to fund. This project was recommended to BPA by the Council. In addition to its responsibilities under the Act, on May 2, 2008, BPA, the Bureau of Reclamation, and the U.S. Army Corps of Engineers signed the 2008 Columbia Basin Fish Accords Memorandum of Agreement with the Yakama Nation. The agreement includes funding for this hatchery project, subject to compliance with NEPA and other environmental review requirements. The project is a component of the Yakima-Klickitat Fisheries Project EIS, which was completed in 1996. The proposal is also consistent with the policy direction in BPA's Fish and Wildlife Implementation Plan, which calls for protecting weak stocks while sustaining overall populations of fish for their economic and cultural value, including long-term harvest opportunities.
The hatchery would be located approximately 5 miles northwest of Ellensburg, WA, between Interstate 90 and Highway 10. Construction of the hatchery would include a 28,000-square-foot hatchery and administration building, an adult holding and spawning facility, intake screens and a pump station to provide water from an existing irrigation canal, three new groundwater wells and acquisition of water rights, a new centralized degassing head box for groundwater treatment and supply, a waste treatment pond, and two 2,000-square-foot residences for hatchery staff.
The proposed hatchery would produce up to 200,000 yearling coho smolts. Project operations would include collection of broodstock from the Roza Dam in Kittitas County, Washington and the Sunnyside Dam in Yakima County, Washington. Fish would be acclimated at existing acclimation sites adjacent to release locations and released into the tributaries and mainstem reaches of the upper Yakima and Naches rivers. Fish would be 100 percent coded wire-tagged and different wire tag codes would be used to distinguish release locations.
BPA will be the lead agency for preparation of the EIS. Cooperating agencies for the EIS may be identified as the proposed project proceeds through the NEPA process.
BPA has established a 30-day scoping period during which affected landowners, concerned citizens, special interest groups, local governments, and any other interested parties are invited to comment on the scope of the proposed EIS. Scoping will help BPA ensure that a full range of issues related to this proposal are addressed in the EIS, and will help to identify significant
When completed, the Draft EIS will be circulated for review and comment, and BPA will hold at least one public comment meeting for the Draft EIS. BPA will consider and respond in the Final EIS to comments received on the Draft EIS. BPA's subsequent decision will be documented in a Record of Decision.
Maps and further information are available from BPA at the address above.
Take notice that on October 26, 2015, Tennessee Gas Pipeline Company, L.L.C. (Tennessee), 1001 Louisiana Street, Houston, Texas 77002, filed an application pursuant to section 7(c) of the Natural Gas Act (NGA) requesting authorization to construct and operate its Southwest Louisiana Supply Project to provide 295,000 dekatherms per day of incremental capacity to serve Mitsubishi Corporation and MMGS, Inc. Specifically, Tennessee proposes to construct (i) approximately 2.4 miles of 30-inch-diameter pipeline lateral in Madison Parish, Louisiana; (ii) approximately 1.4 miles of 30-inch-diameter pipeline lateral in Richland and Franklin Parishes, Louisiana; (iii) five meter stations to allow Tennessee to receive gas on its existing 800 Line from five interconnecting pipelines; (iv) one new compressor station in Franklin Parish, Louisiana; and (v) to replace a turbine engine at an existing compressor station in Rapides Parish, Louisiana. Tennessee estimates the cost of the Project to be $170,453,208, all as more fully set forth in the application which is on file with the Commission and open to public inspection. The filing is available for review at the Commission in the Public Reference Room or may be viewed on the Commission's Web site at
Any questions concerning this application may be directed to Patrick Stewart, Senior Counsel, Tennessee Gas Pipeline Company, L.L.C., 1001 Louisiana Street, Houston, Texas 77002, by telephone at (713) 369-8765, by facsimile at (713) 420-1601, or by email at
Pursuant to section 157.9 of the Commission's rules, 18 CFR 157.9, within 90 days of this Notice, the Commission staff will either: Complete its environmental assessment (EA) and place it into the Commission's public record (eLibrary) for this proceeding; or issue a Notice of Schedule for Environmental Review. If a Notice of Schedule for Environmental Review is issued, it will indicate, among other milestones, the anticipated date for the Commission staff's issuance of the final environmental impact statement (FEIS) or EA for this proposal. The filing of the EA in the Commission's public record for this proceeding or the issuance of a Notice of Schedule for Environmental Review will serve to notify federal and state agencies of the timing for the completion of all necessary reviews, and the subsequent need to complete all federal authorizations within 90 days of the date of issuance of the Commission staff's FEIS or EA.
There are two ways to become involved in the Commission's review of this project. First, any person wishing to obtain legal status by becoming a party to the proceedings for this project should, on or before the comment date stated below file with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, a motion to intervene in accordance with the requirements of the Commission's Rules of Practice and Procedure (18 CFR 385.214 or 385.211) and the Regulations under the NGA (18 CFR 157.10). A person obtaining party status will be placed on the service list maintained by the Secretary of the Commission and will receive copies of all documents filed by the applicant and by all other parties. A party must submit five copies of filings made in the proceeding with the Commission and must mail a copy to the applicant and to every other party. Only parties to the proceeding can ask for court review of Commission orders in the proceeding.
However, a person does not have to intervene in order to have comments considered. The second way to participate is by filing with the Secretary of the Commission, as soon as possible, an original and two copies of comments in support of or in opposition to this project. The Commission will consider these comments in determining the appropriate action to be taken, but the filing of a comment alone will not serve to make the filer a party to the proceeding. The Commission's rules require that persons filing comments in opposition to the project provide copies of their protests only to the party or parties directly involved in the protest.
Persons who wish to comment only on the environmental review of this project should submit an original and two copies of their comments to the Secretary of the Commission. Environmental commenters will be placed on the Commission's environmental mailing list, will receive copies of the environmental documents, and will be notified of meetings associated with the Commission's environmental review process. Environmental commenters will not be required to serve copies of filed documents on all other parties. However, the non-party commenters will not receive copies of all documents filed by other parties or issued by the Commission (except for the mailing of environmental documents issued by the Commission) and will not have the right to seek court review of the Commission's final order.
The Commission strongly encourages electronic filings of comments, protests and interventions in lieu of paper using the “eFiling” link at
Take notice that on November 2, 2015, Columbia Gas Transmission, LLC (Columbia), pursuant to its blanket certificate authorization granted in
Columbia proposes to abandon in-place, as well as replaces a portion of Line G that was originally constructed in 1902, and to abandon in-place Line G-137. These sections of Line G and Line G-137 pipelines consist of 13.57 miles and 1.31 miles, respectively, of 4-, 6-, and 8-inch diameter bare steel pipe. The existing pipelines will be abandoned in-place without earth disturbance and Columbia will retain the easement rights. Also, a 5,000 foot section at the end of Line G from Pleasantville valve to the Gatherco point of receipt will be replaced with a 4-inch diameter plastic pipe to maintain service from Gatherco. The new 4-inch diameter plastic Line G pipeline will be installed within Columbia's existing right-of-way at a 15-foot offset to the east of the existing Line G pipeline. The reduction in pipeline diameter will have no adverse impact on Columbia's ability to meet operational needs and firm commitment on this pipeline. The proposed abandonment will have no impact on the services presently provided by Columbia. Continuity of service to the affected consumers will be maintained by converting them to an alternate energy source. Columbia does not propose abandonment of any tariff-based interstate gas transportation service when it abandons the proposed facilities.
Any questions concerning this application may be directed to Tyler R. Brown, Senior Counsel, Columbia Gas Transmission, LLC, 5151 San Felipe, Suite 2500, Houston, Texas 77056, or by phone at (713) 386-3797.
This filing is available for review at the Commission or may be viewed on the Commission's Web site at
Pursuant to section 157.9 of the Commission's rules, 18 CFR 157.9, within 90 days of this Notice, the Commission staff will either: Complete its environmental assessment (EA) and place it into the Commission's public record (eLibrary) for this proceeding; or issue a Notice of Schedule for Environmental Review. If a Notice of Schedule for Environmental Review is issued, it will indicate, among other milestones, the anticipated date for the Commission staff's issuance of the final environmental impact statement (FEIS) or EA for this proposal. The filing of the EA in the Commission's public record for this proceeding or the issuance of a Notice of Schedule for Environmental Review will serve to notify federal and state agencies of the timing for the completion of all necessary reviews, and the subsequent need to complete all federal authorizations within 90 days of the date of issuance of the Commission staff's FEIS or EA.
Any person or the Commission's staff may, within 60 days after issuance of the instant notice by the Commission, file pursuant to Rule 214 of the Commission's Procedural Rules (18 CFR 385.214) a motion to intervene or notice of intervention and pursuant to Section 157.205 of the regulations under the NGA (18 CFR 157.205), a protest to the request. If no protest is filed within the time allowed therefore, the proposed activity shall be deemed to be authorized effective the day after the time allowed for filing a protest. If a protest is filed and not withdrawn within 30 days after the allowed time for filing a protest, the instant request shall be treated as an application for authorization pursuant to Section 7 of the NGA.
Take notice that on November 9, 2015, Allco Renewable Energy Limited and Allco Finance Limited (collectively, ALLCO) filed a Petition for Enforcement, pursuant to section 210(h)(2)(B) of the Public Utility Regulatory Policies Act of 1978 (PURPA), requesting that the Federal Energy Regulatory Commission (Commission) exercise its authority and initiate enforcement action against the Connecticut Department of Energy and Environmental Protection and the Connecticut Public Utilities Regulatory Authority (collectively, the Connecticut Agencies) to remedy the Connecticut Agencies' implementation of PURPA. ALLCO asserts that the Connecticut Agencies' implementation is improper and outside the confines of PURPA, all as more fully explained in the petition.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant.
This filing is accessible on-line at
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following electric securities filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that Consolidated Irrigation Company (Consolidated), permittee for the proposed Consolidated Irrigation Glendale Conduit Hydro Project No. 14443 has requested that its preliminary permit be withdrawn from consideration. The permit was issued on October 3, 2013, and would have expired on September 30, 2016.
The preliminary permit for Project No. 14443 will remain in effect until the close of business, December 9, 2015. But, if the Commission is closed on this day, then the permit remains in effect until the close of business on the next day in which the Commission is open.
Take notice that on November 6, 2015, Entergy Services, Inc., on behalf of Entergy Texas, Inc. submitted tariff filing: Refund Report to be effectiveN/A.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that on November 6, 2015, pursuant to sections 206, 306, and
The Complainant states that a copy of the complaint has been served on the Respondents.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. The Respondent's answer and all interventions, or protests must be filed on or before the comment date. The Respondent's answer, motions to intervene, and protests must be served on the Complainants.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
The staff of the Federal Energy Regulatory Commission (FERC or Commission) will prepare an environmental assessment (EA) that will discuss the environmental impacts of the Vaporization Capacity Increase and BOG Compressor Project (Project) involving construction and operation of facilities by Total Peaking Services, LLC (Total Peaking) in Milford, Connecticut. The Commission will use this EA in its decision-making process to determine whether the Project is in the public convenience and necessity.
This notice announces the opening of the scoping process the Commission will use to gather input from the public and interested agencies on the Project. You can make a difference by providing us with your specific comments or concerns about the Project. Your comments should focus on the potential environmental effects, reasonable alternatives, and measures to avoid or lessen environmental impacts. Your input will help the Commission staff determine what issues they need to evaluate in the EA. To ensure that your comments are timely and properly recorded, please send your comments so that the Commission receives them in Washington, DC on or before December 9, 2015.
If you sent comments on this Project to the Commission before the opening of this docket on September 22, 2015, you will need to file those comments in Docket No. CP15-557-000 to ensure they are considered as part of this proceeding.
This notice is being sent to the Commission's current environmental mailing list for this Project. State and local government representatives should notify their constituents of this proposed Project and encourage them to comment on their areas of concern.
Total Peaking provided affected landowners with a fact sheet prepared by the FERC entitled “An Interstate Natural Gas Facility On My Land? What Do I Need To Know?” This fact sheet addresses a number of typically asked questions, including how to participate in the Commission's proceedings. It is also available for viewing on the FERC Web site (
For your convenience, there are three methods you can use to submit your comments to the Commission. The Commission encourages electronic filing of comments and has expert staff available to assist you at (202) 502-8258 or
(1) You can file your comments electronically using the
(2) You can file your comments electronically by using the
(3) You can file a paper copy of your comments by mailing them to the following address. Be sure to reference the Project docket number (CP15-557-000) with your submission: Kimberly D. Bose, Secretary, Federal Energy Regulatory Commission, 888 First Street NE., Room 1A, Washington, DC 20426.
Total Peaking proposes to modify its existing liquefied natural gas peak shaving facility
The Project would consist of the following modifications:
• installation of an additional boiloff gas (BOG) compressor;
• installation of a 1,500 kilovolt-ampere transformer and three new 400 kilowatt emergency generators to replace the existing transformer and emergency generator; and
• installation of a new 4,160 volt electric interconnection service line to provide the LNG facility with additional electricity to operate the new vaporization equipment.
The general location of the Project facilities is shown in appendix 1.
Construction of the proposed facilities would occur entirely within the fence line of the existing facility on paved and graveled areas. The construction would disturb about 0.44 acres of land within the approximately 24-acre facility site. Permanent operation of the Project's facilities would require about 0.18 acres.
The National Environmental Policy Act (NEPA) requires the Commission to take into account the environmental impacts that could result from an action whenever it considers the issuance of a Certificate of Public Convenience and Necessity. NEPA also requires us
In the EA we will discuss impacts that could occur as a result of the construction and operation of the proposed Project under these general headings:
• Geology and soils;
• land use;
• water resources, fisheries, and wetlands;
• cultural resources;
• vegetation and wildlife;
• air quality and noise;
• endangered and threatened species;
• public safety; and
• cumulative impacts
We will also evaluate reasonable alternatives to the proposed Project or portions of the Project, and make recommendations on how to lessen or avoid impacts on the various resource areas.
The EA will present our independent analysis of the issues. The EA will be available in the public record through eLibrary. Depending on the comments received during the scoping process, we may also publish and distribute the EA to the public for an allotted comment period. We will consider all comments on the EA before making our recommendations to the Commission. To ensure we have the opportunity to consider and address your comments, please carefully follow the instructions in the Public Participation section, beginning on page 2.
With this notice, we are asking agencies with jurisdiction by law and/or special expertise with respect to the environmental issues of this Project to formally cooperate with us in the preparation of the EA.
In accordance with the Advisory Council on Historic Preservation's implementing regulations for section 106 of the National Historic Preservation Act, we are using this notice to initiate consultation with the applicable State Historic Preservation Office (SHPO), and to solicit their views and those of other government agencies, interested Indian tribes, and the public on the Project's potential effects on historic properties.
The environmental mailing list includes: Federal, state, and local government representatives and agencies; elected officials; Native American Tribes; other interested parties; and local libraries and newspapers. This list also includes all affected landowners (as defined in the Commission's regulations) who are potential right-of-way grantors, whose property may be used temporarily for Project purposes, or who own homes within certain distances of aboveground facilities, and anyone who submits comments on the Project. We will update the environmental mailing list as the analysis proceeds to ensure that we send the information related to this environmental review to all individuals, organizations, and government entities interested in and/or potentially affected by the proposed Project.
If we publish and distribute the EA, copies will be sent to the environmental mailing list for public review and comment. If you would prefer to receive a paper copy of the document instead of the CD version or would like to remove your name from the mailing list, please return the attached Information Request (appendix 2).
In addition to involvement in the EA scoping process, you may want to become an “intervenor” which is an official party to the Commission's proceeding. Intervenors play a more formal role in the process and are able to file briefs, appear at hearings, and be heard by the courts if they choose to appeal the Commission's final ruling. An intervenor formally participates in the proceeding by filing a request to intervene. Instructions for becoming an intervenor are in the “Document-less Intervention Guide” under the “e-filing” link on the Commission's Web site. Motions to intervene are more fully described at
Additional information about the Project is available from the Commission's Office of External Affairs, at (866) 208-FERC, or on the FERC Web site at
In addition, the Commission offers a free service called eSubscription which allows you to keep track of all formal issuances and submittals in specific dockets. This can reduce the amount of time you spend researching proceedings by automatically providing you with notification of these filings, document summaries, and direct links to the documents. Go to
Finally, public meetings or site visits will be posted on the Commission's calendar located at
Take notice that on November 3, 2015, pursuant to Rule 207(a)(2) of the Federal Energy Regulatory Commission's (Commission) Rules of Practice and Procedure, 18 CFR 385.207(a)(2) (2015), Oryx Southern Delaware Gathering and Transport LLC, filed a petition for a declaratory order seeking order approving general rate structure and terms of service for new crude oil pipeline from Permian Basin receipt points to delivery points in Crane and Midland, Texas, all as more fully explained in the petition.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. Anyone filing a motion to intervene or protest must serve a copy of that document on the Petitioner.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible online at
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and § 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests,
On October 29, 2015, Jordan Whittaker filed an application for a preliminary permit, pursuant to section 4(f) of the Federal Power Act (FPA), proposing to study the feasibility of the Oxbow Hydroelectric Project (Oxbow Project or project) to be located on Clear and Tenmile Creeks, tributaries to Eighteenmile Creek and the Lemhi River, near Leadore in Lemhi County, Idaho. The sole purpose of a preliminary permit, if issued, is to grant the permit holder priority to file a license application during the permit term. A preliminary permit does not authorize the permit holder to perform any land-disturbing activities or otherwise enter upon lands or waters owned by others without the owners' express permission.
The proposed project would utilize two existing diversions on Clear and Tenmile Creeks and would use irrigation water that currently flows from approximately March to October within the existing Clear and Tenmile Creeks irrigation canals. The project would consist of the following: (1) Reconstruction of the two existing diversions to include flow control gates, pipeline intakes, and fish screens; (2) two new plastic or steel, buried penstocks to replace or supplement the existing irrigation canals, depending on available flows, including a 7.7-mile-long, 24-inch-diameter Clear Creek penstock, and a 6.7-mile-long, 21-inch diameter Tenmile Creek penstock; (3) a new 20-foot by 40-foot powerhouse containing a single Pelton turbine and generator with a generating capacity of 1,400 kilowatts; (4) a new 4-foot by 4-foot concrete splitter box where water would exit the powerhouse into the Tenmile canal, with gates, as needed, to segregate irrigation water; (5) a new 7.7-mile-long, 12.5-kilovolt (kV) transmission line from the powerhouse to an existing 69 kV transmission line at the point of interconnection near the town of Leadore; and (6) appurtenant facilities.
Applicant Contact: Mr. Jordan Whittaker, 270 Cold Springs Road, Leadore, Idaho 83464; phone: (208) 768-2058.
FERC Contact: Ken Wilcox; phone: (202) 502-6835.
Deadline for filing comments, motions to intervene, competing applications (without notices of intent), or notices of intent to file competing applications: 60 Days from the issuance of this notice. Competing applications and notices of intent must meet the requirements of 18 CFR 4.36.
The Commission strongly encourages electronic filing. Please file comments, motions to intervene, notices of intent, and competing applications using the Commission's eFiling system at
More information about this project, including a copy of the application, can be viewed or printed on the “eLibrary” link of Commission's Web site at
Take notice that on November 6, 2015, pursuant to sections 210, 211 and 212 of the Federal Power Act, 16 U.S.C. 824i, 824j and 824k (2012) and Part 36 of the Federal Energy Regulatory Commission's (Commission) Regulations, 18 CFR part 36 (2015), Public Service Company of Oklahoma requests the Commission to issue orders to implement a proposed arrangement to enable the provision of black start service between the Electric Reliability Council of Texas and the Southwest Power Pool regions.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that on November 6, 2015, Scott D. Drury filed an application for authorization to hold interlocking positions, pursuant to section 305(b) of the Federal Power Act, 16 U.S.C. 825d(b) and Part 45 of the Regulations of the Federal Energy Regulatory Commission (Commission), 18 CFR part 45.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such notices, motions, or protests must be filed on or before the comment date. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
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j. Blackstone Hydro, Inc. (Blackstone Hydro) filed its request to use the Traditional Licensing Process on September 16, 2015. Blackstone Hydro provided public notice of its request on September 15 and 16, 2015. In a letter dated November 9, 2015, the Director of the Division of Hydropower Licensing approved Blackstone Hydro request to use the Traditional Licensing Process.
k. With this notice, we are initiating informal consultation with the U.S. Fish and Wildlife Service and NOAA Fisheries under section 7 of the Endangered Species Act and the joint agency regulations thereunder at 50 CFR, Part 402. We are also initiating consultation with the Massachusetts and Rhode Island State Historic Preservation Officers, as required by section 106, National Historic Preservation Act, and the implementing regulations of the Advisory Council on Historic Preservation at 36 CFR 800.2.
l. With this notice, we are designating Blackstone Hydro as the Commission's non-federal representative for carrying out informal consultation pursuant to section 7 of the Endangered Species Act and consultation pursuant to section 106 of the National Historic Preservation Act.
m. Blackstone Hydro filed a Pre-Application Document (PAD; including a proposed process plan and schedule) with the Commission, pursuant to 18 CFR 5.6 of the Commission's regulations.
n. A copy of the PAD is available for review at the Commission in the Public Reference Room or may be viewed on the Commission's Web site (
o. The licensee states its unequivocal intent to submit an application for a new license for Project No. 3023-012. Pursuant to 18 CFR 16.8, 16.9, and 16.10 each application for a new license and any competing license applications must be filed with the Commission at least 24 months prior to the expiration of the existing license. All applications for license for this project must be filed by September 30, 2018.
p. Register online at
Take notice that the following hydroelectric application has been filed with the Commission and is available for public inspection.
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i.
j.
k. Pursuant to section 4.32(b)(7) of 18 CFR of the Commission's regulations, if any resource agency, Indian Tribe, or person believes that an additional scientific study should be conducted in order to form an adequate factual basis for a complete analysis of the application on its merit, the resource agency, Indian Tribe, or person must file a request for a study with the Commission not later than 60 days from the date of filing of the application, and serve a copy of the request on the applicant.
l.
The Commission strongly encourages electronic filing. Please file additional study requests
m. The application is not ready for environmental analysis at this time.
n. The proposed project would be a closed-loop system using groundwater for initial fill and consist of the following new facilities: (1) A 7,972-foot-long earthen embankment forming a geomembrane-lined upper reservoir with a surface area of 64.21 acres and a storage capacity of 2,568 acre-feet at a maximum surface elevation of 6,135 feet above mean sea level (msl); (2) a 8,003-foot-long earthen embankment forming a geomembrane-lined lower reservoir with a surface area of 60.14 acres and a storage capacity of 3,206 acre-feet at a maximum surface elevation of 4,457 feet msl; (3) a 500-foot-long, rip-rap lined trapezoidal spillway built into the crest of each embankment; (4) a 0.5-percent slope perforated polyvinyl chloride tube of varying diameter and accompanying optical fiber drainage system designed to detect, collect, and monitor water leakage from the reservoirs; (5) a 25-inch-diameter bottom outlet with manual valve for gravitational dewatering of the lower reservoir; (6) an upper intake consisting of a bell mouth, 38.6-foot-wide by 29.8-foot-long inclined screen, head gate, and 13.8-foot-diameter foundational steel pipe; (7) a 36.5-foot-diameter, 9,655-foot-long steel high-pressure penstock from the upper reservoir to the powerhouse that is predominantly above ground with a 14-foot-long buried segment; (8) three 9.8-foot-diameter, 1,430-foot-long steel low-pressure penstocks from the lower reservoir to the powerhouse that are predominantly above ground with a 78-foot-long buried segment; (9) a partially-buried powerhouse with three 131.1-megawatt (MW) reversible pump-turbine units with a total installed capacity of 393.3 MW; (10) a 32.8 mile, 230-kilovolt above-ground transmission line interconnecting to an existing non-project substation; (11) approximately 10.7 miles of improved project access road; (12) approximately 3.4 miles of new permanent project access road; (13) approximately 8.3 miles of temporary project access road; and (14) appurtenant facilities. The project would generate about 1,187 gigawatt-hours annually.
o. A copy of the application is available for review at the Commission in the Public Reference Room or may be viewed on the Commission's Web site at
You may also register online at
p.
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following land acquisition reports:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Environmental Protection Agency (EPA).
Extension of comment period.
On September 18, 2015, the Environmental Protection Agency (EPA) announced the availability of a draft Control Techniques Guidelines (CTG) document titled, “Release of Draft Control Techniques Guidelines for the Oil and Natural Gas Industry.” The EPA is extending the comment period on the notice of availability of the draft CTG document that was scheduled to close on November 17, 2015. The EPA has received several letters from trade and business organizations, states and tribes requesting additional time to review and comment on the notice of availability of the draft CTG document.
The public comment period for notice of availability of the CTG document published in the
The EPA has established a docket for the draft CTG document (available at
For additional submission methods, the full EPA public comment policy, and general guidance on making effective comments, please visit
For additional information on this action, contact Cheryl Vetter, Office of Air Quality Planning and Standards, Environmental Protection Agency (C504-03), Research Triangle Park, North Carolina 27711; telephone number (919) 541-4391; fax number (919) 541-5509; email address:
After considering the requests to extend the public comment period received from various trade and business organizations, states and tribes, the EPA has decided to extend the public comment period until December 4, 2015. This extension will ensure that the public has additional time to comment on the draft CTG document.
Federal Communications Commission.
Notice and request for comments.
As part of its continuing effort to reduce paperwork burdens, and as required by the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520), the Federal Communications Commission (FCC or Commission) invites the general public and other Federal agencies to take this opportunity to comment on the following information collections. Comments are requested concerning: whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; the accuracy of the Commission's burden estimate; ways to enhance the quality, utility, and clarity of the information collected; ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and ways to further reduce the information collection burden on small business concerns with fewer than 25 employees.
The FCC may not conduct or sponsor a collection of information unless it displays a currently valid OMB control number. No person shall be subject to any penalty for failing to comply with a collection of information subject to the PRA that does not display a valid OMB control number.
Written PRA comments should be submitted on or before January 15, 2016. If you anticipate that you will be submitting comments, but find it difficult to do so within the period of time allowed by this notice, you should advise the contact listed below as soon as possible.
Direct all PRA comments to Cathy Williams, FCC, via email
For additional information about the information collection, contact Cathy Williams at (202) 418-2918.
Federal Election Commission.
Tuesday, November 17, 2015 at 10:00 a.m. and Thursday, November 19, 2015 at 1:30 p.m.
999 E Street NW., Washington, DC.
This meeting will be closed to the public.
—Scheduled to be published on November 13, 2015.
The meeting will commence at the conclusion of the Open Meeting on November 17, 2015.
Judith Ingram, Press Officer, Telephone: (202) 694-1220.
Federal Election Commission.
Tuesday, November 10, 2015 at 10:00 a.m.
999 E Street NW., Washington, DC (Ninth Floor)
This meeting will be open to the public.
The meeting will continue on Tuesday, November 17, 2015 at 10:00 a.m.
Individuals who plan to attend and require special assistance, such as sign language interpretation or other reasonable accommodations, should contact Shawn Woodhead Werth, Secretary and Clerk, at (202) 694-1040, at least 72 hours prior to the meeting date.
Judith Ingram, Press Officer, Telephone: (202) 694-1220.
Board of Governors of the Federal Reserve System.
Notice.
The Board of Governors of the Federal Reserve System (Board) has approved the private sector adjustment factor (PSAF) for 2016 of $13.1 million and the 2016 fee schedules for Federal Reserve priced services and electronic access. These actions were taken in accordance with the Monetary Control Act of 1980, which requires that, over the long run, fees for Federal Reserve priced services be established on the basis of all direct and indirect costs, including the PSAF.
The new fee schedules become effective January 1, 2016.
For questions regarding the fee schedules: Susan V. Foley, Senior Associate Director, (202) 452-3596; Slavea A. Assenova, Financial Services Analyst, (202) 452-2087, Division of Reserve Bank Operations and Payment Systems. For questions regarding the PSAF: Gregory L. Evans, Deputy Associate Director, (202) 452-3945; Lawrence Mize, Deputy Associate Director, (202) 452-5232; Manuel Garcia, Senior Financial Analyst, (202) 452-3480, Division of Reserve Bank Operations and Payment Systems. For users of Telecommunications Device for the Deaf (TDD)
Table 1 summarizes 2014 actual, 2015 estimated, and 2016 budgeted cost-recovery rates for all priced services. Cost recovery is estimated to be 104.1 percent in 2015 and budgeted to be 101.9 percent in 2016.
Table 2 provides an overview of cost-recovery performance for the ten-year period from 2005 to 2014, 2014 actual, 2015 budget, 2015 estimate, and 2016 budget by priced service.
1.
2.
3.
The primary risks to the Reserve Banks' ability to achieve their targeted cost-recovery rates are unanticipated volume and revenue reductions and the potential for cost overruns with the technology modernization initiatives. In light of these risks, the Reserve Banks will continue to refine their business and operational strategies to manage operating costs, to increase product revenue, and to capitalize on efficiencies gained from technology initiatives.
4.
Check
• The Reserve Banks will increase the per-item fee for FedReturn® items that are qualified to the Reserve Bank in instances in which the bank of first deposit cannot be identified from $8 to $15.
• The Reserve Banks will increase the fees for traditional paper check forward and return collection deposits. The Reserve Banks will increase the per-item fee for paper forward deposits from $2.00 to $2.50 and the per-item fee for each unencoded item from $1.00 to $1.50.
• The Reserve Banks will introduce Select Mixed Level 3 to the Select Mixed image cash letter (ICL) product.
• The Reserve Banks will eliminate the FedForward® Fine Sort (ICL) product in January 2017 as part of the Reserve Banks' effort to reflect today's electronic check processing environment in their check fee schedule.
Depository institutions may deposit image cash letters using nine deposit options within the FedForward product line; the options vary in price structure and funds availability. The Reserve Banks offer customers the option of sending FedForward ICLs for items drawn on specific endpoints in a separate cash letter, which combines a high fixed fee with a lower variable fee. All eligible items in the cash letter receive immediate availability, while ineligible items receive deferred availability of the next business day. A current list of FedForward deposit options can be found at
• In addition to the above changes, the Reserve Banks plan to announce further modifications to the check fee schedule during 2016 that reflect the efficiencies of today's electronic check processing environment. The new schedule may include elimination of certain sorted deposit options and modifications to the current endpoint-based tiered pricing structure.
FedACH
• The Reserve Banks will increase the minimum monthly fee for forward origination from $35 to $45.
• The Reserve Banks will increase the minimum monthly fee for receipt from $25 to $35.
• The Reserve Banks will eliminate the large file and small file per-item fees and introduce a single base fee of $0.0032 for all origination files. The Reserve Banks will provide a discount of $0.0005 for origination volume between 750,000 to 1,500,000 items per month and $0.0007 for origination volume greater than 1,500,000 items per month.
• The Reserve Banks will lower the top-tier volume origination discount level based on monthly receipt volume from 17,500,000 to 15,000,000 items per month, while maintaining the current discount amounts.
• The Reserve Banks will increase the forward item receipt fee from $0.0025 to $0.0032 per item, while keeping the return item receipt fee at $0.0075 per item.
• The Reserve Banks will change the volume-based receipt discount structure to encourage additional receipt volume. The changes will include a decrease in the first volume-based discount by 250,000 items per month to 750,001 items a month, the introduction of a new volume-based discount tier for volume between 1,500,001 and 2,500,000 items per month, and an increase for all existing volume-based receipt discounts by $0.0007.
• The Reserve Banks will implement a $20 monthly billing discount for any customer that pays the origination minimum fee, subscribes to a FedLine Web® Plus or higher package, and subscribes to either FedACH RDFI Alert, FedACH Risk® Origination Monitoring, or FedPayments® Reporter. In addition to the above changes, the Reserve Banks plan to reassess the FedGlobal® ACH fee schedule during 2016.
Fedwire Funds and National Settlement
• The Reserve Banks will increase the Tier 1 per-item pre-incentive fee from $0.73 to $0.79 per transaction, increase the Tier 3 per-item pre-incentive fee from $0.150 to $0.155 per transaction, and leave Tier 2 per-item pre-incentive fees unchanged.
• The Reserve Banks will increase the surcharge for offline transactions from $50 to $55. The Reserve Banks will increase the monthly participation fee from $90 to $95.
Fedwire Securities and National Settlement Services
• The Reserve Banks will keep prices at existing levels for the priced Fedwire Securities and National Settlement Services.
FedLine® Access Solutions
• The Reserve Banks will increase the fee for the FedLine Exchange
• The Reserve Banks will introduce a 256K/T1 legacy router surcharge of $5,000 per month to encourage customers to migrate to more efficient access solutions.
• The Reserve Banks will introduce a fee for customers that choose to implement FedLine using a customized (nonstandard) router setup. The fee will vary from $2,500 to $5,000 based on the complexity of the setup.
• The Reserve Banks will include two virtual private network (VPN) devices in the FedLine Direct® Premier package (rather than one) to align better with the FedLine Advantage® Premier package.
• Depository institutions with more than 250 Fedwire transactions per month, or more than one routing number, will only have access to the FedPayments Manager Import/Export (FPM) tool via FedLine Advantage Premier.
FedComplete Plus customers with more than 250 Fedwire transactions per month that use the FPM tool will also be transferred to FedComplete Premier packages with the associated fee increase because FedComplete Plus packages incorporate FedLine Advantage Plus. The transfer will affect about 10 current FedCompelete customers.
5.
The portion of Federal Reserve assets that will be used to provide priced services during the coming year is determined using information about actual assets and projected disposals and acquisitions. The priced portion of these assets is determined based on the allocation of depreciation and amortization expenses of each asset class. The priced portion of actual Federal Reserve liabilities consists of postemployment and postretirement benefits, accounts payable, and other liabilities. The priced portion of the actual net pension asset or liability is also included on the balance sheet.
The equity financing rate is the targeted ROE produced by the capital asset pricing model (CAPM). In the CAPM, the required rate of return on a firm's equity is equal to the return on a risk-free asset plus a market risk premium. The risk-free rate is based on the three-month Treasury bill; the beta is assumed to be equal to 1.0, which approximates the risk of the market as a whole; and the market risk premium is based on the monthly returns in excess of the risk-free rate over the most recent 40 years. The resulting ROE reflects the return a shareholder would expect when investing in a private business firm.
For simplicity, given that federal corporate income tax rates are graduated, state income tax rates vary, and various credits and deductions can apply, an actual income tax expense is not explicitly calculated for Reserve Bank priced services. Instead, the Board targets a pretax ROE that would provide sufficient income to fulfill the priced services' imputed income tax obligations. To the extent that performance results are greater or less than the targeted ROE, income taxes are adjusted using the effective tax rate.
The decrease in the 2016 PSAF is primarily due to lower financing costs as a result of fewer priced services assets to be financed than in 2015. Debt and equity financing rates declined and less debt and equity was imputed to fund priced services assets.
Projected 2016 Federal Reserve priced-services assets, reflected in table 3, have decreased $486.3 million from 2015. This reduction is primarily due to a $589.0 million decrease in the balance of imputed investments in federal funds, driven by recent changes in the PSR policy resulting in a decrease in daily float balances and a corresponding effect on imputed investments. The reduction is offset by an increase of $170.0 million from 2015 in items in process of collection. As shown in table 3, imputed equity for 2016 is $53.8 million, a decrease of $18.1 million from the equity imputed for 2015. In accordance with FAS 158 [ASC 715], this amount includes an accumulated other comprehensive loss of $666.1 million.
Table 4 reflects the portion of short- and long-term assets that must be financed with actual or imputed liabilities and equity. Debt and equity imputed to fund the 2016 priced services assets within the observed market leverage ratio produced an equity level that did not meet the FDIC minimum equity requirements. As a result, additional equity was imputed to meet the FDIC requirements, and imputed long-term debt was reduced. The ratio of capital to risk-weighted assets exceeds the required 10 percent of risk-weighted assets and equity exceeds 5 percent of total assets (table 6). In 2015, long-term debt and equity was imputed to meet the asset funding requirements and reflects the leverage ratio observed in the market; additional equity of $7.6 million was required (table 5) to meet the market leverage ratio.
Table 5 shows the derivation of the 2016 and 2015 PSAF. Financing costs for 2016 are $6.1 million lower than in 2015. In addition to the decline in the levels of debt and equity mentioned above, the cost of equity declined 3 basis points. The reduced equity balance and the lower cost of equity result in a pretax ROE that is $2.0 million lower than the 2015 pretax ROE. Imputed sales taxes declined to $2.8 million in 2016 from $3.3 million in 2015. The priced services portion of the Board's expenses increased $1.7 million to $5.0 million in 2016 from $3.3 million in 2015. The effective income tax rate used in 2016 decreased to 21.6 percent from 22.4 percent in 2015.
C.
The decline in Reserve Bank check volume, which is attributable to the decline in the number of checks written generally, was not as great as anticipated.
2.
The Reserve Banks will increase the per-item fee for FedReturn items that are qualified to the Reserve Bank in instances in which the bank of first deposit cannot be identified from $8 to $15.
The Reserve Banks will increase the fees for traditional paper check forward and return collection deposits. The Reserve Banks will increase the per-item fee for paper forward deposits from $2.00 to $2.50 and the per-item fee for each unencoded item from $1.00 to $1.50.
The Reserve Banks will introduce Select Mixed Level 3 tier to the Select Mixed image cash letter (ICL) product.
The Reserve Banks will eliminate the FedForward Fine Sort ICL product in January 2017 as part of the Reserve Banks effort to reflect today's electronic check processing environment in their check fee schedule.
Depository institutions may deposit image cash letters using nine deposit options within the FedForward product line; the options vary in price structure and funds availability. The Reserve Banks offer customers the option of sending FedForward ICLs for items drawn on specific endpoints in a separate cash letter, which combines a high fixed fee with a lower variable fee. All eligible items in the cash letter receive immediate availability, while ineligible items receive deferred availability of the next business day. A current list of FedForward deposit options can be found at
The Reserve Banks estimate that the price changes will result in a 0.5 percent average price increase for check customers. In addition to the above changes, the Reserve Banks plan to announce further modifications to the check fee schedule during 2016 that reflect the efficiencies of today's electronic check processing environment. The new schedule may include elimination of certain sorted deposit options and modifications to the current endpoint-based tiered pricing structure.
Risks to the Reserve Banks' ability to achieve budgeted 2016 cost recovery for the check service include lower-than-expected check volume due to reductions in check writing overall and competition from correspondent banks, aggregators, and direct exchanges, which will result in lower-than-anticipated revenue.
D.
1.
2.
The Reserve Banks will increase the minimum monthly fee for forward origination from $35 to $45 and the minimum monthly fee for receipt from $25 to $35.
Any receiving depository financial institution (RDFI) originating forward value and nonvalue items below the minimum level and incurring less than $35 in receipt fees will be charged the difference to reach the minimum based on origination. RDFIs not originating forward value and nonvalue items will incur the $35 minimum monthly fee for receipt.
The Reserve Banks will eliminate large- and small-file per-item origination fees and introduce a single base fee of $0.0032 for all origination files with a discount of $0.0005 for origination volume between 750,000 to 1,500,000
The Reserve Banks will increase the forward item receipt fee from $0.0025 to $0.0032 per item, while keeping the return item receipt fee at $0.0075 per item. The Reserve Banks will change the volume-based receipt discount structure to encourage additional receipt volume. The changes will include a decrease in the first volume-based discount by 250,000 items per month to 750,001 items a month, the introduction of a new volume-based discount tier for volume between 1,500,001 and 2,500,000 items per month, and an increase for all existing volume-based receipt discounts by $0.0007 as seen in table 11.
The Reserve Banks will implement a $20 monthly billing discount for any customer that pays the origination minimum fee, subscribes to a FedLine Web Plus or higher package, and subscribes to either FedACH RDFI Alert, FedACH Risk Origination Monitoring, or FedPayments Reporter.
The Reserve Banks estimate that the price changes will result in a 6.5 percent average price increase for FedACH customers. In addition to the above changes, the Reserve Banks plan to reassess the FedGlobal ACH fee schedule during 2016.
The primary risks to the Reserve Banks' ability to achieve budgeted 2016 cost recovery for the FedACH service are cost overruns associated with unanticipated problems related to efforts to modernize the FedACH processing platform and higher-than-expected support and overhead costs. Other risks include lower-than-expected volume and associated revenue due to unanticipated mergers and acquisitions and loss of market share due to direct exchanges and a shift of volume to the private-sector operator.
E.
1.
2.
The Reserve Banks will adjust the incentive pricing fees for the Fedwire Funds Service by increasing the Tier 1 per item pre-incentive fee (the fee before volume discounts are applied) from $0.73 to $0.79 and increasing the Tier 3 per item pre-incentive fee from $0.150 to $0.155. The Reserve Banks will keep the Tier 2 per-item pre-incentive fee unchanged.
The Reserve Banks will increase the surcharge for offline transactions from $50 to $55. In addition, the Reserve Banks will increase the monthly participation fee from $90 to $95.
The Reserve Banks estimate that the price changes will result in a 5.8 percent average price increase for Fedwire Funds customers.
The Reserve Banks will not change National Settlement Service fees for 2016. The Reserve Banks' Fedwire Funds and National Settlement Services fees are consistent with their multiyear strategy to minimize pricing volatility while undertaking ongoing technology upgrades and projects to further strengthen operational resiliency. The Reserve Banks recently completed a significant milestone in the Fedwire Funds portion of its modernization initiative by migrating its back-end settlement system from a mainframe to a distributed platform, although key work to complete the initiative remains in progress.
The primary risk to the Reserve Banks' ability to achieve budgeted 2016 cost recovery for these services is cost overruns from unanticipated problems with completing the final stages of complex technology programs.
F.
1.
Through August, Fedwire Securities Service online volume was 8.0 percent lower than during the same period last year. For full-year 2015, the Reserve Banks estimate Fedwire Securities Service online volume will decline 5.4 percent from 2014 levels, compared with a budgeted decline of 12.9 percent. The higher-than-expected online agency transfer volume resulted from the continued low interest-rate environment, which has supported mortgage underwriting activity and mortgage-backed securities issuance, and is generally associated with increased online agency transfer activity over the Fedwire Securities Service. Through August, account maintenance volume was 9.1 percent lower than during the same period last year. For the full year, the Reserve Banks estimate that account maintenance volume will decline 8.4 percent over 2014 levels, compared with a budgeted decline of 14.1 percent. The higher account maintenance volume is the result of conservative estimates for customer account closures that have not materialized.
2.
The Reserve Banks project that online transfer activity will decline 7.7 percent in 2016, the number of accounts maintained will decrease 8.5 percent, and the number of agency securities maintained will decrease 3.3 percent.
Expenses are budgeted to remain approximately the same as 2015 estimates, reflecting higher expected operating costs offset by increased reimbursements from Treasury for fiscal agency services.
The Reserve Banks will not change priced Fedwire Securities Service fees for 2016.
The primary risk to the Reserve Banks' ability to achieve budgeted 2016 cost recovery for these services is cost overruns and schedule delays from unanticipated problems with managing complex technology upgrades.
G.
Six attended access packages offer access to critical payment and information services via a web-based interface. The FedLine Exchange package provides access to basic information services via email, while two FedLine Web packages offer an email option plus online attended access to a range of services, including cash services, FedACH information services, and check services. Three FedLine Advantage packages expand upon the FedLine Web packages and offer attended access to critical transactional services: FedACH, Fedwire Funds, and Fedwire Securities.
Three unattended access packages are computer-to-computer, IP-based interfaces designed for medium- to high-volume customers. The FedLine Command package offers an unattended connection to FedACH, as well as most accounting information services. The two remaining options are FedLine Direct packages, which allow for unattended connections at one of two connection speeds to FedACH, Fedwire Funds, and Fedwire Securities transactional and information services and to most accounting information services.
For the 2016 FedLine fees, the Reserve Banks will make a minor adjustment to existing fees—a $5-per-month increase for the FedLine Exchange subscriber pack—keeping the remaining existing FedLine fees unchanged.
In addition, the Reserve Banks will make two structural changes to existing FedLine packages. First, the Reserve Banks will include two Virtual Private Network (VPN) devices in the FedLine Direct Premier package (rather than one) to help ensure consistency across existing Premier level FedLine packages. Second, the Reserve Banks will modify the availability of the FedPayments Manager Import/Export (FPM) tool within the FedLine Advantage Plus and Premier packages based on Fedwire volume thresholds. In particular, depository institutions with more than 250 Fedwire transactions per month, or more than one routing number, will only have access to the FPM tool via FedLine Advantage Premier. Affected customers will experience a fee increase ranging from $15 to $75 per month to upgrade to FedLine Advantage Premier.
The Reserve Banks estimate that the price changes will result in a 1.5 percent average price increase for FedLine customers.
All operational and legal changes considered by the Board that have a substantial effect on payment system participants are subject to the competitive impact analysis described in the March 1990 policy “The Federal Reserve in the Payments System.”
The 2016 fees, fee structures, and changes in service will not have a direct and material adverse effect on the ability of other service providers to compete effectively with the Reserve Banks in providing similar services.
Le Meridien, 333 Battery Street, Mercantile Room, San Francisco, CA 94111.
Open to the public.
1. Approval of the Minutes for the October 27, 2015 Board Member Meeting.
2. Monthly Reports
a) Monthly Participant Activity Report.
b) Monthly Investment Report.
c) Legislative Report.
3. Office of Investments Report.
4. Investment Manager Annual Service Review.
5. 2016 Proposed Internal Audit Schedule.
Security
Adjourn
Kimberly Weaver, Director, Office of External Affairs, (202) 942-1640.
Section 7A of the Clayton Act, 15 U.S.C. § 18a, as added by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, requires persons contemplating certain mergers or acquisitions to give the Federal Trade Commission and the Assistant Attorney General advance notice and to wait designated periods before consummation of such plans. Section 7A(b)(2) of the Act permits the agencies, in individual cases, to terminate this waiting period prior to its expiration and requires that notice of this action be published in the
The following transactions were granted early termination—on the dates indicated—of the waiting period provided by law and the premerger notification rules. The listing for each transaction includes the transaction number and the parties to the transaction. The grants were made by the Federal Trade Commission and the Assistant Attorney General for the Antitrust Division of the Department of Justice. Neither agency intends to take any action with respect to these proposed acquisitions during the applicable waiting period.
Theresa Kingsberry, Program Support Specialist, Federal Trade Commission Premerger Notification Office, Bureau of Competition, Room CC-5301, Washington, DC 20024, (202) 326-3100.
By direction of the Commission.
Commission to Eliminate Child Abuse and Neglect Fatalities, GSA.
Meetings Notice.
The Commission to Eliminate Child Abuse and Neglect Fatalities (CECANF), a Federal Advisory Committee established by the Protect Our Kids Act of 2012, will hold a meeting open to the public on Monday, December 7, 2015 and Tuesday, December 8, 2015 in Herndon, Virginia.
CECANF will convene its meeting at the Hilton Washington Dulles, 13869 Park Center Drive, Herndon, Virginia 20171. This site is accessible to individuals with disabilities. The meeting also will be made available via teleconference.
Submit comments identified by “Notice-CECANF-2015-09” by either of the following methods:
• Regulations.gov:
Submit comments via the Federal eRulemaking portal by searching for “Notice-CECANF-2015-09.” Select the link “Comment Now” that corresponds with “Notice-CECANF-2015-09.” Follow the instructions provided on the screen. Please include your name, organization name (if any), and “Notice-CECANF-2015-09” on your attached document.
• Mail: U.S. General Services Administration, 1800 F Street NW., Room 7003D, Washington, DC 20405, Attention: Tom Hodnett (CD) for CECANF.
Visit the CECANF Web site at
However, members of the public wishing to comment should follow the steps detailed under the heading
Centers for Medicare & Medicaid Services (CMS), HHS.
Notice.
This annual notice announces Medicare's Hospital Insurance (Part A) premium for uninsured enrollees in calendar year (CY) 2016. This premium is paid by enrollees age 65 and over who are not otherwise eligible for benefits under Medicare Part A (hereafter known as the “uninsured aged”) and by certain disabled individuals who have exhausted other entitlement. The monthly Part A premium for the 12 months beginning January 1, 2016, for these individuals will be $411. The premium for certain other individuals as described in this notice will be $226.
Clare McFarland, (410) 786-6390.
Section 1818 of the Social Security Act (the Act) provides for voluntary enrollment in the Medicare Hospital Insurance Program (Medicare Part A), subject to payment of a monthly premium, of certain persons aged 65 and older who are uninsured under the Old-Age, Survivors, and Disability Insurance (OASDI) program or the Railroad Retirement Act and do not otherwise meet the requirements for entitlement to Medicare Part A. These “uninsured aged” individuals are uninsured under the OASDI program or the Railroad Retirement Act, because they do not have 40 quarters of coverage under Title II of the Act (or are/were not married to someone who did). (Persons insured under the OASDI program or the Railroad Retirement Act and certain others do not have to pay premiums for Medicare Part A.)
Section 1818A of the Act provides for voluntary enrollment in Medicare Part A, subject to payment of a monthly premium for certain disabled individuals who have exhausted other entitlement. These are individuals who were entitled to coverage due to a disabling impairment under section 226(b) of the Act, but who are no longer entitled to disability benefits and free Medicare Part A coverage because they have gone back to work and their earnings exceed the statutorily defined “substantial gainful activity” amount (section 223(d)(4) of the Act).
Section 1818A(d)(2) of the Act specifies that the provisions relating to premiums under section 1818(d) through section 1818(f) of the Act for the aged will also apply to certain disabled individuals as described above.
Section 1818(d)(1) of the Act requires us to estimate, on an average per capita basis, the amount to be paid from the Federal Hospital Insurance Trust Fund for services incurred in the upcoming calendar year (CY) (including the associated administrative costs) on behalf of individuals aged 65 and over who will be entitled to benefits under Medicare Part A. We must then determine the monthly actuarial rate for the following year (the per capita amount estimated above divided by 12) and publish the dollar amount for the monthly premium in the succeeding CY. If the premium is not a multiple of $1, the premium is rounded to the nearest multiple of $1 (or, if it is a multiple of 50 cents but not of $1, it is rounded to the next highest $1).
Section 13508 of the Omnibus Budget Reconciliation Act of 1993 (Pub. L. 103-66) amended section 1818(d) of the Act to provide for a reduction in the premium amount for certain voluntary enrollees (section 1818 and section 1818A of the Act). The reduction applies to an individual who is eligible to buy into the Medicare Part A program and who, as of the last day of the previous month:
• Had at least 30 quarters of coverage under Title II of the Act;
• Was married, and had been married for the previous 1-year period, to a person who had at least 30 quarters of coverage;
• Had been married to a person for at least 1 year at the time of the person's death if, at the time of death, the person had at least 30 quarters of coverage; or
• Is divorced from a person and had been married to the person for at least 10 years at the time of the divorce if, at the time of the divorce, the person had at least 30 quarters of coverage.
Section 1818(d)(4)(A) of the Act specifies that the premium that these individuals will pay for CY 2016 will be equal to the premium for uninsured aged enrollees reduced by 45 percent.
The monthly premium for the uninsured aged and certain disabled individuals who have exhausted other entitlement for the 12 months beginning January 1, 2016, is $411.
The monthly premium for the individuals eligible under section 1818(d)(4)(B) of the Act, and therefore, subject to the 45 percent reduction in the monthly premium, is $226.
As discussed in section I of this notice, the monthly Medicare Part A premium is equal to the estimated monthly actuarial rate for CY 2016 rounded to the nearest multiple of $1 and equals one-twelfth of the average per capita amount, which is determined by projecting the number of Medicare Part A enrollees aged 65 years and over as well as the benefits and administrative costs that will be incurred on their behalf.
The steps involved in projecting these future costs to the Federal Hospital Insurance Trust Fund are:
• Establishing the present cost of services furnished to beneficiaries, by type of service, to serve as a projection base;
• Projecting increases in payment amounts for each of the service types; and
• Projecting increases in administrative costs.
We base our projections for CY 2016 on—(1) current historical data; and (2) projection assumptions derived from current law and the Mid-Session Review of the President's Fiscal Year 2016 Budget.
We estimate that in CY 2016, 47,251,107 people aged 65 years and over will be entitled to benefits (without premium payment) and that they will incur about $233.221 billion in benefits and related administrative costs. Thus, the estimated monthly average per capita amount is $411.31 and the monthly premium is $411. Subsequently, the full monthly premium reduced by 45 percent is $226.
The CY 2016 premium of $411 is approximately 1 percent higher than the CY 2015 premium of $407. We estimate that approximately 652,000 enrollees will voluntarily enroll in Medicare Part A, by paying the full premium. Furthermore, the CY 2016 reduced premium of $226 is approximately 0.9 percent higher than the CY 2015 premium of $224. We estimate an additional 61,000 enrollees will pay the reduced premium. Therefore, we estimate that the total aggregate cost to enrollees paying these premiums in CY 2016, compared to the amount that they paid in CY 2015, will be about $32 million.
We use general notices, rather than notice and comment rulemaking procedures, to make announcements such as this premium notice. In doing so, we acknowledge that, under the Administrative Procedure Act (APA), interpretive rules, general statements of policy, and rules of agency organization, procedure, or practice are excepted from the requirements of notice and comment rulemaking. The agency may also waive notice and comment if there is “good cause,” as defined by the statute. We considered publishing a proposed notice to provide a period for public comment. However, under the APA, we may waive that procedure if we find good cause that prior notice and comment are impracticable, unnecessary, or contrary to the public interest.
We are not using notice and comment rulemaking in this notification of Medicare Part A premiums for CY 2016 as that procedure is unnecessary because of the lack of discretion in the statutory formula that is used to calculate the premium and the solely ministerial function that this notice serves. The APA permits agencies to waive notice and comment rulemaking when notice and public comment thereon are unnecessary. On this basis, we waive publication of a proposed notice and a solicitation of public comments.
This document does not impose information collection requirements, that is, reporting, recordkeeping or third-party disclosure requirements. Consequently, there is no need for review by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Section 1818(d) of the Act requires the Secretary of the Department of Health and Human Services (the Secretary) during September of each year to determine and publish the amount to be paid, on an average per capita basis, from the Federal Hospital Insurance Trust Fund for services incurred in the impending calendar year (CY) (including the associated administrative costs) on behalf of individuals aged 65 and over who will be entitled to benefits under Medicare Part A.
We have examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C. Part I, Ch. 8).
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major notices with economically significant effects ($100 million or more in any 1 year). As stated in section IV of this notice, we estimate that the overall effect of the changes in the Part A premium will be a cost to voluntary enrollees (section 1818 and section 1818A of the Act) of about $32 million. As a result, this notice is non-economically significant under section 3(f)(1) of Executive Order 12866 and is not a major action under the Congressional Review Act. In accordance with the provisions of Executive Order 12866, this notice was reviewed by the Office of Management and Budget.
The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of less than $7.5 million to $38.5 million in any 1 year (for details, see the Small Business Administration's Web site at
Individuals and states are not included in the definition of a small
In addition, section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. As discussed above, we are not preparing an analysis for section 1102(b) of the Act, because the Secretary has determined that this notice will not have a significant impact on the operations of a substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2015, that threshold is approximately $144 million. This notice does not impose mandates that will have a consequential effect of $144 million or more on state, local, or tribal governments or on the private sector.
Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has Federalism implications. Since this notice does not impose any costs on state or local governments, the requirements of Executive Order 13132 are not applicable.
Centers for Medicare & Medicaid Services.
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (the PRA), federal agencies are required to publish notice in the
Comments must be received by January 15, 2016.
When commenting, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be submitted in any one of the following ways:
1.
2.
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' Web site address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786-1326.
Reports Clearance Office at (410) 786-1326.
This notice sets out a summary of the use and burden associated with the following information collections. More detailed information can be found in each collection's supporting statement and associated materials (see
Under the PRA (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA requires federal agencies to publish a 60-day notice in the
1.
Centers for Medicare & Medicaid Services (CMS), HHS.
Notice.
This notice announces the inpatient hospital deductible and the hospital and extended care services coinsurance amounts for services furnished in calendar year (CY) 2016 under Medicare's Hospital Insurance Program (Medicare Part A). The Medicare statute specifies the formulae used to determine these amounts. For CY 2016, the inpatient hospital deductible will be $1,288. The daily coinsurance amounts for CY 2016 will be: (1) $322 for the 61st through 90th day of hospitalization in a benefit period; (2) $644 for lifetime reserve days; and (3) $161.00 for the 21st through 100th day of extended care services in a skilled nursing facility in a benefit period.
Clare McFarland, (410) 786-6390 for general information. Gregory J. Savord, (410) 786-1521 for case-mix analysis.
Section 1813 of the Social Security Act (the Act) provides for an inpatient hospital deductible to be subtracted from the amount payable by Medicare for inpatient hospital services furnished to a beneficiary. It also provides for certain coinsurance amounts to be subtracted from the amounts payable by Medicare for inpatient hospital and extended care services. Section 1813(b)(2) of the Act requires us to determine and publish each year the amount of the inpatient hospital deductible and the hospital and extended care services coinsurance amounts applicable for services furnished in the following calendar year (CY).
Section 1813(b) of the Act prescribes the method for computing the amount of the inpatient hospital deductible. The inpatient hospital deductible is an amount equal to the inpatient hospital deductible for the preceding CY, adjusted by our best estimate of the payment-weighted average of the applicable percentage increases (as defined in section 1886(b)(3)(B) of the Act) used for updating the payment rates to hospitals for discharges in the fiscal year (FY) that begins on October 1 of the same preceding CY, and adjusted to reflect changes in real case-mix. The adjustment to reflect real case-mix is determined on the basis of the most recent case-mix data available. The amount determined under this formula is rounded to the nearest multiple of $4 (or, if midway between two multiples of $4, to the next higher multiple of $4).
Under section 1886(b)(3)(B)(i)(XX) of the Act, the percentage increase used to update the payment rates for FY 2016 for hospitals paid under the inpatient prospective payment system is the market basket percentage increase, otherwise known as the market basket update, reduced by 0.2 percentage points (see section 1886(b)(3)(B)(xii)(IV) of the Act), and an adjustment based on changes in the economy-wide productivity (the multifactor productivity (MFP) adjustment) (see section 1886(b)(3)(B)(xi)(II) of the Act). Under section 1886(b)(3)(B)(viii) of the Act, for fiscal year 2016, the applicable percentage increase for hospitals that do not submit quality data as specified by the Secretary of the Department of Health and Human Services (the Secretary) is reduced by one quarter of the market basket update. We are estimating that after accounting for those hospitals receiving the lower market basket update in the payment-weighted average update, the calculated deductible will not be affected, since the majority of hospitals submit quality data and receive the full market basket update. Section 1886(b)(3)(B)(ix) of the Act requires that any hospital that is not a meaningful electronic health record (EHR) user (as defined in section 1886(n)(3) of the Act) will have three-quarters of the market basket update reduced by 33
Under section 1886(b)(3)(B)(ii)(VIII) of the Act, the percentage increase used to update the payment rates for FY 2016 for hospitals excluded from the inpatient prospective payment system is as follows:
• The percentage increase for long term care hospitals is the market basket percentage increase reduced by 0.2 percentage points and the MFP adjustment (
• The percentage increase for inpatient rehabilitation facilities is the market basket percentage increase reduced by 0.2 percentage points and the MFP adjustment (
• The percentage increase used to update the payment rate for inpatient psychiatric facilities is the market basket percentage increase reduced by 0.2 percentage points and the MFP adjustment (see sections 1886(s)(2)(A)(i), 1886(s)(2)(A)(ii), and 1886(s)(3)(D) of the Act).
The Inpatient Prospective Payment System market basket percentage increase for 2016 is 2.4 percent and the MFP adjustment is 0.5 percent, as announced in the final rule that appeared in the
To develop the adjustment to reflect changes in real case-mix, we first calculated an average case-mix for each hospital that reflects the relative costliness of that hospital's mix of cases compared to those of other hospitals. We then computed the change in average case-mix for hospitals paid under the Medicare prospective payment system in FY 2015 compared to FY 2014. (We excluded from this calculation hospitals whose payments are not based on the inpatient prospective payment system because their payments are based on alternate prospective payment systems or reasonable costs.) We used Medicare bills from prospective payment hospitals that we received as of July 2015. These bills represent a total of about 7.6 million Medicare discharges for FY 2015 and provide the most recent case-mix data available at this time. Based on these bills, the change in average case-mix in FY 2015 is 0.21 percent. Based on these bills and past experience, we expect the overall case mix change to be 0.5 percent as the year progresses and more FY 2015 data become available.
Section 1813 of the Act requires that the inpatient hospital deductible be adjusted only by that portion of the case-mix change that is determined to be real. Real case-mix is that portion of case-mix that is due to changes in the mix of cases in the hospital and not due to coding optimization. We expect that all of the change in average case-mix will be real and estimate that this change will be 0.5 percent.
Thus as stated above, the estimate of the payment-weighted average of the applicable percentage increases used for updating the payment rates is 1.72 percent, and the real case-mix adjustment factor for the deductible is 0.5 percent. Therefore, using the statutory formula as stated in section 1813(b) of the Act, we calculate the inpatient hospital deductible for services furnished in CY 2016 to be $1,288. This deductible amount is determined by multiplying $1,260 (the inpatient hospital deductible for CY 2015 (79 FR 49854)) by the payment-weighted average increase in the payment rates of 1.0172 multiplied by the increase in real case-mix of 1.005, which equals $1,288.08 and is rounded to $1,288.
The coinsurance amounts provided for in section 1813 of the Act are defined as fixed percentages of the inpatient hospital deductible for services furnished in the same CY. The increase in the deductible generates increases in the coinsurance amounts. For inpatient hospital and extended care services furnished in CY 2016, in accordance with the fixed percentages defined in the law, the daily coinsurance for the 61st through 90th day of hospitalization in a benefit period will be $322 (one-fourth of the inpatient hospital deductible as stated in section 1813(a)(1)(A) of the Act); the daily coinsurance for lifetime reserve days will be $644 (one-half of the inpatient hospital deductible as stated in section 1813(a)(1)(B) of the Act); and the daily coinsurance for the 21st through 100th day of extended care services in a skilled nursing facility in a benefit period will be $161 (one-eighth of the inpatient hospital deductible as stated in section 1813(a)(3) of the Act).
Table 1 below summarizes the deductible and coinsurance amounts for CYs 2015 and 2016, as well as the number of each that is estimated to be paid.
The estimated total increase in costs to beneficiaries is about $610 million (rounded to the nearest $10 million) due to: (1) The increase in the deductible and coinsurance amounts, and (2) the increase in the number of deductibles and daily coinsurance amounts paid. We determine the increase in cost to beneficiaries by calculating the difference between the 2015 and 2016 deductible and coinsurance amounts multiplied by the increase in the number of deductible and coinsurance amounts paid.
Section 1813(b)(2) of the Act requires publication of the inpatient hospital deductible and all coinsurance amounts—the hospital and extended care services coinsurance amounts—between September 1 and September 15 of the year preceding the year to which they will apply. These amounts are determined according to the statute as discussed above. As has been our custom, we use general notices, rather than notice and comment rulemaking procedures, to make the announcements. In doing so, we acknowledge that under the Administrative Procedure Act (APA), interpretive rules, general statements of policy, and rules of agency organization, procedure, or practice are excepted from the requirements of notice and comment rulemaking.
We considered publishing a proposed notice to provide a period for public comment. However, we may waive that procedure if we find good cause that prior notice and comment are impracticable, unnecessary, or contrary to the public interest. We find that the procedure for notice and comment is unnecessary here, because the formulae used to calculate the inpatient hospital deductible and hospital and extended care services coinsurance amounts are statutorily directed, and we can exercise no discretion in following the formulae. Moreover, the statute establishes the time period for which the deductible and coinsurance amounts will apply and delaying publication would be contrary to the public interest.
This document does not impose information collection requirements, that is, reporting, recordkeeping or third-party disclosure requirements. Consequently, there is no need for review by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Section 1813(b)(2) of the Act requires the Secretary to publish, between September 1 and September 15 of each year, the amounts of the inpatient hospital deductible and hospital and extended care services coinsurance applicable for services furnished in the following calendar year (CY).
We have examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C., Part I, Ch. 8).
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major notices with economically significant effects ($100 million or more in any 1 year). As stated in section IV of this notice, we estimate that the total increase in costs to beneficiaries associated with this notice is about $610 million due to: (1) The increase in the deductible and coinsurance amounts, and (2) the increase in the number of deductibles and daily coinsurance amounts paid. As a result, this notice is economically significant under section 3(f)(1) of Executive Order 12866 and is a major action under the Congressional Review Act. In accordance with the provisions of Executive Order 12866, this notice was reviewed by the Office of Management and Budget.
The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of less than $7.5 million to $38.5 million in any 1 year (for details, see the Small Business Administration's Web site at
In addition, section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. As discussed above, we are not preparing an analysis for section 1102(b) of the Act because the Secretary has determined that this notice will not have a significant impact on the operations of a substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. For 2015, that threshold accounting for inflation is approximately $144 million. This notice does not impose mandates that will have a consequential effect of $144 million or more on state, local, or tribal governments or on the private sector.
Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has Federalism implications. Since this notice does not impose any costs on state or local governments, preempt state law, or have Federalism implications, the requirements of Executive Order 13132 are not applicable.
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (PRA), federal agencies are required to publish notice in the
Comments on the collection(s) of information must be received by the OMB desk officer by December 16, 2015.
When commenting on the proposed information collections, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be received by the OMB desk officer via one of the following transmissions: OMB, Office of Information and Regulatory Affairs, Attention: CMS Desk Officer, Fax Number: (202) 395-5806
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' Web site address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786-1326.
Reports Clearance Office at (410) 786-1326.
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires federal agencies to publish a 30-day notice in the
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2.
Centers for Medicare & Medicaid Services (CMS), HHS.
Notice.
This notice announces the monthly actuarial rates for aged (age 65 and over) and disabled (under age 65) beneficiaries enrolled in Part B of the Medicare Supplementary Medical Insurance (SMI) program beginning January 1, 2016. In addition, this notice announces the monthly premium for aged and disabled beneficiaries, the deductible for 2016, the income-related monthly adjustment amounts to be paid by beneficiaries with modified adjusted gross income above certain threshold amounts, and the transfer amount equal to the reduction in premiums payable as a result of amendments made by the Bipartisan Budget Act of 2015. The monthly actuarial rates for 2016 are $237.60 for aged enrollees and $282.60 for disabled enrollees. The standard monthly Part B premium rate for all enrollees for 2016 is $121.80, which is equal to 50 percent of the monthly actuarial rate for aged enrollees (or approximately 25 percent of the expected average total cost of Part B coverage for aged enrollees) plus $3.00. (The 2015 standard premium rate was $104.90.) The Part B deductible for 2016 is $166.00 for all Part B beneficiaries. If a beneficiary has to pay an income-related monthly adjustment, they will have to pay a total monthly premium of about 35, 50, 65, or 80 percent of the total cost of Part B coverage plus $4.20, $6.00, $7.80, or $9.60. Section 1844(d) of the Social Security Act, as added by section 601(b) of the Bipartisan Budget Act of 2015, provides for a transfer from the general fund to the Part B account
M. Kent Clemens, (410) 786-6391.
Part B is the voluntary portion of the Medicare program that pays all or part of the costs for physicians' services, outpatient hospital services, certain home health services, services furnished by rural health clinics, ambulatory surgical centers, comprehensive outpatient rehabilitation facilities, and certain other medical and health services not covered by Medicare Part A, Hospital Insurance. Medicare Part B is available to individuals who are entitled to Medicare Part A, as well as to U.S. residents who have attained age 65 and are citizens, and aliens who were lawfully admitted for permanent residence and have resided in the United States for 5 consecutive years. Part B requires enrollment and payment of monthly premiums, as described in 42 CFR part 407, subpart B, and part 408, respectively. The premiums paid by (or on behalf of) all enrollees fund approximately one-fourth of the total incurred costs, and transfers from the general fund of the Treasury pay approximately three-fourths of these costs.
The Secretary of the Department of Health and Human Services (the Secretary) is required by section 1839 of the Social Security Act (the Act) to announce the Part B monthly actuarial rates for aged and disabled beneficiaries as well as the monthly Part B premium. The Part B annual deductible is included because its determination is directly linked to the aged actuarial rate.
The monthly actuarial rates for aged and disabled enrollees are used to determine the correct amount of general revenue financing per beneficiary each month. These amounts, according to actuarial estimates, will equal, respectively, one-half of the expected average monthly cost of Part B for each aged enrollee (age 65 or over) and one-half of the expected average monthly cost of Part B for each disabled enrollee (under age 65).
The Part B deductible to be paid by enrollees is also announced. Prior to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173), the Part B deductible was set in statute. After setting the 2005 deductible amount at $110, section 629 of the MMA (amending section 1833(b) of the Act) requires that the Part B deductible be indexed beginning in 2006. The inflation factor to be used each year is the annual percentage increase in the Part B actuarial rate for enrollees age 65 and over. Specifically, the 2016 Part B deductible is calculated by multiplying the 2015 deductible by the ratio of the 2016 aged actuarial rate to the 2015 aged actuarial rate. The amount determined under this formula is then rounded to the nearest $1.
The monthly Part B premium rate to be paid by aged and disabled enrollees is also announced. (Although the costs to the program per disabled enrollee are different than for the aged, the statute provides that they pay the same premium amount.) Beginning with the passage of section 203 of the Social Security Amendments of 1972 (Pub. L. 92-603), the premium rate, which was determined on a fiscal year basis, was limited to the lesser of the actuarial rate for aged enrollees, or the current monthly premium rate increased by the same percentage as the most recent general increase in monthly Title II social security benefits.
However, the passage of section 124 of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. 97-248) suspended this premium determination process. Section 124 of TEFRA changed the premium basis to 50 percent of the monthly actuarial rate for aged enrollees (that is, 25 percent of program costs for aged enrollees). Section 606 of the Social Security Amendments of 1983 (Pub. L. 98-21), section 2302 of the Deficit Reduction Act of 1984 (DEFRA 84) (Pub. L. 98-369), section 9313 of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA 85) (Pub. L. 99-272), section 4080 of the Omnibus Budget Reconciliation Act of 1987 (OBRA 87) (Pub. L. 100-203), and section 6301 of the Omnibus Budget Reconciliation Act of 1989 (OBRA 89) (Pub. L. 101-239) extended the provision that the premium be based on 50 percent of the monthly actuarial rate for aged enrollees (that is, 25 percent of program costs for aged enrollees). This extension expired at the end of 1990.
The premium rate for 1991 through 1995 was legislated by section 1839(e)(1)(B) of the Act, as added by section 4301 of the Omnibus Budget Reconciliation Act of 1990 (OBRA 90) (Pub. L. 101-508). In January 1996, the premium determination basis would have reverted to the method established by the 1972 Social Security Act Amendments. However, section 13571 of the Omnibus Budget Reconciliation Act of 1993 (OBRA 93) (Pub. L. 103-66) changed the premium basis to 50 percent of the monthly actuarial rate for aged enrollees (that is, 25 percent of program costs for aged enrollees) for 1996 through 1998.
Section 4571 of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) permanently extended the provision that the premium be based on 50 percent of the monthly actuarial rate for aged enrollees (that is, 25 percent of program costs for aged enrollees).
The BBA included a further provision affecting the calculation of the Part B actuarial rates and premiums for 1998 through 2003. Section 4611 of the BBA modified the home health benefit payable under Part A for individuals enrolled in Part B. Under this section, beginning in 1998, expenditures for home health services not considered “post-institutional” are payable under Part B rather than Part A. However, section 4611(e)(1) of the BBA required that there be a transition from 1998 through 2002 for the aggregate amount of the expenditures transferred from Part A to Part B. Section 4611(e)(2) of the BBA also provided a specific yearly proportion for the transferred funds. The proportions were 1/6 for 1998, 1/3 for 1999, 1/2 for 2000, 2/3 for 2001, and 5/6 for 2002. For the purpose of determining the correct amount of financing from general revenues of the Federal Government, it was necessary to include only these transitional amounts in the monthly actuarial rates for both aged and disabled enrollees, rather than the total cost of the home health services being transferred.
Section 4611(e)(3) of the BBA also specified, for the purpose of determining the premium, that the monthly actuarial rate for enrollees age 65 and over be computed as though the transition would occur for 1998 through 2003 and that 1/7 of the cost be transferred in 1998, 2/7 in 1999, 3/7 in 2000, 4/7 in 2001, 5/7 in 2002, and 6/7 in 2003. Therefore, the transition period for incorporating this home health transfer into the premium was 7 years while the transition period for including these services in the actuarial rate was 6 years.
Section 811 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173, also known as the Medicare Modernization Act, or MMA), which amended section 1839 of the Act, requires that, starting on January 1, 2007, the Part B premium a beneficiary pays each month be based on their annual income. Specifically, if a beneficiary's “modified adjusted gross
Section 4732(c) of the BBA added section 1933(c) of the Act, which required the Secretary to allocate money from the Part B trust fund to the State Medicaid programs for the purpose of providing Medicare Part B premium assistance from 1998 through 2002 for the low-income Medicaid beneficiaries who qualify under section 1933 of the Act. This allocation, while not a benefit expenditure, was an expenditure of the trust fund and was included in calculating the Part B actuarial rates through 2002. For 2003 through 2015, the expenditure was made from the trust fund because the allocation was temporarily extended. However, because the extension occurred after the financing was determined, the allocation was not included in the calculation of the financing rates for these years. Section 211 of MACRA permanently extended this expenditure, which is included in the calculation of the Part B actuarial rates for 2016 and subsequent years.
Another provision affecting the calculation of the Part B premium is section 1839(f) of the Act, as amended by section 211 of the Medicare Catastrophic Coverage Act of 1988 (MCCA 88) (Pub. L. 100-360). (The Medicare Catastrophic Coverage Repeal Act of 1989 (Pub. L. 101-234) did not repeal the revisions to section 1839(f) of the Act made by MCCA 88.) Section 1839(f) of the Act, referred to as the “hold-harmless” provision, provides that if an individual is entitled to benefits under section 202 or 223 of the Act (the Old-Age and Survivors Insurance Benefit and the Disability Insurance Benefit, respectively) and has the Part B premium deducted from these benefit payments, the premium increase will be reduced, if necessary, to avoid causing a decrease in the individual's net monthly payment. This decrease in payment occurs if the increase in the individual's social security benefit due to the cost-of-living adjustment under section 215(i) of the Act is less than the increase in the premium. Specifically, the reduction in the premium amount applies if the individual is entitled to benefits under section 202 or 223 of the Act for November and December of a particular year and the individual's Part B premiums for December and the following January are deducted from the respective month's section 202 or 223 benefits. The “hold-harmless” provision does not apply to beneficiaries who are required to pay an income-related monthly adjustment amount.
A check for benefits under section 202 or 223 of the Act is received in the month following the month for which the benefits are due. The Part B premium that is deducted from a particular check is the Part B payment for the month in which the check is received. Therefore, a benefit check for November is not received until December, but has December's Part B premium deducted from it.
Generally, if a beneficiary qualifies for hold-harmless protection, the reduced premium for the individual for that January and for each of the succeeding 11 months is the greater of either—
• The monthly premium for January reduced as necessary to make the December monthly benefits, after the deduction of the Part B premium for January, at least equal to the preceding November's monthly benefits, after the deduction of the Part B premium for December; or
• The monthly premium for that individual for that December.
In determining the premium limitations under section 1839(f) of the Act, the monthly benefits to which an individual is entitled under section 202 or 223 of the Act do not include retroactive adjustments or payments and deductions on account of work. Also, once the monthly premium amount is established under section 1839(f) of the Act, it will not be changed during the year even if there are retroactive adjustments or payments and deductions on account of work that apply to the individual's monthly benefits.
Individuals who have enrolled in Part B late or who have re-enrolled after the termination of a coverage period are subject to an increased premium under section 1839(b) of the Act. The increase is a percentage of the premium and is based on the new premium rate before any reductions under section 1839(f) of the Act are made.
For 2016, social security benefits will receive no cost-of-living adjustment under section 215(i) of the Act. As a result, the majority of Part B enrollees can pay no increase in their monthly premium. The Bipartisan Budget Act of 2015 helps to ensure the financial adequacy of the Part B account of the SMI Trust Fund without transferring the financial burden of the entire increase in 2016 premium requirements to the minority of enrollees who are not held harmless.
Section 1839 of the Social Security Act, as amended by section 601(a) of the Bipartisan Budget Act of 2015 (Pub. L. 114-74), specifies that the 2016 actuarial rate for enrollees age 65 and older be determined as if the hold-harmless provision does not apply. The premium revenue that is lost by using the resulting lower premium (excluding the foregone income-related premium revenue) is to be replaced by a transfer of general revenue from the Treasury, which will be repaid over time to the general fund. The transfer amount will be $7,440,648,000, consisting of $5,237,880,000 for the lost aged premium revenue and $2,202,768,000 for the lost disabled premium revenue.
Starting in 2016, in order to repay the balance due (which is to include the transfer amount and the foregone income-related premium revenue), the Part B premium otherwise determined will be increased by $3.00. These repayment amounts will be added to the Part B premium otherwise determined each year and paid back to the general fund of the Treasury.
These repayment amounts will continue until the total amount collected is equal to the beginning balance due. (In the final year of the repayment, the additional amounts may be modified in order to avoid an overpayment.) The repayment amounts (excluding the repayment amounts for high-income enrollees) are subject to the hold harmless provision. The beginning balance due is $9,066,409,000, consisting of the transfer amount plus $1,625,761,000 in foregone income-related premium revenue.
The Medicare Part B monthly actuarial rates applicable for 2016 are $237.60 for enrollees age 65 and over and $282.60 for disabled enrollees under age 65. In section II.B. of this notice, we present the actuarial assumptions and bases from which these rates are derived. The Part B standard monthly premium rate for all enrollees for 2016 is $121.80. The following are the 2016 Part B monthly premium rates to be paid by beneficiaries who file an individual tax return (including those who are single, head of household, qualifying widow(er) with dependent child, or married filing separately who lived apart from their spouse for the entire taxable year), or a joint tax return.
In addition, the monthly premium rates to be paid by beneficiaries who are married and lived with their spouse at any time during the taxable year, but file a separate tax return from their spouse, are as follows:
The Part B annual deductible for 2016 is $166.00 for all beneficiaries.
The transfer amount is the estimate by the Chief Actuary of the aggregate reduction in premiums payable, separately for enrollees age 65 and older and for enrollees under age 65, as a result of the amendments made by the Bipartisan Budget Act of 2015 (excluding the reduction in the income-related monthly adjustment amounts). The 2016 actuarial rate for enrollees age 65 and older is $237.60, and the actuarial rate portion of the 2016 premium is $118.80. If the only change to the 2016 actuarial rate for enrollees age 65 and older was the absence of the Bipartisan Budget Act amendments, then the 2016 actuarial rate for enrollees age 65 and older would be $318.00, and the actuarial rate portion of the 2016 premium would be $159.00.
The reduction in premiums payable as a result of the Bipartisan Budget Act amendments is estimated separately for—(1) enrollees held harmless; (2) enrollees not held harmless who are age 65 or older; and (3) enrollees not held harmless who are under age 65. All enrollees that are subject to the hold harmless provision will have no reduction in their premiums payable in 2016 as a result of these amendments. (The 2016 monthly premium for enrollees subject to the hold harmless provision in 2016 will be the same as their 2015 monthly premium.) An estimated 11.8 million enrollees age 65 and older (with 10.8 million enrollee years of premium payments) will not be held harmless and will have a reduction in monthly premiums payable from $159.00 to $118.80. Based on this difference in premiums payable and adjusting for the additional premiums payable by individuals subject to the late enrollment penalty (assuming a historical average penalty), the transfer amount for enrollees age 65 and older is $5,237,880,000. An estimated 4.9 million enrollees under age 65 (with 4.6 million enrollee years of premium payments) will not be held harmless and will have a reduction in monthly premiums payable from $159.00 to $118.80. Based on this difference in premiums payable and adjusting for the additional premiums payable by individuals subject to the late enrollment penalty (assuming a historical average penalty), the transfer amount for enrollees under age 65 is $2,202,768,000. The total transfer amount will be $7,440,648,000.
Except where noted, the actuarial assumptions and bases used to determine the monthly actuarial rates and the monthly premium rates for Part B are established by the Centers for Medicare & Medicaid Services Office of the Actuary. The estimates underlying these determinations are prepared by actuaries meeting the qualification standards and following the actuarial standards of practice established by the Actuarial Standards Board.
Under section 1839 of the Act, the starting point for determining the standard monthly premium is the amount that would be necessary to finance Part B on an incurred basis. This is the amount of income that would be sufficient to pay for services furnished during that year (including associated administrative costs) even though payment for some of these services will not be made until after the close of the year. The portion of income required to cover benefits not paid until after the close of the year is added to the trust fund and used when needed.
The premium rates are established prospectively and are, therefore, subject to projection error. Additionally, legislation enacted after the financing was established, but effective for the period in which the financing is set, may affect program costs. As a result, the income to the program may not equal incurred costs. Therefore, trust fund assets must be maintained at a level that is adequate to cover an appropriate degree of variation between actual and projected costs, and the amount of incurred, but unpaid, expenses. Numerous factors determine what level of assets is appropriate to cover variation between actual and projected costs. The three most important of these factors are the: (1) Difference from prior years between the actual performance of the program and estimates made at the time financing was established; (2) likelihood and potential magnitude of expenditure changes resulting from enactment of legislation affecting Part B costs in a year subsequent to the establishment of financing for that year; and (3) expected relationship between incurred and cash expenditures. These factors are analyzed on an ongoing basis, as the trends can vary over time.
Table 1 summarizes the estimated actuarial status of the trust fund as of the end of the financing period for 2014 and 2015.
The monthly actuarial rate for enrollees age 65 and older is one-half of the sum of monthly amounts for: (1) The projected cost of benefits; and (2) administrative expenses for each enrollee age 65 and older, after adjustments to this sum to allow for interest earnings on assets in the trust fund and an adequate contingency margin. The contingency margin is an amount appropriate to provide for possible variation between actual and projected costs and to amortize any surplus assets or unfunded liabilities.
The monthly actuarial rate for enrollees age 65 and older for 2016 is determined by first establishing per-enrollee cost by type of service from program data through 2015 and then projecting these costs for subsequent years. The projection factors used for financing periods from January 1, 2013 through December 31, 2016 are shown in Table 2.
As indicated in Table 3, the projected per-enrollee amount required to pay for one-half of the total of benefits and administrative costs for enrollees age 65 and over for 2016 is $227.86. Based on current estimates, the assets at the end of 2015 are not sufficient to cover the amount of incurred, but unpaid, expenses and to provide for a significant degree of variation between actual and projected costs. Thus, a positive contingency margin is needed to increase assets to a more appropriate level. The monthly actuarial rate of $237.60 provides an adjustment of $11.61 for a contingency margin (determined as if the hold harmless provision did not apply for 2016, as required by the Bipartisan Budget Act of 2015) and −$1.87 for interest earnings.
Two other factors affect the contingency margin for 2016. Starting in 2011, manufacturers and importers of brand-name prescription drugs have paid a fee that is allocated to the Part B account of the SMI trust. For 2016, the total of these brand-name drug fees is estimated to be $3.0 billion. The contingency margin has been reduced to account for this additional revenue.
Another factor impacting the contingency margin comes from the requirement that certain payment incentives, to encourage the development and use of health information technology (HIT) by Medicare physicians, are to be excluded from the premium determination. HIT positive incentive payments or penalties will be directly offset through transfers with the general fund of the Treasury. The monthly actuarial rate includes an adjustment of −$0.36 for HIT positive incentive payments in 2016.
The traditional goal for the Part B reserve has been that assets minus liabilities at the end of a year should represent between 15 and 20 percent of the following year's total incurred expenditures. To accomplish this goal, a 17 percent reserve ratio has been the normal target used to calculate the Part B premium.
The contingency margin included in establishing the 2016 actuarial rate of $237.60 per month for aged beneficiaries, as announced in this notice, is projected to fully restore the Part B assets under the projection assumptions listed in Table 2.
Disabled enrollees are those persons under age 65 who are enrolled in Part B because of entitlement to Social Security disability benefits for more than 24 months or because of entitlement to Medicare under the end-stage renal disease (ESRD) program. Projected monthly costs for disabled enrollees (other than those with ESRD)
As shown in Table 4, the projected per-enrollee amount required to pay for one-half of the total of benefits and administrative costs for disabled enrollees for 2016 is $272.94. The monthly actuarial rate of $282.60 also provides an adjustment of −$2.86 for interest earnings and $12.52 for a contingency margin, reflecting the same factors described previously for the aged actuarial rate at magnitudes appropriate to the disabled rate determination. Based on current estimates, the assets associated with the disabled Medicare beneficiaries at the end of 2015 are not sufficient to cover the amount of incurred, but unpaid, expenses and to provide for a significant degree of variation between actual and projected costs. Thus, a positive contingency margin is needed to increase assets to an appropriate level.
The actuarial rate of $282.60 per month for disabled beneficiaries, as announced in this notice for 2016, reflects the combined net effect of the factors described previously for aged beneficiaries and the projection assumptions listed in Table 2.
Several factors contribute to uncertainty about future trends in medical care costs. It is appropriate to test the adequacy of the rates using alternative cost growth rate assumptions. The results of those assumptions are shown in Table 5. One set represents increases that are higher and, therefore, more pessimistic than the current estimate. The other set represents increases that are lower and, therefore, more optimistic than the current estimate. The values for the alternative assumptions were determined from a statistical analysis of the historical variation in the respective increase factors.
As indicated in Table 5, the monthly actuarial rates would result in an excess of assets over liabilities of $53,052 million by the end of December 2016 under the cost growth rate assumptions shown in Table 2 and assuming that the provisions of current law are fully implemented. This amounts to 17.0 percent of the estimated total incurred expenditures for the following year.
Assumptions that are somewhat more pessimistic (and that therefore test the adequacy of the assets to accommodate projection errors) produce a surplus of $8,962 million by the end of December 2016 under current law, which amounts to 2.5 percent of the estimated total incurred expenditures for the following year. Under fairly optimistic assumptions, the monthly actuarial rates would result in a surplus of $94,727 million by the end of December 2016, or 34.9 percent of the estimated total incurred expenditures for the following year.
The sensitivity analysis indicates that the premium and general revenue financing established for 2016, together with existing Part B account assets would be adequate to cover estimated Part B costs for 2016 under current law, even if actual costs prove to be somewhat greater than expected.
As determined in accordance with section 1839 of the Act, listed are the 2016 Part B monthly premium rates to be paid by beneficiaries who file an individual tax return (including those who are single, head of household, qualifying widow(er) with dependent child, or married filing separately who lived apart from their spouse for the entire taxable year), or a joint tax return.
In addition, the monthly premium rates to be paid by beneficiaries who are married and lived with their spouse at any time during the taxable year, but file a separate tax return from their spouse, are listed as follows:
This document does not impose information collection requirements, that is, reporting, recordkeeping or third-party disclosure requirements. Consequently, there is no need for review by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Section 1839 of the Act requires us to annually announce (that is by September 30th of each year) the Part B monthly actuarial rates for aged and disabled beneficiaries as well as the monthly Part B premium. We also announce the Part B annual deductible because its determination is directly linked to the aged actuarial rate.
We have examined the impacts of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Public Law 96-354), section 1102(b) of the Social Security Act, section 202 of the
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major notices with economically significant effects ($100 million or more in any 1 year). For 2016 approximately 70 percent of Part B enrollees will be held harmless and pay no increase in their Part B premium, but the standard Part B premium rate, the Part B income-related premium rates, and the Part B deductible are higher than the respective amounts for 2015 and have an annual effect on the economy of $100 million or more. As a result, this notice is economically significant under section 3(f)(1) of Executive Order 12866 and is a major action as defined under the Congressional Review Act (5 U.S.C. 804(2)).
As discussed earlier, this notice announces that the monthly actuarial rates applicable for 2016 are $237.60 for enrollees age 65 and over and $282.60 for disabled enrollees under age 65. It also announces the 2016 monthly Part B premium rates to be paid by beneficiaries who file an individual tax return (including those who are single, head of household, qualifying widow(er) with a dependent child, or married filing separately who lived apart from their spouse for the entire taxable year), or a joint tax return.
In addition, the monthly premium rates to be paid by beneficiaries who are married and lived with their spouse at any time during the taxable year, but file a separate tax return from their spouse, are also announced and listed in the following chart:
The RFA requires agencies to analyze options for regulatory relief of small businesses, if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Individuals and States are not included in the definition of a small entity. This notice announces the monthly actuarial rates for aged (age 65 and over) and disabled (under 65) beneficiaries enrolled in Part B of the Medicare SMI program beginning January 1, 2016. Also, this notice announces the monthly premium for aged and disabled beneficiaries as well as the income-related monthly adjustment amounts to be paid by beneficiaries with modified adjusted gross income above certain threshold amounts. As a result, we are not preparing an analysis for the RFA because the Secretary has determined that this notice will not have a significant economic impact on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area and has fewer than 100 beds. As we discussed previously, we are not preparing an analysis for section 1102(b) of the Act because the Secretary has determined that this notice will not have a significant effect on a substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1-year of $100 million in 1995 dollars, updated annually for inflation. In 2015, that threshold is approximately $144 million. Part B enrollees who are also enrolled in Medicaid have their monthly Part B premiums paid by Medicaid. The 2016 premium increase is estimated to be a cost to the state Medicaid programs that is less than $144 million per state. This notice does not impose mandates that will have a consequential effect of $144 million or more on State, local, or tribal governments or on the private sector.
Executive Order 13132 establishes certain requirements that an agency must meet when it publishes a proposed rule (and subsequent final rule) that imposes substantial direct compliance costs on State and local governments, preempts State law, or otherwise has
In accordance with the provisions of Executive Order 12866, this notice was reviewed by the Office of Management and Budget.
The Medicare statute requires the publication of the monthly actuarial rates and the Part B premium amounts in September. We ordinarily use general notices, rather than notice and comment rulemaking procedures, to make such announcements. In doing so, we note that, under the Administrative Procedure Act, interpretive rules, general statements of policy, and rules of agency organization, procedure, or practice are excepted from the requirements of notice and comment rulemaking.
We considered publishing a proposed notice to provide a period for public comment. However, we may waive that procedure if we find, for good cause, that prior notice and comment are impracticable, unnecessary, or contrary to the public interest. The statute establishes the time period for which the premium rates will apply, and delaying publication of the Part B premium rate such that it would not be published before that time would be contrary to the public interest. Moreover, we find that notice and comment are unnecessary because the formulas used to calculate the Part B premiums are statutorily directed. Therefore, we find good cause to waive publication of a proposed notice and solicitation of public comments.
Food and Drug Administration, HHS.
Notice of public workshop; request for comments.
The Food and Drug Administration (FDA) is announcing a public workshop entitled “Eighth Annual Sentinel Initiative Public Workshop.” Convened by the Center for Health Policy at the Brookings Institution and supported by a cooperative agreement with FDA, this 1-day workshop will bring the stakeholder community together to discuss a variety of topics on active medical product surveillance. Topics will include an update on the state of FDA's Sentinel Initiative, including an overview of the transition from the Mini-Sentinel pilot to the full Sentinel System, and key activities and uses of the Sentinel System accomplished in 2015. In addition, panelists will discuss the future of the Sentinel System and opportunities to expand its medical product surveillance capabilities. This workshop will also engage stakeholders to discuss current and emerging Sentinel projects.
The public workshop will be held on February 3, 2016, from 9 a.m. to 4 p.m., Eastern Standard Time (EST).
There will also be a live webcast for those unable to attend the meeting in person (see
You may submit comments as follows:
Submit electronic comments in the following way:
• Federal eRulemaking Portal:
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
• Mail/Hand delivery/Courier (for written/paper submissions): Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
• For written/paper comments submitted to the Division of Dockets Management, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the
Carlos Bell, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 22, Rm. 4343, Silver Spring, MD 20993-0002, 301-796-3714, FAX: 301-796-9832, email:
If you need special accommodations due to a disability, please contact Joanna Klatzman at the Brookings Institution (phone: 813-586-1201, email:
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA), Center for Devices and Radiological Health (CDRH or Center) is announcing the 2015 Experiential Learning Program (ELP) General Training Program. This training component is intended to provide CDRH staff with an opportunity to understand the policies, laboratory practices, and challenges faced in broader disciplines that impact the device development life cycle. The purpose of this document is to invite medical device industry, academia, and health care facilities to request to participate in this formal training program for FDA's medical device review staff, or to contact CDRH for more information regarding the ELP General Training Program.
Submit either an electronic or written request for participation in the ELP General Training Program by December 16, 2015
Submit either electronic requests to
Latonya Powell, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 32, Rm. 5232, Silver Spring, MD 20993-0002, 301-796-6965, FAX: 301-827-3079,
CDRH is responsible for helping to ensure the safety and effectiveness of medical devices marketed in the United States. Furthermore, CDRH assures that patients and providers have timely and continued access to high-quality, safe, and effective medical devices. In support of this mission, the Center launched various training and development initiatives to enhance performance of its staff involved in regulatory review and in the premarket review process. One of these initiatives, the ELP Pilot, was launched in 2012 and fully implemented on April 2, 2013 (78 FR 19711).
CDRH is committed to advancing regulatory science; providing industry with predictable, consistent, transparent, and efficient regulatory pathways; and helping to ensure consumer confidence in medical devices marketed in the United States and throughout the world. The ELP General Training Program component is intended to provide CDRH staff with an opportunity to understand the policies, laboratory practices, and challenges faced in broader disciplines that impact the device development life cycle. This component is a collaborative effort to enhance communication and facilitate the premarket review process. Furthermore, CDRH is committed to understanding current industry practices, innovative technologies, regulatory impacts, and regulatory needs.
These formal training visits are not intended for FDA to inspect, assess,
In this training program, groups of CDRH staff will observe operations at research, manufacturing, academia, and health care facilities. The focus areas and specific areas of interest for visits may include the following:
CDRH will be responsible for CDRH staff travel expenses associated with the site visits. CDRH will not provide funds to support the training provided by the site to this ELP General Training Program. Selection of potential facilities will be based on CDRH's priorities for staff training and resources available to fund this program. In addition to logistical and other resource factors, all sites must have a successful compliance record with FDA or another Agency with which FDA has a memorandum of understanding. If a site visit involves a visit to a separate physical location of another firm under contract with the site, that firm must agree to participate in the ELP General Training program and must also have a satisfactory compliance history.
Submit proposals for participation with the docket number found in the brackets in the heading of this document. Received requests may be seen in the Division of Dockets Management (see
The proposal should include a description of your facility relative to focus areas described in tables 1 or 2. Please include the Area of Interest (see tables 1 or 2) that the site visit will demonstrate to CDRH staff, a contact person, site visit location(s), length of site visit, proposed dates, and maximum number of CDRH staff that can be accommodated during a site visit. Proposals submitted without this minimum information will not be considered. In addition, please include an agenda outlining the proposed training for the site visit. A sample request and agenda are available on the ELP Web site at
Notice.
The Food and Drug Administration (FDA or Agency) is announcing that all outstanding hearing requests regarding nitroglycerin drug
You may submit comments as follows:
Submit electronic comments in the following way:
• Federal eRulemaking Portal:
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
• Mail/Hand delivery/Courier (for written/paper submissions): Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
• For written/paper comments submitted to the Division of Dockets Management, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Barbara Wise, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 5160, Silver Spring, MD 20993-0002, 301-796-2089, email:
When enacted in 1938, the Federal Food, Drug, and Cosmetic Act (the FD&C Act) required that “new drugs” (21 U.S.C. 321(p)) be approved for safety by FDA before they could legally be sold in interstate commerce. Between 1938 and 1962, if a drug obtained approval, FDA considered drugs that were IRS (see 21 CFR 310.6(b)(1)) to the approved drug to be covered by that approval, and allowed those IRS drugs to be marketed without independent approval.
In 1962, Congress amended the FD&C Act to require that new drugs be proven effective for their labeled indications, as well as safe, in order to obtain FDA approval. This amendment also required FDA to conduct a retrospective evaluation of the effectiveness of the drug products that FDA had approved as safe between 1938 and 1962. FDA contracted with the National Academy of Science/National Research Council (NAS/NRC) to make an initial evaluation of the effectiveness of over 3,400 products that had been approved only for safety between 1938 and 1962. The NAS/NRC reports for these drug products were submitted to FDA in the late 1960s and early 1970s. The Agency reviewed and reevaluated the reports and published its findings in
All drugs reviewed under DESI are “new drugs” under the FD&C Act. If FDA's final DESI determination classifies a drug product as lacking substantial evidence of effectiveness for one or more indications, that drug product and those IRS to it may no longer be marketed for such indications and are subject to enforcement action as unapproved new drugs. If FDA's final DESI determination classifies the drug product as effective for one or more of its labeled indications, the drug can be marketed for such indications, provided it is the subject of an application approved for safety and effectiveness. Sponsors of drug products that have been found to be effective for one or more indications through the DESI process may rely on FDA's effectiveness
In a
The December 1972 notice was amended again in August 1977, to announce the addition of controlled-release forms of specified coronary vasodilators, and the availability of guidelines and methods for determining the bioavailability of coronary vasodilators (42 FR 43127, August 26, 1977). The August 1977 notice specifically added nitroglycerin (topical ointment forms, conventional oral forms, and controlled release forms) to the list of drugs allowed to remain on the market while efficacy studies were conducted (42 FR 43127 at 43128). The December 1972 notice was further amended in October 1977, to extend the deadlines for submission of data and applications required for the coronary vasodilator products, and to announce the availability of guidelines for alternative methods of determining bioavailability for these products (42 FR 56156, October 21, 1977). Controlled-release transdermal nitroglycerin patches were included among the types of drugs permitted to remain on the market pending completion of efficacy studies based on their similarity to nitroglycerin ointment products (58 FR 38129 at 38130, July 15, 1993).
In July 1993, FDA revoked the temporary exemption for single-entity coronary vasodilator products containing nitroglycerin in a transdermal delivery system, which had allowed the products to stay on the market beyond the time limit scheduled for the implementation of DESI (58 FR 38129). FDA found the products to be effective for prevention of angina pectoris caused by coronary artery disease, and required sponsors to submit bioavailability/bioequivalence studies within 1 year (see 58 FR 38129 at 38130 to 38131). In March 1999, FDA reclassified one NDA and five ANDAs for nitroglycerin transdermal systems to lacking substantial evidence of effectiveness, based on the sponsors' failure to submit the required bioavailability/bioequivalence data (64 FR 14451, March 25, 1999). In the March 1999 notice, FDA proposed to withdraw approval of the applications and offered an opportunity for a hearing on the proposal to withdraw the applications.
In response to the March 1999 notice, Schwarz Pharma, Inc. (Schwarz Pharma), now a subsidiary of UCB, S.A., which was the sponsor of two of the five ANDAs, and Hercon Laboratories Corp. (Hercon), which was the sponsor of the remaining three ANDAs, requested hearings.
At the request of Hercon, in the
There are no longer outstanding hearing requests for nitroglycerin drug products in transdermal systems under this docket. Therefore, as proposed in the March 1999 notice of opportunity for hearing, FDA finds that the following applications lack substantial evidence of effectiveness and hereby withdraws approval of the applications under section 505(e) of the FD&C Act (21 U.S.C. 355): ANDA 88-727, DEPONIT (release rate of 0.2 mg of nitroglycerin per hour), held by Schwarz Pharma; ANDA 89-022, DEPONIT (release rate of 0.4 mg of nitroglycerin per hour), held by Schwarz Pharma; and NDA 20-146, NITRODISC, held by G.D. Searle & Co. Shipment in interstate commerce of any nitroglycerin drug product in a transdermal system identified in this docket, or any IRS product, that is not the subject of an approved NDA or ANDA is unlawful as of the effective date of this notice (see
Firms must notify the Agency of certain product discontinuations in writing under section 506C(a) of the FD&C Act (21 U.S.C. 356c). See
FDA cautions firms against reformulating products into unapproved new drugs and marketing under the same name or substantially the same name (including a new name that contains the old name). Reformulated products marketed under a name previously identified with a different active ingredient or combinations of active ingredients have the potential to confuse health care practitioners and harm patients.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is canceling the November 18, 2015, session and postponing the November 19, 2015, session of the Gastroenterology and Urology Devices Panel meeting. The meeting was announced in the
Patricio Garcia, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 1535, Silver Spring MD 20993-0002,
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is requesting nominations for voting members to serve on the Tobacco Products Scientific Advisory Committee, Office of Science, Center for Tobacco Products.
FDA seeks to include the views of women and men, members of all racial and ethnic groups, and individuals with and without disabilities on its advisory committees and, therefore encourages nominations of appropriately qualified candidates from these groups.
Nominations received on or before January 15, 2016 will be given first consideration for membership on the Tobacco Products Scientific Advisory Committee. Nominations received after January 15, 2016 will be considered for nomination to the committee as later vacancies occur.
All nominations for membership should be sent electronically by logging into the FDA Advisory Committee Membership Nomination Portal:
Regarding all nomination questions for membership, the primary contact is:
Caryn Cohen, Office of Science, Center for Tobacco Products, Food and Drug Administration, Center for Tobacco Products, Document Control Center, Building 71, Rm. G335, 10903 New Hampshire Ave., Silver Spring, MD 20993-0002, 1-877-287-1373 (choose Option 5), FAX: 240-276-3655,
Information about becoming a member on an FDA advisory committee can also be obtained by visiting FDA's Web site by using the following link:
FDA is requesting nominations for voting members on the Tobacco Products Scientific Advisory Committee.
The Tobacco Products Scientific Advisory Committee (the Committee) advises the Commissioner of Food and Drugs (the Commissioner) or designee in discharging responsibilities related to the regulation of tobacco products. The Committee reviews and evaluates safety, dependence, and health issues relating to tobacco products and provides appropriate advice, information, and recommendations to the Commissioner.
The Committee consists of 12 members including the Chair. Members and the Chair are selected by the Commissioner or designee from among individuals knowledgeable in the fields of medicine, medical ethics, science, or technology involving the manufacture, evaluation, or use of tobacco products. Almost all non-Federal members of this committee serve as Special Government Employees. Members will be invited to serve for terms of up to 4 years. The Committee includes nine technically qualified voting members, selected by the Commissioner or designee. The nine voting members include seven members who are physicians, dentists, scientists, or health care professionals practicing in the area of oncology, pulmonology, cardiology, toxicology, pharmacology, addiction, or any other relevant specialty. The nine voting members also include one member who is an officer or employee of a state or local government or of the Federal Government, and one member who is a representative of the general public.
Any interested person may nominate one or more qualified individuals for membership on the advisory committee. Self-nominations are also accepted. Nominations must include a current, complete résumé or curriculum vitae for each nominee, including current business address and/or home address, telephone number, and email address if available. Nominations must also
This notice is issued under the Federal Advisory Committee Act (5 U.S.C. app. 2) and 21 CFR part 14, relating to advisory committees.
Health Resources and Services Administration, HHS.
Notice.
In compliance with Section 3507(a)(1)(D) of the Paperwork Reduction Act of 1995, the Health Resources and Services Administration (HRSA) has submitted an Information Collection Request (ICR) to the Office of Management and Budget (OMB) for review and approval. Comments submitted during the first public review of this ICR will be provided to OMB. OMB will accept further comments from the public during the review and approval period.
Comments on this ICR should be received no later than December 16, 2015.
Submit your comments, including the Information Collection Request Title, to the desk officer for HRSA, either by email to
To request a copy of the clearance requests submitted to OMB for review, email the HRSA Information Collection Clearance Officer at
OMB No. 0915-0278—Extension.
The travel approval process is initiated when an NHSC scholar or S2S participant notifies the NHSC of an impending interview at one or more NHSC-approved practice sites. The Travel Request Worksheet is also used to initiate the relocation process after an NHSC scholar or S2S participant has successfully been matched to an approved practice site in accordance with the PHSA, section 331(c)(3). Upon receipt of the Travel Request Worksheet, the NHSC will review and approve or disapprove the request and promptly notify the scholar or S2S participant, and the NHSC logistics contractor regarding travel arrangements and authorization of the funding for the site visit or relocation.
The Health Resources and Services Administration (HRSA) is requesting nominations to fill vacancies on The National Advisory Council on the National Health Service Corps (hereafter referred to as NACNHSC). The NACNHSC was established under 42 U.S.C. 254j (Section 337 of the Public Health Service Act), as amended by Section 10501 of the Affordable Care Act. The NAC is governed by provisions of 92 (5 U.S.C. App. 2), also known as the Federal Advisory Committee Act, which sets forth standards for the formation and use of advisory committees.
The agency will receive nominations on a continuous basis.
All nominations should be submitted to Regina Wilson, Advisory Council Operations, Bureau of Health Workforce, HRSA, 11w45c, 5600 Fishers Lane, Rockville, Maryland 20857. Mail delivery should be addressed to Regina Wilson, Advisory Council Operations, Bureau of Health Workforce, HRSA, at the above address, or via email to:
CAPT Shari Campbell, Designated Federal Official, National Advisory Council on National Health Service Corps at (301) 594-4251 or email
The NACNHSC is a group of health care providers and health care site administrators who are experts in the issues that communities with a shortage of primary care professionals face in meeting their health care needs. The NACNHSC is committed to effectively implementing its mandate to advise the Secretary of the Department of Health and Human Services (HHS) and, by designation, the Administrator of the Health Resources and Services Administration (HRSA).
The NACNHSC consists of 15 members who are Special Government Employees. Responsibilities of the Council include: (1) Serving as a forum to identify the priorities for the NHSC and bring forward and anticipate future program issues and concerns through ongoing communication with program staff, professional organizations, communities and program participants; (2) functioning as a sounding board for proposed policy changes by utilizing the varying levels of expertise represented on the Council to advise on specific program areas; (3) developing and distributing white papers and briefs that clearly state issues and/or concerns relating to the NHSC with specific recommendations for necessary policy revisions.
Specifically, HRSA is requesting nominations for voting members of the NACNHSC representing primary care, dental health, and mental health that demonstrate the following areas of expertise: (1) Working with underserved populations; (2) health care policy, recruitment and retention; (3) site administration; (4) customer service; (5) marketing; (6) organizational partnerships; (7) research; (8) and clinical practice. We are looking for nominees that either currently hold or have previously filled a role as site administrators, physicians, dentists, mid-level professionals (
The Department of Health and Human Services (HHS) will consider nominations of all qualified individuals with the areas of subject matter expertise noted above. Individuals may nominate themselves or other individuals, and professional associations and organizations may nominate one or more qualified persons for membership. Nominations shall state that the nominee is willing to serve as a member of the NACNHSC and appears to have no conflict of interest that would preclude the NACNHSC membership. Potential candidates will be asked to provide detailed information concerning financial interests, consultancies, research grants, and/or contracts that might be affected by recommendations of the NACNHSC to permit evaluation of possible sources of conflicts of interest.
A nomination package should include the following information for each nominee:
(1) A letter of nomination stating the name, affiliation, and contact information for the nominee, the basis for the nomination (
HHS strives to ensure that the membership of HHS federal advisory committees is balanced in terms of points of view represented and the committee's function. Every effort is made to ensure that the views of women, all ethnic and racial groups, and people with disabilities are represented on HHS federal advisory committees. The Department also encourages geographic diversity in the composition of the committee. The Department encourages nominations of qualified candidates from all groups and locations. Appointment to the NACNHSC shall be made without discrimination on the basis of age, race, ethnicity, gender, sexual orientation, disability, and cultural, religious, or socioeconomic status.
Office of the Secretary, Office of the Assistant Secretary for Health, Department of Health and Human Services.
Notice.
Pursuant to Section 10(a) of the Federal Advisory Committee Act, U.S.C. Appendix 2, notice is hereby given that the Secretary's Advisory Committee on Human Research Protections (SACHRP) will hold a meeting that will be open to the public. Information about SACHRP and the full meeting agenda will be posted on the SACHRP Web site at:
The meeting will be held on Thursday, December 3, 2015, from 8:30 a.m. until 5:00 p.m. and Friday, December 4, 2015, from 8:30 a.m. until 4:30 p.m.
Fishers Lane Conference Center, Terrace Level, 5635 Fishers Lane, Rockville, Maryland 20852.
Julia Gorey, J.D., Executive Secretary, SACHRP, or Jerry Menikoff, M.D., J.D., Director, Office for Human Research Protections (OHRP); U.S. Department of Health and Human Services, 1101 Wootton Parkway, Suite 200, Rockville, Maryland 20852; telephone: 240-453-8141; fax: 240-453-6909; email address:
Under the authority of 42 U.S.C. 217a, Section 222 of the Public Health Service Act, as amended, SACHRP was established to provide expert advice and recommendations to the Secretary of Health and Human Services, through the Assistant Secretary for Health, on issues and topics pertaining to or associated with the protection of human research subjects.
The meeting will open to the public at 8:30 a.m., on Thursday, December 3, followed by opening remarks from Dr. Jerry Menikoff, OHRP Director, and Dr. Jeffrey Botkin, SACHRP Chair. The Committee will hear the Subpart A Subcommittee (SAS) and Subcommittee on Harmonization (SOH) reports on the recent Notice of Proposed Rulemaking (NPRM) entitled Federal Policy for the Protection of Human Subjects (80 FR 53933, Sep. 8, 2015). Both days will be devoted to the discussion of the NPRM.
SAS was established by SACHRP in October 2006 and is charged with developing recommendations for consideration by SACHRP regarding the application of subpart A of 45 CFR part 46 in the current research environment.
SOH was established by SACHRP at its July 2009 meeting and charged with identifying and prioritizing areas in which regulations and/or guidelines for human subjects research adopted by various agencies or offices within HHS would benefit from harmonization, consistency, clarity, simplification and/or coordination.
The meeting will adjourn at 4:30 p.m. on December 4, 2015. Time for public comment sessions will be allotted both days.
Public attendance at the meeting is limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify one of the designated SACHRP points of contact at the address/phone number listed above at least one week prior to the meeting. Pre-registration is required for participation in the on-site public comment session; individuals may pre-register the day of the meeting. Individuals who would like to submit written statements as public comment should email or fax their comments to SACHRP at
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial
Under the provisions of Section 3507(a)(1)(D) of the Paperwork Reduction Act of 1995, the National Institutes of Health (NIH) has submitted to the Office of Management and Budget (OMB) a request for review and approval of the information collection listed below. This proposed information collection was previously published in the
To obtain a copy of the data collection plans and instruments or request more information on the proposed project contact: Dr. W. Fred Taylor Ph.D., Branch Chief, Capacity-Building Branch (CBB), Division of Training, Workforce Development, and Diversity (TWD), NIGMS, NIH, 45 Center Drive, Room 2AS43S, Bethesda MD 20892, or call non-toll-free number (301) 435-0760 or Email your request, including your address to:
OMB approval is requested for 3 years. There are no costs to respondents other than their time. The total estimated annualized burden hours are 613.
This document, originally published on October 29, 2015 (80 FR 66549), has been amended to extend the comment receipt date to December 31, 2015. The Office of Dietary Supplements (ODS) at the National Institutes of Health, in partnership with the National Library of Medicine (NLM), has developed a Dietary Supplement Label Database (DSLD) that is compiling all information from the labels of dietary supplements marketed in the United States. ODS welcomes comments about features to add and functionality improvements to make so the DSLD may become a more useful tool to users.
A federal stakeholder panel for the DSLD will consider all comments received. The ODS requests input from academic researchers, government agencies, the dietary supplement industry, and other interested parties, including consumers. The DSLD can be accessed online at
To ensure full consideration, all comments must be received by 11:59 p.m. EST, December 31, 2015.
Interested individuals and organizations should submit their responses to
Richard Bailen MBA, MHA, Office of Dietary Supplements, National Institutes of Health, 6100 Executive Boulevard, Room 3B01, Bethesda, MD 20892-7517, Phone: 301-435-2920, Fax: 301-480-1845, Email:
The DSLD is a free resource that captures all information present on dietary supplement labels as provided by the seller, including contents, ingredient amounts, and any health-related product statements, claims, and cautions. It also provides a downloadable photo of each label. Users can search for and organize this information in various ways. Research scientists, for example, could use the DSLD to determine total nutrient intakes from food and supplements in populations they study. Health care providers can learn the content of products their patients are taking. Consumers might use the DSLD to search for and compare products of interest.
The DSLD currently contains 50,000 labels, and it is expected to grow rapidly over the next three years to include most of the estimated 75,000+ dietary supplement products sold to American consumers. The DSLD is updated regularly to include any formulation changes and label information in a product. It also includes the labels of products that have been discontinued and are no longer sold. More information about the DSLD and its current capabilities is available at
ODS would like to receive ideas and suggestions for how the DSLD might evolve. What features might be added, improved, or enhanced—for example, in capabilities related to search, sorting, organization, and downloading of information—that would make it a more valuable tool for users?
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
National Institutes of Health, Public Health Service, HHS.
Notice.
This notice, in accordance with 35 U.S.C. 209 and 37 CFR part 404, that the National Cancer Institute, National Institutes of Health, Department of Health and Human Services, is contemplating the grant of an exclusive patent license to practice the inventions embodied in the following U.S. Patents and Patent Applications to Beacon Biomedical, Inc. (“Beacon”) located in Scottsdale, AZ, USA. A notice was previously published on December 6, 2013 in Volume 78, Number 235 for a period of thirty (30) days. Herein, the National Cancer Institute, National Institutes of Health, Department of Health and Human Services, is proposing a modification to the contents of the previous notice regarding the following intellectual property:
The patent rights in these inventions have been assigned to the government of the United States of America.
The prospective exclusive license territory may be worldwide and the field of use may be limited to the use of the Licensed Patent Rights to make, use and sell FDA approved and 510(k) cleared, or foreign equivalent, Point of Care (POC) tests, services and kits for the purpose of disease state recognition, detection, diagnosis, monitoring, association and risk-stratification of cancer.
Only written comments and/or applications for a license which are received by the NCI Technology Transfer Center on or before December 1, 2015 will be considered.
Requests for copies of the patent application, inquiries, and comments relating to the contemplated exclusive license should be directed to: Rose Freel, Ph.D. Licensing and Patenting Manager, Technology Transfer Center, National Cancer Institute, 8490 Progress Drive, Riverside 5, Suite 400, Frederick, MD 21702; Telephone: (301) 624-1257; Email:
Cripto-1 (Cr-1) is a member of the epidermal growth factor (EGF)-related families of peptides and is involved in the development and progression of various human carcinomas. In particular, Cr-1 overexpression has been detected in 50-90% of carcinomas of the colon, pancreas, stomach, gallbladder, breast, lung, endometrium and cervix. Current methodologies of cancer detection,
The previous notice published on December 6, 2013 contemplated the prospective grant of an exclusive license in a field of use that was limited to the use of the Licensed Patent Rights to develop FDA approved and/or 510K cleared Point of Care (POC) tests and kits for the purpose of disease state recognition, detection, diagnosis, monitoring, association and risk-stratification of colon and rectal cancer, breast cancer, and lung cancer. This notice serves to modify the prospective grant that may be limited to field of use as described in the Summary above.
The prospective exclusive license will be royalty bearing and will comply with the terms and conditions of 35 U.S.C. 209 and 37 CFR part 404. The prospective exclusive license may be granted unless within fifteen (15) days from the date of this published notice, the NCI receives written evidence and argument that establishes that the grant of the license would not be consistent with the requirements of 35 U.S.C. 209 and 37 CFR part 404.
Applications for a license in the field of use filed in response to this notice will be treated as objections to the grant of the contemplated exclusive license. Comments and objections submitted to this notice will not be made available for public inspection and, to the extent permitted by law, will not be released under the Freedom of Information Act, 5 U.S.C. 552.
Bureau of Indian Affairs, Interior.
Tribal consultation meetings.
The Bureau of Indian Education (BIE) will be conducting three consultation sessions to obtain oral and written comments on issues concerning the Johnson O'Malley (JOM) program. The sessions continue the previous dialogues conducted by the Bureau of Indian Affairs (BIA) and BIE in 2012 and 2015.
See the
See the
Ms. Jennifer L. Davis, Program Analyst-JOM, telephone (202) 208-4397.
As required by 25 U.S.C. 2011(b), the purpose of this consultation is to provide Indian Tribes, school boards, parents, Indian organizations and other interested parties with an opportunity to comment on issues raised during previous consultation sessions and future plans for the JOM program. The topics for the JOM Tribal Consultation are use of the 2014 JOM student count and the JOM funding methodology for 2015, 2016, and thereafter. The issues will be described in more detail in a Tribal consultation booklet issued by the BIE before the consultation sessions.
Tribal consultation sessions will be held on the following dates at the following location:
A consultation booklet for the sessions will be distributed to all federally-recognized Indian Tribes, Bureau Regional and Agency Offices and Bureau-funded schools. The booklet will also be available at each session and on the BIE Web site at
National Park Service, Interior.
Notice of availability.
The National Park Service announces the availability of the Draft Environmental Impact Statement for the Moose-Wilson Corridor Comprehensive Management Plan, Grand Teton National Park, Wyoming. The Draft Environmental Impact Statement analyzes four alternatives for future management of the corridor. Alternative C has been identified as the NPS preferred alternative.
The National Park Service will accept comments from the public through January 15, 2016. In addition, a public meeting will be conducted in the Jackson, Wyoming, area in the fall of 2015. Please check local newspapers and the Web site below for additional information.
Information will be available for public review and comment online at
David Vela, Superintendent, Grand Teton National Park, P.O. Drawer 170, Moose, Wyoming 83012-0170, (307) 739-3411,
In recent years, the Moose-Wilson corridor in Grand Teton National Park has experienced changes in ecological conditions, development patterns, and use by visitors and local residents. As a result, the National Park Service is conducting a comprehensive planning and environmental impact process to determine how best to protect park resources and values while providing appropriate opportunities for visitor
You are encouraged to comment on the draft plan via the Internet at
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
On the basis of the record
The Commission, pursuant to sections 705(b) and 735(b) of the Act (19 U.S.C. 1671d(b) and 19 U.S.C. 1673d(b)), instituted these investigations effective March 28, 2014, following receipt of a petition filed with the Commission and Commerce by the American Sugar Coalition and its members: American Sugar Cane League, Thibodaux, LA; American Sugarbeet Growers Association, Washington, DC; American Sugar Refining, Inc., West Palm Beach, FL; Florida Sugar Cane League, Washington, DC; Hawaiian Commercial and Sugar Company, Puunene, HI; Rio Grande Valley Sugar Growers, Inc., Santa Rosa, TX; Sugar Cane Growers Cooperative of Florida, Belle Glade, FL; and United States Beet Sugar Association, Washington, DC. The final phase of the investigations was scheduled by the Commission following notification of preliminary determinations by Commerce that imports of sugar from Mexico were subsidized within the meaning of section 703(b) of the Act (19 U.S.C. 1671b(b)) and dumped within the meaning of 733(b) of the Act (19 U.S.C. 1673b(b)). Notice of the scheduling of the final phase of the Commission's investigations and of a public hearing to be held in connection therewith was given by posting copies of the notice in the Office of the Secretary, U.S. International Trade Commission, Washington, DC, and by publishing the notice in the
The Commission made these determinations pursuant to sections 705(b) and 735(b) of the Tariff Act of 1930 (19 U.S.C. 1671d(b) and 19 U.S.C. 1673d(b)). It completed and filed its determinations in these investigations on November 6, 2015. The views of the Commission are contained in USITC Publication 4577 (November 2015), entitled
By order of the Commission.
United States International Trade Commission.
November 18, 2015 at 11:00 a.m.
Room 101, 500 E Street SW., Washington, DC 20436, Telephone: (202) 205-2000.
Open to the public
1. Agendas for future meetings: None.
2. Minutes.
3. Ratification List.
4. Vote in Inv. No. 701-TA-530 (Final) (Supercalendered Paper from Canada). The Commission is currently scheduled to complete and file its determination and views of the Commission on December 1, 2015.
5. Vote in Inv. Nos. 701-TA-473 and 731-TA-1173 (Review) (Potassium Phosphate Salts from China). The Commission is currently scheduled to complete and file its determinations and views of the Commission on December 4, 2015.
6. Outstanding action jackets: None.
In accordance with Commission policy, subject matter listed above, not disposed of at the scheduled meeting, may be carried over to the agenda of the following meeting.
By order of the Commission.
U.S. International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has determined to review in part a final initial determination (“ID”) issued by the presiding administrative law judge (“ALJ”), finding no violation of section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337.
Robert Needham, Office of the General Counsel, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436, telephone (202) 708-5468. Copies of non-confidential documents filed in connection with this investigation are or will be available for inspection during official business hours (8:45 a.m. to 5:15 p.m.) in the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436, telephone (202) 205-2000. General information concerning the Commission may also be obtained by accessing its Internet server (
The Commission instituted this investigation on September 9, 2014, based on a complaint filed by Adrian Rivera of Whittier, California, and Adrian Rivera Maynez Enterprises, Inc., of Santa Fe Springs, California (together, “ARM”). 79 FR 53445-46. The complaint alleges violations of section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. 1337, in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain beverage brewing capsules, components thereof, and products containing the same that infringe claims 5-8 and 18-20 of U.S. Patent No. 8,720,320 (“the '320 patent”).
The Commission terminated the investigation with respect to Melitta, Spark, LBP, and B. Marlboros based on the entry of consent orders and terminated the investigation with respect to Amazon based on a settlement agreement. Notice (Dec. 18, 2014); Notice (Jan. 13, 2015); Notice (Mar. 27, 2015); Notice (Apr. 10, 2015). The Commission also found Eko Brands and Evermuch in default for failing to respond to the complaint and notice of investigation. Notice (May 18, 2015). Accordingly, Solofill and DongGuan (together, “Respondents”) were the only respondents actively participating in the investigation at the time of the issuance of the final ID.
On September 4, 2015, the ALJ issued his final ID finding no violation of section 337. The ID found that ARM had established every element for finding a violation of section 337 except for infringement. The ID found that Respondents were not liable for direct infringement because direct infringement required the combination of Respondents' products with a third-party single serve beverage brewer, and that Respondents were not liable for induced or contributory infringement because they did not have pre-suit knowledge of the '320 patent. The ID did find that Respondents' products directly infringed when combined with a third-party single serve coffee brewer, that the asserted claims have not been shown invalid by clear and convincing evidence, and that ARM satisfied both the technical and economic prongs of the domestic industry requirement. The ALJ also issued his recommendation on remedy and bonding along with his ID.
On September 21, 2015, Complainants petitioned for review of the ID's findings that Respondents were not liable for induced and contributory infringement because of a lack of pre-suit knowledge, and Respondents petitioned for review of several of the ID's findings. On September 29, 2015, the parties opposed each other's petitions, and the Commission Investigative Attorney opposed both petitions.
Having examined the record of this investigation, including the ALJ's final ID, the petitions for review, and the responses thereto, the Commission has determined to review the final ID in part. Specifically the Commission has determined to review the following: (1) The ID's findings on the construction, infringement, and technical prong of the domestic industry requirement for the limitation “a needle-like structure,
In connection with its review, the Commission is interested in briefing only on the following issue:
The Commission recently determined that the “knowledge of the patent” element for contributory infringement can be satisfied through service of a section 337 complaint.
The parties have been invited to brief only the discrete issue described above, with reference to the applicable law and evidentiary record. The parties are not to brief other issues on review, which are adequately presented in the parties' existing filings.
In connection with the final disposition of this investigation, the Commission may (1) issue an order that could result in the exclusion of the subject articles from entry into the United States, and/or (2) issue a cease and desist order that could result in the respondent being required to cease and desist from engaging in unfair acts in the importation and sale of such articles. Accordingly, the Commission is interested in receiving written submissions that address the form of remedy, if any, that should be ordered. If a party seeks exclusion of an article from entry into the United States for purposes other than entry for consumption, the party should so indicate and provide information establishing that activities involving other types of entry either are adversely affecting it or likely to do so. For background,
If the Commission contemplates some form of remedy, it must consider the effects of that remedy upon the public interest. The factors the Commission will consider include the effect that an exclusion order and/or a cease and desist order would have on (1) the public health and welfare, (2) competitive conditions in the U.S. economy, (3) U.S. production of articles that are like or directly competitive with those that are subject to investigation, and (4) U.S. consumers. The Commission is therefore interested in receiving written submissions that address the aforementioned public interest factors in the context of this investigation.
If the Commission orders some form of remedy, the U.S. Trade Representative, as delegated by the President, has 60 days to approve or disapprove the Commission's action.
Persons filing written submissions must file the original document electronically on or before the deadlines stated above and submit 8 true paper copies to the Office of the Secretary by noon the next day pursuant to § 210.4(f) of the Commission's Rules of Practice and Procedure (19 CFR 210.4(f)). Submissions should refer to the investigation number (“Inv. No. 337-TA-929”) in a prominent place on the cover page and/or the first page. (
Any person desiring to submit a document to the Commission in confidence must request confidential treatment. All such requests should be directed to the Secretary to the Commission and must include a full statement of the reasons why the Commission should grant such treatment.
The authority for the Commission's determination is contained in section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and in part 210 of the Commission's Rules of Practice and Procedure (19 CFR part 210).
By order of the Commission.
Notice is hereby given that, on October 15, 2015, pursuant to Section 6(a) of the National Cooperative Research and Production Act of 1993, 15 U.S.C. 4301
Also, Philips Medical, Murray Hill, NJ; Arlon LLC, Bear, DE; and Integral Technology, Lake Forrest, CA, have withdrawn as parties to this venture.
No other changes have been made in either the membership or planned activity of the group research project. Membership in this group research project remains open, and HDPUG intends to file additional written notifications disclosing all changes in membership.
On September 14, 1994, HDPUG filed its original notification pursuant to Section 6(a) of the Act. The Department of Justice published a notice in the
The last notification was filed with the Department on February 23, 2015. A notice was published in the
Notice is hereby given that, on October 22, 2015 pursuant to section 6(a) of the National Cooperative Research and Production Act of 1993, 15 U.S.C. 4301
No other changes have been made in either the membership or planned activity of the group research project. Membership in this group research project remains open, and OpenDaylight intends to file additional written notifications disclosing all changes in membership.
On May 23, 2013, OpenDaylight filed its original notification pursuant to section 6(a) of the Act. The Department of Justice published a notice in the
The last notification was filed with the Department on August 3, 2015. A notice was published in the
Notice is hereby given that, on October 8, 2015, pursuant to section 6(a) of the National Cooperative Research and Production Act of 1993, 15 U.S.C. 4301
Also, the following members have changed their names: TNBS.FR to T&BS SAS, Paris, FRANCE; Albanian Mobile Communications Sh. A. to Telekom Albania Sh.A., Laprake, ALBANIA; JDSU to Viavi Solutions, Muehleweg, GERMANY; Mobile Telecommunications Company K.S.C.P to Zain Group, Kuwait City, KUWAIT; Voo to Nethys SA—Betv/VOO, Liège, BELGIUM; and Quindell Telecoms to SMI Technologies, Portsmouth, UNITED KINGDOM.
In addition, the following parties have withdrawn as parties to this venture: 4STARS Ltd., Zagreb, CROATIA; Affinegy, Inc., Austin, TX; AIST Limited, Stanmore, UNITED KINGDOM; Alvenie Systems Ltd., Purley, UNITED KINGDOM; Aria Systems Ltd., Reading, UNITED KINGDOM; ARSAT, Buenos Aires, ARGENTINA; Beijing C-platform Digital Technology Co., Ltd., Beijing, PEOPLE'S REPUBLIC OF CHINA; BNM Incorporated, Indialantic, FL; Boss Portal, Auckland, NEW ZEALAND; CableVision, SA, Buenos Aires, ARGENTINA; CalIT Consulting, Hurth, GERMANY; Cellex Networks Systems (2007) Ltd., Bne Beraq, ISRAEL; CIMI Corporation, Voorhees, NJ; CircuitVision, Tampa, FL; Clarebourne Consultancy Ltd., Farnham, UNITED KINGDOM; Conexion S.A., Asuncion, PARAGUAY; CSN Technology Pty Ltd., Eveleigh, AUSTRALIA; Cycle30, Seattle, WA; DAM Solutions, Mexico, MEXICO; DIRECTV, Inc., El Segundo, CA; EA Principals, Inc., Alexandria, VA; Ebizu Sdn. Bhd., Kuala Lumpur, MALAYSIA;
No other changes have been made in either the membership or planned activity of the group research project. Membership in this group research project remains open, and The Forum intends to file additional written notifications disclosing all changes in membership.
On October 21, 1988, the Forum filed its original notification pursuant to section 6(a) of the Act. The Department of Justice published a notice in the
The last notification was filed with the Department on July 8, 2015. A notice was published in the
Notice is hereby given that, on September 28, 2015, pursuant to section 6(a) of the National Cooperative Research and Production Act of 1993, 15 U.S.C. 4301
Also, Chipdata, Inc., Richardson, TX; Electronic Tools Co., Sonoma, CA; Ericsson, Stockholm, SWEDEN; Fujitsu Ltd., Sunnyvale, CA; Monterey Design Systems, Inc., Sunnyvale, CA; Multi-Gig Limited, Wellingborough, UNITED KINGDOM; Semiconductor Research Corporation (SRC), Research Triangle Park, NC; Motorola, Inc., Tempe, AZ; and Sagantec, Fremont, CA, have withdrawn as parties to this venture.
No other changes have been made in either the membership or planned activity of the group research project. Membership in this group research project remains open, and Si2 intends to file additional written notifications disclosing all changes in membership.
On December 30, 1988, Si2 filed its original notification pursuant to section 6(a) of the Act. The Department of Justice published a notice in the
The last notification was filed with the Department on July 30, 2003. A notice was published in the
Justice Management Division, Department of Justice.
30-day notice.
The Department of Justice (DOJ), Justice Management Division will submit the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995. This proposed information was previously published in the
Comments are encouraged and will be accepted for an additional 30 days until December 16, 2015.
If you have additional comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact Mr. Neil Ryder, Director, Internal Review and Evaluation, United States Department of Justice, Justice Management Division, Two Constitution Square, 145 N Street NE., Room 8W-222, Washington, DC 20530. Written comments and/or suggestions can also be directed to the Office of Management and Budget, Office of Information and Regulatory Affairs, Attention Department of Justice Desk Officer, Washington, DC 20503 or sent to
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Evaluate whether and if so how the quality, utility, and clarity of the information to be collected can be enhanced; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Overview of this information collection:
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If additional information is required contact: Jerri Murray, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE., Room 3E-405B, Washington, DC 20530.
Antitrust Division, Department of Justice.
30-day notice.
The Department of Justice (DOJ), Antitrust Division (ATR), will be submitting the following information collection request to the Office of
Comments are encouraged and will be accepted for 30 days until January 15, 2016.
If you have additional comments especially on the estimated public burden or associated response time, suggestions, or need a copy of the proposed information collection instrument with instructions or additional information, please contact Jill Ptacek, Attorney, Antitrust Division, United States Department of Justice, 450 Fifth Street NW., Suite 8000, Washington, DC 20530 (phone: 202-307-6607). Written comments and/or suggestions can also be directed to the Office of Management and Budget, Office of Information and Regulatory Affairs, Attention Department of Justice Desk Officer, Washington, DC 20530 or sent to
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address one or more of the following four points:
—Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
—The accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
—Whether and if so how the quality, utility, and clarity of the information to be collected can be enhanced; and
—Whether the agency's collection process minimizes the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
Overview of this information collection:
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Primary: Business or other for profit.
Other: None.
Abstract: The Department of Justice evaluates the competitive impact of issuances, transfers and exchanges of federal coal leases. These forms seek information regarding a prospective coal lessee's existing coal reserves. The Department uses this information to determine whether the issuance, transfer or exchange of the federal coal lease is consistent with the antitrust laws.
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If additional information is required contact: Jerri Murray, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE., 3E.405B, Washington, DC 20530.
On November 5, 2015, the Department of Justice lodged a proposed Amendment to Consent Decree with the United States District Court for the Northern District of New York in the lawsuit entitled
The original Consent Decree, entered in 2001, resolved certain claims of the United States under Sections 106 and 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”), 42 U.S.C. 9606 and 9607(a), in connection with the performance of the remedial design and remedial action (“RD/RA”) selected for the Tri-Cities Barrel Superfund Site, located in the Town of Fenton, Broome County, New York (the “Site”), by the United States Environmental Protection Agency (“EPA”) in a Record of Decision executed March 31, 2000, and the reimbursement of response costs. The original Consent Decree required the active remediation of the soils, sediments and groundwater at the Site, with the soils and sediment remediation having now been completed. The Amendment to the Consent Decree is made necessary because EPA in 2011 issued a ROD Amendment which changes the active groundwater remediation to Monitoring Natural Attenuation (MNA).
The publication of this notice opens a period for public comment on the Amendment to Consent Decree. Comments should be addressed to the Assistant Attorney General, Environment and Natural Resources Division, John C. Cruden and should refer to
During the public comment period, the Amendment to Consent Decree may be examined and downloaded at this Justice Department Web site:
Employment and Training Administration, Department of Labor.
Notice.
The Employment and Training Administration (ETA) of the Department of Labor (Department) is issuing this notice to announce the new Adverse Effect Wage Rate (AEWR) for the employment of temporary or seasonal nonimmigrant foreign workers (H-2A workers) to perform herding or production of livestock on the range.
AEWRs are the minimum wage rates the Department has determined must be offered and paid by employers to H-2A workers and workers in corresponding employment so that the wages of similarly employed U.S. workers will not be adversely affected. 20 CFR 655.100(b). In this notice, the Department announces the new AEWR for workers engaged in the herding or production of livestock on the range, as required by the methodology established in the
William W. Thompson, II, Acting Administrator, Office of Foreign Labor Certification, U.S. Department of Labor, Room C-4312, 200 Constitution Avenue NW., Washington, DC 20210. Telephone: 202-693-3010 (this is not a toll-free number). Individuals with hearing or speech impairments may access the telephone number above via TTY by calling the toll-free Federal Information Relay Service at 1-800-877-8339.
On October 16, 2015, the Department published regulations in the
As provided in 20 CFR 655.211(c) of the H-2A Herder Rule, the methodology for establishing the monthly AEWR for range occupations in all states is based on the current Federal minimum wage ($7.25/hour) multiplied by 48 hours per week, and then multiplied by 4.333 weeks per month. In applying the transition wage rate methodology set forth under 20 CFR 655.211(d)(1), the Department is setting the initial national monthly AEWR at 80 percent of the full wage calculated using the H-2A Herder Rule methodology. Thus, the national monthly AEWR rate for all range occupations in the H-2A program is calculated at (7.25 × 48 × 4.333 × .80 = 1,206.31) or $1,206.31.
Accordingly, any employer certified or seeking certification for range workers must pay each worker a wage that is at least the highest of the monthly AEWR of $1,206.31, the agreed-upon collective bargaining wage, or the applicable minimum wage imposed by Federal or State legislation or judicial action, effective immediately. Given the mid-month effective date of the new AEWR, the prorated amount due for employers obligated to pay the new AEWR for work performed for the portion of November following the effective date is $603.15.
Notice.
The Department of Labor (DOL) is submitting the Employee Benefits Security Administration (EBSA) sponsored information collection request (ICR) titled, “Disclosures for Participant Directed Individual Account Plans,” to the Office of Management and Budget (OMB) for review and approval for continued use, without change, in accordance with the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501
The OMB will consider all written comments that agency receives on or before December 16, 2015.
A copy of this ICR with applicable supporting documentation; including a description of the likely respondents, proposed frequency of response, and estimated total burden may be obtained free of charge from the RegInfo.gov Web site at
Submit comments about this request by mail or courier to the Office of Information and Regulatory Affairs,
Michel Smyth by telephone at 202-693-4129, TTY 202-693-8064, (these are not toll-free numbers) or by email at
This ICR seeks to extend PRA authority for the Disclosures for Participant Directed Individual Account Plans information collection. Employee Retirement Income Security Act of 1974 (ERISA) section 404(c), 29 U.S.C. 1104(c), provides that, if an individual account pension plan permits a participant or beneficiary to exercise control over assets in his or her account and the participant or beneficiary in fact exercises such control (as determined under DOL regulations), the participant or beneficiary shall not be deemed to be a fiduciary by such exercise of control and no person otherwise a fiduciary to the plan shall be liable for any loss or breach that results solely from this exercise of control. Regulations 29 CFR 2550.404a-5 provides that, when a plan allocates investment responsibilities to participants or beneficiaries, the plan administrator must take action to ensure they are provided with sufficient information regarding the plan and its investment options, including fee and expense information, to make informed decisions with regard to the management of their individual accounts; therefore, the regulation requires a plan administrator to provide each participant or beneficiary with certain plan-related information and investment-related information. ERISA section 404 authorizes this information collection.
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless it is approved by the OMB under the PRA and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid Control Number.
OMB authorization for an ICR cannot be for more than three (3) years without renewal, and the current approval for this collection is scheduled to expire on November 30, 2015. The DOL seeks to extend PRA authorization for this information collection for three (3) more years, without any change to existing requirements. The DOL notes that existing information collection requirements submitted to the OMB receive a month-to-month extension while they undergo review. For additional substantive information about this ICR, see the related rulemaking notice published in the
Interested parties are encouraged to send comments to the OMB, Office of Information and Regulatory Affairs at the address shown in the
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
National Aeronautics and Space Administration (NASA).
Notice of information collection.
The National Aeronautics and Space Administration, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. 3506(c)(2)(A)).
All comments should be submitted within 30 calendar days from the date of this publication.
Interested persons are invited to submit written comments regarding the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 7th Street NW., Washington, DC 20543. Attention: Desk Officer for NASA.
Requests for additional information or copies of the information collection instrument(s) and instructions should be directed to Ms. Frances Teel, NASA Clearance Officer, NASA Headquarters, 300 E Street SW., JF000, Washington, DC 20546, or
The NASA Contractor Financial Management Reporting System is the basic financial medium for contractor reporting of estimated and incurred costs, providing essential data for projecting costs and hours to ensure that contractor performance is realistically planned and supported by dollar and labor resources. The data provided by
Comments submitted in response to this notice will be summarized and included in the request for OMB approval of this information collection. They will also become a matter of public record.
NASA collects this information electronically and that is the preferred manner, however information may also be collected via mail or fax.
Comments are invited on: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of NASA, including whether the information collection has practical utility; (2) the accuracy of NASA's estimate of the burden (including hours and cost) of the proposed collection of information; (3) ways to minimize the burden of the collection of information on respondents.
Comments submitted in response to this notice will be summarized and included in the request for OMB approval of this information collection. They will also become a matter of public record.
National Endowment for the Arts, National Foundation on the Arts and Humanities.
Notice of meetings.
Pursuant to the Federal Advisory Committee Act, as amended, notice is hereby given that 20 meetings of the Arts Advisory Panel to the National Council on the Arts will be held by teleconference.
All meetings are Eastern time and ending times are approximate:
National Endowment for the Arts, Constitution Center, 400 7th St. SW., Washington, DC, 20506.
Further information with reference to these meetings can be obtained from Ms. Kathy Plowitz-Worden, Office of Guidelines & Panel Operations, National Endowment for the Arts, Washington, DC, 20506;
The closed portions of meetings are for the purpose of Panel review, discussion, evaluation, and recommendations on financial assistance under the National Foundation on the Arts and the Humanities Act of 1965, as amended, including information given in confidence to the agency. In accordance with the determination of the Chairman of February 15, 2012, these sessions will be closed to the public pursuant to subsection (c)(6) of section 552b of title 5, United States Code.
In accordance with the Federal Advisory Committee Act (Pub., L. 92-463, as amended), the National Science Foundation announces the following meeting:
1:00 p.m.-8:00 p.m.: Closed; Draft report on education and research activities.
Noon to 3:00 p.m.: Closed; Complete written site visit report with preliminary recommendations.
In accordance with Federal Advisory Committee Act (Pub. L. 92-463, as amended), the National Science Foundation announces the following meeting:
December 9, 2015; 8:45 a.m. to 12:00 p.m. (EST).
Nuclear Regulatory Commission.
Request for information.
The U.S. Nuclear Regulatory Commission (NRC) is requesting information from the general public on a number of issues associated with medical treatment of patients with sodium iodide I-131 (hereafter referred to as I-131). Specifically, the NRC would like input on patient concerns about medical treatment involving the use of I-131, information that physicians use to make decisions on when it is safe to release I-131 patients based on radiation exposure concerns, radiation safety information used by I-131 patients after their release, and the availability of a radiation safety informational guidance brochure for I-131 patients that can be distributed nationwide. The information collected will be used to develop a Web site to provide patients with clear and consistent information about radioactive iodine treatments and to revise NRC patient release guidance.
Submit information and comments by February 16, 2016. Information and comments received after this date will be considered if it is practical to do so, but the NRC is able to assure consideration only for information and comments received on or before this date.
You may submit information and comments by any of the following methods (unless this document describes a different method for submitting information and comments on a specific subject):
• Federal Rulemaking Web site: Go to
• Mail information and comments to: Cindy Bladey, Office of Administration,
For additional direction on obtaining and submitting information and comments, see “Obtaining and Submitting Information and Comments” in the
Donna-Beth Howe, Ph.D., Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-7848; email:
Please refer to Docket ID NRC-2015-0020 when contacting the NRC about the availability of information for this action. You may obtain publicly-available information related to this action by any of the following methods:
• Federal rulemaking Web site: Go to
• NRC's Agencywide Documents Access and Management System (ADAMS): You may obtain publicly-available documents online in the ADAMS Public Documents collection at
• NRC's PDR: You may examine and purchase copies of public documents at the NRC's PDR, Room O1-F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852.
Please include Docket ID NRC-2015-0020 in your submission.
The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your submission. The NRC will post all submissions at
If you are requesting or aggregating information from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their submission. Your request should state that the NRC does not routinely edit submissions to remove such information before making the submissions available to the public or entering the submission into ADAMS.
In a March 10, 2014, memorandum to the Commission (COMAMM-14-0001/COMWDM-14-0001, “Background and Proposed Direction to NRC Staff to Verify Assumptions Made Concerning Patient Release Guidance” (see
In the Staff Requirements Memorandum to COMAMM-14-0001/COMWDM-14-0001 (see
The NRC is interested in obtaining input from as many stakeholders as possible, including the NRC's Advisory Committee on the Medical Use of Isotopes, professional organizations, physicians, patients, patient advocacy groups, licensees, Agreement States, and other interested individuals. The focus of this information gathering effort is to obtain: Information that patients believe will help them understand the I-131 treatment (also referred to as Radioactive Iodine (RAI)) procedures, the physician's or licensee's best practices when making informed decisions on releasing RAI treatment patients, and information provided to patients on how to reduce radiation doses to others. The NRC is also interested in learning if patient advocacy, medical professional organizations, licensees, or other individuals have brochures that already contain the information requested.
The NRC is considering establishing a Web site that provides potential patients with information on RAI treatment procedures so that patients will understand the reason for the procedures, the process, and how to reduce radiation exposure to others. Some of this is medical information that is outside the NRC's field of expertise. The NRC would like to be able to provide links to other sites providing this medical information. The NRC may develop the basic radiation safety information itself, but could provide links if established sites already have this information.
The NRC is also seeking input from patients, patient advocacy groups, and other interested individuals to articulate concerns that may not be included in the topics identified in this section.
If you have, or know of, a Web site that that can be used to explain the disease and treatment process, and addresses one or more of the following topics, please provide the link to the NRC.
• What is radioactivity?
• What is radioactive iodine (RAI)?
• RAI treatment:
• Any explanation of how radiation is used in the treatment should include clear information that the patient will receive radioactive material, emit radiation, retain radioactive material, and release radioactive material.
• What to expect before and after receiving the treatment.
• Side effects of RAI treatment.
• Basic radiation safety:
• Appropriate venues for recovery after release.
• Precautions to take after receiving treatment.
• Risks to others, to include risks to young children and pregnant women.
• Expected general behaviors after release.
When identifying a Web site, indicate the topic it addresses and provide a link to that specific information on the topic.
The NRC is looking for best practices used by individual physicians and licensees that focus on enhancing the ability to make informed radiation safety decisions on the release of individual patients from their radiation safety control under the patient release criteria in the NRC's medical use regulations. The NRC expects the physician (licensee) to have a dialog with the patient that will ultimately lead to an informed decision on when the patient should be released from its radiation safety control based on radiation exposure considerations (this includes immediate or delayed release, in addition to hospitalization). The NRC is also interested in knowing whether a patient/licensee acknowledgment form documenting this dialog exists and is part of the physicians' best practices. The NRC believes this dialog would include some or all of the following:
• The patient's ability to understand the language of the physician (licensee) or need for an interpreter that understands the procedure.
• The need for a family member or another support person present to facilitate better retention of information.
• A discussion with the patient to determine suitability for release.
• Description of the patient's transportation from the medical facility to home.
• Discussion of the patient's normal daily behavior and patterns, including but not limited to:
• The patient's normal/routine social interactions.
• The patient's normal/routine working environment and tasks.
• The patient's normal/routine living arrangements.
• The planned changes to the patient's normal/routine behaviors during the treatment period (have friend or family member accompany the patient or spend time with patient, change in living arrangements, etc.).
• Financial considerations that will affect the patient's preference on early or delayed release.
• Discussion to evaluate patient's ability to understand and follow instructions.
• Discussion to evaluate of patient's willingness to follow instructions.
• Discussion to evaluate the level of disruption to patient routine lifestyle, if released, and the ability of the patient to make and follow the changes, if released.
If you have a policy or procedure that provides you with the confidence that you are releasing the patient at the appropriate time, please describe your policy or provide your procedure. If the policy or procedure includes a patient/licensee acknowledgement form, or if you have a stand-alone form, documenting the patient/licensee discussion, please provide it. The policy, procedure, or form could include some of the topics listed but may include others. Indicate when this type of discussion with the patients takes place (
The NRC would also like input from the patient's or other interested individual's perspective of the optimal time for the discussion to take place so that both the patient and the medical facility have confidence the release decision is appropriate. How much time is needed to allow patients to make different living, working, transportation arrangements? The NRC is also seeking input from patients, patient advocacy groups, and other interested individuals to articulate other topics that should be included in the discussion.
The Commission directed the NRC staff to develop standardized guidance for licensees to provide to their patients that would help to reduce the variability of instructions provided to patients and eliminate some of the uncertainty regarding the type of information that is provided to the patient. While the NRC currently prefers to develop performance based guidance (articulating objectives but not telling licensees how to reach those objectives), prescriptive guidance (
If you have guidance documents that you believe provide clear instructions to released patients, please provide a copy to the NRC. If your guidance includes topics not addressed below, indicate why you think each is an important topic to include. If it does not address one of the topics and you believe that topic is not needed, describe why it is not needed.
• What “tools” (or methods/means) can the patient use to protect others once released?
• Are both oral and written information presented in the patient's native language and presented in a manner understandable to both the patient and physician (licensee)?
• Does the medical facility/licensee have access to an interpreting service to make sure that oral and written information and instructions are understood?
• How are instructions personalized to the individual patient?
• Does the medical facility explain how to limit the exposures to others (especially to young children and pregnant women)?
• Arrangements for protecting others once arriving at home.
• Informed how long special care must be exercised.
• Are actions described that the patient can take to minimize the exposure of people both inside and outside the home?
• Do transportation instructions from the medical facility to home match the patient's plans?
• Are discussions held on managing biological wastes and trash in accordance with NRC, state, and local requirements?
• Are discussions held to identify whom to contact in the event that questions arise during the recovery period?
• Are discussions held on where to go for emergency care?
The NRC is also seeking input from patients, patient advocacy groups, and other interested individuals to articulate topics that should be included in the instructions provided to released patients. Further, when do you want to be provided with these instructions? Are the instructions provided in a manner that is easy to understand and
The NRC is seeking identification of a brochure that you believe provides clear guidance on the release of patients treated with I-131. If you have or know of such a brochure please send the NRC a copy or a link to it. The intent is to identify a brochure that could be distributed nationwide.
This information request contains information collection requirements that are subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The burden to the public for these information collections is estimated to average 0.25 to 0.50 hours per response, including time for reviewing instructions, searching existing data sources, gathering data, performing necessary analyses, and completing and reviewing the information collection. This information collection request only information already possessed by the responder and does not request the responder develop any new data.
The NRC may not conduct or sponsor, and a person is not required to respond to, a request for information or an information collection requirement unless the requesting document displays a currently valid OMB control number.
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
License application; opportunity to request a hearing and petition for leave to intervene; order.
The U.S. Nuclear Regulatory Commission (NRC) has received an application from Rare Element Resources, Inc., for a license to possess and use source material associated with its Bear Lodge Project. The Bear Lodge Project includes a mine in the Black Hills National Forest in Crook County, Wyoming for the purpose of extracting rare earth element ores, and a rare earth element processing plant in Weston County, Wyoming. In addition, the license application contains sensitive unclassified non-safeguards information (SUNSI).
A request for a hearing or petition for leave to intervene must be filed by January 15, 2016. Any potential party as defined in § 2.4 of title 10 of the
Please refer to Docket ID NRC-2015-0255 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:
• Federal Rulemaking Web site: Go to
• NRC's Agencywide Documents Access and Management System (ADAMS): You may obtain publicly-available documents online in the ADAMS Public Documents collection at
• NRC's PDR: You may examine and purchase copies of public documents at the NRC's PDR, Room O1-F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852.
Kenneth Kalman, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-6664, email:
The NRC has received, by letter dated May 4, 2015 (ADAMS Accession No. ML15132A726), an application from Rare Element Resources Inc., to possess and use up to 10 curies of unsealed, non-volatile thorium hydroxide and to possess and use unlimited quantities of unsealed, non-volatile source material in any bound form. The source material will be uranium and thorium in their natural isotopic abundance in concentrations greater than 0.05 percent by weight. The NRC staff will document its review of this license application in a safety evaluation report and an environmental assessment.
The license application is available in ADAMS under Accession No. ML15134A378. The NRC has identified the following documents as containing SUNSI and is withholding these documents from public disclosure pursuant to Section 304 of the National Historic Preservation Act of 1966, 54 U.S.C. 307103.
• “Stand Alone Report 10, A Class III Cultural Resource Inventory of the Bear Lodge Project—Upton Plant Site.”
• The two Tribal reports referenced in Section 7.3, “Historic, Scenic, and Cultural Resources,” of the application.
Within 60 days after the date of publication of this notice, any person(s) whose interest may be affected by this action may file a request for a hearing and a petition to intervene with respect to issuance of the amendment to the subject facility operating license or combined license. Requests for a hearing and a petition for leave to intervene shall be filed in accordance with the Commission's “Agency Rules of Practice and Procedure” in 10 CFR part 2. Interested person(s) should consult a current copy of 10 CFR 2.309, which is available at the NRC's PDR, located in One White Flint North, Room O1-F21 (first floor), 11555 Rockville Pike, Rockville, Maryland 20852. The NRC's regulations are accessible electronically from the NRC Library on the NRC's Web site at
As required by 10 CFR 2.309, a petition for leave to intervene shall set forth, with particularity, the interest of the petitioner in the proceeding and how that interest may be affected by the results of the proceeding. The petition should specifically explain the reasons why intervention should be permitted, with particular reference to the following general requirements: (1) The name, address, and telephone number of the requestor or petitioner; (2) the nature of the requestor's/petitioner's right under the Act to be made a party to the proceeding; (3) the nature and extent of the requestor's/petitioner's property, financial, or other interest in the proceeding; and (4) the possible effect of any decision or order which may be entered in the proceeding on the requestor's/petitioner's interest. The petition must also set forth the specific contentions which the requestor/petitioner seeks to have litigated at the proceeding.
Each contention must consist of a specific statement of the issue of law or fact to be raised or controverted. In addition, the requestor/petitioner shall provide a brief explanation of the bases for the contention and a concise statement of the alleged facts or expert opinion that support the contention and on which the requestor/petitioner intends to rely in proving the contention at the hearing. The requestor/petitioner must also provide references to those specific sources and documents of which the petitioner is aware and on which the requestor/petitioner intends to rely to establish those facts or expert opinion. The petition must include sufficient information to show that a genuine dispute exists with the applicant on a material issue of law or fact. Contentions shall be limited to matters within the scope of the amendment under consideration. The contention must be one which, if proven, would entitle the requestor/petitioner to relief. A requestor/petitioner who fails to satisfy these requirements with respect to at least one contention will not be permitted to participate as a party.
Those permitted to intervene become parties to the proceeding, subject to any limitations in the order granting leave to intervene, and have the opportunity to participate fully in the conduct of the hearing with respect to resolution of that person's admitted contentions, including the opportunity to present evidence and to submit a cross-examination plan for cross-examination of witnesses, consistent with NRC regulations, policies, and procedures. The Atomic Safety and Licensing Board will set the time and place for any prehearing conferences and evidentiary hearings, and the appropriate notices will be provided.
Petitions for leave to intervene must be filed no later than 60 days from the date of publication of this notice. Requests for hearing, petitions for leave to intervene, and motions for leave to file new or amended contentions that are filed after the 60-day deadline will not be entertained absent a determination by the presiding officer that the filing demonstrates good cause by satisfying the three factors in 10 CFR 2.309(c)(1)(i)-(iii).
A State, local governmental body, Federally-recognized Indian tribe, or agency thereof, may submit a petition to the Commission to participate as a party under 10 CFR 2.309(h)(1). The petition should state the nature and extent of the petitioner's interest in the proceeding. The petition should be submitted to the Commission by January 15, 2016. The petition must be filed in accordance with the filing instructions in the “Electronic Submissions (E-Filing)” section of this document, and should meet the requirements for petitions for leave to intervene set forth in this section, except that under § 2.309(h)(2) a State, local governmental body, or Federally-recognized Indian tribe, or agency thereof does not need to address the standing requirements in 10 CFR 2.309(d) if the facility is located within its boundaries. A State, local governmental body, Federally-recognized Indian tribe, or agency thereof may also have the opportunity to participate under 10 CFR 2.315(c).
If a hearing is granted, any person who does not wish, or is not qualified, to become a party to the proceeding may, in the discretion of the presiding officer, be permitted to make a limited appearance pursuant to the provisions of 10 CFR 2.315(a). A person making a limited appearance may make an oral or written statement of position on the issues, but may not otherwise participate in the proceeding. A limited appearance may be made at any session of the hearing or at any prehearing conference, subject to the limits and conditions as may be imposed by the presiding officer. Persons desiring to make a limited appearance are requested to inform the Secretary of the Commission by January 15, 2016.
All documents filed in NRC adjudicatory proceedings, including a request for hearing, a petition for leave to intervene, any motion or other document filed in the proceeding prior to the submission of a request for hearing or petition to intervene, and documents filed by interested governmental entities participating under 10 CFR 2.315(c), must be filed in accordance with the NRC's E-Filing rule (72 FR 49139; August 28, 2007). The E-Filing process requires participants to submit and serve all adjudicatory documents over the internet, or in some cases to mail copies on electronic storage media. Participants may not submit paper copies of their filings unless they seek an exemption in accordance with the procedures described below.
To comply with the procedural requirements of E-Filing, at least ten 10 days prior to the filing deadline, the participant should contact the Office of the Secretary by email at
Information about applying for a digital ID certificate is available on the NRC's public Web site at
If a participant is electronically submitting a document to the NRC in accordance with the E-Filing rule, the
Once a participant has obtained a digital ID certificate and a docket has been created, the participant can then submit a request for hearing or petition for leave to intervene. Submissions should be in Portable Document Format (PDF) in accordance with NRC guidance available on the NRC's public Web site at
A person filing electronically using the NRC's adjudicatory E-Filing system may seek assistance by contacting the NRC Meta System Help Desk through the “Contact Us” link located on the NRC's public Web site at
Participants who believe that they have a good cause for not submitting documents electronically must file an exemption request, in accordance with 10 CFR 2.302(g), with their initial paper filing requesting authorization to continue to submit documents in paper format. Such filings must be submitted by: (1) First class mail addressed to the Office of the Secretary of the Commission, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemaking and Adjudications Staff; or (2) courier, express mail, or expedited delivery service to the Office of the Secretary, Sixteenth Floor, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852, Attention: Rulemaking and Adjudications Staff. Participants filing a document in this manner are responsible for serving the document on all other participants. Filing is considered complete by first-class mail as of the time of deposit in the mail, or by courier, express mail, or expedited delivery service upon depositing the document with the provider of the service. A presiding officer, having granted an exemption request from using E-Filing, may require a participant or party to use E-Filing if the presiding officer subsequently determines that the reason for granting the exemption from use of E-Filing no longer exists.
Documents submitted in adjudicatory proceedings will appear in the NRC's electronic hearing docket which is available to the public at
A. This Order contains instructions regarding how potential parties to this proceeding may request access to documents containing SUNSI.
B. Within 10 days after publication of this notice of hearing and opportunity to petition for leave to intervene, any potential party who believes access to SUNSI is necessary to respond to this notice may request such access. A “potential party” is any person who intends to participate as a party by demonstrating standing and filing an admissible contention under 10 CFR 2.309. Requests for access to SUNSI submitted later than 10 days after publication of this notice will not be considered absent a showing of good cause for the late filing, addressing why the request could not have been filed earlier.
C. The requester shall submit a letter requesting permission to access SUNSI to the Office of the Secretary, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemakings and Adjudications Staff, and provide a copy to the Associate General Counsel for Hearings, Enforcement and Administration, Office of the General Counsel, Washington, DC 20555-0001. The expedited delivery or courier mail address for both offices is: U.S. Nuclear Regulatory Commission, 11555 Rockville Pike, Rockville, Maryland 20852. The email address for the Office of the Secretary and the Office of the General Counsel are
(1) A description of the licensing action with a citation to this
(2) The name and address of the potential party and a description of the potential party's particularized interest that could be harmed by the action identified in C.(1); and
(3) The identity of the individual or entity requesting access to SUNSI and the requester's basis for the need for the information in order to meaningfully participate in this adjudicatory proceeding. In particular, the request must explain why publicly-available versions of the information requested would not be sufficient to provide the basis and specificity for a proffered contention.
D. Based on an evaluation of the information submitted under paragraph C.(3) the NRC staff will determine within 10 days of receipt of the request whether:
(1) There is a reasonable basis to believe the petitioner is likely to
(2) The requestor has established a legitimate need for access to SUNSI.
E. If the NRC staff determines that the requestor satisfies both D.(1) and D.(2) above, the NRC staff will notify the requestor in writing that access to SUNSI has been granted. The written notification will contain instructions on how the requestor may obtain copies of the requested documents, and any other conditions that may apply to access to those documents. These conditions may include, but are not limited to, the signing of a Non-Disclosure Agreement or Affidavit, or Protective Order
F. Filing of Contentions. Any contentions in these proceedings that are based upon the information received as a result of the request made for SUNSI must be filed by the requestor no later than 25 days after the requestor is granted access to that information. However, if more than 25 days remain between the date the petitioner is granted access to the information and the deadline for filing all other contentions (as established in the notice of hearing or opportunity for hearing), the petitioner may file its SUNSI contentions by that later deadline. This provision does not extend the time for filing a request for a hearing and petition to intervene, which must comply with the requirements of 10 CFR 2.309.
G. Review of Denials of Access.
(1) If the request for access to SUNSI is denied by the NRC staff after a determination on standing and need for access, the NRC staff shall immediately notify the requestor in writing, briefly stating the reason or reasons for the denial.
(2) The requester may challenge the NRC staff's adverse determination by filing a challenge within 5 days of receipt of that determination with: (a) The presiding officer designated in this proceeding; (b) if no presiding officer has been appointed, the Chief Administrative Judge, or if he or she is unavailable, another administrative judge, or an administrative law judge with jurisdiction pursuant to 10 CFR 2.318(a); or (c) officer if that officer has been designated to rule on information access issues.
H. Review of Grants of Access. A party other than the requester may challenge an NRC staff determination granting access to SUNSI whose release would harm that party's interest independent of the proceeding. Such a challenge must be filed with the Chief Administrative Judge within 5 days of the notification by the NRC staff of its grant of access.
If challenges to the NRC staff determinations are filed, these procedures give way to the normal process for litigating disputes concerning access to information. The availability of interlocutory review by the Commission of orders ruling on such NRC staff determinations (whether granting or denying access) is governed by 10 CFR 2.311.
I. The Commission expects that the NRC staff and presiding officers (and any other reviewing officers) will consider and resolve requests for access to SUNSI, and motions for protective orders, in a timely fashion in order to minimize any unnecessary delays in identifying those petitioners who have standing and who have propounded contentions meeting the specificity and basis requirements in 10 CFR part 2. Attachment 1 to the Order summarizes the general target schedule for processing and resolving requests under these procedures.
For the Nuclear Regulatory Commission.
Nuclear Regulatory Commission.
Draft NUREG; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) is requesting public comment on draft Chapter 7, “Instrumentation and Control Systems,” which augments the following: (1) NUREG-1537, Part 1, “Guidelines for Preparing and Reviewing Applications for the Licensing of Non-Power Reactors: Format and Content;” and (2) NUREG-1537, Part 2, “Guidelines for Preparing and Reviewing Applications for the Licensing of Non-Power Reactors: Standard Review Plan and Acceptance Criteria.” This draft chapter of NUREG-1537 provides revised guidance for preparing and reviewing applications for instrumentation and control systems.
Submit comments by February 1, 2016. Comments received after this date will be considered, if it is practical to do so, but the Commission is able to ensure consideration only for comments received before this date.
You may submit comments by any of the following methods (unless this document describes a different method for submitting comments on a specific subject):
•
•
For additional direction on accessing information and submitting comments, see “Obtaining Information and Submitting Comments” in the
Duane A. Hardesty, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20005-0001; telephone: 301-415-3724; email:
Please refer to Docket ID NRC-2012-0167 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document by any of the following methods:
• Federal Rulemaking Web site: Go to
• NRC's Agencywide Documents Access and Management System (ADAMS): You may obtain publicly-available documents online in the ADAMS Public Documents collection at
• NRC's PDR: You may examine and purchase copies of public documents at the NRC's PDR, Room O1-F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852.
Please include Docket ID NRC-2012-0167 in your comment submission.
The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC posts all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment submissions into ADAMS.
The NRC is issuing this notice to solicit public comment on draft Chapter 7, “Instrumentation and Control System,” which augments the following: (1) NUREG-1537, Part 1, “Guidelines for Preparing and Reviewing Applications for the Licensing of Non-Power Reactors: Format and Content;” and (2) NUREG-1537, Part 2, “Guidelines for Preparing and Reviewing Applications for the Licensing of Non-Power Reactors: Standard Review Plan and Acceptance Criteria.” After the NRC staff considers public comments, it will make a determination regarding issuance of the final NUREG.
For the Nuclear Regulatory Commission.
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing concerning an amendment to Parcel Select Contract 8 negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202-789-6820.
On November 6, 2015, the Postal Service filed notice that it has agreed to an Amendment to the existing Parcel Select Contract 8 negotiated service agreement approved in this docket.
The Postal Service also filed the unredacted Amendment and supporting financial information under seal. The Postal Service seeks to incorporate by reference the Application for Non-Public Treatment originally filed in this docket for the protection of information that it has filed under seal.
The Amendment changes the prices offered to the customer under the existing contract. Notice at 1.
The Postal Service intends for the Amendment to become effective one business day after the date that the Commission completes its review of the Notice.
The Commission invites comments on whether the changes presented in the Postal Service's Notice are consistent with the policies of 39 U.S.C. 3632, 3633, or 3642, 39 CFR 3015.5, and 39 CFR part 3020, subpart B. Comments are due no later than November 16, 2015. The public portions of these filings can be accessed via the Commission's Web site (
The Commission appoints Jennaca Upperman to represent the interests of the general public (Public Representative) in this docket.
1. The Commission reopens Docket No. CP2015-3 for consideration of matters raised by the Postal Service's Notice.
2. Pursuant to 39 U.S.C. 505, the Commission appoints Jennaca Upperman to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in this proceeding.
3. Comments are due no later than November 16, 2015.
4. The Secretary shall arrange for publication of this order in the
By the Commission.
On July 30, 2015, BATS Exchange, Inc. (the “Exchange” or “BATS”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to adopt a principles-based approach to prohibit the misuse of material nonpublic information by Lead Market Makers (“LMMs”) by deleting Rule 6.83. The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to adopt a principles-based approach to prohibit the misuse of material nonpublic information by LMMs by deleting Rule 6.83.
The Exchange believes that Rule 6.83 is no longer necessary because all OTP Holders and OTP Firms (collectively, “OTPs”),
The Exchange has two classes of registered market makers. Pursuant to Rule 6.32(a), a Market Maker is an individual who is registered with the Exchange for the purpose of making transactions as a dealer-specialist on the Floor of the Exchange or for the purpose of submitting quotes electronically and making transactions as a dealer-specialist through the NYSE Arca OX electronic trading system. As the rule further provides, a Market Maker registered on the Exchange will be either a Market Maker or a Lead Market Maker.
Rule 6.82(c) specifies the obligations of LMMs, which, in addition to the Market Maker obligations of Rules 6.37 and 6.37A, must also honor guaranteed markets. The quoting obligations of all Market Makers, including LMMs, are set forth in Rule 6.37B. That rule sets forth the main difference between Market Makers and LMMs, namely that LMMs have a heightened quoting obligation as compared to Market Makers.
Importantly, all Market Makers, including LMMs, have access to the same information in the Consolidated Book that is available to all other market participants. Moreover, none of the Exchange's Market Makers, including LMMs, have agency obligations to orders in the Exchange's Consolidated Book. As such, the key distinctions between Market Makers and LMMs are the quoting requirements set forth in Rule 6.37B and allocation guarantee for LMMs set forth in Rule 6.76A.
Notwithstanding that all Market Makers have access to the same Exchange trading information as all other market participants on the Exchange, the Exchange has specific rules governing how LMMs may operate. Rule 6.83 prohibits OTPs affiliated with an LMM from purchasing or selling any option to which the LMM is appointed, except to reduce or liquidate positions after appropriate identification and Trading Official approval of the transaction. The rule further provides an exemption from the prohibition for affiliated firms that implement specified Exchange-approved procedures to restrict the flow of material, non-public information. Rules 6.83(e)—(j) outline the “Exemption Guidelines” with which an affiliated firm must comply to obtain an exemption from the restriction in Rule 6.83. These specified “Exemption Guidelines” are meant to ensure that an LMM will not have access to material, non-public information possessed by its affiliated OTP(s), and that a firm will not misuse its affiliated LMM's material, non-public information.
The Exchange believes that the guidelines in Rule 6.83 for LMMs are no longer necessary and proposes to delete the Rule in its entirety. The Exchange believes that Rule 11.3, governing the misuse of material, non-public information, provides for an appropriate, principles-based approach to prevent the market abuses Rule 6.83 was designed to address. Specifically, Rule 11.3 requires every OTP to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material, non-public information by such OTP or associated persons. For
(a) Trading in any securities issued by a corporation, or in any related securities or related options or other derivative securities, while in possession of material, non-public information concerning that issuer;
(b) trading in a security or related options or other derivative securities, while in possession of material, non-public information concerning imminent transactions in the security or related securities; or
(c) disclosing to another person or entity any material, non-public information involving a corporation whose shares are publicly traded or an imminent transaction in an underlying security or related securities for the purpose of facilitating the possible misuse of such material, non-public information.
Because LMMs are already subject to the requirements of Rule 11.3, the Exchange does not believe that it is necessary to separately require specific limitations on dealings between LMMs and their affiliates. Deleting Rule 6.83 would provide LMMs with the flexibility to adapt their policies and procedures as appropriate to reflect changes to their business model, business activities, or the securities market in a manner similar to how Market Makers on the Exchange currently operate and consistent with Rule 11.3.
As noted above, LMMs are distinguished under Exchange rules from other types of Market Makers in that LMMs have heightened obligations and allocation guarantees. However, none of these heightened obligations provides different or greater access to nonpublic information than any other market participant on the Exchange.
The Exchange notes that even with this proposed rule change, pursuant to Rule 11.3, an LMM would still be obligated to ensure that its policies and procedures reflect the current state of its business and continue to be reasonably designed to achieve compliance with applicable federal securities law and regulations, and with applicable Exchange rules, including being reasonably designed to protect against the misuse of material, non-public information. While information barriers would not specifically be required under the proposal, Rule 11.3 already requires that an OTP consider its business model or business activities in structuring its policies and procedures, which may dictate that an information barrier or a functional separation be part of the appropriate set of policies and procedures that would be reasonably designed to achieve compliance with applicable securities law and regulations, and with applicable Exchange rules.
The Exchange is not proposing to change what is considered to be material, non-public information and, thus does not expect there to be any changes to the types of information that an affiliated brokerage business of an LMM could share with such LMM. In that regard, the proposed rule change will not permit the affiliates of LMMs to have access to any non-public order or quote information of the LMM, including hidden or undisplayed size or price information of such orders or quotes. Affiliates of LMMs would only have access to orders and quotes that are publicly available to all market participants. OTPs do not expect to receive any additional order or quote information as a result of this proposed rule change.
Further, the Exchange does not believe that there will be any material change to Market Maker information barriers as a result of removal of the Exchange's pre-approval requirements. In fact, the Exchange anticipates that eliminating the pre-approval requirement should facilitate implementation of changes to Market Maker information barriers as necessary to protect against the misuse of material, non-public information. The Exchange also suggests that the pre-approval requirement is unnecessary because LMMs do not have agency responsibilities to orders in the Consolidated Book, or time and place information advantages because of their market role. However, as is the case today with Market Makers, information barriers of new entrants would be subject to review as part of a new firm application. Moreover, the policies and procedures of market makers, including those relating to information barriers, would be subject to review by FINRA, on behalf of the Exchange, pursuant to a Regulatory Services Agreement.
The Exchange further notes that under Rule 11.3, an OTP would be able to structure its firm to provide for its options LMMs, or Market Makers, as applicable, to be structured with its equities and customer-facing businesses, provided that any such structuring would be done in a manner reasonably designed to protect against the misuse of material, non-public information. For example, pursuant to Rule 11.3, a Market Maker on the Exchange could be in the same independent trading unit, as defined in Rule 200(f) of Regulation SHO,
The Exchange believes that the proposed reliance on the principles-based Rule 11.3 would help ensure that an OTP that operates an LMM would be required to protect against the misuse of any material non-public information. As noted above, Rule 11.3 already requires that firms refrain from trading while in possession of material non-public information concerning imminent transactions in the security or related
The Exchange further notes that if LMMs are integrated with other market making operations, they would be subject to existing rules that prohibit OTPs from disadvantaging their customers or other market participants by improperly capitalizing on a member organization's access to the receipt of material, non-public information. As such, an OTP that integrates its LMM operations together with equity market making would need to protect customer information consistent with existing obligations to protect such information. The Exchange has rules prohibiting OTPs from disadvantaging their customers or other market participants by improperly capitalizing on the OTP's access to or receipt of material, non-public information. For example, Rule 11.18 requires OTPs to establish, maintain, enforce, and keep current a system of compliance and supervisory controls, reasonably designed to achieve compliance with applicable securities laws and Exchange rules. Additionally, Rule 6.49 prevents an OTP or person associated with an OTP, who has knowledge of an originating order, a solicited order, or a facilitation order, to enter, based on such knowledge, an order to buy or sell an option on the underlying securities of any option that is the subject of the order, an order to buy or sell the security underlying any option that is the subject of the order, or any order to buy or sell any related instrument unless certain circumstances are met.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act
The Exchange believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market by adopting a principles-based approach to permit an OTP operating an LMM to maintain and enforce policies and procedures to, among other things, prohibit the misuse of material non-public information and eliminating restrictions on how an OTP structures it LMM operations. The Exchange notes that the proposed rule change is based on an approved rule of the Exchange to which LMMs are already subject—Rule 11.3—and harmonizes the rules governing LMMs and Market Makers. Moreover, OTPs operating LMMs would continue to be subject to federal and Exchange requirements for protecting material non-public order information.
The Exchange further believes the proposal is designed to prevent fraudulent and manipulative acts and practices and to promote just and equitable principles of trade because existing rules make clear to LMMs and OTPs the type of conduct that is prohibited by the Exchange. While the proposal eliminates requirements relating to the misuse of material non-public information, LMMs and OTPs would remain subject to existing Exchange rules requiring them to establish and maintain systems to supervise their activities, and to create, implement, and maintain written procedures that are reasonably designed to comply with applicable securities laws and Exchange rules, including the prohibition on the misuse of material, nonpublic information.
The Exchange notes that the proposed rule change would still require that OTPs operating LMMs maintain and enforce policies and procedures reasonably designed to ensure compliance with applicable federal securities laws and regulations and with Exchange rules. Even though there would no longer be pre-approval of LMM information barriers, any LMM written policies and procedures would continue to be subject to oversight by the Exchange and therefore the elimination of prescribed restrictions should not reduce the effectiveness of the Exchange rules to protect against the misuse of material non-public information. Rather, OTPs will be able to utilize a flexible, principles-based approach to modify their policies and procedures as appropriate to reflect changes to their business model, business activities, or to the securities market itself. Moreover, while specified information barriers may no longer be required, an OTP's business model or business activities may dictate that an information barrier or functional separation be part of the appropriate set of policies and procedures that would be reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable Exchange rules. The Exchange therefore believes that the proposed rule change will maintain the existing protection of investors and the public interest that is currently applicable to LMMs, while at the same time removing impediments to and perfecting a free and open market by moving to a principles-based approach to protect against the misuse of material non-public information.
In accordance with Section 6(b)(8) of the Act,
Moreover, the Exchange believes that the proposed rule change would eliminate a burden on competition for OTPs which currently exists as a result of disparate rule treatment between the options and equities markets regarding how to protect against the misuse of material non-public information. For those OTPs that are also members of equity exchanges, their respective equity market maker operations are now subject to a principles-based approach to protecting against the misuse of material non-public information.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B)
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange is filing a proposal to amend Rule 521, Nullification and Adjustment of Options Transactions Including Obvious Errors, to modify the amount to be charged to Members that appeal an Official ruling when the ruling is sustained and not overturned or modified, and to pass through other market center charges associated with obvious error determinations.
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On May 7, 2015 the Exchange filed a proposed rule change to replace Exchange Rule 521 entitled “Obvious and Catastrophic Errors” with new Exchange Rule 521 entitled “Nullification and Adjustment of Options Transactions Including Obvious Errors.” Rule 521 became operative on May 8, 2015.
The purpose of the proposed rule change is to further harmonize Rule 521 with the rules of other exchanges by modifying the amount to be charged to Members that appeal an Official ruling under Rule 521 if such ruling is sustained and not overturned or modified, and to permit the Exchange to pass along charges assessed by another market center in connection with Obvious Error and Catastrophic Error determination requests presented to that market center by the Exchange on a Member's behalf.
The Exchange proposes to amend Section (l)(2) of the Rule to charge $500.00 to MIAX Members that appeal an Official ruling when such ruling is sustained and not overturned or modified, and to add new language to permit the Exchange to pass along charges assessed by another market center in connection with Obvious Error and Catastrophic Error determination requests presented to that market center by the Exchange on a Member's behalf. Currently, the Exchange charges Members $250.00 in this circumstance. The Exchange proposes to increase this charge from $250.00 to $500.00.
The Exchange believes that its proposal to amend Rule 521 is consistent with Section 6(b) of the Act
The $500.00 charge and the provision to pass through charges from other market centers proposed herein is just and equitable and not unfairly discriminatory because it would apply equally to all MIAX Members seeking review on appeal of Official rulings pursuant to Rule 521(l), and will not be assessed if the ruling giving rise to the appeal is modified or reversed. The $500.00 charge is consistent with the amount charged by other U.S. options exchanges for unsuccessful appeals under their obvious error rules.
The provision to pass through charges from other market centers proposed herein is just and equitable and not unfairly discriminatory because it would apply equally to all MIAX Members requesting Obvious Error or Catastrophic Error determinations from other market centers through the Exchange. The pass through charge is also consistent with pass through charges charged by other U.S. options exchanges under their obvious error rules.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that the proposal will have any impact on
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On July 30, 2015, BATS Exchange, Inc. (“Exchange” or “BATS”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1)
The Exchange proposes to list and trade the Shares under BATS Rule 14.11(i), which governs the listing and trading of Managed Fund Shares on the Exchange. The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange's existing rules governing the trading of equity securities.
The Shares will be offered by the Trust, which is established as a Delaware statutory trust. The Trust is registered with the Commission as an open-end investment company and has filed a registration statement on behalf of the Fund on Form N-1A (“Registration Statement”) with the Commission.
The Fund will generally seek exposure to the commodity and financial markets included in the S&P® Strategic Futures Index (“Index”),
Under normal market conditions,
The Fund may also invest up to 100% of its assets in cash or cash equivalents such as U.S. Treasury securities or other high credit quality short-term fixed-income or similar securities (including shares of money market funds, bank deposits, bank money market accounts, certain variable rate-demand notes, and repurchase agreements collateralized by government securities) for direct investment or as collateral for the Futures Contracts or swap agreements. The Fund will use the fixed-income securities as investments and to meet asset coverage tests resulting from the Subsidiary's derivative exposure on a day-to-day basis.
After careful review, the Commission finds that the Exchange's proposal to list and trade the Shares is consistent with the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange.
The Commission also finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Exchange Act,
Intraday price quotations on repurchase agreements and U.S. Government securities of the type held by the Fund are available from major broker-dealer firms and from third-parties, which may provide prices free with a time delay, or “live” with a paid fee. Major broker-dealer firms will also provide intraday quotes on swaps of the type held by the Fund.
On each business day, before commencement of trading in Shares during Regular Trading Hours on the Exchange, the Fund will disclose on its
The Commission also believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. The Commission notes that the Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time.
In support of this proposal, the Exchange has made the following representations:
(1) The Shares will be subject to BATS Rule 14.11(i), which sets forth the initial and continued listing criteria applicable to Managed Fund Shares.
(2) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions.
(3) Trading of the Shares through the Exchange will be subject to the Exchange's surveillance procedures for derivative products, including Managed Fund Shares, and that these procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws.
(4) Prior to the commencement of trading, the Exchange will inform its members in an Information Circular of the special characteristics and risks associated with trading the Shares. Specifically, the Information Circular will discuss the following: (a) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (b) BATS Rule 3.7, which imposes suitability obligations on Exchange members with respect to recommending transactions in the Shares to customers; (c) how information regarding the Intraday Indicative Value is disseminated; (d) the risks involved in trading the Shares during the Pre-Opening
(5) For initial and/or continued listing, the Fund must be in compliance with Rule 10A-3 under the Act.
(6) As it relates to futures contracts, all Futures Contracts in the Disclosed Portfolio for the Fund will trade on markets that are a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.
(7) A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange.
This approval order is based on all of the Exchange's representations, including those set forth above and in the Notice. For the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendments Nos. 1 and 2, is consistent with Section 6(b)(5) of the Act
Interested persons are invited to submit written data, views, and
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
The Commission finds good cause to approve the proposed rule change, as modified by Amendments Nos. 1 and 2, prior to the thirtieth day after the date of publication of notice in the
It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend its Price List to modify certain fees for transactions that remove liquidity from the Exchange, effective November 2, 2015. The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend its Price List to increase certain fees that remove liquidity from the Exchange, effective November 2, 2015. The proposed change would only apply to transactions in securities priced $1.00 or more.
In particular, the Exchange currently charges $0.0027 per share for non-Floor broker transactions that remove liquidity from the Exchange, including those of Designated Market Makers (“DMM”). The Exchange proposes to increase this fee to $0.00275 per share.
Similarly, the Exchange currently charges $0.0027 per share for all Midpoint Passive Liquidity (“MPL”) Orders
The Exchange currently charges $0.0024 per share or $0.0027 if an MPL Order for all other Floor broker transactions that remove liquidity from the Exchange. MPL orders designated with a Retail Modifier as defined in Rule 13 are not charged a fee. The Exchange proposes to increase the $0.0027 per share fee for Floor broker MPL Orders that take liquidity from the
The proposed change is not otherwise intended to address any other issues, and the Exchange is not aware of any problems that member organizations would have in complying with the proposed change.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed fee increase for non-Floor broker transactions that remove liquidity is reasonable because non-Floor brokers would continue to receive credits for their transactions that provide liquidity on the Exchange, including (i) for member organizations that add liquidity that satisfies certain thresholds under the Tier Adding Credits, (ii) for DMMs under the DMM credits, and (iii) for MPL Orders under various pricing categories in the Price List. The resulting fee also is equitable and not unfairly discriminatory because it would continue to be consistent with, and in some cases lower than, the applicable rate on other marketplaces. For example, the standard fee for removing liquidity from NASDAQ in both NASDAQ-listed and NYSE-listed securities is $0.0030 per share, which is higher than the proposed $0.00275 per share fee.
The Exchange believes that the proposed increase to the fee for executions of MPL Orders, including Floor broker MPL orders, that remove liquidity from the Exchange is reasonable because the charge would be the same as the $0.00275 per share fee proposed for all other non-Floor broker transactions that take liquidity from the NYSE. The proposed fee is also reasonable because it would be lower than the applicable rate on other marketplaces. For example, NASDAQ charges $0.0030 per share to execute against resting midpoint liquidity, which is greater than both the existing $0.0027 per share rate and the proposed $0.00275 per share rate that would apply to MPL Orders.
The Exchange believes that the proposed fee increase for MPL Orders, including Floor broker MPL orders, that remove liquidity from the Exchange is equitable and not unfairly discriminatory because MPL Orders may provide opportunities for market participants to interact with orders priced at the midpoint of the PBBO, thus providing price improving liquidity to market participants and thereby increase the quality of order execution on the Exchange's market, which benefits all market participants. The Exchange also believes the proposed fee is equitable and not unfairly discriminatory because all market participants that use the MPL Order type will pay the same proposed fee.
The Exchange also believes it is equitable and not unfairly discriminatory to continue to charge Floor brokers that take liquidity a lower fee ($0.0024) than non-Floor brokers that take liquidity because Floor brokers have slower access to the Exchange (via handheld technology) than non-Floor brokers and are prohibited from routing directly to other market centers from handheld devices, which prevents them from accessing any associated pricing opportunities that might exist at those away markets.
Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange's statement regarding the burden on competition.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
In accordance with Section 6(b)(8) of the Act,
Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees and rebates to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees and credits in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. As a result of all of these considerations, the Exchange does not believe that the proposed changes will impair the ability of member organizations or competing order execution venues to maintain their competitive standing in the financial markets.
No written comments were solicited or received with respect to the proposed rule change.
The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of The Tirex Corporation (“Tirex”) because it has not filed any periodic reports since it filed a Form 10-K for the period ended June 30, 2009 on March 1, 2011. Tirex is a Delaware corporation based in Wilton, Connecticut. Its securities are quoted on OTC Link (previously “Pink Sheets”), operated by OTC Markets Group, Inc. under the ticker symbol “TXMC.”
The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed company.
By the Commission.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
FINRA is proposing to amend Section 4(c) of Schedule A to the FINRA By-Laws to establish an examination fee for the Securities Trader qualification examination (Series 57).
The text of the proposed rule change is available on FINRA's Web site at
In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B,
The SEC recently approved amendments to FINRA rules to establish two new registration categories for associated persons who engage in the securities trading activities specified in NASD Rule 1032(f) and for principals who supervise such activities: (1) Securities Traders; and (2) Securities Trader Principals.
FINRA is expecting the national securities exchanges to also file amendments to their respective registration rules relating to securities trading activities to replace the Proprietary Trader qualification examination (Series 56) with the Series 57 examination.
FINRA currently administers examinations electronically through the PROCTOR® system
FINRA has filed the proposed rule change for immediate effectiveness. FINRA is expecting to implement the proposed rule change on January 4, 2016, which coincides with the anticipated implementation date for the Securities Trader registration category and examination program.
FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(5) of the Act,
FINRA believes that the proposed rule change constitutes an equitable allocation of fees as the examination fee will be used to cover FINRA's costs in developing, maintaining and delivering the examination and will be assessed only on those individuals who will take the Series 57 examination. FINRA further believes that the proposed fee for the Series 57 examination is reasonable because it is aligned with the overall cost associated with the Series 57 examination program. Accordingly, FINRA believes that the proposed fee for the Series 57 examination is equitably allocated and reasonable.
FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. FINRA believes that the establishment of the fee for the Series 57 examination will have a limited economic impact on the industry.
In proposing a fee of $120 for the Series 57 examination, FINRA applied the same criteria as it does for establishing the fees for other FINRA qualification examinations. The primary factors that FINRA considered include the number of test questions, test session time, staff effort associated with test development and delivery, corporate overhead and operational and technology costs associated with maintaining the PROCTOR system (
Moreover, the proposed rule change will reduce the examination fees for the registration of associated persons who are required to be registered to engage in or supervise securities trading.
The need for the rule and the regulatory objective are discussed previously.
Currently, associated persons who engage in the securities trading activities specified under NASD Rule 1032(f) or who directly supervise such activities, including principals, are required to take and pass the Series 55 examination in combination with other examinations. As described above, the new registration categories of Securities Trader and Securities Trader Principal will allow such individuals to engage in
Based on a survey of Equity Traders, FINRA understands that some Equity Traders, albeit a limited number, currently engage in sales activities in addition to securities trading. Today, such individuals may engage in sales activities because, concurrent to registration as an Equity Trader, they are registered as either a General Securities Representative or Corporate Securities Representative. However, a newly-registered Securities Trader who will be engaging in sales activities in addition to securities trading must separately register in an appropriate sales-related registration category (
The proposed rule change will reduce the examination fees for the registration of associated persons who are required to be registered to engage in or supervise securities trading. By way of example, the current examination fee for registering as an Equity Trader is $415 (for associated persons who take the Series 7 and 55 examinations) or $205 (for associated persons who take the Series 62 and 55 examinations). Under the proposed rule change, the examination fee for registering as a Securities Trader will be $120. Assuming a constant examination volume at the 2014 level, FINRA estimates that the aggregate cost savings will be approximately $188,000 per year for individuals who currently take the Series 7 and 55 examinations or Series 62 and 55 examinations to engage only in securities trading. In addition, the current examination fee for registering as a Proprietary Trader is $305 (for individuals who take the Series 7 examination) or $195 (for individuals who take the Series 56 examination). Assuming a constant volume at the 2014 level, FINRA estimates that the aggregate cost savings for individuals who currently take the Series 56 examination to engage in securities trading will be approximately $58,200 per year.
As noted above, newly-registered persons who will engage in both sales and trading activities may experience an increase in their total examination fees. For instance, the examination fee for associated persons who will take the Series 7 and 57 examinations to engage in both sales and trading activities will be $425 compared to the current fee of $415 for associated persons who take the Series 7 and 55 examinations to engage in such activities.
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Riverdale Mining Inc. (CIK No. 1402357), a revoked Nevada corporation with its principal place of business listed as
It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Tresoro Mining Corp. (CIK No. 1348788), a defaulted Nevada corporation with its principal place of business listed as Vancouver, British Columbia, Canada, with stock quoted on OTC Link under the ticker symbol TSOR, because it has not filed any periodic reports since the period ended November 30, 2012. On May 5, 2014, Tresoro Mining received a delinquency letter sent by the Division of Corporation Finance requesting compliance with their periodic filing obligations.
The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed companies.
Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the above-listed companies is suspended for the period from 9:30 a.m. EST on November 12, 2015, through 11:59 p.m. EST on November 25, 2015.
By the Commission.
In accordance with part 211 of Title 49 Code of Federal Regulations (CFR), this document provides the public notice that by a document dated October 16, 2015, Kansas City Southern Railway (KCS) has petitioned the Federal Railroad Administration (FRA) for a waiver of compliance from certain provisions of the Federal railroad safety regulations contained at CFR part 213. FRA assigned the petition Docket Number FRA-2015-0115.
Pursuant to 49 CFR 213.113(a), KCS requests a waiver from the accepted practice of stop/start rail testing to start a 3-year pilot test process of nonstop continuous testing. The projected starting date for implementing the test process would be November 1, 2015. The test process would occur on the main tracks between Kansas City, MO, and Heavener, OK, on the Pittsburgh Subdivision and the Heavener Subdivision. Once the two initial subdivisions are completed, KCS would like to expand the test process to include the Shreveport Subdivision in Shreveport, LA. KCS intends to test the subdivisions within a 30- to 45-day frequency.
For this pilot test, the process would be similar to the waiver granted to Union Pacific Railroad in Docket Number FRA-2015-0003. KCS would not have parallel or redundant stop/start testing on the segments being tested in a nonstop process. KCS will produce a bimonthly report for FRA's Rail and Infrastructure Integrity Division managers. This report would include the in-service rail failure ratios per 49 CFR part 213, a report on the miles tested, and the frequency of testing.
The nonstop continuous rail testing vehicle will be a self-propelled ultrasonic induction unit capable of testing at speeds up to 30 mph. The data will be analyzed from a remote location facility by experts with experience reviewing Rail Flaw Detection test data. The field verification of suspected defects will be conducted by qualified and certified test professionals with recordable field validation equipment, based on GPS location and known track features. KCS believes nonstop continuous rail testing will provide the capability to test track more quickly and frequently, and to minimize the risk of rail service failures.
A copy of the petition, as well as any written communications concerning the petition, is available for review online at
Interested parties are invited to participate in these proceedings by submitting written views, data, or comments. FRA does not anticipate scheduling a public hearing in connection with these proceedings since the facts do not appear to warrant a hearing. If any interested party desires an opportunity for oral comment, they should notify FRA, in writing, before the end of the comment period and specify the basis for their request.
All communications concerning these proceedings should identify the appropriate docket number and may be submitted by any of the following methods:
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Communications received by December 16, 2015 will be considered by FRA before final action is taken. Comments received after that date will be considered as far as practicable.
Anyone is able to search the electronic form of any written communications and comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its processes. DOT posts these comments, without edit, including any personal information the commenter provides, to
National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).
Coordinated Remedy Order.
1. On June 5, 2015, NHTSA opened the Coordinated Remedy Program Proceeding and public Docket Number NHTSA-2015-0055 to address the recalls of certain Takata air bag inflators, which together constitute the largest Safety Act recall in NHTSA's history and one of the largest consumer product recalls in United States history.
2. An air bag inflator (“inflator”) is a component inside an air bag module that contains explosive materials
3. The first recall involving a rupturing Takata driver side frontal air bag inflator was initiated by Honda on November 11, 2008. At that time, the defect was thought to be the result of a specific manufacturing issue involving a propellant press at Takata's Moses Lake, Washington plant. Due to various purported discrepancies in Takata's record keeping for the affected parts, and changing theories as to the root cause of the defect, Honda expanded the scope of the recall several times between 2009 and 2011.
4. The first recall involving a rupturing Takata passenger side frontal air bag inflator was initiated by Takata on April 11, 2013, and involved BMW, Honda, Mazda, Nissan, and Toyota. At that time, the defect was thought by Takata to be the result of two specific manufacturing issues: (1) The possibility that the auto-reject function on a propellant press had been manually disabled, and (2) the possibility that certain propellant lots were exposed to uncontrolled moisture conditions at Takata's Monclova, Mexico plant. In 2013 and 2014, GM recalled vehicles to address separate manufacturing problems specific to a limited number of inflators Takata supplied only to GM.
5. Between August 2013 and April 2014, NHTSA received three Vehicle Owner Questionnaires (VOQs) that alleged air bag inflator ruptures in vehicles outside the scope of the prior driver side and passenger side frontal air bag inflator recalls. In late May 2014, Takata confirmed the three ruptures with NHTSA's Office of Defects Investigation (ODI), and notified ODI of an additional three ruptures (for a total of six rupture incidents between August 2013 and May 2014). All of these ruptures occurred in vehicles experiencing long-term exposure to hot and humid climate conditions in Florida and Puerto Rico.
6. On June 10, 2014, at NHTSA's urging, Takata and the affected vehicle manufacturers agreed to initiate various field actions in Florida, Hawaii, Puerto Rico, and the U.S. Virgin Islands. The data supporting these field actions indicated that certain Takata frontal air bag inflators in regions prone to consistent long-term
7. On June 11, 2014, NHTSA opened a preliminary evaluation (PE14-016) to investigate the six identified rupture incidents involving driver side and passenger side frontal air bag inflators manufactured by Takata.
8. During the period of October through December 2014, at NHTSA's direction, field actions were converted to recalls and the recalls were expanded, though some recalls remained limited to certain regions with higher absolute humidity. Also during this period, NHTSA urged Takata and the affected vehicle manufacturers to, among other things, speed up the
9. On November 18, 2014, NHTSA demanded that the five vehicle manufacturers with affected driver side frontal air bag inflators expand their regional field actions and conduct nationwide actions. This decision was based on, among other things, NHTSA's evaluation of a driver side frontal air bag failure in a vehicle outside the existing regional recall area. In response, beginning in December 2014, BMW, FCA, Ford, Honda and Mazda initiated national service campaigns or safety improvement campaigns on vehicles with driver side frontal air bag inflators.
10. On November 26, 2014, NHTSA demanded that Takata submit Defect Information Reports (“DIRs”) of driver side frontal air bag inflators. While Takata declined to do so in a December 2, 2014 response, NHTSA continued to insist that Takata accept responsibility for the rupturing air bag inflators and file DIRs.
11. On February 24, 2015, NHTSA upgraded PE14-016 to an engineering analysis (EA15-001).
12. On May 18, 2015, after NHTSA's consistent demands, and pursuant to its legal obligations under the Safety Act, 49 U.S.C. 30118(c)(1) and 49 CFR 573.6(c), Takata filed four DIRs with NHTSA (15E-040, 15E-041, 15E-042, 15E-043) (“Takata DIRs”). In the Takata DIRs, Takata admitted that certain types of air bag inflators manufactured by Takata with a phase-stabilized ammonium nitrate-based propellant (specifically, the PSDI, PSDI-4, PSDI-4K, SPI, PSPI and PSPI-L) contain defects constituting an unreasonable risk to safety.
13. Between May 13, 2015 and June 24, 2015, BMW, FCA, Daimler Trucks,
14. As part of the Coordinated Remedy Program Proceeding, launched on June 5, 2015, NHTSA sought information from each of the Initial Vehicle Manufacturers, Takata, and other major inflator suppliers
15. Among other things, NHTSA engaged in numerous teleconferences and in-person meetings with the Suppliers to enhance NHTSA's understanding of, among other things, each Supplier's current production capacities, capabilities or plans for increasing production, existing contractual obligations, and product reliability. NHTSA also engaged in teleconferences and in-person meetings with the Initial Vehicle Manufacturers to enhance NHTSA's understanding of, among other things, each Vehicle Manufacturer's anticipated timelines for receipt of replacement air bag units, anticipated timelines for remedy program launch and completion, number of impacted vehicles, number of replacement air bag units needed, and plans and efforts for promptly conducting recall remedies and effectively reaching consumers.
16. On September 22, 2015, NHTSA gathered supplemental data from additional vehicle manufacturers that NHTSA had learned were supplied with Takata air bag inflators containing phase-stabilized ammonium nitrate (“PSAN”)
17. On September 23 and 24, 2015, NHTSA convened problem-solving meetings with the Initial Vehicle Manufacturers to examine aggregate data and engage in a collaborative risk analysis to aid NHTSA in developing a principled, rational, risk-mitigation based approach for the prioritization and phasing of recall plans. Factors considered included those currently associated with a higher risk of inflator rupture, specifically: age of the inflator (with older inflators presenting a greater risk); geographic location of vehicles with the recalled inflators (with HAH areas presenting a greater risk); position of the inflator in the vehicle (with the driver side frontal air bag inflator presenting a greater risk of serious injury or death when a rupture occurs); and the presence of recalled inflators in both the driver and passenger side airbag modules. During the meetings, the Initial Vehicle Manufacturers provided input on factors supporting a technically supported risk-assessment methodology for the Inflator Recalls. Following the meeting, each Initial Vehicle Manufacturer submitted a vehicle prioritization list that applied these factors, and other factors specific to their products, that prioritized vehicles into three risk categories. NHTSA analyzed these submissions and determined that the Initial Vehicle Manufacturers generally identified reasonable and appropriate priority groups based on the evidence known at this time.
18. Throughout this process, the public has been able to engage in this dialogue through submissions to the public Docket, NHTSA-2015-0055. In addition to the actions set forth above, NHTSA reviewed and considered all public comments to the docket.
19. While Takata is a manufacturer of air bag inflators, other Suppliers also manufacture inflators, some of which closely match the performance requirements of the original Takata inflator and thus can be modified and safely installed in Takata air bag modules for use as remedy parts for the
20. Further, some of the Takata driver inflators, sometimes referred to as containing propellant in the shape of a “batwing,” have been used as interim replacement parts that will degrade if continuously exposed to long-term to HAH conditions, and are themselves subject to recall. These inflators will not be used as a final remedy of driver side frontal air bags. Further, Takata's passenger side frontal air bag inflators subject to the Inflator Recalls have not previously been recalled for vehicles later than model year 2008.
21. The Initial Vehicle Manufacturers recognized the need to increase the remedy parts supply in order to have sufficient remedy parts available. To do so, they were required find alternative suppliers to meet their demands for remedy air bag inflator parts. The Initial Vehicle Manufacturers found that necessary alternative supply source in other inflator suppliers, specifically, Autoliv, Daicel, and ZF TRW (collectively, the “Alternative Inflator Suppliers”).
22. According to Takata, in October 2015, the Alternative Inflator Suppliers were scheduled to provide over 1.9 million remedy inflator parts per month for installation in remedy air bag kits. This totaled approximately seventy percent (70%) of the 2.8 million remedy inflator kits produced by Takata that month for global demand. Nonetheless, the sheer volume of remedy parts required across the vehicle manufacturing industry, for both U.S. and foreign markets, has created challenges for the Initial Vehicle Manufacturers in obtaining sufficient remedy parts to remedy all of the recalled inflators within a reasonable time.
23. Despite the efforts of each of the Initial Vehicle Manufacturers to procure remedy parts in a timely fashion, some vehicle manufacturers will not be able to obtain sufficient remedy parts to launch their remedy programs, in part or in full, until late 2015 or early 2016, more than six (6) months after filing their initial DIRs in regard to the Inflator Recalls.
24. Further, pursuant to a November 3, 2015 Consent Order to Takata (“November 2015 Takata Consent Order”), additional Takata air bag inflators not previously subject to a recall may need to be replaced. This would cause the Potential Expansion Vehicle Manufacturers to join the existing field of Initial Vehicle Manufacturers (collectively, the “Vehicle Manufacturers”) in need of remedy air bag inflator parts.
25. Each time Takata air bag inflator recalls are issued under the November 2015 Takata Consent Order, or current recalls are expanded, similar challenges will arise for the Vehicle Manufacturers regarding supply chain and the need for risk-assessments based on principled rationales that utilize the most-current available science and data.
26. Throughout this sequence of events, Takata has conducted inflator testing in an effort to determine the “root cause” of the inflator ruptures and, by testing modules recovered from vehicles that have been remedied, to determine which inflators posed the greatest risk of rupture. While production issues at Takata manufacturing plants in Monclova, Mexico and Moses Lake, Washington, were identified early on as the purported root cause in some rupture incidents, those theories (even if correct) do not account for the ongoing issues with inflator rupture. For example, inflators installed in vehicles spending many consecutive years of their service lives in hot and humid climates have also ruptured even though they appear to have been manufactured within Takata's specifications. While Takata now believes that the ruptures are related to long-term exposure to HAH conditions, their root cause testing has not produced any conclusive answers regarding why the inflators rupture.
27. Moreover, Takata has been unable to provide a definitive explanation for other inflators rupturing, including the rupture of an SSI-20 side air bag inflator on June 7, 2015, in a Volkswagen vehicle involved in a crash, or the rupture of a PSDI-X inflator during Takata's testing of an air bag module on September 29, 2015 with a resulting recall by Honda. Takata has also been unable to definitively explain the October 2015, rupture of an SSI-20 inflator during Takata quality control testing. It therefore appears to the agency that Takata continues to have ongoing quality control issues with the volatile, explosive compound it has chosen as the propellant for most of its air bag inflators: PSAN.
28. While the ultimate responsibility for determining root cause rests squarely with Takata, testing has also been conducted by NHTSA and third parties in an effort to establish the root cause of the defect and to verify the results of Takata's testing of inflators returned from the field. NHTSA has conducted testing through Battelle Memorial Institute, 3D Engineering Solutions, and the Transportation Research Center of Ohio, testing organizations located in Ohio, to verify Takata's test results and examine the root cause of the defect. Testing has also been undertaken by the Independent Testing Coalition (“ITC”), which is comprised of BMW, FCA, Ford, GM, Honda, Mazda, Mitsubishi, Nissan, Subaru, and Toyota. Orbital ATK, a testing company located in Utah, has commenced testing on behalf of the ITC, and hopes to conclude root cause analysis in 2016. Multiple individual vehicle manufacturers have also conducted testing in efforts to confirm Takata's results or establish root cause for the defect. While this multitude of independent testing efforts have largely confirmed the observations made and patterns identified from Takata's test results, none of these efforts has identified any specific root cause(s) for the propellant failures and inflator ruptures. While progress is being made, it is unknown when, or if, root cause will ever be definitively determined.
29. Without a conclusive determination of root cause, the source of the problems with certain Takata inflators remains unknown. What is known, however, is that the propellant in inflators covered by the Inflator Recalls and the recalls within the scope of this Order have, at various rates of frequency, a propensity to ignite and/or
30. As of October 30, 2015, there have been 99 confirmed incidents in the United States where a ruptured Takata air bag inflator allegedly caused death or injury. Many of these incidents resulted in serious injury to vehicle occupants. In seven of the incidents, the vehicle's driver died as a result of injuries sustained from the rupture of the air bag inflator. In other incidents, vehicle occupants suffered injuries including cuts or lacerations to the face or neck, broken or fractured facial bones, loss of eyesight, and broken teeth. The risk of these tragic consequences is greatest for individuals sitting in the driver seat, where one in ten individuals' whose air bag inflator ruptured has died.
Based upon the agency's analysis and judgment, and upon consideration of the entire record, NHTSA finds that:
31. (1) There is a risk of serious injury or death if the remedy program of each of the Initial Vehicle Manufacturers is not accelerated; (2) acceleration of each Initial Vehicle Manufacturer's remedy program can be reasonably achieved by expanding the sources of replacement parts; and (3) each Initial Vehicle Manufacturer's remedy program is not likely to be capable of completion within a reasonable time without acceleration.
32. Each air bag inflator with the capacity to rupture, as the recalled Takata inflators do, presents an unreasonable risk of serious injury or death. Seven individuals have already been killed in the United States alone, with at least 92 more injured. Since the propensity for rupture increases with the age of the inflator, and increases even more when the vehicle has been exposed to consistent long-term HAH conditions, the risk for injurious or lethal rupture increases with each passing day. While each of the Initial Vehicle Manufacturers has made efforts towards the remedy of these defective air bag inflators, acceleration and coordination of the inflator remedy programs is necessary to reduce this risk to public safety. Acceleration and coordination will enable vehicle manufacturers to establish priorities based on principled rationales for risk-assessment, coordinate on safety-focused efforts to successfully complete their respective remedy programs, and allow for the organization and prioritization of remedy parts, if and as needed, with NHTSA's oversight.
33. Acceleration of the inflator remedy programs can be reasonably achieved by, among other things, expanding the sources of replacement parts. This acceleration can be accomplished in part by a vehicle manufacturer contracting with any of the Alternative Inflator Suppliers for remedy parts as Takata cannot manufacture sufficient remedy parts in a reasonable time for the estimated 23 million inflators in the U.S. market alone that require remedy under the Inflator Recalls.
34. In light of all the circumstances, including the safety risk discussed above, the Initial Vehicle Manufacturers' recall remedy programs are not likely capable of completion within a reasonable amount of time without acceleration of each remedy program. It is critical to the timely completion of each remedy program that the Initial Vehicle Manufacturers obtain remedy inflators from sources other than Takata. Takata's inflator production for October 2015 will make up only around thirty percent (30%) of the remedy inflators produced that month. Further, Takata's ability to supply remedy parts going forward may decrease, such that other Suppliers will need to fill the resulting void.
35. Pursuant to the conditions for expansion of the recalls in the Takata DIRs for Recall Nos. 15E-042 and 15E-043, Paragraphs 27-30 of the November 2015 Takata Consent Order, and as otherwise agreed by Takata, and after consultation throughout this Coordinated Remedy Program Proceeding with Takata and all of the vehicle manufacturers affected by said Recalls, NHTSA further finds that continued testing and analysis of Takata air bag inflators is necessary. If circumstances warrant the issuance of an Order expanding the production or geographic scope of the Inflator Recalls, the agency will do so in accordance with the November 2015 Takata Consent Order.
36. The issuance of this Coordinated Remedy Order is an appropriate exercise of NHTSA's authority under the Safety Act, 49 U.S.C. § 30101,
37. This Coordinated Remedy Order, developed after taking into account the input and concerns of each of the Vehicle Manufacturers, Suppliers, Takata, other interested parties and the public, will reduce the risk of serious injury or death to the motoring public and enable the Initial Vehicle Manufacturers and Takata to implement, and complete, the necessary remedy programs on an accelerated basis.
Accordingly, it is hereby
38. Each Initial Vehicle Manufacturer has previously submitted to NHTSA a vehicle prioritization plan based on a risk-assessment that takes into account the primary factors related to Takata inflator rupture, as currently known and understood, and other factors specific to that vehicle manufacturer's products. The primary factors utilized by all of the Initial Vehicle Manufacturers are: (1) Age of the inflator (with older presenting a greater risk of rupture); (2) geographic location of the inflator (with continuous long-term exposure to high absolute humidity [“HAH”] areas,
Vehicles in Priority Group 1 are equipped with Takata inflators that pose the highest risk of rupture and thus the highest risk of injury or death to the vehicle occupants. Generally, Priority Group 1 vehicles are currently model year 2008 and earlier, and have spent time
Vehicles in Priority Group 2 are equipped with Takata inflators that pose an intermediate risk of rupture; that is, a lower risk of rupture and resulting injury or death to vehicle occupants than the inflators and vehicles in Priority Group 1, but a higher likelihood of rupture and injury or death than vehicles in Priority Groups 3 and 4. Generally, Priority Group 2 includes: (1) All remaining vehicles with recalled
Vehicles in Priority Group 3 are equipped with Takata inflators that pose an unreasonable risk of serious injury or death to vehicle occupants and should be remedied as soon as possible following the remedy of the highest risk vehicles in Priority Groups 1 and 2. The likelihood of these inflators rupturing is lower than Priority Groups 1 and 2. Generally, Priority Group 3 includes the remaining vehicles, specifically, vehicles that are model year 2009 and later and either: (1) Are outside the HAH region and contain only a passenger side inflator, or; (2) are in the HAH region and contain a specific passenger side inflator type with a lower rupture rate (the PSPI type) than other passenger side inflator types.
Some Initial Vehicle Manufacturers are replacing recalled inflators with newly manufactured “like-for-like” inflators while they work towards an alternative, final remedy. Vehicles in Priority Group 4 include those vehicles with driver side frontal air bag inflators that have received, or will receive, an “interim remedy,” meaning they have been, or will be, remedied with a Takata inflator that has been recalled, and will require a second remedy once the final remedy is available.
39. Pursuant to their obligations to remedy a defect within a reasonable time, as set forth in 49 U.S.C. § 30120(a)(1) and § 30120(c)(2), each Initial Vehicle Manufacturer shall acquire a sufficient supply of remedy parts to enable it to provide remedy parts, in a manner consistent with customary business practices, upon demand to dealers within their dealer network by the timelines set forth in this Paragraph. Each Initial Vehicle Manufacturer shall ensure that it has a sufficient supply of remedy parts on the following schedule:
40. Further pursuant to their obligations to remedy a defect within a reasonable time, as set forth in 49 U.S.C. § 30120(a)(1) and § 30120(c)(2), each Initial Vehicle Manufacturer shall implement and execute its recall remedy program pursuant to the Safety Act with the target deadline to complete the recall remedy program for all vehicles in Priority Groups 1 through 3 of December 31, 2017, and a target deadline to remedy all vehicles in Priority Group 4 of December 31, 2019, as shown below:
41. Pursuant to 49 U.S.C. 30166(e), within 90 days of this Order, a vehicle manufacturer recalling inflators subject to this Order shall provide to NHTSA and the Monitor (as set forth at Paragraph 44 below), a written recall engagement process or plan for maximizing remedy completion rates for all vehicles covered by the Inflator Recalls. Such a process or plan shall, at a minimum, include but not be limited to the methodology and techniques presented at the Retooling Recalls Workshop
42. Pursuant to 49 U.S.C. 30166(e), a vehicle manufacturer recalling inflators subject to this Order shall, upon request, provide to NHTSA and the Monitor any and all information demonstrating the reasonableness of the efforts made by that vehicle manufacturer to maximize remedy completion rates.
43. The facts relating to supply, demand, and root cause may change during this Coordinated Remedy Program. Pursuant to Paragraph 32 of the November 2015 Takata Consent Order, Takata shall continue to cooperate with NHTSA in all ways to coordinate and accelerate remedy programs, and to adequately remedy the air bag inflators covered by the Inflator Recalls.
44. Pursuant to Paragraphs 35 through 46 of the November 2015 Takata
a. The Monitor shall have the authority to take such reasonable steps, in the Monitor's view, as are necessary to be fully informed about the operations of the Coordinated Remedy Program and this Order.
b. It is expected that the Monitor will develop and implement written procedures and may make additional recommendations aimed at enhancing the Coordinated Remedy Program and ensuring that all Coordinated Remedy Program deadlines, including those in this Order, are met.
c. The Monitor is not intended to supplant NHTSA's authority over decisions related to the Coordinated Remedy Program, this Order, motor vehicle safety, or otherwise. If the Monitor identifies a problem or issue, the Monitor shall make appropriate recommendations to NHTSA and provide all supporting information, including information contrary to the Monitor's recommendation, to enable NHTSA to make an informed decision on that recommendation.
d. Takata and Vehicle Manufacturers, along with all of their respective officers, directors, employees, agents, and consultants, shall have an affirmative duty to cooperate with and assist the Monitor in connection with the Coordinated Remedy Program and this Order.
45. The provisions of the November 2015 Takata Consent Order regarding future recalls and possible future recalls, contained at Paragraphs 29-30 of that document, are hereby incorporated by reference into this Order. Accordingly, any future recall(s) of Takata inflators pursuant to, or contemplated by, Paragraphs 29-30 of that Order shall become part of the Coordinated Remedy Program established herein.
46. Upon Takata's filing of a DIR pursuant to 49 CFR § 573, the affected vehicle manufacturer(s) shall timely file a DIR. Upon the filing of such DIRs NHTSA may, pursuant to 49 U.S.C. §§ 30118-30119, 49 U.S.C. § 30120(c), 49 CFR § 573.14, and 49 U.S.C. § 30166(b), (c), and (e), convene a meeting with the affected vehicle manufacturers to take place within forty-five (45) days of Takata's DIR filing, at an appropriate location within the United States, as determined by NHTSA, to address issues related to the Coordinated Remedy Program including, but not limited to, establishing a risk-assessment framework for the prioritization of vehicles and/or phasing of remedy programs, as appropriate. Any such prioritizations shall be made publicly available, and shall be annexed to this Order, in a format similar to the Priority Group lists in Annex A of this Order.
47. Pursuant to 49 U.S.C. § 30166(b), (c), (e), and (g), in carrying out any recall remedy program covered by this Order, each affected vehicle manufacturer and Takata shall make any report, submit any information, and accommodate any inspection and/or investigation, as requested by NHTSA or the Monitor.
48. NHTSA may, after consultation with affected vehicle manufacturers, and/or Takata, or upon a recommendation of the Monitor, modify or amend provisions of this Order to, among other things: account for and timely respond to newly obtained facts, scientific data, changed circumstances, and/or other relevant information that may become available throughout the term of the Coordinated Remedy Program. This includes but is not limited to, changes to the Priority Groups contained in Annex A; allowing for reasonable extensions of time for the timelines contained in Paragraphs 39 and 40; facilitating further recalls as contemplated by Paragraphs 45 and 46; or for any other purpose arising under, or in connection with, the Coordinated Remedy Program and/or this Coordinated Remedy Order.
49. This Coordinated Remedy Order shall become effective upon issuance by the NHTSA Administrator. In the event of a breach of, or failure to perform, any term of this Order by Takata or any vehicle manufacturer, NHTSA may pursue any and all appropriate remedies, including, but not limited to, actions compelling specific performance of the terms of this Order, and/or commencing litigation to enforce this Order in any United States District Court.
50. This Coordinated Remedy Order shall not be construed to create rights in, or grant any cause of action to, any third party not subject to this Order.
51. In carrying out the directives of this Coordinated Remedy Order, vehicle manufacturers and vehicle equipment manufacturers (
In the Priority Groups listed below, the area of high absolute humidity (“HAH”) is defined by each vehicle manufacturer individually, but in all instances includes vehicles originally sold or ever registered in Alabama, Florida, Georgia, Hawaii, Louisiana, Mississippi, Texas, Puerto Rico, American Samoa, Guam, Saipan, and the U.S. Virgin Islands. In limited instances, parts for some HAH recalls are currently only available to a limited area within the HAH with the highest risk of rupture. “Non-HAH” means any vehicle that has not been identified by the vehicle manufacturer as having been originally sold or ever registered in the HAH region, as defined by the vehicle manufacturer.
Pipeline and Hazardous Materials Safety Administration (PHMSA), DOT.
Decision on petitions for reconsideration of administrative determinations of preemption.
Federal hazardous material transportation law does not preempt California and Los Angeles County requirements on (1) the unloading of hazardous materials from rail tank cars by a consignee and (2) the consignee's on-site storage of hazardous materials following delivery of the hazardous materials to their destination and departure of the carrier from the consignee's premises or private track adjacent to the consignee's premises.
Vincent Lopez or Joseph Solomey, Office of Chief Counsel (PHC-10), Pipeline and Hazardous Materials Safety Administration, U.S. Department of Transportation, 1200 New Jersey Avenue SE., Washington, DC 20590-0001 (Tel. No. 202-366-4400).
This is a decision on petitions for reconsideration of PHMSA's determinations of preemption regarding certain of the State of California and Los Angeles County requirements applicable to unloading of hazardous materials from rail tank cars and the on-site storage of hazardous materials in rail tank cars or after unloading. The filing of these petitions for reconsideration rendered PHMSA's determinations of preemption non-final. With this decision on the petitions for reconsideration, the determinations of preemption that PHMSA was asked to reconsider become final.
In PDs Nos. 8(R)-11(R), published in the
• Permits to store, transport, or handle these materials;
• unloading and storage of these materials, including the design and construction of tanks and containers;
• markings on containers of cryogenic liquids;
• the fees in Title 2 of LACoC on “handlers” of hazardous materials.
SPCMA also challenged the definitions of “handle” and “storage” in Chapter 6.95 of the California Health and Safety Code (CHSC), which make substantive requirements in Chapter 6.95 applicable to on-site handling and storage of hazardous materials in rail tank cars at SPCMA members' facilities.
In PDs 8(R)-11(R), PHMSA discussed its responsibility under 49 U.S.C. 5103(b) to “prescribe regulations for the safe transportation of hazardous material in intrastate, interstate and foreign commerce,”
• “Unloading that is incidental to transportation includes consignee unloading of tank cars containing hazardous materials,” and must be performed in accordance with 49 CFR 174.67.
• “Storage that is incidental to transportation includes storage by a carrier that may occur between the time a hazardous material is offered for transportation to a carrier and the time it reaches its intended destination and is accepted by the consignee,” and is governed by requirements in 49 CFR 174.204(a)(2), but “consignor and consignee storage of hazardous materials is not incidental to transportation in commerce.” 60 FR at 8778.
• Other Federal agencies, including the Environmental Protection Agency (EPA) and the Department of Labor's Occupational Safety and Health Administration (OSHA) also regulate hazardous materials “to ensure that they are not unintentionally or unlawfully released into the environment” and “to ensure worker safety” in the workplace.
PHMSA found there was insufficient information to make a determination whether four specific requirements were preempted and that Federal hazardous material transportation law preempts only the following specific provisions challenged in the applications of SPCMA and Hasa:
• The prohibition in Title 32 LACoC 79.809(c) against allowing a tank car to remain on a siding at point of delivery for more than 24 hours while connected for transfer operations, because tank car unloading requirements in 49 CFR 174.67 did not limit the amount of time a tank car may remain on a siding at a point of delivery while connected for transfer operations. 60 FR at 8788.
• The requirement in Title 32 LACoC 79.809(f) for in-person attendance of a tank car during unloading, because Los Angeles County did not recognize the authority granted to Hasa in former DOT exemption E 10552 for the use of electronic surveillance to monitor tank car unloading, under certain conditions and restrictions. 60 FR at 8789.
• The fees imposed on “handlers” of hazardous materials under Title 2 LACoC 2.20.140, 2.20.150, 2.20.160 and 2.20.170 to the extent that these fees applied to tank car unloading activities, because the fees collected were not being used for purposes related to hazardous materials transportation. 60 FR at 8784.
Within the 20-day time period provided in 49 CFR 107.211(a), petitions for reconsideration of PHMSA's determinations in PDs 8(R)-11(R) were submitted by Hasa, The Chlorine Institute and the American Chemistry Council (ACC),
In their jointly-filed petition, The Chlorine Institute and ACC asserted that, because “49 CFR parts 174 and 177 set forth detailed regulations for the loading and unloading of hazardous materials on private property, loading and unloading on private property are held to be in commerce even though they clearly cannot be accomplished in commerce as that term is being construed by [PHMSA].” These petitioners referred to other Federal statutes which apply to transportation-related activities on private property; they stated that the environmental statutes administered by EPA, which authorize State and local requirements, “do not regulate the on-site transportation, handling or storage of hazardous materials.” They also stated that PHMSA should resolve any ambiguity in a State or local law “against the enforcing entity,” and that a State or local requirement “must be held to be preempted” whenever its enforcement could create a conflict with a requirement in the HMR.
The Society of the Plastics Industry stated that it concurred with and supported the petition for reconsideration filed by The Chlorine Institute and ACC. It asserted that the decisions in PDs 8(R)-11(R) ignore “the fact that the HMTA applies to loading and unloading, activities which occur within plant gates” and also “the `stream of commerce' decisions adopted under the Interstate Commerce Act.”
NTTC expressed agreement with the position that the HMR do not apply to a hazardous material which “has been removed from specification packaging . . . and not reloaded into another specification container or package.” NTTC stated that the definition of “commerce” in Federal hazardous material transportation law “embraces both `transportation' and [that] which affects . . . transportation.” NTTC also stated that the decisions in PDs 8(R)-11(R) were in conflict with prior interpretations that the HMR apply to representations that a packaging complies with a specification marking, “regulations regarding the removal of placards from cargo tanks (prior to such being cleaned, purged and/or laden with another product),” and enforcement actions against carriers who failed to report an unintentional release of hazardous materials during loading or
Pioneer Chlor Alkali Company addressed “a loaded tank car on the receiver's property” which it stated, prior to PHMSA's decisions, meant that “the car is under Federal Jurisdiction from the time it is loaded, while it is being transported, held/stored, and up to the time it is unloaded.” It stated that the “change” in PDs 8(R)-11(R) “is not in the best interest of the general public,” because, instead of “one set of uniformly applied rules/regulations,” there would be “one set of rules/regulations covering the car at the loading point, another set (Federal) while it is in the so called `Commerce' area and another third set at the unloading point.”
SPCMA and NPGA submitted further comments in support of the petitions for reconsideration. SPCMA stated that State and local regulations are likely to vary from place to place, so that hazardous materials “will be subject to different—and without doubt conflicting—requirements throughout the journey” from one place to another in commerce. NPGA stated that the decisions in PDs 8(R)-11(R) open up the possibility of “a plethora of local regulations governing the loading and unloading operations that are already subject to DOT regulation.”
Additional comments on the petitions for reconsideration were submitted by the California Office of Emergency Services (OES), the Contra Costa County Health Services Department (Contra Costa County), and the Association of Waste Hazardous Materials Transporters (AWHMT). OES stated that the California regulatory scheme was aimed at facilities, not transporters, and does not apply to transportation or incidental activities regulated under Federal hazardous material transportation law or the HMR. It stated that the California statutes and implementing local regulations relate to emergency response planning and do not prohibit storage of hazardous materials; rather these provisions merely define “storage” and when compliance with the State law is triggered. OES argued that there is no evidence of any “obstacle” to accomplishing and carrying out the Federal hazardous material transportation law and the HMR, and that it is irrelevant how other Federal laws and the Commerce Clause have been interpreted. Contra Costa County indicated its concurrence with the OES comments and referred to a July 1993 incident involving the release of sulfur trioxide at Richmond, California, when the company allegedly failed to train its personnel, report the quantity of materials present, or implement a risk management and prevention program under CHSC Chapter 6.95.
AWHMT recommended that PHMSA delay taking action on the petitions for reconsideration and open a rulemaking docket with notice and opportunity for public comment and participation by EPA and OSHA. AWHMT stated that further clarification was needed “on a number of points, not necessarily relevant to the fact-specific situation presented in PDs 8(R)-11(R),” because “there is no bright line that distinguishes the moment materials are placed in or out of transportation at consignee/consignor facilities.”
On July 24, 1996, PHMSA published a notice in the
On August 20, 1999, The Chlorine Institute and ACC submitted a petition to “supplement the record and for discharge” of their March 1995 petition to PHMSA for reconsideration of the determinations in PDs 8(R)-11(R). They provided a recently-issued interpretation by EPA on the applicability of the Clean Air Act, which these petitioners contended “is at odds” with findings in PDs 8(R)-11(R), and stated that “there is every reason to discharge the Petition for Reconsideration and finally decide this matter.” In its October 19, 1999 letter, PHMSA advised these parties that it was granting their request to supplement the record in this proceeding and it had placed the August 20, 1999 petition in the docket of both the HM-223 rulemaking and the preemption proceeding. PHMSA also stated that it was denying their request to “discharge” the March 1995 petition for reconsideration “pending completion of the HM-223 rulemaking,” and that, after completion of the HM-223 rulemaking, PHMSA would reopen the docket in the preemption proceeding “so that all participants in that proceeding may supplement the record if they wish,” before acting on the petitions for reconsideration.
In June 2000, The Chlorine Institute and ACC formally withdrew their joint petition for reconsideration of PDs 8(R)-11(R) and filed a complaint in the United States District Court for the District of Columbia asking the court to “reverse the holdings in the preemption determinations” and “such other and further relief as may be proper.”
After considering the extensive comments to the July 24, 1996 ANPRM, including the comments at the three public meetings, and the comments submitted in response to the April 1999 supplemental ANPRM and the June 2001 NPRM, PHMSA issued a final rule in its HM-223 rulemaking on October 30, 2003 (68 FR 61906). On April 15, 2005, PHMSA published in the
In those final rules, PHMSA amended the HMR to define several terms including “pre-transportation function,” “transportation,” “loading incidental to movement,” “unloading incidental to movement,” “storage incidental to movement,” and “transloading.” 68 FR at 61907, 61940-41; 70 FR at 20021, 20033-34. PHMSA made clear that storage of hazardous materials “at its final destination as shown on a shipping document” is not “storage incidental to movement” of the materials, and
PHMSA amended 49 CFR 171.1 to list examples of regulated and non-regulated functions and to “indicate that facilities at which functions are performed in accordance with the HMR may be subject to applicable standards and regulations of other Federal agencies or to applicable state or local governmental laws and regulations (except to the extent that such non-Federal requirements may be preempted under Federal hazmat law).” 68 FR at 61907;
PHMSA also specifically noted that “DOT specification packagings, such as rail tank cars, cargo tank motor vehicles, and cylinders, are subject to DOT regulation at all times that the packaging is marked to indicate that it conforms to the applicable specification requirements.” 70 FR at 20024. Moreover, under the HM-223 final rules, the HMR continue to apply “to pre-transportation functions, such as filling a rail tank car and preparing shipping papers.”
Ten industry associations petitioned the United States Court of Appeals for the District of Columbia for review of PHMSA's October 30, 2003 and April 15, 2005 final rules.
• The costs of complying with local requirements are “fairly traceable” to the HM-223 final rules or that, if the HM-223 final rules had not been issued, the local requirements would likely be preempted under 49 U.S.C. 5125.
• They would suffer an actual or imminent injury because of an alleged “gap” or “void” in Federal, State, or local safety requirements governing the unloading of hazardous materials by a consignee.
The Court also found that the intervenors had not provided evidence to show that “there are inconsistent state and local regulations which a properly-issued Final Rule would have preempted” or “that they face increased liability risks associated with gaps in federal oversight over the safe and secure transportation of hazardous materials.”
PHMSA specifically recognized in PDs 8(R)-11(R) that OSHA and EPA also regulate activities involving hazardous materials “to ensure that they are not unintentionally or intentionally released into the environment” and “to ensure worker safety” in the workplace. 60 FR at 8778. In HM-223, PHMSA provided in 49 CFR 171.1(e) that: “Each facility at which pre-transportation or transportation functions are performed in accordance with the HMR may be subject to applicable standards and regulations of other Federal agencies.” 68 FR at 61938. PHMSA explained in the preamble to its October 30, 2003 final rule that “unloading of rail cars at a facility after delivery by and departure of the rail carrier is subject to OSHA regulations applicable to worker protection and safety.”
Nonetheless, concerns continued to be raised as to whether further Federal requirements or guidance are necessary to address the loading and unloading of shipments of hazardous materials in bulk packagings, such as rail tank cars and cargo tank motor vehicles. In recommendations I-02-1 & I-02-2, the National Transportation Safety Board had urged DOT, together with OSHA and EPA, to develop regulations “that apply to the [certain aspects of] loading and unloading of railroad tank cars, highway cargo tanks, and other bulk containers” and, separately in recommendation R-04-10, “require safe operating procedures to be established before hazardous materials are heated in a railroad tank car for unloading.”
During late 2006 and early 2007, PHMSA reviewed incident reports submitted during the prior decade in
• During 2004-06, “hazardous materials shipments transported by highway and rail in bulk packagings were involved in approximately 9 out of 10 high consequence events.”
• “Many of the identified causes of both en route and storage incidents can be attributed to loading and unloading operations (
In the January 4, 2008 notice, PHMSA also discussed the public workshop which had been held on June 14, 2007, to discuss “the risks associated with loading and unloading bulk materials and the range of actions that could be taken by the government and industry to address those risks.”
Thereafter, PHMSA proposed to amend the HMR to require each person who engages in loading or unloading cargo tanks to perform a risk assessment of the loading and unloading operations and develop and implement safe operating procedures based upon the results of a risk assessment. NPRM, “Cargo Tank Motor Vehicle Loading and Unloading Operations,” 76 FR 13313 (Mar. 11, 2011); extension of comment period, 76 FR 27300 (May 11, 2011).
• Issue “a guidance document for CTMV loading and unloading operations;”
• Implement “an outreach campaign to educate the regulated community on current regulatory requirements and best safety practices; and”
• Conduct “human factors research to examine human involvement in release of hazmat and to potentially use this to support further consideration of rulemaking to address CTMV loading and unloading operations.”
During the meantime, Congress considered but failed to adopt proposals to apply the HMR to the unloading of certain packagings containing hazardous materials after delivery to the consignee.
In its February 15, 1995 decisions in PDs 8(R)-11(R), PHMSA considered and addressed the applicability of the HMR to unloading and storage of hazardous materials in rail tank cars at a consignee's facility after a tank car has been delivered by the rail carrier and the carrier has departed. At the conclusion of its ten-year HM-223 rulemaking, after considering the many comments submitted in that rulemaking by the parties petitioning for reconsideration of PDs 8(R)-11(R), PHMSA amended the “applicability” provisions in the HMR to clarify that the following activities or functions are not subject to the requirements of the HMR:
• “Unloading of a hazardous material from a transport vehicle or bulk packaging performed by a person employed by or working under contract to the consignee following delivery of the hazardous material by the carrier to its destination and departure from the consignee's premises of the carrier's personnel or, in the case of a private carrier, departure of the driver from the unloading area.” 49 CFR 171.1(d)(2).
• Storage of a freight container, transport vehicle, or package containing a hazardous material after its delivery to the destination indicated on a shipping document, package marking, or other medium, or, in the case of a rail car, storage of a rail car on private track.” 49 CFR 171.1(d)(3).
Since issuance of PDs 8(R)-11(R), the issues relating to post-delivery unloading and storage have been exhaustively presented and considered in rulemaking proceedings and federal court litigation. Affirmance of the fundamental holdings in the initial preemption determinations is consistent with the clarifications in the HM-223 rulemaking with regard to the scope of the definition of “transportation” in Federal hazardous material transportation law and the applicability of the HMR. Moreover, it is unlikely that any further submissions on the petitions for reconsideration will contain any new information or arguments. Reopening the docket on those petitions for reconsideration, as PHMSA offered to do in 1999, is no longer warranted. The time has come to close the preemption proceeding and devote future efforts to actions to reduce the safety risks in activities involved in the loading and unloading of shipments of hazardous materials, as outlined in PHMSA's February 25, 2014 withdrawal of notice of proposed rulemaking. 79 FR at 10465.
For all the reasons set forth above, PHMSA finds that that Federal hazardous material transportation law does not preempt California and Los Angeles County requirements on (1) the unloading of hazardous materials from rail tank cars by a consignee and (2) the consignee's on-site storage of hazardous materials following delivery of the hazardous materials to their destination and departure of the carrier from the consignee's premises or private track adjacent to the consignee's premises.
In accordance with 49 CFR 107.211(d), this decision constitutes PHMSA's final agency action on the applications by SPCMA and Hasa for
A person who is adversely affected or aggrieved by a preemption determination may file a petition for judicial review of that determination in the United States Court of Appeals for the District of Columbia or in the Court of Appeals for the United States for the circuit in which the petitioner resides or has its principal place of business, within 60 days after the determination becomes final. 49 U.S.C. 5127(a).
Office of the Comptroller of the Currency (OCC), Treasury.
Notice and request for comment.
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on a continuing information collection, as required by the Paperwork Reduction Act of 1995 (PRA).
In accordance with the requirements of the PRA, the OCC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The OCC is soliciting comment concerning the renewal of its information collection titled, “Market Risk.” The OCC also is giving notice that it has sent the collection to OMB for review.
You should submit written comments by: December 16, 2015.
Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by email, if possible. Comments may be sent to: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, Attention: 1557-0247, 400 7th Street SW., Suite 3E-218, Mail Stop 9W-11, Washington, DC 20219. In addition, comments may be sent by fax to (571) 465-4326 or by electronic mail to
All comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.
Additionally, please send a copy of your comments by mail to: OCC Desk Officer, 1557-0247, U.S. Office of Management and Budget, 725 17th Street NW., #10235, Washington, DC 20503, or by email to: oira
Shaquita Merritt, Clearance Officer, (202) 649-5490 or, for persons who are deaf or hard of hearing, TTY, (202) 649-5597, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Washington, DC 20219.
The OCC is requesting extension of OMB approval for this collection. There have been no changes to the requirements of the regulations.
The information collection requirements are located at 12 CFR 3.203 through 3.212. The rules enhance risk sensitivity and include requirements for the public disclosure of certain qualitative and quantitative information about the market risk of national banks and Federal savings associations. The collection of information is necessary to ensure capital adequacy appropriate for the level of market risk.
Section 3.203 sets forth the requirements for applying the market risk framework. Section 3.203(a)(1) requires national banks and Federal savings associations to have clearly defined policies and procedures for determining which trading assets and trading liabilities are trading positions and specifies the factors a national bank or Federal savings association must take into account in drafting those policies and procedures. Section 3.203(a)(2) requires national banks and Federal savings associations to have clearly defined trading and hedging strategies for trading positions that are approved by senior management and specifies what the strategies must articulate. Section 3.203(b)(1) requires national banks and Federal savings associations to have clearly defined policies and procedures for actively managing all covered positions and specifies the minimum requirements for those policies and procedures. Sections 3.203(c)(4) through 3.203(c)(10) require the annual review of internal models and specify certain requirements for those models. Section 3.203(d) requires the internal audit group of a national bank or Federal savings association to prepare an annual report to the board of directors on the effectiveness of controls supporting the market risk measurement systems.
Section 3.204(b) requires national banks and Federal savings associations to conduct quarterly backtesting. Section 3.205(a)(5) requires institutions to demonstrate to the OCC the appropriateness of proxies used to capture risks within value-at-risk models. Section 3.205(c) requires institutions to develop, retain, and make available to the OCC value-at-risk and profit and loss information on sub-portfolios for two years. Section 3.206(b)(3) requires national banks and Federal savings associations to have policies and procedures that describe how they determine the period of significant financial stress used to calculate the institution's stressed value-at-risk models and to obtain prior OCC approval for any material changes to these policies and procedures.
Section 3.207(b)(1) details requirements applicable to a national bank or Federal savings association when the national bank or Federal savings association uses internal models
The OCC issued a notice for 60 days of comment on August 10, 2015, 80 FR 47987. No comments were received. Comments continue to be invited on:
(a) Whether the collection of information is necessary for the proper performance of the functions of the OCC, including whether the information has practical utility;
(b) The accuracy of the OCC's estimate of the burden of the collection of information;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the collection on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
Office of the Comptroller of the Currency (OCC), Treasury.
Notice and request for comment.
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on a revision to an information collection, as required by the Paperwork Reduction Act of 1995 (PRA).
Under the PRA, Federal agencies are required to publish notice in the
In accordance with the requirements of the PRA, the OCC may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The OCC is soliciting comment concerning a revision to its information collection titled, “Domestic First Lien Residential Mortgage Data.”
You should submit written comments by: January 15, 2016.
Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by email, if possible. Comments may be sent to: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, Attention: 1557-0331, 400 7th Street SW., Suite 3E-218, Mail Stop 9W-11, Washington, DC 20219. In addition, comments may be sent by fax to (571) 465-4326 or by electronic mail to
All comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.
Shaquita Merritt, Clearance Officer, (202) 649-5490 or, for persons who are deaf or hard of hearing, TTY, (202) 649-5597, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Washington, DC 20219.
The OCC is requesting OMB approval for the following information collection:
Comprehensive mortgage data is vital to assessing and monitoring credit quality and loss mitigation activities in the residential mortgage market and the federal banking system. This data is important and necessary to support supervisory activities to ensure the safety and soundness of the federal banking system.
The Dodd-Frank Wall Street Reform and Regulatory Improvement Act of 2010 requires that this data be collected. 12 U.S.C. 1715z-25.
This data collection is being revised to include aggregate values to be calculated from data that is currently reported in loan level format. These aggregate values will be industry standard measures of portfolio performance, including but not limited to: Outstanding loan count and unpaid principal balance; delinquency and liquidation ratios; and the number of loss mitigation actions completed. Aggregate values generally will be reported at the total portfolio level, with some values also reported by portfolio segments including, but not limited to: borrower credit class and type and execution date of loss mitigation action.
The reported data items will still be calculated from loan level data that includes: Bankruptcy or foreclosure status; and other detailed loan information. Banks would not be required to report this data to the OCC monthly, but would be required to provide it upon OCC's request.
Comments submitted in response to this notice will be summarized and included in the request for OMB approval. All comments become a matter of public record. Comments are invited on:
(a) Whether the collection of information is necessary for the proper performance of the functions of the OCC, including whether the information shall have practical utility;
(b) The accuracy of the OCC's estimate of the burden of the collection of information;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the collection on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
31 CFR 357.45.
Bureau of the Fiscal Service, Fiscal Service, Treasury.
Notice.
The Department of the Treasury (Treasury) is announcing a new fee schedule applicable to transfers of U.S. Treasury book-entry securities maintained on the National Book-Entry System (NBES) that occur on or after January 4, 2016.
Effective January 4, 2016.
Brandon Taylor or Janeene Wilson, Bureau of the Fiscal Service, 202-504-3550.
Treasury has established a fee structure for the transfer of Treasury book-entry securities maintained on NBES. Treasury reassesses this fee structure periodically based on its review of the latest book-entry costs and volumes.
For each transfer or reversal of Treasury securities sent or received on or after January 4, 2016, the basic fee will increase from $0.75 to $0.81. The Board of Governors of the Federal Reserve System (Federal Reserve) will maintain its fee for Federal Reserve funds movement at $0.11. The funds movement fee is not a Treasury fee, but is charged by the Federal Reserve for the cost of moving funds associated with the transfer of a Treasury book-entry security. The two fees will result in a combined fee of $0.92 for each transfer of Treasury book-entry securities. The surcharge for an off-line Treasury book-entry securities transfer will remain at $50.00. Off-line refers to the sending and receiving of transfer messages to or from a Federal Reserve Bank by means other than on-line access, such as by written, facsimile, or telephone voice instruction. The basic transfer fee assessed to both sends and receives is reflective of costs associated with the processing of securities transfers. The off-line surcharge reflects the additional processing costs associated with the manual processing of off-line securities transfers.
Treasury does not charge a fee for account maintenance, the stripping and reconstitution of Treasury securities, the wires associated with original issues, or interest and redemption payments. Treasury currently absorbs these costs.
The fees described in this notice apply only to the transfer of Treasury book-entry securities held on NBES. Information concerning fees for book-entry transfers of Government Agency securities, which are priced by the Federal Reserve, is set out in a separate
The following is the Treasury fee schedule that will take effect on January 4, 2016, for book-entry transfers on NBES:
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed
Written comments should be received on or before January 15, 2016 to be assured of consideration.
Direct all written comments to Michael Joplin, Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224.
Requests for additional information or copies of the form and instructions should be directed to Sara Covington at Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224, or through the internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). Currently, the IRS is soliciting comments concerning Form 5304-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)—Not for Use With a Designated Financial Institution; Form 5305-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)—for Use With a Designated Financial Institution; Notice 98-4, Simple IRA Plan Guidance.
Written comments should be received on or before January 15, 2016 to be assured of consideration.
Direct all written comments to Michael Joplin, Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224.
Requests for additional information or copies of the forms, instructions, and notice should be directed to Sara Covington, Internal Revenue Service, Room 6129, 1111 Constitution Avenue NW., Washington, DC 20224, or through the internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104-13(44 U.S.C. 3506(c)(2)(A)). Currently, the IRS is soliciting comments concerning Form 6781, Gains and Losses From Section 1256 Contracts and Straddles.
Written comments should be received on or before January 15, 2016 to be assured of consideration.
Direct all written comments to Michael A. Joplin, Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224.
Requests for additional information or copies of the form and instructions should be directed to Sara Covington at Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224, or through the internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). Currently, the IRS is soliciting comments concerning Schedule C-EZ (Form 1040), Net Profit From Business.
Written comments should be received on or before January 15, 2016 to be assured of consideration.
Direct all written comments to Michael Joplin, Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224.
Requests for additional information or copies of the form and instructions should be directed to Sara Covington, at Internal Revenue Service, room 6129, 1111 Constitution Avenue NW., Washington, DC 20224, or through the internet at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.
Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Department of Veterans Affairs.
The Department of Veterans Affairs gives notice under the Federal Advisory Committee Act, 5 U.S.C., App. 2, that a meeting of the National Research Advisory Council, previously scheduled to be held in Room 730, on December 9, 2015, at the Department of Veterans Affairs, 810 Vermont Avenue NW., Washington, DC, is hereby postponed. The Notice of Meeting appeared in the
If you have any questions, please contact Pauline Cilladi-Rehrer, Designated Federal Officer, at
Centers for Medicare & Medicaid Services (CMS), HHS.
Final rule with comment period.
This major final rule with comment period addresses changes to the physician fee schedule, and other Medicare Part B payment policies to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services, as well as changes in the statute.
Comment date: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on December 29, 2015. (See the
In commenting, please refer to file code CMS-1631-FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one of the ways listed):
1.
2.
Please allow sufficient time for mailed comments to be received before the close of the comment period.
3.
4.
a. For delivery in Washington, DC—Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.
(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)
b. For delivery in Baltimore, MD— Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.
Donta Henson, (410) 786-1947 for issues related to pathology and ophthalmology services or any physician payment issues not identified below.
Abdihakin Abdi, (410) 786-4735, for issues related to portable X-ray transportation fees.
Gail Addis, (410) 786-4522, for issues related to the refinement panel.
Lindsey Baldwin, (410) 786-1694, for issues related to valuation of moderate sedation and colonoscopy services.
Jessica Bruton, (410) 786-5991, for issues related to potentially misvalued code lists.
Roberta Epps, (410) 786-4503, for issues related to PAMA section 218(a) policy.
Ken Marsalek, (410) 786-4502, for issues related to telehealth services.
Ann Marshall, (410) 786-3059, for issues related to advance care planning, and for primary care and care management services.
Geri Mondowney, (410) 786-4584, for issues related to geographic practice cost indices, malpractice RVUs, target, and phase-in provisions.
Chava Sheffield, (410) 786-2298, for issues related to the practice expense methodology, impacts, and conversion factor.
Michael Soracoe, (410) 786-6312, for issues related to the practice expense methodology and the valuation and coding of the global surgical packages.
Regina Walker-Wren, (410) 786-9160, for issues related to the “incident to” proposals.
Pamela West, (410) 786-2302, for issues related to therapy caps.
Emily Yoder, (410) 786-1804, for issues related to valuation of radiation treatment services.
Amy Gruber, (410) 786-1542, for issues related to ambulance payment policy.
Corinne Axelrod, (410) 786-5620, for issues related to rural health clinics or federally qualified health centers and payment to grandfathered tribal FQHCs.
Simone Dennis, (410) 786-8409, for issues related to rural health clinics HCPCS reporting.
Edmund Kasaitis (410) 786-0477, for issues related to Part B drugs, biologicals, and biosimilars.
Alesia Hovatter, (410) 786-6861, for issues related to Physician Compare.
Deborah Krauss, (410) 786-5264 and Alexandra Mugge, (410) 786-4457, for issues related to the physician quality reporting system and the merit-based incentive payment system.
Alexandra Mugge, (410) 786-4457, for issues related to EHR Incentive Program.
Sarah Arceo, (410) 786-2356 or Patrice Holtz, (410786-5663 for issues related to EHR Incentive Program-Comprehensive Primary Care (CPC) initiative and Medicare EHR Incentive Program aligned reporting.
Rabia Khan or Terri Postma, (410) 786-8084 or
Kimberly Spalding Bush, (410) 786-3232, or Sabrina Ahmed (410) 786-7499, for issues related to value-based Payment Modifier and Physician Feedback Program.
Frederick Grabau, (410) 786-0206, for issues related to changes to opt-out regulations.
Lisa Ohrin Wilson (410) 786-8852, or Matthew Edgar (410) 786-0698, for issues related to physician self-referral updates.
Christiane LaBonte, (410) 786-7234, for issues related to Comprehensive Primary Care (CPC) initiative.
JoAnna Baldwin (410) 786-7205, or Sarah Fulton (410) 786-2749, for issues
Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.
In addition, because of the many organizations and terms to which we refer by acronym in this final rule with comment period, we are listing these acronyms and their corresponding terms in alphabetical order below:
The PFS Addenda along with other supporting documents and tables referenced in this final rule with comment period are available through the Internet on the CMS Web site at
Throughout this final rule with comment period, we use CPT codes and descriptions to refer to a variety of services. We note that CPT codes and descriptions are copyright 2015 American Medical Association. All Rights Reserved. CPT is a registered trademark of the American Medical Association (AMA). Applicable Federal Acquisition Regulations (FAR) and Defense Federal Acquisition Regulations (DFAR) apply.
This major final rule with comment period revises payment polices under the Medicare Physician Fee Schedule (PFS) and makes other policy changes related to Medicare Part B payment. These changes are applicable to services furnished in CY 2016.
The Social Security Act (the Act) requires us to establish payments under the PFS based on national uniform relative value units (RVUs) that account for the relative resources used in furnishing a service. The Act requires that RVUs be established for three categories of resources: Work, practice expense (PE); and malpractice (MP) expense; and, that we establish by regulation each year's payment amounts for all physicians' services paid under the PFS, incorporating geographic adjustments to reflect the variations in the costs of furnishing services in different geographic areas. In this major final rule with comment period, we establish RVUs for CY 2016 for the PFS, and other Medicare Part B payment policies, to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services, as well as changes in the statute. In addition, this final rule with comment period includes discussions and proposals regarding:
• Potentially Misvalued PFS Codes.
• Telehealth Services.
• Advance Care Planning.
• Establishing Values for New, Revised, and Misvalued Codes.
• Target for Relative Value Adjustments for Misvalued Services.
• Phase-in of Significant RVU Reductions.
• “Incident to” policy.
• Portable X-ray Transportation Fee.
• Updating the Ambulance Fee Schedule regulations.
• Changes in Geographic Area Delineations for Ambulance Payment.
• Chronic Care Management Services for RHCs and FQHCs.
• HCPCS Coding for RHCs.
• Payment to Grandfathered Tribal FQHCs that were Provider-Based Clinics on or before April 7, 2000.
• Payment for Biosimilars under Medicare Part B.
• Physician Compare Web site.
• Physician Quality Reporting System.
• Medicare Shared Savings Program.
• Electronic Health Record (EHR) Incentive Program.
• Value-Based Payment Modifier and the Physician Feedback Program.
The Act requires that annual adjustments to PFS RVUs may not cause annual estimated expenditures to differ by more than $20 million from what they would have been had the adjustments not been made. If adjustments to RVUs would cause expenditures to change by more than $20 million, we must make adjustments to preserve budget neutrality. These adjustments can affect the distribution of Medicare expenditures across specialties. In addition, several changes in this final rule with comment period will affect the specialty distribution of Medicare expenditures. When considering the combined impact of work, PE, and MP RVU changes, the projected payment impacts are small for most specialties; however, the impact is larger for a few specialties.
We have determined that this major final rule with comment period is economically significant. For a detailed discussion of the economic impacts, see section VII. of this final rule with comment period.
Since January 1, 1992, Medicare has paid for physicians' services under section 1848 of the Act, “Payment for Physicians' Services.” The system relies on national relative values that are established for work, PE, and MP, which are adjusted for geographic cost variations. These values are multiplied by a conversion factor (CF) to convert the RVUs into payment rates. The concepts and methodology underlying the PFS were enacted as part of the Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239, enacted on December 19, 1989) (OBRA '89), and the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508, enacted on November 5, 1990) (OBRA '90). The final rule published on November 25, 1991 (56 FR 59502) set forth the first fee schedule used for payment for physicians' services.
We note that throughout this major final rule with comment period, unless otherwise noted, the term “practitioner” is used to describe both physicians and nonphysician practitioners (NPPs) who are permitted to bill Medicare under the PFS for services furnished to Medicare beneficiaries.
The work RVUs established for the initial fee schedule, which was implemented on January 1, 1992, were developed with extensive input from the physician community. A research team at the Harvard School of Public Health developed the original work RVUs for most codes under a cooperative agreement with the Department of Health and Human Services (HHS). In constructing the code-specific vignettes used in determining the original physician work RVUs, Harvard worked with panels of experts, both inside and outside the federal government, and obtained input from numerous physician specialty groups.
As specified in section 1848(c)(1)(A) of the Act, the work component of physicians' services means the portion of the resources used in furnishing the service that reflects physician time and intensity. We establish work RVUs for new, revised and potentially misvalued codes based on our review of information that generally includes, but is not limited to, recommendations received from the American Medical Association/Specialty Society Relative Value Update Committee (RUC), the Health Care Professionals Advisory Committee (HCPAC), the Medicare Payment Advisory Commission (MedPAC), and other public commenters; medical literature and comparative databases; as well as a comparison of the work for other codes within the Medicare PFS, and consultation with other physicians and health care professionals within CMS and the federal government. We also assess the methodology and data used to develop the recommendations submitted to us by the RUC and other public commenters, and the rationale for their recommendations.
Initially, only the work RVUs were resource-based, and the PE and MP RVUs were based on average allowable charges. Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 103-432, enacted on October 31, 1994), amended section 1848(c)(2)(C)(ii) of the Act and required us to develop resource-based PE RVUs for each physicians' service beginning in 1998. We were required to consider general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising PEs. The PE RVUs continue to represent the portion of these resources involved in furnishing PFS services.
Originally, the resource-based method was to be used beginning in 1998, but section 4505(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33, enacted on August 5, 1997) (BBA) delayed implementation of the resource-based PE RVU system until January 1, 1999. In addition, section 4505(b) of the BBA provided for a 4-year transition period from the charge-based PE RVUs to the resource-based PE RVUs.
We established the resource-based PE RVUs for each physicians' service in a final rule, published on November 2, 1998 (63 FR 58814), effective for services furnished in CY 1999. Based on the requirement to transition to a resource-based system for PE over a 4-year period, payment rates were not fully based upon resource-based PE RVUs until CY 2002. This resource-based system was based on two significant sources of actual PE data: the Clinical Practice Expert Panel (CPEP) data and the AMA's Socioeconomic Monitoring System (SMS) data. (These data sources are described in greater detail in the CY 2012 final rule with comment period (76 FR 73033).)
Separate PE RVUs are established for services furnished in facility settings, such as a hospital outpatient department (HOPD) or an ambulatory surgical center (ASC), and in nonfacility settings, such as a physician's office. The nonfacility RVUs reflect all of the direct and indirect PEs involved in furnishing a service described by a particular HCPCS code. The difference, if any, in these PE RVUs generally results in a higher payment in the nonfacility setting because in the facility settings some costs are borne by the facility. Medicare's payment to the facility (such as the outpatient prospective payment system (OPPS) payment to the HOPD) would reflect costs typically incurred by the facility. Thus, payment associated with those facility resources is not made under the PFS.
Section 212 of the Balanced Budget Refinement Act of 1999 (Pub. L. 106-113, enacted on November 29, 1999) (BBRA) directed the Secretary of Health and Human Services (the Secretary) to establish a process under which we accept and use, to the maximum extent practicable and consistent with sound data practices, data collected or developed by entities and organizations to supplement the data we normally collect in determining the PE component. On May 3, 2000, we published the interim final rule (65 FR 25664) that set forth the criteria for the submission of these supplemental PE survey data. The criteria were modified in response to comments received, and published in the
In the CY 2007 PFS final rule with comment period (71 FR 69624), we revised the methodology for calculating direct PE RVUs from the top-down to the bottom-up methodology beginning in CY 2007. We adopted a 4-year transition to the new PE RVUs. This transition was completed for CY 2010. In the CY 2010 PFS final rule with comment period, we updated the practice expense per hour (PE/HR) data that are used in the calculation of PE RVUs for most specialties (74 FR 61749). In CY 2010, we began a 4-year transition to the new PE RVUs using the updated PE/HR data, which was completed for CY 2013.
Section 4505(f) of the BBA amended section 1848(c) of the Act to require that we implement resource-based MP RVUs for services furnished on or after CY 2000. The resource-based MP RVUs were implemented in the PFS final rule with comment period published November 2, 1999 (64 FR 59380). The MP RVUs are based on commercial and physician-owned insurers' malpractice insurance premium data from all the states, the District of Columbia, and Puerto Rico. For more information on MP RVUs, see section II.B.2. of this final rule with comment period.
Section 1848(c)(2)(B)(i) of the Act requires that we review RVUs no less often than every 5 years. Prior to CY 2013, we conducted periodic reviews of work RVUs and PE RVUs independently. We completed five-year reviews of work RVUs that were effective for calendar years 1997, 2002, 2007, and 2012.
Although refinements to the direct PE inputs initially relied heavily on input from the RUC Practice Expense Advisory Committee (PEAC), the shifts to the bottom-up PE methodology in CY 2007 and to the use of the updated PE/HR data in CY 2010 have resulted in significant refinements to the PE RVUs in recent years.
In the CY 2012 PFS final rule with comment period (76 FR 73057), we finalized a proposal to consolidate reviews of work and PE RVUs under section 1848(c)(2)(B) of the Act and reviews of potentially misvalued codes under section 1848(c)(2)(K) of the Act into one annual process.
In addition to the five-year reviews, beginning for CY 2009, CMS, and the RUC have identified and reviewed a number of potentially misvalued codes on an annual basis based on various identification screens. This annual review of work and PE RVUs for potentially misvalued codes was supplemented by the amendments to section 1848 of the Act, as enacted by section 3134 of the Affordable Care Act, which requires the agency to periodically identify, review and adjust values for potentially misvalued codes.
As described in section VI.C. of this final rule with comment period, in accordance with section 1848(c)(2)(B)(ii)(II) of the Act, if revisions to the RVUs cause expenditures for the year to change by more than $20 million, we make adjustments to ensure that expenditures did not increase or decrease by more than $20 million.
To calculate the payment for each service, the components of the fee schedule (work, PE, and MP RVUs) are adjusted by geographic practice cost indices (GPCIs) to reflect the variations in the costs of furnishing the services. The GPCIs reflect the relative costs of work, PE, and MP in an area compared to the national average costs for each component.
We received several comments regarding GPCIs that are not within the scope of proposals in the CY 2016 PFS proposed rule. Many of these commenters requested adjustments to GPCI values for the Puerto Rico payment locality. These commenters contend that the data used to calculate GPCIs do not accurately reflect the cost of medical practice in Puerto Rico. We have addressed some of these issues in response to specific comments in prior rulemaking, such as the CY 2014 PFS final rule with comment period (78 FR 74380 through 74391), and will further take comments into account when we next propose to update GPCIs. However, we also note that we anticipate proposing updated GPCIs during CY 2017 rulemaking, and in the context of that update, we will consider the concerns expressed by commenters and others regarding the GPCIs for the Puerto Rico locality.
RVUs are converted to dollar amounts through the application of a CF, which is calculated based on a statutory formula by CMS's Office of the Actuary (OACT). The formula for calculating the Medicare fee schedule payment amount for a given service and fee schedule area can be expressed as:
Section 1848(b)(2)(B) of the Act specifies that the fee schedule amounts for anesthesia services are to be based on a uniform relative value guide, with appropriate adjustment of an anesthesia conversion factor, in a manner to assure that fee schedule amounts for anesthesia services are consistent with those for other services of comparable value. Therefore, there is a separate fee schedule methodology for anesthesia services. Specifically, we establish a separate conversion factor for anesthesia services and we utilize the uniform relative value guide, or base units, as well as time units, to calculate the fee schedule amounts for anesthesia services. Since anesthesia services are not valued using RVUs, a separate methodology for locality adjustments is also necessary. This involves an adjustment to the national anesthesia CF for each payment locality.
Section 220(d) of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93, enacted on April 1, 2014) added a new subparagraph (O) to section 1848(c)(2) of the Act to establish an annual target for reductions in PFS expenditures resulting from adjustments to relative values of misvalued codes. If the estimated net reduction in expenditures for a year is equal to or greater than the target for that year, the provision specifies that reduced expenditures attributable to such adjustments shall be redistributed in a budget-neutral manner within the PFS. The provision specifies that the amount by which such reduced expenditures exceed the target for a given year shall be treated as a reduction in expenditures for the subsequent year for purposes of determining whether the target for the subsequent year has been met. The provision also specifies that an amount equal to the difference between the target and the estimated net reduction in expenditures, called the target recapture amount, shall not be taken into account when applying the budget neutrality requirements specified in section 1848(c)(2)(B)(ii)(II) of the Act. The PAMA amendments originally made the target provisions applicable for CYs 2017 through 2020 and set the target for reduced expenditures at 0.5 percent of estimated expenditures under the PFS for each of those 4 years.
Subsequently, section 202 of the Achieving a Better Life Experience Act of 2014 (ABLE) (Division B of Pub. L. 113-295, enacted December 19, 2014) accelerated the application of the target, amending section 1848(c)(2)(O) of the Act to specify that target provisions apply for CYs 2016, 2017, and 2018; and setting a 1 percent target for reduced expenditures for CY 2016 and a 0.5 percent target for CYs 2017 and 2018. The implementation of the target legislation is discussed in section II.E. of this final rule with comment period.
Section 1848(c)(7) of the Act, as added by section 220(e) of the PAMA, specified that for services that are not new or revised codes, if the total RVUs for a service for a year would otherwise be decreased by an estimated 20 percent or more as compared to the total RVUs for the previous year, the applicable adjustments in work, PE, and MP RVUs shall be phased in over a 2-year period. Section 220(e) of the PAMA required the phase-in of RVU reductions of 20 percent or more to begin for 2017. Section 1848(c)(7) of the Act was later amended by section 202 of the ABLE Act to require instead that the phase-in must begin in CY 2016. The implementation of the phase-in legislation is discussed in section II.F. of this final rule with comment period.
Section 218(a) of the PAMA added a new section 1834(p) of the Act. Section 1834(p) of the Act requires for certain computed tomography (CT) services reductions in payment for the technical component (TC) (and the TC of the global fee) of the PFS service and in the hospital OPPS payment (5 percent in 2016, and 15 percent in 2017 and subsequent years). The CT services that are subject to the payment reduction are services identified as of January 1, 2014 by HCPCS codes 70450-70498, 71250-71275, 72125-72133, 72191-72194, 73200-73206, 73700-73706, 74150-74178, 74261-74263, and 75571-75574, and succeeding codes, that are furnished using equipment that does not meet each of the attributes of the National Electrical Manufacturers Association (NEMA) Standard XR-29-2013, entitled “Standard Attributes on CT Equipment Related to Dose Optimization and Management.” The implementation of the amendments made by section 218(a) of the PAMA is discussed in section II.G. of this final rule with comment period.
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted on April 16, 2015) makes several changes to the statute, including but not limited to:
(1) Repealing the sustainable growth rate (SGR) update methodology for physicians' services.
(2) Revising the PFS update for 2015 and subsequent years.
(3) Requiring that we establish a Merit-based Incentive Payment System (MIPS) under which MIPS eligible professionals (initially including physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists) receive annual payment adjustments (increases or decreases) based on their performance in a prior period. These and other MACRA provisions are discussions in various sections of this final rule with comment period. Please refer to the table of contents for the location of the various MACRA provision discussions.
Practice expense (PE) is the portion of the resources used in furnishing a service that reflects the general categories of physician and practitioner expenses, such as office rent and personnel wages, but excluding malpractice expenses, as specified in section 1848(c)(1)(B) of the Act. As required by section 1848(c)(2)(C)(ii) of the Act, we use a resource-based system for determining PE RVUs for each physicians' service. We develop PE RVUs by considering the direct and indirect practice resources involved in furnishing each service. Direct expense categories include clinical labor, medical supplies, and medical equipment. Indirect expenses include administrative labor, office expense, and all other expenses. The sections that follow provide more detailed information about the methodology for translating the resources involved in furnishing each service into service-specific PE RVUs. We refer readers to the CY 2010 PFS final rule with comment period (74 FR 61743 through 61748) for a more detailed explanation of the PE methodology.
We determine the direct PE for a specific service by adding the costs of the direct resources (that is, the clinical staff, medical supplies, and medical equipment) typically involved with furnishing that service. The costs of the resources are calculated using the refined direct PE inputs assigned to each CPT code in our PE database, which are generally based on our review of recommendations received from the RUC and those provided in response to public comment periods. For a detailed explanation of the direct PE methodology, including examples, we refer readers to the Five-Year Review of Work Relative Value Units under the PFS and Proposed Changes to the Practice Expense Methodology proposed notice (71 FR 37242) and the CY 2007 PFS final rule with comment period (71 FR 69629).
We use survey data on indirect PEs incurred per hour worked in developing the indirect portion of the PE RVUs. Prior to CY 2010, we primarily used the practice expense per hour (PE/HR) by specialty that was obtained from the AMA's Socioeconomic Monitoring Surveys (SMS). The AMA administered a new survey in CY 2007 and CY 2008, the Physician Practice Expense Information Survey (PPIS). The PPIS is a multispecialty, nationally representative, PE survey of both physicians and nonphysician practitioners (NPPs) paid under the PFS using a survey instrument and methods highly consistent with those used for the SMS and the supplemental surveys. The PPIS gathered information from 3,656 respondents across 51 physician specialty and health care professional groups. We believe the PPIS is the most comprehensive source of PE survey information available. We used the PPIS data to update the PE/HR data for the CY 2010 PFS for almost all of the Medicare-recognized specialties that participated in the survey.
When we began using the PPIS data in CY 2010, we did not change the PE RVU methodology itself or the manner in which the PE/HR data are used in that methodology. We only updated the PE/HR data based on the new survey. Furthermore, as we explained in the CY 2010 PFS final rule with comment period (74 FR 61751), because of the magnitude of payment reductions for some specialties resulting from the use of the PPIS data, we transitioned its use over a 4-year period from the previous PE RVUs to the PE RVUs developed using the new PPIS data. As provided in the CY 2010 PFS final rule with comment period (74 FR 61751), the transition to the PPIS data was complete for CY 2013. Therefore, PE RVUs from CY 2013 forward are developed based entirely on the PPIS data, except as noted in this section.
Section 1848(c)(2)(H)(i) of the Act requires us to use the medical oncology supplemental survey data submitted in 2003 for oncology drug administration services. Therefore, the PE/HR for medical oncology, hematology, and hematology/oncology reflects the continued use of these supplemental survey data.
Supplemental survey data on independent labs from the College of American Pathologists were implemented for payments beginning in CY 2005. Supplemental survey data from the National Coalition of Quality Diagnostic Imaging Services (NCQDIS), representing independent diagnostic testing facilities (IDTFs), were blended with supplementary survey data from the American College of Radiology (ACR) and implemented for payments beginning in CY 2007. Neither IDTFs, nor independent labs, participated in the PPIS. Therefore, we continue to use the PE/HR that was developed from their supplemental survey data.
Consistent with our past practice, the previous indirect PE/HR values from the supplemental surveys for these specialties were updated to CY 2006 using the MEI to put them on a comparable basis with the PPIS data.
We also do not use the PPIS data for reproductive endocrinology and spine surgery since these specialties currently are not separately recognized by Medicare, nor do we have a method to blend the PPIS data with Medicare-recognized specialty data.
Previously, we established PE/HR values for various specialties without SMS or supplemental survey data by crosswalking them to other similar specialties to estimate a proxy PE/HR. For specialties that were part of the PPIS for which we previously used a crosswalked PE/HR, we instead used the PPIS-based PE/HR. We continue previous crosswalks for specialties that did not participate in the PPIS. However, beginning in CY 2010 we changed the PE/HR crosswalk for portable X-ray suppliers from radiology to IDTF, a more appropriate crosswalk because these specialties are more similar to each other for work time.
For registered dietician services, the resource-based PE RVUs have been calculated in accordance with the final policy that crosswalks the specialty to the “All Physicians” PE/HR data, as adopted in the CY 2010 PFS final rule with comment period (74 FR 61752) and discussed in more detail in the CY 2011 PFS final rule with comment period (75 FR 73183).
For CY 2016, we have incorporated the available utilization data for interventional cardiology, which became a recognized Medicare specialty during 2014. We proposed to use a proxy PE/HR value for interventional cardiology, as there are no PPIS data for this specialty, by crosswalking the PE/HR from Cardiology, since the specialties furnish similar services in the Medicare claims data. The change is reflected in the “PE/HR” file available on the CMS Web site under the supporting data files for the CY 2016 PFS proposed rule at
To establish PE RVUs for specific services, it is necessary to establish the direct and indirect PE associated with each service.
The relative relationship between the direct cost portions of the PE RVUs for any two services is determined by the relative relationship between the sum of the direct cost resources (that is, the clinical staff, medical supplies, and medical equipment) typically involved with furnishing each of the services. The costs of these resources are calculated from the refined direct PE inputs in our PE database. For example, if one service has a direct cost sum of $400 from our PE database and another service has a direct cost sum of $200, the direct portion of the PE RVUs of the first service would be twice as much as the direct portion of the PE RVUs for the second service.
Section II.A.2.b. of this final rule with comment period describes the current data sources for specialty-specific indirect costs used in our PE calculations. We allocated the indirect costs to the code level on the basis of the direct costs specifically associated with a code and the greater of either the clinical labor costs or the work RVUs. We also incorporated the survey data described earlier in the PE/HR discussion. The general approach to developing the indirect portion of the PE RVUs is as follows:
• For a given service, we used the direct portion of the PE RVUs calculated as previously described and the average percentage that direct costs represent of total costs (based on survey data) across the specialties that furnish the service to determine an initial indirect allocator. That is, the initial indirect allocator is calculated so that the direct costs equal the average percentage of direct costs of those specialties furnishing the service. For example, if the direct portion of the PE RVUs for a given service is 2.00 and direct costs, on average, represented 25 percent of total costs for the specialties that furnished the service, the initial indirect allocator would be calculated so that it equals 75 percent of the total PE RVUs. Thus, in this example, the
• Next, we added the greater of the work RVUs or clinical labor portion of the direct portion of the PE RVUs to this initial indirect allocator. In our example, if this service had work RVUs of 4.00 and the clinical labor portion of the direct PE RVUs was 1.50, we would add 4.00 (since the 4.00 work RVUs are greater than the 1.50 clinical labor portion) to the initial indirect allocator of 6.00 to get an indirect allocator of 10.00. In the absence of any further use of the survey data, the relative relationship between the indirect cost portions of the PE RVUs for any two services would be determined by the relative relationship between these indirect cost allocators. For example, if one service had an indirect cost allocator of 10.00 and another service had an indirect cost allocator of 5.00, the indirect portion of the PE RVUs of the first service would be twice as great as the indirect portion of the PE RVUs for the second service.
• Next, we incorporated the specialty-specific indirect PE/HR data into the calculation. In our example, if, based on the survey data, the average indirect cost of the specialties furnishing the first service with an allocator of 10.00 was half of the average indirect cost of the specialties furnishing the second service with an indirect allocator of 5.00, the indirect portion of the PE RVUs of the first service would be equal to that of the second service.
For procedures that can be furnished in a physician's office, as well as in a hospital or other facility setting, we establish two PE RVUs: facility; and nonfacility. The methodology for calculating PE RVUs is the same for both the facility and nonfacility RVUs, but is applied independently to yield two separate PE RVUs. Because in calculating the PE RVUs for services furnished in a facility, we do not include resources that would generally not be provided by physicians when furnishing the service in a facility, the facility PE RVUs are generally lower than the nonfacility PE RVUs. Medicare makes a separate payment to the facility for its costs of furnishing a service.
Diagnostic services are generally comprised of two components: a professional component (PC) and a technical component (TC). The PC and TC may be furnished independently or by different providers, or they may be furnished together as a “global” service. When services have separately billable PC and TC components, the payment for the global service equals the sum of the payment for the TC and PC. To achieve this we use a weighted average of the ratio of indirect to direct costs across all the specialties that furnish the global service, TCs, and PCs; that is, we apply the same weighted average indirect percentage factor to allocate indirect expenses to the global service, PCs, and TCs for a service. (The direct PE RVUs for the TC and PC sum to the global.)
For a more detailed description of the PE RVU methodology, we refer readers to the CY 2010 PFS final rule with comment period (74 FR 61745 through 61746).
First, we create a setup file for the PE methodology. The setup file contains the direct cost inputs, the utilization for each procedure code at the specialty and facility/nonfacility place of service level, and the specialty-specific PE/HR data calculated from the surveys.
Sum the costs of each direct input.
We did not receive any comments on this proposed refinement of the methodology. Therefore, we are finalizing this refinement as proposed.
Create indirect allocators.
Historically, we have used the specialties that furnish the service in the most recent full year of Medicare claims data (crosswalked to the current year set of codes) to determine which specialties furnish individual procedures. For example, for CY 2015 ratesetting, we used the mix of specialties that
For most services the indirect allocator is: indirect PE percentage * (direct PE RVUs/direct percentage) + work RVUs.
There are two situations where this formula is modified:
• If the service is a global service (that is, a service with global, professional, and technical components), then the indirect PE allocator is: indirect percentage (direct PE RVUs/direct percentage) + clinical labor PE RVUs + work RVUs.
• If the clinical labor PE RVUs exceed the work RVUs (and the service is not a global service), then the indirect allocator is: indirect PE percentage (direct PE RVUs/direct percentage) + clinical labor PE RVUs.
(
• The first part does not vary by service and is the indirect percentage (direct PE RVUs/direct percentage).
• The second part is either the work RVU, clinical labor PE RVU, or both depending on whether the service is a global service and whether the clinical PE RVUs exceed the work RVUs (as described earlier in this step).
Apply a scaling adjustment to the indirect allocators.
Calculate the indirect practice cost index.
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We also make adjustments to volume and time that correspond to other payment rules, including special multiple procedure endoscopy rules and multiple procedure payment reductions (MPPRs). We note that section 1848(c)(2)(B)(v) of the Act exempts certain reduced payments for multiple imaging procedures and multiple therapy services from the BN calculation under section 1848(c)(2)(B)(ii)(II) of the Act. These MPPRs are not included in the development of the RVUs.
For anesthesia services, we do not apply adjustments to volume since we use the average allowed charge when simulating RVUs; therefore, the RVUs as calculated already reflect the payments as adjusted by modifiers, and no volume adjustments are necessary. However, a time adjustment of 33 percent is made only for medical direction of two to four cases since that is the only situation where a single practitioner is involved with multiple beneficiaries concurrently, so that counting each service without regard to the overlap with other services would overstate the amount of time spent by the practitioner furnishing these services.
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The following is a summary of the comments we received regarding PE RVU methodology.
The equipment cost per minute is calculated as:
Given our longstanding difficulties in acquiring accurate pricing information for equipment items, we solicited comments on whether adding another item-specific financial variable for equipment costs will be likely to increase the accuracy of PE RVUs across the PFS. We noted that most of the information for maintenance costs we have received is for capital equipment, and for the most part, this information has been limited to single invoices. Like the invoices for the equipment items themselves, we do not believe that very small numbers of voluntarily submitted invoices are likely to reflect typical costs for all of the same reasons we have discussed in previous rulemaking. We noted that some commenters submitted high-level summary data from informal surveys but we currently have no means to validate that data. Therefore, we continue to seek a source of publicly available data on actual maintenance costs for medical equipment to improve the accuracy of the equipment costs used in developing PE RVUs.
Although most commenters were supportive of adopting a variable maintenance factor for equipment items, commenters also stated that they were unaware of any publicly available data source containing this information. One commenter agreed that there is no comprehensive data source for the maintenance information and therefore it would be difficult to implement a variable maintenance formula. Multiple other commenters concurred that they were unaware of any such public dataset. Several commenters encouraged CMS to work with stakeholders to define service contracts/maintenance contracts, collect data on their associated costs and update the equipment maintenance adjustment factor as necessary.
We will continue to investigate potential avenues for determining equipment maintenance costs across a broad range of equipment items.
This section focusses on specific PE inputs that we addressed in the proposed rule. The direct PE inputs are included in the CY 2016 direct PE input database, which is available on the CMS Web site under downloads for the CY 2016 PFS final rule with comment period at
Prior to CY 2015 rulemaking, the RUC provided a recommendation regarding the PE inputs for digital imaging services. Specifically, the RUC recommended that we remove supply and equipment items associated with film technology from a list of codes since these items are no longer typical resource inputs. The RUC also recommended that the Picture Archiving and Communication System (PACS) equipment be included for these imaging services since these items are now typically used in furnishing imaging services. However, since we did not receive any invoices for the PACS system, we were unable to determine the appropriate pricing to use for the inputs. For CY 2015, we proposed, and finalized our proposal, to remove the film supply and equipment items, and to create a new equipment item as a proxy for the PACS workstation as a direct expense. We used the current price associated with ED021 (computer, desktop, w-monitor) to price the new item, ED050 (PACS Workstation Proxy), pending receipt of invoices to facilitate pricing specific to the PACS workstation.
Subsequent to establishing payment rates for CY 2015, we received information from several stakeholders regarding pricing for items related to the digital acquisition and storage of images. Some of these stakeholders submitted information that included prices for items clearly categorized as indirect costs within the established PE methodology and equivalent to the storage mechanisms for film. Additionally, some of the invoices we received included other products (like training and maintenance costs) in addition to the equipment items, and there was no distinction on these invoices between the prices for the equipment items themselves and the related services. However, we did receive invoices from one stakeholder that facilitated a proposed price update for the PACS workstation. Therefore, we proposed to update the price for the PACS workstation to $5,557 from the current price of $2,501 since the latter price was based on the proxy item and the former based on submitted invoices. The PE RVUs in Addendum B on the CMS Web site reflect the updated price.
In addition to the workstation used by the clinical staff acquiring the images and furnishing the TC of the services, a stakeholder also submitted more detailed information regarding a workstation used by the practitioner interpreting the image in furnishing the PC of many of these services.
As we stated in the CY 2015 final rule with comment period (79 FR 67563), we generally believe that workstations used by these practitioners are more accurately considered indirect costs associated with the PC of the service. However, we understand that the professional workstations for interpretation of digital images are similar in principle to some of the previous film inputs incorporated into the global and technical components of the codes. Given that many of these services are reported globally in the nonfacility setting, we believe it may be appropriate to include these costs as direct inputs for the associated HCPCS codes. Based on our established methodology, these costs would be incorporated into the PE RVUs of the global and technical component of the HCPCS code.
We solicited comments on whether including the professional workstation as a direct PE input for these codes would be appropriate, given that the resulting PE RVUs would be assigned to the global and technical components of the codes.
Response: We believe that maintaining consistent treatment of PE costs is of central importance in the resource-based relative value system. Since the PE RVUs for individual services are relative to all other PFS services, we believe that we must categorize typical costs for individual services into the direct and indirect categories using the same definitions that apply to all PFS services. We believe it would be inconsistent with cost-based relative value principles to change the definition of those categories for particular procedures or tests, even when technology changes. Centralized record keeping systems, containing clinical or billing information are considered indirect expenses across the PFS. Due to technological changes, some of these systems are well-integrated into equipment items with clinical functionality, while others remain completely distinct. In pricing and categorizing these costs, we have aimed to separate these costs where possible and believe we have maintained relativity among PFS services to the greatest extent possible. We remind commenters that indirect PE RVUs are included for every nationally priced PFS service and that these RVUs contribute to payment for each and every service. We also note that over time, indirect costs change as direct costs change. For example, changes in technology might result in particular items using more or less office space, or using more or less electricity. We do not believe it would be appropriate to redefine indirect costs as direct costs whenever we have reason to believe that indirect costs have changed due to changes in technology. Instead, we acknowledge that indirect costs change over time for all those who are paid through the Medicare PFS, making it even more important to follow the established principles of relativity in establishing direct PE inputs.
After consideration of comments received, we are finalizing our proposal to update the price for the PACS workstation to $5,557 from the current price of $2,501.
As we noted in the proposed rule, one commenter expressed concern about the changes in direct PE inputs for CPT code 76377, (3D radiographic procedure with computerized image post-processing), that were proposed and finalized in CY 2015 rulemaking as part of the film to digital change. Based on a recommendation from the RUC, we removed the input called “computer workstation, 3D reconstruction CT-MR” from the direct PE input database and assigned the associated minutes to the proxy for the PACS workstation. Therefore, we sought comment from stakeholders, including the RUC, about whether or not the PACS workstation used in imaging codes is the same workstation that is used in the post-processing described by CPT code 76377, or if a more specific workstation should be incorporated in the direct PE input database.
As we noted in PFS rulemaking for CY 2015, we continue to work on revisions to the direct PE input database to provide the number of clinical labor minutes assigned for each task for every code in the database instead of only including the number of clinical labor minutes for the pre-service, service, and post-service periods for each code. In addition to increasing the transparency of the information used to set PE RVUs, this improvement would allow us to compare clinical labor times for activities associated with services across the PFS, which we believe is important to maintaining the relativity of the direct PE inputs. This information will facilitate the identification of the usual numbers of minutes for clinical labor tasks and the identification of exceptions to the usual values. It will also allow for greater transparency and consistency in the assignment of equipment minutes based on clinical labor times. Finally, we believe that the information can be useful in maintaining standard times for particular clinical labor tasks that can be applied consistently to many codes as they are valued over several years, similar in principle to the use of physician pre-service time packages. We believe such standards will provide greater consistency among codes that share the same clinical labor tasks and could improve relativity of values among codes. For example, as medical practice and technologies change over time, changes in the standards could be updated at once for all codes with the applicable clinical labor tasks, instead of waiting for individual codes to be reviewed.
Although this work is not yet complete, we anticipate completing it in the near future. In the following paragraphs, we address a series of issues related to clinical labor tasks, particularly relevant to services currently being reviewed under the misvalued code initiative.
In PFS rulemaking for CY 2015, we noted that the RUC recommendation regarding inputs for digital imaging services indicated that, as each code is reviewed under the misvalued code initiative, the clinical labor tasks associated with digital technology (instead of film) would need to be addressed. When we reviewed that recommendation, we did not have the capability of assigning standard clinical labor times for the hundreds of individual codes since the direct PE input database did not previously allow for comprehensive adjustments for clinical labor times based on particular clinical labor tasks. Therefore, consistent with the recommendation, we proposed to remove film-based supply and equipment items but maintain clinical labor minutes that were assigned based on film technology.
As noted in the paragraphs above, we continue to improve the direct PE input database by specifying the minutes for each code associated with each clinical labor task. Once completed, this work would allow adjustments to be made to minutes assigned to particular clinical labor tasks related to digital technology, consistent with the changes that were made to individual supply and equipment items. In the meantime, we
The following is a summary of the comments we received regarding whether these standard times accurately reflect the typical time it takes to perform these clinical labor tasks associated with digital imaging.
Another commenter also supported standard clinical labor times for four out of the five tasks associated with digital technology, again excepting the activity “Technologist QC's images in PACS, checking for all images, reformats, and dose page.” This commenter stated that a survey of imaging providers had been conducted which suggested that the median time required to perform this clinical labor task was 10 minutes. The commenter stated that CMS did not have any data to support its belief in the standard time of 2 minutes, and recommended considering the commenter's data and information from other stakeholders regarding the appropriate standard minutes for the clinical labor tasks associated digital imaging.
After consideration of comments received, we are finalizing standard times for clinical labor tasks associated with digital imaging at 2 minutes for “Availability of prior images confirmed”, 2 minutes for “Patient clinical information and questionnaire reviewed by technologist, order from physician confirmed and exam protocoled by radiologist”, 2 minutes for “Review examination with interpreting MD”, and 1 minute for “Exam documents scanned into PACS. Exam completed in RIS system to generate billing process and to populate images into Radiologist work queue.” We are not finalizing a standard time for clinical labor task “Technologist QC's images in PACS, checking for all images, reformats, and dose page” at this time, pending consideration of any additional public comment and future rulemaking, as described above.
As with the clinical labor tasks associated with digital imaging, many of the specialized clinical labor tasks associated with pathology services do not have consistent times across those
Therefore, we developed standard times that we have used in finalizing direct PE inputs. These times are based on our review and assessment of the current times included for these clinical labor tasks in the direct PE input database. We have listed these standard times in Table 6. For services reviewed for CY 2016, in cases where the RUC-recommended times differed from these standards, we have refined the time for those tasks to align with the values in Table 6. We solicited comments on whether these standard times accurately reflect the typical time it takes to perform these clinical labor tasks when furnishing pathology services.
We also believe that many of the clinical labor activities that we discussed in Table 6 are tasks that do not depend on number of blocks or batch size. Clinical labor activities such as “Clean room/equipment following procedure” and “Dispose of remaining specimens” would typically remain standard across different services without varying by block number or batch size, with the understanding of occasional allowance for additional time for clinical labor tasks of unusual difficulty.
After consideration of comments received, we are finalizing standard times for clinical labor tasks associated with pathology services at 4 minutes for
In the process of improving the level of detail in the direct PE input database by including the minutes assigned for each clinical labor task, we noticed that there are several codes with minutes assigned for the clinical labor task called “complete botox log.” We do not believe the completion of such a log is a direct resource cost of furnishing a medically reasonable and necessary physician's service for a Medicare beneficiary. Therefore, we proposed to eliminate the minutes assigned for the task “complete botox log” from the direct PE input database. The PE RVUs displayed in Addendum B on the CMS Web site were calculated with the modified inputs displayed in the CY 2016 direct PE input database.
The following is a summary of the comments we received regarding the clinical labor task “complete botox log.”
Subsequent to the publication of the CY 2015 PFS final rule with comment period, stakeholders alerted us to several clerical inconsistencies in the clinical labor nonfacility intraservice time for several vertebroplasty codes with interim final values for CY 2015, based on our understanding of RUC recommended values. We proposed to correct these inconsistencies in the CY 2016 proposed direct PE input database to reflect the RUC recommended values, without refinement, as stated in the CY 2015 PFS final rule with comment period. The CY 2015 interim final direct PE inputs for these codes are displayed on the CMS Web site under downloads for the CY 2015 PFS final rule with comment period at
For CY 2016, we proposed the following adjustments:
• For CPT codes 22510 (percutaneous vertebroplasty (bone biopsy included when performed), 1 vertebral body, unilateral or bilateral injection, inclusive of all imaging guidance; cervicothoracic) and 22511 (percutaneous vertebroplasty (bone biopsy included when performed), 1 vertebral body, unilateral or bilateral injection, inclusive of all imaging guidance; lumbosacral), a value of 45 minutes for labor code L041B (“Radiologic Technologist”) we proposed to assign for the “assist physician” task and a value of 5 minutes for labor code L037D (“RN/LPN/MTA”) for the “Check dressings & wound/home care instructions/coordinate office visits/prescriptions” task.
• For CPT code 22514 (percutaneous vertebral augmentation, including cavity creation (fracture reduction and bone biopsy included when performed) using mechanical device (
The PE RVUs displayed in Addendum B on the CMS Web site were calculated with the inputs displayed in the CY 2016 direct PE input database.
The following is a summary of the comments we received regarding clinical labor input inconsistencies.
The commenters stated that for CPT code 22511, the CMS direct PE labor file correctly included the 45 minutes of “Assist physician” time for the second technologist, however, the 5 minutes for the RN/LPN/MTA blend (L037D) to “Check dressings & wound” was still not included in the CMS file. The commenter indicated that the postoperative E/M visit was also not included for this code. The commenters also stated that for CPT code 22514, CMS was proposing to include the 5 minutes for “Check dressings & wound” in the intraservice time for this service. The commenters indicated that this did not appear to be consistent with how CMS was proposing to handle the same clinical labor task in the prior two codes discussed. The commenters requested that CMS outline specifically which line items (from the PE spreadsheet) it proposed to change and the effects these changes would have on the direct inputs for these three codes.
For CPT code 22510, we agree with the commenters that the clinical labor assigned to the RadTech (L041B) for “Assist Physician” was incorrectly listed twice in our direct PE input database. The clinical labor staff type was also incorrectly entered as L041C, which is priced at the same rate but refers to a second Radiologic Technologist for Vertebroplasty. We will remove the duplicative clinical labor and assign type L041B to the “Assist Physician” activity. We do not agree with the commenters that the time for clinical labor task “Check dressings & wound” was missing, as it is present in the database. We agree with the commenters that the clinical labor time for the office visit was missing from CPT code 22510, and we will add it to the direct PE database.
For CPT code 22511, the commenters are correct that the time for clinical labor task “Assist physician” was entered at the correct value of 45 minutes, and the 5 minutes of clinical labor for “Check dressings & wound” does not appear in the non-facility setting. This clinical labor time appears to have been incorrectly entered for the facility setting instead; we will remove this time and add it to its proper non-facility setting. We agree with the commenters that the clinical labor time for the office visit was again missing from CPT code 22511, and we will add it to the direct PE input database.
For CPT code 22514, the time for clinical labor task “Assist physician” has been refined to 50 minutes as detailed in the CY 2016 PFS proposed rule. We agree with the commenters that the 5 minutes of clinical labor time for “Check dressings & wound” is missing from the direct PE input database. We agree that the clinical labor for this activity should not be treated differently from the rest of the codes in the family, and therefore these 5 minutes are included in the direct PE input database. The postoperative office visit is included in the direct PE input database for CPT code 22514.
After consideration of comments received, we are finalizing our proposed changes to clinical labor along with the additional corrections described above.
We identified several pathology codes for which equipment minutes are assigned to the item EP110 “Freezer.” Minutes are only allocated to particular equipment items when those items cannot be used in conjunction with furnishing services to another patient at the same time. We do not believe that minutes should be allocated to items such as freezers since the storage of any particular specimen or item in a freezer for any given period of time would be unlikely to make the freezer unavailable for storing other specimens or items. Instead, we proposed to classify the freezer as an indirect cost because we believe that would be most consistent with the principles underlying the PE methodology since freezers can be used for many specimens at once. The PE RVUs displayed in Addendum B on the CMS Web site were calculated with the modified inputs displayed in the CY 2016 direct PE input database.
We did not receive comments on this proposal, and therefore, we are finalizing as proposed.
In the CY 2011 PFS final rule with comment period (75 FR 73205), we finalized a process to act on public requests to update equipment and supply price and equipment useful life inputs through annual rulemaking beginning with the CY 2012 PFS proposed rule. During 2014, we received a request to update the price of supply item “antigen, mite” (SH006) from $4.10 per test to $59. In reviewing the request, it is evident that the requested price update does not apply to the SH006 item but instead represents a different item than the one currently included as an input in CPT code 86490 (skin test, coccidioidomycosis). Therefore, rather than changing the price for SH006 that is included in several codes, we proposed to create a new supply code for Spherusol, valued at $590 per 1 ml vial and $59 per test, and to include this new item as a supply for 86490 instead of the current input, SH006.
We also received a request to update the price for EQ340 (Patient Worn Telemetry System) used only in CPT code 93229 (External mobile cardiovascular telemetry with electrocardiographic recording, concurrent computerized real time data analysis and greater than 24 hours of accessible ECG data storage (retrievable with query) with ECG triggered and patient selected events transmitted to a remote attended surveillance center for up to 30 days; technical support for connection and patient instructions for use, attended surveillance, analysis and transmission of daily and emergent data reports as prescribed by a physician or other qualified health care.) The requestor noted that we had previously proposed and finalized a policy to remove wireless communication and delivery costs related to the equipment item that had previously been included in the direct PE input database as supply items. The requestor asked that we alter the price of the equipment from $21,575 to $23,537 to account for the equipment costs specific to the patient-worn telemetry system.
In the proposed rule, we stated that we considered this request in the context of the unique nature of this particular equipment item. This equipment item is unique in several ways, including that it is used continuously 24 hours per day and 7 days per week for an individual patient over several weeks. It is also unique in that the equipment is primarily used outside of a healthcare setting. Within our current methodology, we currently account for these unique properties by calculating the per minute costs with different assumptions than those used for most other equipment by increasing the number of hours the equipment is available for use. Therefore, we also believe it would be appropriate to incorporate other unique aspects of the operating costs of this item in our calculation of the equipment cost per minute. We believe the requestor's suggestion to do so by increasing the price of the equipment is practicable and appropriate. Therefore, we proposed to change the price for EQ340 (Patient Worn Telemetry System) to $23,537. The PE RVUs displayed in Addendum B on the CMS Web site were calculated with the modified inputs displayed in the CY 2016 direct PE input database.
For CY 2015, we received a request to update the price for supply item “kit, HER-2/neu DNA Probe” (SL196) from $105 to $144.50. Accordingly, in the CY 2015 proposed rule, we proposed to update the price to $144.50. In the CY 2015 final rule with comment period, we indicated that we obtained new information suggesting that further study of the price of this item was necessary before proceeding to update the input price. We obtained pricing information readily available on the Internet that indicated a price of $94 for this item for a particular hospital. Subsequent to the CY 2015 final rule with comment period, stakeholders requested that we use the updated price of $144.50. One stakeholder suggested that the price of $94 likely reflected discounts for volume purchases not received by the typical laboratory. We solicited comments on how to consider the higher-priced invoice, which is 53 percent higher than the price listed, relative to the price currently in the direct PE database. Specifically, we solicited information on the price of the disposable supply in the typical case of the service furnished to a Medicare beneficiary, including, based on data, whether the typical Medicare case is furnished by an entity likely to receive a volume discount.
Other commenters stated that they were unable to find this pricing information through publicly available sources, suggesting that it may not reflect typical transactions. The commenters also stated that it was unclear as to whether the proposed price referred to FDA-approved kits, which are more expensive than non-approved kits. The commenters further indicated that a number of new morphometric analysis, multiplex quantitative/semi-quantitative ISH tests are in use today with probe kit costs that are higher than those of HER-2/neu probe kits. The commenters suggested that CMS should adopt a weighted-average of the probe kit prices for the probe kits currently used to perform these procedures.
In reviewing public comments in response to the CY 2015 PFS final rule with comment period, we re-examined issues around the typical number of pathology tests furnished at once. In the CY 2013 final rule with comment period (77 FR 69074), we noted that the number of blocks assumed for a particular code significantly impacts the assumed clinical labor, supplies, and equipment for that service. We indicated that we had concerns that the assumed number of blocks was inaccurate, and that we sought corroborating, independent evidence that the number of blocks assumed in the current direct PE input recommendations is typical. We note that, given the high volume of many pathology services, these assumptions have a significant impact on the PE RVUs for all other PFS services. We refer readers to section II.H. where we detail our concerns about the lack of information regarding typical batch size and typical block size for many pathology services and solicit stakeholder input on approaches to obtaining accurate information that can facilitate our establishing payment rates that best reflect the relative resources involved in furnishing the typical service, for both pathology services in particular and more broadly for services across the PFS.
We noted that not all PFS services are priced in the nonfacility setting, but as medical practice changes, we routinely develop nonfacility prices for particular services when they can be furnished outside of a facility setting. We noted that the valuation of a service under the PFS in particular settings does not address whether those services are medically reasonable and necessary in the case of individual patients, including being furnished in a setting appropriate to the patient's medical needs and condition.
Cataract surgery generally has been performed in an ambulatory surgery center (ASC) or a hospital outpatient department (HOPD). We have not assigned nonfacility PE RVUs under the PFS for cataract surgery. According to Medicare claims data, there are a relatively small number of these services furnished in nonfacility settings. Except in unusual circumstances, anesthesia for cataract surgery is either local or topical/intracameral. Advancements in technology have significantly reduced operating time and improved both the safety of the procedure and patient outcomes. As discussed in the proposed rule, we believe that it now may be possible for cataract surgery to be furnished in an in-office surgical suite, especially for routine cases. Cataract surgery patients require a sterile surgical suite with certain equipment and supplies that we believe could be a part of a nonfacility-based setting that is properly constructed and maintained for appropriate infection prevention and control.
We also noted in the proposed rule that we believe there are potential advantages for all parties to furnishing appropriate cataract surgery cases in the nonfacility setting. Cataract surgery has been for many years the highest volume surgical procedure performed on Medicare beneficiaries. For beneficiaries, cataract surgery in the office setting might provide the additional convenience of receiving the preoperative, operative, and post-operative care in one location. It might also reduce delays associated with registration, processing, and discharge protocols associated with some facilities. Similarly, it might provide surgeons with greater flexibility in scheduling patients at an appropriate site of service depending on the individual patient's needs. For example, routine cases in patients with no comorbidities could be performed in the nonfacility surgical suite, while more complicated cases (for example, pseudoexfoliation) could be scheduled in the ASC or HOPD. In addition, furnishing cataract surgery in the nonfacility setting could result in lower Medicare expenditures for cataract surgery if the nonfacility payment rate were lower than the sum of the PFS facility payment rate and the payment to either the ASC or HOPD.
We solicited comments from ophthalmologists and other stakeholders on office-based surgical suite cataract surgery. In addition, we solicited comments from the RUC and other stakeholders on the direct PE inputs involved in furnishing cataract surgery in the nonfacility setting in conjunction with our consideration of information regarding the possibility of development of nonfacility cataract surgery PE RVUs.
We received 138 comments from stakeholders including professional medical societies, the RUC, ambulatory surgical centers (ASCs), practitioners, and the general public. The RUC deferred to the specialty societies regarding the appropriateness of performing these services in the nonfacility setting.
A stakeholder indicated that due to changes in technology and technique, several codes that describe endoscopic sinus surgeries can now be furnished in the nonfacility setting. According to Medicare claims data, there are a relatively small number of these services furnished in nonfacility settings. These CPT codes are 31254 (Nasal/sinus endoscopy, surgical; with ethmoidectomy, partial (anterior)), 31255 (Nasal/sinus endoscopy, surgical; with ethmoidectomy, total (anterior and posterior)), 31256 (Nasal/sinus endoscopy, surgical, with maxillary antrostomy), 31267 (Nasal/sinus endoscopy, surgical, with maxillary antrostomy; with removal of tissue from maxillary sinus), 31276 (Nasal/sinus endoscopy, surgical with frontal sinus exploration, with or without removal of tissue from frontal sinus), 31287 (Nasal/sinus endoscopy, surgical, with sphenoidotomy), and 31288 (Nasal/sinus endoscopy, surgical, with sphenoidotomy; with removal of tissue from the sphenoid sinus). We solicited input from stakeholders, including the RUC, about the appropriate direct PE inputs for these services.
We received 53 comments from stakeholders including specialty societies, device manufacturers, medical centers, and physician practices (otolaryngology, allergy, facial, and plastics specialists).
Section 1848(c) of the Act requires that each service paid under the PFS be composed of three components: Work, PE, and malpractice (MP) expense. As required by section 1848(c)(2)(C)(iii) of the Act, beginning in CY 2000, MP RVUs are resource based. Malpractice RVUs for new codes after 1991 were extrapolated from similar existing codes or as a percentage of the corresponding work RVU. Section 1848(c)(2)(B)(i) of the Act also requires that we review, and if necessary adjust, RVUs no less often than every 5 years. In the CY 2015 PFS final rule with comment period, we implemented the third review and update of MP RVUs. For a discussion of the third review and update of MP RVUs see the CY 2015 proposed rule (79 FR 40349 through 40355) and final rule with comment period (79 FR 67591 through 67596).
As explained in the CY 2011 PFS final rule with comment period (75 FR 73208), MP RVUs for new and revised codes effective before the next five-year review of MP RVUs were determined either by a direct crosswalk from a similar source code or by a modified
For CY 2016, we proposed to continue our current approach for determining MP RVUs for new/revised codes. For the new and revised codes for which we proposed work RVUs and PE inputs, we also published the proposed MP crosswalks used to determine their MP RVUs. The MP crosswalks for those new and revised codes were subject to public comment and we are responding to comments and finalizing them in section II.H. of this CY 2016 PFS final rule with comment period. The MP crosswalks for new and revised codes with interim final values established in this CY 2016 final rule with comment period will be implemented for CY 2016 and subject to public comment. We will then respond to comments and finalize them in the CY 2017 PFS final rule with comment period.
In the CY 2012 PFS final rule with comment period (76 FR 73057), we finalized a process to consolidate the five-year reviews of work and PE RVUs with our annual review of potentially misvalued codes. We discussed the exclusion of MP RVUs from this process at the time, and we stated that, since it is not feasible to obtain updated specialty level MP insurance premium data on an annual basis, we believe the comprehensive review of MP RVUs should continue to occur at 5-year intervals. In the CY 2015 PFS proposed rule (79 FR 40349 through 40355), we stated that there are two main aspects to the update of MP RVUs: (1) Recalculation of specialty risk factors based upon updated premium data; and (2) recalculation of service level RVUs based upon the mix of practitioners providing the service. In the CY 2015 PFS final rule with comment period (79 FR 67596), in response to several stakeholders' comments, we stated that we would address potential changes regarding the frequency of MP RVU updates in a future proposed rule. For CY 2016, we proposed to begin conducting annual MP RVU updates to reflect changes in the mix of practitioners providing services, and to adjust MP RVUs for risk. Under this approach, the specialty-specific risk factors would continue to be updated every 5 years using updated premium data, but would remain unchanged between the 5-year reviews. However, in an effort to ensure that MP RVUs are as current as possible, our proposal would involve recalibrating all MP RVUs on an annual basis to reflect the specialty mix based on updated Medicare claims data. Since under this proposal, we would be recalculating the MP RVUs annually, we also proposed to maintain the relative pool of MP RVUs from year to year; this will preserve the relative weight of MP RVUs to work and PE RVUs. We proposed to calculate the current pool of MP RVUs by using a process parallel to the one we use in calculating the pool of PE RVUs. (We direct the reader to section II.2.b.(6) for detailed description of that process, including a proposed technical revision that we are finalizing for 2016.) To determine the specialty mix assigned to each code, we also proposed to use the same process used in the PE methodology, described in section II.2.b.(6) of this final rule with comment period. We note that for CY 2016, we proposed and are finalizing a policy to modify the specialty mix assignment methodology to use an average of the 3 most recent years of available data instead of a single year of data. We anticipate that this change will increase the stability of PE and MP RVUs and mitigate code-level fluctuations for all services paid under the PFS, and for new and low-volume codes in particular. We also proposed to no longer apply the dominant specialty for low volume services, because the primary rationale for the policy has been mitigated by this proposed change in methodology. However, we did not propose to adjust the code-specific overrides established in prior rulemaking for codes where the claims data are inconsistent with a specialty that could be reasonably expected to furnish the service. We believe that these proposed changes serve to balance the advantages of using annually updated information with the need for year-to-year stability in values. We solicited comments on both aspects of the proposal: Updating the specialty mix for MP RVUs annually (while continuing to update specialty-specific risk factors every 5 years using updated premium data); and using the same process to determine the specialty mix assigned to each code as is used in the PE methodology, including the proposed modification to use the most recent 3 years of claims data. We also solicited comments on whether this approach will be helpful in addressing some of the concerns regarding the calculation of MP RVUs for services with low volume in the Medicare population, including the possibility of limiting our use of code-specific overrides of the claims data.
The following is a summary of the comments we received regarding our current approach for determining malpractice RVUs for new/revised codes.
After consideration of the public comments received, we are finalizing the policies as proposed. That is, we are finalizing the proposal to conduct annual MP RVU updates to reflect changes in the mix of practitioners providing services and to adjust MP RVUs for risk, and to modify the specialty mix assignment methodology to use an average of the 3 most recent years of available data instead of a single year. We note that we will continue to maintain the code-specific overrides where the claims data are inconsistent with a specialty that would reasonable be expected to furnish the services.
We also proposed an additional refinement in our process for assigning MP RVUs to individual codes. Historically, we have used a floor of 0.01 MP RVUs for all nationally-priced PFS codes. This means that even when the code-level calculation for the MP RVU falls below 0.005, we have rounded to 0.01. In general, we believe this approach accounts for the minimum MP costs associated with each service furnished to a Medicare beneficiary. However, in examining the calculation of MP RVUs, we do not believe that this floor should apply to add-on codes. Since add-on codes must be reported with another code, there is already an MP floor of 0.01 that applies to the base code, and therefore, to each individual service. By applying the floor to add-on codes, the current methodology practically creates a 0.02 floor for any service reported with one add-on code, and 0.03 for those with 2 add-on codes, etc. Therefore, we proposed to maintain the 0.01 MP RVU floor for all nationally-priced PFS services that are described by base codes, but not for add-on codes. We will continue to calculate, display, and make payments that include MP RVUs for add-on codes that are calculated to 0.01 or greater, including those that round to 0.01. We only proposed to allow the MP RVUs for add-on codes to round to 0.00 where the calculated MP RVU is less than 0.005.
In the CY 2015 PFS proposed rule (79 FR 40354 through 40355), we did not include an adjustment under the anesthesia fee schedule to reflect updated MP premium information, and stated that we intended to propose an anesthesia adjustment for MP in the CY 2016 PFS proposed rule. We also solicited comments regarding how to best reflect updated MP premium amounts under the anesthesiology fee schedule.
As we previously explained, anesthesia services under the PFS are paid based upon a separate fee schedule, so routine updates must be calculated in a different way than those for services for which payment is calculated based upon work, PE, and MP RVUs. To apply budget neutrality and relativity updates to the anesthesiology fee schedule, we typically develop proxy RVUs for individual anesthesia services that are derived from the total portion of PFS payments made through the anesthesia fee schedule. We then update the proxy RVUs as we would the RVUs for other PFS services and adjust the anesthesia fee schedule conversion factor based on the differences between the original proxy RVUs and those adjusted for relativity and budget neutrality.
We believe that taking the same approach to update the anesthesia fee schedule based on new MP premium data is appropriate. However, because work RVUs are integral to the MP RVU methodology and anesthesia services do not have work RVUs, we decided to seek potential alternatives prior to implementing our approach in conjunction with the proposed CY 2015 MP RVUs based on updated premium data. One commenter supported the delay in proposing to update the MP for anesthesia at the same time as updating the rest of the PFS, and another commenter suggested using mean anesthesia MP premiums per provider over a 4- or 5-year period prorated by Medicare utilization to yield the MP expense for anesthesia services; no commenters offered alternatives to calculating updated MP for anesthesia services. The latter suggestion might apply more broadly to the MP methodology for the PFS and does not address the methodology as much as the data source.
We continue to believe that payment rates for anesthesia should reflect MP resource costs relative to the rest of the PFS, including updates to reflect changes over time. Therefore, for CY 2016, to appropriately update the MP resource costs for anesthesia, we proposed to make adjustments to the anesthesia conversion factor to reflect the updated premium information collected for the 5 year review. To determine the appropriate adjustment, we calculated imputed work RVUs and MP RVUs for the anesthesiology fee schedule services using the work, PE, and MP shares of the anesthesia fee schedule. Again, this is consistent with our longstanding approach to making annual adjustments to the PE and work RVU portions of the anesthesiology fee schedule. To reflect differences in the complexity and risk among the anesthesia fee schedule services, we multiplied the service-specific risk factor for each anesthesia fee schedule service by the CY 2016 imputed proxy work RVUs and used the product as the updated raw proxy MP RVUs for each anesthesia service for CY 2016. We then applied the same scaling adjustments to these raw proxy MP RVUs that we apply to the remainder of the PFS MP RVUs. Finally, we calculated the aggregate difference between the 2015 proxy MP RVUs and the proxy MP RVUs calculated for CY 2016. We then adjusted the portion of the anesthesia conversion factor attributable to MP proportionately; we refer the reader to section VI.C. of this final rule with comment period for the Anesthesia Fee Schedule Conversion Factors for CY 2016. We invited public comments regarding this proposal.
The following is a summary of the comments we received regarding this proposal.
In the CY 2015 PFS final rule with comment period (79 FR 67591 through 67596), we finalized updated MP RVUs that were calculated based on updated MP premium data obtained from state insurance rate filings. The methodology used in calculating the finalized CY 2015 review and update of resource-based MP RVUs largely paralleled the process used in the CY 2010 update. We posted our contractor's report, “Final Report on the CY 2015 Update of Malpractice RVUs” on the CMS Web site. It is also located under the supporting documents section of the CY 2015 PFS final rule with comment period located at
In the CY 2015 PFS proposed rule, we outlined the steps for calculating MP RVUs. In the process of calculating MP RVUs for purposes of the CY 2016 PFS proposed rule, we identified a necessary refinement to way we calculated Step 1, which involves computing a preliminary national average premium for each specialty, to align the calculations within the methodology to the calculations described within the aforementioned contractor's report. Specifically, in the calculation of the national premium for each specialty (refer to equations 2.3, 2.4, 2.5 in the aforementioned contractor's report), we calculate a weighted sum of premiums across areas and divide it by a weighted sum of MP GPCIs across areas. The calculation currently takes the ratio of sums, rather than the weighted average of the local premiums to the MP GPCI in that area. Instead, we proposed to update the calculation to use a price-adjusted premium (that is, the premium divided by the GPCI) in each area, and then taking a weighted average of those adjusted premiums. The CY 2016 PFS proposed rule MP RVUs were calculated in this manner.
Additionally, in the calculation of the national average premium for each specialty as discussed above, our current methodology used the total RVUs in each area as the weight in the numerator (that is, for premiums), and total MP RVUs as the weights in the denominator (that is, for the MP GPCIs). After further consideration, we believe that the use of these RVU weights is problematic. Use of weights that are central to the process at hand presents potential circularity since both weights incorporate MP RVUs as part of the computation to calculate MP RVUs. The use of different weights for the numerator and denominator introduces potential inconsistency. Instead, we believe that it would be better to use a different measure that is independent of MP RVUs and better represents the reason for weighting. Specifically, we proposed to use area population as a share of total U.S. population as the weight. The premium data are for all MP premium costs, not just those associated with Medicare patients, so we believe that the distribution of the population does a better job of capturing the role of each area's premium in the “national” premium for each specialty than our previous Medicare-specific measure.
The CY 2016 PFS final MP RVUs, as displayed in Addendum B of this final rule with comment period, reflect MP RVUs calculated following our established methodology, with the inclusion of the proposals and refinements described above.
In the CY 2012 PFS final rule with comment period, we finalized a process for the public to nominate potentially misvalued codes (76 FR 73058). Members of the public including direct stakeholders may nominate potentially misvalued codes for review by submitting the code with supporting documentation during the 60-day public comment period following the release of the annual PFS final rule with comment period. Supporting documentation for codes nominated for the annual review of potentially misvalued codes may include, but is not limited to, the following:
• Documentation in the peer reviewed medical literature or other reliable data that there have been changes in work due to one or more of the following: Technique; knowledge and technology; patient population; site-of-service; length of hospital stay; and work time.
• An anomalous relationship between the code being proposed for review and other codes.
• Evidence that technology has changed work, that is, diffusion of technology.
• Analysis of other data on time and effort measures, such as operating room logs or national and other representative databases.
• Evidence that incorrect assumptions were made in the previous valuation of the service, such as a misleading vignette, survey, or flawed crosswalk assumptions in a previous evaluation.
• Prices for certain high cost supplies or other direct PE inputs that are used to determine PE RVUs are inaccurate and do not reflect current information.
• Analyses of work time, work RVU, or direct PE inputs using other data sources (for example, Department of Veteran Affairs (VA) National Surgical Quality Improvement Program (NSQIP), the Society for Thoracic Surgeons (STS) National Database, and the Physician Quality Reporting System (PQRS) databases).
• National surveys of work time and intensity from professional and management societies and organizations, such as hospital associations.
After we receive the nominated codes during the 60-day comment period following the release of the annual PFS final rule with comment period, we evaluate the supporting documentation and assess whether the nominated codes
During the comment periods for the CY 2015 proposed rule and final rule with comment period, we received nominations and supporting documentation for three codes to be considered as potentially misvalued codes. We evaluated the supporting documentation for each nominated code to ascertain whether the submitted information demonstrated that the code should be proposed as potentially misvalued.
CPT code 36516 (Therapeutic apheresis; with extracorporeal selective adsorption or selective filtration and plasma reinfusion) was nominated for review as potentially misvalued. The nominator stated that CPT code 36516 is misvalued because of incorrect direct and indirect PE inputs and an incorrect work RVU. Specifically, the nominator stated that the direct supply costs failed to include an $18 disposable bag and the $37 cost for biohazard waste disposal of the post-treatment bag, and that the labor costs for nursing staff were inaccurate. The nominator also stated that the overhead expenses associated with this service were unrealistic and that the current work RVU undervalues a physician's time and expertise. Based on the requestor's comment, we proposed this code as a potentially misvalued code. We also noted that we established a policy in CY 2011 to consider biohazard bags as an indirect expense, and not as a direct PE input (75 FR 73192).
CPT Codes 52441 (Cystourethroscopy with insertion of permanent adjustable transprostatic implant; single implant) and 52442 (Cystourethroscopy with insertion of permanent adjustable transprostatic implant; each additional permanent adjustable transprostatic implant) were nominated for review as potentially misvalued. The nominator stated that the costs of the direct PE inputs were inaccurate, including the cost of the implant. We proposed these services as potentially misvalued codes.
In the CY 2015 final rule with comment period (79 FR 67670), we reviewed and valued all of the inputs for the following CPT codes: 95971 (Electronic analysis of implanted neurostimulator pulse generator system (
In the CY 2015 PFS rule, we proposed and finalized the high expenditure screen as a tool to identify potentially misvalued codes in the statutory category of “codes that account for the majority of spending under the PFS.” We also identified codes through this screen and proposed them as potentially misvalued in the CY 2015 PFS proposed rule (79 FR 40337-40338). However, given the resources required for the revaluation of codes with 10- and 90-day global periods, we did not finalize those codes as potentially misvalued codes in the CY 2015 PFS final rule with comment period. We stated that we would re-run the high expenditure screen at a future date, and subsequently propose the specific set of codes that meet the high expenditure criteria as potentially misvalued codes (79 FR 67578).
As detailed in the CY 2016 PFS proposed rule (80 FR 41706), we believed that our current resources will not necessitate further delay in proceeding with the high expenditure screen for CY 2016. Therefore, we re-ran the screen with the same criteria finalized in last year's final rule. However, in developing this CY 2016 proposed list, we also excluded all codes with 10- and 90-day global periods since we believe these codes should be reviewed as part of the global surgery revaluation described in section II.B.6. of this final rule with comment period.
We proposed 118 codes as potentially misvalued codes, identified using the high expenditure screen under the statutory category, “codes that account for the majority of spending under the PFS.” To develop the list, we followed the same approach taken last year except we excluded codes with 10- and 90-day global periods. Specifically, we identified the top 20 codes by specialty (using the specialties used in Table 64 in terms of allowed charges. As we did last year, we excluded codes that we have reviewed since CY 2010, those with fewer than $10 million in allowed charges, and those that described anesthesia or E/M services. We excluded E/M services from the list of proposed potentially misvalued codes for the same reasons that we excluded them in a similar review in CY 2012. These reasons were explained in the CY 2012 final rule with comment period (76 FR 73062 through 73065).
Also, we believe that the resources involved in furnishing a service can evolve over time, including the time and technology used to furnish the service, and such efficiencies could easily develop in a time span as short as 5 years. As a result, we continue to believe that the review of these high expenditure codes is necessary to ensure that the services are appropriately valued. Additionally, not only do we believe that regular monitoring of codes with high impact on the PFS will produce a more accurate and equitable payment system, but we have a statutory obligation under
Accordingly, we are finalizing the 103 codes in Table 8 as potentially misvalued services under the high expenditure screen and seek recommended values for these codes from the RUC and other interested stakeholders.
The CPT manual includes more than 400 diagnostic and therapeutic procedures, listed in Appendix G, for which the CPT Editorial Committee has determined that moderate sedation is an inherent part of furnishing the procedure. For these diagnostic and therapeutic procedures, only the procedure code is reported by the practitioner who conducts the procedure, without separate billing by the same practitioner for anesthesia services, and, in developing RVUs for these services, we include the resource costs associated with moderate sedation in the valuation. To the extent that moderate sedation is inherent in the diagnostic or therapeutic service, we believe that the inclusion of moderate sedation in the valuation of the procedure is appropriate. In the CY 2015 PFS proposed rule (79 FR 40349), we noted that it appeared practice patterns for endoscopic procedures were changing, with anesthesia increasingly being separately reported for these procedures. Due to the changing nature of medical practice, we noted that we were considering establishing a uniform approach to valuation for all Appendix G services. We continue to seek an approach that is based on using the best available objective, broad-based information about the provision of moderate sedation, rather than merely addressing this issue on a code-by-code basis using RUC survey data when individual procedures are revalued. We sought public comment on approaches to address the appropriate valuation of these services given that moderate sedation is no longer inherent for many of these services. To the extent that Appendix G procedure code values are adjusted to no longer include moderate sedation, we requested suggestions as to how moderate sedation should be reported and valued, and how to remove from existing valuations the RVUs and inputs related to moderate sedation.
To establish an approach to valuation for all Appendix G services based on the best data about the provision of moderate sedation, we need to determine the extent to which each code may be misvalued. We know that there are standard packages for the direct PE inputs associated with moderate sedation, and we began to develop approaches to estimate how much of the work involved in these services is attributable to moderate sedation. However, we believe that we should seek input from the medical community prior to proposing changes in values for these services, given the different methodologies used to develop work RVUs for the hundreds of services in Appendix G. Therefore, in the CY 2016 PFS proposed rule, we solicited recommendations from the RUC and other interested stakeholders on the appropriate valuation of the work associated with moderate sedation before formally proposing an approach that allows Medicare to adjust payments based on the resource costs associated with the moderate sedation or anesthesia services that are being furnished.
The anesthesia procedure codes 00740 (Anesthesia for procedure on gastrointestinal tract using an endoscope) and 00810 (Anesthesia for procedure on lower intestine using an endoscope) are used for anesthesia furnished in conjunction with lower GI
In the CY 2015 PFS final rule (79 FR 67582 through 67591) we finalized a policy to transition all 10-day and 90-day global codes to 0-day global periods in order to improve the accuracy of valuation and payment for the various components of global surgical packages, including pre- and postoperative visits and the surgical procedure itself. Although in previous rulemaking we have marginally addressed some of the concerns we identified with global packages, we believe there is still a need to address other fundamental issues with the 10- and 90-day postoperative global packages. We believe it is critical that the RVUs we use to develop PFS payment rates reflect the most accurate resource costs associated with PFS services. We believe that valuing global codes that package services together without objective, auditable data on the resource costs associated with the components of the services contained in the packages may significantly skew relativity and create unwarranted payment disparities within PFS fee-for-service payment. We also believe that the resource-based valuation of individual physicians' services will continue to serve as a critical foundation for Medicare payment to physicians. Therefore, we believe it is critical that the RVUs under the PFS be based as closely and accurately as possible on the actual resources involved in furnishing the typical occurrence of specific services.
In the rulemaking for CY 2015, we stated our belief that transforming all 10- and 90-day global codes to 0-day global codes would:
• Increase the accuracy of PFS payment by setting payment rates for individual services based more closely upon the typical resources used in furnishing the procedures;
• Avoid potentially duplicative or unwarranted payments when a beneficiary receives postoperative care from a different practitioner during the global period;
• Eliminate disparities between the payment for E/M services in global periods and those furnished individually;
• Maintain the same-day packaging of pre- and postoperative physicians' services in the 0-day global code; and
• Facilitate availability of more accurate data for new payment models and quality research.
The MACRA was enacted into law on April 16, 2015. Section 523 of the MACRA addresses payment for global surgical packages. Section 523(a) adds a new paragraph at section 1848(c)(8) of the Act. Section 1848(c)(8)(A)(i) of the Act prohibits the Secretary from implementing the policy established in the CY 2015 PFS final rule with comment period that would have transitioned all 10-day and 90-day global surgery packages to 0-day global periods. Section 1848(c)(8)(A)(ii) of the Act provides that nothing in the previous clause shall be construed to prevent the Secretary from revaluing misvalued codes for specific surgical services or assigning values to new or revised codes for surgical services.
Section 1848(c)(8)(B)(i) of the Act requires CMS to develop, through rulemaking, a process to gather information needed to value surgical services from a representative sample of physicians, and requires that the data collection shall begin no later than January 1, 2017. The collected information must include the number and level of medical visits furnished during the global period and other items and services related to the surgery, as appropriate. This information must be reported on claims at the end of the global period or in another manner specified by the Secretary. Section 1848(c)(8)(B)(ii) of the Act requires that, every 4 years, we must reassess the value of this collected information; and allows us to discontinue the collection if the Secretary determines that we have adequate information from other sources in order to accurately value global surgical services. Section 1848(c)(8)(B)(iii) of the Act specifies that the Inspector General will audit a sample of the collected information to verify its accuracy. Section 1848(c)(8)(C) of the Act requires that, beginning in CY 2019, we must use the information collected as appropriate, along with other available data, to improve the accuracy of valuation of surgical services under the PFS. Section 523(b) of the MACRA adds a new paragraph at section 1848(c)(9) of the Act that authorizes the Secretary, through rulemaking, to delay up to 5 percent of the PFS payment for services for which a physician is required to report information under section 1848(c)(8)(B)(i) of the Act until the required information is reported.
Since section 1848(c)(8)(B)(i) of the Act, as added by section 523(a) of the MACRA, requires us to use rulemaking to develop and implement the process to gather information needed to value surgical services no later than January 1, 2017, we sought input from stakeholders on various aspects of this task. We solicited comments from the public regarding the kinds of auditable, objective data (including the number and type of visits and other services furnished by the practitioner reporting the procedure code during the current postoperative periods) needed to increase the accuracy of the values for surgical services. We also solicited comment on the most efficient means of acquiring these data as accurately and efficiently as possible. For example, we sought information on the extent to which individual practitioners or practices may currently maintain their own data on services, including those furnished during the postoperative period, and how we might collect and objectively evaluate those data for use in increasing the accuracy of the values beginning in CY 2019.
We received many comments regarding the kinds of auditable, objective data needed to increase the accuracy of the values for surgical services and the most efficient means of acquiring these data. Commenters had several suggestions for the approach that CMS should take, including the following:
• Collect and examine large group practice data for CPT code 99024 (postoperative follow-up visit).
• Review Medicare Part A claims data to determine the length of stay of surgical services performed in the hospital facility setting.
• Prioritize services that the Agency has identified as high concern subjects.
• Review postoperative visit and length of stay data for outliers.
In general, commenters were supportive of the need to identify auditable, objective, representative data, but many were not able to identify a specific source for such data. We appreciate the comments we received and we will consider these suggestions for purposes of future rulemaking.
As noted above, section 1848(c)(8)(C) of the Act mandates that we use the collected data to improve the accuracy of valuation of surgery services beginning in 2019. We described in previous rulemaking (79 FR 67582 through 67591) the limitations and difficulties involved in the appropriate valuation of the global packages, especially when the values of the component services are not clear. We sought public comment on potential methods of valuing the individual components of the global surgical package, including the procedure itself, and the pre- and postoperative care, including the follow-up care during postoperative days. We were also interested in stakeholder input on what other items and services related to the surgery, aside from postoperative visits, are furnished to beneficiaries during postoperative care.
We received many comments regarding potential methods of valuing the individual components of the global surgical package, including the following:
• Use a measured approach to valuing the individual components of the global surgical package rather than implementing a blanket data collection policy.
• Examine and consider the level of the postoperative E/M visits, including differences between specialties.
• Consider the interaction between the valuing the global surgery package and the multiple procedure payment reduction (MPPR) policy.
We will consider these comments regarding the best means to develop and implement the process to gather information needed to value surgical services and will provide further opportunity for public comment through future rulemaking.
As discussed in the CY 1993 PFS final rule with comment period (57 FR 55938), we adopted a refinement panel process to assist us in reviewing the public comments on CPT codes with interim final work RVUs for a year and in developing final work RVUs for the subsequent year. We decided the panel would be composed of a multispecialty group of physicians who would review and discuss the work involved in each procedure under review, and then each panel member would individually rate the work of the procedure. We believed establishing the panel with a
Following enactment of section 1848(c)(2)(K) of the Act, which required the Secretary periodically to identify and review potentially misvalued codes and make appropriate adjustments to the RVUs, we reassessed the refinement panel process. As detailed in the CY 2011 PFS final rule with comment period (75 FR 73306), we continued using the established refinement panel process with some modifications.
For CY 2015, in light of the changes we made to the process for valuing new, revised, and potentially misvalued codes (79 FR 67606), we reassessed the role that the refinement panel process plays in the code valuation process. We noted that the current refinement panel process is tied to the review of interim final values. It provides an opportunity for stakeholders to provide new clinical information that was not available at the time of the RUC valuation that might affect work RVU values that are adopted in the interim final value process. For CY 2015 interim final rates, we stated in the CY 2015 PFS final rule with comment period that we will use the refinement panel process as usual for these codes (79 FR 67609).
We proposed to permanently eliminate the refinement panel beginning in CY 2016, and instead, publish the proposed rates for all interim final codes in the PFS proposed rule for the subsequent year. For example, we would publish the proposed rates for all CY 2016 interim final codes in the CY 2017 PFS proposed rule. With the change in the process for valuing codes adopted in the CY 2015 final rule with comment period (79 FR 67606), proposed values for most codes that are being valued for CY 2016 were published in the CY 2016 PFS proposed rule. As explained in the CY 2015 final rule with comment period, a smaller number of codes being valued for CY 2016 will be published as interim final in the 2016 PFS final rule with comment period and be subject to comment. Under our proposal, we will evaluate the comments we receive on these code values, and both respond to these comments and propose values for these codes for CY 2017 in the CY 2017 PFS proposed rule. Therefore, stakeholders will have two opportunities to comment and to provide any new clinical information that was not available at the time of the RUC valuation that might affect work RVU values that are adopted on an interim final basis. We believe that this proposed process, which includes two opportunities for public notice and comment, offers stakeholders a better mechanism and ample opportunity for providing any additional data for our consideration, and discussing any concerns with our interim final values, than the current refinement process. It also provides greater transparency because comments on our rules are made available to the public at
The following is a summary of the comments we received on this proposed change to eliminate the use of refinement panels in our process for establishing final values for interim final codes.
Several commenters agreed with the proposal to eliminate the refinement panel. One commenter supported the permanent elimination of the refinement panel since CMS's display of interim final values in the subsequent year's proposed rule will provide another opportunity for public input. Another believed the new process will provide more timely input on the codes and stated that publishing interim final values for these in the proposed rule versus the final rule should allow adequate time for public comment and for physicians to prepare for changes that would have an impact on their practices and patients. Another commenter welcomed the increased opportunity to review and comment on interim values, especially given that CMS has not been obligated to accept recommendations of the refinement panels and has frequently rejected those recommendations.
We also appreciate commenters' interest in CMS maintaining a transparent process with public accountability in establishing values for physicians' services. In contrast to the prior process of establishing interim final values and using a refinement panel process that generally is not observed by members of the public, we believe that the new process of proposing the majority of code values in the proposed rule and making sure that those proposed values are open for comment prior to their taking effect for payment inherently represents greater transparency and accountability. We will also continue to work towards greater transparency in describing in rulemaking how we develop our proposed values for individual codes. We believe that focusing our resources on notice and comment rulemaking would facilitate greater transparency.
Given that the timing for valuation of PFS services under the new process will in large part mitigate the need to establish values on an interim final basis and will provide two opportunities for notice and public comment, we do not believe that the refinement panel would necessarily provide value as an avenue for input, for either CMS or stakeholders, beyond that intrinsic in the notice and comment rulemaking process. However, we appreciate commenters' concerns that the new process has not been fully implemented and there may be unanticipated needs for additional input like the kind made available through the refinement panels. We agree that it may be advisable to preserve existing avenues for public input beyond the rulemaking process, like the refinement panel.
Therefore, after consideration of all of the comments and the issues described in this section, we are not finalizing our proposal to eliminate the refinement panel process at this time. Instead, we will retain the ability to convene refinement panels for codes with interim final values under circumstances where additional input provided by the panel is likely to add value as a supplement to notice and comment rulemaking. We will make the determination on whether to convene refinement panels on an annual basis, based on review of comments received on interim final values. We remind stakeholders that CY 2016 is the final year for which we anticipate establishing interim final values for existing services.
We also want to remind stakeholders that we have established an annual process for the public nomination of potentially misvalued codes. This process, described in the CY 2012 PFS final rule (76 FR 73058), provides an annual means for those who believe that values for individual services are inaccurate and should be readdressed through notice and comment rulemaking to bring those codes to our attention.
In the CY 2016 PFS proposed rule, we sought public comment on a number of issues regarding payment for primary care and care coordination under the PFS. We are committed to supporting primary care, and we have increasingly recognized care management as one of the critical components of primary care that contributes to better health for individuals and reduced expenditure growth (77 FR 68978). Accordingly, we have prioritized the development and implementation of a series of initiatives designed to improve the accuracy of payment for, and encourage long-term investment in, care management services.
In addition to the Medicare Shared Savings Program, various demonstration initiatives including the Pioneer Accountable Care Organization (ACO) model, the patient-centered medical home model in the Multi-payer Advanced Primary Care Practice (MAPCP), the Federally Qualified Health Center (FQHC) Advanced Primary Care Practice demonstration and the Comprehensive Primary Care (CPC) initiative, among others (see the CY 2015 PFS final rule (79 FR 67715) for a discussion of these), we also have continued to explore potential refinements to the PFS that would appropriately value care management within Medicare's statutory structure for fee-for-service physician payment and quality reporting. The payment for some non-face-to-face care management services is bundled into the payment for face-to-face evaluation and management (E/M) visits. However, because the current E/M office/outpatient visit CPT codes were designed with an overall orientation toward episodic treatment, we have recognized that these E/M codes may not reflect all the services and resources involved with furnishing certain kinds of care, particularly comprehensive, coordinated care management for certain categories of beneficiaries.
Over several years, we have developed proposals and sought stakeholder input regarding potential PFS refinements to improve the accuracy of payment for care management services. For example, in the CY 2013 PFS final rule with comment period, we adopted a policy to pay separately for transitional care management (TCM) involving the transition of a beneficiary from care furnished by a treating physician during an inpatient stay to care furnished by the beneficiary's primary physician in the community (77 FR 68978 through 68993). In the CY 2014 PFS final rule with comment period, we finalized a policy, beginning in CY 2015 (78 FR 74414), to pay separately for chronic care management (CCM) services furnished to Medicare beneficiaries with two or more qualifying chronic conditions. We believe that these new separately billable codes more accurately describe, recognize, and make payment for non-face-to-face care management services furnished by practitioners and clinical staff to particular patient populations.
We view ongoing refinements to payment for care management services as part of a broader strategy to incorporate input and information gathered from research, initiatives, and demonstrations conducted by CMS and other public and private stakeholders, the work of all parties involved in the potentially misvalued code initiative, and, more generally, from the public at large. Based on input and information gathered from these sources, we are considering several potential refinements that would continue our efforts to improve the accuracy of PFS payments. In this section, we discuss our comment solicitation and the public comments we received regarding these potential refinements.
Although both the TCM and CCM services describe certain aspects of professional work, some stakeholders have suggested that neither of these new sets of codes nor the inputs used in their valuations explicitly account for all of the services and resources associated with the more extensive cognitive work that primary care physicians and other practitioners perform in planning and thinking critically about the individual chronic care needs of particular subsets of Medicare beneficiaries. Commenters stated that the time and intensity of the cognitive efforts associated with such planning are in addition to the work typically required to supervise and manage the clinical staff associated with the current TCM and CCM codes. Similarly, we continue to receive requests from a few stakeholders for CMS to lead efforts to revise the current CPT E/M codes or construct a new set of E/M codes. The goal of such efforts would be to better describe and value the work (time and intensity) specific to primary care and other cognitive specialties in the context of complex care of patients relative to the time and intensity of the procedure-oriented care physicians and practitioners, who use the same codes to report E/M services. Some of these stakeholders have suggested that in current medical practice, many physicians, in addition to the time spent treating acute illnesses, spend substantial time working toward optimal outcomes for patients with chronic conditions and patients they treat episodically, which can involve additional work not reflected in the codes that describe E/M services since that work is not typical across the wide range of practitioners that report the same codes. According to these groups, this work involves
We agree with stakeholders that it is important for Medicare to use codes that accurately describe the services furnished to Medicare beneficiaries and to accurately reflect the relative resources involved with furnishing those services. Therefore, in the CY 2016 PFS proposed rule we solicited public comments on ways to recognize the different resources (particularly in cognitive work) involved in delivering broad-based, ongoing treatment, beyond those resources already incorporated in the codes that describe the broader range of E/M services. The resource costs of this work may include the time and intensity related to the management of both long-term and, in some cases, episodic conditions. To appropriately recognize the different resource costs for this additional cognitive work within the structure of PFS resource-based payments, we were particularly interested in codes that could be used in addition to, not instead of, the current E/M codes.
In our comment solicitation, we stated that, in principle, these codes could be similar to the hundreds of existing add-on codes that describe additional resource costs, such as additional blocks or slides in pathology services, additional units of repair in dermatologic procedures, or additional complexity in psychotherapy services. For example, these codes might allow for the reporting of the additional time and intensity of the cognitive work often undertaken by primary care and other cognitive specialties in conjunction with an E/M service, much like add-on codes for certain procedures or diagnostic test describe the additional resources sometimes involved in furnishing those services. Similar to the CCM code, the codes might describe the increased resources used over a longer period of time than during one patient visit. For example, the add-on codes could describe the professional time in excess of 30 minutes and/or a certain set of furnished services, per one calendar month, for a single patient to coordinate care, provide patient or caregiver education, reconcile and manage medications, assess and integrate data, or develop and modify care plans. Such activity may be particularly relevant for the care of patients with multiple or complicated chronic or acute conditions, and should contribute to optimal patient outcomes including more coordinated, safer care.
Like CCM, we would require that the patient have an established relationship with the billing professional; and additionally, the use of an add-on code would require the extended professional resources to be reported with another separately payable service. However, in contrast to the CCM code, the new codes might be reported based on the resources involved in professional work, instead of the resource costs in terms of clinical staff time. The codes might also apply broadly to patients in a number of different circumstances, and would not necessarily make reporting the code(s) contingent on particular business models or technologies for medical practices. We stated that we were interested in stakeholder comments on the kinds of services that involve the type of cognitive work described above and whether or not the creation of particular codes might improve the accuracy of the relative values used for such services on the PFS. Finally, we were interested in receiving information from stakeholders on the overlap between the kinds of cognitive resource costs discussed above and those already accounted for through the currently payable codes that describe CCM and other care management services.
We strongly encouraged stakeholders to comment on this topic to assist us in developing potential proposals to address these issues through rulemaking in CY 2016 for implementation in CY 2017. We anticipated using an approach similar to our multi-year approach for implementing CCM and TCM services, to facilitate broader input from stakeholders regarding details of implementing such codes, including their structure and description, valuation, and any requirements for reporting.
We believe that the care and management for Medicare beneficiaries with multiple chronic conditions, a particularly complicated disease or acute condition, or common behavioral health conditions often requires extensive discussion, information-sharing and planning between a primary care physician and a specialist (for example, with a neurologist for a patient with Alzheimer's disease plus other chronic diseases). We note that for CY 2014, CPT created four codes that describe interprofessional telephone/internet consultative services (CPT codes 99446-99449). Because Medicare includes payment for telephone consultations with or about a beneficiary as a part of other services furnished to the beneficiary, we currently do not make separate payment for these services. We note that such interprofessional consultative services are distinct from the face-to-face visits previously reported to Medicare using the consultation codes, and we refer the reader to the CY 2010 PFS final rule for information regarding Medicare payment policies for those services (74 FR 61767).
However, in considering how to improve the accuracy of our payments for care coordination, particularly for patients requiring more extensive care, in the CY 2016 PFS proposed rule we also sought comment on how Medicare might accurately account for the resource costs of a more robust interprofessional consultation within the current structure of PFS payment. For example, we were interested in stakeholders' perspectives regarding whether there are conditions under which it might be appropriate to make separate payment for services like those described by these CPT codes. We expressed interest in stakeholder input regarding the parameters of, and resources involved in, these collaborations between a specialist and primary care practitioner, especially in the context of the structure and valuation of current E/M services. In particular, we were interested in comments about how these collaborations could be distinguished from the kind of services included in other E/M services, how these services could be described if stakeholders believe the current CPT codes are not adequate, and how these services should be valued under the PFS. We also expressed interest in comments on whether we should tie those interprofessional consultations to a beneficiary encounter, and on
Additionally, we solicited comments on whether this kind of care might benefit from inclusion in a CMMI model that would allow Medicare to test its effectiveness with a waiver of beneficiary financial liability and/or variation of payment amounts for the consulting and the primary care practitioners. Without such protections, beneficiaries could be responsible for coinsurance for services of physicians whose role in the beneficiary's care is not necessarily understood by the beneficiary. Finally, we also solicited comments on key technology supports needed to support collaboration between specialist and primary care practitioners in support of high quality care management services, on whether we should consider including technology requirements as part of any proposed services, and on how such requirements could be implemented in a way that minimizes burden on providers. We encouraged stakeholders to comment on this topic to assist us in developing potential proposals to address these issues through rulemaking in CY 2016 for implementation in CY 2017. We anticipated using an approach similar to our multi-year approach for implementing CCM and TCM services, to facilitate broader input from stakeholders regarding details of implementing such codes, including their structure and description, valuation, and any requirements for reporting.
In recent years, many randomized controlled trials have established an evidence base for an approach to caring for patients with common behavioral health conditions called “Collaborative Care.” Collaborative care typically is provided by a primary care team, consisting of a primary care provider and a care manager, who works in collaboration with a psychiatric consultant, such as a psychiatrist. Care is directed by the primary care team and includes structured care management with regular assessments of clinical status using validated tools and modification of treatment as appropriate. The psychiatric consultant provides regular consultations to the primary care team to review the clinical status and care of patients and to make recommendations. Several resources have been published that describe collaborative care models in greater detail and assess their impact, including pieces from the University of Washington (
Because this particular kind of collaborative care model has been tested and documented in medical literature, in the proposed rule, we were particularly interested in comments on how coding under the PFS might facilitate appropriate valuation of the services furnished under such a collaborative care model. As these kinds of collaborative models of care become more prevalent, we would evaluate potential refinements to the PFS to account for the provision of services through such a model. We solicited information to assist us in considering refinements to coding and payment to address this model in particular. We also sought comments on the potential application of the collaborative care model for other diagnoses and treatment modalities. For example, we solicited comments on how a code similar to the CCM code applicable to multiple diagnoses and treatment plans could be used to describe collaborative care services, as well as other interprofessional services, and could be appropriately valued and reported within the resource-based relative value PFS system, and how the resources involved in furnishing such services could be incorporated into the current set of PFS codes without overlap. We also requested input on whether requirements similar to those used for CCM services should apply to a new collaborative care code, and whether such a code could be reported in conjunction with CCM or other E/M services. For example, we might consider whether the code should describe a minimum amount of time spent by the psychiatric consultant for a particular patient per one calendar month and be complemented by either the CCM or other care management code to support the care management and primary care elements of the collaborative care model. As with our comment solicitation on interprofessional consultation, since the patient may not have direct contact with the psychiatric consultant we solicited comments on whether and, if so, how written consent for the non-face-to-face services should be required prior to practitioners reporting any new interprofessional consultation code or the care management code.
We also solicited comments on appropriate care delivery requirements for billing, the appropriateness of CCM technology requirements or other technology requirements for these services, necessary qualifications for psychiatric consultants, and whether or not there are particular conditions for which payment would be more appropriate than others; as well as how these services may interact with quality reporting, the resource inputs we might use to value the services under the PFS (specifically, work RVUs, time, and direct PE inputs), and whether or not separate codes should be developed for the psychiatric consultant and the care management components of the service.
In addition, we solicited comments on whether this kind of care model should be implemented through a CMMI model that would allow Medicare to test its effectiveness with a waiver of beneficiary financial liability and/or variation of payment methodology and amounts for the psychiatric consultant and the primary care physician. Again, we encouraged stakeholders to comment on this topic to assist us in developing potential proposals to address these issues through rulemaking in CY 2016 for implementation in CY 2017.
We took particular note that several commenters identified resource inputs CMS might use to value these services under the PFS, including defined time elements. As we consider those comments, we encourage stakeholders to consider whether there are alternatives to time elements that would account for the range in intensity of services delivered in accordance with beneficiary need. In addition, since the
In CY 2013, we implemented separate payment for TCM services under CPT codes 99495 and 99496, and in CY 2015, we implemented separate payment for CCM services under CPT code 99490. We established many service elements and billing requirements that the physician or nonphysician practitioner must satisfy to fully furnish these services and to report these codes (77 FR 68989, 79 FR 67728). Particularly because of the significant amount of non face-to-face work involved in CCM and TCM services, these elements and requirements were relatively extensive and generally exceeded those for other E/M and similar services. Since the implementation of these services, some practitioners have stated that the service elements and billing requirements are too burdensome, and suggested that they interfere with their ability to provide these care management services to their patients who could benefit from them. In light of this feedback from the physician and practitioner community, we solicited comments on steps that we could take to further improve beneficiary access to TCM and CCM services. Our aims in implementing separate payment for these services are that Medicare practitioners are paid appropriately for the services they furnish, and that beneficiaries receive comprehensive care management that benefits their long term health outcomes. However, we understand that excessive requirements on practitioners could possibly undermine the overall goals of the payment policies. In the CY 2016 PFS proposed rule, we solicited stakeholder input on how we could best balance access to these services and practitioner burdens such that Medicare beneficiaries may obtain the full benefit of these services.
As we stated in the CY 2015 PFS final rule (79 FR 67719), we believe that Medicare beneficiaries with two or more chronic conditions as defined under the CCM code can benefit from the care management services described by that code, and we want to make this service available to all such beneficiaries. As with most services paid under the PFS, we recognized that furnishing CCM services to some beneficiaries will require more resources and some less; but we value and make payment based upon the typical service. Because CY 2015 is the first year for which we are making separate payment for CCM services, we sought information regarding the circumstances under which CCM services are furnished. This information would include the clinical status of the beneficiaries receiving the service and the resources involved in furnishing the service, such as the number of documented non-face-to-face minutes furnished by clinical staff in the months the code is reported. We were interested in examining such information to identify the range of minutes furnished over those months as well as the distribution of the number of minutes within the total volume of services. We also solicited objective data regarding the resource costs associated with furnishing the services described by this code. We stated that as we review that information, in addition to our own claims data, we would consider any changes in payment and coding that may be warranted in the coming years, including the possibility of establishing separate payment amounts and making Medicare payment for the related CPT codes, such as the complex care coordination codes, CPT codes 99487 and 99489.
Section 220(d) of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93, enacted on April 1, 2014) added a new subparagraph at section 1848(c)(2)(O) of the Act to establish an annual target for reductions in PFS expenditures resulting from adjustments to relative values of misvalued codes. Under section 1848(c)(2)(O)(ii) of the Act, if the estimated net reduction in expenditures for a year as a result of adjustments to the relative values for misvalued codes is equal to or greater than the target for that year, reduced expenditures attributable to such adjustments shall be redistributed in a budget-neutral manner within the PFS in accordance with the existing budget neutrality requirement under section 1848(c)(2)(B)(ii)(II) of the Act. The provision also specifies that the amount by which such reduced expenditures exceeds the target for a given year shall be treated as a net reduction in expenditures for the succeeding year, for purposes of determining whether the target has been met for that subsequent year. Section 1848(c)(2)(O)(iv) of the Act defines a target recapture amount as the difference between the target for the year and the estimated net reduction in expenditures under the PFS resulting
Section 202 of the Achieving a Better Life Experience Act of 2014 (ABLE) (Division B of Pub. L. 113-295, enacted December 19, 2014) amended section 1848(c)(2)(O) of the Act to accelerate the application of the PFS expenditure reduction target to CYs 2016, 2017, and 2018, and to set a 1 percent target for CY 2016 and 0.5 percent for CYs 2017 and 2018. As a result of these provisions, if the estimated net reduction for a given year is less than the target for that year, payments under the fee schedule will be reduced.
In the CY 2016 PFS proposed rule, we proposed a methodology to implement this statutory provision in a manner consistent with the broader statutory construct of the PFS. In developing this proposed methodology, we identified several aspects of our approach for which we specifically solicited comments. We organized this discussion by identifying and explaining these aspects in particular but we solicited comments on all aspects of our proposal.
The potentially misvalued code initiative has resulted in changes in PFS payments in several ways. First, potentially misvalued codes have been identified, reviewed, and revalued through notice and comment rulemaking. However, in many cases, the identification of particular codes as potentially misvalued has led to the review and revaluation of related codes, and frequently, to revisions to the underlying coding for large sets of related services. Similarly, the review of individual codes has initiated reviews and proposals to make broader adjustments to values for codes across the PFS, such as when the review of a series of imaging codes prompted a RUC recommendation and CMS updated the direct PE inputs for imaging services to assume digital instead of film costs. This change, originating through the misvalued code initiative, resulted in a significant reduction in RVUs for a large set of PFS services, even though the majority of affected codes were not initially identified through potentially misvalued code screens. Finally, due to both the relativity inherent in the PFS ratesetting process and the budget neutrality requirements specified in section 1848(c)(2)(B)(ii)(II) of the Act, adjustments to the RVUs for individual services necessarily result in the shifting of RVUs to broad sets of other services across the PFS.
To implement the PFS expenditure reduction target provisions under section 1848(c)(2)(O) of the Act, we must identify a subset of the adjustments in RVUs for a year to reflect an estimated “net reduction” in expenditures. Therefore, we dismissed the possibility of including all changes in RVUs for a year in calculating the estimated net reduction in PFS expenditures, even though we believe that the redistributions in RVUs to other services are an important aspect of the potentially misvalued code initiative. Conversely, we considered the possibility of limiting the calculation of the estimated net reduction in expenditures to reflect RVU adjustments made to the codes formally identified as “potentially misvalued.” We do not believe that calculation would reflect the significant changes in payments that have directly resulted from the review and revaluation of misvalued codes under section 1848(c)(2) of the Act. We further considered whether to include only those codes that underwent a comprehensive review (work and PE). As we previously have stated (76 FR 73057), we believe that a comprehensive review of the work and PE for each code leads to the more accurate assignment of RVUs and appropriate payments under the PFS than do fragmentary adjustments for only one component. However, if we calculated the net reduction in expenditures using revisions to RVUs only from comprehensive reviews, the calculation would not include changes in PE RVUs that result from proposals like the film-to-digital change for imaging services, which not only originated from the review of potentially misvalued codes, but substantially improved the accuracy of PFS payments faster and more efficiently than could have been done through the multiple-year process required to complete a comprehensive review of all imaging codes.
After considering these options, we believe that the best approach is to define the reduction in expenditures as a result of adjustments to RVUs for misvalued codes to include the estimated pool of all services with revised input values. This would limit the pool of RVU adjustments used to calculate the net reduction in expenditures to those for the services for which individual, comprehensive review or broader proposed adjustments have resulted in changes to service-level inputs of work RVUs, direct PE inputs, or MP RVUs, as well as services directly affected by changes to coding for related services. For example, coding changes in certain codes can sometimes necessitate revaluations for related codes that have not been reviewed as misvalued codes, because the coding changes have also affected the scope of the related services. This definition would incorporate all reduced expenditures from revaluations for services that are deliberately addressed as potentially misvalued codes, as well as those for services with broad-based adjustments like film-to-digital and services that are redefined through coding changes as a result of the review of misvalued codes.
Because the annual target is calculated by measuring changes from one year to the next, we also considered how to account for changes in values that are best measured over 3 years, instead of 2 years. Under our current process, the overall change in valuation for many misvalued codes is measured across values for 3 years: the original value in the first year, the interim final value in the second year, and the finalized value in the third year. As we describe in section II.H.2. of this final rule with comment period, our misvalued code process has been to establish interim final RVUs for the potentially misvalued, new, and revised codes in the final rule with comment period for a year. Then, during the 60-day period following the publication of the final rule with comment period, we accept public comment about those valuations. For the final rule with comment period for the subsequent year, we consider and respond to public comments received on the interim final values, and make any appropriate adjustments to values based on those comments. However, the calculation of the target would only compare changes between 2 years and not among 3 years, so the contribution of a particular change towards the target for any single year would be measured against only the preceding year without regard to the overall change that takes place over 3 years.
For recent years, interim final values for misvalued codes (year 2) have generally reflected reductions relative to original values (year 1), and for most codes, the interim final values (year 2)
However, including changes that take place over 3 years generates challenges in calculating the target for CY 2016 for two reasons. First, CY 2015 was the final full year of establishing interim final values for all new, revised, and potentially misvalued codes. Starting with this final rule with comment period, we are finalizing values for a significant portion of misvalued codes during one calendar year. Therefore, CY 2015 will include a significant number of services that would be measured between years 2 and 3 relative to the services measured between 1 and 2 years. Second, because there was no target for CY 2015, any reductions that occurred on an interim final basis for CY 2015 were not counted toward achievement of a target. If we were to include any upward adjustments made to these codes based on public comment as “misvalued code” changes for CY 2016, we would effectively be counting the service-level increases for 2016 (year 3) relative to 2015 (year 2) against achievement of the target without any consideration to the service-level changes relative to 2014 (year 1), even in cases where the overall change in valuation was negative.
Therefore, we proposed to exclude code-level input changes for CY 2015 interim final values from the calculation of the CY 2016 misvalued code target since the misvalued change occurred over multiple years, including years not applicable to the misvalued code target provision.
We note that the impact of interim final values in the calculation of targets for future years will be diminished as we transition to proposing values for almost all new, revised, and potentially misvalued codes in the proposed rule. We anticipate a smaller number of interim final values for CY 2016 relative to CY 2015. For calculation of the CY 2018 target, we anticipate almost no impact based on misvalued code adjustments that occur over multiple years.
The list of codes with changes for CY 2016 included under this definition of “adjustments to RVUs for misvalued codes” is available on the CMS Web site under downloads for the CY 2016 PFS final rule with comment period at
The following is a summary of the comments we received regarding this aspect of the proposal to implement the statutory provision:
With regard to the commenter who stated that the net reduction in expenditures under the PFS if CMS does not achieve the target reduction would negate the 0.5 percent increase physicians were promised under MACRA, we note that both of these provisions continue to apply under current law.
After consideration of the public comments received, we are finalizing the approach of defining the reduction in expenditures as a result of adjustments to RVUs for misvalued codes to include the estimated pool of all services with revised input values, including any codes for which changes in coding or policies might result in differences in how a given service is reported from one year to the next. We are also finalizing our proposal to exclude code-level input changes for CY 2015 interim final values from the calculation of the CY 2016 misvalued code target. After considering all comments, we continue to believe this approach is appropriate and compliant with statutory directives.
Once the RVU adjustments attributable to misvalued codes are identified, estimated net reductions in PFS expenditures resulting from those adjustments would be calculated by determining the sum of all decreases and offsetting them against any applicable increases in valuation within the changes that we defined as misvalued, as described above. Because section 1848(c)(2)(O)(i) of the Act only explicitly addresses reductions in expenditures, and we recognize that many stakeholders will want to maximize the overall magnitude of the measured reductions in order to prevent an overall reduction to the PFS conversion factor, we considered the possibility of ignoring the applicable increases in valuation in the calculation of net reduction. However, we believe that the requirement to calculate “net” reductions implies that we are to take into consideration both decreases and increases. Additionally, we believe this approach may be the only practical one due to the presence of new and deleted codes on an annual basis.
For example, a service that is described by a single code in a given year, like intensity-modulated radiation therapy (IMRT) treatment delivery, could be addressed as a misvalued service in a subsequent year through a coding revision that splits the service into two codes, “simple” and “complex.” If we counted only the reductions in RVUs, we would count only the change in value between the single code and the new code that describes the “simple” treatment delivery code. In this scenario, the change in value from the single code to the new “complex” treatment delivery code would be ignored, so that even if there were an increase in the payment for IMRT treatment delivery service(s) overall, the mere change in coding would contribute inappropriately to a “net reduction in expenditures.” Therefore, we proposed to net the increases and decreases in values for services, including those for which there are coding revisions, in calculating the estimated net reduction in expenditures as a result of adjustments to RVUs for misvalued codes.
The following is a summary of the comments we received regarding our proposal.
In response to the commenter who asked for clarification on how new technology will be handled, we assume the commenter intends to ask about how new codes for new services would be addressed under our proposed methodology. Under our proposal, we would include adjustments to values for all deleted, new, and revised codes under our calculations of changes from one year to the next. We would also weight the changes in the values for those codes by the utilization for those services in order to calculate the net reduction in expenditures. If a new code describes a new service (new technology as opposed to recoding of an existing service), then there would be no utilization for that code in the calculation. Without utilization, the value for a new service would have no impact on the calculation of the target. In response to the commenter who expressed concern about how CMS would operationalize this policy, and stated that CMS did not explain where the adjustments would be, we note that if the estimated net reduction in expenditures is less than the target for the year, then there would be an overall reduction to the PFS conversion factor as described in section VI. of this final rule with comment period.
However, in considering the points raised by commenters, we do agree that the increases in value for new codes like ACP or Chronic Care Management (CCM) are not the same as increases to other services. In general, new codes describe new services that would not have been reported with particular codes in the previous years or new codes describe existing services that were reported using other codes in the prior year. In other cases, however, new codes describe services that were previously included in the payment for other codes. When those services become separately payable through new codes, we generally make adjustments to other relevant codes to adjust for the value of the services that will be separately reported. In general, new codes describing care management services fall into this latter category, since the associated resource costs for these services were previously bundled into payment for other services. However, unlike many other PFS services, the resource costs for these kinds of services were bundled into a set of broadly reported E/M codes and services that include E/M visits. Since these codes are so broadly reported across nearly all PFS specialties, to the extent that it would be impracticable to make adjustments to individual codes, we have not made corresponding adjustments to E/M visits to account for the status of the new codes as separately billable. Instead, when unbundling new separately reported services such as these, we have allowed our general budget neutrality adjustment to account for these types of changes, since budget neutrality adjustments apply broadly to the full range of PFS services, including both codes that specifically describe E/M visits and those with E/M services as components of the service, such as all codes with global periods. In terms of calculating the net reduction in expenditures for purposes of section 1848(c)(2)(O)(i) of the Act, this means that the shift in payment to these new separately reportable services, unlike the adjustments to values for other new services, is not offset by adjustments to any other individual codes. Therefore, under the methodology we proposed, the increase in payment for these new separately reportable services would be counted in the net reduction calculations since the adjustments to values for these services are reflected in values for individual codes, but the corresponding decreases would not be counted, since the corresponding decreases are not attributable to any particular codes. Under the methodology we proposed, the change to make these types of codes separately reported would be counted against achievement of the target even though the increases in value for these codes are fully offset by budget-neutrality adjustments to all other PFS services.
As we have reflected on the comments and on this particular circumstance, we do not believe that the change to separate payment for these kinds of services should be counted as increases that are included in calculating the “net reductions” in expenditures attributable to adjustments for misvalued codes. Instead, we think that the adjustments to value these services should be considered in the context of the budget neutrality adjustments that are applied broadly to PFS services. This would be consistent with our treatment of the increase in values for other new codes since the reductions or deletion of predecessor codes are counted as offsets in our calculation. Since, under the established ratesetting methodology, the increases in new separately reportable services and the corresponding budget neutrality decreases fully offset one another and net to zero, we believe that the easiest way to account for the adjustments associated with valuing these services is to exclude altogether the changes for these types of codes from the list of codes included in the target. This will effectively make the creation and valuation of such codes neutral in the calculation of the misvalued code target.
After considering public comments, we are finalizing our policy as proposed with a modification to exclude from the calculation of the “net reduction” in expenditures changes in coding and valuation for services, such as ACP for CY 2016, that are newly reportable, but for which no corresponding reduction is made to existing codes and instead reductions are taken exclusively through a budget neutrality adjustment.
The most straightforward method to estimating the net reduction in expenditures due to adjustments to RVUs for misvalued codes is to compare the total RVUs of the relevant set of codes (by volume) in the current year to the update year, and divide that by the total RVUs for all codes (by volume) for the current year. This approach had the advantage of being intuitive and readily replicable.
However, there are several issues related to the potential imprecision of this method. First, and most significantly, the code-level PE RVUs in the update year include either increases due to the redistribution of RVUs from other services or reductions due to increases in PE for other services. Second, because relativity for work RVUs is maintained through annual adjustments to the CF, the precise value of a work RVU in any given year is adjusted based on the total number of work RVUs in that year. Finally, relativity for the MP RVUs is maintained by both redistribution of MP RVUs and adjustments to the CF, when necessary (under our proposed methodology this is true annually; based on our established methodology the redistribution of the MP RVUs only takes place once every 5 years and the CF is adjusted otherwise). Therefore, to make a more precise assessment of the net reduction in expenditures that are the result of adjustments to the RVUs for misvalued codes, we would need to compare, for the included codes, the update year's total work RVUs (by volume), direct PE RVUs (by volume), indirect PE RVUs (by volume), and MP RVUs (by volume) to the same RVUs in the current year, prior to the application of any scaling factors or adjustments. This would make for a direct comparison between years.
However, this approach would mean that the calculation of the net reduction in expenditures would occur within various steps of the PFS ratesetting methodology. Although we believe that this approach would be transparent and external stakeholders could replicate this method, it might be difficult and time-consuming for stakeholders to do so. We also noted that when we modeled the interaction of the statutory phase-in requirement under section 220(e) of the PAMA and the calculation of the target using this approach during the development of this proposal, there were methodological challenges in making these calculations. When we simulated the two approaches using information from prior years, we found that both approaches generally resulted in similar estimated net reductions. After considering these options, we proposed to use the simpler approach of comparing the total RVUs (by volume) for the relevant set of codes in the current year to the update year, and divide that result by the total RVUs (by volume) for the current year. We solicited comments on whether
The following is a summary of the comments we received regarding our proposal.
After consideration of the public comments received, we are finalizing the policy to calculate the net reduction using the simpler method as proposed.
We refer readers to the regulatory impact analysis section of this final rule with comment period for our final estimate of the net reduction in expenditures relative to the 1 percent target for CY 2016, and the resulting adjustment required to be made to the conversion factor. Additionally, we refer readers to the public use file that provides a comprehensive description of how the target is calculated as well as the estimated impact by code family on the CMS Web site under the supporting data files for the CY 2016 PFS final rule at
Section 1848(c)(7) of the Act, as added by section 220(e) of the PAMA, also specifies that for services that are not new or revised codes, if the total RVUs for a service for a year would otherwise be decreased by an estimated 20 percent or more as compared to the total RVUs for the previous year, the applicable adjustments in work, PE, and MP RVUs shall be phased-in over a 2-year period. Although section 220(e) of the PAMA required the phase-in to begin for 2017, section 202 of the ABLE Act amended section 1848(c)(7) of the Act to require that the phase-in begin for CY 2016.
In the CY 2016 PFS proposed rule, we proposed a methodology to implement this statutory provision. In developing this methodology, we identified several aspects of our approach for which we specifically solicited comments, given the challenges inherent in implementing this provision in a manner consistent with the broader statutory construct of the PFS. We organized this discussion by identifying and explaining these aspects in particular but we solicited comments on all aspects of our proposal.
As described in this final rule with comment period, the statute specifies that services described by new or revised codes are not subject to the phase-in of RVUs. We believe this exclusion recognizes the reality that there is no practical way to phase-in changes to RVUs that occur as a result of a coding change for a particular service over 2 years because there is no relevant reference code or value on which to base the transition. To determine which services are described by new or revised codes for purposes of the phase-in provision, we proposed to apply the phase-in to all services that are described by the same, unrevised code in both the current and update year, and to exclude codes that describe different services in the current and update year. This approach excludes services described by new codes or existing codes for which the descriptors were altered substantially for the update year to change the services that are reported using the code. We also are excluding as new and revised codes those codes that describe a different set of services in the update year when compared to the current year by virtue of changes in other, related codes, or codes that are part of a family with significant coding revisions. For example, significant coding revisions within a family of codes can change the relationships among codes to the extent that it changes the way that all services in the group are reported, even if some individual codes retain the same number or, in some cases, the same descriptor. Excluding codes from the phase-in when there are significant revisions to the code family would also help to maintain the appropriate rank order among codes in the family, avoiding years for which RVU changes for some codes in a family are in transition while others were fully implemented. This application of the phase-in is also consistent with previous RVU transitions, especially for PE RVUs, for which we only applied transition values to those codes that described the same service in both the current and the update years. We also excluded from the phase-in as new and revised codes those codes with changes to the global period, since the code in the current year would not describe the
We received few comments regarding this aspect of our proposal, and some of the comments suggested changes that would require changes to the statutory provision that requires the phase-in of significant changes in RVUs. The following is a summary of the comments that we received.
After consideration of the public comments received on this aspect of our proposal to implement the phase-in of significant changes in RVUs, we are finalizing the implementation of the phase-in for significant (20 percent or greater) reductions in RVUs as proposed.
Because the phase-in of significant reductions in RVUs falls within the budget neutrality requirements specified in section 1848(c)(2)(B)(ii)(II) of the Act, we proposed to estimate total RVUs for a service prior to the budget-neutrality redistributions that result from implementing phase-in values. We recognize that the result of this approach could mean that some codes may not qualify for the phase-in despite a reduction in RVUs that is ultimately slightly greater than 20 percent due to budget neutrality adjustments that are made after identifying the codes that meet the threshold in order to reflect the phase-in values for other codes. We believe the only alternative to this approach is not practicable, since it would be circular, resulting in cyclical iteration.
The following is a summary of the comments we received regarding this proposal.
After consideration of the public comments received on this aspect of our proposal, we are finalizing without modification our proposal to identify significant reductions in RVUs based on a comparison of RVUs before application of budget neutrality adjustment.
Section 1848(c)(7) of the Act states that the applicable adjustments in work, PE, and MP RVUs shall be phased-in over a 2-year period when the RVU reduction for a code is estimated to be equal to or greater than 20 percent. We believe that there are two reasonable ways to determine the portion of the reduction to be phase-in for the first year. Most recent RVU transitions have distributed the values evenly across several years. For example, for a 2-year transition we would estimate the fully implemented value and set a rate approximately 50 percent between the value for the current year and the value for the update year. We believe that this is the most intuitive approach to the phase-in and is likely the expectation for many stakeholders. However, we believe that the 50 percent phase-in in the first year has a significant drawback. For instance, since the statute establishes a 20 percent threshold as the trigger for phasing in the change in RVUs, under the 50 percent phase-in approach, a service that is estimated to be reduced by a total of 19 percent for an update year would be reduced by a full 19 percent in that update year, while a service that is estimated to be reduced by 20 percent in an update year would only be reduced 10 percent in that update year.
The logical alternative approach is to consider a 19 percent reduction as the maximum 1-year reduction for any service not described by a new or revised code. This approach would be to reduce the service by the maximum allowed amount (that is, 19 percent) in the first year, and then phase in the remainder of the reduction in the second year. Under this approach, the code that is reduced by 19 percent in a year and the code that would otherwise have been reduced by 20 percent would both be reduced by 19 percent in the first year, and the latter code would see an additional 1 percent reduction in the second year of the phase-in. For most services, this would likely mean that the majority of the reduction would take place in the first year of the phase-in. However, for services with the most drastic reductions (greater than 40 percent), the majority of the reduction would not take place in the first year of the phase-in.
After considering both of these options, we proposed to consider the 19 percent reduction as the maximum 1-year reduction and to phase-in any remaining reduction greater than 19 percent in the second year of the phase-in. We believe that this approach is
The following is a summary of the comments we received regarding this proposal.
In order to avoid these circumstances and apply the most gradual phase-in possible to codes with the most significant reductions, we continue to believe that a 19 percent reduction as the maximum 1-year reduction is the better approach to determining the phase-in amount.
After consideration of the comments, we are finalizing the policy to phase in 19 percent of the reduction in value in the first year, and the remainder of the reduction in the second year, as proposed.
Section 1848(c)(7) of the Act provides that the applicable adjustments in work, PE, and MP RVUs be phased-in over 2 years for any service for which total RVUs would otherwise be decreased by an estimated amount equal to or greater than 20 percent as compared to the total RVUs for the previous year. However, for several thousand services, we develop separate RVUs for facility and nonfacility sites of service. For nearly one thousand other services, we develop separate RVUs for the professional and technical components of the service, and sum those RVUs for global billing. Therefore, for individual practitioners furnishing particular services to Medicare beneficiaries, the relevant changes in RVUs for a particular code are based on the total RVUs for a code for a particular setting (facility/nonfacility) or for a particular professional/technical (PC/TC) component. We believe the most straightforward and fair approach to addressing both the site of service differential and the codes with professional and technical components is to consider the RVUs for the different sites of service and components independently for purposes of identifying when and how the phase-in applies. We proposed, therefore, to estimate whether a particular code met the 20 percent threshold for change in total RVUs by taking into account the total RVUs that apply to a particular setting, or to a particular professional or technical component. This would mean that if the change in total facility RVUs for a code met the threshold, then that change would be phased in over 2 years, even if the change for the total nonfacility RVUs for the same code would not be phased in over 2 years. Similarly, if the change in the total RVUs for the technical component of a service meets the 20 percent threshold, then that change would be phased in over 2 years, even if the change for the professional component did not meet the threshold. (Because the global is the sum of the professional and technical components, the portion of the global attributable to the technical component would then be phased-in, while the portion attributable to the professional component would not be.)
However, we note that we create the site of service differential exclusively by developing independent PE RVUs for each service in the nonfacility and facility settings. That is, for these codes, we use the same work RVUs and MP RVUs in both settings and vary only the PE RVUs to implement the difference in resources depending on the setting. Similarly, we use the work RVUs assigned to the professional component codes as the work RVUs for the service when billed globally. Like the codes with the site of service differential, the PE RVUs for each component are developed independently. The resulting PE RVUs are then summed for use as the PE RVUs for the code, billed globally. Since variation of PE RVUs is the only constant across all individual codes,
We considered alternatives to this approach. For example, for codes with a site of service differential, we considered applying a phase-in for codes in both settings (and all components) whenever the total RVUs in either setting reached the 20 percent threshold. However, there are cases where the total RVUs for a code in one setting (or one component) may reach the 20 percent reduction threshold, while the total RVUs for the other setting (or other component) are increasing. In those cases, applying phase-in values for work or MP RVUs would mean applying an additional increase in total RVUs for particular services. We also considered implementing the phase-in of the RVUs for the component codes billed globally by comparing the global value in the prior year versus the global value in the current year and applying the phase-in to the global value for the current year and letting the results flow through to the PC and TC for each code, irrespective of their respective changes in value. Similarly, for the codes with site of service differentials, we considered developing an overall, blended set of overall PE RVUs using a weighted average of site of service volume in the Medicare claims data and then comparing that blended value in the prior year versus the blended value in the current year and applying the phase-in to the value for the current year before re-allocating the blended value to the respective PE RVUs in each setting, regardless of the changes in value for nonfacility or facility values. We did not pursue this approach for several reasons. First, the resulting phase-in amounts would not relate logically to the values paid to any individual practitioner, except those who bill the PC/TC codes globally. Second, the approach would be so administratively complicated that it would likely be difficult to replicate or predict.
Therefore, we have concluded that applying the adjustments to the PE RVUs for all individual codes in order to effect the appropriate phase-in amount is the most straightforward and fair approach to implementing the 2-year phase-in of significant reductions of total RVUs.
The following is a summary of the comments we received regarding this proposal.
After consideration of the comments received, we are finalizing this aspect of the phase-in methodology as proposed.
The list of codes subject to the phase-in and the associated RVUs that result from this methodology are available on the CMS Web site under downloads for the CY 2016 PFS final rule with comment period at
Section 218(a)(1) of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93) amended section 1834 of the Act by establishing a new subsection 1834(p). Effective for services furnished on or after January 1, 2016, new section 1834(p) of the Act reduces payment for the technical component (TC) of applicable CT services paid under the Medicare PFS and applicable CT services paid under the OPPS (a 5-percent reduction in 2016 and a 15-percent reduction in 2017 and subsequent years). The applicable CT services are identified by HCPCS codes 70450 through 70498; 71250 through 71275; 72125 through 72133; 72191 through 72194; 73200 through 73206; 73700 through 73706; 74150 through 74178; 74261 through 74263; and 75571 through 75574 (and any succeeding codes). As specified in section 1834(p)(4) of the Act, the reduction applies for applicable services furnished using equipment that does not meet
Section 1834(p)(6)(A) of the Act requires that information be provided and attested to by a supplier and a hospital outpatient department that indicates whether an applicable CT service was furnished that was not consistent with the standard set forth in section 1834(p)(4) of the Act (currently the NEMA CT equipment standard) and that such information may be included on a claim and may be a modifier. Section 1834(p)(6)(A) of the Act also provides that such information must be verified, as appropriate, as part of the periodic accreditation of suppliers under section 1834(e) of the Act and hospitals under section 1865(a) of the Act. Section 218(a)(2) of the PAMA made a conforming amendment to section 1848 (c)(2)(B)(v) of the Act by adding a new subclause (VIII), which provides that, effective for fee schedules established beginning with 2016, reduced expenditures attributable to the application of the quality incentives for computed tomography under section 1834(p) of the Act shall not be taken into account for purposes of the budget neutrality calculation under the PFS.
To implement this provision, in the CY 2016 PFS proposed rule (80 FR 41716), we proposed to establish a new modifier to be used on claims that describes CT services furnished using equipment that does not meet each of the attributes of the NEMA Standard XR-29-2013. We proposed that, beginning January 1, 2016, hospitals and suppliers would be required to use this modifier on claims for CT scans described by any of the CPT codes identified in this section (and any successor codes) that are furnished on non-NEMA Standard XR-29-2013-compliant CT scans. We stated that the use of this proposed modifier would result in the applicable payment reduction for the CT service, as specified under section 1834(p) of the Act. We received the following comments on our proposal to require the modifier to be used on claims:
Many commenters endorsed the use of quality incentives to improve patient safety and optimize the use of radiation when providing CT diagnostic imaging services. Several commenters were supportive of the proposal to establish the modifier to identify CT services furnished using equipment that does not meet each of the attributes of the NEMA Standard XR-29-2013.
After consideration of the public comments we received, we are finalizing the establishment of new modifier, “CT.” This 2-digit modifier will be added to the HCPCS annual file as of January 1, 2016, with the label “CT,” and the long descriptor “Computed tomography services furnished using equipment that does not meet each of the attributes of the National Electrical Manufacturers Association (NEMA) XR-29-2013 standard”.
Beginning January 1, 2016, hospitals and suppliers will be required to report the modifier “CT” on claims for CT scans described by any of the CPT codes identified in this section (and any successor codes) that are furnished on non-NEMA Standard XR-29-2013-compliant CT scanners. The use of this modifier will result in the applicable payment reduction for the CT service, as specified under section 1834(p) of the Act.
Establishing valuations for newly created and revised CPT codes is a routine part of maintaining the PFS. Since inception of the PFS, it has also been a priority to revalue services regularly to assure that the payment rates reflect the changing trends in the practice of medicine and current prices for inputs used in the PE calculations. Initially, this was accomplished primarily through the five-year review process, which resulted in revised work RVUs for CY 1997, CY 2002, CY 2007, and CY 2012, and revised PE RVUs in CY 2001, CY 2006, and CY 2011. Under the five-year review process, revisions in RVUs were proposed in a proposed rule and finalized in a final rule. In addition to the five-year reviews, in each year beginning with CY 2009, CMS and the RUC have identified a number of potentially misvalued codes using various identification screens, as discussed in section II.B.5. of this final rule with comment period. Each year, when we received RUC recommendations, our process has been to establish interim final RVUs for the potentially misvalued codes, new codes, and any other codes for which there were coding changes in the final rule with comment period for a year. Then, during the 60-day period following the publication of the final rule with comment period, we accept public comment about those valuations.
For services furnished during the calendar year following the publication of interim final rates, we pay for services based upon the interim final values established in the final rule with comment period. In the final rule with comment period for the subsequent year, we consider and respond to public comments received on the interim final values, and make any appropriate adjustments to values based on those comments. We then typically finalize the values for the codes.
In the CY 2015 PFS final rule with comment period, we finalized a new process for establishing values for new, revised and potentially misvalued codes. Under the new process, we include proposed values for these services in the proposed rule, rather than establishing them as interim final in the final rule with comment period. CY 2016 represents a transition year for this new process. For CY 2016, we proposed new values in the CY 2016 proposed rule for the codes for which we received complete RUC recommendations by February 10, 2015. For recommendations regarding any new or revised codes received after the February 10, 2015 deadline, including updated recommendations for codes included in the CY 2016 proposed rule, we are establishing interim final values in this final rule with comment period, consistent with previous practice. In this final rule with comment period, we considered all comments received in response to proposed values for codes in our proposed rule, including alternative recommendations to those used in developing the proposed rule.
Beginning with valuations for CY 2017, the new process will be applicable to all codes. That is, beginning with rulemaking for CY 2017, we will propose values for the vast majority of new, revised, and potentially misvalued codes and consider public comments before establishing final values for the codes; use G-codes as necessary to facilitate continued payment for certain services for which we do not receive recommendations in time to propose values; and adopt interim final values in the case of wholly new services for which there are no predecessor codes or values and for which we do not receive recommendations in time to propose values.
For CY 2016, we received RUC recommendations prior to February 10, 2015 for many new, revised and potentially misvalued codes and are establishing final values for those codes in this final rule with comment period. However, the RUC recommendations included CPT tracking codes instead of the actual 2016 CPT codes, which were first made available to the public subsequent to the publication of the CY 2016 proposed rule with comment period. Because CPT procedure codes are 5 alpha-numeric characters but CPT tracking codes typically have 6 or 7 alpha-numeric characters and CMS systems only utilize 5-character HCPCS codes, we developed and used alternative 5-character placeholder codes for use in the proposed rule. The final CPT codes are included and used for purposes of discussion in this final rule with comment period. Table 9 lists the CPT tracking codes, the CMS placeholder codes, and the final CPT codes for all new CPT codes included in the CY 2016 PFS proposed rule.
We conducted a review of each code identified in this section and reviewed the current work RVU (if any), RUC-recommended work RVU, intensity, time to furnish the preservice, intraservice, and postservice activities, as well as other components of the service that contribute to the value. Our review of recommended work RVUs and time generally includes, but is not limited to, a review of information provided by the RUC, HCPAC, and other public commenters, medical literature, and comparative databases, as well as a comparison with other codes within the Medicare PFS, consultation with other physicians and health care professionals within CMS and the federal government, as well as Medicare claims data. We also assessed the methodology and data used to develop the recommendations submitted to us by the RUC and other public commenters and the rationale for the recommendations. In the CY 2011 PFS final rule with comment period (75 FR 73328 through 73329), we discussed a variety of methodologies and approaches used to develop work RVUs, including survey data, building blocks, crosswalk to key reference or similar codes, and magnitude estimation. More information on these issues is available in that rule. When referring to a survey, unless otherwise noted, we mean the surveys conducted by specialty societies as part of the formal RUC process. The building block methodology is used to construct, or deconstruct, the work RVU for a CPT code based on component pieces of the code.
Components used in the building block approach may include preservice, intraservice, or postservice time and post-procedure visits. When referring to a bundled CPT code, the building block components could be the CPT codes that make up the bundled code and the inputs associated with those codes. Magnitude estimation refers to a methodology for valuing work that determines the appropriate work RVU for a service by gauging the total amount of work for that service relative to the work for a similar service across the PFS without explicitly valuing the components of that work. In addition to these methodologies, CMS has frequently utilized an incremental methodology in which we value a code based upon its incremental difference between another code or another family of codes. Since the statute specifically defines the work component as the resources in time and intensity required in furnishing the service and the published literature on valuing work has recognized the key role of time in overall work, we have also refined the work RVUs for particular codes in direct proportion to the changes in the best information regarding the time resources involved in furnishing particular services, either considering the total time or the intra-service time.
Several years ago, to aid in the development of preservice time recommendations for new and revised CPT codes, the RUC created standardized preservice time packages. The packages include preservice evaluation time, preservice positioning time, and preservice scrub, dress and wait time. Currently there are six preservice time packages for services typically furnished in the facility setting, reflecting the different combinations of straightforward or difficult procedure, straightforward or difficult patient, and without or with sedation/anesthesia. Currently, there are three preservice time packages for services typically furnished in the nonfacility setting, reflecting procedures without and with sedation/anesthesia care.
We have developed several standard building block methodologies to value services appropriately when they have common billing patterns. In cases where a service is typically furnished to a beneficiary on the same day as an E/M service, we believe that there is overlap between the two services in some of the activities furnished during the preservice evaluation and postservice time. We believe that at least one-third of the work time in both the preservice evaluation and postservice period is duplicative of work furnished during the E/M visit.
Accordingly, in cases where we believe that the RUC has not adequately accounted for the overlapping activities in the recommended work RVU and/or times, we adjust the work RVU and/or times to account for the overlap. The work RVU for a service is the product of the time involved in furnishing the service multiplied by the intensity of the work. Preservice evaluation time and postservice time both have a long-established intensity of work per unit of time (IWPUT) of 0.0224, which means that 1 minute of preservice evaluation or postservice time equates to 0.0224 of a work RVU.
Therefore, in many cases when we remove 2 minutes of preservice time and 2 minutes of postservice time from a procedure to account for the overlap with the same day E/M service, we also remove a work RVU of 0.09 (4 minutes × 0.0224 IWPUT) if we do not believe the overlap in time has already been accounted for in the work RVU. The RUC has recognized this valuation policy and, in many cases, now addresses the overlap in time and work when a service is typically provided on the same day as an E/M service.
Table 13 contains a list of codes for which we proposed work RVUs; this includes all RUC recommendations received by February 10, 2015. When the proposed work RVUs varied from those recommended by the RUC or for which we do not have RUC
On an annual basis, the RUC provides CMS with recommendations regarding PE inputs for new, revised, and potentially misvalued codes. We review the RUC-recommended direct PE inputs on a code-by-code basis. Like our review of recommended work RVUs, our review of recommended direct PE inputs generally includes, but is not limited to, a review of information provided by the RUC, HCPAC, and other public commenters, medical literature, and comparative databases, as well as a comparison with other codes within the Medicare PFS, consultation with other physicians and health care professionals within CMS and the federal government, as well as Medicare claims data. We also assess the methodology and data used to develop the recommendations submitted to us by the RUC and other public commenters and the rationale for the recommendations. When we determine that the RUC recommendations appropriately estimate the direct PE inputs (clinical labor, disposable supplies, and medical equipment) required for the typical service, consistent with the principles of relativity, and reflect our payment policies, we use those direct PE inputs to value a service. If not, we refine the recommended PE inputs to better reflect our estimate of the PE resources required for the service. We also confirm whether CPT codes should have facility and/or nonfacility direct PE inputs and refine the inputs accordingly.
Our review and refinement of RUC-recommended direct PE inputs includes many refinements that are common across codes as well as refinements that are specific to particular services. Table 16 details our refinements of the RUC's direct PE recommendations at the code-specific level. In this final rule with comment period, we address several refinements that are common across codes, and refinements to particular codes are addressed in the portions of this section that are dedicated to particular codes. We note that for each refinement, we indicate the impact on direct costs for that service. We note that, on average, in any case where the impact on the direct cost for a particular refinement is $0.32 or less, the refinement has no impact on the interim final PE RVUs. This calculation considers both the impact on the direct portion of the PE RVU, as well as the impact on the indirect allocator for the average service. We also note that nearly half of the refinements listed in Table 14 result in changes under the $0.32 threshold and are unlikely to result in a change to the final RVUs.
We also note that the final direct PE inputs for CY 2016 are displayed in the final CY 2016 direct PE input database, available on the CMS Web site under the downloads for the CY 2016 final rule at
Some direct PE inputs are directly affected by revisions in work time. Specifically, changes in the intraservice portions of the work time and changes in the number or level of postoperative visits associated with the global periods result in corresponding changes to direct PE inputs. Although the direct PE input recommendations generally correspond to the work time values associated with services, we believe that in some cases inadvertent discrepancies between work time values and direct PE inputs should be refined in the establishment of interim final direct PE inputs. In other cases, CMS refinement of RUC-recommended work times prompts necessary adjustments in the direct PE inputs.
We proposed to remove the 6 minutes of clinical labor time allotted to “discharge management, same day (0.5 × 99238)” in the facility setting from a number of procedures under review. We proposed to align the clinical labor for discharge day management to align the work time assigned in the work time file. We made these proposed refinements under the belief that we should not allocate clinical labor staff time for discharge day management if there is no discharge visit included in the procedure's global period.
We have thus far been addressing the subject of discharge day management on a code-by-code basis. Based on the comments received, we believe there is a need for a broader policy concerning the proper treatment of this issue. We will consider this subject for future rulemaking.
After consideration of the comments received, we are finalizing our current
Prior to CY 2010, the RUC did not generally provide CMS with recommendations regarding equipment time inputs. In CY 2010, in the interest of ensuring the greatest possible degree of accuracy in allocating equipment minutes, we requested that the RUC provide equipment times along with the other direct PE recommendations, and we provided the RUC with general guidelines regarding appropriate equipment time inputs. We continue to appreciate the RUC's willingness to provide us with these additional inputs as part of its PE recommendations.
In general, the equipment time inputs correspond to the service period portion of the clinical labor times. We have clarified this principle, indicating that we consider equipment time as the time within the intraservice period when a clinician is using the piece of equipment plus any additional time that the piece of equipment is not available for use for another patient due to its use during the designated procedure. For those services for which we allocate cleaning time to portable equipment items, because the portable equipment does not need to be cleaned in the room where the service is furnished, we do not include that cleaning time for the remaining equipment items as those items and the room are both available for use for other patients during that time. In addition, when a piece of equipment is typically used during follow-up post-operative visits included in the global period for a service, the equipment time would also reflect that use.
We believe that certain highly technical pieces of equipment and equipment rooms are less likely to be used during all of the pre-service or post-service tasks performed by clinical labor staff on the day of the procedure (the clinical labor service period) and are typically available for other patients even when one member of the clinical staff may be occupied with a pre- service or post-service task related to the procedure. We also note that we believe these same assumptions would apply to inexpensive equipment items that are used in conjunction with and located in a room with non-portable highly technical equipment items. Some stakeholders have objected to this rationale for our refinement of equipment minutes on this basis and have reiterated these objections in comments regarding the proposed direct PE inputs. We are responding to these comments by referring the commenters to our extensive discussion in response to the same objections in the CY 2012 PFS final rule with comment period (76 FR 73182) and the CY 2015 PFS final rule with comment period (79 FR 67639).
In general, the preservice, intraservice period, and postservice clinical labor minutes associated with clinical labor inputs in the direct PE input database reflect the sum of particular tasks described in the information that accompanies the RUC-recommended direct PE inputs, commonly called the “PE worksheets.” For most of these described tasks, there are a standardized number of minutes, depending on the type of procedure, its typical setting, its global period, and the other procedures with which it is typically reported. The RUC sometimes recommends a number of minutes either greater than or less than the time typically allotted for certain tasks. In those cases, CMS staff reviews the deviations from the standards and any rationale provided for the deviations. When we do not accept the RUC-recommended exceptions, we refine the proposed direct PE inputs to conform to the standard times for those tasks. In addition, in cases when a service is typically billed with an E/M service, we remove the pre-service clinical labor tasks to avoid duplicative inputs and to reflect the resource costs of furnishing the typical service.
In general, clinical labor tasks fall into one of the categories on the PE worksheets. In cases where tasks cannot be attributed to an existing category, the tasks are labeled “other clinical activity.” We believe that continual addition of new and distinct clinical labor tasks each time a code is reviewed under the misvalued code initiative is likely to degrade relativity between newly reviewed services and those with already existing inputs. To mitigate the potential negative impact of these additions, we review these tasks to determine whether they are fully distinct from existing clinical labor tasks, typically included for other clinically similar services under the PFS, and thoroughly explained in the recommendation. For those tasks that do not meet these criteria, we do not accept these newly recommended clinical labor tasks; two examples of such tasks encountered during our review of the recommendations include “Enter data into laboratory information system, multiparameter analyses and field data entry, complete quality assurance documentation” and “Consult with pathologist regarding representation needed, block selection and appropriate technique.”
In conducting our review of the RUC recommendations for CY 2016, we noted that several of the recommended times for clinical labor tasks associated with pathology services differed across codes, both within the CY 2016 recommendations and in comparison to codes currently in the direct PE database. We refer readers to Table 16 in section II.A.3. of this final rule with comment period for a discussion of these standards.
In some cases, the PE worksheets included with the RUC recommendations include items that are not clinical labor, disposable supplies, or medical equipment that cannot be allocated to individual services or patients. Two examples of such items are “emergency service container/safety kit” and “service contract.” We have addressed these kinds of recommendations in previous rulemaking (78 FR 74242), and we do not use these recommended items as direct PE inputs in the calculation of PE RVUs.
Over several rulemaking cycles, we have proposed and finalized a standard package of direct PE inputs for services where moderate sedation is considered inherent in the procedure (76 FR 73043 through 73049). Our CY 2016 proposed direct PE inputs conform to these policies. This includes not
The RUC generally recommends the use of supply and equipment items that already exist in the direct PE input database for new, revised, and potentially misvalued codes. Some recommendations include supply or equipment items that are not currently in the direct PE input database. In these cases, the RUC has historically recommended that a new item be created and has facilitated our pricing of that item by working with the specialty societies to provide us copies of sales invoices. For CY 2016, we received invoices for several new supply and equipment items. We have accepted the majority of these items and added them to the direct PE input database. Tables 18 and 19 detail the invoices received for new and existing items in the direct PE database. As discussed in section II.A. of this final rule with comment period, we encourage stakeholders to review the prices associated with these new and existing items to determine whether these prices appear to be accurate. Where prices appear inaccurate, we encourage stakeholders to provide invoices or other information to improve the accuracy of pricing for these items in the direct PE database. We remind stakeholders that due to the relativity inherent in the development of RVUs, reductions in existing prices for any items in the direct PE database increase the pool of direct PE RVUs available to all other PFS services. Tables 18 and 19 also include the number of invoices received as well as the number of nonfacility allowed services for procedures that use these equipment items. We provide the nonfacility allowed services so that stakeholders will note the impact the particular price might have on PE relativity, as well as to identify items that are used frequently, since we believe that stakeholders are more likely to have better pricing information for items used more frequently. We are concerned that a single invoice may not be reflective of typical costs and encourage stakeholders to provide additional invoices so that we might identify and use accurate prices in the development of PE RVUs.
In some cases, we do not use the price listed on the invoice that accompanies the recommendation because we identify publicly available alternative prices or information that suggests a different price is more accurate. In these cases, we include this in the discussion of these codes. In other cases, we cannot adequately price a newly recommended item due to inadequate information. Sometimes, no supporting information regarding the price of the item has been included in the recommendation. In other cases, the supporting information does not demonstrate that the item has been purchased at the listed price (for example, vendor price quotes instead of paid invoices). In cases where the information provided on the item allows us to identify clinically appropriate proxy items, we might use existing items as proxies for the newly recommended items. In other cases, we have included the item in the direct PE input database without any associated price. Although including the item without an associated price means that the item does not contribute to the calculation of the proposed PE RVU for particular services, it facilitates our ability to incorporate a price once we obtain information and are able to do so.
The following is a summary of the comments we received regarding new supply and equipment items.
Therefore, after consideration of the comments received, we are increasing the price of supply SH103 from $83 to $86.
Several of the PE worksheets included in RUC recommendations contained clinical labor minutes assigned to the service period in the facility setting. Our proposed inputs did not include these minutes because the cost of clinical labor during the service period for a procedure in the facility setting is not considered a resource cost to the practitioner since Medicare makes separate payment to the facility for these costs. We received no general comments that addressed this issue; we will address code-specific refinements to clinical labor in the individual code sections.
Several of the PE worksheets included in the RUC recommendations contained time for the equipment item “xenon light source” (EQ167). Because there appear to be two special light sources already present (the fiberoptic headlight and the endoscope itself) in the services for which this equipment item was recommended by the RUC, we did not propose to include the time for this equipment item from these services. In the proposed rule, we solicited comments on whether there is a rationale for including this additional light source as a direct PE input for these procedures.
The following is a summary of the comments we received.
After consideration of comments received, we are restoring input EQ167 and removing input EQ170 with the same number of equipment minutes for CPT codes 30300, 31295, 31296, 31297, and 92511.
Several commenters identified possible errors in the direct PE database that did not apply to CPT codes under review. The following is a summary of the comments we received regarding potential database entry errors.
We note that services subject to the MPPR lists on diagnostic cardiovascular services, diagnostic imaging services, diagnostic ophthalmology services and therapy services, and the list of procedures that meet the definition of imaging under section 5102(b) of the DRA and are therefore subject to the OPPS cap for the upcoming calendar year are displayed in the public use files for the PFS proposed and final rules for each year. The public use files for CY 2016 are available on the CMS Web site under downloads for the CY 2016 PFS final rule with comment period at
As discussed in section II.B. of this final rule with comment period, our malpractice methodology uses a crosswalk to establish risk factors for new services until utilization data becomes available. Table 10 lists the CY 2016 HCPCS codes and their respective source codes used to set the CY 2016 MP RVUs. The MP RVUs for these services are reflected in Addendum B on the CMS Web site at
CPT revised the lower gastrointestinal endoscopy code set for CY 2015 following identification of some of the codes as potentially misvalued and the affected specialty society's contention that this code set did not allow for accurate reporting of services based upon current medical practice. The RUC subsequently provided recommendations to us for valuing these services. In the CY 2015 PFS final rule with comment period, we delayed valuing the lower GI codes and indicated that we would propose values for these codes in the CY 2016 proposed rule, citing the new process for including proposed values for new, revised and potentially misvalued codes in the proposed rule as one of the reasons for the delay.
In the CY 2014 PFS final rule with comment period, we indicated that we used what we called an “incremental difference methodology” in valuing the upper GI codes for that year. We explained that the RUC made extensive use of a methodology that uses the incremental difference in codes to determine values for many of these services. This methodology uses a base code or other comparable code and considers what the difference should be between that code and another code by comparing the differentials to those for other sets of similar codes. As with the esophagoscopy subfamily, many of the procedures described within the colonoscopy subfamily have identical counterparts in the esophagogastroduodenoscopy (EGD) subfamily. For instance, the base colonoscopy CPT code 45378 is described as “Colonoscopy, flexible; diagnostic, including collection of specimen(s) by brushing or washing when performed, (separate procedure).” The base EGD CPT code 43235 is described as “Esophagogastroduodenoscopy, flexible, transoral; diagnostic, with collection of specimen(s) by brushing or washing, when performed.” In valuing other codes within both subfamilies, the RUC frequently used the difference between these two base codes as an increment for measuring the difference in work involved in doing a similar procedure utilizing colonoscopy versus utilizing EGD. For example, the EGD CPT code 43239 includes a biopsy in addition to the base diagnostic EGD CPT code 43235. The RUC valued this by adding the incremental difference in the base colonoscopy code over the base EGD CPT code to the value it recommended for the esophagoscopy biopsy, CPT code 43202. With some variations, the RUC used this incremental difference methodology extensively in valuing subfamilies of codes. In the CY 2016 PFS proposed rule, we made use of similar methodologies in establishing the proposed work RVUs for codes in this family.
We agreed with several of the RUC recommendations for codes in this family. Where we did not agree, we consistently applied the incremental difference methodology. Table 12 reflects how we applied this methodology and the values we proposed. To calculate the base RVU for the colonoscopy subfamily, we looked at the current intraservice time for CPT code 45378, which is 30 minutes, and the current work RVU, which is 3.69. The RUC recommended an intraservice time of 25 minutes and 3.36 RVUs. We then compared that service to the base EGD CPT code 43235 for which the RUC recommended a work RVU of 2.26, giving an increment between EGD and colonoscopy of 1.10 RVUs. We added that increment to our proposed work RVU for CPT code 43235 of 2.19 to arrive at our proposed work RVU for the base colonoscopy CPT code 45378 of 3.29. We used this value as the base code in the incremental methodology for establishing the proposed work RVU for the other base codes in the colonoscopy subfamilies which were then used to value the other codes in that subfamily.
Prior to CY 2013, CPT code 43775 described a non-covered service. For CY 2013, this service was covered as part of the bariatric surgery National Coverage Determination (NCD) and has been contractor-priced since 2013. In the CY 2016 PFS proposed rule, we proposed to establish national pricing for CPT code 43775. To establish a work RVU, we crosswalked the work RVUs for this code from CPT code 37217 (Transcatheter placement of an intravascular stent(s), intrathoracic common carotid artery or innominate artery by retrograde treatment, via open ipsilateral cervical carotid artery
Prior to CY 2015, according to CPT instruction, an incomplete colonoscopy was defined as a colonoscopy that did not evaluate the colon past the splenic flexure (the distal third of the colon). In accordance with that definition, the Medicare Claims Processing Manual (pub. 100-04, chapter 12, section 30.1.B., available at
In CY 2015, the CPT instruction changed the definition of an incomplete colonoscopy to a colonoscopy that does not evaluate the entire colon. The 2015 CPT Manual states when performing a diagnostic or screening endoscopic procedure on a patient who is scheduled and prepared for a total colonoscopy, if the physician is unable to advance the colonoscope to the cecum or colon-small intestine anastomosis due to unforeseen circumstances, report 45378 (colonoscopy) or 44388 (colonoscopy through stoma) with modifier -53 and provide appropriate documentation.
Given that the new definition of an incomplete colonoscopy also includes colonoscopies where the colonoscope is advanced past the splenic flexure but not to the cecum, we proposed to establish new values for the incomplete colonoscopies, reported with the -53 modifier. At present, we crosswalk the RVUs for the incomplete colonoscopies from the values of the corresponding sigmoidoscopy. Given that the new CPT instructions will reduce the number of reported complete colonoscopies and increase the number of colonoscopies that proceeded further toward completion reported with the -53 modifier, we believe CPT code 45378 reported with the -53 modifier will now describe a more resource-intensive group of services than were previously reported. Therefore, we proposed to develop RVUs for these codes reported with the -53 modifier by using one-half the value of the inputs for the corresponding codes reported without the -53 modifier.
In addition to this change in input values, we also solicited comments on how to address the disparity of resource costs among the broader range of services now described by the colonoscopy codes billed with the -53 modifier. We believe that it may be appropriate for practitioners to report the sigmoidoscopy CPT code 45330 under circumstances when a beneficiary is scheduled and prepared for a total colonoscopy (diagnostic colonoscopy, screening colonoscopy or colonoscopy through stoma), but the practitioner is unable to advance the colonoscope beyond the splenic flexure. We solicited comments and recommendations on that possibility, as well as more generally, the typical resource costs of these incomplete colonoscopy services under CPT's new definition. Finally, we solicited information regarding the number of colonoscopies that will be considered incomplete under CPT's new definition relative to the old definition, as well as the number of incomplete colonoscopies where the practitioner is unable to advance the colonoscope beyond the splenic flexure. This information will help us determine whether or not differential payment is required, and if it is, how to make the appropriate utilization assumptions within our ratesetting process.
We examined the RUC-recommended MP crosswalk for this family of codes. The MP crosswalks are used to identify the presumed mix of specialties that
For CY 2015, the CPT Editorial Panel revised the set of codes that describe radiation treatment delivery services based in part on the CMS identification of these services as potentially misvalued in CY 2012. We identified these codes as potentially misvalued under a screen called “Services with Stand-Alone PE Procedure Time.” We proposed this screen following our discovery of significant discrepancies between the RUC-recommended 60 minute procedure time assumptions for intensity modulated radiation therapy (IMRT) and information available to the public suggesting that the procedure typically took between 5 and 30 minutes per treatment.
The CPT Editorial Panel's revisions included the addition and deletion of several codes and the development of new guidelines and coding instructions. Four treatment delivery codes (77402, 77403, 77404, and 77406) were condensed into 77402 (Radiation Treatment Delivery, Simple), three treatment delivery codes (77407, 77408, 77409) were condensed into 77407 (Radiation treatment delivery, intermediate), and four treatment codes (77412, 77413, 77414, 77416) were condensed into 77412 (Radiation treatment delivery, complex). Intensity Modulated Radiation Therapy (IMRT) treatment delivery, previously reported under a single code, was split into two codes, 77385 (IMRT treatment delivery, simple) and 77386 (IMRT treatment delivery, complex). The CPT Editorial Panel also created a new image guidance code, 77387 (Guidance for localization of target volume for delivery of treatment, includes intrafraction tracking when performed) to replace 77014 (computed tomography guidance for placement of radiation therapy fields), 77421 (stereoscopic X-ray guidance for localization of target volume for the delivery of radiation therapy,) and 76950 (ultrasonic guidance for placement of radiation therapy fields) when any of these services were furnished in conjunction with radiation treatment delivery.
In response to stakeholder concerns regarding the magnitude of the coding changes and in light of the process changes we adopted for valuing new and revised codes, we did not implement interim final values for the new codes and delayed implementing the new code set until 2016. To address the valuation of the new code set through proposed rulemaking, and continue making payment based on the previous valuations even though CPT deleted the prior radiation treatment delivery codes for CY 2015, we created G-codes that mimic the predecessor CPT codes (79 FR 67667).
We proposed to establish values for the new codes based on RUC recommendations, subject to standard CMS refinements. We also note that because the invoices used to price the capital equipment included “on-board imaging,” and based on our review of the information used to price the equipment, we considered the costs of that equipment already to be reflected in the price per minute associated with the capital equipment. Therefore, we did not propose to include it as a separate item in the direct PE inputs for these codes, even though it appeared as a separate item on the PE worksheet included with the RUC recommendations for these codes. The proposed direct PE inputs for those codes were displayed the proposed direct PE input database available on the CMS Web site under the supporting data files for the CY 2016 PFS proposed rule with comment period at
We received many comments regarding various aspects of our proposal to implement the new CPT codes for radiation treatment services based on our refinement of RUC-recommended input values. Some commenters addressed issues for which we explicitly sought comment, while several commenters brought other issues to our attention. We address these comments in the following paragraphs.
Under the previous CPT coding structure, image guidance was separately billable when furnished in
However, the 2013 Medicare claims data for separately reported image guidance indicated that stereotactic guidance for radiation treatment services was furnished more frequently than CT guidance. The RUC recommended a work RVU of 0.58 and associated work times of three pre-service minutes, 10 intraservice minutes, and three post-service minutes for image guidance CPT code 77387. We reviewed this recommendation considering the discrepancy between the modality the RUC assumed to be typical in the vignette and the modality typically reported in the Medicare claims data. Given that the recommended work RVU for the new single code is similar to the work RVUs of the predecessor codes, roughly prorated based on their distribution in Medicare claims data, we agree with the RUC-recommended work RVU for the service. However, the RUC also recommended an increase in overall work time associated with image guidance consistent with the survey data used to value the new services. If accurate, this increase in time and maintenance of total work would suggest a decrease in the overall intensity for image guidance relative to the current codes. We solicited comments as to the appropriate work time associated with CPT code 77387.
Although CPT codes 77421 (stereotactic guidance) and 76950 (ultrasonic guidance) have been deleted, we note that CPT maintained CPT code 77014 (Computed tomography guidance for placement of radiation therapy fields). The RUC recommendation stated that the CPT editorial panel maintained CPT code 77014 based on concerns that without this option, some practitioners might have no valid CPT alternative than to use higher valued diagnostic CT codes when they used this CT guidance. The RUC recommendation also included a statement that utilization of this code was expected to drop to negligible levels in 2015, assuming that practitioners would use the new codes that are not differentiated based on imaging modality. Once all the new codes are implemented for Medicare, we anticipate that CPT and/or the RUC will address the continued use of 77014 and, if it continues to be part of the code set, provide recommendations as to the appropriate values given changes in utilization.
Regarding the reporting of the new image guidance codes, CPT guidance instructs that the technical portion of image guidance is now bundled into the IMRT and stereotactic radiation treatment delivery codes, but it is not bundled into the simple, intermediate, and complex radiation treatment delivery codes. CPT guidance states that the technical component of the image guidance code can be reported with CPT codes 77402, 77407, and 77412 (simple, intermediate, and complex radiation treatment) when furnished, which means that the technical component of the image guidance code should not be reported with the IMRT, stereotactic radiosurgery (SRS) or stereotactic body radiation therapy (SBRT) treatment delivery codes. The RUC recommendation, however, incorporated the same capital cost of image guidance equipment (a linear accelerator, or linac), for the conventional radiation treatment delivery codes and the the codes that describe IMRT treatment delivery services. The RUC explained that the older lower-dose external beam radiation machines are no longer manufactured and the image guidance technology is integrated into the single kind of linear accelerator used for all the radiation treatment services.
In reviewing the new code structure and the RUC recommendations for the proposed rule, we assumed that the CPT editorial panel did not foresee that the RUC would recommend that we develop PE RVUs for all the radiation treatment delivery codes based on the assumption that the same capital equipment is typically used in furnishing this range of external beam radiation treatments. Because the RUC recommendations incorporate the more extensive capital equipment in the lower dose treatment codes as well, a portion of the resource costs of the technical portion of imaging guidance are already allocated into the PE RVUs for all of the treatment delivery codes, not just the IMRT, SRS, and SBRT treatment delivery codes as CPT guidance would suggest.
In order to avoid incorporating the cost of this equipment into both the treatment delivery codes (CPT codes 77402, 77407, and 77412) and the technical component of the new imaging guidance code (CPT code 77387-TC), we considered valuing CPT code 77387 as a professional service only and not creating the professional/technical component splits envisioned by CPT. In the proposed rule we stated that in the context of the budget neutral PFS, incorporating a duplicative direct input with a cost of more than six dollars per minute would have significant impacts on the PE RVUs for all other services. However, we also noted that the RUC did not address this issue in its recommendation and proposed that not all of the recommended direct PE inputs for the
Some other commenters were concerned that the new coding structure for image guidance did not accurately reflect the way that image guidance is typically furnished. These commenters stated that multiple modalities of image guidance can be used in a single procedure, and that this heterogeneity is not reflected through a single image guidance code.
The cost of the capital equipment is the primary determining factor in the payment rates for these services. For each CPT code, the equipment costs are estimated based on multiplying the assumed number of minutes the equipment is used for that procedure by the per minute cost of the particular equipment item. Under our PE methodology, we currently use two default equipment usage assumptions in allocating capital equipment costs to calculate PE RVUs. The first is that each equipment item is only available to be used during what are assumed to be regular business hours for a physician's office: 10 hours per day, 5 days per week (50 hours per week) and 50 weeks per year. The second assumption is that the equipment is in use only 50 percent of the time that it is available for use. The current default 50 percent utilization rate assumption translates into 25 hours per week out of a 50-hour work week.
We have previously addressed the accuracy of these default assumptions as they apply to particular equipment resources and particular services. In the CY 2008 PFS proposed rule (72 FR 38132), we discussed the 50 percent utilization assumption and acknowledged that the default 50
Subsequently, a 2009 report on equipment utilization by MedPAC included studies that suggested a higher utilization rate for diagnostic imaging equipment costing more than $1 million. These studies cited by MedPAC suggested that for Magnetic Resonance Imaging equipment, a utilization rate of 92 percent on a 50-hour week would be most accurate. Similarly, another MedPAC-cited study suggested that for computed tomography scanners, 45 hours was more accurate, and would be equivalent to a 90 percent utilization rate on a 50-hour work week. For the CY 2010 PFS proposed rule, we proposed to increase the equipment usage rate to 90 percent for all services containing equipment that cost in excess of $1 million dollars. We stated that the studies cited by MedPAC suggested that physicians and suppliers would not typically make huge capital investments in equipment that would only be utilized 50 percent of the time (74 FR 33532).
In response to comments to that proposal, we finalized a 90 percent utilization rate assumption for MRI and CT to be transitioned over a 4-year period. Regarding the utilization assumptions for other equipment priced over $1 million, we stated that we would continue to explore data sources regarding use of the most accurate utilization rates possible (74 FR 61755). Congress subsequently specified the utilization rate to be assumed for MRI and CT by successive amendments to section 1848(b)(4)(C) of the Act. Section 3135(a) of the Affordable Care Act (Pub. L. 111-148) set the assumed utilization rate for expensive diagnostic imaging equipment to 75 percent, effective for 2011 and subsequent years. Section 635 of the American Taxpayer Relief Act (ATRA) (Pub. L. 112-240) set the assumed equipment utilization rate to 90 percent, effective for 2014 and subsequent years. Both of these changes were exempted from the budget neutrality requirements described in section 1848(c)(2)(B)(ii)(II) of the Act.
We have also made other adjustments to the default assumptions regarding the number of hours for which the equipment is available to be used. For example, some equipment used in furnishing services to Medicare beneficiaries is available to be used on a 24-hour/day, 7 days/per week basis. For these items, we develop the rate per minute by amortizing the cost over the extended period of time the equipment is in use.
Based on the RUC recommendations for the new codes that describe radiation treatment services, we do not believe our default assumptions regarding equipment usage are accurate for the capital equipment used in radiation treatment services. As we noted above, the RUC recommendations assume that the same type of linear accelerator is now typically used to furnish all levels and types of external beam radiation treatment services because the machines previously used to furnish these services are no longer manufactured. In valuing the previous code set and making procedure time assumptions, different equipment items were assumed to be used to furnish the different levels and types of radiation treatment. With the current RUC-recommended inputs, we can then assume that the same equipment item is used to furnish more services. If we assume the RUC recommendation to include the same kind of capital equipment for all of these codes is accurate, we believe that it is illogical to continue to assume that the equipment is only used for 25 out of a possible 50 hours per week. In order to estimate the difference between the previous number of minutes the linear accelerator was assumed to be in use under the previous valuation and the number of minutes now being recommended by the RUC, we applied the change in assumptions to the services reported in the most recent year of Medicare claims data. Under the assumptions reflected in the previous direct PE inputs, the kind of linear accelerator used for IMRT made up a total of 44.8 million out of 65 million minutes of external beam treatments furnished to Medicare beneficiaries. Under the new code set, however, we suggested in the proposed rule that a single kind of linear accelerator would be used for all of the 65 million minutes furnished to Medicare beneficiaries. This represents a 45 percent increase in the aggregate amount of time that this kind of linac is in use. As we noted in the proposed rule, the utilization rate that corresponds with that increase in minutes is not necessarily precise since the current utilization rate only reflects the default assumption and is not itself rooted in empirical data. Additionally, in some cases, individual practices that already use linear accelerators for IMRT may have replaced the now-obsolete capital equipment with new, additional linear accelerators instead of increasing the use of capital equipment already owned. However, we do not believe that the latter scenario is likely to be common in cases where the linear accelerators had previously been used only 25 hours per week.
Therefore, we proposed to adjust the equipment utilization rate assumption for the linear accelerator to account for the significant increase in usage. Instead of applying our default 50 percent assumption, we proposed to use a 70 percent assumption based on the recognition that the item is now being typically used in a significantly broader range of services, and that would increase how often the equipment is used in comparison to the previous assumption. In the proposed rule, we noted that we developed the 70 percent rate based on a rough reconciliation between the number of minutes the equipment is being used according to the new recommendations versus the current number of minutes based on an analysis of claims data.
Given the best available information, we believe that the 70 percent utilization assumption based on the changes in direct PE input recommendations and Medicare claims
For example, as part of the 2014 RUC recommendations for the Radiation Treatment Delivery codes, the RUC submitted a 2011 staffing survey conducted by the American Society for Radiology Technicians (ASRT). Using the 2014 version of the same study, we noted that there are an average of 2.3 linacs per radiation treatment facility and 52.7 patients per day treated per radiation treatment facility. These data suggest that an average of 22.9 patients are treated on each linac per day. Using an average of the RUC-recommended procedure times for CPT codes 77385, 77386, 77402, 77407, and 77412 weighted by the annual volume of procedures derived from Medicare claims data yielded a total of 670.39 minutes or 11.2 hours that a single linac is in use per day. This is in contrast to both the number of hours of use reflected in our default assumptions (5 of the 10 available business hours per day) and in our proposed revision to the equipment utilization rate assumptions (7 hours out of 10 available business hours per day).
For advanced diagnostic imaging services, we finalized a policy for CY 2010 to change the equipment utilization assumption only by 10 percent per year, in response to suggestions from commenters. Because capital equipment costs are amortized over several years, we believe it is reasonable to transition changes to the default assumptions for particular items over several years. We noted in the proposed rule that the change from one kind of capital equipment to another is likely to occur over a number of years, roughly equivalent to the useful life of particular items as they become obsolete. In the case of most of these items, we have assumed a 7-year useful life, and therefore, we assumed that the transition to use of a single kind of capital equipment would likely take place over seven years as individual pieces of equipment age into obsolescence. However, in the case of this transition in capital equipment, we have reason to believe that the transition to the new capital equipment has already occurred. First, we note that the specialty societies concluded that the single linear accelerator was typical for these services at the time that the current recommendations were developed in 2013. Therefore, we believe it is logical to assume that, at a minimum, the first several years of the transition to new capital equipment had already taken place by 2013. This would not be surprising, given that prior to the 2013 review by the RUC, the codes describing the non-IMRT external beam radiation treatments had last been reviewed in 2002. Second, because we proposed to use the 2013 recommendations for the CY 2016 PFS payment rates, we believed it would be reasonable to assume that in the years between 2013 and 2016, the majority of the rest of the obsolete machines would have been replaced with the single linear accelerator.
Nonetheless, we recognized that there would be value in following precedent to transition changes in utilization assumptions over several years.
Given the fact that it is likely that the transition to the linear accelerator began prior to the 2013 revaluation of the radiation treatment delivery codes by the RUC and that the useful life of the newest generation of linear accelerator is seven years, we believe a 2-year transition to the 70 percent utilization rate assumption would account for any remaining time to transition to the new equipment. Therefore, in developing PE RVUs for these services, we proposed to use a 60 percent utilization rate assumption for CY 2016 and a 70 percent utilization rate assumption for CY 2017. The proposed PE RVUs displayed in Addendum B on the CMS Web site were calculated using the proposed 60 percent equipment utilization rate for the linac as displayed in the proposed direct PE input database.
Additionally, we continue to seek empirical data on the capital equipment costs, including equipment utilization rates, for the linac and other capital-intensive machines, and seek comment on how to most accurately address issues surrounding those costs within the PE methodology.
In consideration of comments from stakeholders and our concerns as described above, however, we do not believe that, on balance, we should finalize the new code set for CY 2016. Therefore, for CY 2016, we are not finalizing our proposal to implement the new set of codes. We will continue the use of the current G-codes and values for CY 2016 while we seek more information, including public comments and recommendations regarding new codes to be developed either through the CPT process or through future PFS rulemaking. We believe that significant changes to the codes need to be made before we can develop accurate payment rates under the PFS for these services. These changes would include: developing a code set that recognizes the difference in costs between kinds of imaging guidance modalities; making sure that this code set facilitates valuation that incorporates the cost of imaging based on how frequently it is actually provided; and developing treatment delivery codes that are structured to differentiate payment based on the equipment resources used.
While we are not finalizing the new code set for these services, we are finalizing our proposals to include the single linear accelerator for radiation treatment delivery services as recommended by the RUC, and to update the default utilization rate assumption for linear accelerators used in radiation treatment services from 50 to 70 percent, phased in over 2 years. Under either set of codes, it is clear that the 50 percent utilization assumption is incompatible with the times used to develop payment rates for individual procedures, given that the same linear accelerator is used for the services.
Finally, because the costs of capital equipment are the primary drivers of RVUs and payment amounts for these services, and we acknowledge significant difficult in obtaining quality information regarding the actual costs of such equipment across the wide range of practitioners and suppliers that furnish these services, we will be engaging in market research to develop independent estimates of utilization and pricing for linear accelerators and image guidance used in furnishing radiation treatment services. We will also consider ways in which data collected from hospitals under the OPPS may be helpful in establishing rates for these and other technical component services. We will consider this information, including public comment, as we develop proposals for inclusion in future notice and comment rulemaking.
In the CY 2015 PFS final rule with comment period, we noted that changes to the CPT prefatory language modified the services that are appropriately billed using CPT code 77401 (radiation treatment delivery, superficial and/or ortho voltage, per day). The changes effectively meant that many other procedures supporting superficial radiation therapy were bundled with CPT code 77401. The RUC, however, did not review the inputs for superficial radiation therapy procedures, and therefore, did not assess whether changes in its valuation were appropriate in light of this bundling. Some stakeholders suggested that the change in the prefatory language precluded them from billing for codes that were previously frequently billed in addition to this code and expressed concern that as a result there would be significant reduction in their overall payments. In the CY 2015 PFS final rule with comment period, we requested information on whether the new radiation therapy code set, combined with modifications in prefatory text, allowed for appropriate reporting of the services associated with superficial radiation and whether the payment continued to reflect the relative resources required to furnish superficial radiation therapy services.
In response to our request, we received a recommendation from a stakeholder to make adjustments to both the work and PE components for CPT code 77401. The stakeholder suggested that since crucial aspects of the service, such as treatment planning and device design and construction, were not currently reflected in CPT code 77401, and practitioners were precluded from reporting these activities separately, additional work should be included for CPT code 77401. Additionally, the stakeholders suggested that the current inputs used to value the code are not accurate because the inputs include zero work and minutes for a radiation therapist to provide the service directly to the patient. The stakeholders suggested, alternatively, that physicians, not radiation therapists, typically provide superficial radiation services directly. Finally, stakeholders also suggested that we amend the direct PE inputs by including nurse time and updating the price of the capital equipment used in furnishing the service.
In response, we solicited recommendations from stakeholders, including the RUC, regarding whether or not it would be appropriate to add physician work for this service and remove minutes for the radiation therapists, even though physician work is not included in other radiation treatment services. We believe it would be appropriate to address the clinical labor assigned to the code in the context of the information regarding the work that might be associated with the service. We also solicited information on the possible inclusion of nurse time for this service as part of the comments and/or recommendations regarding work for the service. Lastly, we reviewed the invoices submitted in response to our request to update the capital equipment for the service.
We proposed to update the equipment item ER045 “orthovoltage radiotherapy system” by renaming it “SRT-100 superficial radiation therapy system” and update the price from $140,000 to $216,000, on the basis of the submitted invoices. The proposed PE RVUs displayed in Addendum B on the CMS Web site were calculated with this proposed modification that was displayed in the CY 2016 direct PE input database.
After considering the comments, we are finalizing the update to ER045 as proposed.
For CY 2015, the CPT Editorial Panel created two new codes describing advance care planning (ACP) services: CPT code 99497 (Advance care planning including the explanation and discussion of advance directives such as standard forms (with completion of such forms, when performed), by the physician or other qualified health professional; first 30 minutes, face-to-face with the patient, family member(s) and/or surrogate); and an add-on CPT code 99498 (Advance care planning including the explanation and discussion of advance directives such as standard forms (with completion of such forms, when performed), by the physician or other qualified health professional; each additional 30 minutes (List separately in addition to code for primary procedure)). In the CY 2015 PFS final rule with comment period (79 FR 67670-71), we assigned a PFS interim final status indicator of “I” (Not valid for Medicare purposes. Medicare uses another code for the reporting and payment of these services) to CPT codes 99497 and 99498 for CY 2015. We said that we would consider whether to pay for CPT codes 99497 and 99498 after we had the opportunity to go through notice and comment rulemaking.
In the CY 2016 PFS proposed rule, for CY 2016 we proposed to assign CPT codes 99497 and 99498 PFS status indicator “A,” which is defined as: “Active code. These codes are separately payable under the PFS. There will be RVUs for codes with this status. The presence of an “A” indicator does not mean that Medicare has made a national coverage determination regarding the service. Contractors remain responsible for local coverage decisions in the absence of a national Medicare policy.” We proposed to adopt the RUC-recommended values (work RVUs, time, and direct PE inputs) for CPT codes 99497 and 99498 beginning in CY 2016. The services could be paid on the same day or a different day as other E/M services. Physicians' services are covered and paid by Medicare in accordance with section 1862(a)(1)(A) of the Act. Therefore, under our proposal CPT code 99497 (and CPT code 99498 when applicable) would be reported when the described service is reasonable and necessary for the diagnosis or treatment of illness or injury. For example, this could occur in conjunction with the management or treatment of a patient's current condition, such as a 68 year old male with heart failure and diabetes on multiple medications seen by his physician for the E/M of these two
We solicited comment on this proposal, including whether payment is needed and what type of incentives the proposal might create. In addition, we solicited comment on whether payment for advance care planning is appropriate in other circumstances such as an optional element, at the beneficiary's discretion, of the annual wellness visit (AWV) under section 1861(hhh)(2)(G) of the Act.
We received approximately 725 public comments to the proposed rule regarding payment for ACP services. We received comments from individual citizens; several coalitions; professional associations; professional and community-based organizations focusing on end-of-life health care; healthcare systems; major employers; and many individual healthcare professionals working in primary care, geriatrics, hospice/palliative medicine, critical care, emergency medicine and other settings. We also received comments from chaplains, ethicists, advanced illness counseling companies and other interested parties. The majority of commenters expressed support for the proposal, providing recommendations on valuation, the types of professionals who should able to furnish or bill for the services and the appropriate setting of care, intersection with existing codes, the establishment of standards or specialized training, and beneficiary cost sharing and education. Some commenters opposed or expressed provisional support for the proposal because they believed it might create perverse financial incentives relating to termination of patient care. We summarize all of the comments below.
Similarly, other commenters described social workers, clinical psychologists, registered nurses, chaplains and other individuals as appropriate providers of ACP services, either alone or together with a physician, and recommended payment for the services of these individuals. For example, one commenter stated that a significant portion of ACP discussions occur between patients and registered nurses or allied health professionals functioning as care coordinators, care navigators or similar roles; that a growing proportion are performed at home; and that CMS should enable care coordinators and navigators to bill the ACP codes either by defining them as “other qualified health professionals” or under “incident to” provisions.
Some commenters specifically recommended allowing social workers and chaplains qualified under the hospice benefit to bill the ACP codes. One community oncologist association stated that best practices have evolved to include a multi-disciplinary approach utilizing trained physician, advanced practice provider and social worker skill sets, and that nearly half of their oncology network's ACP is performed by licensed clinical social workers. This commenter stated that while it is typical for a physician to initiate the ACP discussion with patients, ACP usually occurs with a mid-level provider or social worker and therefore the association requested that CMS allow clinical social workers to bill for these services. Another national association stated that it was working towards the development of new CPT codes for practitioners such as social workers who the commenter believed would not be able to directly bill the proposed codes.
Some commenters argued that such non-medically trained individuals are qualified and have special training and expertise (whether psychosocial, spiritual or legal) that are needed on ACP care teams. Some believed that ACP is sometimes appropriate for physicians to perform, but that physicians do not have enough time to supply all of the demand for ACP services. Some commenters similarly argued that inclusion of social workers and other non-medically trained individuals including Spiritual Directors, Chaplains, Clinical Pastoral Counselors and others would alleviate concerns about undue influence over patient decisions. These commenters stated that part of the ACP conversation is emotional and spiritual and not merely clinical, so it is important to include individuals who can address the non-clinical aspect of ACP. Some commenters argued that widening the field of professionals who can initiate these conversations within their scope of practice will further encourage appropriate and frequent ACP. Several commenters stated that physicians should not be paid for ACP services due to an ethical or financial conflict of interest, and that communities should take more responsibility for these services.
In contrast, several commenters were concerned that allowing ACP to be paid to certain trained facilitators would undermine physician authority in treating patients. These commenters described the use of trained facilitators in certain community models that offer group discussions by trained lay and health professionals. These commenters were concerned that such facilitators would qualify as “other qualified professionals” under the CPT code descriptor and be given control over ACP, shaping physician behavior. One commenter stated that to prevent coercion of patients, it would be better if payment was limited to non-employees of hospitals.
Regarding who can furnish ACP when it is furnished as an optional element of the AWV, we note that AWV cannot be furnished as an “incident to” service since the AWV has a separate, distinct benefit category from “incident to” services. However, the current regulations for the AWV allow the AWV to be furnished under a team approach by physicians or other health professionals under direct supervision. Therefore, the rules that apply to the AWV will also apply to ACP services when furnished as an optional element of the AWV, including the requirement for direct supervision.
Several commenters were concerned about the nature of the services that would be payable under the proposed codes, noting that ACP should extend beyond education about advance directives and completing forms. Several recommended the development of content criteria or quality measures to ensure that ACP services are meaningful and of value to patients. Some commenters expressed concern about ensuring appropriate services were furnished as part of ACP. For example, they expressed concern that payable services would include mere group information sessions, filling out forms or similar offerings. One commenter recommended that CMS require some minimal element like one personal real-time encounter, whether face-to-face or by phone or telemedicine.
In summary, we are finalizing our proposal to assign CPT codes 99497 and 99498 PFS status indicator “A” with RVUs developed based on the RUC-recommended values. We are also adding ACP as an optional element, at the beneficiary's discretion, of the AWV. We are also making the conforming changes to our regulations at § 410.15 that describe the conditions for and limitations on coverage for the AWV.
We note that while some public commenters were opposed to Medicare paying for ACP services, the vast majority of comments indicate that most patients desire access to ACP services as they prepare for important medical decisions.
CPT code 11750 appeared on the RUC's misvalued code screen of 10-day global services with greater than 1.5 office visits and utilization over 1,000. The Health Care Professional Advisory Committee (HCPAC) reviewed the survey results for valuing this code and determined that 1.99 work RVUs, corresponding to the 25th percentile survey result, was the appropriate value for this service. As discussed in the proposed rule, we indicated that we believed the recommendation for this service overstated the work involved in performing this procedure, specifically, given the decrease in post-operative visits. Due to similarity in service and time, we indicated that we believed a direct crosswalk from the work RVU for CPT code 10140 (Drainage of blood or fluid accumulation), which is also a 10-day global service with one post-operative visit, more accurately reflects the time and intensity of furnishing the service. Therefore, for CY 2016 we proposed a work RVU of 1.58 for CPT code 11750.
The following is a summary of the comments we received on our proposal.
After consideration of comments received, we are finalizing a work RVU of 1.58 for CPT code 11750, as proposed.
In its review of 10-day global services, the RUC identified CPT code 20240 as potentially misvalued. Subsequent to this identification, the RUC requested that CMS change this code from a 10-day global period to a 0-day global period for this procedure. Based on survey data, the RUC recommended a decrease in the intraservice time from 39 to 30 minutes, removal of two postoperative visits (one 99238 and one 99212), and an increase in the work RVUs for CPT code 20240 from 3.28 to 3.73. In the proposed rule, we stated that we did not believe the RUC recommendation accurately reflected the work involved in this procedure, especially given the decrease in intraservice time and post-operative visits relative to the previous assumptions used in valuing the service. Therefore, for CY 2016, we proposed a work RVU of 2.61 for CPT code 20240 based on the reductions in time for the service.
The following is a summary of the comments we received on our proposal.
The commenters also suggested that using a reverse building block methodology to convert a 10-day global code to 0-day global code by removing the bundled E/M services is inappropriate since magnitude estimation was used initially when establishing the work RVUs for surgical codes. Several commenters indicated that CMS' proposed work RVU has inappropriately low work intensity and expressed concern about CMS' approach to global code conversion.
Additionally, the RUC expressed disagreement with CMS' decision to remove 6 minutes of clinical labor minutes for discharge management time from 0-day global services stating there is clinical staff time that needs to be accounted for; the commenter requested we include the 6 minutes of clinical labor time based on the standard clinical labor task “conduct phone calls/call in prescriptions.”
In terms of the clinical labor minutes associated with the discharge day management, we do not agree that the typical discharge work associated for this service or for others without work time for discharge day management would typically involve clinical staff conducting phone calls regarding prescriptions. We are aware that some codes include the clinical labor minutes for discharge management even though the work time for these codes do not include time for discharge management. We are seeking comment on how we might address this discrepancy in future rulemaking.
After consideration of comments received, we are finalizing the proposed work RVU of 2.61 for CPT code 20240.
For CY 2016, the CPT Editorial Panel deleted one code, CPT code 31620 (Ultrasound of lung airways using an endoscope), and created three new codes, CPT codes 31652-31654, to describe bronchoscopic procedures that are inherently performed with endobronchial ultrasound (EBUS).
In their review of the newly revised EBUS family, the RUC recommended a change in the work RVUs for CPT code 31629 from 4.09 to 4.00. The RUC also recommended maintaining the current work RVUs for CPT codes 31622, 31625, 31626, 31628, 31632 and 31633. We proposed to use those work RVUs for CY 2016.
For the newly created codes, the RUC recommended work RVUs of 5.00 for CPT code 31652, 5.50 for CPT code 31653 and 1.70 for CPT code 31654. In the proposed rule, we stated that we believe the RUC-recommended work RVUs for these services overstate the work involved in furnishing the procedures. In order to develop proposed work RVUs for CPT code 31652, we compared the service described by the code descriptor to deleted CPT codes 31620 and 31629, because this new code describes a service that combines services described by CPT code 31620 and 31629. Specifically, we took the sum of the current work RVU of CPT code 31629 (WRVU = 4.09) and the CY 2015 work RVU of CPT code 31620 (WRVU = 1.40) and multiplied it by the quotient of CPT code 31652's RUC-recommended intraservice time (INTRA = 60 minutes) and the sum of CPT codes 31620 and 31629's current and CY 2015 intraservice times (INTRA = 70 minutes), respectively. This resulted in a proposed work RVU of 4.71. To value CPT code 31653, we used the RUC-recommended increment of 0.5 work RVUs between this service and CPT code 31652 to calculate for CPT code 31653 our proposed work RVUs of 5.21. Lastly, because the service described by new CPT code 31654 is very similar to deleted CPT code 31620, we stated that we believed a direct crosswalk of the previous values for CPT code 31620 accurately reflected the time and intensity of furnishing the service described by CPT code 31654. Therefore, we proposed a work RVU of 1.40 for CPT code 31654.
The following is a summary of the comments we received on our proposals.
Specifically, in considering CPT code 31652 in the context of similar codes, including CPT code 31638 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with revision of tracheal or bronchial stent inserted at previous session (includes tracheal/bronchial dilation as required)) and CPT code 31661(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with bronchial thermoplasty, 2 or more lobes) both of which have 60 minutes of intraservice time and RVUs of 4.88 and 4.50, we continue to believe that a work RVU of 4.71 is the most accurate valuation. For CPT code 31653, we continue to believe that maintaining the RUC-recommended 0.5 work RVU increment between 31652 and 31653 yields the most accurate value for CPT code 31653. For CPT code 31654, we note the direct crosswalk preserves the work RVU of 1.40 from the previous CPT code 31620, which was also an add-on code, and had more intraservice time. Therefore, after consideration of comments received, we are finalizing the work RVUs for CPT codes 31622, 31652, 31653, 31625, 31626, 31628, 31629, 31654, 31632 and 31633 for CY 2016 as proposed.
In the CY 2015 PFS proposed rule, a stakeholder requested that CMS establish non-facility PE RVUs for CPT codes 37250 and 37251. CMS sought comment regarding the setting and valuation of these services. In September 2014, these codes were referred to the CPT Editorial Panel. The CPT Editorial Panel deleted CPT codes 37250 and 37251 and created new bundled codes 37252 and 37253 to describe intravascular ultrasound (IVUS). The RUC recommended 1.80 RVUs for CPT code 37252 and 1.44 RVUs for CPT code 37253. The RUC also recommended new direct PE inputs for an IVUS catheter and IVUS system. CMS proposed to accept the RUC-recommended work RVUs for intravascular ultrasound.
The RUC identified three laparoscopic lymphadenectomy codes as potentially misvalued: CPT code 38570 (Laparoscopy, surgical; with retroperitoneal lymph node sampling (biopsy), single or multiple); CPT code 38571 (Laparoscopy, surgical; with retroperitoneal lymph node sampling (biopsy), single or multiple with bilateral total pelvic lymphadenectomy); and CPT code 38572 (Laparoscopy, surgical; with retroperitoneal lymph node sampling (biopsy), single or multiple with bilateral total pelvic lymphadenectomy and periaortic lymph node sampling (biopsy), single or multiple). Accordingly, the specialty society surveyed these 10-day global codes, and the survey results indicated decreases in intraservice and total work times. After reviewing the survey responses, the RUC recommended that CMS maintain the current work RVU for CPT code 38570 of 9.34; reduce the work RVU for CPT code 38571 from 14.76 to 12.00; and reduce the work RVU for CPT code 38572 from 16.94 to 15.60. We used the RUC recommendations to propose values for CPT codes 38571 and 38572, since the RUC recommended reductions in the work RVUs that correspond with marked decreases in intraservice time and decreases in total time. As discussed in the proposed rule, we did not agree with the RUC's recommendation to maintain the current work RVU for CPT code 38570 in spite of similar changes in intraservice and total times as were shown in the RUC recommendations for CPT codes 38571 and 38572. Therefore, we proposed a work RVU for CPT code 38570 of 8.49, which reflects the proportional reduction in total time for this code and maintains the rank order among the three codes.
The following is a summary of the comments we received on our proposals.
Commenters also stated that the recommended work RVU of 9.34 was based on work time and a comparison to CPT codes 31239 (Nasal/sinus endoscopy, surgical; with dacryocystorhinostomy) and 50590 (Lithotripsy, extracorporeal shock wave). Commenters indicated that the comparison to these codes confirmed
We were unable to find mention of CPT code 31239 in the RUC recommendations for 38570. Therefore, we considered the values for the code as a potential rationale for using the RUC-recommended value for CPT code 38570. We concluded that CPT code 31239 has limited utility as a comparison, since its values appear to be an outlier among codes with similar characteristics. For example, all 25 of the other 10-day global codes with 60 minutes of intraservice time have a lower work RVU than CPT code 38570, most of them substantially lower, with CPT code 49429 (Removal of peritoneal-venous shunt) having the next highest work RVU of 7.44. We also do not agree with the comparison to CPT code 50590, since that code describes all of the work within a 90-day global period, and we do not believe that relativity between services would be preserved if we were to make direct work RVU comparisons between 10-day and 90-day global codes.
After consideration of comments received, we are finalizing our proposed work RVUs of 8.49 for CPT code 38570, 12.00 for CPT code 38571, and 15.60 for CPT code 38572.
The RUC identified CPT code 39400 (Mediastinoscopy, including biopsy(ies) when performed) as a potentially misvalued code due to an unusually high preservice time and Medicare utilization over 10,000. In reviewing the code's history, = the CPT Editorial Panel concluded that the code had been used to report two distinct procedural variations although the code was valued using a vignette for only one of them. As a result, CPT code 39400 is being deleted and replaced with CPT codes 39401 and 39402 to describe each of the two mediastinoscopy procedures.
We proposed to accept the RUC-recommended work RVU of 5.44 for code 39401 and to use the RUC-recommended crosswalk from CPT code 52235 (Cystourethroscopy, with fulguration), which accurately estimates the overall work for CPT code 39401. In the proposed rule, we disagreed with the RUC-recommended work RVU of 7.50 for CPT code 39402. We stated that the work RVU for CPT code 39401 establishes an accurate baseline for this family of codes, so we proposed to scale the work RVU of CPT code 39402 in accordance with the change in the intraservice times between CPT codes 39401 and 39402. We indicated that applying this ratio in the intraservice time to the work RVU of CPT code 39401 yielded a total work RVU of 7.25 for CPT code 39402. We also noted that the RUC recommendation for CPT code 39401 represented a decrease in value by 0.64 work RVUs, which is roughly proportionate to the reduction from a full hospital discharge visit (99238) to a half discharge visit assumed to be typical in the post-operative period. The RUC recommendation for CPT code 39402 had the same reduction in the post-operative work without a corresponding decrease in its recommended work RVU. In order to reflect the reduction in post-operative work and to maintain relativity between the two codes in the family, we proposed a work RVU of 7.25 for CPT code 39402.
The following is a summary of the comments we received on our proposals.
After consideration of comments received, we are finalizing our proposed work RVU of 5.44 for CPT code 39401 and 7.25 for 39402.
The RUC identified CPT code 46500 (Injection of sclerosing solution, hemorrhoids) as potentially misvalued, and the specialty society resurveyed this 10-day global code. The survey showed a significant decrease in the reported intraservice and total work times. After reviewing the survey responses, the RUC recommended that CMS maintain the current work RVU of 1.69 in spite of the reductions in intraservice and total times. We proposed to reduce the work RVU to 1.42, which reduces the work RVU by the same ratio as the reduction in total time.
We also proposed to refine the RUC-recommended direct PE inputs by removing the inputs associated with cleaning the scope.
The following is a summary of the comments we received on our proposals.
Another commenter supported our efforts to identify and address such incongruities between work times and work RVUs, stating that when work time decreases, work RVUs should decrease comparatively, absent a compelling argument that the intensity of the service has increased sufficiently to offset the decrease in work time.
One commenter disagreed with CMS' proposed PE refinements for CPT code 46500 regarding the pre-service clinical labor time for the facility setting, clinical labor time related to setting up endoscopy equipment, clinical labor time and supplies related to cleaning endoscopy equipment, equipment time for item ES002, and clinical labor time associated with clinical labor task “follow-up phone calls and prescriptions”. The commenter also disagreed with CMS' refinement of not including setup and clean-up time for the scope at the post-operative visit.
After reviewing the public comments that were submitted regarding direct PE inputs, we recognize that we mistakenly believed that a disposable scope was included as a direct PE input, when a reusable equipment item was actually included. As a result, we removed the clinical labor time associated with setting up and cleaning the scope. Since we made this refinement in error, we will restore the clinical labor time associated with setting up and cleaning the scope. We also agree with commenters regarding the time for clinical labor task “follow-up phone calls and prescriptions”. Therefore, we are restoring the RUC-recommended clinical labor times for “follow-up phone calls & prescriptions”, “setup scope (non-facility setting only)”, and “clean scope”. As a result of including the previously removed clinical labor time associated with the equipment input ES002 (anoscope with light source), we are increasing the equipment time for this code from 60 minutes to 70 minutes. We did not add the set-up and clean scope time to the post-operative visits, however, since the clinical labor time for post-operative visits across PFS services match the clinical labor for the associated E/M visits. We are seeking comment regarding whether or not we should reconsider that practice broadly before making an exception in this particular case.
The RUC identified CPT code 47135 (Liver allotransplantation; orthotopic, partial or whole, from cadaver or living donor, any age) as potentially misvalued, and the specialty society resurveyed this 90-day global code. The survey results showed a significant decrease in reported intraservice work time, but a significant increase in total work time (the number of post-operative visits significantly declined while the level of visits increased). After reviewing the survey responses, the RUC recommended an increase in the work RVU from 83.64 to 91.78, which corresponds to the survey median result, as well as the exact work RVU for CPT code 33935 (Heart-lung transplant with recipient cardiectomy-pneumonectomy). In the proposed rule, we stated that we did not believe the RUC-recommended crosswalk was the most accurate from among the group of transplant codes. We noted that CPT code 32854 (Lung transplant, double (bilateral sequential or en bloc); with cardiopulmonary bypass) has intraservice and total times that are closer to those the RUC recommended for CPT code 47135, and CPT code 32854 has a work RVU of 90.00 which corresponds to the 25th percentile survey result for CPT code 47135. Therefore, we proposed to increase the work RVU of CPT code 47135 to 90.00.
The following is a summary of the comments we received on our proposal.
For CY 2016, the CPT Editorial Panel deleted six CPT codes (50392, 50393, 50394, 50398, 74475, and 74480) that were commonly reported together, and created 12 new CPT codes, both to describe these genitourinary catheter procedures more accurately and to bundle inherent imaging guidance. Three of these CPT codes (506XF, 507XK, and 507XL) were referred back to CPT to be resurveyed as add-on codes. The other nine codes were reviewed at the January 2015 RUC meeting and assigned recommended work RVUs and direct PE inputs.
We proposed to use the RUC-recommended work RVU of 3.15 for CPT code 50430. We agreed that this is
In our proposal for CPT code 50431, we stated that we disagreed with the RUC-recommended work RVU of 1.42; we instead proposed a work RVU of 1.10, based on three separate data points. First, the RUC recommendation stated that CPT code 50431 describes work previously described by a combination of CPT codes 50394 and 74425. These two codes have work RVUs of 0.76 and 0.36, respectively, which sum together to 1.12. Second, we noted that the work of CPT code 49460 (Mechanical removal of obstructive material from gastrostomy) is similar, with the same intraservice time of 15 minutes and same total time of 55 minutes but a work RVU of 0.96. Finally, we observed that the minimum survey result had a work RVU of 1.10, and we suggested that this value reflected the total work for the service. Accordingly, we proposed 1.10 as the work RVU for CPT code 50431.
We employed a similar methodology to develop a proposed work RVU of 4.25 for CPT code 50432. The three previously established codes were combined in CPT code 50432; these had respective work RVUs of 3.37 (CPT code 50392), 0.54 (CPT code 74475), and 0.36 (CPT code 74425); together these sum to 4.27 work RVUs. We also examined the valuation of this service relative to other codes in the family. The ratio of the intraservice time of 35 minutes for CPT code 50430 and the intraservice time of 48 minutes for CPT code 50432, applied to the work RVU of base code 50430 (3.15), results in a potential work RVU of 4.32. The total time for CPT code 50432 is higher than CPT code 50430 (107 minutes relative to 91 minutes); applying this ratio to the base work RVU results in a work RVU of 3.70. We utilized these data to inform our proposed crosswalk. In valuing CPT code 50432, we considered CPT code 31660 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance), which has an intraservice time of 50 minutes, total time of 105 minutes, and a work RVU of 4.25. Therefore, we proposed to establish the work RVU for CPT code 50432 at the crosswalked value of 4.25 work RVUs.
In the proposed rule, we stated that according to the RUC recommendations, CPT codes 50432 and 50433 are very similar procedures, with CPT code 50433 making use of a nephroureteral catheter instead of a nephrostomy catheter. The RUC valued the added difficulty of CPT code 50433 at 1.05 work RVUs compared to CPT code 50432. We proposed to maintain the relative difference in work between these two codes by proposing a work RVU of 5.30 for CPT code 50433 (4.25 + 1.05). Additionally, we considered CPT code 57155 (Insertion of uterine tandem and/or vaginal ovoids for clinical brachytherapy), which has a work RVU of 5.40 and an identical intraservice time of 60 minutes, but 14 additional minutes of total time (133 minutes compared to 119 minutes for CPT code 50433), which supported the difference of 0.10 RVUs. For these reasons, we proposed a work RVU of 5.30 for CPT code 50433.
As with the other genitourinary codes, we developed the proposed work RVU of CPT code 50434 in order to preserve relativity within the family. In the proposed rule, we stated that CPT code 50434 has 15 fewer minutes of intraservice time compared to CPT code 50433 (45 minutes compared to 60 minutes). We proposed to apply this ratio of 0.75 to the base work RVU of CPT code 50433 (5.30), which resulted in a potential work RVU of 3.98. We also considered CPT code 50432 as another similar service within this family of services, with three more minutes of intraservice time compared to CPT code 50434 (48 minutes of intraservice time instead of 45 minutes). We noted that applying this ratio (0.94) to the base work RVU of CPT code 50432 (4.25) resulted in a potential work RVU of 3.98. Based on this information, we identified CPT code 31634 (Bronchoscopy, rigid or flexible, with balloon occlusion) as an appropriate direct crosswalk, and proposed a work RVU of 4.00 for CPT code 50434. The two codes share an identical intraservice time of 45 minutes, though the latter possesses a lower total time of 90 minutes.
For CPT code 50435, we considered how the code and work RVU would fit within the family in comparison to our proposed values for CPT codes 50430 and 50432. CPT code 50430 serves as the base code for this group; it has 35 minutes of intraservice time in comparison to 20 minutes for CPT code 50435. This intraservice time ratio of 0.57 (20/35) resulted in a potential work RVU of 1.80 for CPT code 50435 when applied to the work RVU of CPT code 50430 (3.15). Similarly, CPT code 50432 is the most clinically similar procedure to CPT code 50435. CPT code 50432 has 48 minutes of intraservice time compared to 20 minutes of intraservice time for CPT code 50435. This ratio of 0.42 (20/48) applied to the base work RVU of CPT code 50432 (4.25) results in a potential work RVU of 1.77. We also considered two additional procedures to determine a proposed value for CPT code 50435. CPT code 64416 (Injection, anesthetic agent; brachial plexus) also includes 20 minutes of intraservice time and has a work RVU of 1.81. CPT code 36569 (Insertion of peripherally inserted central venous catheter) has the same intraservice and total time as CPT code 50435, with a work RVU of 1.82. Accordingly, we proposed a work RVU of 1.82, a direct crosswalk from CPT code 36569.
The remaining three codes all utilize ureteral stents and form their own small subfamily within the larger group of genitourinary catheter procedures. For CPT code 50693, we proposed a work RVU of 4.21, which corresponds to the 25th percentile survey result. We stated in the proposed rule that we believed that the work RVU corresponding to the 25th percentile survey result provided a more accurate value for CPT code 50693 based on the work involved in the procedure and within the context of other codes in the family. We also indicated that CPT code 31648 (Bronchoscopy, rigid or flexible, with removal of bronchial valve), which shares 45 minutes of intraservice time and has a work RVU of 4.20, was an accurate crosswalk for CPT code 50693.
For CPT code 50694, we compared its intraservice time to the code within the family that had the most similar duration, CPT code 50433. This code has 60 minutes of intraservice time compared to 62 minutes for CPT code 50694. This is a ratio of 1.03; when applied to the base work RVU of CPT code 50433 (5.30), we arrived at a potential work RVU of 5.48. We also looked to procedures with similar times, in particular CPT code 50382 (Removal and replacement of internally dwelling ureteral stent), which has 60 minutes of intraservice time, 125 minutes of total time, and a work RVU of 5.50. We proposed a work RVU of 5.50, a direct crosswalk from CPT code 50382.
Finally, we developed the proposed work RVU for CPT code 50695 using three related methods. In the proposed rule, we stated that CPT codes 50694 and 50695 describe very similar procedures, with 50695 adding the use of a nephrostomy tube. The RUC addressed the additional difficulty of this procedure by recommending 1.55 more work RVUs for CPT code 50695 than for CPT code 50694. Maintaining the 1.55 work RVUs increment, we noted that adding 1.55 to our proposed work RVU for CPT code 50694 (5.50)
In reviewing the direct PE inputs for this family of codes, we refined a series of the RUC- recommended direct PE inputs in order to maintain relativity with other codes in the direct PE database. All of the following refinements refer to the non-facility setting for this family of codes. Under the clinical labor inputs, we proposed to remove the RN/LPN/MTA (L037D) (intraservice time for assisting physician in performing procedure) for CPT codes 50431 and 50435. This amounts to 15 minutes for CPT code 50431 and 20 minutes for CPT code 50435. Moderate sedation is not inherent in these procedures and, therefore, we indicated that we did not believe that this clinical labor task would typically be completed in the course of this procedure. We also reduced the RadTech (L041B) intraservice time for acquiring images from 47 minutes to 46 minutes for CPT code 50694. This procedure contains 62 minutes of intraservice time, with clinical labor assigned for acquiring images (75 percent) and a circulator (25 percent). The time for these clinical labor tasks is 46.5 minutes and 15.5 minutes, respectively. The RUC recommendation for CPT code 50694 rounded both of these values upwards, assigning 47 minutes for acquiring images and 16 minutes for the circulator, which together sum to 63 minutes. We reduced the time for clinical labor tasks “acquire images” to 46 minutes to preserve the 62 minutes of total intraservice time for CPT code 50694.
With respect to the post-service portion of the clinical labor service period, we proposed to change the labor type for the task “patient monitoring following service/check tubes, monitors, drains (not related to moderate sedation)”. There are 45 minutes of clinical labor time assigned under this category to CPT codes 50430, 50432, 50433, 50434, 50693, 50694, and 50695. Although we agreed that the 45 minutes are accurate for these procedures as part of moderate sedation, we proposed to change the clinical labor type from the RUC-recommended RN (L051A) to RN/LPN/MTA (L037D) to reflect the staff that would typically be doing the monitoring for these procedures. Even though the CPT Editorial Committee's description of post-service work for CPT code 50435 included a recovery period for sedation, we recognized in our proposal that according to the RUC recommendation, CPT codes 50431 and 50435 did not use moderate sedation; therefore, we did not propose to include moderate sedation inputs for these codes.
The RUC recommendation for CPT code 50433 included a nephroureteral catheter as a new supply input with an included invoice. However, the RUC recommendation did not discuss the use of a nephroureteral catheter in the intraservice work description. CPT code 50433 did mention the use of a nephroureteral stent in this description, but there is no request for a nephroureteral stent supply item on the PE worksheet for this code. We asked for feedback from stakeholders regarding the use of the nephroureteral catheter for CPT code 50433, but did not propose to add the nephroureteral catheter as a supply item for CPT code 50433 pending this information. We also requested stakeholder feedback regarding the intraservice work description in for this code to explain the use, if any, of the nephroureteral catheter in this procedure.
The RUC recommended the inclusion of “room, angiography” (EL011) for this family of codes. In our proposal we stated that we did not agree with the RUC that an angiography room would be used in the typical case for these procedures, as there are other rooms available which can provide fluoroscopic guidance. Most of the codes that make use of an angiography room are cardiovascular codes, and much of the equipment listed for this room would not be used for non-cardiovascular procedures. We therefore proposed to replace equipment item “room, angiography” (EL011) with equipment item “room, radiographic-fluoroscopic” (EL014) for the same number of minutes. We requested public comment regarding the typical room type used to furnish the services described by these CPT codes, as well as the more general question of the typical room type used for GU and GI procedures. In the past, the RUC has developed broad recommendations regarding the typical uses of rooms for particular procedures, including the radiographic-fluoroscopy room. In the proposed rule, we stated that we believed that such a recommendation from the RUC concerning all of these codes could be useful in ensuring relativity across the PFS.
The following is a summary of the comments we received on our proposals.
After consideration of comments received, we are finalizing our proposed work RVU of 1.10 for CPT code 50431.
We note as well that our proposed work RVU for CPT code 50432 was supported by the use of two time ratios with CPT code 50430. Both the intraservice time ratio and the total time ratio suggested that a value below the RUC recommendation of 4.70 RVUs would be more accurate. After consideration of comments received, we are finalizing our proposed work RVU of 4.25 for CPT code 50432.
We continue to believe that a work RVU of 4.21, corresponding to the 25th percentile survey result, is the most accurate value for CPT code 50693. We believe that the ureteral stent procedures are clinically similar to the rest of the genitourinary catheter family, and the use of intraservice time ratios with these procedures provides an accurate method for determining relative values. We continue to believe that the work RVU of 4.21, corresponding to the 25th percentile survey result, is further supported through our crosswalk to CPT code 31648 (Bronchoscopy, rigid or flexible, with removal of bronchial valve) which has similar times and a work RVU of 4.20. After consideration of comments received, we are finalizing our proposed work RVU of 4.21 for CPT code 50693.
Response: We agree with the commenters that three sets of sterile garments would typically be used for the three medical professionals performing the procedure. We are therefore restoring one pair of sterile gloves, one sterile surgical gown, one IV starter kit, and one three-way stop cock to these codes, consistent with the RUC recommendation. We do not believe that the use of two more pairs of non-sterile gloves (beyond the two pairs already included in the visit pack) would be typical for these procedures. With regards to the “endoscope cleaning and disinfecting pack”, our rationale was not that this supply was duplicative, but rather that its use would not be typical because the genitourinary catheter codes do not make use of an endoscope. We did not receive comments that suggested that supply item “endoscope cleaning and disinfecting pack” would typically be used.
After consideration of comments received, we are finalizing the direct PE inputs as proposed, with the addition of the nephroureteral catheter for CPT code 50433, the change in clinical labor type from L037D to L051A for patient monitoring following service (not related to moderate sedation), and the additional four supplies detailed in the previous paragraph for CPT codes 50430, 50432, 50433, 50434, 50693, 50694, and 50695.
The CPT Editorial Panel created these two new codes because there are no existing codes to capture penile traumatic injury that includes penile fracture, also known as traumatic corporal tear, and complete penile amputation. CPT code 54437 describes a repair of traumatic corporeal tear(s), while CPT code 54438 describes a replantation, penis, complete amputation.
In the proposed rule, we stated that we disagreed with the RUC recommendation of 24.50 work RVUs for CPT code 54438. We indicated that a work RVU of 22.10, corresponding to the 25th percentile survey result, was a more accurate value based on the work involved in the procedure and within the context of other codes in the same family, since CPT code 54437 was also valued using the 25th percentile. We found further support for this valuation through a crosswalk to CPT code 43334 (Repair, paraesophageal hiatal hernia via thoracotomy, except neonatal), which has an identical intraservice time and a work RVU of 22.12. Therefore, we proposed a work RVU of 22.10 for CPT code 54438.
Because CPT codes 54437 and 54438 are typically performed on an emergency basis, in the proposed rule, we questioned the accuracy of the standard 60 minutes of preservice clinical labor in the facility setting, as we suggested that the typical procedure would not make use of office-based clinical labor. We suggested, for example, the typical case would require 8 minutes to schedule space in the facility for an emergency procedure, or 20 minutes to obtain consent. We solicited further public comment on this issue from the RUC and other stakeholders.
The following is a summary of the comments we received on our proposals.
CPT code 65785 is a new code describing insertion of prosthetic ring segments into the corneal stroma for treatment of keratoconus in patients whose disease has progressed to a degree that they no longer tolerate contact lens wear for visual rehabilitation.
In the proposed rule, we stated that we disagreed with the RUC recommendation of a work RVU of 5.93 for CPT code 65785. Although we appreciated the extensive list of other codes the RUC provided as references, we expressed concern that the recommended value for CPT code 65785 overestimated the work involved in furnishing this service relative to other PFS services. We did not find any codes with comparable intraservice and total time that had a higher work RVU. The recommended crosswalk, CPT code 67917 (Repair of ectropion; extensive), appears to have the highest work RVU of any 90-day global surgery service in this range of work time values. It also has longer intraservice time and total time than the code in question, making a direct crosswalk unlikely to be accurate.
As a result, we proposed a work RVU for CPT code 65785 based on the intraservice time ratio in relation to the recommended crosswalk. We compared the 33 minutes of intraservice time in CPT code 67917 to the 30 minutes of intraservice time in CPT code 65785. The intraservice time ratio between these two codes is 0.91, and when multiplied by the work RVU of CPT code 67917 (5.93) resulted in a potential work RVU of 5.39. We also considered CPT code 58605 (Ligation or transection of fallopian tube(s)), which has the same intraservice time, 7 additional minutes of total time, and a work RVU of 5.28. In the proposed rule, we stated that we believed that CPT code 58605 was a more accurate direct crosswalk because it shares the same intraservice time of 30 minutes with CPT code 65785. Accordingly, we proposed a work RVU of 5.39 for CPT code 65785.
The RUC recommendation for CPT code 65785 included a series of invoices for several new supplies and equipment items. One of these was the 10-0 nylon suture with two submitted invoice prices of $245.62 per box of 12, or $20.47 per suture, and another was priced at $350.62 per box of 12, or $29.22 per suture. Given the range of prices between these two invoices, we sought publicly available information and identified numerous sutures that appear to be consistent with those recommended by the specialty society, at lower prices, which we believed were more likely to be typical since we assumed that the typical practitioner would seek the best price. One example is “Surgical Suture, Black Monofilament, Nylon, Size: 10-0, 12”/30cm, Needle: DSL6, 12/bx” for $146. Therefore, we proposed to establish a new supply code for “suture, nylon 10-0” and price that item at $12.17 each. We welcomed comments from stakeholders regarding this supply item.
The following is a summary of the comments we received on our proposals.
As discussed in the proposed rule, all CPT codes with comparable time values and the same global period had lower work RVUs than the RUC-recommended work RVU of 5.93. While it is true that the seven codes provided by the commenters have work RVUs higher than 5.93 RVUs, we do not agree that these CPT codes are appropriate for comparative purposes with code 65785. CPT code 33768 is an add-on code (global ZZZ) that cannot be compared to a code with a 90-day global period such as 65785. CPT code 59830 is a Harvard-valued code that has not been subject to RUC review, has low utilization (2013 = 7 reported services), and 20 minutes fewer total time than CPT code 65785. CPT codes 66770 and 67145 are also Harvard codes which have not been RUC reviewed, and both have different intraservice times than 65785, 5 minutes and 10 minutes, respectively. CPT codes 67210 and 67220 are the only codes supplied by the commenters to be recently reviewed by the RUC, but both of them have only 15 minutes intraservice time, limiting their utility for comparative purposes with the 30 minutes intraservice time assumed for CPT code 65785. Although we accept the commenters' point that other codes with work RVUs above 5.93 RVUs do exist, we do not agree that codes referenced by commenters have “comparable intraservice and total time” with CPT code 65785. We continue to believe that scaling the RUC's key reference code of 67917 by the intraservice time ratio between the two codes provides the most accurate value for CPT code 65785.
After consideration of comments received, we are finalizing the work RVU and the direct PE inputs for CPT code 65785 as proposed.
The RUC reviewed 10-day global services and identified 18 services with greater than 1.5 office visits and 2012 Medicare utilization data over 1,000, including CPT codes 66801, 68810, 68811, 68815, and 68816. The RUC requested surveys and reviews of these services for CY 2016.
As discussed in the proposed rule, the RUC recommended a work RVU of 1.00
The RUC recommended a work RVU of 2.03, 3.00, and 2.35 for CPT codes 68811, 68815 and 68816, respectively. In the proposed rule, we stated that the RUC recommendations for these services do not appear to best reflect the work involved in performing these procedures. To value these services for the proposed rule, we calculated a total time ratio by dividing the code's current total time by the RUC-recommended total time, and then applying that ratio to the current work RVU. This produced the proposed work RVUs of 1.74, 2.70, and 2.10 for CPT codes 68811, 68815, and 68816, respectively.
The following is a summary of the comments we received on our proposals.
Therefore, for CY 2016 we are finalizing work RVUs for CPT codes 68801, 68810, 68811, 68815, and 68816, as proposed.
For CY 2015, the CPT Editorial Panel deleted codes 72010 (radiologic examination, spine, entire, survey study, anteroposterior and lateral), 72069 (radiologic examination, spine, thoracolumbar, standing (scoliosis)), and 72090 (radiological examination, spine; scoliosis study, including supine and erect studies), revised one code, 72080 (Radiologic examination, spine; thoracolumbar junction, minimum of 2 views) and created four new codes which cover radiologic examination of the entire thoracic and lumbar spine, including the skull, cervical and sacral spine if performed. The new codes were organized by number of views, ranging from one view in 72081, two to three views in 72082, four to five views in 72083, and minimum of six views in 72084.
In the proposed rule, we stated that we did not agree with the RUC's recommended work RVUs for the four new codes. For 72081, we noted that the one minute increase in time resulted in a larger work RVU than would be expected when taking the ratio between time and RVUs in the source code and comparing that to the time and work RVU ratio in the new code. Using the relationship between time and RVUs from deleted CPT code 72069, we proposed a work RVU of 0.26 for CPT code 72081, which differs from the RUC-recommended value of 0.30. Using an incremental methodology based on the relationship between work and time in the first code we proposed to adjust the RUC-recommended work RVUs for CPT codes 72082, 72083 and 72084 to 0.31, 0.35, and 0.41, respectively.
The following is a summary of the comments we received on our proposals.
Therefore, after considering the comments received, we are finalizing these work RVUs for 72081, 72082, 72083, and 72084 as proposed.
In the CY 2014 PFS final rule with comment period, we requested additional information to assist us in the valuation of ultrasound guidance codes. We nominated these codes as potentially misvalued based on the extent to which standalone ultrasound guidance codes were billed separately from services where ultrasound guidance was an integral part of the procedure. CPT code 76948 was among the codes considered potentially misvalued. CPT code 76948 was surveyed by the specialty societies and the RUC issued a recommendation for CY 2016. In the proposed rule, we stated that we had concerns about valuation of this code since it is a guidance code
We proposed to use work times based on refinements of the RUC-recommended values by removing the 3 minutes of pre and post service time since these times are reflected in CPT code 58970. We proposed work and time values for 76948 based on a crosswalk from 76945 (Ultrasonic guidance for chorionic villus sampling, imaging supervision and interpretation) which has a work time of 30 minutes and an RVU of 0.56. Therefore we proposed to maintain 25 minutes of intraservice time for CPT code 76948 and proposed a work RVU of 0.56.
The following is a summary of the comments we received on our proposals.
In October 2014 the CPT Editorial Panel created five new codes to describe high dose radiation (HDR) brachytherapy. We proposed the RUC-recommended work RVUs of 1.05, 1.40, 1.95, 3.80, and 5.40 respectively, for CPT codes 77767, 77768, 77770, 77771, and 77772. The RUC also recommended a new PE input, a brachytherapy treatment vault, which we proposed to include without modification.
As discussed in the proposed rule, in establishing CY 2015 interim final direct PE inputs for CPT codes 88341, 88342, and 88344, we replaced the RUC-recommended supply item “UltraView Universal DAB Detection Kit” (SL488) with “Universal Detection Kit” (SA117), since the RUC recommendation did not provide an explanation for the required use of a more expensive kit. We also adjusted the equipment time for equipment item “microscope, compound” (EP024). We reexamined these codes when valuing the immunofluorescence family of codes for CY 2016, and reviewed information received by commenters that explained the need for these supply items. Specifically, commenters explained that the universal detection kit that CMS included in place of the RUC-recommended kit was not typically used in these services as it was not clinically appropriate. We proposed to include the RUC-recommended supply item SL488 for CPT codes 88341, 88342, and 88344, as well as the RUC-recommended equipment time for “microscope, compound” for CY 2016.
In establishing interim final work RVUs for this family of codes, we refined the RUC recommendation for CPT code 88341 to 0.42, such that the work RVU for this add-on code was 60 percent of that of the base code 88342 (0.70 work RVUs). We noted that for similar procedures in this family, the RUC had recommended work RVUs for add-on codes that were 60 percent of the base codes, and that we believed this methodology would appropriately value this add-on code. In the proposed rule, we reexamined the work RVU for this service in the context of reviewing the immunoflurescent studies procedures. In doing so, we increased the work RVU of this add-on code to 0.53, which reflected 76 percent of 0.70, the base code for this service. We discuss our rationale for this adjustment in the immunofluorescent studies section below. However, we inadvertently omitted the rationale for this revision to the work RVU in the proposed rule.
The following is a summary of the comments we received on our proposals.
A few commenters also noted that the work RVU for CPT code 88341 (Immunohistochemistry or immunocytochemistry, per specimen; each additional single antibody stain procedure (List separately in addition to code for primary procedure) as displayed in Addendum B of the proposed rule was inconsistent with the CY 2015 work RVU but was not discussed elsewhere in the proposed rule.
For CY 2016, the CPT Editorial Panel deleted one code, CPT code 88347
The following is a summary of the comments we received on our proposals.
The RUC reviewed and developed recommendations regarding CPT codes 88367 and 88368. We reviewed and proposed values based on those recommended values as discussed in the proposed rule. Subsequently, the RUC re-reviewed these services for CY 2016 due to the specialty society's initially low survey response rate. In our review of these codes, we noticed that the latest RUC recommendation was identical to the RUC recommendation provided for CY 2015. Therefore, we proposed to retain the CY 2015 work RVUs and work time for CPT codes 88367 and 88368 for CY 2016.
For CPT codes 88364 and 88369, we refined the RUC recommendations to 0.67 for both procedures, such that the work RVUs for these add-on codes was 60 percent of the base codes. We noted that for similar procedures in this family, the RUC had previously recommended work RVUs for add-on codes that were 60 percent of the base codes, and that we believed this methodology would appropriately value these add-on codes. In the proposed rule, we reexamined the work RVUs for these services in the context of reviewing the immunofluorescent studies procedures. In doing so, we increased the work RVUs of these add-on codes to 0.67, which reflected 76 percent of 0.88, the work RVUs of the base codes for these services. We discuss our rationale for this adjustment in the immunofluorescent studies section above. However, we inadvertently omitted the rationale for this revision to the work RVU in the proposed rule.
As discussed in the proposed rule, in establishing interim final direct PE inputs for CY 2015 for CPT codes 88364, 88365, 88366, 88367, 88373, 88374, 88377, 88368, and 88369, we refined the RUC-recommended direct PE inputs as follows. We refined the units of several supply items, including “ethanol, 100%” (SL189), “ethanol, 70%” (SL190), “ethanol, 85%” (SL191), “ethanol, 95%” (SL248), “kit, FISH paraffin pretreatment” (SL195), “kit, HER-2/neu DNA Probe” (SL196), positive and negative control slides (SL112, SL118, SL119, SL184, SL185, SL508, SL509, SL510, SL511), “(EBER) DNA Probe Cocktail” (SL497),”Kappa probe cocktails” (SL498) and “Lambda probe cocktails” (SL499), to maintain consistency within the codes in the family, and adjusted the quantities included in these codes to align with the code descriptors and better reflect the typical resources used in furnishing these services. We also adjusted the equipment time for equipment items “water bath, FISH procedures (lab)” (EP054), “chamber, Hybridization” (EP045), “microscope, compound” (EP024), “instrument, microdissection (Veritas)” (EP087), and “ThermoBrite” (EP088), to reflect the typical time the equipment is used, among other common refinements.
For CY 2016, we reexamined these codes when valuing the immunofluorescence family of codes, and reviewed information received from commenters during the CY 2015 final rule's comment period that described the typical batch size for each of these services, which identified apparent inconsistencies and discrepancies in the quantity of units among the codes in the family. For CY 2016, we proposed to include the RUC-recommended quantities for each of these supply items for the CPT codes 88364, 88365, 88366, 88367, 88373, 88374, 88377, 88368, and 88369. With regard to the equipment items, we received information explaining that the recommended equipment times already accounted for the typical batch size, and thus, the recommended times were already reflective of the typical case. Therefore, we proposed to adjust the equipment time for equipment items EP054, EP045, and EP087 to align with the RUC-recommended times. We also received comments explaining the need for equipment item EP088. Therefore, we proposed to include this equipment item consistent with the RUC recommendations for CPT code 88366.
In the proposed rule, we noted that the information we received regarding the typical batch size was critical in determining the appropriate direct PE inputs for these pathology services. We also noted that we usually do not have information regarding the typical batch size or block size when we are reviewing the direct PE inputs for pathology services. The supply quantity and equipment minutes are often a direct function of the number of tests processed at once. Given the importance of the typical number of tests being processed by a laboratory in determining the direct PE inputs, which often include expensive supplies, we
In particular, we noted in the proposed rule that since laboratories of various sizes furnish pathology tests and that, depending on the test, a large laboratory may be at least as likely to have furnished a test to a Medicare beneficiary compared to a small laboratory, we noted that an equipment item involved in furnishing a service that is commercially available to a small laboratory may not be the same equipment item that is used in the typical case. If the majority of services billed under the PFS for a particular CPT code are furnished by laboratories that run many of these tests each day, then assumptions informed by commercially available products may significantly underestimate the typical number of tests processed together, and thus the assumptions underlying current valuations for per-test cost of supplies and equipment may be much higher than the typical resources used in furnishing the service. We invited stakeholders to provide us with information about the equipment and supply inputs used in the typical case for particular pathology services.
The following is a summary of the comments we received on our proposals.
For CY 2016, the CPT Editorial Panel deleted CPT code 92543 (Assessment and recording of balance system during irrigation of both ears) and created two new CPT codes, 92537 and 92538, to report caloric vestibular testing for bithermal and monothermal testing procedures, respectively. The RUC recommended a work RVU of 0.80 for CPT code 92537 and a work RVU of 0.55 for CPT code 92538. In the proposed rule, we stated that we believed that the recommendations for these services overstate the work involved in performing these procedures. Due to similarity in service and time, we proposed that a direct crosswalk of CPT code 97606 (Negative pressure wound therapy, surface area greater than 50 square centimeters, per session) to CPT code 92537 accurately reflects the total work involved in furnishing the service. To establish a proposed value for CPT code 92538, we divided the proposed work RVU for 92537 in half since the code descriptor for this procedure describes the service as having two irrigations as opposed to the four involved in CPT code 92537. Therefore, for CY 2016, we proposed work RVUs of 0.60 to CPT code 92537 and 0.30 to CPT code 92538.
The following is a summary of the comments we received on our proposals.
For CY 2015, the CPT Editorial Panel created a new code, CPT code 99177, to describe instrument-based ocular screening with on-site analysis and also revised existing CPT code 99174, which describes instrument-based ocular screening with remote analysis and report. In the proposed rule, we stated that CPT code 99174 was currently assigned a status indicator of N (non-covered service) which we proposed should remain unchanged since this is a screening service. After review of CPT code 99177, we proposed that this service was also a screening service and should be assigned a status indicator of N (non-covered service). Therefore, for CY 2016, we proposed to assign a PFS status indicator of N (non-covered service) for CPT codes 99174 and 99177.
The following is a summary of the comments we received on our proposals.
We issued national coverage determination (NCD) for Medicare coverage of a lung cancer screening counseling and shared decision making visit, and for appropriate beneficiaries, annual screening with low dose computed tomography (LDCT), as an additional preventive benefit, effective February 5, 2015. The American College of Radiology (ACR) submitted recommendations for work and direct PE inputs.
We proposed to value CPT code G0296 (Counseling visit to discuss need for lung cancer screening (LDCT) using low dose CT scan (service is for eligibility determination and shared decision making)) using a crosswalk from the work RVU for G0443 (Brief face-to-face counseling for alcohol misuse, 15 minutes) which has a work RVU of 0.45. We added 2 minutes of pre-service time, and one minute post-service time which we valued at 0.0224 RVU per minute yielding a total of 0.062 additional RVUs which we then added to 0.45, bringing the total proposed work RVUs for G0296 to 0.52. The direct PE input recommendations from the ACR were refined according to CMS standard refinements and appear in the CY 2016 proposed direct PE input database.
For CPT code G0297 (Low dose CT scan (LDCT) for lung cancer screening), the ACR recommended that CMS crosswalk CPT code G0297 to CPT code 71250 (computed tomography, thorax; without contrast material) with additional work added to account for the added intensity of the service. After reviewing this recommendation, we stated in our proposal that the work (time and intensity) was identical for both CPT code G0297 and CPT code 71250. Therefore, we proposed a work RVU of 1.02 for CPT code G0297. The following is a summary of the comments we received on our proposals.
After consideration of the comments received, we are finalizing the work RVUs for G0296 and G0297 as proposed.
In CY 2014, we proposed to limit the nonfacility PE RVUs for individual codes so that the total nonfacility PFS payment amount would not exceed the total combined amount that Medicare would pay for the same code in the facility setting. In developing the proposal, we sought a reliable means for Medicare to set upper payment limits for office-based procedures given our several longstanding concerns regarding the accuracy of certain aspects of the direct PE inputs, including both items and procedure time assumptions, and prices of individual supplies and equipment (78 FR 74248 through 74250). After considering the many comments we received regarding our proposal, the majority of which urged us to withdraw the proposal for a variety of reasons, we decided not to finalize the policy. However, we continue to believe that using PE data that are auditable, comprehensive, and regularly updated would contribute to the accuracy of PE calculations.
Subsequent to our decision not to finalize the proposal, the RUC forwarded direct PE input recommendations for a subset of codes with nonfacility PE RVUs that would have been limited by the policy. Some of these codes also include work RVUs, but the RUC recommendations did not address the accuracy of those values.
We generally believe that combined reviews of work and PE for each code under the potentially misvalued codes initiative leads to more accurate and appropriate assignment of RVUs. We also believe, and have previously stated, that our standard process for evaluating potentially misvalued codes is unlikely to be the most effective means of addressing our concerns regarding the accuracy of some aspects of the direct PE inputs (79 FR 74248).
However, we also believe it is important to use the most accurate and up-to-date information available to us when developing PFS RVUs for individual services. Therefore, we reviewed the RUC-recommended direct PE inputs for these services and proposed to use them, with the refinements addressed in this section. However, we also identified these codes as potentially misvalued because their direct PE inputs were not reviewed alongside review of their work RVUs and time. We considered not addressing these recommendations until such time as comprehensive reviews could occur, but we recognized the public interest in using the updated recommendations regarding the PE inputs until such time as the work RVUs and time can be addressed. Therefore, we noted that while we proposed adjusted PE inputs for these services based on these recommendations, we would anticipate addressing any corresponding change to direct PE inputs once the work RVUs and time are addressed.
The RUC recommendation for CPT code 11760 included 22 minutes assigned to clinical labor task “Assist physician in performing procedure.” Because CPT code 11760 has 33 minutes of work intraservice time, we believe that this clinical labor input was intended to be calculated at 67 percent of work time. However, the equipment times were also calculated based on the 22 minutes of intraservice time. We proposed to use the RUC-recommended equipment times while we solicited comments on whether or not it would be appropriate to include the full 33 minutes of work intraservice time for the equipment.
We refined the time for clinical labor task “Check dressings & wound/home care instructions” to 3 minutes for each code in this family to reflect the standard time for this clinical labor task.
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT codes 12005, 12006, 12007, 12013, 12014, 12015, and 12016.
We refined the preservice clinical labor time in the non-facility setting to zero minutes, and the information in the proposed rule indicated that this refinement was because these codes are emergent procedures where certain
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT codes 12041, 12054, 12055, and 12057, with the additional refinement to SA054 discussed above.
We refined some of the preservice clinical labor times to align with standard values, as well as the fact that the decision for surgery would have been made on the previous day. We also refined the time for clinical labor task “Sedate/apply anesthesia” to reflect the established standard, refined the quantity of the Afrin nasal spray (SJ037) to the amount typical for the procedures, and refined the equipment times to conform to our standard policies.
After consideration of comments received, we are finalizing the direct PE inputs for CPT codes 31295, 31296, and 31297 as proposed.
In the proposed rule, we stated that the ENT suction and pressure cabinet (EQ234) would not typically be used during an office visit, and we refined the equipment times to remove the minutes associated with the office visit. We also refined the quantity of supply item “suction canister” (SD009) from two to one to reflect the amount typically used during these procedures.
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT Codes 40804 and 42809.
We proposed to update the price for supply item “Millipore filter” (SL502) based on stakeholder submission of new information following the RUC's original recommendation. As requested, we proposed to crosswalk the price of SL502 from the cytology specimen filter (Transcyst) supply (SL041) and assign a price of $4.15. The proposed direct PE inputs are included in the proposed CY 2016 direct PE input database, which is available on the CMS Web site under downloads for the CY 2016 PFS final rule with comment period at
As discussed in the proposed rule, we are concerned that there is a lack of clarity and the possibility for confusion contained in the CPT descriptors of CPT codes 88160 and 88161. The CPT descriptor for the first code refers to the “screening and interpretation” of cytopathology smears, while the descriptor for the second code refers to the “preparation, screening and interpretation” of cytopathology smears. We believe that there is currently the potential for duplicative counting of direct PE inputs due to the overlapping nature of these two codes. We are concerned that the same procedure may be billed multiple times under both CPT code 88160 and 88161. We believe that these codes are potentially misvalued, and we are seeking a full review of this family of codes for both work and PE, given the potential for overlap. We recognize that the ideal solution may involve revisions by the CPT Editorial Panel.
With regard to the current direct PE input recommendations, we proposed to remove the clinical labor minutes recommended for “Stain air dried slides with modified Wright stain” for CPT code 88160 since staining slides would not be a typical clinical labor task if no slide preparation is taking place, as the descriptor for this code suggests.
We proposed to update supply item “protease solution” (SL506) based on stakeholder submission of new information following the RUC's original recommendation. As requested, we proposed to change the name of the supply to “Protease”, alter the unit of measurement from milliliters to milligrams, change the quantity assigned to CPT code 88182 from 1 to 1.12, and update the price from $0.47 to $0.4267. These changes are reflected in the direct PE input database, which is available on the CMS Web site under downloads for the CY 2016 final rule with comment period at
Subsequent to receiving these recommendations, we received additional recommendations from the RUC for this family of procedures following the publication of the CY 2016 PFS proposed rule. We will address both recommendations here.
In addition, we have removed the time associated with clinical labor task “Recycle xylene from stainer” from all of the codes for similar reasons. We also noticed what appeared to be an error in the amount of non-sterile gloves (SB022), impermeable staff gowns (SB027), and eye shields (SM016) assigned to CPT codes 88108 and 88112. The recommended value of these supplies was a quantity of 0.2, which we believe was intended to be a quantity of 2. We are therefore refining the value of these supplies to 2 for CPT codes 88108 and 88112. After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT Codes 88104, 88106, 88108, 88160, 88161, and 88162 with the exception of the refinements to the clinical labor, supplies, and equipment described above.
We refined many of the clinical labor activities in this procedure to align with the typical times included for other recently reviewed pathology codes. We requested additional information regarding the use of the desktop computer with monitor (ED021) since the RUC recommendation did not specify how it is used.
We refined many of the clinical labor activities in these procedures to align with the times typically included in other recently reviewed pathology codes. We also requested additional information regarding the specific use of the desktop computer with monitor (ED021) for CPT codes 88184 and 88185 since the recommendation does not specify how it is used.
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT codes 88184 and 88185, with the additional refinements to equipment time discussed above.
We proposed to remove the time for clinical labor task “Accession specimen/prepare for examination” for CPT codes 88321 and 88325. These codes do not involve the preparation of slides, so this clinical labor task is duplicative with the labor carried out under “Open shipping package, remove and sort slides based on outside number.” We proposed to maintain the recommended 4 minutes for this clinical labor task for CPT code 88323, since it does require slide preparation.
We proposed to refine the time for clinical labor task “Register the patient in the information system, including all demographic and billing information” from 13 minutes to 5 minutes for all three codes. As indicated in Table 6, our standard time for clinical labor task “entering patient data” is 4 minutes for pathology codes, and we believe that the extra tasks involving label preparation described in this clinical labor task would typically require an additional 1 minute to complete. We also believe that the additional recommended time likely reflects administrative tasks that are appropriately accounted for in the allocation of indirect PE under our established methodology.
We proposed to refine the time for clinical labor task “Receive phone call from referring laboratory/facility with scheduled procedure to arrange special delivery of specimen procurement kit, including muscle biopsy clamp as needed. Review with sender instructions for preservation of specimen integrity and return arrangements. Contact courier and arrange delivery to referring laboratory/facility” from 7 minutes to 5 minutes. Based on the description of this task, we indicated that we believe that this task would typically take 5 minutes to be performed by the Lab Technician.
We proposed to remove supply item “eosin solution” (SL063) from CPT code
We proposed to remove many of the inputs for clinical labor, supplies, and equipment for CPT code 88325. The descriptor for this code indicates that it does not involve slide preparation, and therefore we proposed to refine the labor, supplies, and equipment inputs to align with the inputs recommended for CPT code 88321, which also does not include the preparation of slides.
• Register the patient in the information system, including all demographic and billing information. In addition to standard accessioning, enter contributing physician name and address, number of slides and the outside case number, etc., into the laboratory information system. Print labels for slides, and affix labels to slides.
• Print label for outside block and affix to block.
• List and label all accompanying material (imaging on a disk, portion of chart, etc.)
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT Codes 88321, 88323, and 88325, with the additional refinement to the eosin stain and hematoxylin stain supplies discussed above in CPT code 88323.
We refined many of the clinical labor activities in these procedures to align with the typical times included in recently reviewed pathology codes, in particular the clinical labor times for CPT code 88305. We also removed supply item “H&E stain kit supply” (SL231) and replaced it with supply item “H&E frozen section stain supply” (SL134) and refined the quantity of the microscope slides (SL122) for CPT codes 88333 and 88334.
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT Codes 88329, 88331, 88332, 88333, and 88334.
We refined many of the clinical labor activities in these procedures to align with the standard times used by other recently reviewed pathology codes, in particular the clinical labor times for CPT code 88305. We also removed the equipment time for the ultradeep freezer (EP046), as we believe that items used for storage such as freezers are more accurately classified as indirect PE.
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT code 88355, with the additional clinical labor refinements discussed above.
We refined many of the clinical labor activities in these procedures to align with the typical times included in recently reviewed pathology codes. We also proposed to update the pricing for the Benchmark ULTRA automated slide preparation system (EP112) and the E-Bar II Barcode Slide Label System (EP113). Based on stakeholder submission of information subsequent to the original RUC recommendation, we proposed to reclassify these two pieces of equipment as a single item with a price of $150,000, which will use equipment code EP112. CPT codes 88360 and 88361 have been valued using this new price. The equipment minutes remain unchanged.
The RUC recommendation for CPT codes 88360 and 88361 included an invoice for supply item “Antibody Estrogen Receptor monoclonal” (SL493). The submitted invoice had a price of $694.70 per box of 50, or $13.89 per test. We sought publicly available information regarding this supply and identified numerous monoclonal antibody estrogen receptors that appear to be consistent with those recommended by the specialty society, at publicly available lower prices, which we believe are more likely to be typical since we assume that the practitioner would seek the best price available to the public. One example is Estrogen Receptor Antibody (h-151) [DyLight 405], priced at 100 tests per box for $319. Therefore, we proposed to establish a new supply code for “Antibody Estrogen Receptor monoclonal” and price that item at $3.19 each. We welcomed comments from stakeholders regarding this supply item.
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT Codes 88360 and 88361.
We proposed to refine the recommended time for clinical labor task “Assist pathologist with gross specimen examination including the following; Selection of fresh unfixed tissue sample; selection of tissue for formulant fixation for paraffin blocking and epon blocking. Reserve some specimen for additional analysis” from 10 minutes to 5 minutes. We noted that the 5 minutes includes 3 minutes for assisting the pathologist with the gross specimen examination (as listed in Table 6 of the proposed rule (80 FR 41698) and an additional 2 minutes for the additional tasks due to the work taking place on a fresh specimen.
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT code 88362, with the additional clinical labor refinements discussed above.
We proposed to remove the endosheath (SD070) from this procedure, because we indicated that we do not believe it would be typically used and it was not included in the recommendations for any of the other related codes in the same tab. If the endosheath were included as a supply with the presentation of additional clinical information, then we stated we believed it would be appropriate to remove all of the clinical labor and equipment time currently assigned to cleaning the scope. We sought public comment regarding the proper use of the endosheath supply and the clinical labor associated with scope cleaning.
After consideration of comments received, we are finalizing the direct PE inputs for CPT code 92511, with the additional supply refinements described above.
We refined several of the clinical labor times for CPT codes 95812 and 95813 to align them with our proposed standards, including refining the time for clinical labor task “Assist physician in performing procedure” to align with the intraservice time of each procedure. We also removed the service period time for clinical labor task “Provide pre-service education/obtain consent” to avoid duplicative clinical labor with the same task in the preservice period, and refined several of the equipment times to align with the standard equipment times for non-highly technical equipment.
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT codes 95812 and 95813.
We proposed to reduce the quantity of supply item “iontophoresis electrode kit” (SA014) from 4 to 3. According to the description of this code, the procedure typically uses 2-4 electrodes, and we indicated that we therefore believe that a supply quantity of 3 would better reflect the typical case. We requested further information regarding the typical number of electrodes used in this procedure; if the maximum of 4 electrodes is in fact typical for the procedure, then we recommended that the code descriptor be referred to CPT for further clarification.
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT Code 95923, with the additional refinement to SA014 discussed above.
We refined portions of the clinical labor time for CPT codes 95928 and 95929 as duplicative with other tasks, and refined the time for clinical labor task “Assist physician in performing procedure” to align with the intraservice work duration. We also removed a minimum multi-specialty visit pack (SA048) from CPT code 95928 due to the fact that it is typically billed with a same-day E/M service, and we refined some of the equipment times for both procedures to conform to the standard equipment formulas.
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT codes 95928 and 95929.
We added 2 minutes of time for clinical labor task “Prepare room, equipment, supplies” to CPT code 95933 and refined the time for clinical labor task “Clean room/equipment by physician staff” to 3 minutes, in both cases conforming to the established standards for these clinical labor tasks.
After consideration of comments received, we are finalizing the direct PE inputs as proposed for CPT code 95933.
In this section, we discuss each code for which we received a comment on the CY 2015 interim final work RVU or work time during the comment period for the CY 2015 final rule or for which we are modifying the CY 2015 interim final work RVU, work time or procedure status indicator for CY 2016. If a code in Table 15 is not discussed in this section, we did not receive any comments on that code or received only comment(s) in support of the CY 2015 interim final status; for those, we are finalizing the interim final work RVU and time without modification for CY 2016.
A comprehensive list of all interim final values for which public comments were sought in the comment period for the CY 2015 PFS final rule is contained in Addendum C to the CY 2015 PFS final rule with comment period. We note that the values for some codes with interim final values were addressed in the CY 2016 PFS proposed rule (see:
In CY 2015 we established the RUC-recommended work RVU for CPT code 20983 and made minor refinements to the RUC-recommended direct PE inputs.
For CY 2015, the CPT Editorial Panel deleted CPT code 21810 (Treatment of rib fracture requiring external fixation) and replaced it with CPT codes 21811, 21812, and 21813 to address internal fixation of rib fracture. As described in the CY 2015 PFS final rule with comment period, the RUC recommended that we value these procedures with 90-day global periods. We indicated that we believed it would be more appropriate to value these
In the CY 2015 PFS final rule with comment period, we considered whether certain pre-service clinical labor tasks would typically be performed given that these procedures are frequently furnished on an emergency basis. We reviewed other emergency procedures valued under the PFS to determine whether pre-service clinical labor activities were typically included in the PE worksheets and found that the recommendations for these procedures were inconsistent. Therefore, in the CY 2015 PFS final rule with comment period, we did not remove the time allocated for certain clinical labor activities, but sought public comment on this issue.
For CPT code 21813, we agree with the commenter that there is a lack of 0-day global codes with comparable intraservice times. We also agree with the commenter's suggestion that CPT codes 93654 and 93656 provide the best references available. These codes share an intraservice time of 240 minutes compared to the 210 minutes of intraservice time for CPT code 21813. However, we disagree with the commenter that CPT code 21813 is undervalued based on a comparison of these intraservice times. Applying the ratio between the 210 minutes for CPT code 21813 and the 240 minutes for the reference CPT code 93654 (0.875) to the work RVU of 20.00 for CPT code 93654, results in a work RVU of 17.50. This is similar to our valuation for CPT code 21813 of 17.61. We believe that this intraservice time ratio further supports our valuation of CPT code 21813, which maintains relativity with similar 0-day global codes. After consideration of comments received, we are finalizing the interim final work RVUs for CPT codes 21811, 21812, and 21813 for CY 2016.
In CY 2015, we established the RUC-recommended work RVUs as interim final for all of the codes in this family except CPT code 22511 because we did not agree with its RUC-recommended crosswalk. To value this code, we took the difference between the work RVUs for the predecessor codes for CPT codes 22510 and 22511, CPT codes 22520 (Percutaneous vertebroplasty (bone biopsy included when performed), one vertebral body, unilateral or bilateral injection; thoracic)) and 22521 (Percutaneous vertebroplasty (bone biopsy included when performed), one vertebral body, unilateral or bilateral injection; thoracic; lumbar)) and applied
Another commenter requested that CMS reconsider the RVUs for these codes. The commenter believed that, due to the bundling of these imaging codes for CY 2015, additional PE costs were added to the service. The commenter expressed concerns that practitioners might find it infeasible to furnish these services in the non-facility setting if payment continues to be based on the interim final values we adopted for CY 2015.
Additionally, several commenters alerted CMS to missing clinical labor times for “assist physician” for all of the codes in this family. Some commenters also stated that clinical labor time was missing for the post-operative visit in CPT codes 22510, 22511, 22513, and 22514.
We agree with the commenters that there were inconsistencies in the clinical labor times for these codes as entered in our direct PE database. We direct the reader to section II.B. of this final rule with comment period for a discussion of these clinical labor input inconsistencies.
Therefore, we are finalizing our CY 2015 work valuation for CPT codes 22510, 22511, 22512, 22513, 22514, and 22515.
In the CY 2015 PFS final rule with comment period, we maintained the CY 2014 work RVU for CPT code 22856, consistent with the RUC recommendation.
After consideration of comments received, we are finalizing the CY 2015 interim final work RVU for CY 2016 without modification, consistent with the RUC recommendation.
In the CY 2015 PFS final rule with comment period, we maintained the CY 2014 work RVU for CPT code 27279, consistent with the RUC recommendation.
For CY 2015, the CPT Editorial Panel added the word “implantable” to the descriptors for several codes in this family and created several new codes (CPT codes 33270, 33271, 33272, 33273, 93260, 93261, and 93644). We established as interim final the RUC-recommended work RVUs for all of the codes in this family except CPT code 93644. The RUC-recommended times for CPT code 93644 included an intraservice time of 20 minutes and a total time of 84 minutes. We disagreed with the RUC-recommended direct crosswalk for CPT code 93644 because the code that serves as the source for the crosswalk had greater intraservice time (29 minutes) and total time (115 minutes). We believed that a crosswalk to CPT code 32551 was more accurate since the intraservice time for CPT code 32551 was 20 minutes, total time was 83 minutes, and intensity was comparable. Therefore, we established a CY 2015 interim final work RVU of 3.29 for CPT code 93644.
For CY 2015, we examined several FEVAR codes. CPT code 34839 was created to report the planning that occurs prior to the work included in the global period for a FEVAR. We accepted the RUC recommendation for all of the codes in this family except CPT code 34839. We believed the planning that occurs prior to the work was included in the global period for FEVAR and should be bundled with the underlying service. We did not believe bundling was inappropriate in this case. Accordingly, we assigned a PFS procedure status indicator of B (Bundled Code) to CPT code 34839.
For CY 2015, we examined several endovenous ablation therapy codes and used the RUC-recommended work RVUs to establish interim final work RVUs. We made minor refinements to the RUC recommended direct PE inputs to establish interim final direct PE inputs for this family of codes.
With regards to the commenter's feedback regarding the supplies allocated to CPT codes 36475 and 36478, we reviewed the direct PE inputs as recommended by the RUC and agree that they represent the typical inputs used in furnishing these procedures.
For CY 2015, we proposed the RUC-recommended work RVU of 9.13 for CPT code 47383 and made several refinements to the recommended clinical labor and equipment times.
After consideration of comments received, we are finalizing the CY 2015 interim final work RVU and direct PE inputs as proposed for CPT code 47383.
In CY 2015, we established the RUC-recommended work RVUs and direct PE inputs as interim final for CPT codes 52441 and 52442.
In the CY 2015 final rule with comment period, we established as interim final the RUC-recommended work RVUs and direct PE inputs for these codes.
In the CY 2015 PFS final rule with comment period, we accepted the RUC-recommended work RVU for these nine codes on an interim final basis. We made refinements to the clinical labor and equipment time for the non-radiological codes in the family.
After consideration of comments received, we are finalizing these codes as proposed, with the change in clinical staff type detailed above.
In the CY 2015 PFS final rule with comment period, we used the RUC-recommended work RVU to establish an interim final work RVU of 0.85 for CPT code 70486 (Computed tomography, maxillofacial area; without contrast material). The RUC arrived at this value by crosswalking CPT code 70486 to CPT code 70460 (Computed tomography, head or brain; with contrast material(s)), which is the equivalent code in the head and brain CT family. To maintain rank order within and across CT families, we crosswalked the work RVU for CPT code 70487 (Computed tomography, maxillofacial area; with contrast material(s)) from CPT code 70460 (Computed tomography, head or brain; with contrast material(s)). We also crosswalked the work RVU for CPT code 70488 (Computed tomography, maxillofacial area; without contrast material, followed by contrast material(s) and further sections) from CPT code 70470 (Computed tomography, head or brain; without contrast material, followed by contrast material(s) and further sections). Therefore, we established interim final work RVUs of 1.13 for CPT code 70487 and 1.27 for CPT code 70488.
For CY 2015, we used the RUC-recommended work RVUs and PE inputs to establish interim final values for six codes in the abdominal ultrasound family.
For CY 2015, the CPT Editorial Panel replaced CPT code 76645 (Ultrasound, breast(s) (unilateral or bilateral), real time with image documentation) with two codes: CPT codes 76641 (Ultrasound, breast, unilateral, real time with image documentation, including axilla when performed; complete) and 76642 (Ultrasound, breast, unilateral, real time with image documentation, including axilla when performed; limited). We used the RUC-recommended work RVUs of 0.73 and 0.68 to establish interim final work RVUs for CPT codes 76641 and 76642, respectively.
In the CY 2015 PFS final rule with comment period, we used the RUC-recommended work and direct PE input recommendations without refinement to establish interim final values for these codes.
In the CY 2015 PFS final rule with comment period, we assigned a PFS indicator of “I” to CPT codes 77061 and 77062 on an interim basis while awaiting recommendations from the RUC for all mammography services. Since CPT code 77063 is an add-on code and did not have an equivalent CY 2014 code, we believed it was appropriate to value it on an interim final basis in advance of receiving the RUC recommendations for other mammography services. We assigned it a CY 2015 interim final work RVU of 0.60 as recommended by the RUC. We also removed the equipment time for the PACS Workstation proxy from all three codes, and removed the time for task “Federally Mandated MQSA Activities Allocated To Each Mammogram” from CPT code 77063.
After consideration of comments received, we are finalizing the PFS indicator “I” for CPT codes 77061 and 77062, the interim final work RVU of 0.60 for CPT code 77063, and the interim final direct PE inputs for all three codes.
To establish interim final RVUs for these codes, we used the RUC-recommend work and direct PE inputs for these codes with PE refinements, with the refinement of consideration of the “record and verify system” as an indirect PE.
For CY 2015, the CPT Editorial Panel replaced six CPT codes (77305, 77310, 77315, 77326, 77327, and 77328) with five new CPT codes to bundle basic dosimetry calculation(s) with teletherapy and brachytherapy isodose planning. We established interim final work RVUs based on the RUC-recommended work RVUs for CY 2015 for all of the codes in this family except CPT code 77316. Instead of using the RUC-recommended work RVU for CPT code 77316, a simple isodose planning code, we developed an interim final work RVU based on a direct crosswalk from the corresponding simple isodose planning code in the same family, CPT code 77306. Therefore, for CY 2015 we established an interim final work RVU of 1.40 for CPT code 77316. This approach is similar to the crosswalk the RUC used to develop the recommended work RVUs for CPT code 77318.
We received PE-only recommendations for CPT code 88348 following the October 2013 RUC meeting. After reviewing these recommendations, we used the RUC recommendations without refinement to establish interim final values for CY 2015.
In reviewing the RUC recommendations for CPT code 88380, the work vignette indicated that the microdissection is performed by the pathologist. However, the PE worksheet also included several subtasks of “Microdissect each stained slide sequentially while reviewing H and E stained slide” that are performed by the cytotechnologist. Since we did not believe that both the pathologist and the cytotechnologist were completing these tasks, we did not allocate clinical labor time for the specific tasks we believe are completed by the pathologist. Table 31 of the CY 2015 final rule (FR 79 67697-67698) detailed our refinements to these clinical labor tasks. We accepted the RUC-recommended work RVU of 1.14 for CPT code 88380 and 0.53 for CPT code 88381 on an interim final basis for CY 2015.
We established a work RVU of 0.10 for CPT code 92543 as interim final for CY 2015. Several commenters disagreed with our interim final values. However, the CPT Editorial Panel deleted CPT code 92543 for CY 2016; we refer readers to section II.H. of this final rule with comment period, where we discuss CPT codes 9254A and 9254B, used to report related services.
As detailed in the CY 2015 PFS final rule with comment period, we maintained the CY 2014 work RVUs for CPT codes 93320, 93321 and 93325, based upon the RUC-recommended work RVUs. In establishing interim final direct PE inputs for CY 2015, we refined the RUC's recommendations for CPT codes 93320, 93321 and 93325 by removing the minutes associated with equipment item ED021 (computer, desktop, w/monitor) since a computer is included in the other equipment inputs associated with codes.
For CY 2015, we used the RUC-recommended work RVU of 2.40 to establish an interim final value for CPT code 93318 and 4.66 for CPT code 93355. Based on a crosswalk from CPT code 75573, we assigned CPT code 93312 a CY 2015 interim final work RVU of 2.55. We noted that based on the CPT descriptor for CPT code 93315, we believed that the appropriate work for this service was reflected in the combined work of CPT codes 93316 and 93317, resulting in a CY 2015 interim final work RVU of 2.94. For CPT codes 93313, 93314, 93316 and 93317, we assigned CY 2015 interim final work RVUs that corresponded to the 25th percentile survey result. Each of these codes had a significant reduction in intraservice time since the last valuation. We noted that we believe the 25th percentile survey values better describe the work and time involved in these procedures than the RUC recommendations, and that it helps maintain appropriate relativity in the family. Additionally, we refined the preservice and intraservice times for CPT codes 93314 and 93317 to 10 and 20 minutes, respectively, to maintain relativity among the interim final work RVUs and times.
For CY 2014, we maintained the CY 2013 RVUs for CPT codes 93880 and 93882. As we stated in the CY 2014 PFS final rule with comment period (78 FR 74342), we were concerned that the RUC-recommended work RVUs for CPT codes 93880 and 93882, as well as our final work RVUs for CPT codes 93925 (Duplex scan of lower extremity arteries or arterial bypass grafts; complete bilateral study) and 93926 (Duplex scan of lower extremity arteries or arterial bypass grafts; unilateral or limited study) did not maintain the appropriate relativity within the family. We referred the entire family to the RUC to assess relativity among the codes and to recommend appropriate work RVUs. We also requested that the RUC consider CPT codes 93886 (Transcranial Doppler study of the intracranial arteries; complete study) and 93888 (Transcranial Doppler study of the intracranial arteries; limited study) in conjunction with the duplex scan codes to assess the relativity between and among the codes. In the CY 2015 PFS final rule with comment period, we used the RUC-recommended work RVUs for CPT codes 93880, 93882, 93925, and 93926 while making several standard PE refinements consistent with standard inputs for digital imaging and our policies for not allocating quality assurance documentation to individual services as a direct expense.
In the CY 2014 PFS final rule with comment period (78 FR 74342), we requested that the RUC assess the relativity among the entire family of duplex scans codes and recommend appropriate work RVUs. We also requested that the RUC consider CPT codes 93886 (Transcranial Doppler study of the intracranial arteries; complete study) and 93888 (Transcranial Doppler study of the intracranial arteries; limited study) in conjunction with the duplex scan codes to assess the relativity between and among those codes. For CY 2015, we established the RUC-recommended work RVUs as interim final for all of the codes in the family except CPT codes 93886, 93888, 93926, 93975, 93976, 93977, 93978, and 93979. For several codes in this family with 10 minutes of intraservice time, the RUC recommended 0.50 work RVUs. CPT code 93926 (Duplex scan of lower extremity arteries or arterial bypass grafts; unilateral or limited study), CPT code 93979 (Duplex scan of aorta, inferior vena cava, iliac vasculature, or bypass grafts; unilateral or limited study,) and CPT code 93888 all have 10 minutes intraservice time and we assigned them an interim final work RVU of 0.50. For several codes in this family with 15 minutes of intraservice time, the RUC recommended work RVUs that corresponded to the 25th percentile survey result. We found this to appropriately reflect the work involved and applied the same logic to other codes with 15 minutes of intraservice time. We established the work RVUs for CPT codes 93975, 93976, and 93978 that corresponded to the 25th percentile survey result, which all have 15 minutes of intraservice time. Therefore, for CY 2015 we established the following interim final work RVUs: 1.16 for CPT code 93975; 0.80 for CPT code 93976; 0.80 for CPT code 93978; and 0.50 for CPT code 93979.
After considering these comments, we are finalizing the CY 2015 interim final values as established.
For CY 2015, the CPT Editorial Panel created new CPT code 93895 to describe the work of using carotid ultrasound to measure atherosclerosis and quantify the intima-media thickness. After review of this code, we determined that
Prior to CY 2013, CPT codes 97605 and 97606 were both used to report negative pressure wound therapy, which were typically reported in conjunction with durable medical equipment that was separately payable. In the CY 2013 final rule with comment period, we created two HCPCS codes to provide a payment mechanism for negative pressure wound therapy services furnished to beneficiaries using equipment that is not paid for as durable medical equipment: G0456 (Negative pressure wound therapy, (for example, vacuum assisted drainage collection) using a mechanically powered device, not durable medical equipment, including provision of cartridge and dressing(s), topical application(s), wound assessment, and instructions for ongoing care, per session; total wound(s) surface area less than or equal to 50 square centimeters) and G0457 (Negative pressure wound therapy, (for example, vacuum assisted drainage collection) using a mechanically-powered device, not durable medical equipment, including provision of cartridge and dressing(s), topical application(s), wound assessment, and instructions for ongoing care, per session; total wound(s) surface area greater than 50 sq. cm).
For CY 2015, the CPT Editorial Panel created CPT codes 97607 and 97608 to describe negative pressure wound therapy with the use of a disposable system. In addition, CPT codes 97605 and 97606 were revised to specify the use of durable medical equipment. Based upon the revised coding scheme for negative pressure wound therapy, we deleted the G-codes. We contractor-priced CPT codes 97607 and 97608 for CY 2015 and the CPT codes were designated “Sometimes Therapy” on our Therapy Code List, consistent with the G-codes.
For CY 2015, we received RUC recommendations for CPT code 99183 that included significant increases to the direct PE inputs, which assumed a treatment time of 120 minutes. Prior to CY 2015, CPT code 99183 was used to report both the professional attendance and supervision, and the costs associated with treatment delivery were included in nonfacility direct PE inputs for the code. We created HCPCS code G0277 to be used to report the treatment delivery separately, consistent with the OPPS coding mechanism, to allow the use of the same coding structure across settings. In establishing interim final direct PE inputs for HCPCS code G0277, we used the RUC-recommended direct PE inputs for CPT code 99183 and adjusted them to align with the 30-minute treatment interval. We observed that the quantity of oxygen increased significantly relative to the previous value. To better understand this change, we reviewed the instruction manual for the most commonly used HBOT chamber, which provided guidance regarding the quantity of oxygen used. Based on our review, we determined that 12,000, rather than 47,000, was the typical number of units. Therefore, in
For recommendations regarding any new or revised codes received after the February 10, 2015 deadline, including updated recommendations for codes included in the CY 2016 proposed rule, we are establishing interim final values in this final rule with comment period, consistent with previous practice.
We note that in the CY 2016 PFS proposed rule, we inadvertently published work RVUs for several CPT codes in Addendum B that were not explicitly discussed in the text. Those CPT codes include 88341, 88364, and 88369; these codes had previously been proposed on an interim basis in the CY 2015 PFS final rule with comment period. While these codes were not discussed in the proposed rule because our files displayed incorrect work RVUs for these codes due to the data error, some commenters raised questions about these codes' displayed work RVUs. To allow public comment on the correct valuations, we are therefore establishing interim final work RVUs for these codes for CY 2016 and requesting comment on those interim final values in this final rule. We will respond to comments on these values in CY 2017 rulemaking.
The RUC recommended a work RVU of 10.03 for CPT code 26356. Although the RUC-recommended work RVU represents a reduction from the current work RVU of 10.62, we believe that the decrease in resource costs as reflected in the survey data (specifically in the intraservice time, the total time, and the change in the office visits) are not adequately reflected in the recommended work RVU. The intraservice time decreased from 90 minutes to 60 minutes (33 percent) while the RUC-recommended work RVU decreased from 10.62 to 10.03, a reduction of less than 6 percent. The total time and the number of office visits were also reduced by about 25 percent in each case, which is significantly greater than the 6 percent decrease in the recommended work RVU. We examined CPT code 25607 (Open treatment of distal radial extra-articular fracture), which has an intraservice time of 60 minutes and a total time of 275 minutes, which closely approximates the 60 minutes and 277 minutes reflected in the survey results for CPT code 26356. We also believe that these procedures have similar intensity based on their clinical profiles. We are therefore establishing an interim final work RVU of 9.56 for CPT code 26356 after considering both its similarity in time to CPT code 25607 and the reduction in time relative to the current times included for this procedure.
The RUC recommended a work RVU of 11.50 for CPT code 26357. We refined the RUC-recommended work RVU, employing a similar methodology to the one we used in valuing CPT code 26356. While we agree that the value of this code should increase from its current work RVU of 8.77, we believe that the RUC-recommended work RVU of 11.50 does not accurately reflect the change in time for this code. The RUC-recommended work RVU is an increase of 31 percent from the current work RVU of the code, while the total time increases from 256 minutes to 302 minutes, an increase of only 18 percent. The intraservice time for CPT code 26357 decreases from 89 minutes to 85 minutes, which does not suggest that a significant increase to the work RVU is accurate. Therefore, we considered CPT code 27654, (Repair, secondary, Achilles tendon, with or without graft) which has a similar intraservice time of 90 minutes, a total time of 283 minutes, a similar intensity, and a work RVU of 10.53. We are establishing an interim final work RVU of 10.53 for CPT code 26357 based on this direct crosswalk from CPT code 27654, as we believe this work RVU better reflects the changes in time for this procedure.
The RUC recommended a work RVU of 13.10 for CPT code 26358. We do not believe that this value accurately reflects the change in the intraservice time and the total time for this code. The RUC-recommended work RVU is an increase of 40 percent over the current work RVU of 9.36, while the total time only increases from 286 minutes to 327 minutes, an increase of 14 percent, and the intraservice time only increases from 108 minutes to 110 minutes, an increase of 2 percent. We do not believe that the RUC-recommended work RVU of 13.10, which corresponds to the survey median result, accurately reflects the increase in time. In the interest of preserving relativity among the codes in this family, we are maintaining the RUC-recommended increment of 1.6 work RVUs between CPT codes 26257 and 26358. Therefore, we are establishing an interim final work RVU of 12.13 for CPT code 26358, based on an increase of 1.6 work RVUs relative to CPT code 26357.
In the proposed rule, we proposed CPT code 41530 as potentially misvalued based on a public nomination. The nominator stated that CPT code 41530 is misvalued because there have been changes in the direct PE inputs used in furnishing the service. In the CY 2015 PFS Final Rule (79 FR 67575), we noted that the RUC submitted PE recommendations and stated that, under our usual process, we value work and PE at the same time and would expect to receive RUC recommendations for both before we revalued this service. Subsequently, the RUC submitted recommendations for both. The RUC recommended a work RVU of 3.50 for CPT code 41530, which we are establishing as the interim final work RVU for the code. To address the concerns raised by CMS in the CY 2015 PFS Final Rule, the PE Subcommittee reviewed minor revisions submitted by the specialty society. The RUC determined that this service should not be performed in the office setting and recommended removing the nonfacility direct PE inputs from the direct PE input database. However, 2014 Medicare claims data indicate that this service is furnished in the office setting 95 percent of the time, and that this service is frequently furnished multiple times to a beneficiary. Due to this discrepancy, we are seeking comment about the typical site of service and whether changes to the coding are needed to clarify this issue. For CY 2016, we have established interim final nonfacility direct PE inputs based on the current direct PE inputs for the code.
The CPT Editorial Panel established CPT code 43210 to describe trans-oral esophagogastric fundoplasty. The RUC recommended a work RVU of 9.00 for CPT code 43210. We were unable to identify CPT codes with an intraservice time of 60 minutes that have an RVU of 9.00 or greater. We were also unable to identify esophagogastroduodenoscopy (EGD) codes with an RVU of 9.00 or greater. We compared this code to CPT code 43240 (Drainage of cyst of the esophagus, stomach, and/or upper small bowel using an endoscope), which has similar total work time and a work RVU of 7.25. We believe a work RVU of 7.75, which corresponds to the 25th percentile survey result, more accurately reflects the resources used in furnishing the service. Therefore, for CY 2016 we are establishing an interim final work RVU of 7.75 for CPT code
Several percutaneous biliary catheter and related image guidance procedures were identified through a misvalued code screen of codes reported together more than 75 percent of the time. For CY 2016, the CPT Editorial Panel deleted six existing biliary catheter codes (47500, 47505, 47510, 47511, 47525, and 47530) and five related image-guidance codes (74305, 74320, 74327, 75980, and 75982) and created 14 new codes, CPT codes 47531 through 47544, to describe percutaneous biliary procedures and to bundle inherent imaging services. We are establishing the RUC recommended work RVUs as interim final for CY 2016 for all of the percutaneous biliary procedures with the exception of CPT codes 47540, 47542, 47543, and 47544.
The RUC recommended a work RVU of 12.00 for CPT code 47540 (Placement of stent(s) into a bile duct, percutaneous, including diagnostic cholangiography, imaging guidance (
The RUC recommended a work RVU of 3.28 for 47542. We believe that a work RVU of 2.50 more accurately reflects the work associated with this service. In valuing CPT code 47542, the RUC used a direct crosswalk from CPT code 37185 (Primary percutaneous transluminal mechanical thrombectomy, noncoronary, arterial or arterial bypass graft, including fluoroscopic guidance and intraprocedural pharmacological thrombolytic injection(s); second and all subsequent vessel(s) within the same vascular family), which has an intraservice time of 40 minutes. We believe that a more appropriate direct crosswalk is CPT code 15116 (Epidermal autograft, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, or multiple digits) because it shares an intraservice time of 35 minutes. Therefore, we are establishing an interim final work RVU of 2.50 for CPT code 47542 for CY 2016.
The RUC recommended work RVUs of 3.51 and 4.74 for CPT codes 47543 and 47544, respectively. We do not believe the RUC-recommended work RVUs accurately reflect the work involved in furnishing these procedures. To value the work described in these procedures, we used the intraservice time ratio to identify values. We used CPT code 47542 as the base code, and calculated an intraservice time ratio by dividing the intraservice time of CPT code 47543 (43 minutes) by the intraservice time of CPT code 47542 (35 minutes); we then applied that ratio (1.228) to the interim final work RVU of 2.50 for CPT code 47542. This resulted in a work RVU of 3.07 for CPT code 47543. We used the same intraservice time ratio approach to calculate the interim final work RVU for CPT code 47544. We divided the intraservice time for CPT code 47544 (60 minutes) by the intraservice time for CPT code 47542 (35 minutes), and then applied that ratio (1.714) to the interim final work RVU of 2.50 for CPT code 47542, which results in a work RVU of 4.29. We are establishing an interim final work RVU of 3.07 for CPT code 47543 and 4.29 for CPT code 47544 for CY 2016.
We also refined a series of RUC-recommended direct PE inputs. We are replacing supply item “catheter, balloon, PTA” (SD152) with supply item “catheter, balloon ureteral (Dowd)” (SD150) on an interim final basis. We believe that the use of this balloon catheter, which is specifically designed for catheter and image guidance procedures, would be more typical than the use of a PTA balloon catheter.
We are also refining the RUC-recommended malpractice crosswalks for most of the codes in this family to align with the specialty mix that furnishes these procedures; we believe that these better reflect the malpractice risk associated with these procedures. We are establishing as interim final the malpractice crosswalks listed in Table 20.
The CPT Editorial Panel created CPT code 49185 (Sclerotherapy of a fluid collection (eg, lymphocele, cyst, or seroma), percutaneous, including contrast injection(s), sclerosant injection(s)) to describe percutaneous image-guided sclerotherapy of fluid collections. These services were previously reported using CPT code 20500 (Injection of sinus tract; therapeutic (separate procedure)). To develop recommended work RVUs for CPT code 49185, the RUC used a direct crosswalk from reference code 31622 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; diagnostic, with cell washing, when performed), which has an intraservice time of 30 minutes and work RVU of 2.78. Although CPT code 31622 is clinically similar to CPT code 49185, we do not believe CPT code 31622 has a similar intensity to CPT code 49185. To establish the CY 2016 interim final work RVU for CPT code 49185, we instead used a direct crosswalk from CPT code 62305 (injection, radiologic supervision and interpretation), which shares an intraservice time of 30 minutes and is clinically similar, as it also includes an injection, radiologic supervision, and interpretation. We are establishing an interim final work RVU of 2.35 for CPT code 49185.
The RUC recommended including 300 ml of supply item “sclerosing solution injection” (SHO62) for CPT code 49185, which is priced at $2.29 per millimeter. The predecessor code included supply item “obupivacaine (0.25% inj (Marcaine)” (SH021)), which is priced at 25.4 cents per millimeter. We are concerned that supply item SH062 may not be used in the typical case for this procedure. We note that other CPT codes that include supply item SH062 include between 1 and 10 ml. We request that stakeholders review this supply item and provide invoices to improve the accuracy of pricing. We are also requesting information regarding the price of supply item SH062 given the significant increase in volume used in this procedure relative to other procedures.
We are establishing as interim final the RUC-recommended work RVUs for all three codes.
For CPT code 50706, we are replacing the RUC-recommended supply item “catheter, balloon, PTA” (SD152) with a “catheter, balloon, ureteral-GI (strictures)” (SD019) in the nonfacility setting. We believe that the latter balloon catheter, which is specifically designed for ureteral procedures, would be more typically used for these procedures than a PTA balloon catheter. We welcome further comment regarding the appropriate catheter supply for CPT code 50706, including any objective data regarding which supply item is more typically used for these procedures.
The RUC recommended the inclusion of “room, angiography” (EL011) for this family of codes. As discussed in section II.H.d.8. of this final rule with comment period, we do not believe that an angiography room would be used in the typical case for these procedures, and are therefore replacing the recommended equipment item “room, angiography” with equipment item “room, radiographic-fluoroscopic” (EL014) for all three codes on an interim final basis. Since the predecessor procedure codes generally did not include an angiography room and we do not have a reason to believe that the procedure would have shifted to an angiography room in the course of this coding change, we do not believe that the use of an angiography room would be typical for these procedures.
We are refining the RUC-recommended MP crosswalks for the codes in this family, as we do not believe that the source codes, which are cardiovascular services, are representative of the specialty mix that would typically furnish the genitourinary catheter procedures. Instead, we are establishing interim final MP crosswalks from codes with a specialty mix similar to the expected mix of those furnishing the services described by the new codes. We are therefore establishing the following MP crosswalks as interim final for 2016: CPT code 50606 from 50955, CPT code 50705 from 50393, and CPT code 50706 from 50395.
For CPT code 55866, the RUC recommended a work RVU of 26.80. This is significantly higher than the work RVU for CPT code 55840 (Prostatectomy, retropubic radical, with or without nerve sparing), the key reference code selected by the specialty society's survey participants. This reference code shares an intraservice time of 180 minutes as well as similar total time (442 minutes for CPT code 55866, relative to 448 minutes for CPT code 55840). We believe that these codes are medically similar and would require similar work resources, and CPT code 55840 was recently reviewed in CY 2014. However, CPT code 55840 has a work RVU of 21.36 while the RUC-recommended work RVU for CPT code 55866 is 26.80. We do not believe that difference in intensity between CPT code 55840 and CPT code 55866 is significant enough to warrant the difference of 5.50 work RVUs.
In addition to CPT code 55840, we also examined CPT code 55845 as another medically similar and recently RUC-reviewed procedure. CPT code 55845 is an open procedure that involves a lymphadenectomy, while CPT code 55866 is a laparoscopic procedure without a lymphadenectomy. In the CY 2014 PFS Final Rule with Comment Period, CMS requested review of CPT codes 55845 and 55866 as potentially misvalued because the work RVU for the laparoscopic procedure (55866) was higher than for the open procedure (55845). In general, we do not believe that a laparoscopic procedure would require greater resources than the open procedure. However, the RUC-recommended work RVU for CPT code 55866 is 26.80, which is still higher than the work RVU of 25.18 for CPT code 55845. We do not believe that the rank order of these work RVUs accurately reflects the relative resources
The CPT Editorial Panel created three new codes to describe percutaneous intracranial endovascular intervention procedures and to bundle inherent imaging services. These services were previously reported using CPT codes 61640-61642 (Balloon dilatation of intracranial vasospasm). In establishing interim final values for these services, we are refining the RUC-recommended work RVUs for all of the codes in this family. The RUC recommended a work RVU of 17.00 for CPT code 61645 (Percutaneous arterial transluminal mechanical thrombectomy and/or infusion for thrombolysis, intracranial), referencing CPT code 37231 (Revascularization, endovascular, open or percutaneous, tibial, peroneal artery, unilateral, initial vessel; with transluminal stent placement(s) and atherectomy, includes angioplasty within the same vessel, when performed) and CPT code 37182 (Insertion of transvenous intrahepatic portosystemic shunt(s) (TIPS)). We believe that CPT code 37231 is an appropriate direct crosswalk because the overall work is similar to that of CPT code 61645. Therefore, we are establishing an interim final work RVU of 15.00 for CPT code 61645. Additionally, in reviewing the work time for CPT code 61645, we noted that it includes postservice work time associated with postoperative visit CPT code 99233 (level 3 subsequent hospital care, per day). As we stated in the CY 2010 PFS proposed rule (74 FR 33557) and affirmed in the CY 2011 PFS proposed rule (75 FR 40072), we believe that for the typical patient, these services would be considered hospital outpatient services, not inpatient services. We believe that we should treat the valuation of the work time in the same manner as discussed previously, that is, by valuing the intraservice time of the hospital observation care service in the immediate post service time of the 23-hour stay code being valued. Therefore, we refined the work time for CPT code 61645 by removing the 55 minutes of work time associated with CPT code 99233 (subsequent hospital care) and instead included the 30 minutes of intraservice time from CPT code 99233 in the immediate postservice time of the procedure. This reduces the total work time from 266 minutes to 241 minutes and increases the immediate post service time from 53 minutes to 83 minutes.
The RUC recommended a work RVU of 12.00 for CPT code 61650 (Endovascular intracranial prolonged administration of pharmacologic agent(s) other than for thrombolysis, arterial, including catheter placement, diagnostic angiography, and imaging guidance; initial vascular territory). We believe the RUC-recommended work RVU overestimates the work involved in furnishing this procedure. To establish an interim final work RVU for CPT code 61650, we are using a direct crosswalk from CPT code 37221 (Revascularization, endovascular, open or percutaneous, iliac artery, unilateral, initial vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed), which shares an intraservice time of 90 minutes with similar intensity. Therefore, we are establishing an interim final work RVU of 10.00 for CPT code 61650.
For CY 2016, we are also establishing interim final work time by removing the 55 minutes total time associated with CPT code 99233 (subsequent hospital care) as recommended by the RUC and instead allocating the intraservice time of 30 minutes to the immediate postservice time of the procedure. This reduces the total time from 231 minutes to 206 minutes and the immediate post service time from 45 minutes to 75 minutes.
The RUC recommended a work RVU of 5.50 for CPT code 61651 (Endovascular intracranial prolonged administration of pharmacologic agent(s) other than for thrombolysis, arterial, including catheter placement, diagnostic angiography, and imaging guidance; each additional vascular territory (List separately in addition to the primary code)). We believe that a direct crosswalk from CPT code 37223 (Revascularization, endovascular, open or percutaneous, iliac artery, each additional ipsilateral iliac vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, when performed (List separately in addition to code for primary procedure)), more accurately reflects the work described by CPT code 61651. We believe that CPT code 37223 is an appropriate crosswalk because it shares intraservice time, has similar intensity, and is clinically similar to CPT code 61651. Therefore, we are establishing an interim final work RVU of 4.25 for CPT code 61651.
We have also refined the RUC-recommended malpractice crosswalks for this family of codes to align with the specialty mix that furnish the services in this family. We are establishing the following interim final malpractice crosswalks in place of the RUC-recommended malpractice crosswalks: CPT code 37218 to CPT code 61645; and CPT code 37202 to CPT codes 61650 and 61651.
In CY 2015, the CPT Editorial Panel created three new codes to describe paravertebral block injections at single or multiple levels, as well as for continuous infusion for the administration of local anesthetic for post-operative pain control and thoracic and abdominal wall analgesia. We are establishing as interim final the RUC-recommended work RVUs for CPT codes 64461 and 64462. For CPT code 64463 (Paravertebral block (PVB) (paraspinous block), thoracic continuous infusion by catheter (includes imaging guidance, when performed) the RUC recommended a work RVU of 1.90, which corresponds to the 25th percentile survey result. After considering similar injection codes with identical intra-service time and longer total times, we believe the RUC recommendation for CPT code 64463 overestimates the work involved in furnishing the service. We believe a direct crosswalk from three other injection codes which all have a work RVU of 1.81 (CPT codes 64461, 64446, and 64449) more accurately reflects the work involved in furnishing this service. Therefore, for CY 2016, we are establishing an interim final work RVU of 1.81 for CPT code 64463.
These services were identified through the New Technology/New Services List in February 2010. For CY 2015, the RUC's Relativity Assessment Workgroup noted there may have been diffusion in technology for these services and requested that the specialty society survey these codes for work and direct PE inputs. While we are establishing the RUC-recommended work RVUs for CPT code 65778 and 65779 as interim final, we removed the work time associated with the half-day discharge management from CPT code 65779.
The RUC identified 65780 as potentially misvalued through a misvalued code screen of 90-day global services (based on 2012 Medicare utilization data) reported at least 1,000 times per year that included more than 6 office visits. The RUC recommended a direct work RVU crosswalk from CPT code 27829 (Open treatment of distal tibiofibular joint (syndesmosis) disruption, includes internal fixation, when performed). After examining comparable codes, we believe the RUC-recommended work RVU of 8.80 for CPT code 65780 overstates the work involved in the procedures given the reduction in intraservice and total times. We believe that the ratio of the total times (230/316) applied to the work RVU (10.73) more accurately reflects the work involved in this procedure. Therefore, we are establishing an interim final work RVU of 7.81 to CPT code 65780.
The RUC identified CPT code 65855 (Trabeculoplasty by laser surgery, 1 or more sessions (defined treatment series)) as potentially misvalued through the review of 10-day global services with more than 1.5 postoperative visits. The RUC noted that the code was changed from a 90-day to a 10-day global period when it was last valued in 2000. However, the descriptor was not updated to reflect that change. CPT code 65855 describes multiple laser applications to the trabecular meshwork through a contact lens to reduce intraocular pressure. The current practice is to perform only one treatment session of the laser for glaucoma during a 10-day period and then wait for the effect on the intraocular pressure. The descriptor for CPT code 65855 has been revised and removes the language “1 or more sessions” to clarify this change in practice.
The RUC recommended a work RVU of 3.00. While the RUC-recommended value represents a reduction from the CY 2015 work RVU of 3.99, we believe that significant reductions in the intraservice time, the total time, and the change in the office visits represent a more significant change in the work resources involved in furnishing the typical service. The intraservice and total times were decreased by approximately 33 percent while the elimination of two post-operative visits (CPT code 99212) alone would reduce the overall work RVU by at least 24 percent under the reverse BBM. However, the recommended work RVU only represents a 25 percent reduction relative to the previous value. To develop an interim final work RVU for this service, we calculated an intraservice time ratio between the CY 2015 intraservice time, 15 minutes, and the RUC-recommended intraservice time, 10 minutes, and applied this ratio to the current work RVU of 3.99 to arrive at a work RVU of 2.66 for CPT code 65855. Therefore, for CY 2016, we are establishing an interim final work RVU of 2.66 for CPT code 65855.
The RUC identified CPT codes 66170 and 66172 as potentially misvalued through a 90-day global post-operative visits screen (services reported at least 1,000 times per year that included more than 6 office visits). We believe the RUC-recommended work RVU of 13.94 for CPT code 66170 (fistulization of sclera for glaucoma; trabeculectomy ab externo in absence of previous surgery) does not accurately account for the reductions in time. Specifically, the survey results indicated reductions of 25 percent in intraservice time and 28 percent in total time. These reductions suggest that the RUC-recommended work RVU for CPT code 66170 overstates the work involved in furnishing the service, since the recommended value only represents a reduction of approximately seven percent. We believe that applying the intraservice time ratio, as described above, to the current work RVU results in a more appropriate work RVU. Therefore, for CY 2016, we are establishing an interim final work RVU of 11.27 for CPT code 66170.
For CPT code 66172 (fistulization of sclera for glaucoma; trabeculectomy ab externo with scarring from previous ocular surgery or trauma (includes injection of antifibrotic agents)), the RUC recommended a work RVU of 14.81. After comparing the RUC-recommended work RVUs for this code to the work RVUs of similar codes (for example, CPT code 44900 (Incision and drainage of appendiceal abscess, open) and CPT code 59100 (Hysterotomy, abdominal (eg, for hydatidiform mole, abortion)), we believe the RUC-recommended work RVU of 14.81 overstates the work involved in this procedure. For the same reasons and following the same valuation methodology utilized above, we applied the intraservice time ratio between the CY 2015 intraservice time and the survey intraservice time, 60/90, to the CY 2015 work RVU of 18.86. This results in a work RVU of 12.57 for CPT code 66172. Therefore, for CY 2016, we are establishing an interim final work RVU of 12.57 for CPT code 66172.
CPT codes 67107, 67108, 67110 and 67113 were identified as potentially misvalued through the 90-day global post-operative visit screen (either directly or indirectly as being part of the same family). The RUC recommended a work RVU of 16.00 for CPT code 67107, which corresponds to the 25th percentile survey result. While the RUC recommendation represents a 5 percent reduction from the current work RVU of 16.71, we believe the RUC recommendation still overvalues the service given the 15 percent reduction in intraservice time and 25 percent reduction in total time. Using the methodology previously described, we used the intraservice time ratio to arrive at an interim final work RVU of 14.06. We believe this value more accurately reflects the work involved in this service and is comparable to other codes that have the same global period and similar intraservice time and total time. For CY 2016, we are establishing an interim final work RVU of 14.06 for CPT code 67107.
For CPT code 67108, the RUC recommended a work RVU of 17.13 based on the 25th percentile survey result, which reflects a 25 percent reduction from the current work RVU. The survey results reflect a 53 percent reduction in intraservice time and a 42 percent reduction in total time. We believe the RUC-recommended work RVU overstates the work, given the significant reductions in intraservice time and total time and does not maintain relativity among the codes in this family. To determine the appropriate value for this code and maintain relativity within the family, we preserved the 1.13 increment recommended by the RUC, between this code and CPT code 67107, and applied that increment to the interim final work RVU of 14.06 for CPT code 67107. Therefore, we are establishing an interim final work RVU of 15.19 for CPT code 67108.
For CPT code 67110, the RUC recommended maintaining the current work RVU of 10.25. To maintain appropriate relativity with the work RVUs established for the other services within this family, we are using the RUC-recommended -5.75 RVU differential between CPT code 67107 and CPT code 67110 to establish the CY 2016 interim final work RVU of 8.31 for CPT code 67110.
(15) Fetal MRI (CPT Codes 74712 and 74713)
For CY 2016, the CPT Editorial Panel established two new codes to describe fetal MRI services, which were previously billed using CPT codes 72195 (Magnetic resonance (eg, proton) imaging, pelvis; without contrast material(s)), 72196 (with contrast material(s)) and 72197 (without contrast material(s), followed by contrast material(s) and further sequences). For CY 2016, we are establishing as interim final the RUC-recommended work RVU of 3.00 for 74712. The RUC recommended a work RVU of 1.85 for add-on code 74713, with an intra-service time of 35 minutes. Based on the ratio of work to time for these codes, we believe that the add-on code should approximate the relationship between work and time in the base code; therefore, we are establishing as interim final a work RVU of 1.78 for CPT code 74713, which corresponds to the 25th percentile survey result.
The RUC identified CPT code 77778 (interstitial radiation source application, complex, includes supervision, handling, loading of radiation source, when performed) and CPT code 77790 (supervision, handling, loading of radiation source) through a misvalued code screen of codes reported together more than 75 percent of the time. After reviewing the entire code family (CPT codes 77776, 77777, 77778, and 77790), the CPT Editorial Panel deleted the interstitial radiation source codes (CPT codes 77776 and 77777) and revised CPT code 77778 to incorporate the supervision and handling of brachytherapy sources previously reported with CPT code 77790. The RUC recommended that CPT code 77790 be valued without work, and recommended a work RVU of 8.78 for CPT code 77778. We are establishing an interim final value for CPT code 77790 without a work RVU, consistent with the RUC's recommendation.
The specialty society's survey indicated that the total service time for CPT code 77778 was 220 minutes and the median work RVU was 8.78; however, the RUC recommended a total work time of 145 minutes. In reviewing that recommendation, we cannot reconcile how the RUC determined that the same survey results that overestimated the time by over 50 percent at the same time accurately estimated the work, given that time is a component of overall work. We believe that the 25th percentile survey result is more likely to represent the typical overall work in a survey in which time is overestimated. Therefore, we are establishing an interim final work RVU of 8.00 for CPT code 77778 based on the 25th percentile survey. However, we are also seeking comment regarding the accuracy of the survey results given the significant disparity between the survey results and the considered judgment of the RUC regarding the amount of overall time required to furnish this service.
For CY 2016, the CPT Editorial Panel revised CPT code 78264 (gastric emptying study) to describe gastric emptying procedure, and also created two new add-on codes, CPT code 78265 (gastric emptying imaging study (eg, liquid, solid, or both); with small bowel transit up to 24 hours) and CPT code 78266 (gastric emptying study (eg, liquid, solid, or both with small bowel and colon transit for multiple days)). The RUC recommendation indicates that the base CPT code 78264 was previously used to report three distinct procedural variations. The new codes were created to describe the services in the procedures.
We are establishing as interim final the RUC-recommended work RVUs for CPT codes 78265 and 78266. However, we believe the RUC-recommended work RVU of 0.80 overstates the work involved in CPT code 78264. We note that CPT code 78264 has a higher recommended work RVU and a shorter intraservice time relative to the other codes in the family. Additionally, the CY 2016 RUC survey result showed a two minute decrease, from 12 to 10 minutes, in the intraservice time for CPT code 78264. We considered reference CPT code 78226 (Hepatobiliary system imaging, including gallbladder when present), as it shares the same intraservice time of 10 minutes and has similar intensity, and we are using a direct crosswalk from the work RVU of 0.74. We are establishing an interim final work RVU of 0.74 for CPT code 78264.
We received invoices for several new supply and equipment items for colon transit imaging services, as listed in Table 21. We have accepted the invoices for these items and added them to the direct PE input database. However, we are concerned that these invoice prices may not be reflective of the typical costs associated with the submitted supply items. We request that stakeholders review these prices and provide invoices or other information to improve the accuracy of pricing for these and other items in the direct PE database. Additionally, as discussed in section II.A of the proposed rule, we remind stakeholders that due to the relativity inherent in the development of RVUs, reductions in existing prices for any items in the direct PE database increase the pool of direct PE RVUs available to all other PFS services.
For CY 2015, we used the RUC recommendation of 0.30 RVUs and direct PE inputs without refinement to establish interim final values for CPT code 91200. For CY 2016, we received an updated RUC recommendation of 0.27 RVUs; we have established the RUC-recommended work RVU and direct PE inputs as interim final.
Another commenter requested reconsideration for the nonfacility payment rates stating the PE RVUs for the comparison codes CPT code 76700 (Ultrasound, abdominal, real time with image documentation; complete) and CPT code 76102 (Radiologic examination, complex motion (ie, hypercycloidal) body section (eg, mastoid polytomography), other than with urography; bilateral) are significantly higher than CPT code 91200. The commenter also stated the nonfacility payment was lower than the OPPS rate while the equipment costs are the same.
With respect to the commenter's statement about the comparison of the PFS payment amount to the OPPS payment amount, we note that OPPS payments for individual services are grouped into rates that reflect the cost of a range of services. We also note that for services newly priced under the OPPS, the APC assignment is based on that of the predecessor codes and clinical similarity to other services. As such, the payment rates for newly priced services may not be reflective of the rates that will be assigned once claims data for these services becomes available.
As stated above, we are establishing an interim final work RVU and direct PE inputs; we will accept comments during the comment period for this final rule with comment period.
For CY 2015, the RUC reviewed CPT codes 95971 and 95972 because they were identified by the High Volume Growth Services Screen which identifies services in which Medicare utilization increased by at least 100 percent from 2006 to 2011 screen. In the CY 2015 final rule with comment period, we stated that the lack of survey data for CPT code 95973, along with the confusing descriptor language and intraservice time for CPT code 95972, suggested the need for these services to be described through revised codes. However, to facilitate more accurate payment for these services pending such revisions, we adopted the RUC-recommended intraservice time of 20 minutes and work RVU of 0.78 for CPT code 95971. For CPT code 95972, we refined the RUC-recommended work RVU of 0.90 to establish an interim final value of 0.80 and adopted the RUC-recommended intraservice time of 23 minutes.
For CY 2016, the CPT Editorial Panel deleted CPT code 95973 and modified the descriptor for CPT code 95972. The RUC again reviewed CPT codes 95971 and 95972 and recommended no change to the work RVU of 0.78 with an intraservice time of 20 minutes for CPT code 95971. Because the survey for CPT code 95972 had used the older descriptor, the RUC recommended that the code be resurveyed with the correct descriptor and that the current RVU of 0.80 with an intraservice time of 23 minutes be maintained until the new survey is complete. We agree with the RUC that we should use these values for these codes on an interim final basis pending new recommendations from the RUC for the CY 2017 rule based on a new survey for CPT code 95972. We look forward to receiving recommendations from the AMA RUC, and intend to consider both codes using the most recent survey data available.
For CY 2014, we finalized interim final work RVUs and direct PE inputs for the surgical pathology services described by CPT codes 88300-88309 (Surgical Pathology, Levels I through VI). In conjunction with the revaluation of these procedures, we modified the code descriptors of G0416 through G0419 so that they described any method of prostate needle biopsy services, rather than only saturation biopsies. To simplify the coding, for CY 2014, we revised the descriptor for G0416 on an interim final basis to reflect all prostate biopsies, regardless of the number of specimens taken or the method used, and we deleted the remaining G-codes. We also maintained the existing RVUs for G0416, pending additional information, including recommendations from the RUC, about the typical resource costs associated with prostate biopsies. For CY 2016, we received and will be establishing as interim final, the RUC's recommended direct PE inputs to use in valuing G0416. However, we also received comments suggesting that the typical number of blocks used in these services can be significantly lower than what is assumed in the RUC recommendations. Given our consideration of those comments and our anticipation of a RUC-recommended work RVU for CY 2017 rulemaking, we emphasize that we are seeking evidence of the typical batch and block size used in furnishing this service.
We also note that the RUC recommended that, for purposes of calculating overall PFS budget neutrality, we assume that more practitioners will report these services accurately in the future than did so in prior years. For purposes of calculating budget neutrality, we generally assume that the Medicare utilization data reflect the accurate reporting of PFS services in compliance with Medicare payment rules. Therefore, we did not incorporate an anticipated shift toward compliant coding as recommended by the RUC. The utilization crosswalk used in setting rates for CY 2016 is available on the CMS Web site under downloads for the CY 2016 PFS Final Rule at
Several conditions must be met for Medicare to make payments for telehealth services under the PFS. The service must be on the list of Medicare telehealth services and meet all of the following additional requirements:
• The service must be furnished via an interactive telecommunications system.
• The service must be furnished by a physician or other authorized practitioner.
• The service must be furnished to an eligible telehealth individual.
• The individual receiving the service must be located in a telehealth originating site.
When all of these conditions are met, Medicare pays a facility fee to the originating site and makes a separate payment to the distant site practitioner furnishing the service.
Section 1834(m)(4)(F)(i) of the Act defines Medicare telehealth services to include consultations, office visits, office psychiatry services, and any additional service specified by the Secretary, when furnished via a telecommunications system. We first implemented this statutory provision, which was effective October 1, 2001, in the CY 2002 PFS final rule with comment period (66 FR 55246). We established a process for annual updates to the list of Medicare telehealth services as required by section 1834(m)(4)(F)(ii) of the Act in the CY 2003 PFS final rule with comment period (67 FR 79988).
As specified at § 410.78(b), we generally require that a telehealth service be furnished via an interactive telecommunications system. Under § 410.78(a)(3), an interactive telecommunications system is defined as multimedia communications equipment that includes, at a minimum, audio and video equipment permitting two-way, real-time interactive communication between the patient and distant site physician or practitioner.
Telephones, facsimile machines, and stand-alone electronic mail systems that are not integrated into an electronic health record system do not meet the definition of an interactive telecommunications system. An interactive telecommunications system is generally required as a condition of payment; however, section 1834(m)(1) of the Act allows the use of asynchronous “store-and-forward” technology when the originating site is part of a federal telemedicine demonstration program in Alaska or Hawaii. As specified in § 410.78(a)(1), asynchronous store-and-forward is the transmission of medical information from an originating site for review by the distant site physician or practitioner at a later time.
Medicare telehealth services may be furnished to an eligible telehealth individual notwithstanding the fact that the practitioner furnishing the telehealth service is not at the same location as the beneficiary. An eligible telehealth individual is an individual enrolled under Part B who receives a telehealth service furnished at a telehealth originating site.
Practitioners furnishing Medicare telehealth services are reminded that these services are subject to the same non-discrimination laws as other services, including the effective communication requirements for persons with disabilities of section 504 of the Rehabilitation Act and language access for persons with limited English proficiency, as required under Title VI of the Civil Rights Act of 1964. For more information, see
Practitioners furnishing Medicare telehealth services submit claims for telehealth services to the MACs that process claims for the service area where their distant site is located. Section 1834(m)(2)(A) of the Act requires that a practitioner who furnishes a telehealth service to an eligible telehealth individual be paid an amount equal to the amount that the practitioner would have been paid if the service had been furnished without the use of a telecommunications system.
Originating sites, which can be one of several types of sites specified in the statute where an eligible telehealth individual is located at the time the service is being furnished via a telecommunications system, are paid a facility fee under the PFS for each Medicare telehealth service. The statute specifies both the types of entities that can serve as originating sites and the geographic qualifications for originating sites. With regard to geographic qualifications, § 410.78(b)(4) limits originating sites to those located in rural health professional shortage areas (HPSAs) or in a county that is not included in a metropolitan statistical area (MSA).
Historically, we have defined rural HPSAs to be those located outside of MSAs. Effective January 1, 2014, we modified the regulations regarding originating sites to define rural HPSAs as those located in rural census tracts as determined by the Office of Rural Health Policy (ORHP) of the Health Resources and Services Administration (HRSA) (78 FR 74811). Defining “rural” to include geographic areas located in rural census tracts within MSAs allows for broader inclusion of sites within HPSAs as telehealth originating sites. Adopting the more precise definition of “rural” for this purpose expands access to health care services for Medicare beneficiaries located in rural areas. HRSA has developed a Web site tool to provide assistance to potential originating sites to determine their geographic status. To access this tool, see the CMS Web site at
An entity participating in a federal telemedicine demonstration project that has been approved by, or received funding from, the Secretary as of December 31, 2000 is eligible to be an originating site regardless of its geographic location.
Effective January 1, 2014, we also changed our policy so that geographic status for an originating site would be established and maintained on an annual basis, consistent with other telehealth payment policies (78 FR 74400). Geographic status for Medicare telehealth originating sites for each calendar year is now based upon the status of the area as of December 31 of the prior calendar year.
For a detailed history of telehealth payment policy, see 78 FR 74399.
As noted previously, in the December 31, 2002
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Some examples of clinical benefit include the following:
• Ability to diagnose a medical condition in a patient population without access to clinically appropriate in-person diagnostic services.
• Treatment option for a patient population without access to clinically appropriate in-person treatment options.
• Reduced rate of complications.
• Decreased rate of subsequent diagnostic or therapeutic interventions (for example, due to reduced rate of recurrence of the disease process).
• Decreased number of future hospitalizations or physician visits.
• More rapid beneficial resolution of the disease process treatment.
• Decreased pain, bleeding, or other quantifiable symptom.
• Reduced recovery time.
For the list of telehealth services, see the CMS Web site at
Requests to add services to the list of Medicare telehealth services must be submitted and received no later than December 31 of each calendar year to be considered for the next rulemaking cycle. For example, qualifying requests submitted before the end of CY 2015 will be considered for the CY 2017 proposed rule. Each request to add a service to the list of Medicare telehealth services must include any supporting documentation the requester wishes us to consider as we review the request. Because we use the annual PFS rulemaking process as a vehicle for making changes to the list of Medicare telehealth services, requestors should be advised that any information submitted is subject to public disclosure for this purpose. For more information on submitting a request for an addition to the list of Medicare telehealth services, including where to mail these requests, see the CMS Web site at
Under our existing policy, we add services to the telehealth list on a category 1 basis when we determine that they are similar to services on the existing telehealth list for the roles of, and interactions among, the beneficiary, physician (or other practitioner) at the distant site and, if necessary, the telepresenter. As we stated in the CY 2012 final rule with comment period (76 FR 73098), we believe that the category 1 criteria not only streamline our review process for publicly requested services that fall into this category, the criteria also expedite our ability to identify codes for the telehealth list that resemble those services already on this list.
We received several requests in CY 2014 to add various services as Medicare telehealth services effective for CY 2016. The following presents a discussion of these requests, and our proposals for additions to the CY 2016 telehealth list. Of the requests received, we found that the following services were sufficiently similar to psychiatric diagnostic procedures or office/outpatient visits currently on the telehealth list to qualify on a category 1 basis. Therefore, we proposed to add the following services to the telehealth list on a category 1 basis for CY 2016:
• CPT code 99356 (prolonged service in the inpatient or observation setting, requiring unit/floor time beyond the usual service; first hour (list separately in addition to code for inpatient evaluation and management service)); and 99357 (prolonged service in the inpatient or observation setting, requiring unit/floor time beyond the
The prolonged service codes can only be billed in conjunction with hospital inpatient and skilled nursing facility evaluation & management (E/M) codes, and of these, only subsequent hospital and subsequent nursing facility visit codes are on list of Medicare telehealth services. Therefore, CPT codes 99356 and 99357 would only be reportable with codes for which limits of one subsequent hospital visit every three days via telehealth, and one subsequent nursing facility visit every 30 days, would continue to apply.
• CPT codes 90963 (end-stage renal disease (ESRD) related services for home dialysis per full month, for patients younger than 2 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents); 90964 (end-stage renal disease (ESRD) related services for home dialysis per full month, for patients 2-11 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents); 90965 (end-stage renal disease (ESRD) related services for home dialysis per full month, for patients 12-19 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents); and 90966 (end-stage renal disease (ESRD) related services for home dialysis per full month, for patients 20 years of age and older).
Although these services are for home-based dialysis, and a patient's home is not an authorized originating site for telehealth, we recognize that many components of these services could be furnished when a patient is located at a telehealth originating site and, therefore, can be furnished via telehealth.
The required clinical examination of the catheter access site must be furnished face-to-face “hands on” (without the use of an interactive telecommunications system) by a physician, certified nurse specialist (CNS), nurse practitioner (NP), or physician's assistant (PA). An interactive telecommunications system may be used to provide additional visits required under the 2-to-3 visit Monthly Capitation Payment (MCP) code and the 4-or-more visit MCP code. See the final rule for CY 2005 (69 FR 66276) for further information on furnishing ESRD services via telehealth.
We also received requests to add services to the telehealth list that do not meet our criteria for Medicare telehealth services. We did not propose to add the following procedures for the reasons noted:
• All E/M services; telerehabilitation services; and palliative care, pain management and patient navigation services for cancer patients.
None of these requests identified the specific codes that were being requested for addition as telehealth services, and two of the requests did not include evidence of any clinical benefit when the services are furnished via telehealth. Since we did not have information on the specific codes requested for addition or evidence of clinical benefit for these requests, we cannot evaluate whether the services are appropriate for addition to the Medicare telehealth services list.
• CPT codes 99291 (critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); and 99292 (critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes (list separately in addition to code for primary service).
We previously considered and rejected adding these codes to the list of Medicare telehealth services in the CY 2009 PFS final rule (74 FR 69744) on a category 1 basis because, due to the acuity of critically ill patients, we did not consider critical care services similar to any services on the current list of Medicare telehealth services. In that rule, we said that critical care services must be evaluated as category 2 services. Because we would consider critical care services under category 2, we needed to evaluate whether these are services for which telehealth can be an adequate substitute for a face-to-face encounter, based on the category 2 criteria at the time of that request. We had no evidence suggesting that the use of telehealth could be a reasonable surrogate for the face-to-face delivery of this type of care.
The American Telemedicine Association (ATA) submitted a new request for CY 2016, which cited several studies to support adding these services on a category 2 basis. To qualify under category 2, we would need evidence that the service produces a clinical benefit for the patient. However, in reviewing the information provided by the ATA and a study entitled, “Impact of an Intensive Care Unit Telemedicine Program on Patient Outcomes in an Integrated Health Care System,” published July 2014 in JAMA Internal Medicine, which found no evidence that the implementation of ICU telemedicine significantly reduced mortality rates or hospital length of stay, we do not believe that the submitted evidence demonstrates a clinical benefit to patients. Therefore, we did not propose to add these services on a category 2 basis to the list of Medicare telehealth services for CY 2016.
• CPT code 99358 (prolonged evaluation and management service before and/or after direct patient care; first hour) and 99359 (prolonged evaluation and management service before and/or after direct patient care; each additional 30 minutes (list separately in addition to code for prolonged service)).
As we indicated in the CY 2015 PFS final rule with comment period (79 FR 67600), these services are not separately payable by Medicare. It would be inappropriate to include a service as a telehealth service when Medicare does not otherwise make a separate payment for it. Therefore, we did not propose to add these nonpayable services to the list of Medicare telehealth services for CY 2016.
• CPT code 99444 (online evaluation and management service provided by a physician or other qualified health care professional who may report an evaluation and management service provided to an established patient or guardian, not originating from a related E/M service provided within the previous 7 days, using the internet or similar electronic communications network).
As we indicated in the CY 2014 PFS final rule with comment period (78 FR 74403), we assigned a status indicator of “N” (Noncovered service) to this service because: (1) This service is non-face-to-face; and (2) the code descriptor includes language that recognizes the provision of services to parties other than the beneficiary and for whom Medicare does not provide coverage (for example, a guardian). Under section 1834(m)(2)(A) of the Act, Medicare pays the physician or practitioner furnishing a telehealth service an amount equal to the amount that would have been paid if the service was furnished without the use of a telecommunications system. Because CPT code 99444 is currently noncovered, there would be no Medicare payment if this service was furnished without the use of a telecommunications system. Since this service is noncovered under Medicare, we are not proposing to add it to the list of Medicare telehealth services for CY 2016.
• CPT code 99490 (chronic care management services, at least 20 minutes of clinical staff time directed by a physician or other qualified health care professional, per calendar month, with the following required elements: multiple (two or more) chronic conditions expected to last at least 12
This service is one that can be furnished without the beneficiary's face-to-face presence, and using any number of non-face-to-face means of communication. Therefore, the service is not appropriate for consideration as a Medicare telehealth service. It is unnecessary to add this service to the list of Medicare telehealth services. Therefore, we did not propose to add it to the list of Medicare telehealth services for CY 2016.
• CPT codes 99605 (medication therapy management service(s) provided by a pharmacist, individual, face-to-face with patient, with assessment and intervention if provided; initial 15 minutes, new patient); 99606 (medication therapy management service(s) provided by a pharmacist, individual, face-to-face with patient, with assessment and intervention if provided; initial 15 minutes, established patient); and 99607 (medication therapy management service(s) provided by a pharmacist, individual, face-to-face with patient, with assessment and intervention if provided; each additional 15 minutes (list separately in addition to code for primary service)).
These codes are noncovered services for which no payment may be made under the PFS. Therefore, we did not propose to add these services to the list of Medicare telehealth services for CY 2016.
In summary, we proposed to add the following codes to the list of Medicare telehealth services beginning in CY 2016 on a category 1 basis: Prolonged service inpatient CPT codes 99356 and 99357 and ESRD-related services 90963 through 90966. As indicated above, the prolonged service codes can only be billed in conjunction with subsequent hospital and subsequent nursing facility codes. Limits of one subsequent hospital visit every three days, and one subsequent nursing facility visit every 30 days, would continue to apply when the services are furnished as telehealth services. For the ESRD-related services, the required clinical examination of the catheter access site must be furnished face-to-face “hands on” (without the use of an interactive telecommunications system) by a physician, CNS, NP, or PA.
Under section 1834(m)(1) of the Act, Medicare makes payment for telehealth services furnished by physicians and practitioners. Section 1834(m)(4)(E) of the Act specifies that, for purposes of furnishing Medicare telehealth services, the term “practitioner” has the meaning given that term in section 1842(b)(18)(C) of the Act, which includes a certified registered nurse anesthetist (CRNA) as defined in section 1861(bb)(2) of the Act.
We initially omitted CRNAs from the list of distant site practitioners for telehealth services in the regulation because we did not believe these practitioners would furnish any of the service on the list of Medicare telehealth services. However, CRNAs in some states are licensed to furnish certain services on the telehealth list, including E/M services. Therefore, we proposed to revise the regulation at § 410.78(b)(2) to include a CRNA, as described under § 410.69, to the list of distant site practitioners who can furnish Medicare telehealth services.
The following is a summary of the comments we received on proposals related to telehealth services.
Therefore, we added subsequent hospital care services, specifically CPT codes 99231, 99232, and 99233, to the list of telehealth services on a category 1 basis in CY 2011, but with some limitations on the frequency with which these services may be furnished through telehealth. Because of our concerns regarding the potential acuity of hospital inpatients, we limited the provision of subsequent hospital care services through telehealth to once every 3 days. We were confident that admitting practitioners would continue to make appropriate in-person visits to all patients who need such care during their hospitalization.
Likewise, for CY 2011, we concluded that subsequent nursing facility visits by a patient's admitting practitioner sufficiently resemble follow-up inpatient consultation services to consider them on a category 1 basis for the telehealth list. We concluded that it would be appropriate to permit some subsequent nursing facility care services to be furnished through telehealth to ensure that complex nursing facility patients have frequent encounters with their admitting practitioner, although we continued to believe that the federally mandated visits should be in-person to facilitate the comprehensive, coordinated, and personal care that these complex patients require on an ongoing basis.
Therefore, we added subsequent nursing facility care services, specifically CPT codes 99307, 99308, 99309, and 99310, to the list of Medicare telehealth services on a
We believe the concerns that we addressed in the cases discussed in this section continues to hold for CPT codes 99356 and 99357, and that frequency limits are appropriate to ensure that patients continue to receive appropriate and high-quality care.
We note that section 1834(m) of the Act requires Medicare to make the same payment for services furnished via telehealth as is made for face-to-face services. In addition, it provides for payment of an originating site facility fee. However, the statute does not require that all conditions for payment for telehealth services be the same as for the services when furnished without the use of an interactive telecommunications system. We continue to believe the established frequency limits are appropriate and will leave them in place for these services.
Another commenter questioned our statement that there is “no evidence that the implementation of ICU TM significantly reduce[s] mortality rates or hospital length of stay,” noting that these are not category 2 criteria and that telemedicine for critical care services clearly meets the following three criteria for adding services on a category 2 basis:
• Ability to diagnose a medical condition in a patient population without access to clinically appropriate in-person diagnostic services.
• Treatment option for a patient population without access to clinically appropriate in-person treatment options.
• Reduced rate of complications.
The commenter maintained that telemedicine is safe and feasible for all patients. The commenter further maintained that advances in today's technology enable health care providers to deliver a focused, critical intervention no matter where the patient may be situated and/or what services are delivered.
Another commenter questioned the relevance of the “JAMA Internal Medicine Study” we cited because it involved VA hospitals whose patients do not represent the Medicare patient population. Finally, a commenter indicated that adding these services to the telehealth list would support the clinical stabilization of such patients awaiting critical care and/or surgical intervention or transport, in which a specialist may not be available to support the immediate clinical needs of the patient.
As noted in the proposed rule (80 FR 41783), we reviewed the information provided by the ATA. We also reviewed a study entitled, “Impact of an Intensive Care Unit Telemedicine Program on Patient Outcomes in an Integrated Health Care System,” published July 2014 in
In Response to commenters who suggested that we are applying a “double standard” for coverage of telehealth services, we note that section 1834(m)(4)(F) of the Act initially provided a payment mechanism for services furnished via telehealth for professional consultations, office visits, and office psychiatry services. The statute further required the Secretary to establish a process for annual additions or deletions to the telehealth list to be paid under particular circumstances. The statute does not suggest that any service that potentially could be furnished via telehealth should be included. Rather, the statute specifies a consideration process by CMS before making changes to the list of Medicare telehealth services. Since establishing the process in 2002, we have added codes to the telehealth list on a regular
• A patient's home, a dialysis facility, and an assisted living facility serve as originating sites for telehealth services.
• Originating site restrictions to rural areas be eliminated.
• Home health providers, registered nurses (RNs), Certified Pediatric Nurse Practitioners (CPNPs) and Certified Family Nurse Practitioners (CFNPs) be included in the list of eligible providers telehealth.
• The ability of NPs and PAs in a retail clinic setting to furnish telehealth services be clarified and that payment be commensurate with furnishing an in-person service.
Section 1834(m)(4)(E) of the Act defines a practitioner for telehealth services per section 1842(b)(18)(C), which does not include home health providers or RNs. CPNPs or CFNPS are authorized to furnish telehealth services if they meet the conditions for NPs in section 1861(a)(a)(5) of the Act. NPs and PAs can furnish telehealth service as distant site practitioners. There are no specific criteria for a distant site. Therefore, there are no telehealth rules that would prohibit eligible distant site practitioners from furnishing telehealth services from a retail clinic, assuming the telehealth individual (beneficiary) is located at a telehealth originating site. Section 1834(m)(2)(A) of the Act provides that payment for a service furnished via telehealth equals the payment that would be made for an in-person service. Because these requirements are specified in the statute, we do not have discretion to revise the telehealth rules as desired by the commenters.
We wish to inform stakeholders of the following initiatives to promote telehealth:
The CMS Innovation Center is responsible for developing and testing new payment and service delivery models to lower costs and improve quality for Medicare, Medicaid, and CHIP beneficiaries. As part of that authority, the CMS Innovation Center can consider potential new payment and service delivery models to test changes to Medicare's telehealth payment policies. For example, the Next Generation Accountable Care Organization (ACO) Model is an Innovation Center initiative for ACOs that are experienced in coordinating care for populations of patients. It will allow these provider groups to assume higher levels of financial risk and reward than are available under the current Pioneer ACO Model and Medicare Shared Savings Program (Shared Savings Program). The goal of the Model is to test whether strong financial incentives for ACOs, coupled with tools to support better patient engagement and care management, can improve health outcomes and lower expenditures for Medicare fee-for-service (FFS) beneficiaries. Central to the Next Generation ACO Model are several benefit enhancement tools to help ACOs improve engagement with beneficiaries. ACOs participating in this Model have the opportunity to provide aligned beneficiaries with access to home visits and telehealth services that exceed what is currently covered under the Medicare program, and CMS will make reward payments to aligned beneficiaries who receive a high percentage of their care from the ACO and from certain providers and suppliers that have agreed to participate in the ACO's network as ACO Participants or Preferred Providers under this Model.
The Fed-Tel Committee is comprised of employees from various federal agencies whose purpose is to facilitate telehealth education and information sharing, as well as coordinate funding opportunity announcements and other programmatic materials.
We reminded all interested stakeholders that we are currently soliciting public requests to add services to the list of Medicare telehealth services. To be considered during PFS rulemaking for CY 2017, these requests must be submitted and received by December 31, 2015. Each request to add a service to the list of Medicare telehealth services must include any supporting documentation the requester wishes us to consider as we review the request. For more information on submitting a request for an addition to the list of Medicare telehealth services, including where to mail these requests, we refer readers to the CMS Web site at
Section 1834(m)(2)(B) of the Act establishes the Medicare telehealth originating site facility fee for telehealth services furnished from October 1, 2001 through December 31 2002, at $20.00. For telehealth services furnished on or after January 1 of each subsequent
Section 1861(s)(2)(A) of the Act establishes the benefit category for services and supplies furnished as “incident to” the professional services of a physician. The statute specifies that services and supplies furnished as an incident to a physician's professional service (hereinafter “incident to services”) are “of kinds which are commonly furnished in physicians' offices and are commonly either rendered without charge or included in physicians' bills.” In addition to the requirements of the statute, the regulation at § 410.26 sets forth specific requirements that must be met for physicians and other practitioners to bill Medicare for incident to services. Section 410.26(a)(7) limits “incident to” services to those included under section 1861(s)(2)(A) of the Act and that are not covered under another benefit category. Section 410.26(b) specifies (in part) that for services and supplies to be paid as incident to services under Medicare Part B, the services or supplies must be:
• Furnished in a noninstitutional setting to noninstitutional patients.
• An integral, though incidental, part of the service of a physician (or other practitioner) in the course of diagnosis or treatment of an injury or illness.
• Furnished under supervision (as specified under § 410.26(a)(2) and § 410.26(b)(5)) of a physician or other practitioner eligible to bill and directly receive Medicare payment.
• Furnished by a physician, a practitioner with an incident to benefit, or auxiliary personnel.
In addition to § 410.26, there are regulations specific to each type of practitioner who is allowed to bill for incident to services as specified in § 410.71(a)(2) (clinical psychologist services), § 410.74(b) (PAs' services), § 410.75(d) (NPs' services), § 410.76(d) (CNSs' services), and § 410.77(c) (certified nurse-midwives' services). Incident to services are treated as if they were furnished by the billing physician or other practitioner for purposes of Medicare billing and payment. Consistent with this terminology, when referring in this discussion to the physician or other practitioner furnishing the service, we are referring to the physician or other practitioner who is billing for the incident to service. When we refer to the “auxiliary personnel” or the person who “provides” the service, we are referring to an individual who is personally performing the service or some aspect of it as distinguished from the physician or other practitioner who bills for the incident to service.
Since we treat incident to services as services furnished by the billing physician or other practitioner for purposes of Medicare billing and payment, payment is made to the billing physician or other practitioner under the PFS, and all relevant Medicare rules apply including, but not limited to, requirements regarding medical necessity, documentation, and billing. Those practitioners who can bill Medicare for incident to services are paid at their applicable Medicare payment rate as if they personally furnished the service. For example, when incident to services are billed by a physician, they are paid at 100 percent of the fee schedule amount, and when the services are billed by a nurse practitioner or clinical nurse specialist, they are paid at 85 percent of the fee schedule amount. Payments are subject to the usual deductible and coinsurance amounts.
In the CY 2014 PFS final rule with comment period, we amended § 410.26 by adding a paragraph (b)(7) to require that, as a condition for Medicare Part B payment, all incident to services must be furnished in accordance with applicable state law. Additionally, we amended the definition of auxiliary personnel at § 410.26(a)(1) to require that the individual who provides the incident to services must meet any applicable requirements to provide such services (including licensure) imposed by the state in which the services are furnished. These requirements for compliance with applicable state laws apply to any individual providing incident to services as a means to protect the health and safety of Medicare beneficiaries in the delivery of health care services, and to provide the Medicare program with additional recourse for denying or recovering Part B payment for incident to services that are not furnished in compliance with state law (78 FR 74410). Revisions to § 410.26(a)(1) and (b)(7) were intended to clarify the longstanding payment policy of paying only for services that are furnished in compliance with any
In addition to the CY 2014 revisions to the regulations for incident to services, we believe that additional requirements for incident to services should be explicitly and unambiguously stated in the regulations. As described in this final rule with comment period, incident to a physician's or other practitioner's professional services means that the services or supplies are furnished as an integral, although incidental, part of the physician's or other practitioner's personal professional services in the course of diagnosis or treatment of an injury or illness (§ 410.26(b)(2)). Incident to services require direct supervision of the auxiliary personnel providing the service by the physician or other practitioner (§ 410.26(b)(5)) with the exception that allows care management services and transitional care management services (other than the required face-to-face visit) to be furnished under the general supervision of the physician (or other practitioner).)
We proposed to revise the regulations specifying the requirements for which physicians or other practitioners can bill for incident to services. In the CY 2002 PFS final rule (66 FR 55267), in response to a comment seeking clarification regarding what physician billing number should be used on the claim form for an incident to service, we stated that when a claim is submitted to Medicare under the billing number of a physician or other practitioner for an incident to service, the physician or other practitioner is stating that he or she performed the service or directly supervised the auxiliary personnel performing the service. Additionally, in Transmittal 148, which was published on April 23, 2004, effective May 24, 2004, we specifically instructed practitioners as to how claim forms should be completed to account for the fact that the supervising physician or other practitioner is responsible for the incident to service. Section 410.26(b)(5) currently states that the physician (or other practitioner) supervising the auxiliary personnel need not be the same physician (or other practitioner) upon whose professional service the incident to service is based. To be certain that the incident to services furnished to a beneficiary are in fact an integral, although incidental, part of the physician's or other practitioner's personal professional service that is billed to Medicare, we believe that the physician or other practitioner who bills for the incident to service must also be the physician or other practitioner who directly supervises the service. It has been our position that billing practitioners should have a personal role in, and responsibility for, furnishing services for which they are billing and receiving payment as an incident to their own professional services. This is consistent with the requirements that all physicians and billing practitioners attest on each Medicare claim that he or she “personally furnished” the services for which he or she is billing. Without this requirement, there could be an insufficient nexus with the physician's or other practitioner's services being billed on a claim to Medicare as incident to services and the actual services being furnished to the Medicare beneficiary by the auxiliary personnel. Therefore, we proposed to amend § 410.26(b)(5), consistent with previous preamble discussion and subregulatory guidance, that the physician or other practitioner who bills for incident to services must also be the physician or other practitioner who directly supervises the auxiliary personnel who provide the incident to services. Also, to further clarify the meaning of the proposed amendment to this regulation, we proposed to remove the last sentence from § 410.26(b)(5), which specified that the physician (or other practitioner) supervising the auxiliary personnel need not be the same physician (or other practitioner) upon whose professional service the incident to service is based.
As a condition of Medicare payment, auxiliary personnel who, under the direct supervision of a physician or other practitioner, provide incident to services to Medicare beneficiaries must comply with all applicable federal and state laws. This includes not having been excluded from Medicare, Medicaid and all other federally funded health care programs. We proposed to amend the regulation to explicitly prohibit auxiliary personnel from providing incident to services who have either been excluded from Medicare, Medicaid and all other federally funded health care programs by the Office of Inspector General (OIG) or who have had their enrollment revoked for any reason. These excluded or revoked individuals are already prohibited from providing services to Medicare beneficiaries, so this proposed revision is an additional safeguard to ensure that these excluded or revoked individuals are not providing incident to services and supplies under the direct supervision of a physician or other authorized supervising practitioner. These proposed revisions to the incident to regulations will provide the Medicare program with additional recourse for denying or recovering Part B payment for incident to services and supplies that are not furnished in compliance with our program requirements.
We recognize that there are many ways in which compliance with these requirements could be consistently and fairly assured across the Medicare program. In considering implementation of these proposals, we wish to be mindful of the need to minimize or eliminate any practitioner administrative burden while at the same time ensuring that practitioners are not subjected to unnecessary audits or placed at risk of being inadvertently deemed non-compliant. Therefore, while we believe that the initial responsibility of compliance rests with the practitioner, we invited comments through this final rule with comment period about possible approaches we could take to improve our ability to ensure that incident to services are provided to beneficiaries by qualified individuals in a manner consistent with Medicare statute and regulations. We invited commenters to consider the options we considered, such as creating new categories of enrollment, implementing a mechanism for registration short of full enrollment, requiring the use of claim elements such as modifiers to identify the types of individuals providing services, or relying on post-payment audits, investigations and recoupments by CMS contractors such as Recovery Auditors or Program Integrity Contractors. We considered these comments in the course of finalizing proposals for CY 2016, and will continue to consider these comments should we decide in the future that additional regulations or guidance will be necessary to monitor compliance with these or other requirements surrounding incident to services.
The following is a summary of the comments we received regarding our proposals on “incident to” services.
After considering the comments that we received on incident to services under our proposed rule, we are finalizing the changes to our regulation at § 410.26(a)(1) without modification, and we are finalizing the proposed change to the regulation at § 410.26(b)(5) with a clarifying modification. Specifically, we are amending the definition of the term, “auxiliary personnel” at § 410.26(a)(1) that are permitted to provide “incident to” services to exclude individuals who have been excluded from the Medicare program or have had their Medicare enrollment revoked. Additionally, we are amending § 410.26(b)(5) by revising the final sentence to make clear that the physician (or other practitioner) directly supervising the auxiliary personnel need not be the same physician (or other practitioner) that is treating the patient more broadly, and adding a sentence to specify that only the physician (or other practitioner) that supervises the auxiliary personnel that provide incident to services may bill Medicare Part B for those incident to services.
Part B's payment to portable X-ray suppliers includes a transportation fee for transporting portable X-ray equipment to the location where portable X-rays are taken. If more than one patient at the same location is X-rayed during the course of the visit, the portable X-ray transportation fee is prorated to reflect this. We have received feedback that some portable X-ray suppliers have been operating under the assumption that when multiple patients receive portable X-ray services in this manner, the transportation fee would only be prorated among a subset of those patients. The Medicare Claims Processing Manual (Pub. 100-4, Chapter 13, Section 90.3) currently states:
Carriers shall allow only a single transportation payment for each trip the portable X-ray supplier makes to a particular location. When more than one Medicare patient is X-rayed at the same location, e.g., a nursing home, prorate the single fee schedule transportation payment among all patients receiving the services. For example, if two patients at the same location receive X-rays, make one-half of the transportation payment for each.
In some jurisdictions, Medicare contractors have been allowing the portable X-ray transportation fee to be allocated only among Medicare Part B beneficiaries. In other jurisdictions, Medicare contractors have required the transportation fee to be allocated among all Medicare patients (Parts A and B). We believe it would be more appropriate to determine the transportation fee attributable to Medicare Part B by allocating it among all patients who receive portable X-ray services in a single trip. Medicare Part B should not pay for more than its share of the transportation costs for portable X-ray services.
For CY 2016, we proposed to revise the Medicare Claims Processing Manual (Pub. 100-4, Chapter 13, Section 90.3) to remove the word “Medicare” before “patient” in section 90.3. We also proposed to clarify that this subregulatory guidance means that, when more than one patient is X-rayed at the same location, the transportation payment under the PFS for the Part B
After consideration of the comments we received, we are finalizing our proposed change to the subregulatory guidance in the Medicare Claims Processing Manual (Pub. 100-4, Chapter 13, Section 90.3) to clarify the portable X-ray transportation fee proration policy, effective January 1, 2016. We believe the revision to the Manual provides consistent direction to all MACs in the payment of portable X-ray transportation for Medicare Part B claims. In addition, we believe the revision strengthens program integrity under Medicare Part B because Medicare will no longer pay for more than its share of the portable X-ray transportation costs.
We received several comments that are not within the scope of our proposal to clarify the subregulatory guidance in § 90.3 of the Medicare Claims Processing Manual, which pertains to portable X-ray transportation fee proration policy. The topics addressed by commenters included recommendations that CMS:
• Update regulations which govern conditions for coverage of portable x-ray services.
• Consider allowing certain services to be performed in a mobile setting.
• Clarify and/or change the consolidated billing payment policy of diagnostic tests including portable X-ray.
• Use multiple transportation codes that describe costs attributable to different imaging modalities.
Section 1833(b)(1) of the Act waives the deductible for colorectal cancer screening tests regardless of the code that is billed for the establishment of a diagnosis as a result of the test, or the removal of tissue or other matter or other procedure that is furnished in connection with, as a result of, and in the same clinical encounter as the screening test. To implement this statutory provision, we amended § 410.160 to add to the list of services to which the deductible does not apply, beginning January 1, 2011, a surgical service furnished in connection with, as a result of, and in the same clinical encounter as a planned colorectal cancer screening test. A surgical service furnished in connection with, as a result of, and in the same clinical encounter as a colorectal cancer screening test means a surgical service furnished on the same date as a planned colorectal cancer screening test as described in § 410.37.
In the CY 2015 PFS final rule with comment period, we modified the regulatory definition of colorectal cancer screening test with regard to colonoscopies to include anesthesia services whether billed as part of the colonoscopy service or separately. (See § 410.37(a)(1)(iii)) In the preamble to the final rule, we stated that the statutory waiver of deductible would apply to anesthesia services furnished in conjunction with a colorectal cancer screening test even when a polyp or other tissue is removed during a
To better reflect our policy in the regulations, we proposed a technical correction to amend § 410.160(b)(8) to expressly recognize anesthesia services. Specifically, we proposed to amend § 410.160(b)(8) to add “and beginning January 1, 2015, for an anesthesia service,” following the first use of the phrase “a surgical service” and to add “or anesthesia” following the word “surgical” each time it is used in the second sentence of § 410.160(b)(8). This amendment to our regulation will ensure that both surgical or anesthesia services furnished in connection with, as a result of, and in the same clinical encounter as a colorectal cancer screening test will be exempt from the deductible requirement when furnished on the same date as a planned colorectal cancer screening test as described in § 410.37.
One commenter urged CMS to identify a way a way under the existing authority to redefine colorectal cancer screening to include colonoscopy with removal of polyp or abnormal growth during the screening encounter. The commenter stated that nearly half of all patients who undergo screening colonoscopy have a polyp or other tissue removed, and believed that the current policy is unfair and disproportionately affects lower income beneficiaries. The commenter also stated that there are various types of colorectal cancer screenings, including fecal occult blood test, double contrast barium enema, and CT colonography, and urged CMS to cover these other screening tests without cost-sharing obligations for the beneficiary.
Section 1833(g) of the Act requires application of annual per beneficiary limitations on the amount of expenses that can be considered as incurred expenses for outpatient therapy services under Medicare Part B, commonly referred to as “therapy caps.” There is one therapy cap for outpatient occupational therapy (OT) services and another separate therapy cap for physical therapy (PT) and speech-language pathology (SLP) services combined.
The therapy caps apply to outpatient therapy services furnished in all settings, including the previously exempted hospital setting (effective October 1, 2012) and critical access hospitals (CAHs) (effective January 1, 2014).
The therapy cap amounts under section 1833(g) of the Act are updated each year based on the Medicare Economic Index (MEI). Specifically, the annual caps are calculated by updating the previous year's cap by the MEI for the upcoming calendar year and rounding to the nearest $10.00. Increasing the CY 2015 therapy cap of $1,940 by the CY 2016 MEI of 1.1 percent and rounding to the nearest $10.00 results in a CY 2016 therapy cap amount of $1,960.
An exceptions process for the therapy caps has been in effect since January 1, 2006. Originally required by section 5107 of the Deficit Reduction Act of 2005 (DRA), which amended section 1833(g)(5) of the Act, the exceptions process for the therapy caps has been extended multiple times through subsequent legislation as described in the CY 2015 PFS final rule with comment period (79 FR 67730) and most recently extended by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10). The Agency's current authority to provide an exceptions process for therapy caps expires on December 31, 2017.
CMS tracks each beneficiary's incurred expenses annually and counts them towards the therapy caps by applying the PFS rate for each service less any applicable multiple procedure payment reduction (MPPR) amount. As required by section 1833(g)(6)(B), added by section 603(b) of the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240) and extended by subsequent legislation, the PFS-rate accrual process is applied to outpatient therapy services furnished by CAHs even though they are paid on a cost basis. After expenses incurred for the beneficiary's outpatient therapy services for the year have exceeded one or both of the therapy caps, therapy suppliers and providers use the KX modifier on claims for subsequent services to request an exception to the therapy caps. By use of the KX modifier, the therapist is attesting that the services above the therapy caps are reasonable and necessary and that there is documentation of medical necessity for the services in the beneficiary's medical record. Claims for outpatient therapy services over the caps without the KX modifier are denied.
Since October 1, 2012, under section 1833(g)(5)(C) of the Act, we have been required to apply a manual medical review process to therapy claims when a beneficiary's incurred expenses for outpatient therapy services exceed a threshold amount of $3,700. There are two separate thresholds of $3,700, just as there are two separate therapy caps, one for OT services and one for PT and SLP services combined; and incurred expenses are counted towards the thresholds in the same manner as the caps. Now, under section 1833(g)(5) of the Act as amended by section 202(b) of the MACRA, claims exceeding the therapy thresholds are no longer automatically subject to a manual medical review process as they were before. Rather, CMS is permitted to do a more targeted medical review on these claims using factors specified in section 1833(g)(5)(E)(ii) of the Act as amended by section 202(b) of the MACRA, including targeting those therapy providers with a high claims denial rate for therapy services or with aberrant billing practices compared to their peers. The statutorily-required manual medical review process required under section 1833(g)(5)(C) of the Act expires at the same time as the exceptions process for therapy caps on December 31, 2017.
For information on the manual medical review process, go to
Since October 1, 2012, the therapy caps and related provisions have applied to the outpatient therapy services furnished by hospitals as recognized under section 1833(a)(8)(B) of the Act. Before then, outpatient therapy services furnished by hospitals had been exempted from the statutory therapy caps. Since 1999, hospitals have been paid for the outpatient therapy services they furnish at PFS rates—the applicable fee schedule established under section 1834(k)(3) of the Act.
Beginning October 1, 2012, CMS has been required to apply the therapy caps and related provisions to outpatient therapy services under section 1833(g) of the Act furnished in hospitals. As with other statutory provisions on therapy caps, this provision has been extended several times by additional legislation. Most recently, section 202(a) of the MACRA extended this broadened application of the therapy caps to include outpatient therapy services furnished by hospitals through December 31, 2017.
When we first implemented the statutory provision that extended application of the therapy caps to outpatient therapy services furnished by hospitals, we did not apply the therapy caps to most hospitals in Maryland. Originally, this omission was linked to our longstanding waiver policy under section 1814(b) of the Act, which allowed Maryland to set the payment rates for hospital services, including those for the outpatient therapy services they furnish. Since 2014, most hospitals in Maryland are paid at rates determined under the Maryland All-Payer Model, which is being tested under the authority of section 1115A of the Act.
To correct this oversight, we recently issued instructions through Change Request 9223 (available online at
Under the ambulance fee schedule, the Medicare program pays for ambulance transportation services for Medicare beneficiaries when other means of transportation are contraindicated by the beneficiary's medical condition and all other coverage requirements are met. Ambulance services are classified into different levels of ground (including water) and air ambulance services based on the medically necessary treatment provided during transport.
These services include the following levels of service:
Under sections 1834(l) and 1861(s)(7) of the Act, Medicare Part B (Supplemental Medical Insurance) covers and pays for ambulance services, to the extent prescribed in regulations, when the use of other methods of transportation would be contraindicated by the beneficiary's medical condition.
The House Ways and Means Committee and Senate Finance Committee Reports that accompanied the 1965 Social Security Amendments suggest that the Congress intended that—
• The ambulance benefit cover transportation services only if other means of transportation are contraindicated by the beneficiary's medical condition; and
• Only ambulance service to local facilities be covered unless necessary services are not available locally, in which case, transportation to the nearest facility furnishing those services is covered (H.R. Rep. No. 213, 89th Cong., 1st Sess. 37 and Rep. No. 404, 89th Cong., 1st Sess. Pt 1, 43 (1965)).
The reports indicate that transportation may also be provided from one hospital to another, to the beneficiary's home, or to an extended care facility.
Our regulations relating to ambulance services are set forth at 42 CFR part 410, subpart B and 42 CFR part 414, subpart H. Section 410.10(i) lists ambulance services as one of the covered medical and other health services under Medicare Part B. Therefore, ambulance services are subject to basic conditions and limitations set forth at § 410.12 and to specific conditions and limitations included at § 410.40 and § 410.41. Part 414, subpart H, describes how payment is made for ambulance services covered by Medicare.
Section 146(a) of the MIPPA amended section 1834(l)(13)(A) of the Act to specify that, effective for ground ambulance services furnished on or after July 1, 2008 and before January 1, 2010, the ambulance fee schedule amounts for ground ambulance services shall be increased as follows:
• For covered ground ambulance transports that originate in a rural area or in a rural census tract of a metropolitan statistical area, the fee schedule amounts shall be increased by 3 percent.
• For covered ground ambulance transports that do not originate in a rural area or in a rural census tract of a metropolitan statistical area, the fee schedule amounts shall be increased by 2 percent.
The payment add-ons under section 1834(l)(13)(A) of the Act have been extended several times. Most recently, section 203(a) of the Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10, enacted on April 16, 2015) amended section 1834(l)(13)(A) of the Act to extend the payment add-ons through December 31, 2017. Thus, these payment add-ons apply to covered ground ambulance transports furnished before January 1, 2018. We proposed to revise § 414.610(c)(1)(ii) to conform the regulations to this statutory requirement. (For a discussion of past legislation extending section 1834(l)(13) of the Act, please see the CY 2014 PFS final rule with comment period (78 FR 74438 through 74439) and the CY 2015 PFS final rule with comment period (79 FR 67743)).
This statutory requirement is self-implementing. A plain reading of the statute requires only a ministerial application of the mandated rate increase, and does not require any substantive exercise of discretion on the part of the Secretary. We received several comments regarding this proposal. The following is a summary of the comments we received and our response.
After consideration of the public comments received, we are finalizing our proposal to revise § 414.610(c)(1)(ii) to conform the regulations to this statutory requirement.
Section 414(c) of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Pub. L. 108-173, enacted on December 8, 2003) (MMA) added section 1834(l)(12) to the Act, which specified that, in the case of ground ambulance services furnished on or after July 1, 2004, and before January 1, 2010, for which transportation originates in a qualified rural area (as described in the statute), the Secretary shall provide for a percent increase in the base rate of the fee schedule for such transports. The statute requires this percent increase to be based on the Secretary's estimate of the average cost per trip for such services (not taking into account mileage) in the lowest quartile of all rural county populations as compared to the average cost per trip for such services (not taking into account mileage) in the highest quartile of rural county populations. Using the methodology specified in the July 1, 2004 interim final rule (69 FR 40288), we determined that this percent increase was equal to 22.6 percent. As required by the MMA, this payment increase was applied to ground ambulance transports that originated in a “qualified rural area,” that is, to transports that originated in a rural area included in those areas comprising the lowest 25th percentile of all rural populations arrayed by population density. For this purpose, rural areas included Goldsmith areas (a type of rural census tract). This rural bonus is sometimes referred to as the “Super Rural Bonus” and the qualified rural areas (also known as “super rural” areas) are identified during the claims adjudicative process via the use of a data field included in the CMS-supplied ZIP code file.
The Super Rural Bonus under section 1834(l)(12) of the Act has been extended several times. Most recently, section 203(b) of the Medicare Access and CHIP Reauthorization Act of 2015 amended section 1834(l)(12)(A) of the Act to extend this rural bonus through December 31, 2017. Therefore, we are continuing to apply the 22.6 percent rural bonus described in this section (in the same manner as in previous years) to ground ambulance services with dates of service before January 1, 2018 where transportation originates in a qualified rural area. Accordingly, we proposed to revise § 414.610(c)(5)(ii) to conform the regulations to this statutory requirement. (For a discussion of past legislation extending section 1834(l)(12) of the Act, please see the CY 2014 PFS final rule with comment period (78 FR 74439 through 74440) and the CY 2015 PFS final rule with comment period (79 FR 67743 through 67744)).
This statutory provision is self-implementing. It requires an extension of this rural bonus (which was previously established by the Secretary) through December 31, 2017, and does not require any substantive exercise of discretion on the part of the Secretary. We received several comments regarding this proposal. The following is a summary of the comments we received and our response.
After consideration of the public comments received, we are finalizing our proposal to revise § 414.610(c)(5)(ii) to conform the regulations to this statutory requirement.
In the CY 2015 PFS final rule with comment period (79 FR 67744 through 67750) as amended by the correction issued December 31, 2014 (79 FR 78716 through 78719), we adopted, beginning in CY 2015, the revised OMB delineations as set forth in OMB's February 28, 2013 bulletin (No. 13-01) and the most recent modifications of the Rural-Urban Commuting Area (RUCA) codes for purposes of payment under the ambulance fee schedule. With respect to the updated RUCA codes, we designated any census tracts falling at or above RUCA level 4.0 as rural areas. In addition, we stated that none of the super rural areas would lose their status upon implementation of the revised OMB delineations and updated RUCA codes. After publication of the CY 2015 PFS final rule with comment period and the correction, we received feedback from stakeholders expressing concerns about the implementation of the new geographic area delineations finalized in that rule (as corrected). In response to these concerns, in the CY 2016 PFS proposed rule (80 FR 41788 through 41792), we clarified our implementation of the revised OMB delineations and the updated RUCA codes in CY 2015, and reproposed the implementation of the revised OMB delineations and updated RUCA codes for CY 2016 and subsequent calendar years. We requested public comment on our proposals, which comments are further discussed in section III A.3.b. of this final rule with comment period.
Under section 1834(l)(2)(C) of the Act, the Secretary is required to consider appropriate regional and operational differences in establishing the ambulance fee schedule. Historically, the Medicare ambulance fee schedule has used the same geographic area designations as the acute care hospital inpatient prospective payment system (IPPS) and other Medicare payment systems to take into account appropriate regional (urban and rural) differences. This use of consistent geographic standards for Medicare payment purposes provides for consistency across the Medicare program.
The geographic areas used under the ambulance fee schedule effective in CY 2007 were based on OMB standards published on December 27, 2000 (65 FR 82228 through 82238), Census 2000 data, and Census Bureau population estimates for 2007 and 2008 (OMB Bulletin No. 10-02). For a discussion of OMB's delineation of Core-Based Statistical Areas (CBSAs) and our implementation of the CBSA definitions under the ambulance fee schedule, we refer readers to the preamble of the CY
Although the revisions OMB published on February 28, 2013 were not as sweeping as the changes made when we adopted the CBSA geographic designations for CY 2007, the February 28, 2013 OMB bulletin did contain a number of significant changes. For example, there are new CBSAs, urban counties that became rural, rural counties that became urban, and existing CBSAs that were split apart. As we stated in the CY 2015 PFS final rule with comment period (79 FR 67745), we reviewed our findings and impacts relating to the new OMB delineations, and found no compelling reason to further delay implementation. We stated in the CY 2015 final rule with comment period, and in the CY 2016 PFS proposed rule (80 FR 41788), that it is important for the ambulance fee schedule to use the latest labor market area delineations available as soon as reasonably possible to maintain a more accurate and up-to-date payment system that reflects the reality of population shifts.
Additionally, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49952), we adopted OMB's revised delineations to identify urban areas and rural areas for purposes of the IPPS wage index. For the reasons discussed in this section, we believe that it was appropriate to adopt the same geographic area delineations for use under the ambulance fee schedule as are used under the IPPS and other Medicare payment systems. Thus, in the CY 2016 PFS proposed rule (80 FR 41788), we proposed to continue implementation of the new OMB delineations as described in the February 28, 2013 OMB Bulletin No. 13-01 for CY 2016 and subsequent CYs to more accurately identify urban and rural areas for ambulance fee schedule payment purposes. We stated in the CY 2016 PFS proposed rule (80 FR 41788) that we continue to believe that the updated OMB delineations more realistically reflect rural and urban populations, and that the use of such delineations under the ambulance fee schedule would result in more accurate payment. Under the ambulance fee schedule, consistent with our current definitions of urban and rural areas (§ 414.605), in CY 2016 and subsequent CYs, MSAs would continue to be recognized as urban areas, while Micropolitan and other areas outside MSAs, and rural census tracts within MSAs (as discussed below in this section), would continue to be recognized as rural areas. We invited public comments on this proposal.
In addition to the OMB's statistical area delineations, the current geographic areas used in the ambulance fee schedule also are based on rural census tracts determined under the most recent version of the Goldsmith Modification. These rural census tracts within MSAs are considered rural areas under the ambulance fee schedule (see § 414.605). For certain rural add-on payments, section 1834(l) of the Act requires that we use the most recent version of the Goldsmith Modification to determine rural census tracts within MSAs. In the CY 2007 PFS final rule with comment period (71 FR 69714 through 69716), we adopted the most recent (at that time) version of the Goldsmith Modification, designated as RUCA codes. RUCA codes use urbanization, population density, and daily commuting data to categorize every census tract in the country. For a discussion about RUCA codes, we refer the reader to the CY 2007 PFS final rule with comment period (71 FR 69714 through 69716), the CY 2015 PFS final rule with comment period (79 FR 67745 through 67746) and the CY 2016 PFS proposed rule (80 FR 41788 through 41789). As stated previously, on February 28, 2013, OMB issued OMB Bulletin No. 13-01, which established revised delineations for MSAs, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. Several modifications of the RUCA codes were necessary to take into account updated commuting data and the revised OMB delineations. We refer readers to the U.S. Department of Agriculture's Economic Research Service Web site for a detailed listing of updated RUCA codes found at
As we stated in the CY 2015 PFS final rule with comment period (79 FR 67745) and in the CY 2016 PFS proposed rule (80 FR 41789), the 2010 Primary RUCA codes are as follows:
(1) Metropolitan area core: Primary flow with an urbanized area (UA).
(2) Metropolitan area high commuting: Primary flow 30 percent or more to a UA.
(3) Metropolitan area low commuting: Primary flow 10 to 30 percent to a UA.
(4) Micropolitan area core: Primary flow within an Urban Cluster of 10,000 to 49,999 (large UC).
(5) Micropolitan high commuting: Primary flow 30 percent or more to a large UC.
(6) Micropolitan low commuting: Primary flow 10 to 30 percent to a large UC.
(7) Small town core: Primary flow within an Urban Cluster of 2,500 to 9,999 (small UC).
(8) Small town high commuting: Primary flow 30 percent or more to a small UC.
(9) Small town low commuting: Primary flow 10 to 30 percent to a small UC.
(10) Rural areas: Primary flow to a tract outside a UA or UC.
Based on this classification, and consistent with our current policy as set forth in the CY 2015 PFS final rule with comment period (79 FR 67745), we proposed to continue to designate any census tracts falling at or above RUCA level 4.0 as rural areas for purposes of payment for ambulance services under the ambulance fee schedule. As discussed in the CY 2007 PFS final rule with comment period (71 FR 69715), the CY 2015 PFS final rule with comment period (79 FR 67745), and the CY 2016 PFS proposed rule (80 FR 41789), the Office of Rural Health Policy within the Health Resources and Services Administration (HRSA) determines eligibility for its rural grant programs through the use of the RUCA code methodology. Under this methodology, HRSA designates any census tract that falls in RUCA level 4.0 or higher as a rural census tract. In addition to designating any census tracts falling at or above RUCA level 4.0 as rural areas, under the updated RUCA code definitions, HRSA has also designated as rural census tracts those census tracts with RUCA codes 2 or 3 that are at least 400 square miles in area with a population density of no more than 35 people. We refer readers to HRSA's Web site at
Also, consistent with the policy we finalized in the CY 2015 PFS final rule with comment period (79 FR 67749), we did not propose in the CY 2016 PFS proposed rule (80 FR 41789) to designate as rural areas those census tracts that fall in RUCA levels 2 or 3 that are at least 400 square miles in area with a population density of no more than 35 people. We stated in the CY 2016 PFS proposed rule (80 FR 41789) that it is not feasible to implement this guideline due to the complexities of identifying these areas at the ZIP code level. We stated that we do not have sufficient information available to identify the ZIP codes that fall in these specific census tracts. Also, payment under the ambulance fee schedule is based on ZIP codes; therefore, if the ZIP code is predominantly metropolitan but has some rural census tracts, we do not split the ZIP code areas to distinguish further granularity to provide different payments within the same ZIP code. We stated that we believe payment for all ambulance transportation services at the ZIP code level provides for a more consistent and administratively feasible payment system. For example, there are circumstances where ZIP codes cross county or census tract borders and where counties or census tracts cross ZIP code borders. Such overlaps in geographic designations would complicate our ability to appropriately assign ambulance transportation services to geographic areas for payment under the ambulance fee schedule if we were to pay based on ZIP codes for some areas and counties or census tracts for other areas. Therefore, we stated in the proposed rule (80 FR 41789) that, under the ambulance fee schedule, we would not designate as rural areas those census tracts that fall in RUCA levels 2 or 3 that are at least 400 square miles in area with a population density of no more than 35 people.
We invited public comments on our proposals, as discussed in in the CY 2016 PFS proposed rule, to continue to use the revised OMB delineations and updated RUCA codes under the ambulance fee schedule for CY 2016 and subsequent CYs.
As we stated in the CY 2015 PFS final rule with comment period (79 FR 67746) and the CY 2016 PFS proposed rule (80 FR 41789 through 41790), the adoption of the most current OMB delineations and the updated RUCA codes would affect whether certain areas are recognized as rural or urban. The distinction between urban and rural is important for ambulance payment purposes because urban and rural transports are paid differently. The determination of whether a transport is urban or rural is based on the point of pick-up for the transport; thus, a transport is paid differently depending on whether the point of pick-up is in an urban or a rural area. During claims processing, a geographic designation of urban, rural, or super rural is assigned to each claim for an ambulance transport based on the point of pick-up ZIP code that is indicated on the claim.
The continued implementation of the revised OMB delineations and the updated RUCA codes would continue to affect whether or not transports would be eligible for rural adjustments under the ambulance fee schedule statute and regulations. For ground ambulance transports where the point of pick-up is in a rural area, the mileage rate is increased by 50 percent for each of the first 17 miles (§ 414.610(c)(5)(i)). For air ambulance services where the point of pick-up is in a rural area, the total payment (base rate and mileage rate) is increased by 50 percent (§ 414.610(c)(5)(i)).
Section 1834(l)(12) of the Act (as amended most recently by section 203(b) of the Medicare Access and CHIP Reauthorization Act of 2015) specifies that, for services furnished during the period July 1, 2004 through December 31, 2017, the payment amount for the ground ambulance base rate is increased by a “percent increase” (Super Rural Bonus) where the ambulance transport originates in a “qualified rural area,” which is a rural area that we determine to be in the lowest 25th percentile of all rural populations arrayed by population density (also known as a “super rural area”). We implement this Super Rural Bonus in § 414.610(c)(5)(ii). As discussed in section III.A.2.b. of this final rule with comment period, we are revising § 414.610(c)(5)(ii) to conform the regulations to this statutory requirement. As we stated in the CY 2015 PFS final rule with comment period (79 FR 67746) and the CY 2016 PFS proposed rule (80 FR 41790), adoption of the revised OMB delineations and the updated RUCA codes would have no negative impact on ambulance transports in super rural areas, as none of the current super rural areas would lose their status due to the revised OMB delineations and the updated RUCA codes. Furthermore, under section 1834(l)(13) of the Act (as amended most recently by section 203(a) of the Medicare Access and CHIP Reauthorization Act of 2015), for ground ambulance transports furnished through December 31, 2017, transports originating in rural areas are paid based on a rate (both base rate and mileage rate) that is 3 percent higher than otherwise is applicable. (See also § 414.610(c)(1)(ii)). As discussed in section III.A.2.a. of this final rule with comment period, we are revising § 414.610(c)(1)(ii) to conform the
Similar to our discussion in the CY 2015 PFS final rule with comment period (79 FR 67746) and the CY 2016 PFS proposed rule (80 FR 41790), if we continue to use OMB's revised delineations and the updated RUCA codes for CY 2016 and subsequent CYs, ambulance providers and suppliers that pick up Medicare beneficiaries in areas that would be Micropolitan or otherwise outside of MSAs based on OMB's revised delineations or in a rural census tract of an MSA based on the updated RUCA codes (but were within urban areas under the geographic delineations in effect in CY 2014) would continue to experience increases in payment for such transports (as compared to the CY 2014 geographic delineations) because they may be eligible for the rural adjustment factors discussed in this section. In addition, those ambulance providers and suppliers that pick up Medicare beneficiaries in areas that would be urban based on OMB's revised delineations and the updated RUCA codes (but were previously in Micropolitan Areas or otherwise outside of MSAs, or in a rural census tract of an MSA under the geographic delineations in effect in CY 2014) would continue to experience decreases in payment for such transports (as compared to the CY 2014 geographic delineations) because they would no longer be eligible for the rural adjustment factors discussed in this section.
The continued use of the revised OMB delineations and the updated RUCA codes for CY 2016 and subsequent CYs would mean the continued recognition of urban and rural boundaries based on the population migration that occurred over a 10-year period, between 2000 and 2010. As discussed in this section, we proposed to continue to use the updated RUCA codes to identify rural census tracts within MSAs, such that any census tracts falling at or above RUCA level 4.0 would continue to be designated as rural areas. To determine which ZIP codes are included in each such rural census tract, we proposed to continue to use the ZIP code approximation file developed by HRSA. This file includes the 2010 RUCA code designation for each ZIP code and can be found at
Based on the August 2015 USPS ZIP code file that we are using in this final rule with comment period to assess the impacts of the revised geographic delineations, there are a total of 42,927 ZIP codes in the U.S. Table 23 sets forth an analysis of the number of ZIP codes that changed urban/rural status in each U.S. state and territory after CY 2014 due to our implementation of the revised OMB delineations and the updated RUCA codes beginning in CY 2015, using the August 2015 USPS ZIP code file, the revised OMB delineations, and the updated RUCA codes (including the RUCA ZIP code approximation file discussed above). Based on this data, the geographic designations for approximately 95.22 percent of ZIP codes are unchanged by OMB's revised delineations and the updated RUCA codes. Similar to the analysis set forth in the CY 2015 PFS final rule with comment period, as corrected (79 FR 78716 through 78719), and the CY 2016 PFS proposed rule (80 FR 41790 through 41791), as reflected in Table 23, more ZIP codes have changed from rural to urban (1,600 or 3.73 percent) than from urban to rural (451 or 1.05 percent). In general, it is expected that ambulance providers and suppliers in 451 ZIP codes within 42 states may continue to experience payment increases under the revised OMB delineations and the updated RUCA codes, as these areas have been redesignated from urban to rural. The state of Ohio has the most ZIP codes that changed from urban to rural with a total of 54, or 3.63 percent of all zip codes in the state. Ambulance providers and suppliers in 1,600 ZIP codes within 44 states and Puerto Rico may continue to experience payment decreases under the revised OMB delineations and the updated RUCA codes, as these areas have been redesignated from rural to urban. The state of West Virginia has the most ZIP codes that changed from rural to urban (149 or 15.92 percent of all zip codes in the state). As discussed in this section, these findings are illustrated in Table 23.
For more detail on the impact of these changes, in addition to Table 23, the following files are available through the Internet on the Ambulance Fee Schedule Web site at
We stated in the CY 2015 PFS final rule with comment period (79 FR 67750) and in the CY 2016 PFS proposed rule (80 FR 41792) that we believe the most current OMB statistical area delineations, coupled with the updated RUCA codes, more accurately reflect the contemporary urban and rural nature of areas across the country, and thus we believe the use of the most current OMB delineations and RUCA codes under the ambulance fee schedule will enhance the accuracy of ambulance fee schedule payments. As we discussed in the CY 2015 PFS final rule with comment period (79 FR 67750), we considered, as alternatives, whether it would be appropriate to delay the implementation of the revised OMB delineations and the updated RUCA codes, or to phase in the implementation of the new geographic delineations over a transition period for those ZIP codes losing rural status. We determined that it would not be appropriate to implement a delay or a transition period for the revised geographic delineations for the reasons set forth in the CY 2015 PFS final rule. Similarly, we considered whether a delay in implementation or a transition period would be appropriate for CY 2016 and subsequent CYs. We stated in the CY 2016 PFS proposed rule (80 FR 41792) that we continue to believe it is important to use the most current OMB delineations and RUCA codes available as soon as reasonably possible to maintain a more accurate and up-to-date payment system that reflects the reality
We invited public comments on our proposals to continue implementation of the revised OMB delineations as set forth in OMB's February 28, 2013 bulletin (No. 13-01) and the most recent modifications of the RUCA codes as discussed above for CY 2016 and subsequent CYs for purposes of payment under the ambulance fee schedule. In addition, we invited public comments on any alternative methods for implementing the revised OMB delineations and the updated RUCA codes.
We received several comments from ambulance providers and suppliers and associations representing ambulance providers and suppliers on our proposals to continue implementation of the revised OMB delineations and the most recent modifications of the RUCA codes as discussed above for CY 2016 and subsequent CYs. The following is a summary of those comments along with our responses.
We have concerns with the methodology proposed by the commenters to identify as rural certain census tracts with RUCA codes of 2 and 3. The 132 census tracts recognized as rural by HRSA have RUCA code designations of 2 or 3, indicating that the census tracts are predominantly urban. To assign these entire census tracts a RUCA code of 4 before cross walking the ZIP codes could result in inappropriate classifications of urban areas as rural. Payment under the ambulance fee schedule is based on ZIP codes (§ 414.610(e)). We would require a list of ZIP codes assigned to the 132 census tracts with RUCA codes of 2 and 3 that are at least 400 square miles in area with a population density of no more than 35 people per square mile to appropriately identify these areas as rural. As we previously discussed, we do not have sufficient information available to identify the ZIP codes that fall in these specific census tracts. We do not believe it would be prudent at this time to implement the commenters' suggested methodology absent the data and methodology to precisely identify the ZIP codes for the census tracts with RUCA codes of 2 and 3 that are at least 400 square miles in area with a population density of no more than 35 people per square mile. We will consider further evaluating for CY 2017 these additional census tracts that HRSA has designated as rural and the feasibility of identifying the ZIP codes that are assigned to those areas.
According to the Census Bureau's Web site, the content collected by the ACS can be grouped into four main types of characteristics—social, economic, demographic, and housing. For example, economic characteristics include such topics as health insurance coverage, income, benefits, employment status, occupation, industry, commuting to work, and place of work. This is the same information that was collected by the 2010 Census.
The ACS is a continuous survey, in which, each month, a sample of housing unit addresses receives a questionnaire. For the ACS, the Census Bureau selects a random sample of addresses where workers reside to be included in the survey, and the sample is designed to ensure good geographic coverage. About 3.5 million addresses are surveyed each year. The ACS collects data from the 50 states, the District of Columbia, and Puerto Rico. The survey had the following response rates at the state level for 2006-2010: 91.1 percent to 99.0 percent in 2006, 91.7 percent to 99.3 percent in 2007, 91.4 percent to 99.4 percent in 2008, 94.9 percent to 99.4 percent in 2009, and 95.3 percent to 99.0 percent in 2010. The ACS collects survey information continuously and then aggregates the results over a specific period of time—1 year, 3 years, or 5 years. The ACS period estimates describe the average characteristics of the population or housing over a specified period of time. For smaller geographic areas, such as the census tracts, 5 year estimates are used. As mentioned in this section, the most recent update of the RUCA codes was developed using data collected from the 2006, 2007, 2008, 2009, and 2010 ACS. According to the Census Bureau, the estimates that they published based on the ACS had a 90 percent confidence interval.
According to the USDA's Web site,
We do not believe it is necessary to issue an ANPRM prior to the CY 2017 rulemaking cycle. In the CY 2016 PFS proposed rule and in past rules, we have discussed the implementation of the OMB delineations and the RUCA codes for purposes of payment under the ambulance fee schedule, and we believe that the public has had ample opportunity to provide comments and suggestions about other methodologies for designating geographic areas or other policy modifications that should be adopted to apply the RUCA code designations. We note that the public did not provide any suggestions for any alternative data sources for designating rural geographic areas.
We note that we utilize the ACS data in other Medicare payment systems as well. In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49501), we finalized our proposal that the out-migration adjustments be based on commuting data compiled by the Census Bureau that were derived from a custom tabulation of the ACS, an official Census Bureau survey, utilizing 2008 through 2012 (5-Year) Microdata. (See also the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24471)). Furthermore, the physician fee schedule uses the 2008-2010 ACS data for calculating the office rent component of the PE of the geographic practice cost index (78 FR 74390).
After consideration of the public comments received and for the reasons discussed in this section and in the CY 2016 PFS proposed rule, we are finalizing without modification our proposal to continue implementation of the revised OMB delineations as set forth in OMB's February 28, 2013 bulletin (No. 13-01) and the most recent modifications of the RUCA codes, as discussed in this section, for CY 2016 and subsequent CYs for purposes of payment under the ambulance fee schedule. As we proposed, using the updated RUCA code definitions, we will continue to designate any census tracts falling at or above RUCA code 4.0 as rural areas. In addition, as discussed in this section, none of the current super rural areas will lose their super rural status upon implementation of the revised OMB delineations and the updated RUCA codes.
Under section 1861(s)(7) of the Act, Medicare Part B covers ambulance services when the use of other methods of transportation is contraindicated by the individual's medical condition, but only to the extent provided in regulations. Section 410.41(b)(1) requires that a vehicle furnishing ambulance services at the Basic Life Support (BLS) level must be staffed by at least two people, one of whom must meet the following requirements: (1) Be certified as an emergency medical technician by the state or local authority where the services are furnished; and (2) be legally authorized to operate all lifesaving and life-sustaining equipment on board the vehicle.
Section 410.41(b)(2) states that, for vehicles furnishing ambulance services at the Advanced Life Support (ALS) level, ambulance providers and suppliers must meet the staffing requirements for vehicles furnishing services at the BLS level, and, additionally, that one of the two staff members must be certified as a paramedic or an emergency medical technician, by the state or local authority where the services are being furnished, to perform one or more ALS services. These staffing requirements are further explained in the Medicare Benefit Policy Manual (Pub. No. 100-02), Chapter 10 (see sections 10.1.2 and 30.1.1)
In its July 24, 2014 Management Implication Report, 13-0006, entitled “Medicare Requirements for Ambulance Crew Certification,” the Office of Inspector General (OIG) discussed its investigation of ambulance suppliers in a state that requires a higher level of training than Medicare requires for ambulance staff. In some instances, OIG found that second crew members: (1) Possessed a lower level of training than required by state law, or (2) had purchased or falsified documentation to establish their credentials. The OIG expressed its concern that our current regulations and manual provisions do not set forth licensure or certification requirements for the second crew member. The OIG was informed by federal prosecutors that prosecuting
As we stated in the CY 2016 PFS proposed rule (80 FR 41792), the OIG recommended that Medicare revise its regulations and manual provisions related to ambulance staffing to parallel the standard used for vehicle requirements at § 410.41(a), which requires that ambulances be equipped in ways that comply with state and local laws. Specifically, the OIG recommended that our regulation and manual provisions addressing ambulance vehicle staffing should indicate that, for Medicare to cover ambulance services furnished to a Medicare beneficiary, the ambulance crew must meet the requirements currently set forth in § 410.41(b) or the state and local requirements, whichever are more stringent. Currently, § 410.41(b) does not require that ambulance vehicle staff comply with all applicable state and local laws. In the CY 2016 PFS proposed rule, we stated that we agree with OIG's concerns and believe that requiring ambulance staff to also comply with state and local requirements would enhance the quality and safety of ambulance services furnished to Medicare beneficiaries.
Accordingly, in the CY 2016 PFS proposed rule (80 FR 41792), we proposed to revise § 410.41(b) to require that all Medicare-covered ambulance transports must be staffed by at least two people who meet both the requirements of applicable state and local laws where the services are being furnished, and the current Medicare requirements under § 410.41(b). We believe that this would, in effect, require both of the required ambulance vehicle staff to also satisfy any applicable state and local requirements that may be more stringent than those currently set forth at § 410.41(b), consistent with OIG's recommendation. In addition, we proposed to revise the definition of Basic Life Support (BLS) in § 414.605 to include the proposed revised staffing requirements discussed above for § 410.41(b) (80 FR 41793). We stated that these revisions to § 410.41(b) and § 414.605 would account for differences in individual state or local staffing and licensure requirements, better accommodating state or local laws enacted to ensure beneficiaries' health and safety. Likewise, these revisions would strengthen the federal government's ability to prosecute violations associated with such requirements and recover inappropriately or fraudulently received funds from ambulance companies found to be operating in violation of state or local laws. Furthermore, we stated in the proposed rule that we believe these proposals would enhance the quality and safety of ambulance services provided to Medicare beneficiaries.
In addition, we proposed to revise § 410.41(b) and the definition of Basic Life Support (BLS) in § 414.605 to clarify that, for BLS vehicles, at least one of the staff members must be certified, at a minimum, as an emergency medical technician—basic (EMT-Basic), which we believe would more clearly state our current policy (80 FR 41793). Currently, these regulations require that, for BLS vehicles, one staff member be certified as an EMT (§ 410.41(b)) or EMT-Basic (§ 414.605). These revisions to the regulations do not change our current policy, but clarify that one of the BLS vehicle staff members must be certified at the minimum level of EMT-Basic, but may also be certified at a higher level, for example, EMT-intermediate or EMT paramedic.
Finally, we proposed to revise the definition of Basic Life Support (BLS) in § 414.605 to delete the last sentence, which sets forth examples of certain state law provisions (80 FR 41793). This sentence has been included in the definition of BLS since the ambulance fee schedule was finalized in 2002 (67 FR 9100, Feb. 27, 2002). Because state laws may change over the course of time, we are concerned that this sentence may not accurately reflect the status of the relevant state laws over time. Therefore, we proposed to delete the last sentence of this definition. Furthermore, we do not believe that the examples set forth in this sentence are necessary to convey the definition of BLS for Medicare coverage and payment purposes.
We invited public comments on our proposals to revise the ambulance vehicle staffing requirements in § 410.41(b) and the definition of Basic Life Support (BLS) in § 414.605, as discussed in this section. We also stated that, if we finalized these proposals, we would revise our manual provisions addressing ambulance vehicle staffing as appropriate, consistent with our finalized policy.
We received approximately 21 comments from ambulance providers and suppliers and associations representing such entities. The following is a summary of the comments we received along with our responses.
Two commenters opposed the proposed changes to the ambulance staffing requirements, expressing concern that the proposed changes would require both crew members to be certified as EMTs, a change they believed would negatively impact ambulance services in rural communities. One of these commenters stated that such a change would (1) not increase the level of care provided to the patient being transported, and (2) make it more difficult for volunteer Emergency Medical Services (EMS) providers to be properly reimbursed for their work. The commenters also stated that this requirement would limit access in rural communities, and that it would be difficult for volunteer EMS staff to meet such requirements.
After consideration of the public comments received, and for the reasons discussed in this section, we are finalizing without modification our proposals to revise (1) § 410.41(b) and the definition of Basic Life Support (BLS) in § 414.605, as discussed in this section, to require that all Medicare-covered ambulance transports be staffed by at least two people who meet both the requirements of state and local laws where the services are being furnished, and the current Medicare requirements, (2) § 410.41(b) and the definition of Basic Life Support (BLS) in § 414.605 to clarify that for BLS vehicles, one of the staff members must be certified at a minimum as an EMT-Basic, and (3) the definition of Basic Life Support (BLS) in § 414.605 to delete the last sentence, which sets forth examples of certain state law provisions. We will also revise our manual provisions addressing ambulance vehicle staffing, as appropriate, to be consistent with these finalized policies.
Over the last several years, we have been increasing our focus on primary care, and have explored ways in which care coordination can improve health outcomes and reduce expenditures.
In the CY 2012 PFS proposed rule (76 FR 42793 through 42794, and 42917 through 42920), and the CY 2012 PFS final rule (76 FR 73063 through 73064), we discussed how primary care services have evolved to focus on preventing and managing chronic disease, and how refinements for payment for post-discharge care management services could improve care management for a beneficiary's transition from the hospital to the community setting. We acknowledged that the care coordination included in services such as office visits does not always describe adequately the non-face-to-face care management work involved in primary care, and may not reflect all the services and resources required to furnish comprehensive, coordinated care management for certain categories of beneficiaries, such as those who are returning to a community setting following discharge from a hospital or skilled nursing facility (SNF) stay. We initiated a public discussion on primary care and care coordination services, and stated that we would consider payment enhancements in future rulemaking as part of a multiple year strategy exploring the best means to encourage primary care and care coordination services.
In the CY 2013 PFS proposed rule (77 FR 44774 through 44775), we noted several initiatives and programs designed to improve payment for, and encourage long-term investment in, care management services. These include the Medicare Shared Savings Program; testing of the Pioneer Accountable Care Organization (ACO) model and the Advance Payment ACO model; the Primary Care Incentive Payment (PCIP) Program; the patient-centered medical home model in the Multi-payer Advanced Primary Care Practice (MAPCP) Demonstration; the Federally Qualified Health Center (FQHC) Advanced Primary Care Practice demonstration; the Comprehensive Primary Care (CPC) initiative; and the HHS Strategic Framework on Multiple Chronic Conditions. We also noted that we were monitoring the progress of the AMA Chronic Care Coordination Workgroup in developing codes to describe care transition and care coordination activities, and proposed refinement of the PFS payment for post discharge care management services.
In the CY 2013 PFS final rule (77 FR 68978 through 68994), we finalized policies for payment of Transitional Care Management (TCM) services, effective January 1, 2013. We adopted two CPT codes (99495 and 99496) to report physician or qualifying nonphysician practitioner care management services for a patient following a discharge from an inpatient hospital or SNF, an outpatient hospital stay for observation or partial hospitalization services, or partial hospitalization in a community mental health center. As a condition for receiving TCM payment, a face-to-face visit was required.
In the CY 2014 PFS proposed rule (78 FR 43337 through 43343), we proposed to establish separate payment under the PFS for chronic care management (CCM) services and proposed a scope of services and requirements for billing and supervision. In the CY 2014 PFS final rule (78 74414 through 74427), we finalized policies to establish separate payment under the PFS for CCM services furnished to patients with multiple chronic conditions that are expected to last at least 12 months or until the death of the patient, and that place the patient at significant risk of death, acute exacerbation/decompensation, or functional decline. In the CY 2015 PFS final rule (79 FR 67715 through 67730), additional billing requirements were finalized, including the requirement to furnish CCM services using a certified electronic health record or other electronic technology. Payment for CCM services was effective beginning on January 1, 2015, for physicians billing under the PFS.
A RHC or FQHC visit must be a face-to-face encounter between the patient and a RHC or FQHC practitioner (physician, nurse practitioner, physician assistant, certified nurse midwife, clinical psychologist, or clinical social worker, and under certain conditions, an RN or LPN furnishing care to a homebound RHC or FQHC patient) during which time one or more RHC or FQHC services are furnished. A TCM service can also be a RHC or FQHC visit. A Diabetes Self-Management Training (DSMT) service or a Medical Nutrition Therapy (MNT) service furnished by a certified DSMT or MNT provider may also be a FQHC visit.
RHCs are paid an all-inclusive rate (AIR) for medically-necessary medical and mental health services, and qualified preventive health services furnished on the same day (with some exceptions). In general, the A/B MAC calculates the AIR for each RHC by dividing total allowable costs by the total number of visits for all patients. Productivity, payment limits, and other factors are also considered in the calculation. Allowable costs must be reasonable and necessary and may include practitioner compensation, overhead, equipment, space, supplies, personnel, and other costs incident to the delivery of RHC services. The AIR is subject to a payment limit, except for those RHCs that have an exception to the payment limit. Services furnished incident to a RHC professional service are included in the per-visit payment and are not billed separately.
FQHCs have also been paid under the AIR methodology; however, on October 1, 2014, FQHCs began to transition to a FQHC PPS system in which they are paid based on the lesser of a national encounter-based rate or their total adjusted charges. The FQHC PPS rate is adjusted for geographic differences in the cost of services by the FQHC
To address the concern that the non-face-to-face care management work involved in furnishing comprehensive, coordinated care management for certain categories of beneficiaries is not adequately paid for as part of an office visit, beginning on January 1, 2015, practitioners billing under the PFS are paid separately for CCM services under CPT code 99490 when CCM service requirements are met.
RHCs and FQHCs cannot bill under the PFS for RHC or FQHC services and individual practitioners working at RHCs and FQHCs cannot bill under the PFS for RHC or FQHC services while working at the RHC or FQHC. Although many RHCs and FQHCs coordinate services within their own facilities, and may sometimes help to coordinate services outside their facilities, the type of structured care management services that are now payable under the PFS for patients with multiple chronic conditions, particularly for those who are transitioning from a hospital or SNF back into their communities, are generally not included in the RHC or FQHC payment. We proposed to provide an additional payment for the costs of CCM services that are not already captured in the RHC AIR or the FQHC PPS payment, beginning on January 1, 2016. Services that are currently being furnished and paid under the RHC AIR or FQHC PPS payment methodology will not be affected by the ability of the RHC or FQHC to receive payment for additional services that are not included in the RHC AIR or FQHC PPS.
In the May 2, 2014 final rule, “Medicare Program: Prospective Payment System for Federally Qualified Health Centers; Changes to Contracting Policies for Rural Health Clinics; and Changes to Clinical Laboratory Improvement Amendments of 1988 Enforcement Actions for Proficiency Testing Referral Final Rule” (79 FR 25447), we discussed ways to achieve the Affordable Care Act goal of furnishing integrated and coordinated services, and specifically noted the CCM services program beginning in 2015 for physicians billing under the PFS. We encouraged RHCs and FQHCs to review the CCM services information in the CY 2014 PFS final rule with comment period and submit comments to us on how the CCM services payment could be adapted for RHCs and FQHCs to promote integrated and coordinated care in RHCs and FQHCs.
All of the comments we received in response to this request were strongly supportive of payment to RHCs and FQHCs for CCM services. Some commenters were concerned that the requirements for electronic exchange of information and interoperability with other providers would be difficult for some entities, and that some patients do not have the resources to receive secure messages via the internet. One commenter suggested that the additional G-codes for CCM services should be sufficient to cover the associated costs of documenting care coordination in FQHCs, and another commenter suggested that we develop a risk-adjusted CCM services fee. We also received subsequent recommendations from the National Association of Rural Health Clinics on various payment options for CCM services in RHCs. These comments were very helpful in forming the basis for this proposal, and we thank the commenters for their comments.
The requirements we proposed for RHCs and FQHCs to receive payment for CCM services are consistent with those finalized in the CY 2015 PFS final rule with comment period for practitioners billing under the PFS and are summarized in Table 24. We proposed to establish payment, beginning on January 1, 2016, for RHCs and FQHCs that furnish a minimum of 20 minutes of qualifying CCM services during a calendar month to patients with multiple (two or more) chronic conditions that would be expected to last at least 12 months or until the death of the patient, and that would place the patient at significant risk of death, acute exacerbation/decompensation, or functional decline. The CPT code descriptor sets forth the eligibility guidelines for CCM services and would serve as the basis for potential medical review. In accordance with both the CPT instructions and Medicare policy, only one practitioner can bill this code per month, and there are restrictions regarding the billing of other overlapping care management services during the same service period. The following section discusses these aspects of our proposal in more detail and additional information will be communicated in sub-regulatory guidance.
We proposed that a RHC or FQHC could bill for CCM services furnished by, or incident to, the services of a RHC or FQHC physician, NP, PA, or certified nurse midwife (CNM) for a RHC or FQHC patient once per month, and that only one CCM payment per beneficiary per month could be paid. If another practice furnishes CCM services to a beneficiary, the RHC or FQHC could not bill for CCM services for the same beneficiary for the same service period. We also proposed that TCM and any other program that provided additional payment for care management services (outside of the RHC AIR or FQHC PPS payment) cannot be billed during the same service period.
For purposes of meeting the minimum 20-minute requirement, the RHC or FQHC could count the time of only one practitioner or auxiliary staff (for example, a nurse, medical assistant, or other individual working under the supervision of a RHC or FQHC physician or other practitioner) at a time, and could not count overlapping intervals such as when two or more RHC or FQHC practitioners are meeting about the patient. Only conversations that fall under the scope of CCM services would be included towards the time requirement.
We noted that for billing under the PFS, the care coordination included in services such as office visits do not always describe adequately the non-face-to-face care management work involved in primary care. We also noted that payment for office visits may not reflect all the services and resources required to furnish comprehensive, coordinated care management for certain categories of beneficiaries, such as those who are returning to a community setting following discharge from a hospital or SNF stay. We proposed CCM payment for RHCs and FQHCs because we believe that the non-face-to-face time required to coordinate care is not captured in the RHC AIR or the FQHC PPS payment, particularly for the rural and/or low-income populations served by RHCs and FQHCs. Allowing separate payment for CCM services in RHCs and FQHCs is intended to reflect the additional resources necessary for the unique components of CCM services.
We proposed that payment for CCM services be based on the PFS national average non-facility payment rate when CPT code 99490 is billed alone or with other payable services on a RHC or FQHC claim. (For the first quarter of 2015, the national average payment rate was $42.91 per beneficiary per calendar month.) This rate would not be subject to a geographic adjustment. CCM payment to RHCs and FQHCs would be based on the PFS amount, but would be paid as part of the RHC and FQHC benefit, using the CPT code to identify that the requirements for payment are met and a separate payment should be made. We also proposed to waive the RHC and FQHC face-to-face requirements when CCM services are furnished to a RHC or FQHC patient. Coinsurance would be applied as applicable to FQHC claims, and coinsurance and deductibles would apply to RHC claims as applicable. RHCs and FQHCs would continue to be required to meet the RHC and FQHC Conditions of Participation and any additional RHC or FQHC payment requirements.
We considered adding CCM services as a RHC or FQHC covered stand-alone service and removing the RHC/FQHC policy requiring a face-to-face visit requirement for this service. Under this option, payment for RHCs would be at the AIR, payment for FQHCs would be the lesser of total charges or the PPS rate, and if CCM services are furnished on the same day as another payable medical visit, only one visit would be paid. We did not propose this payment option because it would result in a significant overpayment if no other services were furnished on the same day, and would result in no additional payment if furnished on the same day as another medical visit.
We also considered allowing RHCs and FQHCs to carve out CCM services and bill them separately to the PFS. We did not propose this payment option because CCM services are a RHC and FQHC service and only non-RHC/FQHC services can be billed through the PFS.
We also considered developing a modifier that could be added to the claim for additional payment when CCM services are furnished. We did not propose this option because it would require that payment for CCM services be made only when furnished along with a billable service that qualifies as an RHC or FQHC service.
We also considered establishing payment for CCM costs on a reasonable cost basis through the cost report. We did not propose this option because payment for CCM services through the cost report would complicate coinsurance and/or deductible accountability, whereas it is more administratively feasible to apply coinsurance and/or deductible on a RHC/FQHC claim, as applicable. For example, section 1833(a)(3) of the Act specifies that influenza and pneumococcal vaccines and their administration are exempt from payment at 80 percent of reasonable costs and payment to RHCs and FQHCs for such services is at 100 percent of reasonable cost. Since influenza and pneumococcal vaccines and their administration are not subject to copayment, it is administratively feasible to pay these services through the cost report.
Consistent with beneficiary eligibility requirements under the PFS, we proposed that RHCs and FQHCs receive payment for furnishing CCM services to patients with multiple chronic conditions that are expected to last at least 12 months or until the death of the patient, as determined by the RHC or FQHC practitioner, and that place the patient at significant risk of death, acute exacerbation/decompensation, or functional decline. We encouraged RHCs and FQHCs to focus on patients with high acuity and high risk when furnishing CCM services to eligible patients, including those who would be returning to a community setting following discharge from a hospital or SNF.
Not all patients who are eligible for separately payable CCM services may necessarily want these services to be provided, and some patients who receive CCM services may wish to discontinue them. A beneficiary who declines to receive CCM services from the RHC or FQHC, or who accepts the services and then chooses to revoke his/her agreement, would continue to be able to receive care from the RHC or FQHC and receive any care management services that were being furnished under the RHC AIR or FQHC PPS payment system.
Consistent with beneficiary notification and consent requirements under the PFS, we proposed that the following requirements be met before the RHC or FQHC can furnish or bill for CCM services:
• The eligible beneficiary must be informed about the availability of CCM services from the RHC or FQHC and provide his or her written agreement to have the services provided, including the electronic communication of the patient's information with other treating providers as part of care coordination. This would include a discussion with the patient about what CCM services are, how they differ from any care management services the RHC or FQHC currently offers, how these services are accessed, how the patient's information will be shared among others, that a non RHC or FQHC cannot furnish or bill for CCM services during the same calendar month that the RHC or FQHC furnishes CCM services, the applicability of coinsurance even when CCM services are not delivered face-to-face in the RHC or FQHC, and that any care management services that are currently provided will continue even if the patient does not agree to have CCM services provided.
• The RHC or FQHC must document in the patient's medical record that all of the CCM services were explained and offered to the patient, and note the patient's decision to accept these services.
• At the time the agreement is obtained, the eligible beneficiary must be informed that the agreement for CCM services could be revoked by the beneficiary at any time either verbally or in writing, and the RHC or FQHC practitioner must explain the effect of a revocation of the agreement for CCM services. If the revocation occurs during a CCM calendar month, the revocation would be effective at the end of that period. The eligible beneficiary must also be informed that the RHC or FQHC is able to be separately paid for these services during the 30-day period only if no other practitioner or eligible entity, including another RHC or FQHC that is not part of the RHC's or FQHC's organization, has already billed for this service. Since only one CCM payment can be paid per beneficiary per month, the RHC or FQHC would need to ask the patient if they are already receiving CCM services from another practitioner. Revocation by the beneficiary of the agreement must also be noted by recording the date of the revocation in the beneficiary's medical record and by providing the beneficiary with written confirmation that the RHC or FQHC would not be providing CCM services beyond the current 30-day period. A beneficiary who has revoked the agreement for CCM services from a RHC or FQHC may choose instead to receive these services from a different practitioner (including another RHC or
• The RHC or FQHC must provide a written or electronic copy of the care plan to the beneficiary and record this in the beneficiary's electronic medical record.
We proposed that all of the following scope of service requirements must be met to bill for CCM services:
• Initiation of CCM services during a comprehensive Evaluation/Management (E/M), AWV, or IPPE visit. The time spent furnishing these services would not be included in the 20 minute monthly minimum required for CCM billing.
• Continuity of care with a designated RHC or FQHC practitioner with whom the patient is able to get successive routine appointments.
• Care management for chronic conditions, including systematic assessment of a patient's medical, functional, and psychosocial needs; system-based approaches to ensure timely receipt of all recommended preventive care services; medication reconciliation with review of adherence and potential interactions; and oversight of patient self-management of medications.
• A patient-centered plan of care document created by the RHC or FQHC practitioner furnishing CCM services in consultation with the patient, caregiver, and other key practitioners treating the patient to assure that care is provided in a way that is congruent with patient choices and values. The plan would be a comprehensive plan of care for all health issues based on a physical, mental, cognitive, psychosocial, functional and environmental (re)assessment and an inventory of resources and supports. It would typically include, but not be limited to, the following elements: Problem list, expected outcome and prognosis, measurable treatment goals, symptom management, planned interventions, medication management, community/social services ordered, how the services of agencies and specialists unconnected to the practice will be directed/coordinated, the individuals responsible for each intervention, requirements for periodic review and, when applicable, revision, of the care plan. A complete list of problems, medications, and medication allergies would be in the electronic health record to inform the care plan, care coordination, and ongoing clinical care.
• The electronic care plan would be available 24 hours a day and 7 days a week to all practitioners within the RHC or FQHC who are furnishing CCM services whose time counts towards the time requirement for billing the CCM code, and to other practitioners and providers, as appropriate, who are furnishing care to the beneficiary, to address a patient's urgent chronic care needs. No specific electronic solution or format is required to meet this scope of service element. However, we encourage RHCs and FQHCs to review the care plan criterion for health information technology (IT) finalized in the 2015 Edition of Health Information Technology Certification Criteria, 2015 Edition Base Electronic Health Record (EHR) Definition, and ONC Health IT Certification Program Modifications final rule (80 FR 62648), which aims to enable users of certified health IT to create and receive care plan information in accordance with the C-CDA Release 2.1 standard.
• Management of care transitions within health care including referrals to other clinicians, visits following a patient visit to an emergency department, and visits following discharges from hospitals and SNFs. The RHC or FQHC must be able to facilitate communication of relevant patient information through electronic exchange of a summary care record with other health care providers regarding these transitions. The RHC or FQHC must also have qualified personnel who are available to deliver transitional care services to a patient in a timely way to reduce the need for repeat visits to emergency departments and readmissions to hospitals and SNFs.
• Coordination with home and community based clinical service providers required to support a patient's psychosocial needs and functional deficits. Such communication to and from home- and community-based providers regarding these clinical patient needs must be documented in the RHC's or FQHC's medical record system.
• Secure messaging, internet or other asynchronous non-face-to-face consultation methods for a patient and caregiver to communicate with the provider regarding the patient's care in addition to the use of the telephone. We would note that the faxing of information would not meet this requirement. These methods would be required to be available, but would not be required to be used by every practitioner or for every patient receiving CCM services.
We believe that the use of EHR technology that allows data sharing is necessary to assure that RHCs and FQHCs can effectively coordinate services with other practitioners for patients with multiple chronic conditions. Therefore, we proposed the following requirements:
• Certified health IT must be used for the recording of demographic information, health-related problems, medications, and medication allergies; a clinical summary record; and other scope of service requirements that reference a health or medical record.
• RHCs and FQHCs must use technology certified to the edition(s) of certification criteria that is, at a minimum, acceptable for the EHR Incentive Programs as of December 31st of the year preceding each CCM payment year to meet the following core technology capabilities: Structured recording of demographics, problems, medications, medication allergies, and the creation of a structured clinical summary. For example, technology used to furnish CCM services beginning on January 1, 2016, would be required to meet, at a minimum, the requirements included in the 2014 Edition certification criteria. For the purposes of the scope of services, we refer to technology meeting these requirements as “CCM Certified Technology.”
• Applicable HIPAA standards would apply to electronic sharing of patient information.
We invited public comments on all aspects of the proposed payment methodology and billing for CCM services in RHCs and FQHCs, the proposed CCM requirements for RHCs and FQHCs, and any other aspect of our proposal. The following is a summary of the comments we received and our responses.
Most of the comments we received were very supportive of our proposal to establish payment for CCM services in RHCs and FQHCs. Several commenters agreed that allowing separate payment for CCM services in RHCs and FQHCs will better reflect the additional resources necessary for the unique services that are required to furnish CCM services to the populations served by RHCs and FQHCs. Many commenters appreciated that the proposed methodology would enable RHCs and FQHCs to be paid for these services even if there was no billable visit. A few commenters had concerns regarding health information technology requirements or beneficiary copayment requirements. One commenter had concerns about potential duplication in payment and increased Medicare spending. Several commenters requested clarification on specific aspects of the program. A few commenters asked questions that were beyond the scope of the proposal.
We are aware that not all patients, particularly those served by RHCs and FQHCs, may be able to receive secure messages via the Internet, and they are not required to do so. However, to furnish and bill for CCM services, RHCs and FQHCs must have the capability to communicate with the beneficiary and any caregiver, not only through telephone access, but also through the use of secure messaging, Internet, or other asynchronous non face-to-face consultation methods. Beneficiaries are not required to have this capability to receive CCM services.
In general, although a few of the services required for CCM payment may be provided by some RHCs and FQHCs on occasion, the systematic provision of care management, the level and intensity of care coordination, and the interoperability of care plans with external providers is not typically found in RHCs or FQHCs.
As a result of the comments, we are finalizing these provisions as proposed, except to change “30-day period” to “calendar month” wherever it was used in the proposed rule.
RHCs are paid an all-inclusive rate (AIR) per visit for medically necessary primary health services and qualified preventive health services furnished face-to-face by a RHC practitioner to a Medicare beneficiary. The all-inclusive payment system was designed to minimize reporting requirements, and as such, the rate includes all costs associated with the services that a RHC furnishes in a single day to a Medicare beneficiary, regardless of the length or complexity of the visit or the number or type of RHC practitioners seen. Except for certain preventive services that are not subject to coinsurance requirements, it has not been necessary for RHCs to report medical and procedure codes, such as level I and level II of the HCPCS, on claims for services that were furnished during the visit to determine Medicare payment. Generally, the services reported using the appropriate site of service revenue code on a RHC claim receives payment under the AIR, with coinsurance and deductible applied based upon the associated charges on that line, notwithstanding other Medicare requirements.
Historically, billing instructions for RHCs and Federally Qualified Health Centers (FQHCs) have been similar. Beginning on April 1, 2005, through December 31, 2010, RHCs and FQHCs were no longer required to report HCPCS when billing for RHC and FQHC services rendered during an encounter, absent a few exceptions. CMS Transmittal 371, dated November 19, 2004, eliminated HCPCS coding for FQHCs and eliminated the additional line item reporting of preventive services for RHCs and FQHCs for claims with dates of service on or after April 1, 2005. CMS Transmittal 1719, dated April 24, 2009, effective October 1, 2009, required RHCs and FQHCs to report HCPCS codes for a few services, such as certain preventive services eligible for a waiver of deductible, services subject to frequency limits, and services eligible for payments in addition to the all-inclusive rate.
Section 1834(o)(1)(B) of the Act, as added by the Affordable Care Act, required that FQHCs begin reporting services using HCPCS codes to develop and implement the FQHC PPS. Since January 1, 2011, FQHCs have been required to report all services furnished during an encounter by specifically listing the appropriate HCPCS code(s) for each line item, along with the site of service revenue code(s), when billing Medicare. As of October 1, 2014, HCPCS coding is used to calculate payment for FQHCs that are paid under the FQHC PPS.
Section 4104 of the Affordable Care Act waived the coinsurance and deductible for the initial preventive physical examination (IPPE), the annual wellness visit (AWV), and other Medicare covered preventive services recommended by the United States Preventive Services Task Force (USPSTF) with a grade of A or B. Since January 1, 2011, RHCs have been required to report HCPCS coding for these preventive services, for which coinsurance and deductible are waived. When billing for an approved preventive service, RHCs must report an additional line with the appropriate site of service revenue code with the approved preventive service HCPCS code and the associated charges. Although HCPCS coding is currently required for approved preventive services on RHC claims, HCPCS coding is not used to determine RHC payment.
For payment under Medicare Part B, the statute requires health transactions to be exchanged electronically, subject to certain exceptions, using standards specified by the Secretary. Specifically, section 1862(a)(22) of the Act requires that no payment may be made under part A or part B for any expenses incurred for items or services, subject to exceptions under section 1862(h), for which a claim is submitted other than in an electronic form specified by the Secretary. Further, section 1173(1)(a) of the Act, added by section 262 of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), requires the Secretary to adopt standards for transactions, and data elements for such transactions, to enable health information to be exchanged electronically, that are appropriate for transactions. These include but are not limited to health claims or equivalent encounter information. As a result of the HIPAA amendments, HHS adopted regulations pertaining to data standards for health care related transactions. The regulations at 45 CFR 160.103 define a covered entity to include a provider of medical or health services (as defined in section 1861(s) of the Act), and define the types of standard transactions. When conducting a transaction, under 45 CFR 162.1000, a covered entity must use the applicable medical data code sets described in § 162.1002 that are valid at the time the health care is furnished, and these regulations define the standard medical data code sets adopted by the Secretary as HCPCS and CPT (Current Procedural Terminology—Fourth Edition) for physician services and other health care services.
Under section 1861(s)(2)(E) of the Act, a RHC is a supplier of medical or health services. As such, our regulations require these covered entities to report a standard medical code set for electronic health care transactions, although our program instructions have directed RHCs to submit HCPCS codes only for preventive services. We believe reporting of HCPCS coding for all services furnished by a RHC would be consistent with the health transactions requirements, and would provide useful information on RHC patient characteristics, such as level of acuity and frequency of services furnished, and the types of services being furnished by RHCs. This information would also allow greater oversight of the program and inform policy decisions.
We proposed that all RHCs must report all services furnished during an
Under this proposal, a HCPCS code would be reported along with the presently required Medicare revenue code for each service furnished by the RHC to a Medicare patient. Although HCPCS coding is currently used to determine FQHC payment under the FQHC PPS, under this proposal, RHCs would continue to be paid under the AIR and there would be no change in their payment methodology.
Accordingly, we proposed to remove the requirement at § 405.2467(b) pertaining to HCPCS coding for FQHCs and redesignate paragraphs (c) and (d) as paragraphs (b) and (c), respectively. We also proposed to add a new paragraph (g)(3) to § 405.2462 to require FQHCs and RHCs, whether or not exempt from electronic reporting under § 424.32(d)(3), to report on Medicare claims all service(s) furnished during each FQHC and RHC visit (as defined in § 405.2463) using HCPCS and other codes as required.
We proposed to require reporting of HCPCS coding for all services furnished by RHCs to Medicare beneficiaries effective for dates of service on or after January 1, 2016. We are aware that many RHCs already record this information through their billing software or electronic health record systems; however, we recognize there may be some RHCs that need to make changes in their systems. We invited RHCs to submit comments on the feasibility of updating their billing systems to meet this implementation date of January 1, 2016.
As part of the implementation of the HCPCS coding requirement, we plan to provide instructions on how RHCs are to report HCPCS and other coding and clarify other appropriate billing procedures through program instruction.
The following is a summary of the comments we received and our responses.
There is a special government-to-government relationship between the federal government and federally recognized tribes based on U.S. treaties, laws, Supreme Court decisions, Executive Orders and the U.S. Constitution. This government-to-government relationship forms the basis for federal health services to American Indians/Alaska Natives (AI/AN) in the U.S.
In 1976, the Indian Health Care Improvement Act (IHCIA, Pub. L. 94-437) amended the statute to permit payment by Medicare and Medicaid for services provided to AI/ANs in Indian Health Service (IHS) and tribal health care facilities that meet the applicable requirements. Under this authority, Medicare services to AI/ANs may be furnished by IHS operated facilities and programs and tribally-operated facilities and programs under Title I or Title V of the Indian Self Determination Education Assistance Act, as amended (ISDEAA, Pub. L 93-638).
According to the IHS Year 2015 Profile, the IHS healthcare delivery system currently consists of 46 hospitals, with 28 of those hospitals operated by the IHS and 18 of them operated by tribes under the ISDEAA.
Payment rates for inpatient and outpatient medical care furnished by the IHS and tribal facilities is set annually by the IHS under the authority of sections 321(a) and 322(b) of the Public Health Service (PHS) Act (42 U.S.C. 248 and 249(b)), Pub. L. 83-568 (42 U.S.C. 2001(a)), and the IHCIA, based on the previous year's cost reports from federal and tribal hospitals. The 1976 IHCIA provided the authority for CMS (then HCFA) to pay IHS for its hospital services to Medicare eligible patients, and in 1978 CMS agreed to use a Medicare all-inclusive payment rate for IHS hospitals and IHS hospital-based clinics.
There is an outpatient visit rate for Medicare visits in Alaska and an outpatient visit rate for Medicare visits in the lower 48 States. The Medicare outpatient rate is only applicable for those IHS or tribal facilities that meet the definition of a provider-based department as described at § 413.65(a), or a “grandfathered” facility as described at § 413.65(m). For CY 2015, the Medicare outpatient encounter rate is $564 for Alaska and $307 for the rest
In 2000, we adopted regulations at § 413.65 that established criteria for facilities to be considered provider-based to a hospital for Medicare payment purposes. The provider-based rules apply to facilities located both on and off the main hospital campus for which provider-based status is sought.
In the CY 2001 Hospital Outpatient PPS final rule with comment period (65 FR 18507), we addressed comments on the proposed provider-based rules. In regard to IHS facilities, commenters expressed concern that the proposed rule would undermine the ISDEAA contracting and compacting relationships between the IHS and tribes because provider-based clinics must be clinically and administratively integrated into the hospital, and a tribe that assumes the operation of a provider-based clinic but not the operation of the hospital would not be able to meet this requirement. Commenters were also concerned that the proposed proximity requirements would threaten the status of many IHS and tribal facilities that frequently were located in distant remote areas.
In response to these comments and the special provisions of law referenced above governing health care for IHS and the tribes, we recognized the special relationship between tribes and the United States government, and did not apply the general provider-based criteria to IHS and tribally-operated facilities. The regulations currently include a grandfathering provision at § 413.65(m) for IHS and tribal facilities that were provider-based to a hospital on or prior to April 7, 2000. This section states that facilities and organizations operated by the IHS or tribes will be considered to be departments of hospitals operated by the IHS or tribes if, on or before April 7, 2000, they furnished only services that were billed as if they had been furnished by a department of a hospital operated by the IHS or a tribe and they are:
• Owned and operated by the IHS;
• Owned by the tribe but leased from the tribe by the IHS under the ISDEAA in accordance with applicable regulations and policies of the IHS in consultation with tribes; or
• Owned by the IHS but leased and operated by the tribe under the ISDEAA in accordance with applicable regulations and policies of the IHS in consultation with tribes.
Under the authority of the ISDEAA, a tribe may assume control of an IHS hospital and the provider-based clinics affiliated with the hospital, or may only assume responsibility of the provider-based clinic. On August 11, 2003, we issued a letter to Trailblazer Health Enterprises, LLC, stating that changes in the status of a hospital or facility from IHS to tribal operation, or vice versa, or the realignment of a facility from one IHS or tribal hospital to another IHS or tribal hospital, would not affect the facility's grandfathered status if the resulting configuration is one which would have qualified for grandfathering under § 413.65(m) if it had been in effect on April 7, 2000.
However, the Medicare Conditions of Participation (CoPs) for Medicare-participating hospitals at § 482.12 require administrative and clinical integration between a hospital and its provider-based clinics, departments, and locations. A tribal clinic billing under an IHS hospital's CMS Certification Number (CCN), without any additional administrative or clinical relationship with the IHS hospital, could put that hospital at risk for non-compliance with the CoPs.
Consequently, it became apparent that a different structure was needed to maintain access to care for AI/AN populations served by these hospitals and clinics, while also ensuring that these facilities are in compliance with our health and safety rules. We believed that the FQHC program may provide an alternative structure that met the needs of these tribal clinics and the populations they served, while also ensuring the IHS hospitals were not at risk of being cited for non-compliance with the requirements in their CoPs.
FQHCs were established in 1990 by section 4161 of the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508, enacted on November 5, 1990) (OBRA 90), and were effective beginning on October 1, 1991. They are facilities that furnish services that are typically furnished in an outpatient clinic setting.
The statutory requirements that FQHCs must meet to qualify for the Medicare benefit are in section 1861(aa)(4) of the Act. All FQHCs are subject to Medicare regulations at 42 CFR part 405, subpart X, and 42 CFR part 491. Based on these provisions, the following three types of organizations that are eligible to enroll in Medicare as FQHCs:
• Health Center Program grantees: Organizations receiving grants under section 330 of the PHS Act (42 U.S.C. 254b).
• Health Center Program “look-alikes”: Organizations that have been identified by the Health Resources and Services Administration as meeting the requirements to receive a grant under section 330 of the PHS Act, but which do not receive section 330 grant funding.
• Outpatient health programs or facilities operated by a tribe or tribal organization under the ISDEAA, or by an urban Indian organization receiving funds under Title V of the IHCIA.
FQHCs are also entities that were treated by the Secretary for purposes of Medicare Part B as a comprehensive federally funded health center as of January 1, 1990 (see section 1861(aa)(4)(C) of the Act).
Section 1834 of the Act was amended by section 10501(i)(3)(A) of the Affordable Care Act by adding a new subsection (o), “Development and Implementation of Prospective Payment System” for FQHCs. Section 1834(o)(1)(A) of the Act requires that the system include a process for appropriately describing the services furnished by FQHCs, and establish payment rates based on such descriptions of services, taking into account the type, intensity, and duration of services furnished by FQHCs. It also stated that the new system may include adjustments (such as geographic adjustments) as determined appropriate by the Secretary. Section 1833(a)(1)(Z), as added by the Affordable Care Act, requires that Medicare payment for FQHC services under section 1834(o) of the Act be 80 percent of the lesser of the actual charge or the PPS amount determined under section 1834(o) of the Act.
In accordance with the requirements in the statute, as amended by the Affordable Care Act, beginning on October 1, 2014, payment to FQHCs is based on the lesser of the national encounter-based FQHC PPS rate, or the FQHC's total charges, for primary health services and qualified preventive health services furnished to Medicare beneficiaries. The FQHC PPS rate is adjusted by the FQHC geographic adjustment factor (GAF), which is based on the Geographic Practice Cost Index used under the PFS. The FQHC PPS rate is also adjusted when the FQHC furnishes services to a patient that is new to the FQHC, and when the FQHC furnishes an IPPE or an AWV. The FQHC PPS base rate for the period from October 1, 2014, to December 31, 2015 is $158.85. The rate will be adjusted in CY 2016 by the MEI, as defined at section 1842(i)(3) of the Act, and subsequently by either the MEI or a
To assure that FQHCs receive appropriate payment for services furnished, we established a new set of five HCPCS G-codes for FQHCs to report Medicare visits. These G-codes include all the services in a typical bundle of services that would be furnished per diem to a Medicare patient at the FQHC. The five FQHC G-codes are:
• G0466-FQHC visit, new patient.
• G0467-FQHC visit, established patient.
• G0468-FQHC visit, IPPE or AWV.
• G0469-FQHC visit, mental health, new patient.
• G0470-FQHC visit, mental health, established patient.
FQHCs establish charges for the services they furnish to FQHC patients, including Medicare beneficiaries, and charges must be uniform for all patients, regardless of insurance status. The FQHC would determine the services that are included in each of the 5 FQHC G-codes, and the sum of the charges for each of the services associated with the G-code would be the G-code payment amount. Payment to the FQHC for a Medicare visit is the lesser of the FQHC's charges (as established by the G-code), or the PPS rate.
We proposed that IHS and tribal facilities and organizations that met the conditions of § 413.65(m) on or before April 7, 2000, and have a change in their status on or after April 7, 2000 from IHS to tribal operation, or vice versa, or the realignment of a facility from one IHS or tribal hospital to another IHS or tribal hospital such that the organization no longer meets the CoPs, may seek to become certified as grandfathered tribal FQHCs. To help avoid any confusion, we referred to these tribal FQHCs as “grandfathered tribal FQHCs” to distinguish them from freestanding tribal FQHCs that are currently being paid the lesser of their charges or the adjusted national FQHC PPS rate of $158.85, and from provider-based tribal clinics that may have begun operations subsequent to April 7, 2000.
Under the authority in 1834(o) of the Affordable Care Act to include adjustments determined appropriate by the Secretary, we proposed that these grandfathered tribal FQHCs be paid the lesser of their charges or a grandfathered tribal FQHC PPS rate of $307, which equals the Medicare outpatient per visit payment rate paid to them as a provider-based department, as set annually by the IHS, rather than the FQHC PPS per visit base rate of $158.85, and that coinsurance would be 20 percent of the lesser of the actual charge or the grandfathered tribal FQHC PPS rate. These grandfathered tribal FQHCs would be required to meet all FQHC certification and payment requirements. This FQHC PPS adjustment for grandfathered tribal clinics would not apply to a currently certified tribal FQHC, a tribal clinic that was not provider-based as of April 7, 2000, or an IHS-operated clinic that is no longer provider-based to a tribally operated hospital. This provision would also not apply in those instances where both the hospital and its provider-based clinic(s) are operated by the tribe or tribal organization.
Since we proposed that these grandfathered tribal FQHCs would be paid based on the IHS payment rates and not the FQHC PPS payment rates, we also proposed that the payment rate would not be adjusted by the FQHC PPS GAF, or be eligible for the special payment adjustments under the FQHC PPS for new patients, patients receiving an IPPE or an AWV. They would also not be eligible for the exceptions to the single per diem payment that is available to FQHCs paid under the FQHC PPS. As the IHS outpatient rate for Medicare is set annually, we also proposed not to apply the MEI or a FQHC market basket adjustment that is applied annually to the FQHC PPS base rate. We proposed that these adjustments not be applied because we believe that the special status of these grandfathered tribal clinics, and the enhanced payment they would receive under the FQHC PPS system, would make further adjustments unnecessary and/or duplicative of adjustments already made by IHS in deriving the rate. We will monitor future costs and claims data of these tribal clinics and reconsider options as appropriate.
Grandfathered tribal FQHCs would be paid for services included in the FQHC benefit, even if those services are not included in the IHS Medicare outpatient all-inclusive rate. Services that are included in the IHS outpatient all-inclusive rate but not in the FQHC benefit would not be paid. Information on the FQHC benefit is available in Chapter 13 of the Medicare Benefit Policy Manual. Grandfathered tribal FQHCs will be subject to Medicare regulations at part 405, subpart X, and part 491, except as noted in section III.D.2. of this final rule with comment period. Therefore, we proposed to revise § 405.2462, § 405.2463, § 405.2464, and § 405.2469 to specify the requirements for payment as a grandfathered tribal FQHC, and to specify payment provisions, adjustments, rates, and other requirements for grandfathered tribal FQHCs.
To become certified as a FQHC, an eligible tribe or tribal organization must submit a Form 855A and all required accompanied documentation, including an attestation of compliance with the Medicare FQHC Conditions for Coverage at part 491, to the Jurisdiction H Medicare Administrative Contractor (A/B MAC). After reviewing the application and determining that it was complete and approvable, the MAC would forward the application with its recommendation for approval to the CMS Regional Office (RO) that has responsibility for the geographic area in which the tribal clinic is located. The RO would issue a Medicare FQHC participation agreement to the tribal FQHC, including a CCN, and would advise the MAC of the CCN number, to facilitate the MAC's processing of FQHC claims submitted by the tribal FQHC. Payment to grandfathered tribal FQHCs would begin on the first day of the month in the first quarter of the year subsequent to receipt of a Medicare CCN.
In addition, to the changes proposed in § 405.2462, § 405.2463, § 405.2464, and § 405.2469, we proposed to remove obsolete language from § 405.2410 regarding FQHCs that bill on the basis of the reasonable cost system, add a section heading to § 405.2415, and remove obsolete language from § 405.2448 regarding employment requirements.
We invited public comments on all aspects of our proposal to allow IHS and tribal facilities and organizations that met the conditions of § 413.65(m) on or before April 7, 2000, and have a change in their status on or after April 7, 2000 from IHS to tribal operation, or vice versa, or the realignment of a facility from one IHS or tribal hospital to another IHS or tribal hospital such that the organization no longer meets the CoPs, to become certified as grandfathered tribal FQHCs.
We received comments on this proposal from the Alaska Native Health Board, Alaska Native Tribal Health Consortium, Citizen Potawatomi Nation, Southern Ute Indian Tribe, Southcentral Foundation, and the Tribal Technical Advisory Group (TTAG). All the commenters were strongly opposed to the proposal and requested that it be either withdrawn or revised.
The following is a summary of the comments we received and our responses.
Second, a hospital may be legally liable for actions that occur by any part of their organization, which would include a clinic that is billing for Medicare services under the hospital's CCN, even if the hospital exercises no control over the clinic. We believe this puts a hospital in the untenable position of being legally responsible for actions over which it has no control.
Finally, under the current practice, grandfathered tribal outpatient clinics receive Medicare payment for services to Medicare beneficiaries and are subject to the hospital's CoPs. The Medicare CoPs are sets of requirements for acceptable quality in the operation of health care entities that must be met in order to bill Medicare, and an entity cannot participate in Medicare unless it meets every Condition. Because the facility would no longer be associated with a hospital, we believe that the FQHC CoPs would be an appropriate standard that all of these clinics would be able to meet.
For these reasons, we believe it is prudent for grandfathered tribal outpatient clinics to be directly responsible for their operations and held to Medicare CoPs that are reasonable and achievable, and that the option to become grandfathered tribal FQHCs will achieve these goals.
We also held calls with the CMS Regional Office Survey and Certification staff in the regions that have clinics eligible for this transition, and with the MAC responsible for the processing of claims and payment to these clinics, to ensure that they are aware of the proposal and are prepared to assist clinics as necessary in the transition. Subregulatory guidance on payment policies and claims processing will be available following publication of the final rule with comment period.
We intend to continue to provide technical assistance to affected clinics to facilitate the transition to grandfathered tribal FQHC, but we cannot provide training for financial officers or legal analysis.
As noted in the previous response, the services included in the FQHC benefit are different than the services included in the IHS hospital outpatient department AIR, and a direct comparison in Medicare payments cannot be made without factoring in the clinic's charges and the mix of services that are furnished. We have no reason to believe that there will be a significant increase or decrease in Medicare payments to those clinics that become grandfathered tribal FQHCs.
We fully support the rights of tribes to take over IHS facilities under the ISDEAA, and believe that the proposed payment system will enable tribes to continue to exercise self-determination and self-governance of their health care services. These clinics currently have the option of billing for Medicare services as a standard FQHC which has a 2015 PPS payment rate of $158.85, or billing for Medicare services separately under the PFS. We believe the proposed grandfathered tribal FQHC PPS rate, with an adjusted 2015 PPS rate of $307, will enable these clinics to provide Medicare services and bill at approximately the same rate.
As discussed in the proposed rule, there are five FQHC G codes (G0466-FQHC visit, new patient; G0467-FQHC visit, established patient; G0468-FQHC visit, IPPE or AWV; G0469-FQHC visit, mental health, new patient, and G0470-FQHC visit, mental health, established patient). Each grandfathered tribal FQHC would determine which services to include in each G code, based on the services typically furnished per diem by that grandfathered tribal FQHC to their Medicare patients. Once the typical bundle of services in each G code is established, the grandfathered tribal FQHC would total their normal charges for those services. The sum of the charges for the services included in the bundle of services is the G code amount. Since grandfathered tribal outpatient clinics already have established charges for their services, it should not be difficult for them to establish their G codes.
Consistent with longstanding policy, the use of these payment codes does not dictate to providers how to set their charges. A grandfathered tribal FQHC would set the charge for a specific payment code pursuant to its own determination of what would be appropriate for the services normally provided and the population served at that grandfathered tribal FQHC, based on the description of services associated with the G code. The charge for a specific payment code would reflect the sum of regular rates charged to both beneficiaries and other paying patients for a typical bundle of services that would be furnished per diem to a Medicare beneficiary.
In setting its charges, a grandfathered tribal FQHC would have to comply with established cost reporting rules in § 413.53 which specify that charges must reflect the regular rates for various services that are charged to both beneficiaries and other paying patients who receive the services. Each grandfathered tribal FQHC would establish charges for Medicare visits that reflect the sum of regular rates charged to both beneficiaries and other paying patients for a typical bundle of services that the FQHC would furnish per diem to a Medicare beneficiary. We note that establishing Medicare per diem rates that are substantially in excess of the usual rates charged to other paying patients for a similar bundle of services could be subject to section 1128(b)(6) of the Act, as codified at 42 CFR 1001.701.
Further instructions on Medicare CoPs for participation for grandfathered tribal outpatient clinics will be provided in subregulatory guidance.
We appreciate the detailed and thoughtful information that was provided by the TTAG in their July 9, 2015 letter. We regret that the letter was not provided in time to be addressed in the CY 2016 PFS proposed rule that was issued on July 8, 2015.
They also suggested that because eligibility for becoming a grandfathered tribal FQHC applies to clinics that had provider-based status on or before April 7, 2000, tribal clinics that were provider-based before but not on April 7, 2000, should be eligible for grandfathered tribal FQHC status.
As a result of the comments, we are finalizing this rule as proposed.
Section 3139 of the Affordable Care Act amended section 1847A of the Act to define a biosimilar biological product and a reference biological product, and to provide for Medicare payment of biosimilar biological products using the average sale price (ASP) methodology.
Section 1847A(c)(6)(H) of the Act, as added by section 3139 of the Affordable Care Act, defines a biosimilar biological product as a biological product approved under an abbreviated application for a license of a biological product that relies in part on data or information in an application for another biological product licensed under section 351 of the Public Health Service Act (PHSA). Section 1847A(c)(6)(I) of the Act, also added by section 3139 of the Affordable Care Act, defines the reference biological product for a biosimilar biological product as the biological product licensed under such section 351 of the PHSA that is referred to in the application of the biosimilar biological product.
Section 3139 of the Affordable Care Act also amended section 1847A(b) of the Act by adding a new paragraph (8) to specify that the payment amount for a biosimilar biological product will be the sum of the following two amounts: (1) The ASP as determined using the methodology described under section 1847A(b)(6) of the Act applied to a biosimilar biological product for all National Drug Codes (NDCs) assigned to such product in the same manner as such paragraph is applied to drugs described in such paragraph; and (2) 6 percent of the payment amount determined using the methodology in section 1847A(b)(4) of the Act for the corresponding reference biological product. The effective date for section 3139 of the Affordable Care Act regarding payment for biosimilars under the ASP system was July 1, 2010. Separate sections of the Affordable Care Act also established a licensing pathway for biosimilar biological products.
To implement these provisions, we published the CY 2011 PFS final rule with comment period (75 FR 73393 and 73394) in the November 29, 2010
Since 2010, we have continued to monitor the implementation of the FDA biosimilar approval process and the emerging biosimilar marketplace. As biosimilars now begin to enter the marketplace, we have also reviewed the existing guidance on Medicare payment for these products. Our review has revealed a potential inconsistency between our interpretation of the statutory language at section 1847A(b)(8) of the Act and regulation text at § 414.904(j). To make the regulation text more consistent with our interpretation of the statutory language, we proposed to amend § 414.904(j) to make clear that the payment amount for a biosimilar biological product is based on the ASP of all NDCs assigned to the biosimilar biological products included within the same billing and payment code consistent with section 1847A(b)(8) of the Act), which directs the Secretary to use the weighted average payment methodology that is applied to drugs. We also proposed to amend § 414.914(j) to update the effective date of this provision from July 1, 2010 to January 1, 2016, the anticipated effective date of the CY 2016 PFS final rule with comment period. We welcomed comments about these proposals.
We also took this opportunity to discuss and clarify some other details of Part B biosimilar payment policy. First, we plan to use a single ASP payment limit for biosimilar products that are assigned to a specific HCPCS code. In general, this means that products that rely on a common reference product's biologics license application (BLA) will be grouped into the same payment calculation for determining the single ASP payment limit. This approach, which is similar to the ASP calculation for multiple source drugs, is authorized by section 1847A(b)(8)(A) of the Act, which states that the payment for a biosimilar biological product is determined using the methodology in section 1847A(b)(6) of the Act applied to a biosimilar biological product for all NDCs assigned to such product in the same manner as such paragraph is applied to drugs described in such paragraph.
Second, we described how payment for newly approved biosimilars will be determined. As we stated in the CY 2011 PFS final rule with comment period (75 FR 73393 and 73394), we anticipate that as subsequent biosimilar biological products are approved, we will receive manufacturers' ASP sales data through the ASP data submission process and publish national payment amounts in a manner that is consistent with our current approach to other drugs and biologicals that are paid under section 1847A of the Act and set forth in 42 CFR part 414, subpart J. Until we have collected sufficient sales data as reported by manufacturers, payment limits will be determined in accordance with the provisions in section 1847A(c)(4) of the Act. If no manufacturer data is collected, prices will be determined by local contractors using any available pricing information, including provider invoices. As with newly approved drugs and biologicals (including biosimilars), Medicare Part B payment would be available once the product is approved by the FDA. Payment for biosimilars (and other drugs and biologicals that are paid under Part B) may be made before a HCPCS code has been released, provided that the claim is reasonable and necessary, and meets applicable coverage and claims submission criteria.
We also clarified how wholesale acquisition cost (WAC) data may be used by CMS for Medicare payment of biosimilars in accordance with the provisions in section 1847A(c)(4) of the Act. Section 1847A(c)(4) of the Act authorizes the use of a WAC-based payment amount in cases where the ASP during the first quarter of sales is not sufficiently available from the manufacturer to compute an ASP-based payment amount. Once the WAC data is available from the pharmaceutical
The following is a summary of the comments we received regarding our proposals and related discussion in the proposed rule. In general, a number of commenters opposed a single payment amount for all biosimilars that rely on a common reference product. Commenters included individuals, pharmaceutical manufacturers, patient advocate groups, providers, and members of the House of Representatives. Most of these commenters stated that the CMS proposal will create access issues, and that grouping payment for biosimilar biological products is inconsistent with the statute. Other concerns included a belief that as a result of the proposal, prescribers' choices will be limited, that tracking or pharmacovigilance activities will be impaired, and that innovation and product development will be harmed, leading to increased costs for biosimilar products. Many of these commenters suggested that CMS determine a payment amount for each biosimilar. However, several commenters also supported CMS's proposal to amend the regulation text effective January 1, 2016. Commenters who supported the proposal also suggested that CMS remain mindful of its policy as the biosimilar marketplace evolves. However, several commenters asked that policy decisions be delayed while issues such as naming conventions and interchangeability standards are finalized by the FDA.
We would also like to remind readers about the scope of CMS's proposals. The proposals and additional discussion encompass payment policy under Medicare Part B; they do not encompass claims processing instructions, coverage policies, clinical decision making and the clinical use of biosimilars, FDA policies, or payments made by other payers. However, some of these issues overlap with payment policy and we have mentioned them as they pertain to payment policy or specific comments in the more detailed comment responses below.
Our rationale for this clarification arises from our understanding of both the abbreviated approval pathway for biosimilars and the amendments to section 1847A of the Act to address payment for biosimilars. As further explained below, we believe the approach we are finalizing in this rule is consistent with our statutory authority.
The Affordable Care Act contains two provisions for biosimilars: one setting forth a Medicare Part B payment methodology (section 3139); and one setting forth an approval pathway (section 7002). Our proposal addressed Part B payment policy, and therefore, focused on section 3139, but section 7002 is also relevant.
Section 3139 of the Affordable Care Act amends section 1847A of the Act to define the term “biosimilar biological product” to mean “a biological product approved under an abbreviated application for a license of a biological product that relies in part on data or information in an application for another biological product licensed under section 351 of the Public Health Service Act (PHSA).” Section 7002 of the Affordable Care Act defines the terms biosimilar and biosimilarity for purposes of section 351 of the PHSA to mean (A) that the biological product is highly similar to the reference product notwithstanding minor differences in clinically inactive components; and (B) there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product.
This statutory definition establishes that biosimilar products and their corresponding reference products share a number of significant similarities. That is, the biosimilar biological product and reference product must rely on data from a single biologics license application (BLA)—the BLA of the reference product; they share high degree of similarity in the active component; and have no clinically meaningful differences in safety, purity, and potency. While we have not stated, nor are we suggesting now, that these similarities must (or even should) drive clinical decision making for an individual patient, they persuade us that our proposed payment policy approach is reasonable.
Because of the degree of similarity that biosimilars share with their reference products, we believe it is appropriate to price biosimilar products in groups in a manner similar to how we price multiple source or generic drugs. In other words, it is reasonable to look to our payment policy for multiple source drugs to guide our policy on payment for biosimilars because multiple source drugs are biosimilars' closest analogues compared to the other categories of drugs and biologicals for which we make payment under section 1847A of the Act, such as single source drugs. Of course, we acknowledge the comparison between biosimilars and multiple source drugs is not a perfect one because of the distinct approval processes, statutory definitions, and potentially, the differences in molecular complexity between drugs and biologicals. From the perspective of part B drug payment policy, however, we believe that, the abbreviated pathway for biosimilar approval and the abbreviated pathway for generic drug approval have relevant parallels—such as the approval of a predecessor product (a reference product for biosimilars; an innovator product for drugs) and the comparison of a product that is being approved through an abbreviated pathway to the predecessor. Further, we believe that biosimilar products and multiple source drugs will have similar marketplace attributes. Although lack of statutory authority prevents us from pricing a biosimilar reference product with biosimilar products, like multiple source drugs, we see biosimilars competing for market share with each other, as well as competing with the reference or innovator product.
Finally, how the payment provision in section 3139 of the Affordable Care Act addresses interchangeability also supports the position that biosimilars
Thus, in light of our belief that biosimilars with a common reference product are—for payment policy purposes—analogous to multiple source drugs, we believe that our biosimilars payment policy should mirror payment policy for multiple source drugs to the extent possible. We further believe, as described below, that the statute supports such an approach. We would like to make clear that although our payment policy approach for biosimilars is analogous to our payment policy for multiple source drugs as described in this response, we take no position on whether a biosimilar is completely or partially analogous to its biologic reference product as a clinical matter.
We do not believe the use of the singular is dispositive of the issue. The statute directs CMS to apply the payment approach for a given biosimilar biological product in the same manner as such paragraph is applied to drugs described in such paragraph. “Such paragraph” is paragraph (b)(6) of section 1847A of the Act. Section 1847A(b)(6)(A) of the Act states that it applies to all drug products included within the same multiple source drug billing and payment code before setting forth the methodology for determining a volume weighted average sales price for multiple source drugs. The statute also specifies the use of this methodology for determining the average sales prices for single source drugs (under section 1847A(b)(4) of the Act) and biosimilars (under section 1847A(b)(8) of the Act). However, sections 1847A(b)(4) and 1847A(b)(8) of the Act differ in one significant respect; namely, that only section 1847A(b)(8) of the Act includes language that directs the payment determination in paragraph (b)(6) to be carried out in the same manner as paragraph (b)(6) is applied to drugs that are described in paragraph (b)(6). Because all drugs and biologicals paid for under section 1847A of the Act have their ASP-based payment allowances calculated using the methodology set forth in section 1847A(b)(6) of the Act, to give meaning to the phrase that directs that the payment determination be made in the same manner as paragraph (b)(6) is applied to drugs described in paragraph (b)(6), we concluded that the statute authorizes us to develop coding and pricing for biosimilars in the same manner as for multiple source drugs. Our conclusion is based on the language in section 1847A(b)(6)(A) of the Act, which clearly refers to drug products that are within the same multiple source drug billing code. The paragraph also states that the amount specified (or determined by this approach) is the amount determined using the mathematical calculation in section 1847A(b)(6) of the Act that is applied to all drugs and biologicals paid for under section 1847A of the Act.
We further note that the commenters have emphasized use of the singular form “biosimilar product” to support their statutory interpretation. However, we do not believe whether “product” is used in the singular or plural is the critical point for determining coding and pricing of biosimilars. Rather, we believe the critical point is that Congress is directing us to use the methodology specified in section 1847A(b)(6) of the Act for all drug products that are included with the same multiple source drug billing and payment code to determine coding and pricing for biosimilars.
We believe it is reasonable to interpret the phrase that directs the pricing to be carried out in the same manner as such paragraph (that is, paragraph (b)(6)) is applied to drugs described in paragraph (b)(6), to mean that we have the discretion to calculate an ASP-based payment methodology for grouped biosimilars in the same way that we have discretion to calculate an ASP-based payment methodology for grouped multiple source drugs. CMS's historical practices have been to develop coding and pricing for programmatic purposes. This approach is consistent with the provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which required CMS to adopt standards for coding systems that are used for reporting health care transactions, and in October of 2003, the Secretary of HHS delegated authority under the HIPAA legislation to CMS to maintain and distribute HCPCS Level II Codes (the alphanumeric codes that are typically used in part B drug claims) (Source:
For these reasons, we disagree with commenters that a proposal to group biosimilar products together for Part B payment purposes and the associated coding approach are inconsistent with the statute. While other interpretations of the statute may be possible, we believe our interpretation is consistent with the statute. We also note that the proposed revised regulation text would not preclude CMS from separating some, or all, of a group of biosimilars for payment (and the creation of one or more separate HCPCS codes) should a program need to do so arise.
In contrast, the Affordable Care Act was enacted in 2010, when there was no interchangeability or equivalency pathway available for biosimilar biological products. The “Purple Book”, a list of biosimilar and interchangeable biological products licensed by FDA, was published in 2014. However, no interchangeable products are currently on the market, nor are any expected to enter the marketplace in the next year, and interchangeability standards have not yet been finalized.
We attribute this contrast to the fact that there is insufficient experience or information at this time to create an approach for biosimilars that is as specific as that which exists for multiple source drugs, and therefore, do not believe that the lack of specificity upon which the commenter relies is indicative of Congressional intent to limit CMS's ability to group biosimilars together for coding and payment purposes.
Commenters contended that this report's reference to assigning a separate billing code for a biosimilar biological product shows that Congress intended that CMS make separate payment for each biosimilar biological product.
As noted above, commenters believe that the report indicates that Congress intended biosimilar biological products each to have their own ASP-based payment allowance. However, a closer look at the relevant language indicates that instead, Congress was acknowledging CMS's current coding discretion: “The Committee Bill would allow a Part B biosimilar product approved by the Food and Drug Administration and assigned a separate billing code to be reimbursed at the ASP of the biosimilar plus 6 percent of the ASP of the reference product” (emphasis added). This statement's use of the phrase “would allow” (as opposed to “would require”) indicates that CMS has discretion, rather than the obligation, to price biosimilars separately. Moreover, the statement appears to acknowledge that such separate payment would occur only when the biosimilar is assigned its own billing and payment code.
Similarly, the rest of this section of the report supports the notion that biosimilars are analogous to multiple source drugs. The report indicates the committee's view that the approval pathway to be enacted for biosimilars would be comparable to the approval process for generic drugs, stating:
For these reasons, we believe that contrary to commenters' assertions, our proposed approach to coding and payment for biosimilar biological products is consistent with the Senate Committee report.
Issues such as the clinical use of drugs and medical recordkeeping are outside the scope of this rule.
We are aware of situations where products with different indications share a HCPCS code;
In response to comments recommending that CMS include the reference product in the ASP payment calculation for biosimilars, we note that such an approach is not consistent with section 1847A of the Act.
In addition to the comments on biosimilars discussed, we received comments about specific issues pertaining to HCPCS coding and descriptor development such as the use of J codes and Q codes, claims submission and medical record keeping (including the use of NDCs on Medicare Part B claims), notification of substitution to providers and pharmacy dispensing and substitution activities, coverage policies for biosimilars, effects on other payers, Therapeutic Equivalency determinations based on either the Orange Book or interchangeability determinations based on the Purple Book, and the FDA approval process for biosimilars. Comments on these issues are outside the scope of this rule. Therefore, these comments are not addressed in this final rule with comment period.
Section 3401 of the Affordable Care Act requires that the update factor under certain payment systems be annually adjusted by changes in economy-wide productivity. The year that the productivity adjustment is effective varies by payment system. Specifically, section 3401 of the Affordable Care Act requires that in CY 2011 (and in subsequent years) update factors under the ambulance fee schedule (AFS), the clinical laboratory fee schedule (CLFS) and the DMEPOS fee schedule be adjusted by changes in economy-wide productivity. Section 3401(a) of the Affordable Care Act amends section 1886(b)(3)(B) of the Act to add clause (xi)(II), which sets forth the definition of this productivity adjustment. The statute defines the productivity adjustment to be equal to the 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period). Historical published data on the measure of MFP is available on the Bureau of Labor Statistics (BLS) Web site at
MFP is derived by subtracting the contribution of labor and capital inputs growth from output growth. The projection of the components of MFP are currently produced by IHS Global Insight, Inc. (IGI), a nationally recognized economic forecasting firm with which we contract to forecast the components of MFP. To generate a forecast of MFP, IGI replicates the MFP measure calculated by the BLS using a series of proxy variables derived from IGI's U.S. macroeconomic models. In the CY 2011 and CY 2012 PFS final rules with comment period (75 FR 73394 through 73396, 76 FR 73300 through 73301), we set forth the current
Section 218(b) of the PAMA amended Title XVIII of the Act to add section 1834(q) directing us to establish a program to promote the use of appropriate use criteria (AUC) for advanced diagnostic imaging services. This rule outlines the initial component of the new Medicare AUC program and our plan for implementing the remaining components.
In general, AUC are a set of individual criteria that present information in a manner that links a specific clinical condition or presentation, one or more services, and an assessment of the appropriateness of the service(s). Evidence-based AUC for imaging can assist clinicians in selecting the imaging study that is most likely to improve health outcomes for patients based on their individual context.
We believe the goal of this statutory AUC program is to promote the evidence-based use of advanced diagnostic imaging to improve quality of care and reduce inappropriate imaging services. Professional medical societies, health systems, and academic institutions have been designing and implementing AUC for decades. Experience and published studies alike show that results are best when AUC are built on an evidence base that considers patient health outcomes, weighing the benefits and harms of alternative care options, and are integrated into broader care management and continuous quality improvement (QI) programs. Successful QI programs in turn have provider-led multidisciplinary teams that collectively identify key clinical processes and then develop bottom-up, evidence-based AUC or guidelines that are embedded into clinical workflows, and become the organizing principle of care delivery (Aspen 2013). Feedback loops, an essential component, compare provider performance and patient health outcomes to individual, regional and national benchmarks.
There is also consensus that AUC programs built on evidence-based medicine and applied in a QI context are the best method to identify appropriate care and eliminate inappropriate care, and are preferable to across-the-board payment reductions that do not differentiate interventions that add value from those that cause harm or add no value.
The first CMS experience with AUC, the Medicare Imaging Demonstration (MID), was required by section 135(b) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Designed as an alternative to prior authorization, the MID's purpose was to examine whether provider exposure to appropriateness guidelines would reduce inappropriate utilization of advanced imaging services. In the 2-year demonstration which began in October 2011, nearly 4,000 physicians, grouped into one of five conveners across geographically and organizationally diverse practice settings, ordered a total of nearly 50,000 imaging studies.
In addition to the outcomes of the MID (
However, there are different views about how best to roll out AUC into clinical practice. One opinion is that it is best to start with as comprehensive a library of individual AUC as possible to avoid the frustration, experienced and voiced by many practitioners participating in the MID, of spending time navigating the CDS tool only to find that, about 40 percent of the time, no AUC for their patient's specific clinical condition existed. A second opinion is that, based on decades of experience rolling out AUC in the context of robust QI programs, it is best to focus on a few priority clinical areas (for example, low back pain) at a time, to ensure that providers fully understand the AUC they are using, including when they do not apply to a particular patient. This same group also believes, based on experience with the MID, that too many low-evidence alerts or rules simply create “alert fatigue.” They envision that, rather than navigating through a CDS to find relevant AUC, providers would simply enter the patient's condition and a message would pop up stating whether AUC existed for that condition.
We believe there is merit to both approaches, and it has been suggested to us that the best approach may depend on the particular care setting. The second, “focused” approach may work better for a large health system that produces and uses its own AUC. The first, “comprehensive” approach may in turn work better for a smaller practice with broad image ordering patterns and
Section 218(b) of the PAMA amended Title XVIII of the Act by adding a new section 1834(q) entitled, “Recognizing Appropriate Use Criteria for Certain Imaging Services,” which directs us to establish a new program to promote the use of AUC. In section 1834(q)(1)(B) of the Act, AUC are defined as criteria that are evidence-based (to the extent feasible) and assist professionals who order and furnish applicable imaging services to make the most appropriate treatment decision for a specific clinical condition for an individual.
There are four major components of the AUC program under section 1834(q) of the Act, each with its own implementation date: (1) Establishment of AUC by November 15, 2015 (section 1834(q)(2)); (2) mechanisms for consultation with AUC by April 1, 2016 (section 1834(q)(3)); (3) AUC consultation by ordering professionals and reporting on AUC consultation by furnishing professionals by January 1, 2017 (section 1834(q)(4)); and (4) annual identification of outlier ordering professionals for services furnished after January 1, 2017 (section 1834(q)(5)). In the proposed rule, we primarily addressed the first component under section 1834(q)(2)—the process for establishment of AUC, along with relevant aspects of the definitions under section 1834(q)(1).
Section 1834(q)(1) of the Act describes the program and provides definitions of terms. The program is required to promote the use of AUC for applicable imaging services furnished in an applicable setting by ordering professionals and furnishing professionals. Section 1834(q)(1) of the Act provides definitions for AUC, applicable imaging service, applicable setting, ordering professional, and furnishing professional. An “applicable imaging service” under section 1834(q)(1)(C) of the Act must be an advanced imaging service as defined in section 1834(e)(1)(B) of the Act, which defines “advanced diagnostic imaging services” to include diagnostic magnetic resonance imaging, computed tomography, and nuclear medicine (including positron emission tomography); and other diagnostic imaging services we may specify in consultation with physician specialty organizations and other stakeholders, but excluding x-ray, ultrasound and fluoroscopy services.
Section 1834(q)(2)(A) of the Act requires the Secretary to specify applicable AUC for applicable imaging services, through rulemaking and in consultation with physicians, practitioners and other stakeholders, by November 15, 2015. Applicable AUC may be specified only from among AUC developed or endorsed by national professional medical specialty societies or other provider-led entities. Section 1834(q)(2)(B) of the Act identifies certain considerations the Secretary must take into account when specifying applicable AUC including whether the AUC have stakeholder consensus, are scientifically valid and evidence-based, and are based on studies that are published and reviewable by stakeholders. Section 1834(q)(2)(C) of the Act requires the Secretary to review the specified applicable AUC each year to determine whether there is a need to update or revise them, and to make any needed updates or revisions through rulemaking. Section 1834(q)(2)(D) of the Act specifies that, if the Secretary determines that more than one AUC applies for an applicable imaging service, the Secretary shall apply one or more AUC for the service.
The PAMA was enacted into law on April 1, 2014. Implementation of many aspects of the amendments made by section 218(b) of the PAMA requires consultation with physicians, practitioners, and other stakeholders, and notice and comment rulemaking. We believe the PFS calendar year rulemaking process is the most appropriate and administratively feasible implementation vehicle. Given the timing of the PFS rulemaking process, we were not able to include proposals in the PFS proposed rule to begin implementation in the same year the PAMA was enacted. The PFS proposed rule is published in late June or early July each year. For the new Medicare AUC program to have been a part of last year's rule (CY 2015), we would have had to interpret and analyze the new statutory language, and develop proposed plans for implementation in under one month. Additionally, given the complexity of the program to promote the use of AUC for advanced imaging services established under section 1834(q) of the Act, we believed it was imperative to consult with physicians, practitioners and other stakeholders in advance of developing proposals to implement the program. In the time since the legislation was enacted, we have met extensively with stakeholders to gain insight and hear their comments and concerns about the AUC program. Having this open door with stakeholders has greatly informed our proposed policy. In addition, before AUC can be specified as directed by section 1834(q)(2)(A) of the Act, there is first the need to define what AUC are and to specify the process for developing them. To ensure transparency and meet the requirements of the statute, we proposed to implement section 1834(q)(2) of the Act by first establishing through rulemaking a process for specifying applicable AUC and proposing the requirements for AUC development. Under our proposal, the specification of AUC under section 1834(q)(2)(A) of the Act will flow from this process.
We also proposed to define the term, “provider-led entity,” which is included in section 1834(q)(1)(B) of the Act so that the public had an opportunity to comment, and entities meeting the definition are aware of the process by which they may become qualified under Medicare to develop or endorse AUC. Under our proposed process, once a provider-led entity (PLE) is qualified (which includes rigorous AUC development requirements involving evidence evaluation, as provided in section 1834(q)(2)(B) of the Act and proposed in the CY 2016 PFS proposed rule) the AUC that are developed or endorsed by the entity would be considered to be specified applicable AUC under section 1834(q)(2)(A) of the Act.
The second major component of the Medicare AUC program is the identification of qualified CDS mechanisms that could be used by ordering professionals for consultation with applicable AUC under section 1834(q)(3) of the Act. We envision a CDS mechanism for consultation with AUC as an interactive tool that communicates AUC information to the user. The ordering professional would input information regarding the clinical presentation of the patient into the CDS tool, which may be a feature of or accessible through an existing system, and the tool would provide immediate feedback to the ordering professional on the appropriateness of one or more imaging services. Ideally, multiple CDS mechanisms would be available that could integrate directly into, or be seamlessly interoperable with, existing health information technology (IT) systems. This would minimize burden on provider teams and avoid duplicate documentation.
Section 1834(q)(3)(A) of the Act states that the Secretary must specify qualified CDS mechanisms in consultation with physicians, practitioners, health care technology experts, and other stakeholders. This paragraph authorizes the Secretary to specify mechanisms that could include: CDS modules within certified EHR technology; private sector CDS mechanisms that are independent of certified EHR technology; and a CDS mechanism established by the Secretary.
However, all CDS mechanisms must meet the requirements under section 1834(q)(3)(B) of the Act which specifies that a mechanism must: Make available to the ordering professional applicable AUC and the supporting documentation for the applicable imaging service that is ordered; where there is more than one applicable AUC specified for an applicable imaging service, indicate the criteria it uses for the service; determine the extent to which an applicable imaging service that is ordered is consistent with the applicable AUC; generate and provide to the ordering professional documentation to demonstrate that the qualified CDS was consulted by the ordering professional; be updated on a timely basis to reflect revisions to the specification of applicable AUC; meet applicable privacy and security standards; and perform such other functions as specified by the Secretary (which may include a requirement to provide aggregate feedback to the ordering professional). Section 1834(q)(3)(C) of the Act specifies that the Secretary must publish an initial list of specified mechanisms no later than April 1, 2016, and that the Secretary must identify on an annual basis the list of specified qualified CDS mechanisms.
We did not include proposals to implement section 1834(q)(3) of the Act in the CY 2016 PFS proposed rule. We needed to first establish, through notice and comment rulemaking, the process for specifying applicable AUC. Specified applicable AUC would serve as the inputs to any qualified CDS mechanism; therefore, these must first be identified so that prospective tool developers are able to establish relationships with AUC developers. In addition, we intend that in PFS rulemaking for CY 2017, we will provide clarifications, develop definitions, and establish the process by which we will specify qualified CDS mechanisms. The requirements for qualified CDS mechanisms set forth in section 1834(q)(3)(B) of the Act will also be vetted through PFS rulemaking for CY 2017 so that mechanism developers have a clear understanding and notice regarding the requirements for their tools. The CY 2017 proposed rule would be published at the end of June or in early July of 2016, be open for a period of public comment, and then the final rule would be published by November 1, 2016. We anticipate that the initial list of specified applicable CDS mechanisms will be published sometime after the CY 2017 PFS final rule. If we were to follow a similar process for CDS as we have for specifying AUC, the initial list of CDS mechanisms would be available in the summer of 2017. In advance of these actions, we will continue to work with stakeholders to understand how to ensure that appropriate mechanisms are available, particularly with respect to standards for certified health IT, including EHRs, that can enable interoperability of AUC across systems.
The third major component of the AUC program is in section 1834(q)(4) of the Act, Consultation with Applicable Appropriate Use Criteria. This section establishes, beginning January 1, 2017, the requirement for an ordering professional to consult with a listed qualified CDS mechanism when ordering an applicable imaging service that would be furnished in an applicable setting and paid for under an applicable payment system; and for the furnishing professional to include on the Medicare claim information about the ordering professional's consultation with a qualified CDS mechanism. The statute distinguishes between the ordering and furnishing professional, recognizing that the professional who orders the imaging service is usually not the same professional who bills Medicare for the test when furnished. Section 1834(q)(4)(C) of the Act provides for certain exceptions to the AUC consultation and reporting requirements including in the case of certain emergency services, inpatient services paid under Medicare Part A, and ordering professionals who obtain a hardship exemption. Section 1834(q)(4)(D) of the Act specifies that the applicable payment systems for the AUC consultation and reporting requirements are the PFS, hospital outpatient prospective payment system, and the ambulatory surgical center payment system.
We did not include proposals to implement section 1834(q)(4) of the Act in the CY 2016 PFS proposed rule. Again, it is important that we first establish through notice and comment rulemaking the process by which applicable AUC will be specified as well as the CDS mechanisms through which ordering providers would access them. We anticipate including further discussion and adopting policies regarding claims-based reporting requirements in the CY 2017 and CY 2018 rulemaking cycles. Therefore, we do not intend to require that ordering professionals meet this requirement by January 1, 2017.
The fourth component of the AUC program is in section 1834(q)(5) of the Act, Identification of Outlier Ordering Professionals. The identification of outlier ordering professionals under this paragraph facilitates a prior authorization requirement for outlier professionals beginning January 1, 2020, as specified under section 1834(q)(6) of the Act. Although, we did not include proposals to implement these sections in the CY 2016 PFS proposed rule, we proposed to identify outlier ordering professionals from within priority clinical areas. Prior clinical areas will be identified through subsequent rulemaking.
The concept of priority clinical areas allows CMS to implement an AUC program that combines two approaches to implementation. Under our proposed policy, while potentially large volumes of AUC (as some eligible PLEs have large libraries of AUC) would become specified across clinical conditions and advanced imaging technologies, we believe this rapid roll out of specified AUC should be balanced with a more focused approach to identifying outlier ordering professionals. We believe this will provide an opportunity for physicians and practitioners to become familiar with AUC in identified priority clinical areas prior to Medicare claims for those services being part of the input for calculating outlier ordering professionals.
In the CY 2017 PFS rulemaking process, with the benefit of public comments, we will begin to identify priority clinical areas and expand them over time. Also in future rulemaking, we will develop and clarify our policy to identify outlier ordering professionals.
We proposed to amend our regulations to add a new § 414.94, “Appropriate Use Criteria for Certain Imaging Services.”
In § 414.94(b), we proposed to codify and add language to clarify some of the definitions provided in section 1834(q)(1) of the Act as well as define terms that were not defined in statute but for which a definition would be helpful for program implementation. In this section we provide a description of the terms we proposed to codify to facilitate understanding and encourage public comment on the AUC program.
Due to circumstances unique to imaging, it is important to note that there is an ordering professional (the physician or practitioner that orders that the imaging service be furnished) and a furnishing professional (the physician or practitioner that actually performs the imaging service and provides the interpretation of the imaging study) involved in imaging services. In some cases the ordering professional and the furnishing professional are the same.
This AUC program only applies in applicable settings as defined in section 1834(q)(1)(D) of the Act. An applicable setting would include a physician's office, a hospital outpatient department (including an emergency department), an ambulatory surgical center, and any provider-led outpatient setting determined appropriate by the Secretary. The inpatient hospital setting, for example, is not an applicable setting. Further, the program only applies to applicable imaging services as defined in section 1834(q)(1)(C) of the Act. These are advanced diagnostic imaging services for which one or more applicable AUC apply, one or more qualified CDS mechanisms is available, and one of those mechanisms is available free of charge.
We proposed to clarify the definition for appropriate use criteria, which is defined in section 1834(q)(2)(B) of the Act to include only criteria developed or endorsed by national professional medical specialty societies or other PLEs, to assist ordering professionals and furnishing professionals in making the most appropriate treatment decision for a specific clinical condition for an individual. To the extent feasible, such criteria shall be evidence-based. To further describe AUC, we proposed to add the following language to this definition: AUC are a collection of individual appropriate use criteria. Individual criteria are information presented in a manner that links: A specific clinical condition or presentation; one or more services; and, an assessment of the appropriateness of the service(s).
For the purposes of implementing this program, we proposed to define new terms in § 414.94(b). A PLE would include national professional medical specialty societies (for example the American College of Radiology and the American Academy of Family Physicians) or an organization that is comprised primarily of providers and is actively engaged in the practice and delivery of healthcare (for example hospitals and health systems).
Applicable AUC become specified when they are developed or modified by a qualified PLE, or when a qualified PLE endorses AUC developed by another qualified PLE. A PLE is not considered qualified until CMS makes a determination via the qualification process finalized in this CY 2016 PFS final rule with comment period. We introduced priority clinical areas to inform ordering professionals and furnishing professionals of the clinical topics alone, clinical topics and imaging modalities combined or imaging modalities alone that may be identified by the agency through annual rulemaking and in consultation with stakeholders which may be used in the identification of outlier ordering professionals.
The definitions in § 414.94 are important in understanding implementation of the program. Only AUC developed, modified or endorsed by organizations meeting the definition of PLE would be considered specified applicable AUC. As required by the statute, specified applicable AUC must be consulted and such consultation must be reported on the claim for applicable imaging services. To assist in identification of outlier ordering professionals, we proposed to focus on priority clinical areas. Priority clinical areas would be associated with a subset of specified AUC.
In § 414.94, we proposed to include regulations to implement the first component of the Medicare AUC program—specification of applicable AUC. We first proposed a process by which PLEs (including national professional medical specialty societies) become qualified by Medicare to develop or endorse AUC. The cornerstone of this process is for PLEs to demonstrate that they engage in a rigorous evidence-based process for developing, modifying, or endorsing AUC. It is through this demonstration that we proposed to meet the requirements of section 1834(q)(2)(B) of the Act to take into account certain considerations for specifying AUC. Section 1834(q)(2)(B) specifies that the Secretary must consider whether AUC have stakeholder consensus, are scientifically valid and evidence-based, and are based on studies that are published and reviewable by stakeholders. It is not feasible for us to review every individual criterion of an AUC. Rather, we proposed to establish a qualification process and requirements for qualified PLEs to ensure that the AUC development or endorsement processes used by a PLE result in high quality, evidence-based AUC in accordance with section 1834(q)(2)(B). Therefore, we proposed that AUC developed, modified, or endorsed by qualified PLEs will constitute the specified applicable AUC that ordering professionals would be required to consult when ordering applicable imaging services.
To become and remain a qualified PLE, we proposed to require a PLE to demonstrate adherence to specific requirements when developing, modifying or endorsing AUC. The first proposed requirement is related to the evidentiary review process for individual criteria. Entities must engage in a systematic literature review of the clinical topic and relevant imaging studies. We would expect the literature review to include evidence on analytical validity, clinical validity, and clinical utility of the specific imaging study. In addition, the PLE must assess the evidence using a formal, published, and widely recognized methodology for grading evidence. Consideration of relevant published evidence-based guidelines and consensus statements by professional medical specialty societies must be part of the evidence assessment. Published consensus statements may form part of the evidence base of AUC and would be subject to the evidentiary grading methodology as any other evidence identified as part of a systematic review.
In addition, we proposed that the PLE's AUC development process must be led by at least one multidisciplinary team with autonomous governance that is accountable for developing, modifying, or endorsing AUC. At a minimum, the team must be composed of three members including one with
Another important area to address that provides additional assurance regarding quality and evidence-based AUC development is the disclosure of conflicts of interest. We believe it is appropriate to impose relatively stringent requirements for public transparency and disclosure of potential conflicts of interest for anyone participating with a PLE in the development of AUC. We proposed that the PLE must have a publicly transparent process for identifying and disclosing potential conflicts of interest of members on the multidisciplinary AUC development team. The PLE must disclose any direct or indirect relationships, as well as ownership or investment interests, among the multidisciplinary team members or immediate family members and organizations that may financially benefit from the AUC that are being considered for development, modification or endorsement. In addition, the information must be made available to the public, if requested, in a timely manner.
For individual criteria to be available for practitioners to review prior to incorporation into a CDS mechanism, we proposed that the PLE must maintain on its Web site each criterion that is part of the AUC that the entity has considered or is considering for development, modification, or endorsement. This public transparency of individual criteria is critical not only to ordering and furnishing professionals, but also to patients and other health care providers who may wish to view all available AUC.
Although evidence should be the foundation for the development, modification, and endorsement of AUC, we recognized that not all aspects of a criterion will be evidence-based, and that a criterion does not exist for every clinical scenario. We believe it is important for AUC users to understand which aspects of a criterion are evidence-based and which are consensus-based. Therefore, we proposed that key decision points in individual criteria be graded in terms of strength of evidence using a formal, published, and widely recognized methodology. This level of detail must be part of each AUC posted to the entity's Web site.
It is critical that as PLEs develop large collections of AUC, they have a transparent process for the timely and continual review of each criterion, as there are sometimes rapid changes in the evidence base for certain clinical conditions and imaging studies.
Finally, we proposed that a PLE's process for developing, modifying, or endorsing AUC (which would be inclusive of the requirements being proposed in this rule) must be publicly posted on the entity's Web site.
We believe it is important to fit AUC to local circumstances and populations, while also ensuring a rigorous due process for doing so. Under our AUC program, local adaptation of AUC will happen in three ways. First, compatibility with local practice is something that ordering professionals can assess when selecting AUC for consultation. Second, professional medical societies (many of which have state chapters) and large health systems (which incorporate diverse practice settings, both urban and rural) that become qualified PLEs can get local feedback at the outset and build alternative options into the design of their AUC. Third, local PLEs can themselves become qualified to develop, modify, or endorse AUC.
We proposed that PLEs must apply to CMS to become qualified. We proposed that entities that believed they met the definition of provider-led, submit applications to us that document adherence to each of the qualification requirements. The application must include a statement as to how the entity meets the definition of a PLE. Applications will be accepted each year but must be received by January 1. A list of all applicants that we determine to be qualified PLEs will be posted to our Web site by the following June 30 at which time all AUC developed or endorsed by that PLE will be considered to be specified AUC. We proposed all qualified PLEs must re-apply every 6 years and their applications must be received by January 1 during the 5th year of their approval. Note that the application is not a CMS form; rather it is created by the applicant entity.
Section 1834(q)(4) of the Act requires that, beginning January 1, 2017, ordering professionals must consult applicable AUC using a qualified CDS mechanism when ordering applicable imaging services for which payment is made under applicable payment systems and provide information about the CDS mechanism consultation to the furnishing professional, and that furnishing professionals must report the results of this consultation on Medicare claims. Section 1834(q)(5) of the Act further provides for the identification of outlier ordering professionals based on a low adherence to applicable AUC. We proposed to identify priority clinical areas of AUC that we will use in identifying outlier ordering professionals. Although there is no consequence to being identified as an outlier ordering professional until January 2020, it is important to allow ordering and furnishing professionals as much time as possible to use and familiarize themselves with the specified applicable AUC that will eventually become the basis for identifying outlier ordering professionals.
To identify these priority clinical areas, we may consider incidence and prevalence of diseases, as well as the volume, variability of utilization, and strength of evidence for imaging services. We may also consider applicability of the clinical area to a variety of care settings, and to the Medicare population. We proposed to annually solicit public comment and finalize clinical priority areas through the PFS rulemaking process beginning in CY 2017. To further assist us in developing the list of proposed priority clinical areas, we proposed to convene the Medicare Evidence Development and Coverage Advisory Committee (MEDCAC), a CMS FACA compliant committee, as needed to examine the evidence surrounding certain clinical areas.
Specified applicable AUC falling within priority clinical areas may factor into the low-adherence calculation when identifying outlier ordering professionals for the prior authorization component of this statute, which is slated to begin in 2020. Future rulemaking will address further details.
Despite our proposed PLE qualification process that should ensure evidence-based AUC development, we remain concerned that non-evidence-based criteria may be developed or
Section 1834(q) of the Act includes rapid timelines for establishing a new Medicare AUC program for advanced imaging services. The number of clinicians impacted by the scope of this program is massive as it will apply to every physician and practitioner who orders applicable diagnostic imaging services. This crosses almost every medical specialty and could have a particular impact on primary care physicians since their scope of practice can be quite vast.
We believe the best implementation approach is one that is diligent, maximizes the opportunity for public comment and stakeholder engagement, and allows for adequate advance notice to physicians and practitioners, beneficiaries, AUC developers, and CDS mechanism developers. It is for these reasons we proposed a stepwise approach, adopted through rulemaking, to first define and lay out the process for the Medicare AUC program. However, we also recognize the importance of moving expeditiously to accomplish a fully implemented program.
In summary, we proposed definitions of terms necessary to implement the AUC program. We were particularly seeking comment on the proposed definition of PLE as these are the organizations that have the opportunity to become qualified to develop, modify, or endorse specified AUC. We also proposed an AUC development process which allows some flexibility for PLEs but sets standards including an evidence-based development process and transparency. In addition, we proposed the concept and definition of priority clinical areas and how they may contribute to the identification of outlier ordering professionals. Lastly, we proposed to develop a process by which non-evidence-based AUC will be identified and discussed in the public domain. We invited the public to submit comments on these proposals.
The following is a summary of the comments we received regarding our proposals.
Some commenters suggested that physicians and other practitioners are involved in the AUC development process and, therefore, should be considered PLEs. However, we believe the AUC development process typically would be embedded within a larger organization, and the organization as a whole may not be primarily comprised of practitioners. We continue to believe that the statute is intended to focus on the structure of the entire organization, and to require that it be “provider-led.” We believe that the PLE definition must apply to the organization as a whole, as processes that are embedded within the organization are not the same as a separately identifiable entity. We do not believe the modified definition of PLE that we are finalizing will limit the AUC market or the participation of third parties (such as RBMs) in the AUC development process. There may be opportunity for third parties to collaborate with PLEs to develop AUC.
We agree with the commenters' suggestions that the team should be required to include more members, and that the types of experts required on the team should also be expanded. In addition to primary care, we are also modifying our proposal to require that experts in clinical trial design and statistical analysis be required members of the team. While we do not agree that involvement from industry or patient advocates should be required on the team, we do believe that teams could benefit from dialogue with such stakeholders. In response to the commenters that expressed concern about CMS restricting team participation, we encourage teams to be inclusive and seek members with any other relevant expertise.
Regarding local adaption, we believe it is important to fit AUC to local circumstances, while also ensuring application of a rigorous process in doing so. However, only AUC modified by qualified PLEs can become specified applicable AUC.
Specified AUC must first exist prior to being loaded into CDS mechanisms, and qualified CDS mechanisms must exist prior to consultation by ordering professionals.
We fully anticipate that we will be able to finalize rules and requirements around the CDS mechanism and approve mechanisms through
We believe the reapplication timeline is appropriate and allows for PLEs, CDS mechanism developers and ordering practitioners to enter into longer term agreements without the constant concern that the PLE will lose its qualified status. We will assess whether a qualified PLE consistently has developed evidence-based AUC and met our other requirements at the time of requalification. We note, however, that if it appears that qualified PLEs are not maintaining compliance with our requirements for AUC development, we could reevaluate the requalification timeline in future rulemaking.
In response to comments, we are making some changes to our proposals as well as finalizing most aspects of the policies as they were proposed in the CY 2016 PFS proposed rule.
We are finalizing the majority of definitions as they were proposed. However, based on public comments, we are changing the definitions of AUC, PLE and priority clinical area.
We proposed to define AUC as criteria only developed or endorsed by national professional medical specialty societies or other provider-led entities, to assist ordering professionals in making the most appropriate treatment decision for a specific clinical condition for an individual. To the extent feasible, such criteria must be evidence-based. AUC are a collection of individual appropriate use criteria. Individual criteria are information presented in a manner that links: A specific clinical condition or presentation; one or more services; and, an assessment of the appropriateness of the service(s). We are revising the last two sentences of the definition in response to public comments that expressed confusion regarding the AUC terminology used in our proposal. We have also revised related language throughout the final regulation accordingly.
We proposed to define PLE as a national professional medical specialty society, or an organization that is comprised primarily of providers and is actively engaged in the practice and delivery of healthcare. We are revising the definition of PLE to refer to organizations comprised primarily of providers or practitioners who, either within the organization or outside of the organization, predominantly provide direct patient care. The definition of PLE will retain the direct reference to national professional medical specialty societies, and other organizations like them are now subsumed within the definition.
This definition of PLE will include health care collaboratives and other similar organizations such as the National Comprehensive Cancer Network and the High Value Healthcare Collaborative. While this is not a dramatic change from the proposed rule, the focus is now on the role of the members that comprise the organization and not the function of the organization
We are also modifying our proposed definition of priority clinical area. We proposed to define priority clinical area as clinical topics, clinical topics and imaging modalities, or imaging modalities identified by CMS through annual rulemaking and in consultation with stakeholders which may be used in the determination of outlier ordering professionals. We are changing the language to better describe the breadth of clinical areas that may be the focus of priority clinical areas. The finalized definition better reflects that priority clinical areas may identify clinical conditions, diseases or symptom complexes and their associated advanced diagnostic imaging services. This definition will allow the priority clinical areas to better align with the variety of clinical situations for which a patient may present to the ordering practitioner.
In response to the comments we received regarding the role of endorsement of AUC, we are adding a new § 414.94(d) to the regulations. This new section clearly describes the role of endorsement. We note that only a qualified PLE may provide endorsement of AUC. Further, qualified PLEs may only endorse the AUC of other qualified PLEs. Independently, each organization must have been qualified, and therefore, we do not envision participation by CMS in the endorsement relationship. The primary function of endorsement is for qualified PLEs to combine their AUC to create a larger, more clinically encompassing library. For example, one qualified PLE may focus on developing AUC related to neuroimaging, another may focus on developing AUC related to abdominal imaging. The endorsement relationship gives recognition to this type of collaboration.
While we are finalizing the requirements for developing or modifying AUC as proposed (with the exception of grammatical, non-substantive changes for regulatory consistency) in § 414.94(c)(1), we provide clarification in this final rule with comment period around what is expected regarding a systematic literature review as public commenters did not indicate a consistent understanding of this concept. To clarify, the evidence review requirement does not mean that PLEs must commission external systematic evidence reviews or technology assessments. We expect many organizations will undertake their own systematic evidence review to ensure all relevant evidence-based information is considered and evaluated. The literature review must be systematic, reproducible and encompass all relevant literature related to the specific imaging study. Ideally, the review would include evidence on analytical validity, clinical validity, and clinical utility of the specific imaging study. In addition, the PLE must assess the evidence using a formal, published, and widely recognized methodology for grading evidence. We do not require that a particular methodology be used as there may be certain methodologies better suited to some evidentiary assessments than others.
For consistency with regulatory structure, we have revised the proposed language throughout § 414.94(c) to more clearly represent the responsibility of the PLEs seeking qualification in demonstrating adherence to AUC development requirements under this section.
Based on public comments, we are changing the requirements for the multidisciplinary team that must be used in the AUC development process. We proposed at least one multidisciplinary team with autonomous governance, decision making and accountability for developing, modifying or endorsing AUC. At a minimum the team must be comprised of three members including one with expertise in the clinical topic related to the criterion and one with expertise in the imaging modality related to the criterion. While we proposed to require a smaller team, we are finalizing § 414.94(c)(1)(ii) to state that a qualified PLE must utilize at least one multidisciplinary team with autonomous governance, decision making and accountability for developing or modifying AUC. At a minimum the team must be comprised of seven members including at least one practicing physician with expertise in the clinical topic related to the appropriate use criterion being developed or modified, at least one practicing physician with expertise in the imaging studies related to the appropriate use criterion, at least one primary care physician or practitioner (as defined in sections 1833(u)(6), 1833(x)(2)(A)(i)(I), and 1833(x)(2)(A)(i)(II) of the Act), one expert in statistical analysis and one expert in clinical trial design. A given team member may be the team's expert in more than one domain. A team comprised in this manner and at this size better encompasses the expertise and the dedication needed to develop quality AUC. We encourage such teams to be larger where appropriate, and to include experts in medical informatics and quality improvement. These experts should contribute substantial work to the development of the criteria, not simply review the team's work. Teams may also consider involving other stakeholders.
Based on public comments in support of frequent review of AUC, we are adding language to § 414(c)(1)(vii) to require at least annual review by qualified PLEs of their AUC.
In addition, since new § 414.94(d) has been added to clarify the role of qualified PLE endorsement, the term endorsement has been removed from § 414(c)(1)(ii) as it relates to the multidisciplinary team. Since only qualified PLEs can provide endorsement, these qualified PLEs have already demonstrated they meet the requirements of § 414.94(c)(1)(ii).
We have added language to the conflict of interest disclosure requirement in § 414.94(c)(1)(iii) to make clear that the conflict of interest processes and disclosures would apply not only to members of the multidisciplinary team but also the PLE and any entity that participated in the development of AUC.
In addition, and in response to comments, we have included that the conflict of interest process put in place by the PLE must also include processes to recuse or exclude members of the multidisciplinary team where appropriate. This language was not included in the proposed language of § 414.94(c)(1)(iii). We are finalizing conflict of interest language in § 414.94(c)(1)(iii) and § 414.94(c)(1)(iii)(A) and § 414.94(c)(1)(iii)(B).
We are finalizing language to clarify that CMS will perform a review of each PLE's application for qualification. We have added “for review” to § 414.94(c)(2)(i) to make it clear that PLEs must submit an application to CMS for review that documents adherence to each of the AUC development requirements outlined in paragraph (c)(1) of this section.
We proposed the requalification timeline in § 414.94(c)(2)(v). We revised the language and finalized two sections to clarify the requirements related to qualified PLE reapplication.
In the proposed rule we stated that PLEs, on their Web site, must identify when they have AUC that address a priority clinical area. Section 414.94(c)(1)(iv) included that, if relevant to a CMS identified priority clinical area, such a statement must be included. We have expanded this requirement and created § 414.94(c)(1)(v) to include this requirement. This ensures that the AUC are broad enough in scope that an ordering professional could use those AUC to satisfy the priority clinical area.
Section 414.94(f)(3) has been added to clearly specify that CMS will consider information related to a PLE's failure to correct non-evidence-based AUC to determine whether CMS should terminate the PLE's qualified status, and that the information would be used during the PLE's re-qualification review.
To broaden the scope of which potentially non-evidence-based AUC may be reviewed by the MEDCAC, we have revised the language so as not to be limited to reviewing AUC that correspond to priority clinical areas. We proposed § 414.94(e)(1) to state that CMS will accept public comment to facilitate identification of individual or groupings of AUC that fall within a priority clinical area and are not evidence-based. CMS may also independently identify AUC of concern. We have added language to § 414.94(f)(1) that gives priority to AUC that correspond to priority clinical areas but does not limit review to such. In this section, we have also identified that conflicting AUC may receive priority in MEDCAC review.
We thank the public for their comments and believe the changes based on these comments have improved the requirements and process that we will follow to specify AUC under this program for advanced diagnostic imaging services. Following the publication of this final rule with comment period, we will post information on our Web site for this program accessible at
As required by section 10331(a)(1) of the Affordable Care Act, by January 1, 2011, we developed a Physician Compare Internet Web site with information on physicians enrolled in the Medicare program under section 1866(j) of the Act, as well as information on other eligible professionals (EPs) who participate in the Physician Quality Reporting System (PQRS) under section 1848 of the Act. We launched the first phase of Physician Compare on December 30, 2010 (
We also implemented, consistent with section 10331(a)(2) of the Affordable Care Act, a plan for making publicly available through Physician Compare information on physician performance that provides comparable information on quality and patient experience measures for reporting periods beginning no earlier than January 1, 2012. We met this requirement in advance of the statutory deadline of January 1, 2013, as outlined below, and plan to continue addressing elements of the plan through rulemaking.
To the extent that scientifically sound measures are developed and are available, we are required to include, to the extent practicable, the following types of measures for public reporting:
• Measures collected under the Physician Quality Reporting System (PQRS).
• An assessment of patient health outcomes and functional status of patients.
• An assessment of the continuity and coordination of care and care transitions, including episodes of care and risk-adjusted resource use.
• An assessment of efficiency.
• An assessment of patient experience and patient, caregiver, and family engagement.
• An assessment of the safety, effectiveness, and timeliness of care.
• Other information as determined appropriate by the Secretary.
In developing and implementing the plan, section 10331(b) requires that we include, to the extent practicable, the following:
• Processes to ensure that data made public are statistically valid, reliable, and accurate, including risk adjustment mechanisms used by the Secretary.
• Processes for physicians and EPs whose information is being publicly reported to have a reasonable opportunity, as determined by the Secretary, to review their results before posting to Physician Compare. We have established a 30-day preview period for all measurement performance data that will allow physicians and other EPs to view their data as it will appear on the Web site in advance of publication on Physician Compare (77 FR 69166, 78 FR 74450, and 79 FR 67770). Details of the preview process will be communicated directly to those with measures to preview and will also be published on the Physician Compare Initiative page (
• Processes to ensure the data published on Physician Compare provides a robust and accurate portrayal of a physician's performance.
• Data that reflects the care provided to all patients seen by physicians, under both the Medicare program and, to the extent applicable, other payers, to the extent such information would provide a more accurate portrayal of physician performance.
• Processes to ensure appropriate attribution of care when multiple physicians and other providers are involved in the care of the patient.
• Processes to ensure timely statistical performance feedback is provided to physicians concerning the data published on Physician Compare.
• Implementation of computer and data infrastructure and systems used to support valid, reliable and accurate reporting activities.
Section 10331(d) of the Affordable Care Act requires us to consider input from multi-stakeholder groups, consistent with sections 1890(b)(7) and 1890A of the Act, when selecting quality measures for Physician Compare. We also continue to get general input from stakeholders on Physician Compare through a variety of means, including rulemaking and different forms of stakeholder outreach (for example, Town Hall meetings, Open Door Forums, webinars, education and outreach, Technical Expert Panels, etc.).
We submitted a report to the Congress in advance of the January 1, 2015 deadline, as required by section 10331(f) of the Affordable Care Act, on Physician Compare development, including information on the efforts and plans to collect and publish data on physician quality and efficiency and on patient experience of care in support of value-based purchasing and consumer choice.
We believe section 10331 of the Affordable Care Act supports our overarching goals of providing consumers with quality of care information that will help them make informed decisions about their health care, while encouraging clinicians to improve the quality of care they provide to their patients. In accordance with section 10331 of the Affordable Care Act, we plan to continue to publicly report physician performance information on Physician Compare.
Since the initial launch of the Web site, we have continued to build on and improve Physician Compare, including a full redesign in 2013. Currently, Web site users can view information about approved Medicare professionals such as name, primary and secondary specialties, practice locations, group affiliations, hospital affiliations that link to the hospital's profile on Hospital Compare as available, Medicare Assignment status, education, residency, and American Board of Medical Specialties (ABMS) board certification information. In addition, for group practices, users can view group practice names, specialties, practice locations, Medicare assignment status, and affiliated professionals.
We received several comments about the enhancements made to the Physician Compare Web site and the data currently on the Web site.
Some commenters provided suggestions for additional information to publicly report on Physician Compare, including whether a health care professional offers patients online access to their health information, specialist-specific training and certification data, and other qualifications, such as the Certified Medical Director designation and the Certificate of Added Qualifications in Geriatric Medicine, testimony of enhanced comprehensive care services, expanded access or non-traditional hours, and care management and coordination information. One commenter urged CMS to include information about accessibility.
The underlying database for Physician Compare is generated from PECOS, as well as fee-for-service (FFS) claims, and therefore, it is critical that physicians, other health care professionals, and group practices ensure that their information is up-to-date and as complete as possible in the national PECOS database. Currently, the most immediate way to address inaccurate PECOS data on Physician Compare is by updating information via Internet-based PECOS at
To update information not found in PECOS, such as hospital affiliation, professionals should contact the Physician Compare support team directly at
We appreciate the suggestions for alternative ways to update demographic data. However, PECOS is the sole verified source of Medicare information, and thus, some information must come to Physician Compare through PECOS. We are aware of PECOS' limitations and recognize that PECOS' primary purpose is not to provide up-to-the-minute information for a consumer Web site. For these reasons, we completely overhauled the underlying database and began using Medicare claims data to verify the information in PECOS in 2013. Because of this, the data are significantly better today than they were prior to the 2013 redesign and we will continue to work to find ways to further improve the data and the process of receiving and updating the data. We strongly encourage all professionals and group practices listed on the site to regularly check their data and to contact the support team with any questions or concerns. Together, we can continue to make the Web site better.
In addition, there is a section on each Medicare professional's profile page indicating with a green check mark the quality programs under which the EP satisfactorily or successfully reported. The Web site will continue to post annually the names of individual EPs who satisfactorily report under PQRS, EPs who successfully participate in the Medicare Electronic Health Record (EHR) Incentive Program as authorized by section 1848(o)(3)(D) of the Act, and
With the 2013 redesign of the Physician Compare Web site, we added a quality programs section to each group practice profile page, as well. We will continue to indicate which group practices are satisfactorily reporting in the Group Practice Reporting Option (GPRO) under PQRS (79 FR 67763). The Physician Compare Web site also contains a link to the Physician Compare downloadable database (
We continue to implement our plan for a phased approach to public reporting performance information on the Physician Compare Web site. Under the first phase of this plan, we established that GPRO measures collected under PQRS through the Web Interface for 2012 would be publicly reported on Physician Compare (76 FR 73419 through 73420). We further expanded the plan by including on the Physician Compare Web site, the 2013 group practice-level PQRS measures for Diabetes Mellitus (DM) and Coronary Artery Disease (CAD) reported via the Web Interface, and planned to report composite measures for DM and CAD in 2014, as well (77 FR 69166).
The 2012 GPRO measures were publicly reported on Physician Compare in February 2014. The 2013 PQRS GPRO DM and GPRO CAD measures collected via the Web Interface that met the minimum sample size of 20 patients and proved to be statistically valid and reliable were publicly reported on Physician Compare in December 2014.
The composite measures were not reported, however, as some items included in the composites were no longer clinically relevant. If the minimum threshold is not met for a particular measure, or the measure is otherwise deemed not to be suitable for public reporting, the performance rate on that measure is not publicly reported. On the Physician Compare Web site, we only publish those measures that are statistically valid and reliable, and therefore, most likely to help consumers make informed decisions about the Medicare professionals they choose to meet their health care needs. In addition, we do not publicly report first year measures, meaning new PQRS and non-PQRS measures that have been available for reporting for less than one year, regardless of reporting mechanism. After a measure's first year in use, we will evaluate the measure to see if and when the measure is suitable for pubic reporting.
Measures must be based on reliable and valid data elements to be useful to consumers. Therefore, for all measures available for public reporting, including both group and individual EP level measures—regardless of reporting mechanism, only those measures that prove to be valid, reliable, and accurate upon analysis and review at the conclusion of data collection and that meet the established public reporting criteria of a minimum sample size of 20 patients and that prove to resonate with consumers will be included on Physician Compare. For information on how we determine the validity and reliability of data and other statistical analyses we perform, refer to the CY 2015 PFS final rule with comment period (79 FR 67764 through 79 FR 67765).
We received several comments regarding the public reporting standards we have established for Physician Compare. The following is a summary of the comments received about the public reporting standards.
As mentioned above, in previous rulemaking, we have outlined some of the types of reliability studies that are conducted for measures (79 FR 67764 through 79 FR 67765). Additional information is also shared annually via our Technical Expert Panel (TEP) summaries which can be found on the Physician Compare Initiative page on www.CMS.gov. We will evaluate the feasibility of the request to share additional information.
We will continue to publicly report all measures submitted and reviewed and found to be statistically valid and reliable in the Physician Compare downloadable file. However, not all of these measures will necessarily be included on the Physician Compare profile pages. Consumer testing has shown profile pages with too much information and measures that are not well understood by consumers can negatively impact a consumer's ability to make informed decisions. Our analysis of the collected measure data, along with consumer testing and stakeholder feedback, will determine specifically which measures are published on Web site profile pages. Statistical analyses, like those specified above, will ensure the measures included are statistically valid and reliable and comparable across data collection mechanisms. Stakeholder feedback will help us to ensure that all publicly reported measures meet current clinical standards. When measures are finalized in advance of the time period in which the data are collected, it is possible that clinical guidelines may have changed rendering a measure no longer relevant. Publishing that measure can lead to consumer confusion regarding what best practices their health care professional should be subscribing to. We will continue to reach out to stakeholders in the professional community, such as specialty societies, to ensure that the measures under consideration for public reporting remain clinically relevant and accurate.
The primary goal of Physician Compare is to help consumers make informed health care decisions. If a consumer does not properly interpret a quality measure and thus misunderstands what the quality score represents, the consumer cannot use this information to make an informed decision. Through concept testing, we will test with consumers how well they understand measures presented using plain language. Such consumer testing will help us gauge how measures are understood and the kinds of measures that are most relevant to consumers. This will be done to help ensure that the information included on Physician Compare is as consumer friendly and consumer focused as possible.
As is the case for all measures published on Physician Compare, individual EPs and group practices will be given a 30-day preview period to view their measures as they will appear on Physician Compare prior to the measures being published. As in previous years, we will fully explain the process for the 30-day preview and provide a detailed timeline and instructions for preview in advance of the start of the preview period. Although the 30-day preview has been previously finalized and we were not seeking comment on this, several comments were received. The following is a summary of the comments received on the 30-day preview period.
We also report certain Accountable Care Organization (ACO) quality measures on Physician Compare (76 FR 67802, 67948). Because EPs that bill under the TIN of an ACO participant are considered to be a group practice for purposes of qualifying for a PQRS incentive under the Medicare Shared Savings Program (Shared Savings Program), we publicly report ACO performance on quality measures on the Physician Compare Web site in the same way as we report performance on quality measures for group practices participating under PQRS. Public reporting of performance on these measures is presented at the ACO level only. The first subset of ACO measures was also published on the Web site in February 2014. ACO measures can be viewed by following the “Accountable Care Organization (ACO) Quality Data” link on the homepage of the Physician Compare Web site at
ACOs will be able to preview their quality data that will be publicly reported on Physician Compare through the ACO Quality Reports, which are made available to ACOs for review at least 30 days prior to the start of public reporting on Physician Compare. The quality reports indicate the measures that are available for public reporting. ACO measures will be publicly reported in plain language, so a crosswalk linking the technical language included in the Quality Report and the plain language that will be publicly reported will be provided to ACOs at least 30 days prior to the start of public reporting.
As part of our public reporting plan for Physician Compare, we also have available for public reporting patient experience measures, specifically reporting the CAHPS for PQRS measures, which relate to the Clinician and Group Consumer Assessment of Healthcare Providers and Systems (CG-CAHPS) data, for group practices of 100 or more EPs reporting data in 2013 under PQRS and for ACOs participating in the Shared Savings Program (77 FR 69166 and 69167). The 2013 CAHPS data for ACOs were publicly reported on Physician Compare in December 2014.
We continued to expand our plan for publicly reporting data on Physician Compare in 2015. In the CY 2014 PFS final rule with comment period, we finalized a decision that all group practice level measures collected through the Web Interface for groups of 25 or more EPs participating in 2014 under the PQRS and for ACOs participating in the Shared Savings Program were available for public reporting in CY 2015 (78 FR 74450). We also finalized a plan to make available for public reporting performance on certain measures that group practices reported via registries and EHRs for the 2014 PQRS GPRO (78 FR 74451). Specifically, we finalized a decision to make available for public reporting on Physician Compare performance on 16 registry measures and 13 EHR measures in CY 2015 (78 FR 74451). These measures are consistent with the measures available for public reporting via the Web Interface. After review and analysis of these data, it was determined that neither 2014 EHR or registry data would be publicly reported in CY 2015. The 2014 EHR data will not be publicly reported on Physician Compare because CMS was unable to determine the accuracy of these data, and 2014 registry data will not be publicly reported because these data do not meet the public reporting standards. However, we will continue to analyze EHR and registry data for future inclusion on the Web site in 2016 and beyond.
We received comments specifically about EHR measures.
In CY 2015, CAHPS measures for group practices of 100 or more EPs who participate in PQRS, regardless of data submission method, and for Shared Savings Program ACOs reporting through the Web Interface or other CMS-approved tool or interface are available for public reporting (78 FR 74452). In addition, twelve 2014 summary survey measures for groups of 25 to 99 EPs collected via any certified CAHPS vendor regardless of PQRS participation are available for public reporting (78 FR 74452). For ACOs participating in the Shared Savings Program, the patient experience measures that are included in the Patient/Caregiver Experience domain of the Quality Performance Standard under the Shared Savings Program will be available for public reporting in CY 2015 (78 FR 74452).
In late CY 2015, certain 2014 individual PQRS measure data reported by individual EPs are also available for public reporting. Specifically, we finalized to make 20 individual measures collected through a registry, EHR, or claims available for public reporting (78 FR 74453 through 74454). These are measures that are in line with those measures reported by groups via the Web Interface. As noted above, however, both the 2014 EHR and registry data are not being publicly reported for either group practices or individual EPs who reported these data.
Finally, in support of the HHS-wide Million Hearts initiative, performance rates on measures in the PQRS Cardiovascular Prevention measures group at the individual EP level for data collected in 2014 for the PQRS were finalized as available for public reporting in CY 2015 (78 FR 74454). Again, these data are ultimately not going to be publicly reported in late 2015 because they are collected only via registry.
We continue to expand public reporting on Physician Compare by making an even broader set of quality measures available for public reporting on the Web site in CY 2016. All 2015 group-level PQRS measures across all group reporting mechanisms—Web Interface, registry, and EHR—are available for public reporting on Physician Compare in CY 2016 for
Understanding the value of patient experience data for Physician Compare, CMS finalized to make twelve 2015 CAHPS for PQRS summary survey measures available for public reporting for all group practices of two or more EPs, who meet the specified sample size requirements and collect data via a CMS-specified certified CAHPS vendor in CY 2016 (79 FR 67772).
To provide the opportunity for more EPs to have measures included on Physician Compare, and to provide more information to consumers to make informed decisions about their health care, we finalized to make all 2015 PQRS measures for individual EPs collected through a registry, EHR, or claims available for public reporting in CY 2016 on Physician Compare (79 FR 67773).
Furthermore, in support of the HHS-wide Million Hearts initiative, four 2015 PQRS measures reported by individual EPs in support of Million Hearts will be available for public reporting in CY 2016.
To further support the expansion of quality measure data available for public reporting on Physician Compare and to provide more quality data to consumers to help them make informed decisions, CMS finalized that 2015 Qualified Clinical Data Registry (QCDR) PQRS and non-PQRS measure data collected at the individual EP level are available for public reporting in late CY 2016. The QCDR is required to declare during their self-nomination if it plans to post data on its own Web site and allow Physician Compare to link to it or if it will provide data to CMS for public reporting on Physician Compare. Measures collected via QCDRs must also meet the established public reporting criteria. Both PQRS and non-PQRS measures that are in their first year of reporting by a QCDR will not be available for public reporting (79 FR 67774 through 67775).
See Table 25 for a summary of our previously finalized policies for public reporting data on Physician Compare.
We are expanding public reporting on Physician Compare by continuing to make a broad set of quality measures available for public reporting on the Web site. We started the phased approach with a small number of possible PQRS GPRO Web Interface measures for 2012 and have been steadily building on this to provide Medicare consumers with more information to help them make informed health care decisions. As a result, we proposed (80 FR 41811-41814) to add new data elements to the individual EP and/or group practice profile pages and to continue to publicly report a broad set of quality measures on the Web site. We received several comments on the phased approach to public reporting. A summary of the comments received follows.
Throughout this process, we have been engaging with consumers and stakeholders and regularly testing the site and the information to be included to ensure it is accurately presented and understood. We are also continually working to improve the Web site and the administrative and demographic information included. We continue to encourage physicians, other health care professionals, and group practices to ensure their information is updated in PECOS so that we can ensure the most accurate information is available on Physician Compare. We also encourage individuals and groups to reach out to the Physician Compare support team at
We are committed to public reporting to provide consumers with information to help them make informed health care decisions. Even though we will be moving to MIPS as required by the Medicare Access and CHIP Reauthorization Act (MACRA), we are committed to continue providing this useful information to consumers and to continue to be transparent so that health care professionals can evaluate their own performance and the performance of their peers. As we move towards implementation of the new MIPS program, we will continue to engage and educate our stakeholders.
The first goal of the HHS Strategic Plan is to strengthen health care. One of the ways to do this is to reduce the growth of health care costs while promoting high-value, effective care (Objective D, Strategic Goal 1).
The following is a summary of the comments we received on our proposal to include a green check mark indicator of the names of those individual EPs and group practices who receive the VM upward adjustment on profile pages on Physician Compare.
However, several commenters had significant concerns that the VM is not well-understood by the public, may be misinterpreted, or does not provide value to consumers. Many commenters were also opposed to this proposal due to concerns with the VM calculation methodology and the resulting proportion of health care professionals that will receive “average” scores for the cost and/or quality composite. One commenter recommended that EPs who participate in programs that exempt them from VM should receive a checkmark because without this indicator, they would appear lower quality. Several commenters opposed these data being added on the profile page, but supported inclusion in a downloadable database. Some commenters also noted that the VM program will sunset after 2018, and suggested waiting to publicly report cost data until the MIPS is implemented. One commenter suggested an indicator for participating in a QCDR is a better indicator of physician quality and overall value than the VM.
In support of the HHS-wide Million Hearts initiative, we included an indicator for individual EPs who choose to report on specific “ABCS” (Appropriate Aspirin Therapy for those who need it, Blood Pressure Control, Cholesterol Management, and Smoking Cessation) measures (79 FR 67764). Based on available measures the criteria for this indicator have evolved over time. In 2015, an indicator was included if EPs satisfactorily reported four individual PQRS Cardiovascular Prevention measures. In previous years, the indicator was based on satisfactory reporting of the Cardiovascular Prevention measures group, which was not available via PQRS for 2015. To further support this initiative, we proposed (80 FR 41811) to include on Physician Compare annually in the year following the year of reporting (for example, 2016 data will be included on Physician Compare in 2017) an indicator for individual EPs who satisfactorily report the new Cardiovascular Prevention measures group that was proposed (and is being finalized in this final rule) under PQRS. The Million Hearts initiative's primary goal is to improve cardiovascular heart health, and therefore, we believe it is important to continue supporting the program and acknowledging those physicians and other health care professionals working to excel in performance on the ABCS. We solicited comments on this proposal.
The following is a summary of the comments we received on our proposal to include an indicator on profile pages for EPs who satisfactorily report the Cardiovascular Prevention measures group in support of Million Hearts.
Understanding the importance of including quality data on Physician Compare to support the goals of section 10331(a) of the Affordable Care Act, we finalized in the CY 2015 PFS final rule with comment period (79 FR 67547) a policy to make available for public reporting on Physician Compare all PQRS GPRO measures collected in 2015 via the Web Interface, registry, or EHR. In the proposed rule, we proposed (80 FR 41811) to continue to make available for public reporting on Physician Compare on an annual basis all PQRS GPRO measures across all PQRS group practice reporting mechanisms—Web Interface, registry, and EHR—for groups of 2 or more EPs available in the year following the year the measures are reported. Similarly, all measures reported by Shared Savings Program ACOs, including CAHPS for ACO measures, would be available for public reporting on Physician Compare annually in the year following the year the measures are reported. For group practice and ACO measures, the measure performance rate would be represented on the Web site. We solicited comments on this proposal.
The following is a summary of the comments we received on our proposal to make PQRS GPRO measures across all reporting mechanisms for groups of 2 or more EPs and Shared Savings Program ACO measures available for public reporting.
Regarding concerns about potential consumer misinterpretation of the data, we do conduct regular consumer testing to address this issue. In general, consumers find this information interesting and beneficial in their decision making process. If a measure is not accurately interpreted or well understood, or if consumers do not find it to be valuable, that measure is not considered for public reporting on Physician Compare profile pages. We do appreciate that PQRS does not contain a similar number of measures for all possible specialties; we are working on strategies to help fill this gap. One strategy is looking toward QCDRs, which are better able to address the needs of specific specialties with relevant measures.
After considering the issues raised by commenters and for the reasons we articulated, we are finalizing our proposal to continue to make all PQRS group practice level and ACO Shared Savings Program measures available for public reporting annually, including making the 2016 PQRS group practice and ACO data available for public reporting on Physician Compare in late 2017.
Consumer testing indicates that consumers are looking for measures regarding individual doctors and other health care professionals above all other data. As a result, we decided to make individual EP level measure data available for public reporting on Physician Compare starting with a subset of 2014 PQRS measures (78 FR 74451). We expanded this plan by making all 2015 individual EP level PQRS measures collected through a registry, EHR, or claims available for public reporting (79 FR 67773). Through stakeholder outreach and consumer testing we have learned that these PQRS quality data provide the public with useful information to help consumers make informed decisions about their health care. As a result, we proposed to continue to make all PQRS measures across all individual EP reporting mechanisms available for public reporting on Physician Compare annually in the year following the year the measures are reported (for example, 2016 data would be included on Physician Compare in 2017). For individual EP measures, the measure performance rate would be represented on the Web site. We solicited comments on this proposal.
The following is a summary of the comments we received on our proposal to make all individual EP level PQRS measures available for public reporting on Physician Compare.
As a result of the comments received and the importance of individual EP level quality measure data to consumers, we are finalizing our proposal to continue to make all PQRS individual EP level PQRS measures available for public reporting annually, including making the 2016 PQRS individual EP level data available for public reporting on Physician Compare in late 2017.
As previously stated, stakeholder outreach and consumer testing have repeatedly shown that consumers find individual EP quality measures valuable and helpful when making health care decisions. Consumers want to know more about the individual EPs when deciding who they should make an appointment to see for their health care needs, and expanding group practice-level public reporting ensures that more quality data are available to assist consumers with their decision making. We do appreciate, however, that not all specialties have a full complement of available quality measures specific to the work they do currently available through PQRS. As a result, we decided to make individual EP level Qualified Clinical Data Registry (QCDR) measures—both PQRS and non-PQRS measures—available for public reporting starting with 2015 data (79 FR 67774 through 67775). To further support the availability of quality measure data most relevant for all specialties, we proposed to continue to make available for public reporting on Physician Compare all individual EP level QCDR PQRS and non-PQRS measure data that have been collected for at least a full year (80 FR
The following is a summary of the comments we received on our proposal to make both group practice and individual EP level QCDR data available for public reporting on Physician Compare.
There were also some general concerns about QCDR data including concerns that QCDR data are too new, not comparable to PQRS measures, not accurate and reliable, and potentially confusing to consumers. One commenter suggested holding public reporting of QCDR data until more specialties are able to report via QCDRs.
It is important to note that data collected at the individual EP level, whether through a QCDR or through other PQRS reporting mechanism will only be publicly reported at the individual EP level, and data collected at the group practice level will only be reported at the group practice level. Group practice data will never be publicly reported on an individual EP profile page because it would not be accurate to attribute the group's performance rates to only one EP.
Regarding the general concerns raised about publicly reporting QCDR data, it is important to emphasize that data submitted by QCDRs must meet the same public reporting standards as all other data submitted to CMS. If a QCDR submits a PQRS measure and that measure data is not deemed comparable to data submitted via other PQRS reporting mechanisms, the data will not be publicly reported because all data publicly reported must be comparable to ensure one measure is evaluating each EP or group in the same way regardless of how the data were collected and submitted to CMS.
It is expected that non-PQRS measures submitted via QCDRs are likely to be unique from the available PQRS data. This is considered one of the greatest benefits of the QCDR data. These measures are likely to be more specific to specialties otherwise less represented in PQRS and to be a strong fit for those reporting them. Considering the measures are relevant to the group or EP they are representing, we believe this provides a benefit to consumers reviewing the data. We appreciate that not all groups or EPs may have the opportunity to participate in a QCDR, but we see significant value in making the data that are now accessible available for public reporting for these reasons. Again, as with all data under consideration for public reporting, consumer testing will be done to ensure measures included on Physician Compare are accurately interpreted and deemed valuable by consumers.
Understanding the value of these data, the opportunity for these data to fill gaps currently in the PQRS program, and the relevancy of these data to many specialties, we are finalizing this proposal to make group practice and individual EP level QCDR data, both PQRS and non-PQRS measures, available for public reporting on Physician Compare annually, including making 2016 data available for public reporting in late 2017.
Each QCDR will be required to declare during its self-nomination if it plans to post data on its own Web site and allow Physician Compare to link to it or if the QDCR plans to provide data to us for public reporting on Physician Compare. After a QCDR declares a public reporting method, that decision is final for the reporting year. If a declaration is not made, the data will be considered available for public reporting on Physician Compare.
We previously proposed (79 FR 40389) a benchmark that aligned with the Shared Savings Program ACO benchmark methodology finalized in the November 2011 Shared Savings Program final rule (76 FR 67898) and amended in the CY 2014 PFS final rule with comment period (78 FR 74759). Benchmarks are important to ensuring that the quality data published on Physician Compare are accurately understood. A benchmark will allow consumers to more easily evaluate the information published by providing a point of comparison between groups and between individuals. However, given shortcomings when trying to apply the Shared Savings Program methodology to the group practice or individual EP setting, this proposal was not finalized. We noted we would discuss more thoroughly potential benchmarking methodologies with our stakeholders and evaluate other programs' methodologies to identify the best possible option for a benchmark for Physician Compare (79 FR 67772). To accomplish this, we reached out to stakeholders, including specialty societies, consumer advocacy groups, physicians and other health care professionals, measure experts, and quality measure specialists, as well as other CMS Quality Programs. Based on this outreach and the recommendation of our TEP, we proposed (80 FR 41812-41813) to publicly report on Physician Compare an item, or measure-level, benchmark derived using the Achievable Benchmark of Care (ABC
As explained, ABC
ABC
We proposed to derive the benchmark by calculating the total number of patients in the highest scoring subset receiving the intervention or the desired level of care, or achieving the desired outcome, and dividing this number by the total number of patients that were measured by the top performing doctors. This would produce a benchmark that represents the best care provided to the top 10 percent of patients.
(1) We look at the total number of patients with diabetes for all doctors who reported this diabetes measure.
(2) We rank doctors that reported this diabetes measure from highest performance score to lowest performance score to identify the set of top doctors who treated at least 10 percent of the total number of patients with diabetes.
(3) We count how many of the patients with diabetes who were treated by the top doctors also had blood pressure at a healthy level.
(4) This number is divided by the total number of patients with diabetes who were treated by the top doctors, producing the ABC
To account for low denominators, ABC
The ABC
To summarize, we proposed to publicly report on Physician Compare an item or measure-level benchmark derived using the Achievable Benchmark of Care (ABC
The following is a summary of the comments we received on our proposal to publicly report on Physician Compare an item, or measure-level, benchmark derived using the Achievable Benchmark of Care (ABC
Some commenters noted concern that measures are currently not risk-adjusted and that the proposed methodology may not be appropriate for all measures. Multiple commenters, both those who support and do not support the specific proposal, noted concerns about the need to stratify any benchmark developed by specialty, stratify by reporting mechanism, and risk-adjust the benchmark. Some commenters urged CMS to educate physicians and consumers on the benchmark methodology. Several commenters appreciated the stakeholder engagement conducted by the Physician Compare team regarding the benchmark methodology selection and encouraged continued engagement in the future.
Several commenters also asked for clarification on how the pared-mean was determined and how this method can be applied to both process measures and outcome measures. Some commenters suggested increasing the pared-mean to 25 percent and commenters suggested other benchmark methodologies, including an approach that recognizes self-improvement over time and peer-to-peer performance. One commenter asked for the opportunity to review the database and provide a clear demonstration of the benchmark's validity. Additional commenters noted that benchmarks using the ABC
Regarding the commenters' concerns about risk adjustment, we agree that risk adjustment will become increasingly important as we move to more outcome measures, specifically at the individual EP level. We actively encourage measure developers to produce measures that are risk adjusted. We believe that it is most appropriate to approach risk adjustment at the measure development level versus trying to adjust after the fact at the benchmarking stage, especially when data are submitted via reporting mechanisms that do not provide the necessary information to risk adjust after data collection is complete. We will continue to conduct analyses to ensure all data, including the benchmarks, meet the stated public reporting criteria, and therefore, are showing variation in performance and not in other factors, such as region or population of care.
Regarding stratifying the benchmark, one consideration is the negative effect of over-stratification. At this stage in public reporting, looking to stratify by too many criteria can lead to data groupings so small that there can be no meaningful or statistically relevant comparisons made. Also, it is important to remember that searches on Physician Compare are conducted by location and specialty. In this way, when a consumer is evaluating data on the Physician Compare Web site, they are generally looking at health care professionals in the same location practicing in similar or the same specialties. Understanding the limitations to stratifying at this time, there is one stratification consideration that we believe is not only valuable but necessary as we work to ensure data included on the Web site are comparable.
We are in favor of stratifying by reporting mechanism at this time, which would mean creating a benchmark by measure by reporting mechanism. This would help remove the complexity and potential differences between the same measure collected via multiple reporting mechanisms and help solve some of the concerns raised about the available PQRS data. It would also remove the burden of interpretation across mechanisms from consumers. It is important to note that this benchmark proposal does only apply to PQRS data. QCDRs are free to develop their own benchmark methodology and submit their methodology and benchmark rates to Physician Compare for public reporting consideration for non-PQRS measures when and where appropriate.
One of the benefits of the ABC
We do appreciate the comments that requested that CMS evaluate using a consistent benchmark methodology across programs. We are continually evaluating ways to align where and as possible, and will take this recommendation into consideration for the future. One benefit of the ABC
After considering the comments and stakeholder and expert feedback, as well as testing conducted to date, and for the reasons we noted, we are finalizing our proposal to publicly report on Physician Compare an item, or measure-level, benchmark derived using the ABC
In addition to receiving comments about using the ABC
Understanding the value of a star rating system for consumers, we are finalizing our proposal to use the ABC
In the CY 2015 PFS final rule with comment period (79 FR 67547), we adopted a policy to publicly report patient experience data for all group practices of two or more EPs. Consumer testing shows that other patients' assessments of their experience resonate with consumers because it is important to them to hear about positive and negative experiences others have with physicians and other health care professionals. As a result, these patient experience data help them make an informed health care decision. Understanding the value consumers place on patient experience data and our commitment to reporting these data on Physician Compare, we proposed (80 FR 41813) to continue to make available for public reporting all patient experience data for all group practices of two or more EPs, who meet the specified sample size requirements and collect data via a CMS-specified certified CAHPS vendor, annually in the year following the year the measures are reported (for example, 2016 CAHPS for PQRS reported data will be included on the Web site in 2017). The patient experience data available that we proposed to make available for public reporting are the CAHPS for PQRS measures, which include the CG-CAHPS core measures. For group practices, we proposed to annually make available for public reporting a representation of the top box performance rate
• Getting Timely Care, Appointments, and Information.
• How Well Providers Communicate.
• Patient's Rating of Provider.
• Access to Specialists.
• Health Promotion & Education.
• Shared Decision Making.
• Health Status/Functional Status.
• Courteous and Helpful Office Staff.
• Care Coordination.
• Between Visit Communication.
• Helping You to Take Medication as Directed.
• Stewardship of Patient Resources.
We solicited comments on this proposal.
The following is a summary of the comments we received on our proposal to publicly report CAHPS for PQRS data for group practices of 2 or more EPs that meet all stated public reporting criteria.
We do appreciate the comments regarding other types of patient experience data, as well as the inclusion of a CAHPS benchmark, and will consider these recommendations for the future. We do understand that not all measures under consideration for public reporting equally apply to all types of professionals included on Physician Compare. However, we do believe that the CAHPS for PQRS measures apply to the large majority of professionals currently represented on the site. We also appreciate the request for CAHPS for PQRS measures at the individual EP level. This is something consumers have also requested in testing. Unfortunately, at this time, CAHPS for PQRS measures are only available and tested at the group practice level.
Again, as with all measures available for inclusion on Physician Compare, the measures must meet the stated public reporting standards. Any concerns about specific measures are reviewed against these criteria prior to consideration for public reporting.
After considering the comments received and given that CAHPS for PQRS data are highly valued by consumers, we are finalizing our proposal to make all twelve summary survey CAHPS for PQRS measures available for public reporting on Physician Compare annually for groups of 2 or more EPs reporting via a CMS certified CAHPS vendor.
To further aid in transparency, we also proposed (80 FR 41813-41814) to add new data elements to the Physician Compare downloadable database at
The following is a summary of the comments we received on our proposal to include this additional VM data to the Physician Compare downloadable database.
As a result of our commitment to increased transparency and the other reasons we noted, and after considering the public comments, we are finalizing this proposal to add cost and quality tier, as well as adjustment, information to the Physician Compare downloadable database for the 2018 VM based on 2016 quality and cost data.
In addition, we proposed (80 FR 4183-4184) to add utilization data to the Physician Compare downloadable database. Utilization data is information generated from Medicare Part B claims on services and procedures provided to Medicare beneficiaries by physicians and other health care professionals; and are currently available at
The following is a summary of the comments we received on our proposal to include utilization data in the Physician Compare downloadable database.
Given that section 104(e) of MACRA mandates integration of these data on Physician Compare and because we believe that adding these data to the downloadable database advances our transparency goals, we are finalizing our proposal to include utilization data in the Physician Compare downloadable database. Not all available data will be included. The specific HCPCS codes included will be determined based on analysis of the available data, focusing on the most used codes. Additional details about the specific HCPCS codes that will be included in the downloadable database will be provided to stakeholders.
Finally, we proposed (80 FR 41813) adding additional Board Certification information to the Physician Compare Web site. Board Certification is the process of reviewing and certifying the qualifications of a physician or other health care professional by a board of specialists in the relevant field. We currently include American Board of Medical Specialties (ABMS) data as part of individual EP profiles on Physician Compare. We appreciate that there are additional, well respected boards that are not included in the ABMS data currently available on Physician Compare that represent EPs and specialties represented on the Web site. Such board certification information is of interest to consumers as it provides additional information to use to evaluate and distinguish between EPs on the Web site, which can help in making an informed health care decision. The more data of immediate interest that is included on Physician Compare, the more users will come to the Web site and find quality data that can help them make informed decisions. Specifically, we proposed to add to the Web site board certification information from the American Board of Optometry (ABO) and American Osteopathic Association (AOA). Please note we are not endorsing any particular boards. These two specific boards showed interest in being added to the Web site and have demonstrated that they have the data to facilitate inclusion of this information on the Web site. These two boards also fill a gap, as the ABMS does not certify Optometrists and only certain types of DOs are covered by ABMS Osteopathic certification. In general, we reviewed interest from boards as it was brought to our attention, and if the necessary data were available and appropriate arrangements and agreements could be made to share the needed information with Physician Compare, additional board information could be added to the Web site in future. At this time, however, we specifically proposed to include ABO and AOA Board Certification information on Physician Compare. We solicited comments on this proposal.
The following is a summary of the comments we received on our proposal to adding additional Board Certification information to Physician Compare, specifically adding ABO and AOA Certification.
As a result of the overall support for adding additional Board Certification information to Physician Compare and for the reasons we specified above, we are finalizing our proposal to add this specifically ABO and AOA Board Certification information.
Table 26 summarizes the Physician Compare measure and participation data proposals finalized in this final rule.
In addition to the proposals we made in the proposed rule, we solicited comment on several new data elements for possible inclusion on the individual EP and group profile pages of Physician Compare through future rulemaking. In future years, we will consider expanding public reporting to include additional quality measures. We know there are gaps in the measures currently available for public reporting on Physician Compare. Understanding this, we stated that we would like to hear from stakeholders about the types of quality measures that will help us fill these gaps and meet the needs of consumers and stakeholders. Therefore, we sought comment on potential measures that would benefit future public reporting on Physician Compare. We are working to identify possible data sources and we sought comment on the measure concepts, as well as potential specific measures of interest. The quality measures that would be considered for future posting on Physician Compare are those that have been comprehensively vetted and tested, and are trusted by the physician community.
The following is a summary of the comments we received on our request for comment on future quality measure needs.
We also sought comment on adding Medicare Advantage information to Physician Compare individual EP and group practice profile pages. Specifically, we sought comment on adding information on the relevant EP and group practice profile pages about which Medicare Advantage health plans the EP or group accepts and making this information a link to more information about that plan on the Medicare.gov Plan Finder Web site. An increasing number of Medicare clinicians provide services via Medicare Advantage. Medicare Advantage quality data is reported via Plan Finder at the plan level. As a result, physicians and other health care professionals who participate in Medicare Advantage do not have quality measure data available for public reporting on Physician Compare. Adding a link between Physician Compare clinicians participating in Medicare Advantage plans and the associated quality data available for those plans on Plan Finder could help ensure that consumers have access to all of the quality data available to make an informed health care decision.
The following is a summary of the comments we received on our request about possibly integrating Medicare Advantage information with Physician Compare information in the future.
However, many commenters opposed adding Medicare Advantage data due to concerns with data accuracy and comparison to FFS quality data. One commenter suggested alignment of physician and physician group quality measures across traditional FFS Medicare, Medicare ACOs, and Medicare Advantage. Another commenter asked where information on Medicare Advantage professionals would be obtained and how often the database would be updated. Commenters were concerned that adding Medicare Advantage data to Physician Compare would be complicated and difficult for both consumers and health care professionals to understand. One commenter asked for additional information on how this information would be messaged to the consumer.
We also sought comment on including additional VM cost and quality data on Physician Compare. Specifically, we sought comment on including in future years an indicator for a downward and neutral VM adjustment on group practice and individual EP profile pages. We also sought comment on including the VM quality composite or other VM quality performance data on Physician Compare group practice and individual EP profile pages and/or the Physician Compare downloadable database. Similarly, we sought comment on including the VM cost composite or other VM cost measure data on Physician Compare group practice and individual EP profile pages and/or the downloadable database. These VM quality and cost measures ultimately help determine the payment adjustment and are an indication of whether the individual or group is meeting the Affordable Care Act goals of improving quality while lowering cost. Specifically, including this cost data is consistent with the section 10331(a)(2) of the Affordable Care Act as it is an assessment of efficiency. However, these data are complex and we needed time to establish the best method for public reporting and to ensure this information is accurately understood and interpreted by consumers. Therefore, we only sought comment at this time.
The following is a summary of the comments we received regarding potentially including additional VM information on Physician Compare in the future.
We currently make Open Payments data available at
The following is a summary of the comments we received regarding possible future inclusion of Open Payments data on Physician Compare.
Finally, we sought comments on including individual EP and group practice level quality measure data stratified by race, ethnicity, and gender on Physician Compare, if feasible and appropriate (that is, statistically appropriate, etc.). By stratification, we mean that we would report quality measures for each group of a given category. For example, if we were to report a measure for blood pressure control stratified by sex, we would report a performance score for women and one for men. We also sought comment on potential quality measures, including composite measures, for future postings on Physician Compare that could help consumers and stakeholders monitor trends in health equity. Inclusion of data stratified by race and ethnicity and gender, as well as the inclusion of other measures of health equity, would help ensure that HHS is beginning to work to fulfill one of the Affordable Care Act goals of reporting data on race, ethnicity, sex, primary language, and disability status through public postings on HHS Web sites and other dissemination strategies (see section 4302 of the Affordable Care Act).
The following is a summary of the comments we received about including individual EP and group practice level quality measure data stratified by race, ethnicity, and gender on Physician Compare.
We received additional comments which are summarized and addressed below.
This section contains the requirements for the Physician Quality Reporting System (PQRS). The PQRS, as set forth in sections 1848(a), (k), and (m) of the Act, is a quality reporting program that provides incentive payments (which ended in 2014) and payment adjustments (which began in 2015) to eligible professionals (EPs) and group practices based on whether they satisfactorily report data on quality measures for covered professional services furnished during a specified reporting period or to individual EPs based on whether they satisfactorily participate in a qualified clinical data registry (QCDR). Please note that section 101(b)(2)(A) of the Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10, enacted on April 16, 2015) (MACRA) amends section 1848(a)(8)(A) by striking “2015 or any subsequent year” and inserting “each of 2015 through 2018.” This amendment authorizes the end of the PQRS in 2018 and beginning of a new program, which may incorporate aspects of the PQRS, the Merit-based Incentive Payment System (MIPS).
The requirements primarily focus on our proposals related to the 2018 PQRS payment adjustment, which will be based on an EP's or a group practice's reporting of quality measures data during the 12-month calendar year reporting period occurring in 2016 (that is, January 1 through December 31, 2016). Please note that, in developing these proposals, we focused on aligning our requirements, to the extent appropriate and feasible, with other quality reporting programs, such as the Medicare Electronic Health Record (EHR) Incentive Program for EPs, the Physician Value-Based Payment Modifier (VM), and the Medicare Shared Savings Program. In previous years, we have made various strides in our ongoing efforts to align the reporting requirements in CMS' quality reporting programs to reduce burden on the EPs and group practices that participate in these programs. We continued to focus on alignment as we developed our proposals for the 2018 PQRS payment adjustment.
In addition, please note that, in our quality programs, we have begun to emphasize the reporting of certain types of measures, such as outcome measures, as well as measures within certain NQS domains. Indeed, in its March 2015 report (available at
Furthermore, we note that our proposals related to the 2018 PQRS payment adjustment are similar to the requirements we previously established for the 2017 PQRS payment adjustment. We received comments in previous years, as well as during the comment period for the proposed rule, requesting that CMS not make any major changes to the requirements for PQRS, and we believe these final requirements address these commenters' desire for stable requirements. Indeed, we received many comments related to our proposals for the 2018 PQRS payment adjustment, and we will address those comments with specificity below. Please note, however, that we received comments on the PQRS that were outside the scope of the proposed rule, as they were not related to our specific proposals for the 2018 PQRS payment adjustment. While we will take these comments into consideration, primarily when we begin to develop policies and requirements for the Merit-based Incentive Payment System (or MIPS), we will not specifically respond to those comments here.
The PQRS regulations are specified in § 414.90. The program requirements for the 2007 through 2014 PQRS incentives and the 2015 through 2017 PQRS payment adjustments that were previously established, as well as information on the PQRS, including related laws and established requirements, are available at
CMS implemented the first PQRS payment adjustment on January 1, 2015. Specifically, EPs who did not satisfactorily report data on quality measures during the 12-month calendar year reporting period occurring in 2013 are receiving a 1.5 percent negative adjustment during CY 2015 on all of the EPs' Part B covered professional services under the Medicare Physician Fee Schedule (PFS). The 2015 PQRS payment adjustment applies to payments for all of the EPs' Part B covered professional services furnished under the PFS. We received many questions surrounding who must participate in the PQRS to avoid the PQRS payment adjustment. As such, we sought to clarify here who is required to participate in the PQRS for purposes of the payment adjustments in this rule.
Please note that there are no hardship or low-volume exemptions for the PQRS payment adjustment. All EPs who furnish covered professional services must participate in the PQRS each year by meeting the criteria for satisfactory reporting—or, in lieu of satisfactory reporting, satisfactory participation in a QCDR—to avoid the PQRS payment adjustments.
The PQRS payment adjustment applies to EPs who furnish covered professional services. The definition of an EP for purposes of participating in the PQRS is specified in section 1848(k)(3)(B) of the Act. Specifically, the term “eligible professional” (EP) means any of the following: (i) A physician; (ii) a practitioner described in section 1842(b)(18)(C); (iii) a physical or occupational therapist or a qualified speech-language pathologist; or (iv) beginning with 2009, a qualified audiologist (as defined in section 1861(ll)(3)(B)). The term “covered professional services” is defined in section 1848(k)(3)(A) of the Act to mean services for which payment is made under, or is based on, the Medicare PFS established under section 1848 and which are furnished by an EP.
The PQRS includes the following reporting mechanisms: Claims; qualified registry; EHR (including direct EHR products and EHR data submission vendor products); the Web Interface; certified survey vendors, for CAHPS for PQRS survey measures; and the QCDR. Under the existing PQRS regulation, § 414.90(h) through (k) govern which reporting mechanisms are available for use by individuals and group practices for the PQRS incentive and payment adjustment. This section contains our proposals to change the QCDR and qualified registry reporting mechanisms. Please note that we did not propose to make changes to the other PQRS reporting mechanisms.
One of our goals, as indicated in the Affordable Care Act, is to report data on race, ethnicity, sex, primary language, and disability status. A necessary step toward fulfilling this mission is the collection and reporting of quality data, stratified by race, ethnicity, sex, primary language, and disability status. The agency intends to require the collection of these data elements within each of the PQRS reporting mechanisms. Although we did not propose to require the collection of these data elements, we solicited comments regarding the facilitators and obstacles providers and vendors may face in collecting and reporting these attributes. Additionally, we solicited comments on preference for a phased-in approach, perhaps starting with a subset of measures versus a requirement across all possible measures and mechanisms with an adequate timeline for implementation.
We are required, under section 1848(m)(3)(E)(i) of the Act, to establish requirements for an entity to be considered a QCDR. Such requirements must include a requirement that the entity provide the Secretary with such information, at such times, and in such manner as the Secretary determines necessary to carry out this subsection. Section 1848(m)(3)(E)(iv) of the Act, as added by section 601(b)(1)(B) of the American Taxpayer Relief Act of 2012 (ATRA), requires CMS to consult with interested parties in carrying out this provision. We sought to clarify issues related to QCDR self-nomination, as well as propose a change related to the requirements for an entity to become a QCDR.
• Submit quality measures data or results to CMS for purposes of demonstrating that, for a reporting period, its EPs have satisfactorily participated in PQRS. A QCDR must have in place mechanisms for the transparency of data elements and specifications, risk models, and measures.
• Submit to CMS, for purposes of demonstrating satisfactory participation, quality measures data on multiple payers, not just Medicare patients.
• Provide timely feedback, at least four times a year, on the measures at the individual participant level for which the QCDR reports on the EP's behalf for purposes of the individual EP's satisfactory participation in the QCDR.
• Possess benchmarking capacity that compares the quality of care an EP provides with other EPs performing the same or similar functions.
We established further details regarding the requirements to become a QCDR in the CYs 2014 and 2015 PFS final rules (78 FR 74467 through 74473 and 79 FR 67779 through 67782). Please note that the requirements we established were not meant to prohibit entities that meet the basic definition of a QCDR outlined in § 414.90(b) from self-nominating to participate in the PQRS as a QCDR. As long as the entity meets the basic definition of a QCDR provided in § 414.90(b), we encourage the entity to self-nominate to become a QCDR.
The following is a summary of the comments we received regarding this proposal:
In addition, we noted in the CY 2015 PFS final rule (79 FR 67903) that entities wishing to become QCDRs would have until March 31 of the year in which it seeks to become a QCDR to submit measure information the entity intends to report for the year, which included submitting the measure specifications for non-PQRS measures the QCDR intends to report for the year. However, we have experienced issues related to the measures data we received during the 2013 reporting year. These issues prompt us to more closely analyze the measures for which an entity intends to report as a QCDR. Therefore, so that we may vet and analyze these vendors to determine whether they are fully ready to be qualified to participate in the PQRS as a QCDR, we proposed to require that all other documents that are necessary to analyze the vendor for qualification be provided to CMS at the time of self-nomination, that is, by no later than January 31 of the year in which the vendor intends to participate in the PQRS as a QCDR (that is, January 31, 2016 to participate as a QCDR for the reporting periods occurring in 2016). This includes, but is not limited to, submission of the vendor's data validation plan as well as the measure specifications for the non-PQRS measures the entity intends to report. In addition, please note that after the entity submits this information on January 31, it cannot later change any of the information it submitted to us for purposes of qualification. For example, once an entity submits measure specifications on non-PQRS measures, it cannot later modify the measure specifications the entity submitted. Please note that this does not prevent the entity from providing supplemental information if requested by CMS.
We solicited and received the following public comment on this issue:
• Organization Name (Specify Sponsoring Organization name and qualified registry name if the two are different).
• Program Year.
• Vendor Type (for example, qualified registry).
• Provide the method(s) by which the entity obtains data from its customers: claims, web-based tool, practice management system, EHR, other (please explain). If a combination of methods (Claims, Web Based Tool, Practice Management System, EHR, and/or other) is utilized, please state which method(s) the entity utilizes to collect reporting numerator and denominator data.
• Indicate the method the entity will use to verify the accuracy of each Tax Identification Number (TIN) and National Provider Identifier's (NPI) it is intending to submit (that is, National Plan and Provider Enumeration System (NPPES), CMS claims, tax documentation).
• Describe the method that the entity will use to accurately calculate both reporting rates and performance rates for measures and measures groups based on the appropriate measure type and specification. For composite measures or measures with multiple performance rates, the entity must provide us with the methodology the entity uses for these composite measures and measures with multiple performance rates.
• Describe the process that the entity will use for completion of a randomized audit of a subset of data prior to the submission to CMS. Periodic examinations may be completed to compare patient record data with submitted data and/or ensure PQRS measures were accurately reported based on the appropriate Measure Specifications (that is, accuracy of numerator, denominator, and exclusion criteria).
• If applicable, provide information on the entity's sampling methodology. For example, it is encouraged that 3 percent of the TIN/NPIs be sampled with a minimum sample of 10 TIN/NPIs or a maximum sample of 50 TIN/NPIs. For each TIN/NPI sampled, it is encouraged that 25 percent of the TIN/NPI's patients (with a minimum sample of 5 patients or a maximum sample of 50 patients) should be reviewed for all measures applicable to the patient.
• Define a process for completing a detailed audit if the qualified registry's validation reveals inaccuracy and describe how this information will be conveyed to CMS.
QCDRs must perform the validation outlined in the validation strategy and send evidence of successful results to CMS for data collected in the reporting periods occurring in 2016. The Data Validation Execution Report must be sent via email to the QualityNet Help Desk at
We received the following comments on these proposed validation requirements:
We received the following comments on this proposal:
We invited and received the following public comment on this proposal.
In addition, so that we may vet and analyze these vendors to determine whether they are fully ready to be qualified to participate in the PQRS as a qualified registry, we proposed to require that all other documents that are necessary to analyze the vendor for qualification be provided to CMS at the time of self-nomination, that is, by no later than January 31 of the year in which the vendor intends to participate in the PQRS as a qualified registry (that is, January 31, 2016 to participate as a qualified registry for the reporting periods occurring in 2016). This includes, but is not limited to, submission of the vendor's data validation plan. Please note that this does not prevent the entity from providing supplemental information if requested by CMS. We invited but received no public comment on this proposal. Therefore, we are finalizing this proposal to require that all other documents that are necessary to analyze the vendor for qualification be provided to CMS at the time of self-nomination, that is, by no later than January 31 of the year in which the vendor intends to participate in the PQRS as a qualified registry, as proposed.
Please note that we are finalizing our proposals related to attestation statements for registries submitting quality measures data, as proposed.
• Organization Name (specify the sponsoring entity name and qualified registry name if the two are different).
• Program Year.
• Vendor Type (for example, qualified registry).
• Provide the method(s) by which the entity obtains data from its customers: claims, web-based tool, practice management system, EHR, other (please explain). If a combination of methods (Claims, Web Based Tool, Practice Management System, EHR, and/or other) is utilized, please state which method(s) the entity utilizes to collect its reporting numerator and denominator data.
• Indicate the method the entity will use to verify the accuracy of each TIN and NPI it is intending to submit (that is, NPPES, CMS claims, tax documentation).
• Describe how the entity will verify that EPs or group practices report on at least 1 measure contained in the cross-cutting measure set if the EP or group practice sees at least 1 Medicare patient in a face-to-face encounter. Describe how the entity will verify that the data provided is complete and contains the entire cohort of data.
• Describe the method that the entity will use to accurately calculate both reporting rates and performance rates for measures and measures groups based on the appropriate measure type and specification.
• Describe the method the entity will use to verify that only the measures in the applicable PQRS Claims and Registry Individual Measure Specifications (that is, the 2016 PQRS Claims and Registry Individual Measure Specifications for data submitted for reporting periods occurring in 2016) and applicable PQRS Claims and Registry Measures Groups Specifications (that is, the 2016 PQRS Claims and Registry Measures Groups Specifications for data submitted for reporting periods occurring in 2016) are utilized for submission.
• Describe the process that the entity will use for completion of a randomized audit of a subset of data prior to the submission to CMS. Periodic examinations may be completed to compare patient record data with submitted data and/or ensure PQRS measures were accurately reported based on the appropriate Measure Specifications (that is, accuracy of numerator, denominator, and exclusion criteria).
• If applicable, provide information on the entity's sampling methodology. For example, it is encouraged that 3 percent of the TIN/NPIs be sampled with a minimum sample of 10 TIN/NPIs or a maximum sample of 50 TIN/NPIs. For each TIN/NPI sampled, it is encouraged that 25 percent of the TIN/NPI's patients (with a minimum sample of 5 patients or a maximum sample of 50 patients) should be reviewed for all measures applicable to the patient.
• Define a process for completing a detailed audit if the qualified registry's validation reveals inaccuracy and describe how this information will be conveyed to CMS.
• Registries must maintain the ability to randomly request and receive documentation from providers to verify accuracy of data. Registries must also provide CMS access to review the Medicare beneficiary data on which the applicable PQRS registry-based submissions are based or provide to CMS a copy of the actual data (if requested for validation purposes).
Qualified registries must perform the validation outlined in the validation strategy and send evidence of successful results to CMS for data collected for the applicable reporting periods. The Data Validation Execution Report must be sent via email to the QualityNet Help Desk at
We are in the process of auditing PQRS participants, including vendors who submit quality measures data. We believe it is essential for vendors to cooperate with this audit process. In order to ensure that CMS has adequate information to perform an audit of a vendor, we proposed that, beginning in 2016, any vendor submitting quality measures data for the PQRS (for example, entities participating the PQRS as a qualified registry, QCDR, direct EHR, or DSV (data submission vendor)) comply with the following requirements:
• The vendor make available to CMS the contact information of each EP on behalf of whom it submits data. The contact information will include, at a minimum, the EP practice's phone number, address, and, if applicable email.
• The vendor must retain all data submitted to CMS for the PQRS program for a minimum of seven years.
We invited public comment on these proposals. The following is a summary of the comments we received regarding these proposals.
Section 1848(a)(8) of the Act, as added by section 3002(b) of the Affordable Care Act, provides that for covered professional services furnished by an EP during 2015 or any subsequent year, if the EP does not satisfactorily report data on quality measures for covered professional services for the quality reporting period for the year, the fee schedule amount for services furnished by such professional during the year (including the fee schedule amount for purposes of determining a payment based on such amount) shall be equal to the applicable percent of the fee schedule amount that would otherwise apply to such services. For 2016 and subsequent years, the applicable percent is 98.0 percent.
We finalized the following criteria for satisfactory reporting for the submission of individual quality measures via claims and registry for 2017 PQRS payment adjustment (
To be consistent with the satisfactory reporting criterion we finalized for the 2017 PQRS payment adjustment, we proposed to amend § 414.90(j) to specify the same criterion for individual EPs reporting via claims and registry for the 2018 PQRS payment adjustment. Specifically, for the 12-month reporting period for the 2018 PQRS payment adjustment, the EP would report at least 9 measures, covering at least 3 of the NQS domains AND report each measure for at least 50 percent of the EP's Medicare Part B FFS patients seen during the reporting period to which the measure applies. Of the measures reported, if the EP sees at least 1 Medicare patient in a face-to-face encounter, as we proposed to define that term in this section, the EP would report on at least 1 measure contained in the PQRS cross-cutting measure set. If less than 9 measures apply to the EP, the EP would report on each measure that is applicable, AND report each measure for at least 50 percent of the Medicare Part B FFS patients seen during the reporting period to which the measure applies. Measures with a 0 percent performance rate would not be counted.
For what defines a “face-to-face” encounter, for purposes of requiring reporting of at least 1 cross-cutting measure, we proposed to determine whether an EP had a “face-to-face” encounter by assessing whether the EP billed for services under the PFS that are associated with face-to-face encounters, such as whether an EP billed general office visit codes, outpatient visits, and surgical procedures. We would not include telehealth visits as face-to-face encounters for purposes of the proposal requiring reporting of at least 1 cross-cutting measure. For our current list of face-to-face encounter codes for the requirement to report a cross-cutting measure, please see
In addition, we understand that there may be instances where an EP may not have at least 9 measures applicable to an EP's practice. In this instance, like the criterion we finalized for the 2017 payment adjustment (
We solicited and received the following public comments on our proposed satisfactory reporting criteria for individual EPs reporting via claims or registry for the 2018 PQRS payment adjustment:
We finalized the following criterion for the satisfactory reporting for individual EPs reporting individual measures via a direct EHR product or an EHR data submission vendor product for the 2017 PQRS payment adjustment (
To be consistent with the criterion we finalized for the 2017 PQRS payment adjustment, as well as to continue to align with the final criterion for meeting the clinical quality measure (CQM) component of achieving meaningful use under the Medicare EHR Incentive Program, we proposed to amend § 414.90(j) to specify the criterion for the satisfactory reporting for individual EPs to report individual measures via a direct EHR product or an EHR data submission vendor product for the 2018 PQRS payment adjustment. Specifically, the EP would report at least 9 measures covering at least 3 of the NQS domains. If an EP's direct EHR product or EHR data submission vendor product does not contain patient data for at least 9 measures covering at least 3 domains, then the EP would be required to report all of the measures for which there is Medicare patient data. An EP would be required to report on at least 1 measure for which there is Medicare patient data.
We solicited and received the following public comments on this proposal:
We finalized the following criterion for the satisfactory reporting for individual EPs to report measures groups via registry for the 2017 PQRS payment adjustment (
To be consistent with the criterion we finalized for the 2017 PQRS payment adjustment, we proposed to amend § 414.90(j) to specify the same criterion for the satisfactory reporting for individual EPs to report measures groups via registry for the 2018 PQRS payment adjustment. Specifically, for the 12-month reporting period for the 2018 PQRS payment adjustment, the EP would report at least 1 measures group AND report each measures group for at least 20 patients, the majority (11 patients) of which would be required to be Medicare Part B FFS patients. Measures groups containing a measure with a 0 percent performance rate would not be counted.
We solicited and received the following public comment on our proposed satisfactory reporting criterion for individual EPs reporting measures groups via registry for the 2018 PQRS payment adjustment:
Section 601(b) of the ATRA amended section 1848(m)(3) of the Act, by redesignating subparagraph (D) as subparagraph (F) and adding new subparagraphs (D) and (E), to provide for a new standard for individual EPs to satisfy the PQRS beginning in 2014, based on satisfactory participation in a QCDR.
Section 1848(m)(3)(D) of the Act, as added by section 601(b) of the ATRA,
To be consistent with the number of measures reported for the satisfactory participation criterion we finalized for the 2017 PQRS payment adjustment (
We solicited and received the following public comments on this proposal:
In lieu of reporting measures under section 1848(k)(2)(C) of the Act, section 1848(m)(3)(C) of the Act provides the Secretary with the authority to establish and have in place a process under which EPs in a group practice (as defined by the Secretary) shall be treated as satisfactorily submitting data on quality measures. Accordingly, this section III.I.4 contains our proposed satisfactory reporting criteria for group practices participating in the GPRO. Please note that, for a group practice to participate in the PQRS GPRO in lieu of participating as individual EPs, a group practice is required to register to participate in the PQRS GPRO. For more information on GPRO participation, please visit
We draw a sample of Medicare beneficiaries assigned to a practice. For practices with 100 or more eligible providers, the desired sample is 860, and the minimum sample is 416. For practices with 25 to 99 eligible providers, the desired sample is 860, and the minimum sample is 255. For practices with 2 to 24 eligible providers, the desired sample is 860, and the minimum sample is 125. The following beneficiaries are excluded in the practice's patient sample: Beneficiaries under age 18 at the time of the sample draw; beneficiaries known to be institutionalized at the time of the sample draw; and beneficiaries with no eligible focal provider. For more information on CAHPS for PQRS, please visit the PQRS Web site at
First, we are finalizing our proposal to allow all group practices to voluntarily elect to administer the CAHPS for PQRS survey.
Second, regarding our proposal to require group practices of 25 or more EPs that register to participate in the GPRO and select the Web Interface as the reporting mechanism to select a CMS-certified survey vendor to report CAHPS for PQRS, we are not finalizing this proposal with respect to group practices of 25-99 EPs. We are, however, finalizing this proposal with respect to group practices of 100 or more EPs. Thus, we are requiring that, for the reporting periods occurring in 2016, all group practices of 100 or more EPs that register to participate in the GPRO select a CMS-certified survey vendor to report CAHPS for PQRS, regardless of the reporting mechanism the group practice uses. We note that, for reporting periods occurring in 2015, we currently require all group practices of 100 or more EPs that register to participate in the GPRO select a CMS-certified survey vendor to report CAHPS for PQRS, regardless of the reporting mechanism the group practice uses. Therefore, as it was a previously established requirement, and as group practices of 100 or more EPs were logically included in our proposal to require group practices of 25 or more EPs to report CAHPS for PQRS, we believe it was foreseeable that we would finalize this requirement with respect to group practices of 100 or more EPs. We also believe that this modification addresses the commenters' desire to keep the reporting requirements unchanged. As we specify below, since we are not finalizing this proposal with respect to group practices of 25-99 EPs, we will modify our proposed criteria for satisfactory reporting related to requiring the administering of the CAHPS for PQRS survey for group practices of 25-99 EPs.
In addition, we noted that we finalized a 12-month reporting period for the administration of the CAHPS for PQRS survey. However, as group practices have until June of the applicable reporting period (that is, June 30, 2016 for the 12-month reporting period occurring January 1, 2016-December 31, 2016) to elect to participate in the PQRS as a GPRO and administer CAHPS for PQRS, it is not technically feasible for us to collect data for purposes of CAHPS for PQRS until the close of the GPRO registration period. As such, the administration of the CAHPS for PQRS survey only contains 6-months of data. We do not believe this significantly alters the administration of CAHPS for PQRS, as we believe that 6-months of data provide an adequate sample of the 12-month reporting period.
Under our authority specified for the group practice reporting requirements under section 1848(m)(3)(C) of the Act—to be consistent with the criterion we finalized for the satisfactory reporting of PQRS quality measures for group practices registered to participate in the GPRO for the 2017 PQRS payment adjustment using the Web Interface (
Furthermore, similar to the criteria we established for the 2017 PQRS payment adjustment (
We solicited and received the following public comment on this proposal:
For group practices of 25-99 EPs that registered to participate in the GPRO for the 12-month reporting period for the 2018 PQRS payment adjustment using the Web Interface and for which the CAHPS for PQRS survey applies, administration of the CAHPS for PQRS survey will be
For group practices of 100+ EPs that registered to participate in the GPRO for the 12-month reporting period for the 2018 PQRS payment adjustment using the Web Interface and for which the CAHPS for PQRS survey applies, administration of the CAHPS for PQRS survey will be
For assignment of patients for group practices reporting via the Web Interface, in previous years, we have aligned with the Medicare Shared Savings Program methodology of beneficiary assignment (see 77 FR 69195). However, for the 2017 PQRS payment adjustment, we used a beneficiary attribution methodology utilized within the VM for the claims-based quality measures and cost measures that is slightly different from the Medicare Shared Savings Program assignment methodology that applied in 2015, namely (1) eliminating the primary care service pre-step that is statutorily required for the Shared Savings Program and (2) including NPs, PAs, and CNSs in step 1 rather than in step 2 of the attribution process. We believe that aligning with the VM's method of attribution is appropriate, as the VM is directly tied to participation in the PQRS (79 FR 67790). Therefore, to be consistent with the sampling methodology we used for the 2017 PQRS payment adjustment, we proposed to continue using the attribution methodology used for the VM for the Web Interface beneficiary assignment methodology for the 2018 PQRS payment adjustment and future years. We solicited and received the following public comment on this proposal:
As we clarified in the CY 2015 PFS final rule with comment period (79 FR 67790), if a group practice has no Medicare patients for which any of the
We finalized the following satisfactory reporting criteria for the submission of individual quality measures via registry for group practices of 2-99 EPs in the GPRO for the 2017 PQRS payment adjustment (
Consistent with the group practice reporting criteria we finalized for the 2017 PQRS payment adjustment in accordance with section 1848(m)(3)(C) of the Act, for those group practices that choose to report using a qualified registry, we proposed to amend § 414.90(j) to specify satisfactory reporting criteria via qualified registry for group practices of 2+ EPs who select to participate in the GPRO for the 2018 PQRS payment adjustment. Specifically, for the 12-month 2018 PQRS payment adjustment reporting period, the group practice would report at least 9 measures, covering at least 3 of the NQS domains. Of these measures, if a group practice has an EP that sees at least 1 Medicare patient in a face-to-face encounter, the group practice would report on at least 1 measure in the PQRS cross-cutting measure set. If the group practice reports on less than 9 measures covering at least 3 NQS domains, the group practice would report on each measure that is applicable to the group practice, AND report each measure for at least 50 percent of the EP's Medicare Part B FFS patients seen during the reporting period to which the measure applies. Measures with a 0 percent performance rate would not be counted.
In addition, if a group practice of 2+ EPs chooses instead to use a qualified registry in conjunction with reporting the CAHPS for PQRS survey measures, for the 12-month reporting period for the 2018 PQRS payment adjustment, the group practice would report all CAHPS for PQRS survey measures via a certified survey vendor, and report at least 6 additional measures, outside of the CAHPS for PQRS survey, covering at least 2 of the NQS domains using the qualified registry. If less than 6 measures apply to the group practice, the group practice must report on each measure that is applicable to the group practice. Of the non-CAHPS for PQRS measures, if any EP in the group practice sees at least 1 Medicare patient in a face-to-face encounter, the group practice would be required to report on at least 1 measure in the PQRS cross-cutting measure set. We note that this option to report 6 additional measures, including at least 1 cross-cutting measure if a group practice sees at least 1 Medicare patient in a face-to-face encounter, is consistent with the proposed criterion for satisfactory reporting for the 2018 PQRS payment adjustment via qualified registry.
As with individual reporting, we understand that there may be instances where a group practice may not have at least 9 measures applicable to a group practice's practice. In this instance, like the criterion we finalized for the 2017 PQRS payment adjustment (
We invited and received the following public comments on these proposals.
For group practices of 2-99 EPs registered to participate in the GPRO via registry for the 2018 PQRS payment adjustment: The administration of the CAHPS for PQRS survey is
For group practices of 100+ EPs registered to participate in the GPRO via registry for the 2018 PQRS payment adjustment: The administration of the CAHPS for PQRS survey is
For EHR reporting, consistent with the criterion finalized for the 2017 PQRS payment adjustment (
In addition, if a group practice of 2+ EPs chooses instead to use a direct EHR product or EHR data submission vendor in conjunction with reporting the CAHPS for PQRS survey measures, for the 12-month reporting period for the 2018 PQRS payment adjustment, the group practice would report all CAHPS for PQRS survey measures via a certified survey vendor, and report at least 6 additional measures, outside of the CAHPS for PQRS survey, covering at least 2 of the NQS domains using the direct EHR product or EHR data submission vendor product. If less than 6 measures apply to the group practice, the group practice must report all applicable measures. Of the non-CAHPS for PQRS measures that must be reported in conjunction with reporting the CAHPS for PQRS survey measures, a group practice would be required to report on at least 1 measure for which there is Medicare patient data. We note that this option to report 6 additional measures is consistent with the proposed criterion for satisfactory reporting for the 2018 PQRS payment adjustment via EHR without CAHPS for PQRS, since both criteria assess a total of 3 domains (since CAHPS for PQRS is in one NQS domain). We invited and received the following public comments on these proposals:
For group practices of 2-99 EPs registered to participate in the GPRO via EHR for the 2018 PQRS payment adjustment: The administration of the CAHPS for PQRS survey is OPTIONAL. Therefore, if reporting via EHR, these group practices may meet the criteria for satisfactory reporting for the 2018 PQRS payment adjustment in one of two ways:
For group practices of 100+ EPs registered to participate in the GPRO via EHR for the 2018 PQRS payment adjustment: The administration of the CAHPS for PQRS survey is REQUIRED. Therefore, if reporting via EHR, these group practices must meet the following criterion for satisfactory reporting for the 2018 PQRS payment adjustment: For the 12-month reporting period for the 2018 PQRS payment adjustment, report all CAHPS for PQRS survey measures via a certified survey vendor, and report at least 6 additional measures, outside
Section 101(d)(1)(B) of the MACRA amends section 1848(m)(3)(D) of the Act by inserting “and, for 2016 and subsequent years, subparagraph (A) or (C)” after “subparagraph (A)”. This change requires CMS to create an option for EPs participating in the GPRO to report quality measures via a QCDR.
As such, please note that we are modifying § 414.90(k) to indicate that group practices may also use a QCDR to participate in the PQRS.
Section 1848(m)(3)(D) of the Act, as redesignated and added by section 601(b) of the America Taxpayer Relief Act of 2012 and further amended by MACRA, requires the Secretary to treat a group practice as satisfactorily submitting data on quality measures under section 1848(m)(3)(A) of the Act if the group practice is satisfactorily participating in a QCDR for the year. Given that satisfactory participation is with regard to the year, and to provide consistency with the reporting period applicable to individual EPs who participate in the PQRS via a QCDR, we proposed to revise § 414.90(k) to specify a 12-month, CY reporting period from January 1, 2016 through December 31, 2016 for group practices participating in the GPRO to satisfactorily participate in a QCDR for purposes of the 2018 PQRS payment adjustment. We proposed a 12-month reporting period. Based on our experience with the 12- and 6-month reporting periods for the PQRS incentives, we believe that data on quality measures collected based on 12 months provides a more accurate assessment of actions performed in a clinical setting than data collected based on shorter reporting periods. In addition, we believe a 12-month reporting period is appropriate given that the full calendar year would be utilized with regard to the participation by the group practice in the QCDR. We invited public comment on the proposed 12-month, CY 2016 reporting period for the satisfactory participation of group practices in a QCDR for the 2018 PQRS payment adjustment.
The following is a summary of the comments we received regarding our proposal.
To be consistent with individual reporting criteria that we finalized for the 2017 PQRS payment adjustment (see Table 50 at 79 FR 67796) as well as our individual reporting criteria for the 2018 PQRS payment adjustment, for purposes of the 2018 PQRS payment adjustment (which would be based on data reported during the 12-month period that falls in CY 2016), we proposed to amend § 414.90(j) to use the same criterion for group practices as individual EPs to satisfactorily participate in a QCDR for the 2018 PQRS payment adjustment. Specifically, for the 12-month reporting period for the 2018 PQRS payment adjustment, the group practice would report at least 9 measures available for reporting under a QCDR covering at least 3 of the NQS domains, AND report each measure for at least 50 percent of the group practice's patients. Of these measures, the group practice would report on at least 2 outcome measures, OR, if 2 outcomes measures are not available, report on at least 1 outcome measures and at least 1 of the following types of measures—resource use, patient experience of care, efficiency/appropriate use, or patient safety.
We solicited and received the following public comments on these proposals:
Tables 27 and 28 reflect our criteria for satisfactory reporting—or, in lieu of satisfactory reporting, satisfactory participation in a QCDR—for the 2018 PQRS payment adjustment:
Annually, we solicit a “Call for Measures” from the public for possible inclusion in the PQRS. During the Call for Measures, we request measures for inclusion in PQRS that meet the following statutory and other criteria.
Sections 1848(k)(2)(C) and 1848(m)(3)(C)(i) of the Act, respectively, govern the quality measures reported by individual EPs and group practices under the PQRS. Under section 1848(k)(2)(C)(i) of the Act, the PQRS quality measures shall be such measures selected by the Secretary from measures that have been endorsed by the entity with a contract with the Secretary under section 1890(a) of the Act, which is currently the National Quality Forum (NQF). However, in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the NQF, section 1848(k)(2)(C)(ii) of the Act authorizes the Secretary to specify a measure that is not so endorsed as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. In light of these statutory requirements, we believe that, except in the circumstances specified in the statute, each PQRS quality measure must be endorsed by the NQF. Additionally, section 1848(k)(2)(D) of the Act requires that for each PQRS quality measure, the Secretary shall ensure that EPs have the opportunity to provide input during the development, endorsement, or selection of measures applicable to services they furnish. The statutory requirements under section 1848(k)(2)(C) of the Act, subject to the exception noted previously, require only that the measures be selected from measures that have been endorsed by the entity with a contract with the Secretary under section 1890(a) of the Act (that is, the NQF) and are silent as to how the measures that are submitted to the NQF for endorsement are developed.
The steps for developing measures applicable to physicians and other EPs prior to submission of the measures for endorsement may be carried out by a variety of different organizations. We do not believe there needs to be special restrictions on the type or make-up of the organizations carrying out this process of development of physician measures, such as restricting the initial development to physician-controlled organizations. Any such restriction would unduly limit the development of quality measures and the scope and utility of measures that may be considered for endorsement as voluntary consensus standards for purposes of the PQRS.
In addition to section 1848(k)(2)(C) of the Act, section 1890A of the Act, which was added by section 3014(b) of the Affordable Care Act, requires that the Secretary establish a pre-rulemaking process under which certain steps occur for the selection of certain categories of quality and efficiency measures, one of which is that the entity with a contract with the Secretary under section 1890(a) of the Act (that is, the NQF) convene multi-stakeholder groups to provide input to the Secretary on the selection of such measures. These categories are described in section 1890(b)(7)(B) of the Act, and include such measures as the quality measures selected for reporting under the PQRS. In accordance with section 1890A(a)(1) of the Act, the NQF convened multi-stakeholder groups by creating the MAP. Section 1890A(a)(2) of the Act requires that the Secretary must make publicly available by December 1st of each year a list of the quality and efficiency measures that the Secretary is considering for selection through rulemaking for use in the Medicare program. The NQF must provide CMS with the MAP's input on the selection of measures by February 1st of each year. The lists of measures under consideration for selection through rulemaking in 2015 are available at
As we noted above, section 1848(k)(2)(C)(ii) of the Act provides an exception to the requirement that the Secretary select measures that have been endorsed by the entity with a contract under section 1890(a) of the Act (that is, the NQF). We may select measures under this exception if there is a specified area or medical topic for which a feasible and practical measure has not been endorsed by the entity, as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. Under this exception, aside from NQF endorsement, we requested that stakeholders apply the following considerations when submitting measures for possible inclusion in the PQRS measure set:
• Measures that are not duplicative of another existing or proposed measure.
• Measures that are further along in development than a measure concept.
• We are not accepting claims-based-only reporting measures in this process.
• Measures that are outcome-based rather than clinical process measures.
• Measures that address patient safety and adverse events.
• Measures that identify appropriate use of diagnosis and therapeutics.
• Measures that include the NQS domain for care coordination and communication.
• Measures that include the NQS domain for patient experience and patient-reported outcomes.
• Measures that address efficiency, cost and resource use.
As such, we may exercise our authority under section 1848(k)(2)(C)(ii) of the Act to propose and finalize a measure because a feasible and practical measure has not been endorsed by the
Taking into consideration the statutory and non-statutory criteria we described previously, this section discusses the inclusion or removal of measures in PQRS for 2016 and beyond. We classified all measures against six domains based on the NQS's six priorities, as follows:
(1)
(2)
(3)
(4)
(5)
(6)
In addition, CMS considers the MAP's recommendations as part of the comprehensive assessment of each measure considered for inclusion in the program. Additional elements under consideration include a measure's fit within the program, if a measure fills clinical gaps, changes or updates to clinical guidelines and other program needs. As such, while CMS strongly considers the MAP's recommendations, MAP support is not required for inclusion in PQRS.
Please note that the PQRS quality measure specifications for any given PQRS individual quality measure may differ from specifications for the same quality measure used in prior years. For example, for the PQRS quality measures that were selected for reporting in 2016 and beyond, please note that detailed measure specifications, including the measure's title, for the individual PQRS quality measures for 2016 and beyond may have been updated or modified during the NQF endorsement process or for other reasons.
In addition, due to our desire to align measure titles with the measure titles that have been finalized for 2013, 2014, 2015 reporting, and potentially subsequent years of the Medicare EHR Incentive Program, we noted that the measure titles for measures available for reporting via EHR-based reporting mechanisms may change. To the extent that the Medicare EHR Incentive Program updates its measure titles to include version numbers (see 77 FR 13744), we used these version numbers to describe the PQRS EHR measures that will also be available for reporting for the EHR Incentive Program. We will continue to work toward complete alignment of measure specifications across programs whenever possible.
Through NQF's measure maintenance process, NQF-endorsed measures are sometimes updated to incorporate changes that we believe do not substantively change the nature of the measure. Examples of such changes may include updated diagnosis or procedure codes or changes to exclusions to the patient population or definitions. While we address such changes on a case-by-case basis, we generally believe these types of maintenance changes are distinct from substantive changes to measures that result in what are considered new or different measures. Further, we believe that non-substantive maintenance changes of this type do not trigger the same agency obligations under the Administrative Procedure Act.
In the CY 2013 PFS final rule with comment period, we finalized our proposal providing that if the NQF updates an endorsed measure that we have adopted for the PQRS in a manner that we consider to not substantively change the nature of the measure, we would use a subregulatory process to incorporate those updates to the measure specifications that apply to the program (77 FR 69207). We believe this adequately balances our need to incorporate non-substantive NQF updates to NQF-endorsed measures in the most expeditious manner possible, while preserving the public's ability to comment on updates that change an endorsed measure such that it is no longer the same measure that we originally adopted. We also noted that the NQF process incorporates an opportunity for public comment and engagement in the measure maintenance process. We revised the Specifications Manual and posted notices to clearly identify the updates and provide links to where additional information on the updates can be found. Updates are also available on the CMS PQRS Web site at
We are not the measure steward for most of the measures available for reporting under the PQRS. We rely on outside measure stewards and developers to maintain these measures. In Table 31, we proposed that certain measures be removed from the PQRS measure set due to the measure steward indicating that it will not be able to maintain the measure. We noted that this proposal is contingent upon the measure steward not being able to maintain the measure. Should we learn that a certain measure steward is able to maintain the measure, or that another entity is able to maintain the measure in a manner that allows the measure to be available for reporting under the PQRS for the CY 2018 PQRS payment adjustment, we proposed to keep the measure available for reporting under the PQRS and therefore not finalize our proposal to remove the measure. We stated that we would discuss any such instances in the CY 2016 PFS final rule with comment period.
In addition, we noted that we have received feedback from stakeholders, particularly first-time participants who find it difficult to understand which measures are applicable to their particular practice. In an effort to aide EPs and group practices to determine what measures best fit their practice, and in collaboration with specialty societies, we began to group our final measures available for reporting according to specialty. The current listing of our measures by specialty can be found on our Web site at
In the CY 2015 PFS final rule with comment period, we finalized a set of 19 cross-cutting measures for reporting in the PQRS for 2015 and beyond (see Table 52 at 79 FR 67801). The current PQRS cross-cutting measure set is available at
Table 30 contains additional measures we proposed to include in the PQRS measure set for CY 2016 and beyond. We also indicated the PQRS reporting mechanism or mechanisms through which each measure could be submitted, as well as the MAP recommendations. Additional comments and measure information from the MAP review can be found at
Please note that, in some cases specified below, we proposed adding a measure to the PQRS measure set that the MAP believes requires further development prior to inclusion or does not support a measure for inclusion in the PQRS measure set. Please note that, although we take these recommendations into consideration, in these instances, we believe the rationale provided for the addition of a measure outweighs the MAP's recommendation.
In Table 31, we provided our proposals for a NQS domain change for measures that are currently available for reporting under the PQRS.
In Table 32, we proposed to remove the following measures from reporting under the PQRS.
In Table 33, we proposed to change the mechanism(s) by which an EP or group practice may report a respective PQRS measure beginning in 2016.
Section 414.90(b) defines a measures group as a subset of six or more PQRS measures that have a particular clinical condition or focus in common. The denominator definition and coding of the measures group identifies the condition or focus that is shared across the measures within a particular measures group.
We proposed to add the following 3 new measures groups as shown in Tables 34, 35 and 36 that will be available for reporting in the PQRS beginning in 2016. Please note that, in these tables, we provided the PQRS measure numbers for the measures within these measures groups that were previously finalized in the PQRS. New measures within these measures groups that were proposed to be added, as indicated in Table 29, do not have a PQRS number. Therefore, in lieu of a PQRS number, an “NA” is indicated. We solicited and received the following public comments on these proposed measures groups:
•
•
•
We proposed to amend the following previously finalized measures groups (in Table 37 through Table 41) for reporting in the PQRS beginning in 2016. Please note that, in these tables, we provided the PQRS measure numbers for the measures within these proposed measures groups that were previously finalized in the PQRS. New measures within these measures groups that were proposed to be added, as indicated in Table 29, do not have a PQRS number. Therefore, in lieu of a PQRS number, an “NA” is indicated.
We proposed to amend the Dementia Measures Group for reporting in the PQRS beginning in 2016 by adding Preventive Care and Screening: Screening for Clinical Depression and Follow-Up Plan (PQRS# 134) and removing Dementia: Screening for Depressive Symptoms (PQRS #285). We solicited and received the following public comment on this measures group.
We proposed to amend the Diabetes Measures Group for reporting in the PQRS beginning in 2016 by adding Diabetes Mellitus: Diabetic Foot and Ankle Care, Peripheral Neuropathy—Neurological Evaluation (PQRS #126) and removing Diabetes: Foot Exam (PQRS #163). We solicited and received the following public comment on this measures group.
We proposed to amend the Preventative Care Measures Group for reporting in the PQRS beginning in 2016 by adding Preventive Care and Screening: Unhealthy Alcohol Use: Screening & Brief Counseling (NQF #2152) and removing Preventive Care and Screening: Unhealthy Alcohol Use—Screening (PQRS #173). We solicited and received the following public comment on this measures group.
We proposed to amend the Rheumatoid Arthritis Measures Group for reporting in the PQRS beginning in 2016 by adding Tuberculosis Prevention for Psoriasis, Psoriatic Arthritis and Rheumatoid Arthritis Patients on a Biological Immune Response Modifier (PQRS #337). We solicited and received no public comment on this measures
We finalized the measures that are available for reporting in the Web Interface for 2015 and beyond in the CY 2015 PFS final rule (79 FR 67893 through 67902). The current measures available for reporting under the Web Interface are available at
The FINAL list of all PQRS measures available for reporting in 2016 is below:
The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10, enacted on April 16, 2015) (MACRA) repealed the Medicare sustainable growth rate (SGR) update formula for payments under the Medicare physician fee schedule, established the Merit-based Incentive Payments System (MIPS) under the physician fee schedule, established incentive payments for participation in certain alternative payment models (APMS), and made other changes affecting Medicare payments to physicians and other eligible professionals. We sought public input on the following provisions of the MACRA in the CY 2016 PFS proposed rule (80 FR 41879 through 41880):
• Section 101(b): Consolidation of Certain Current Law Performance Programs with New Merit-based Incentive Payment System (hereinafter MIPS)
• Section 101(c): Merit-based Incentive Payment System
• Section 101(e): Promoting Alternative Payment Models
Section 1848(q) of the Act, added by section 101(c) of the MACRA, requires creation of the MIPS, applicable beginning with payments for items and services furnished on or after January 1, 2019, under which the Secretary shall: (1) Develop a methodology for assessing the total performance of each MIPS eligible professional according to performance standards for a performance period for a year; (2) using the methodology, provide for a composite performance score for each eligible professional for each performance period; and (3) use the composite performance score of the MIPS eligible professional for a performance period for a year to determine and apply a MIPS adjustment factor (and, as applicable, an additional MIPS adjustment factor) to the professional for the year. In the proposed rule, we sought public input on specific provisions related to the MIPS, including (80 FR 41879):
• What would be an appropriate low-volume threshold for purposes of excluding certain eligible professionals (as defined in section 1848(k)(3)(B) of the Act) from the definition of a MIPS eligible professional.
• Whether CMS should consider establishing a low-volume threshold using more than one or a combination of factors or, alternatively.
• Whether CMS should focus on establishing a low-volume threshold based on one factor.
• Which factors to include, individually or in combination, in determining a low-volume threshold.
• Whether a low-volume threshold similar to ones currently used in other CMS reporting programs would be an appropriate low-volume threshold for the MIPS and the applicability of existing low-volume thresholds used in other CMS reporting programs toward MIPs.
• What activities could be classified as clinical practice improvement activities according to the definition under section 1848(q)(2)(C)(v)(III) of the Act.
Section 101(e) of the MACRA, Promoting Alternative Payment Models, introduces a framework for promoting and developing alternative payment models (APMs) and providing incentive payments for eligible professionals who participate in certain APMs. The statutory amendments made by this section have payment implications for eligible professionals beginning in 2019. As part of our continued commitment to stakeholder engagement, we broadly sought public comments on the promotion of alternative payment models (APMs) in the proposed rule (80 FR 41879 through 41880). Specifically, we sought comment on approaches for developing and encouraging APMs and on incentive payments for participation in APMs by eligible professionals. We noted that we would be requesting more detailed information in a forthcoming RFI on the following topics: The criteria for assessing physician-focused payment models; the criteria and process for the submission of physician-focused payment models; eligible APMS; qualifying APM participants; the Medicare payment threshold option and the combination all-payer and Medicare payment threshold option for qualifying and partial qualifying APM participants; the time period to use to calculate eligibility for qualifying and partial qualifying APM participants; eligible alternative payment entities; quality measures and EHR use requirements; and the definition of nominal financial risk for eligible alternative payment entities.
In response to our solicitation, we received over 90 insightful and informative public comments suggesting matters to consider in our RFI and for
The Health Information Technology for Economic and Clinical Health (HITECH) Act (Title IV of Division B of the ARRA, together with Title XIII of Division A of the ARRA) authorizes incentive payments under Medicare and Medicaid for the adoption and meaningful use of certified EHR technology (CEHRT). Section 1848(o)(2)(B)(iii) of the Act requires that in selecting clinical quality measures (CQMs) for eligible professionals (EPs) to report under the EHR Incentive Program, and in establishing the form and manner of reporting, the Secretary shall seek to avoid redundant or duplicative reporting otherwise required. As such, we have taken steps to establish alignments among various quality reporting and payment programs that include the submission of CQMs.
Under section 1848(o)(2)(A)(iii) of the Act and the definition of “meaningful EHR user” under § 495.4, EPs must report on CQMs selected by CMS using CEHRT, as part of being a meaningful EHR user under the Medicare EHR Incentive Program. For CY 2012 and subsequent years, § 495.8(a)(2)(ii) requires an EP to successfully report the CQMs selected by CMS to CMS or the states, as applicable, in the form and manner specified by CMS or the states, as applicable.
In the CY 2014 PFS final rule with comment period (78 FR 74756), we finalized our proposal to require EPs who seek to report CQMs electronically under the Medicare EHR Incentive Program to use the most recent version of the electronic specifications for the CQMs and have CEHRT that is tested and certified to the most recent version of the electronic specifications for the CQMs. We stated that we believe it is important for EPs to electronically report the most recent versions of the electronic specifications for the CQMs as updated measure versions to correct minor inaccuracies found in prior measure versions. We stated that to ensure that CEHRT products can successfully transmit CQM data using the most recent version of the electronic specifications for the CQMs, it is important that the product be tested and certified to the most recent version of the electronic specifications for the CQMs.
In this final rule, we summarize the comments we received based on our proposals for the EHR Incentive Program in the CY 2016 PFS proposed rule (80 FR 41880) and state our final policies based on these proposals and comments. Please note that we received numerous comments related generally to the EHR Incentive Program but not related to our specific proposals for the EHR Incentive Program in the CY 2016 PFS proposed rule. While we may take these comments into consideration when developing proposals in the future, we will not address these comments with specificity here.
In the CY 2015 PFS final rule with comment period (79 FR 67906), we finalized our proposal for the Medicare EHR Incentive Program that, beginning in CY 2015, EPs are not required to ensure that their CEHRT products are recertified to the most recent version of the electronic specifications for the CQMs. Although we are not requiring recertification, EPs must still report the most recent version of the electronic specifications for the CQMs if they choose to report CQMs electronically for the Medicare EHR Incentive Program.
In the FY 2016 IPPS proposed rule (80 FR 24611 through 24615), HHS' Office of the National Coordinator for Health Information Technology (ONC) proposed a certification criterion for “CQMs—report” at 45 CFR 170.315(c)(3). This proposal would require that health information technology enable users to electronically create a data file for transmission of clinical quality measurement data in accordance with the Quality Reporting Document Architecture (QRDA) Category I (individual patient-level report) and Category III (aggregate report) standards, at a minimum. As part of the “CQMs—report” criterion, ONC also proposed to offer optional certification for EHRs according to the “form and manner” that CMS requires for electronic submission to participate in the EHR Incentive Programs and PQRS. These requirements are published annually as the “CMS QRDA Implementation Guide” and posted on CMS' Web site at
In the FY 2016 IPPS proposed rule (80 FR 24323 through 24629), we stated that we anticipated proposing to require EPs, eligible hospitals, and CAHs seeking to report CQMs electronically as part of meaningful use under the EHR Incentive Programs for 2016 to adhere to the additional standards and constraints on the QRDA standards for electronic reporting as described in the CMS QRDA Implementation Guide. We stated that we anticipated proposing to revise the definition of “certified electronic health record technology” at § 495.4 to require certification to the optional portion of the 2015 Edition CQM reporting criterion (proposed at 45 CFR 170.315(c)(3)) in the CY 2016 Medicare PFS proposed rule.
Accordingly, to allow providers to upgrade to 2015 Edition CEHRT before 2018, we proposed in the CY 2016 PFS proposed rule (80 FR 41880) to revise the CEHRT definition for 2015 through 2017 to require that EHR technology is certified to report CQMs, in accordance with the optional certification, in the format that CMS can electronically accept (CMS' “form and manner” requirements) if certifying to the 2015 Edition “CQMs—report” certification criterion at § 170.315(c)(3). Specifically, this would require technology to be certified to § 170.315(c)(3)(i) (the QRDA Category I and III standards)
We also proposed in the CY 2016 PFS proposed rule (80 FR 41880) to revise the CEHRT definition for 2018 and subsequent years to require that EHR technology is certified to report CQMs, in accordance with the optional
We proposed these amendments at § 495.4 to ensure that providers participating in PQRS and the EHR Incentive Programs under the 2015 Edition possess EHRs that have been certified to report CQMs according to the format that CMS requires for submission. We invited comment on our proposals. We note that ONC finalized the proposal to adopt a 2015 Edition CQM reporting certification (at 45 CFR 170.315(c)(3)) in its 2015 Edition final rule. The certification criterion requires health IT to be certified to report CQMs using the QRDA Category I and III standards. It also includes an optional provision to report CQMs in the “form and manner” that CMS requires for submission. We refer readers to 80 FR 62651 through 62652.
The following is a summary of the comments we received regarding these proposals.
The Comprehensive Primary Care (CPC) initiative, under the authority of section 3021 of the Affordable Care Act, is a multi-payer initiative fostering collaboration between public and private health care payers to strengthen primary care. Under this initiative, we pay participating primary care practices a care management fee to support enhanced, coordinated services. Simultaneously, participating commercial, state, and other federal insurance plans are also offering enhanced support to primary care practices that provide high-quality primary care. There are approximately 480 CPC practice sites across seven health care markets in the U.S.
Under the CPC initiative, CPC practice sites are required to report to CMS a subset of the CQMs that were selected in the EHR Incentive Program Stage 2 final rule for EPs to report under the EHR Incentive Program beginning in CY 2014 (for a list of CQMs that were selected in the EHR Incentive Program Stage 2 final rule for EPs to report under the EHR Incentive Program beginning in CY 2014, see 77 FR 54069 through 54075).
In the CY 2015 PFS final rule with comment period (79 FR 67906 through 67907), we finalized a group reporting option for CQMs for the Medicare EHR Incentive Program under which EPs who are part of a CPC practice site that successfully reports at least 9 electronically specified CQMs across 2 domains for the relevant reporting period in accordance with the requirements established for the CPC Initiative and using CEHRT would satisfy the CQM reporting component of meaningful use for the Medicare EHR Incentive Program. If a CPC practice site is not successful in reporting, EPs who are part of the site would still have the opportunity to report CQMs in accordance with the requirements established for the Medicare EHR Incentive Program in the Stage 2 final rule. Additionally, only those EPs who are beyond their first year of demonstrating meaningful use may use this CPC group reporting option. The CPC practice sites must submit the CQM data in the form and manner required by the CPC Initiative. Therefore, whether CPC required electronic submission or attestation of CQMs, the CPC practice site must submit the CQM data in the form and manner required by the CPC Initiative.
In the CY 2016 PFS proposed rule (80 9 FR 41881), we proposed to retain the group reporting option for CPC practice sites as finalized in the CY 2015 PFS final rule, but for CY 2016, to require CPC practice sites to submit at least 9 CPC CQMs that cover 3 domains. In CY 2015, the CPC CQM subset was increased from a total of 11 to 13 measures, of which 8 measures fall in the clinical process/effectiveness domain, 3 in the population health domain, and 2 in the safety domain. Additionally, the CPC practice sites have had ample time to obtain measures from the CPC eCQM subset of meaningful use measures. Given the increased number of measures in the CPC eCQM set, the addition of one measure to the safety domain, and the sufficient time that CPC practice sites have had to upgrade their EHR systems, it is reasonable to expect that CPC practice sites would have enough measures to report across the 3 domains as required for the Medicare EHR Incentive Program CQM reporting requirement. If a CPC practice site is not successful in reporting, EPs who are part of the site would still have the opportunity to report CQMs in accordance with the current requirements established for the Medicare EHR Incentive Program. As finalized in the Medicare and Medicaid Programs; Electronic Health Record Incentive Program-Stage 3 and Modifications to Meaningful Use in 2015 through 2017 final rule (80 FR 62888), EPs in any year of participation may electronically report clinical quality measures for a reporting period in 2016. Therefore, we proposed that for CY 2016, EPs who are part of a CPC practice site and are in their first year of demonstrating meaningful use may also use this CPC group reporting option to report their CQMs electronically instead of reporting CQMs by attestation through the EHR Incentive Program's Registration and Attestation System. However, we noted that EPs who choose this CPC group reporting option must use a reporting period for CQMs of one full year (not 90 days), and that the data must be submitted during the submission period from January 1, 2017 through February 28, 2017. This means that EPs who elect to electronically report through the CPC practice site cannot successfully attest to meaningful use prior to October 1, 2016 (the deadline established for EPs who are first-time meaningful users in CY 2016) and therefore will receive reduced payments under the PFS in CY 2017 for failing to demonstrate meaningful use, if they have not applied and been approved for a significant hardship exception under the EHR Incentive Program. We invited public comment on these proposals.
We received several comments in response to the proposed group reporting option for CPC practice sites for CY 2016.
After consideration of the comments received, and for the reasons stated previously, we are finalizing the proposals for the group reporting option for CPC practice sites for CY 2016 as proposed.
We have been working to develop and test models of advanced primary care under the authority of section 1115A of the Act. Through these models, we plan to evaluate whether advanced primary care results in higher quality and more coordinated care at a lower cost to Medicare. We are currently testing the Comprehensive Primary Care (CPC) initiative.
In the CPC initiative, we are collaborating with commercial payers and state Medicaid agencies to test a payment and service delivery model that includes the payment of monthly non-visit based per beneficiary per month care management fees and shared savings opportunities. The model is designed to support the provision by practices of the following five comprehensive primary care functions:
(1) Risk Stratified Care Management: The provision of care management of appropriate intensity for high-risk, high-need, high-cost patients.
(2) Access and Continuity: 24/7 access to the care team; use of asynchronous communication; designation of a primary care practitioner for patients to build continuity of care.
(3) Planned Care for Chronic Conditions and Preventive Care: Proactive, appropriate care based on systematic assessment of patients' needs and personalized care plans.
(4) Patient and Caregiver Engagement: Active support of patients in managing their health care to meet their personal health goals; establishment of systems of care that include engagement of patients and caregivers in goal-setting and decision making, creating opportunities for patient and caregiver engagement throughout the care delivery process.
(5) Coordination of Care across the Medical Neighborhood: Management by the primary care practice of communication and information flow in support of referrals, transitions of care, and when care is received in other settings.
The CPC initiative is testing whether provision of these five comprehensive primary care functions by each practice site—supported by multi-payer payment reform, the continuous use of data to guide improvement, and meaningful use of health information technology—can achieve improved care, better health for populations, and lower costs, and can inform Medicare and Medicaid policy. More information on the CPC initiative can be found on the CMS Center for Medicare and Medicaid Innovation's Web site at
In the CY 2016 PFS proposed rule (80 FR 41881 through 41884), we presented a description of the CPC initiative and solicited public comments regarding policy and operational issues related to a potential future expansion of the CPC initiative. Section 1115A(c) of the Act, as added by section 3021 of the Affordable Care Act, provides the Secretary with the authority to expand through rulemaking the duration and scope of a model that is being tested under section 1115A(b) of the Act, such as the CPC initiative (including implementation on a nationwide basis), if the following findings are made, taking into account the evaluation of the model under section 1115A(b)(4) of the Act: (1) The Secretary determines that the expansion is expected to either reduce Medicare spending without reducing the quality of care or improve the quality of patient care without increasing spending; (2) the CMS Chief Actuary certifies that the expansion would reduce (or would not result in any increase in) net Medicare program spending; and (3) the Secretary determines that the expansion would not deny or limit the coverage or provision of Medicare benefits. The decision of whether or not to expand will be made by the Secretary in coordination with CMS and the Office of the Chief Actuary based on whether findings about the initiative meet the statutory criteria for expansion under section 1115A(c) of the Act. Given that further evaluation is needed to
Consistent with our continuing commitment to engaging stakeholders in CMS's work, we solicited public comments on a variety of issues to broaden and deepen our understanding of the important issues and challenges regarding primary care payment and transformation in the health care marketplace. Among other subject-matter areas, we solicited public comments on practice readiness, practice standards and reporting, practice groupings, interaction with state primary care transformation initiatives, learning activities, payer and self-insured employer readiness, Medicaid, quality reporting, interaction with the chronic care management code, and provision of data feedback to practices. In response to our solicitation, we received over 90 timely and informative public comments suggesting matters to consider in a potential future expansion of the CPC initiative, including engagement of electronic health record vendors, coaching on leadership and change management, documentation, beneficiary cost-sharing, care management, further testing of the CPC initiative, eligibility for incentive payments for participation in Alternative Payment Models under MACRA, auditing requirements, aggregation of payer and clinical data, and engagement with providers across the broader medical neighborhood. These comments, submitted by a variety of stakeholders, broadly supported CPC expansion. We appreciate the commenters' views and recommendations. We will consider the public comments we received if the CPC initiative is expanded in the future through rulemaking.
Under section 1899 of the Act, we established the Medicare Shared Savings Program (Shared Savings Program) to facilitate coordination and cooperation among providers to improve the quality of care for Medicare Fee-For-Service (FFS) beneficiaries and reduce the rate of growth in health care costs. Eligible groups of providers and suppliers, including physicians, hospitals, and other health care providers, may participate in the Shared Savings Program by forming or participating in an Accountable Care Organization (ACO). The final rule establishing the Shared Savings Program appeared in the November 2, 2011
We addressed the following policies under the Shared Savings Program in the CY 2016 PFS proposed rule.
Section 1899(b)(3)(A) of the Act requires the Secretary to determine appropriate measures to assess the quality of care furnished by ACOs, such as measures of clinical processes and outcomes; patient, and, wherever practicable, caregiver experience of care; and utilization such as rates of hospital admission for ambulatory sensitive conditions. Section 1899(b)(3)(B) of the Act requires ACOs to submit data in a form and manner specified by the Secretary on measures that the Secretary determines necessary for ACOs to report to evaluate the quality of care furnished by ACOs. Section 1899(b)(3)(C) of the Act requires the Secretary to establish quality performance standards to assess the quality of care furnished by ACOs, and to seek to improve the quality of care furnished by ACOs over time by specifying higher standards, new measures, or both for the purposes of assessing the quality of care. Additionally, section 1899(b)(3)(D) of the Act gives the Secretary authority to incorporate reporting requirements and incentive payments related to the PQRS, EHR Incentive Program and other similar initiatives under section 1848 of the Act. Finally, section 1899(d)(1)(A) of the Act states that an ACO is eligible to receive payment for shared savings, if they are generated, only after meeting the quality performance standards established by the Secretary.
In the November 2011 final rule establishing the Shared Savings Program and recent CY PFS final rules with comment period (77 FR 69301 through 69304; 78 FR 74757 through 74764; and 79 FR 67907 through 67931), we established the quality performance standards that ACOs must meet to be eligible to share in savings that are generated. In the CY 2015 PFS final rule with comment period, we made a number of updates to the quality requirements within the program, such as updates to the quality measure set, the addition of a quality improvement reward, and the establishment of benchmarks that will apply for 2 years. Through these previous rulemakings, we worked to improve the alignment of quality performance measures, submission methods, and incentives under the Shared Savings Program and PQRS. Currently, eligible professionals who bill through the TIN of an ACO participant may avoid the downward PQRS payment adjustment when the ACO satisfactorily reports the ACO GPRO measures on their behalf using the GPRO web interface.
We identified certain policies related to the quality measures and quality performance standard that we proposed in the CY 2016 PFS proposed rule. Specifically, we proposed to add a new quality measure to be reported through the CMS web interface and to adopt a policy for addressing quality measures that no longer align with updated clinical guidelines or where the application of the measure may result in patient harm.
Section 1899(b)(3)(C) of the Act states that the Secretary shall establish quality performance standards to assess the quality of care furnished by ACOs and “seek to improve the quality of care furnished by ACOs over time by specifying higher standards, new measures, or both. . . .” In the November 2011 Shared Savings Program Final Rule, we established a quality performance standard consisting of 33 measures across four domains, including patient experience of care, care coordination/patient safety, preventive health, and at-risk population. In the CY 2015 PFS final rule with comment period, we made a number of updates to the quality performance standard, including adding new measures that ACOs must report, retiring measures that no longer aligned with updated clinical guidelines, reducing the sample size for measures reported through the CMS web interface, establishing a schedule for the phase in of new quality measures, and establishing an additional reward for quality improvement. In the CY 2015 PFS final rule with comment period, we finalized an updated measure set of 33 measures.
Quality measures are submitted by the ACO through the GPRO web interface, calculated by CMS from administrative and claims data, and collected via a patient experience of care survey based on the Clinician and Group Consumer Assessment of Healthcare Providers and Systems (CG-CAHPS) survey. The CAHPS for ACOs patient experience of care survey used for the Shared Savings Program includes the core CG-CAHPS modules, as well as some additional modules. The measures collected through the GPRO web interface are also used to determine whether eligible professionals participating in an ACO avoid the PQRS and automatic Value Modifier payment adjustments for 2015
As we previously stated (76 FR 67872), our principal goal in selecting quality measures for ACOs has been to identify measures of success in the delivery of high-quality health care at the individual and population levels with a focus on outcomes. We believe endorsed measures have been tested, validated, and clinically accepted, and therefore, when selecting the original 33 measures, we had a preference for NQF-endorsed measures. However, the statute does not limit us to using endorsed measures in the Shared Savings Program. As a result, we also exercised our discretion to include certain measures that we believe to be high impact but that are not currently endorsed, including for example, ACO#11, Percent of PCPs Who Successfully Qualify for an EHR Incentive Program Payment.
In selecting the 33 measure set, we balanced a wide variety of important considerations. Our measure selection emphasized prevention and management of chronic diseases that have a high impact on Medicare FFS beneficiaries, such as heart disease, diabetes mellitus, and chronic obstructive pulmonary disease. We believed that the quality measures used in the Shared Savings Program should be tested, evidence-based, target conditions of high cost and high prevalence in the Medicare FFS population, reflect priorities of the National Quality Strategy, address the continuum of care to reflect the requirement that ACOs accept accountability for their patient populations, and align with existing quality programs and value-based purchasing initiatives.
In selecting the set of 33 measures finalized in the CY 2015 PFS final rule with comment period, we sought to include both process and outcome measures, including patient experience of care (79 FR 67907 through 67931). We believe it is important to retain a combination of both process and outcomes measures, because ACOs are charged with improving and coordinating care and delivering high quality care, but also need time to form, acquire infrastructure and develop clinical care processes. We noted, however, that as other CMS quality reporting programs, such as PQRS, move to more outcomes-based measures and fewer process measures over time, we might also revise the quality performance standard for the Shared Savings Program to incorporate more outcomes-based measures and fewer process measures over time.
In the CY 2015 PFS final rule with comment period, we finalized a number of changes to the quality measures used in establishing the quality performance standard to better align with PQRS, retire measures that no longer align with updated clinical practice, and add new outcome measures that support the CMS Quality Strategy and National Quality Strategy goals. We are continuing to work with the measures community to ensure that the specifications for the measures used under the Shared Savings Program are up-to-date. We believe that it is important to balance the timing of the release of specifications so they are as up-to-date as possible, while also giving ACOs sufficient time to review specifications. Our intention is to issue the specifications annually, prior to the start of the reporting period for which they will apply.
Since the November 2011 Shared Savings Program final rule, we have continued to review the quality measures used for the Shared Savings Program to ensure that they are up to date with current clinical practice and are aligned with the GPRO web interface reporting for PQRS. Based on these reviews, in the CY 2015 PFS final rule with comment period, we retired several measures that no longer aligned with updated clinical guidelines regarding cholesterol targets. As a result of retiring measures that did not align with updated clinical practice, we identified a gap in the Shared Savings Program measure set for measures that address treatment for patients at high risk of cardiovascular disease due to high cholesterol. Cardiovascular disease affects a high volume of Medicare beneficiaries and the prevention of cardiovascular disease as well as its treatment is important. Following further analysis and coordination with agencies such as the Centers for Disease Control and Prevention and the Agency for Healthcare Research & Quality, in the CY 2016 PFS proposed rule we proposed to add a new statin therapy measure for the Shared Savings Program that has been developed to align with the updated clinical guidelines and PQRS reporting. We proposed to add a statin therapy measure to the Preventive Health domain, which would increase our current total number of measures from 33 to 34 measures. Data collection for the new measure would occur through the CMS web interface. Table 45 lists the Shared Savings Program quality measure set, including the one measure we proposed to add, which would be used to assess ACO quality starting in 2016.
• Statin Therapy for the Prevention and Treatment of Cardiovascular Disease
We proposed to add the Statin Therapy for the Prevention and Treatment of Cardiovascular Disease to the Preventive Health domain. The measure was developed by CMS in collaboration with other federal agencies and the Million Hearts® Initiative and is intended to support the prevention and treatment of cardiovascular disease by measuring the use of statin therapies according to the updated clinical guidelines for patients with high cholesterol. The measure reports the percentage of beneficiaries who were prescribed or were already on statin medication therapy during the measurement year and who fall into any of the following three categories:
(1) High-risk adult patients aged greater than or equal to 21 years who were previously diagnosed with or currently have an active diagnosis of clinical atherosclerotic cardiovascular disease (ASCVD);
(2) Adult patients aged greater than or equal to 21 years with any fasting or direct Low-Density Lipoprotein Cholesterol (LDL-C) level that is greater than or equal to 190 mg/dL; or
(3) Patients aged 40 to 75 years with a diagnosis of diabetes with a fasting or direct LDL-C level of 70 to 189 mg/dL who were prescribed or were already on statin medication therapy during the measurement year.
The measure contains multiple denominators to align with the updated clinical guidelines for cholesterol targets and would replace the low-density lipid control measures previously retired from the measure set. We proposed this measure to continue Shared Savings Program alignment with the PQRS program and Million Hearts® Initiative. We proposed that the multiple denominators would be equally weighted when calculating the performance rate. The measure was reviewed by the NQF Measure
As a result, we solicited public comment on the implementation of the measure for the Shared Savings Program. We solicited comment on whether the measure should be considered a single measure with weighted denominators or three measures given the multiple denominators that were developed to adhere to the updated clinical guidelines. In addition, the use of multiple denominators raises questions on how the measure should be benchmarked for the Shared Savings Program. Therefore, we solicited public feedback on the benchmarking approach for the measure, such as whether the measure should be benchmarked as a single measure or three measures. The measure may require larger sample sizes to accommodate exclusions when identifying relevant beneficiaries for each of the denominators used for CMS web interface reporting. Due to the multiple denominators, there may be a large number of beneficiaries who may not meet each denominator for reporting, which could result in a low number of beneficiaries meeting the measure denominators. Hence, we proposed to increase the size of the oversample for this measure from the normal 616 beneficiaries for CMS web interface reporting to an oversample of 750 or more beneficiaries. We proposed such an oversample size for this measure to account for reporting on the multiple denominators and to ensure a sufficient number of beneficiaries meet the measure denominators for reporting. The consecutive reporting requirement for measures reported through the CMS web interface would remain at 248 beneficiaries. We proposed that the measure will be pay for reporting for 2 years and then phase into pay for performance in the third year of the agreement period, as seen in Table 31 of the proposed rule (80 FR 41886 through 41888). Previously, we finalized that new measures will have a 2-year transition period before being phased in as pay for performance (79 FR 67910). However, we also solicited comment on whether stakeholders believe the measure should be pay for reporting for the entire agreement period due to the application of multiple denominators for a single measure. In summary, we solicited comment on our proposal to include this measure in the Preventive Health domain, whether it should be treated as a single or multiple measures for reporting and benchmarking, the transition of the measure into pay for performance or if the measure should remain pay for reporting for the entire agreement period, and the size of the oversample to ensure sufficient identification of beneficiaries for reporting.
The quality scoring methodology is explained in the regulations at § 425.502 and in the preamble to the November 2011 final rule with comment period (76 FR 67895 through 67900). As a result of this proposed addition, each of the four domains will include the following number of quality measures (See Table 44 for details.):
• Patient/Caregiver Experience of Care—8 measures.
• Care Coordination/Patient Safety—10 measures.
• Preventive Health—9 measures.
• At Risk Population—7 measures (including 6 individual measures and a 2-component diabetes composite measure).
Table 44 provides a summary of the number of measures by domain and the total points and domain weights that would be used for scoring purposes with the proposed Statin Therapy measure in the Preventive Health domain. Under our proposal, the total possible points for the Preventive Health domain would increase from 16 points to 18 points. Otherwise, the current methodology for calculating an ACO's overall quality performance score would continue to apply. We also solicited comment on whether the proposed Statin Therapy measure, with multiple denominators, should be scored at more than 2 points if commenters believe this measure should be treated as multiple measures within the Preventive Health domain instead of a single measure. For instance, the measure could be scored as 3 points, 1 point for each of the three denominators, due to the clinical importance of prevention and treatment of cardiovascular disease and the complexity of the measure.
We also received many comments opposing the addition of the Statin Therapy measure, citing concerns about specifications that are not publicly available and about adding a process measure that has not been tested and still does not conform to the four major statin therapy benefit categories from the 2013 ACC/AHA clinical guidelines. Commenters suggested CMS move toward replacing process measures with health outcome and patient-reported outcome measures.
We are finalizing our proposal of adding the Statin Therapy measure as a single 3-part measure scored as 2 points with an oversample of 750 beneficiaries. We are increasing the oversample from 616 to 750 beneficiaries for this measure, but the consecutive reporting requirement for measures reported through the CMS web interface will remain at 248 beneficiaries. Although we proposed transitioning the measure to pay-for-performance in the third year of the agreement period, we are finalizing the measure as pay-for-reporting for all reporting years because a majority of commenters supported finalizing the measure as pay-for-reporting only and because ACC and other experts are continuing to discuss non-statin therapy and reducing ASCVD risk. These discussions may, in turn, cause modifications in the measure specifications. For these reasons, we believe 2 years is too short a timeline to transition to pay for performance in accordance with our current rules and therefore will finalize this measure as pay for reporting for all three years. By finalizing the measure as pay-for-reporting in all agreement years we hope to provide ACOs and their ACO participants and ACO providers/suppliers with an opportunity to gain experience and become familiar with the ACC/AHA clinical guidance and multiple denominators of the measure. However, we agree with commenters that stated support for measures of statin therapy and the importance of moving to pay for performance. We therefore intend to revisit this measure in future rulemaking to propose a timeline for phasing in pay for performance. As a result of adding this measure, the total points possible in the Preventive Health domain will increase from 16 points to 18 points and the total measures in the Shared Savings Program measure set reported by ACOs will increase from 33 measures to 34 measures.
We have encountered circumstances where changes in clinical guidelines result in quality measures within the Shared Savings Program quality measure set no longer aligning with best clinical practice. For instance, in the CY 2015 PFS final rule with comment period we retired measures that were no longer consistent with updated clinical guidelines for cholesterol targets, but we were unable to finalize retirement of the measures for the 2014 reporting year due to the timing of the guideline updates and rulemaking cycle. We issued an update in the 2014 Shared Savings Program benchmark guidance document that maintained these measures as pay-for-reporting for the 2014 reporting year due to the measures not aligning with updated clinical evidence.
However, given the frequency of changes that occur in scientific evidence and clinical practice, in the CY 2016 PFS proposed rule (80 FR 41889) we proposed to adopt a general policy under which we would maintain measures as pay-for-reporting, or revert pay-for-performance measures to pay-for-reporting measures, if the measure owner determines the measure no longer meets best clinical practices due to clinical guideline updates or when clinical evidence suggests that continued measure compliance and collection of the data may result in harm to patients. This flexibility will enable us to respond more quickly to clinical guideline updates that affect measures without waiting until a future rulemaking cycle to retire a measure or revert to pay for reporting. In the proposed rule, we explained that we expected to continue to retire measures through the annual PFS final rule with comment period as clinical guidelines change; however, the timing of clinical guideline updates may not always correspond with the rulemaking cycle. Under this proposal, if a guideline update is published during a reporting year and the measure owner determines the measure specifications do not align with the updated clinical practice, we would have the authority to maintain a measure as pay for reporting or revert a pay-for-performance measure to pay for reporting and finalize changes in the subsequent PFS final rule with comment period. Therefore, we proposed to add a new provision at § 425.502(a)(5) to reserve the right to maintain a measure as pay for reporting, or revert a pay-for-performance measure to pay for reporting, if a measure owner determines the measure no longer meets best clinical practices due to clinical guideline updates or clinical evidence suggests that continued application of the measure may result in harm to patients. The measure owner will inform CMS if a measure's specification does not align with updated guidelines or if continued application of the measure may result in patient harm. We would then implement any necessary change to the measure in the next PFS rulemaking cycle by either retiring the measure or maintaining it as pay for reporting. We solicited comment on this proposal and whether there may be additional criteria we should consider in deciding when it may be appropriate to maintain a measure as pay-for-reporting or revert from pay-for-performance back to pay-for-reporting.
In the November 2011 final rule, we included a measure related to the use of health information technology under the Care Coordination/Patient Safety domain: The percent of PCPs within an ACO who successfully qualify for an EHR Incentive Program incentive (76 FR 67878). In finalizing this measure, we included eligible professionals that qualified for payments to adopt, implement, or upgrade EHR technology, in addition to those receiving a payment for meeting Meaningful Use Requirements. We selected this measure as opposed to other proposed measures to focus on EHR adoption among the primary care physicians within an ACO. Finally, we chose to focus on this measure because it represented a structural measure of EHR program participation that is not duplicative of measures within the EHR Incentive program for which providers may already qualify for incentive payments or face penalties. Although this was the only measure we finalized related to use of health information technology, we chose to double weight this measure for scoring purposes to signal the importance of health information technology for ACOs (76 FR 67895).
In the CY 2015 PFS final rule with comment period, we finalized a proposal to change the name and specification of this measure to “Percent of PCPs who Successfully Meet Meaningful Use Requirements” to reflect the transition from incentive payments to downward payment adjustments in 2015 (79 FR 67912). We believe this name will more accurately depict successful use and adoption of EHR technology. In addition, we also updated the measure specifications to include providers who met meaningful use requirements within the past 2 years to account for the changes in meaningful use requirements and to support the progression of HIT adoption and use.
We continue to believe that measures that encourage the effective adoption and use of health information technology among participants in accountable care initiatives are an important way to signal the importance of technology infrastructure in supporting successful ACOs, especially as they mature and assume additional risk. Since the initial EHR quality measure was finalized in 2011, the EHR Incentive Program and Meaningful Use requirements have shifted from an initial focus on technology adoption and data capture to interoperable exchange of data across systems and the use of more advanced health IT functions to support care coordination and quality improvement. In October 2015, final rules were issued for “Stage 3” of the EHR Incentive program (80 FR 62761), as well as the 2015 Edition of ONC certification criteria (80 FR 62601). Together, these rules aim to support
We believe that the widespread inclusion of these capabilities within health IT systems, and their adoption and effective use by providers, will greatly enhance ACOs' ability to coordinate care for beneficiaries with practitioners both within and outside their ACO and more effectively manage the total cost of care for attributed patients. Although we did not propose any changes to the current measure “Percent of PCPs who Successfully Meet Meaningful Use Requirements” (ACO-11), we solicited comments on how this measure might evolve in the future to ensure we are incentivizing and rewarding providers for continuing to adopt and use more advanced health IT functionality as described above, and broadening the set of providers across the care continuum that have adopted these tools. We welcomed comments on the following questions:
• Although the current measure focuses only on primary care physicians, should this measure be expanded in the future to include all eligible professionals, including specialists?
• How could the current measure be updated to reward providers who have achieved higher levels of health IT adoption?
• Should we substitute or add another measure that would focus specifically on the use of health information technology, rather than meeting overall Meaningful Use requirements, for instance, the transitions of care measure required for the EHR Incentives Program?
• What other measures of IT-enabled processes would be most relevant to participants within ACOs? How could we seek to minimize the administrative burden on providers in collecting these measures?
We appreciate the numerous thoughtful comments on the questions we posed regarding the current measure “Percent of PCPs who Successfully Meet Meaningful Use Requirements” (ACO-11) and its evolution as a part of the Shared Savings Program. We will use the feedback as we determine how the measure could be updated and expanded to further incentivize and reward providers for using and adopting more advanced health IT. We would make any modifications necessary to permit the evolution of the measure through future rulemaking.
Under the Shared Savings Program rules at § 425.504, ACOs, on behalf of their ACO providers/suppliers who are eligible professionals, must submit quality measures using a CMS web interface (currently the CMS Group Practice Reporting Option Web Interface) to satisfactorily report on behalf of their eligible professionals for purposes of the PQRS payment adjustment under the Shared Savings Program. Under § 425.118(a)(4), all Medicare enrolled individuals and entities that have reassigned their right to receive Medicare payment to the TIN of an ACO participant must be included on the ACO provider/supplier list and must agree to participate in the ACO and comply with the requirements of the Shared Savings Program, including the quality reporting requirements. Thus, each eligible professional that bills under the TIN of an ACO participant must be included on the ACO provider/supplier list in accordance with the requirements in § 425.118.
The methodology for applying the PQRS adjustment to group practices takes into account the services billed by all eligible professionals through the TIN of the group practice, however, the references to “ACO providers/suppliers who are eligible professionals” in § 425.504 indicate that the ACO provider/supplier list should be used to determine the eligible professionals. Our intent and current practice is to treat the ACO and its ACO participants the same as any other physician group electing to report for purposes of PQRS through the GPRO Web Interface. We therefore have determined that it is necessary to modify the language in § 425.504 for clarity and to bring it into alignment with the methodology used to determine the applicability of the payment adjustment under the PQRS GPRO methodology so that it is consistently applied to eligible professionals billing through an ACO participant TIN. We proposed in the CY 2016 PFS proposed rule (80 FR 41890) to revise § 425.504(a) to replace the phrase “ACO providers/suppliers who are eligible professionals” and “ACO providers/suppliers that are eligible professionals” with the phrase “eligible professionals who bill under the TIN of an ACO participant” along with conforming changes anywhere the term ACO providers/suppliers appears in § 425.504. We indicated that we believe these changes are necessary to clarify that the requirement that the ACO report on behalf of these eligible professionals applies in a way that is consistent with the PQRS GPRO policies and also addresses mid-year updates to and deletions from the ACO provider/supplier list.
Section 1899(c) of the Act requires the Secretary to “determine an appropriate method to assign Medicare fee-for-service beneficiaries to an ACO based on their utilization of primary care services provided under this title by an ACO professional described in paragraph (h)(1)(A).”
As we have explained in detail elsewhere (79 FR 72792), we established the current list of codes that constitute primary care services under the Shared Savings Program at § 425.20 because we believed the listed codes represented a reasonable approximation of the kinds of services that are described by the statutory language which refers to assignment of “Medicare fee-for-service beneficiaries to an ACO based on their utilization of primary care services” furnished by physicians. We proposed the following revisions to the assignment of beneficiaries to ACOs under the Shared Savings Program.
As discussed in detail in the November 2014 proposed rule for the Shared Savings Program (79 FR 72792 through 72793), we welcomed comment from stakeholders on the implications of retaining certain E/M codes used for physician services furnished in SNFs and other nursing facility settings (CPT codes 99304 through 99318) in the definition of primary care services. As we noted in the November 2014 proposed rule, in some cases, hospitalists that perform E/M services in SNFs have requested that these codes be excluded from the definition of primary care services so that their ACO participant TIN need not be exclusive to only one ACO based on the exclusivity policy established in the November 2011 final rule (76 FR 67810 through 67811). The requirement under § 425.306(b) that an ACO participant TIN be exclusive to a single ACO applies when the ACO participant TIN submits claims for primary care services that are considered in the assignment process. However, ACO participant TINs upon which beneficiary assignment is not dependent (that is, ACO participant TINs that do not submit claims for primary care services that are considered in the assignment process) are not required to be exclusive to a single ACO.
In response to the discussion in the Shared Savings Program proposed rule of our policy of including the codes for SNF visits, CPT codes 99304 through 99318, in the definition of primary care services, some commenters objected to inclusion of SNF visit codes, believing a SNF is more of an extension of the inpatient setting rather than a component of the community based primary care setting. As a result, these commenters believe that ACOs are often inappropriately assigned patients who have had long SNF stays but would not otherwise be aligned to the ACO and with whom the ACO has no clinical contact after their SNF stay. Some commenters draw a distinction between such services provided in two different places of service, POS 31 (SNF) and POS 32 (NF). Although the same CPT visit codes are used to describe these services in SNFs (POS 31) and NFs (POS 32), the patient population is arguably quite different. These commenters suggested excluding SNF visit codes furnished in POS 31 to potentially relieve physicians practicing exclusively in skilled nursing facilities from the requirement that ACO professionals must be exclusive to a single ACO if their services are considered in assignment. Patients in SNFs (POS 31) are shorter stay patients who are receiving continued acute medical care and rehabilitative services. Although their care may be coordinated during their time in the SNF, they are then transitioned back in the community. Patients in a SNF (POS 31) require more frequent practitioner visits-often from 1 to 3 times a week. In contrast, patients in NFs (POS 32) are almost always permanent residents and generally receive their primary care services in the facility for the duration of their life. Patients in the NF (POS 32) are usually seen every 30 to 60 days unless medical necessity dictates otherwise.
We agree that it would be feasible to use POS 31 to identify claims for services furnished in a SNF. Therefore, in the CY 2016 PFS proposed rule we proposed to amend our definition of primary care services at § 425.20, for purposes of the Shared Savings Program, to exclude services billed under CPT codes 99304 through 99318 when the claim includes the POS 31 modifier. We recognize that SNF patients are shorter stay patients who are generally receiving continued acute medical care and rehabilitative services. Although their care may be coordinated during their time in the SNF, they are then transitioned back in the community to the primary care professionals who are typically responsible for providing care to meet their true primary needs. We indicated in the proposal that if we finalized this proposal, we anticipated applying this revised definition of primary care services for purposes of determining ACO eligibility during the application cycle for the 2017 performance year, which occurs during 2016, and the revision would be then be applicable for all ACOs starting with the 2017 performance year. This approach would align the assignment algorithms for both new ACOs entering the program and existing ACOs ensuring that beneficiaries are being assigned to the most appropriate ACO and that assigned beneficiary populations are determined using consistent assignment algorithms for all ACOs, as well as aligning our program operations with the application cycle. We proposed to make a conforming change to the definition of primary care services in paragraph (2) by indicating that the current definition will be in use for the 2016 performance year and to add a new definition of primary care services in paragraph (4), which excludes SNFs from the definition of primary care services effective starting with the 2017 performance year. We believe that excluding services furnished in SNFs from the definition of primary care services will complement our goal to assign beneficiaries to an ACO based on their utilization of primary care services. Further, based on preliminary analysis, we do not expect removal of these claims from the assignment process would result in a significant reduction in the number of beneficiaries assigned to ACOs, although we recognize that assignment to some ACOs may be more affected than others, depending on the practice patterns of their ACO professionals. ACO participant TINs that include only ACO professionals that furnish services exclusively in SNFs would not be required to be exclusive to a single ACO. We also note, however, that an ACO participant TIN that includes both ACO professionals that furnish services exclusively in SNFs as well as other ACO professionals that furnish primary care services in non-SNF settings would continue to be required to be exclusive to a single ACO since such an ACO participant TIN would be submitting claims for primary care services that would continue to be used for beneficiary assignment.
The following is a summary of the comments we received regarding these proposals:
We disagree with the comment that this approach would deprive ACO attribution and benefits to a significant portion of the rural Medicaid population and those in most need of such patient-centered service delivery. While residing in a SNF, patients are primarily receiving continued acute medical care and rehabilitative services. Further, assignment under the Shared Savings Program is only available to Medicare beneficiaries, and the assignment methodology includes primary care services furnished in RHCs. We believe that it is more appropriate for such patients to be assigned to ACOs based on the primary care professionals in the community (including NFs) who are typically responsible for providing care to meet their true primary care needs. We also disagree with the commenter who questioned the validity of excluding the SNF visits from the beneficiary assignment process while including the cost savings generated by an ACO through collaborative affiliation with SNFs. We believe that including such expenditures as part of determining an ACO's shared savings or losses provides an appropriate incentive for ACOs to coordinate and manage a patient's overall care. We also note this is consistent with the statutory requirements in section 1899(c) of the Act, which requires that beneficiaries be assigned to ACOs based on their utilization of primary care services, and requires that ACOs be accountable for the total cost of the beneficiary's care (that is, both part A and B expenditures).
After considering the comments, we are finalizing the proposal to amend paragraph (2) under § 425.20 to exclude from our definition of primary care services claims billed under CPT codes 99304 through 99318 when the claim includes the POS code 31 modifier. We believe that excluding these services furnished in SNFs from the definition of primary care services will complement our goal of assigning beneficiaries to an ACO based on their utilization of primary care services. We are also finalizing our proposal to make a conforming change to the definition of primary care services by indicating that the current definition will be in use for the 2016 performance year and to add a new definition of primary care services, which excludes services furnished in SNFs from the definition of primary care services effective starting with the 2017 performance year. To conform to the precedent set by the June 2015 Shared Savings Program final rule (
We have developed special operational instructions and processes (79 FR 72801 through 72802) that enable us to include primary care services performed by physicians at ETA hospitals in the assignment of beneficiaries to ACOs under § 425.402. ETA hospitals are hospitals that, under section 1861(b)(7) of the Act and § 415.160, have voluntarily elected to receive payment on a reasonable cost basis for the direct medical and surgical services of their physicians in lieu of Medicare PFS payments that might otherwise be made for these services. We use institutional claims submitted by ETA hospitals in the assignment process under the Shared Savings Program because ETA hospitals are paid for physician professional services on a reasonable cost basis through their cost reports and no other claim is submitted for such services. However, ETA hospitals bill us for their separate facility services when physicians and other practitioners provide services in the ETA hospital and the institutional claims submitted by ETA hospitals include the HCPCS code for the services provided. To determine the rendering physician for ETA institutional claims, we use the NPI listed in the “other provider” NPI field on the institutional claim. Then we use PECOS to obtain the CMS specialty for the NPI listed on the ETA institutional claim.
These institutional claims do not include allowed charges, which are necessary to determine where a beneficiary received the plurality of primary care services as part of the assignment process. Accordingly, we use the amount that would otherwise be payable under the PFS for the applicable HCPCS code, in the applicable geographic area as a proxy for the allowed charges for the service.
The definition of primary care services at § 425.20 includes CPT codes in the range 99201 through 99205 and 99211 through 99215, and certain other codes. For services furnished prior to January 1, 2014, we use the HCPCS code included on the institutional claim submitted by an ETA hospital to identify whether the primary care service was rendered to a beneficiary in the same way as for any other claim. However, we implemented a change in coding policy under the Outpatient Hospital Prospective Payment System (OPPS) that inadvertently affects the assignment of beneficiaries to an ACO when the beneficiary receives care at an ETA hospital. Effective for services furnished on or after January 1, 2014, outpatient hospitals, including ETA hospitals, were instructed to use the single HCPCS code G0463 and to no longer use CPT codes in the ranges of 99201 through 99205 and 99211 through 99215. (For example, see our Web site at
We continue to believe that it is appropriate to use ETA institutional claims for purposes of identifying primary care services furnished by physicians in ETA hospitals and to allow these services to be included in the stepwise methodology for assigning beneficiaries to ACOs. We believe including these claims increases the accuracy of the assignment process by helping ensure that beneficiaries are assigned to the ACO or other entity that is actually managing the beneficiary's care. ETA hospitals are often located in underserved areas and serve as providers of primary care for the beneficiaries they serve. Therefore, we proposed to consider HCPCS code
We would note that to promote flexibility for the Shared Savings Program and to allow the definition of primary care services used in the Shared Savings Program to respond more quickly to HCPCS/CPT coding changes made in the annual PFS rulemaking process, we recently adopted a policy of making revisions to the definition of primary care service codes for the Shared Savings Program through the annual PFS rulemaking process, and we amended the definition of primary care services at § 425.20 to include additional codes designated by CMS as primary care services for purposes of the Shared Savings Program, including new HCPCS/CPT codes or revenue codes and any subsequently modified or replacement codes. Therefore, we proposed to amend the definition of primary care services at § 425.20 by adding HCPCS code G0463 for services furnished in an ETA hospital to the definition of primary care services that will be applicable for performance year 2016 and subsequent performance years.
We also proposed to revise § 425.402 by adding a new paragraph (d) to provide that when considering services furnished by physicians in ETA hospitals in the assignment methodology, we would use an estimated amount based on the amounts payable under the PFS for similar services in the geographic location in which the ETA hospital is located as a proxy for the amount of the allowed charges for the service. In this case, because G0463 is not payable under the PFS, we proposed to use the weighted mean amount payable under the PFS for CPT codes in the range 99201 through 99205 and 99211 through 99215 as a proxy for the amount of the allowed charges for HCPCS code G0463 when submitted by ETA hospitals. The weights needed to impute the weighted mean PFS payment rate for HCPCS code G0463 would be derived from the relative number of services furnished at the national level for CPT codes 99201 through 99205 and 99211 through 99215. This approach is consistent with our current practice and guidance and would continue to allow for beneficiaries to be attributed to the ACO responsible for their care. Additional details regarding computation of the proxy amount for G0463 would be provided through sub-regulatory guidance.
In addition, because we are able to consider claims submitted by ETA hospitals as part of the assignment process, we also proposed to amend § 425.102(a) to add ETA hospitals to the list of ACO participants that are eligible to form an ACO that may apply to participate in the Shared Savings Program.
The following is a summary of the comments we received regarding these ETA proposals:
Accordingly, we are finalizing our proposals to codify our current practice and guidance regarding the treatment of claims for primary care services submitted by ETA hospitals in the assignment process. We are amending the definition of primary care services at § 425.20 by adding HCPCS code G0463 for services furnished in an ETA hospital to the definition of primary care services to codify our current practice for performance year 2016 and subsequent performance years. We are revising § 425.402 by adding a new paragraph (d) to provide that when considering services furnished by physicians in ETA hospitals in the assignment methodology, we will use an estimated amount based on the amounts payable under the PFS for similar services in the geographic location in which the ETA hospital is located as a proxy for the amount of the allowed charges for the service. We are also finalizing our proposal to amend § 425.102(a) to add ETA hospitals to the list of ACO participants that are eligible to form an ACO that may apply to participate in the Shared Savings Program. In addition, we are also correcting a typographical error in § 425.102(b) by revising “eligible participate” to read “eligible to participate.”
In the 2015 PFS final rule with comment period (79 FR 67931), we finalized corrections to a technical error and a typographical error at § 425.502(d)(2)(ii) that were not subsequently reflected in the regulations text. Specifically, we proposed and finalized a technical correction to eliminate the specific reference to paragraph (c) of § 425.216. The provision at § 425.216, which addresses the actions we may take prior to termination of an ACO from the Shared Savings Program, does not include paragraph (c). We also finalized a correction to a typographical error in § 425.502(d)(2)(ii) by revising “actions describe” to read “actions described.” In the 2015 PFS final rule with comment period, we noted that we did not receive any objections to correcting the typographical error or the other minor technical correction to § 425.502(d)(2)(ii), and stated that we intended to finalize them as proposed (79 FR 67931). However, we inadvertently neglected to include these corrections in the regulations text section of the 2015 PFS final rule. As a result of this oversight, the CFR was not updated to reflect our final policies. At this time, therefore, we are correcting the oversight by including the previously finalized revisions to § 425.502(d)(2)(ii) in this final rule as they were finalized in the 2015 PFS final rule with comment period.
Section 1848(p) of the Act requires that we establish a value-based payment modifier (VM) and apply it to specific physicians and groups of physicians the Secretary determines appropriate starting January 1, 2015, and to all physicians and groups of physicians by January 1, 2017. On or after January 1, 2017, section 1848(p)(7) of the Act provides the Secretary discretion to apply the VM to eligible professionals (EPs) as defined in section 1848(k)(3)(B) of the Act. Section 1848(p)(4)(C) of the Act requires the VM to be budget neutral. The VM and Physician Feedback program continue CMS' initiative to recognize and reward providers based on the quality and cost of care provided to their patients, increase the transparency of health care
In the CY 2013 PFS final rule with comment period, we discussed the goals of the VM and also established that specific principles should govern the implementation of the VM (77 FR 69307). We refer readers to that rule for a detailed discussion and list those principles here for reference.
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In the CY 2013 PFS final rule with comment period (77 FR 69310), we finalized policies to phase-in the VM by applying it beginning January 1, 2015, to Medicare PFS payments to physicians in groups of 100 or more EPs. A summary of the existing policies that we finalized for the CY 2015 VM can be found in the CY 2014 PFS proposed rule (78 FR 43486 through 43488). Subsequently, in the CY 2014 PFS final rule with comment period (78 FR 74765 through 74787), we finalized policies to continue the phase-in of the VM by applying it starting January 1, 2016, to payments under the Medicare PFS for physicians in groups of 10 or more EPs. Then, in the CY 2015 PFS final rule with comment period (79 FR 67931 through 67966), we finalized policies to complete the phase-in of the VM by applying it starting January 1, 2017, to payments under the Medicare PFS for physicians in groups of 2 or more EPs and to physician solo practitioners. We also finalized that beginning in January 1, 2018, the VM will apply to nonphysician EPs in groups with 2 or more EPs and to nonphysician EPs who are solo practitioners.
As a general summary, in the CY 2016 PFS proposed rule (80 FR 41892 through 41908) we proposed the following VM policies:
• Beginning with the CY 2016 payment adjustment period, a TIN's size would be determined based on the lower of the number of EPs indicated by the Medicare Provider Enrollment, Chain, and Ownership System (PECOS)-generated list or our analysis of the claims data for purposes of determining the payment adjustment amount under the VM.
• For the CY 2018 payment adjustment period, to apply the VM to nonphysician EPs who are physician assistants (PAs), nurse practitioners (NPs), clinical nurse specialists (CNSs), and certified registered nurse anesthetists (CRNAs) in groups and those who are solo practitioners, and not to other types of professionals who are nonphysician EPs.
• For the CY 2018 payment adjustment period, to identify TINs as those that consist of nonphysician EPs if either the PECOS-generated list or our analysis of the claims data shows that the TIN consists of nonphysician EPs and no physicians.
• For the CY 2018 payment adjustment period, to not apply the VM to groups and solo practitioners if either the PECOS-generated list or claims analysis shows that the groups and solo practitioners consist only of nonphysician EPs who are not PAs, NPs, CNSs, and CRNAs.
• To continue to apply a two-category approach for the CY 2018 VM based on participation in the PQRS by groups and solo practitioners.
• For the CY 2018 payment adjustment period, to apply the quality-tiering methodology to all groups and solo practitioners in Category 1. Groups and solo practitioners would be subject to upward, neutral, or downward adjustments derived under the quality-tiering methodology, with the exception finalized in the CY 2015 PFS final rule with comments period (79 FR 67937), that groups consisting only of nonphysician EPs and solo practitioners who are nonphysician EPs will be held harmless from downward adjustments under the quality-tiering methodology in CY 2018.
• Beginning with the CY 2017 payment adjustment period, to apply the VM adjustment percentage for groups and solo practitioners that participate in two or more ACOs during the applicable performance period based on the performance of the ACO with the highest quality composite score.
• For the CY 2018 payment adjustment period, to apply the VM for groups and solo practitioners that participate in an ACO under the Shared Savings Program during the applicable performance period as described under § 414.1210(b)(2), regardless of whether any EPs in the group or the solo practitioner also participated in an Innovation Center model during the performance period.
• For the CY 2018 payment adjustment period, if the ACO does not successfully report quality data as required by the Shared Savings Program, all groups and solo practitioners participating in the ACO will fall in Category 2 for the VM and will be subject to a downward payment adjustment.
• Beginning in the CY 2017 payment adjustment period, to apply an additional upward payment adjustment of +1.0x to Shared Savings ACO Program participant TINs that are classified as “high quality” under the quality-tiering methodology, if the ACOs in which the TINs participated during the performance period have an attributed patient population that has an average beneficiary risk score that is in the top 25 percent of all beneficiary risk scores nationwide as determined under the VM methodology.
• Beginning with the CY 2017 payment adjustment period, to waive application of the VM for groups and solo practitioners, as identified by TIN, if at least one EP who billed for PFS items and services under the TIN during the applicable performance period for the VM participated in the Pioneer ACO Model, CPC Initiative, or other similar Innovation Center models during the performance period.
• To set the maximum upward adjustment under the quality-tiering methodology for the CY 2018 VM to +4.0 times an upward payment adjustment factor (to be determined after the performance period has ended) for groups with 10 or more EPs; +2.0 times an adjustment factor for groups with between 2 to 9 EPs and physician solo practitioners; and +2.0 times an adjustment factor for groups and solo practitioners that consist of nonphysician EPs who are PAs, NPs, CNSs, and CRNAs.
• To set the amount of payment at risk under the CY 2018 VM to 4.0 percent for groups with 10 or more EPs, 2 percent for groups with between 2 to 9 EPs and physician solo practitioners, and 2 percent for groups and solo practitioners that consist of nonphysician EPs who are PAs, NPs, CNSs, and CRNAs.
• To not recalculate the VM upward payment adjustment factor after it is made public unless there was a significant error made in the calculation of the adjustment factor.
• To use CY 2016 as the performance period for the CY 2018 VM.
• To align the quality measures and quality reporting mechanisms for the CY 2018 VM with those available to groups and individuals under the PQRS during the CY 2016 performance period.
• To separately benchmark the PQRS electronic clinical quality measures (eCQMs) beginning with the CY 2018 VM.
• To include Consumer Assessment of Healthcare Providers and Systems (CAHPS) Surveys in the VM for Shared Savings Program ACOs beginning with the CY 2018 VM.
• To apply the VM to groups for which the PQRS program removes individual EPs from that program's unsuccessful participants list beginning with the CY 2016 VM.
• Beginning with the CY 2017 payment adjustment period, to increase the minimum number of episodes for inclusion of the MSPB measure in the cost composite to 100 episodes.
• Beginning with the CY 2018 VM, to include hospitalizations at Maryland hospitals as an index admission for the MSPB measure for the purposes of the VM program.
• Beginning in the CY 2016 payment adjustment period, a group or solo practitioner subject to the VM would receive a quality composite score that is classified as average under the quality-tiering methodology if the group or solo practitioner does not have at least one quality measure that meets the minimum number of cases required for the measure to be included in the calculation of the quality composite.
• To make technical changes to § 414.1255 and § 414.1235.
We also solicited comment on, but made no proposals regarding stratifying cost measure benchmarks by beneficiary risk score.
The policies to identify groups and solo practitioners that are subject to the VM during a specific payment adjustment period are described in § 414.1210(c). Our previously-finalized policy is that, beginning with the CY 2016 payment adjustment period, the list of groups and solo practitioners subject to the VM is based on a query of the PECOS that occurs within 10 days of the close of the PQRS group registration process during the applicable performance period described at § 414.1215. Groups and solo practitioners, respectively, are removed from the PECOS-generated list if during the performance period for the applicable CY payment adjustment period, based on our analysis of claims, the group did not have the required number of EPs that submitted claims or the solo practitioner did not submit claims. In the CY 2013 PFS final rule with comment period, we stated that for the CY 2015 payment adjustment period, we will not add groups to the PECOS-generated list based on the analysis of claims (77 FR 69309 through 69310). In the CY 2014 PFS final rule with comment period, we finalized that we will continue to follow this procedure for the CY 2016 payment adjustment period and subsequent adjustment period (78 FR 74767).
In the CY 2014 PFS final rule with comment period (78 FR 74767 through 74771), we established different payment adjustment amounts under the 2016 VM for (1) groups with between 10 to 99 EPs, and (2) groups with 100 or more EPs. Similarly, in the CY 2015 PFS final rule with comment period (79 FR 67938 through 67941 and 67951 through 67954), we established different payment adjustment amounts under the 2017 VM for: (1) Groups with between 2 to 9 EPs and physician solo practitioners; and (2) groups with 10 or more EPs. However, we have not addressed how we would handle scenarios where the size of a TIN as indicated on the PECOS-generated list is not consistent with the size of the TIN based on our analysis of the claims data. Therefore, we proposed that, beginning with the CY 2016 payment adjustment period, the TIN's size would be determined based on the lower of the number of EPs indicated by the PECOS-generated list or by our analysis of the claims data for purposes of determining the payment adjustment amount under the VM. In the event that our analysis of the claims data indicates that a TIN had fewer EPs during the performance period than indicated by the PECOS-generated list, and the TIN is still subject to the VM based on its size, then we would apply the payment adjustment amount under the VM that is applicable to the size of the TIN as indicated by our analysis of the claims data. In the event that our analysis of the claims data indicates that a TIN had more EPs during the performance period than indicated by the PECOS-generated list, then we would apply the payment adjustment amount under the VM that is applicable to the size of the TIN as indicated by the PECOS-generated list.
For example, for the CY 2016 payment adjustment period, if the PECOS list indicates that a TIN had 100 EPs in the CY 2014 performance period, but our analysis of claims shows that the TIN had 90 EPs based in CY 2014, then we would apply the payment policies to the TIN that are applicable to groups with between 10 to 99 EPs, instead of the policies applicable to groups with 100 or more EPs. Alternatively, if the PECOS list indicates that a TIN had 90 EPs in the CY 2014 performance period, but our analysis of claims shows that the TIN had 100 EPs based in CY 2014, then we would apply the payment policies to the TIN that are applicable to groups with between 10 to 99 EPs, instead of the policies applicable to groups with 100 or more EPs. We proposed to update § 414.1210(c) accordingly.
The following is a summary of the comments we received on these proposals.
In section III.M.4.b. of the proposed rule (80 FR 41895), we proposed to apply the VM in the CY 2018 payment adjustment period to nonphysician EPs who are PAs, NPs, CNSs, and CRNAs in groups with two or more EPs and to those who are solo practitioners. In section III.M.4.f. of the proposed rule (80 FR 41901-41903), we proposed to apply different payment adjustment amounts under the CY 2018 VM based on the composition of a group. Specifically, in that section, we proposed that the PAs, NPs, CNSs, and CRNAs in groups that consist of nonphysician EPs (that is, groups that do not include any physicians) and those who are solo practitioners would be subject to different payment adjustment amounts under the CY 2018 VM than would groups composed of physicians and nonphysician EPs and physician solo practitioners. We proposed to identify TINs that consist of nonphysician EPs as those TINs for which either the PECOS-generated list or our analysis of the claims data shows that the TIN consists of nonphysician EPs and no physicians. We noted that under our proposal the VM would only apply to the PAs, NPs, CNSs, and CRNAs who bill under these TINs, and not to the other types of nonphysician EPs who may also bill under these TINs. We proposed that the VM would not apply to a TIN if either the PECOS-generated list or our analysis of the claims data shows that the TIN consists of only nonphysician EPs who are
• If the PECOS-generated list shows that a TIN consists of physicians and NPs and the claims data show that only NPs billed under the TIN, then we would apply the payment adjustments in section III.M.4.f. of the proposed rule that are applicable to PAs, NPs, CNSs, and CRNAs in TINs that consist of nonphysician EPs.
• If the PECOS-generated list shows that a TIN consists of PAs, NPs, CNSs, or CRNAs, and no physicians, and the claims data show that the TIN also consists of physicians, then we would still apply the payment adjustments applicable to PAs, NPs, CNSs, and CRNAs in TINs that consist of nonphysician EPs. This would be consistent with our policy to apply the payment adjustments applicable to the lower group size when there is a discrepancy in the group size between PECOS and claims analysis, in that it would result in the group being subject to the lower amount at risk and lower possible upward payment adjustment, when there is a difference between the PECOS and claims analyses.
• If the PECOS-generated list shows that a TIN consists of physicians and the claims data shows, for example that PAs and physicians billed under the TIN then we would apply the payment adjustments in section III.M.4.f. of the proposed rule for TINs with physicians and nonphysician EPs depending on the size of the TIN.
• If the PECOS-generated list shows, for example, that a TIN consists of PAs and the claims data shows that only physical therapists billed under the group, then the TIN would not be subject to the VM in CY 2018. Conversely, if the PECOS-generated list shows, for example, that a TIN consists of physical therapists and the claims data shows that only PAs billed under the group, then the TIN would not be subject to the VM in CY 2018.
We welcomed public comment on these proposals. We proposed to revise § 414.1210(c) accordingly. The following is a summary of the comments we received on these proposals.
Section 1848(p)(7) of the Act provides the Secretary discretion to apply the VM on or after January 1, 2017 to EPs as defined in section 1848(k)(3)(B) of the Act. In the CY 2015 PFS final rule with comment period (79 FR 67937), we finalized that we will apply the VM beginning in the CY 2018 payment adjustment period to nonphysician EPs in groups with two or more EPs and to nonphysician EPs who are solo practitioners. We added § 414.1210(a)(4) to reflect this policy. Also in that prior rule, we finalized that we will apply the VM beginning in CY 2018 to the items and services billed under the PFS by all of the physicians and nonphysician EPs, as specified in section 1848(k)(3)(B) of the Act, that bill under a group's TIN based on the TIN's performance during the applicable performance period and that during the payment adjustment period, all of the nonphysician EPs who bill under a group's TIN will be subject to the same VM that will apply to the physicians who bill under that TIN. We finalized the modification to the definition of “group of physicians” under § 414.1205 to also include the term “group” to reflect these policies. Additionally, in the CY 2015 PFS final rule with comment period, we finalized that beginning in CY 2018, physicians and nonphysician EPs will be subject to the same VM policies established in earlier rulemakings and under subpart N. For example, nonphysician EPs will be subject to the same amount of payment at risk and quality-tiering policies as physicians. We finalized modifications to the regulations under subpart N accordingly.
Subsequent to our having finalized the preceding policies in the CY 2015 PFS final rule with comment period, the MACRA was enacted on April 16, 2015. Under section 1848(p)(4)(B)(iii) of the Act, as amended by section 101(b)(3) of MACRA, the VM shall not be applied to payments for items and services furnished on or after January 1, 2019. Section 1848(q) of the Act, as added by section 101(c) of MACRA, establishes the MIPS that shall apply to payments for items and services furnished on or after January 1, 2019. Under section 1848(q)(1)(C)(i)(I) of the Act, with regard to payments for items and services furnished in 2019 and 2020, the MIPS will only apply to:
• A physician (as defined in section 1861(r) of the Act);
• A PA, NP, and CNS (as defined in section 1861(aa)(5) of the Act);
• A CRNA (as defined in section 1861(bb)(2) of the Act); and
• A group that includes such professionals.
Then, under section 1848(q)(1)(C)(i)(II) of the Act, beginning with payments for items and services furnished in 2021, the MIPS will apply to such other EPs as defined in section 1848(k)(3)(B) of the Act as specified by the Secretary. As noted above, section 1848(p)(7) of the Act provides the Secretary discretion to apply the VM on or after January 1, 2017 to EPs as defined in section 1848(k)(3)(B) of the Act. After the enactment of MACRA in April 2015, we believe it would not be appropriate to apply the VM in CY 2018 to any nonphysician EP who is not a PA, NP, CNS, or CRNA because payment adjustments under the MIPS would not apply to them until 2021. Therefore, we proposed (80 FR 41895) to apply the VM in the CY 2018 payment adjustment period to nonphysician EPs who are PAs, NPs, CNSs, and CRNAs in groups with two or more EPs and to PAs, NPs, CNSs, and CRNAs who are solo practitioners. We proposed to revise § 414.1210(a)(4) to reflect this proposed policy. We proposed to define PAs, NPs, and CNSs as defined in section 1861(aa)(5) of the Act and to define CRNAs as defined in section 1861(bb)(2) of the Act. We proposed to add these definitions under § 414.1205.
Under our proposal, we would apply the VM in CY 2018 to the items and services billed under the PFS by all of the PAs, NPs, CNSs, and CRNAs who bill under a group's TIN based on the TIN's performance during the applicable performance period. We noted that the VM would not apply to other types of nonphysician EPs (that is, nonphysician EPs who are not PAs, NPs, CNSs, or CRNAs) who may also bill under the TIN.
As noted above, we finalized in the CY 2015 PFS final rule with comment period (79 FR 67937) that beginning in CY 2018, all of the nonphysician EPs who bill under a group's TIN will be subject to the same VM that will apply to the physicians who bill under that TIN, and physicians and nonphysician EPs will be subject to the same VM policies established in earlier rulemakings and under subpart N. For example, nonphysician EPs who are in groups containing one or more physicians will be subject to the same amount of payment at risk and quality-tiering policies as physicians. We did not propose to revise these policies; however, we noted that if a group is composed of physicians and nonphysician EPs, only the physicians and the nonphysician EPs who are PAs, NPs, CNSs, and CRNAs would be subject to the VM in CY 2018.
In the CY 2015 PFS final rule with comment period (79 FR 67937), we also finalized that we will apply the VM beginning in CY 2018 to groups that consist only of nonphysician EPs (for example, groups with only NPs or PAs) and to nonphysician EPs who are solo practitioners. However, since CY 2018 will be the first year that groups that consist only of nonphysician EPs and solo practitioners who are nonphysician EPs will be subject to the VM, we finalized a policy to hold these groups and solo practitioners harmless from downward adjustments under the quality-tiering methodology in CY 2018. We stated that we would add regulation text under § 414.1270 to reflect this policy when we established the policies for the VM for the CY 2018 payment adjustment period in future rulemaking. Accordingly, we proposed (80 FR 41895) to add § 414.1270(d) to codify that PAs, NPs, CNSs, and CRNAs in groups that consist of nonphysician EPs and PAs, NPs, CNSs, and CRNAs who are solo practitioners will be held harmless from downward adjustments under the quality-tiering methodology in CY 2018. In section III.M.4.f. of this final rule with comment period, we discuss the proposed CY 2018 payment adjustment amounts for groups that consist of nonphysician EPs and solo practitioners who are nonphysician EPs that fall in Category 1 and Category 2 for the CY 2018 VM. As discussed above, we proposed to apply the VM in CY 2018 only to nonphysician EPs who are PAs, NPs, CNSs, and CRNAs.
The following is a summary of the comments we received on these proposals.
Few commenters opposed our proposal and stated that CMS is not required by the statute to apply the VM to nonphysician EPs; nonphysician practices typically have fewer resources than physician practices and struggle to meet reporting requirements; and that subjecting the nonphysician EPs to the
We appreciate the concerns raised by the commenter and encourage the commenter to review the procedures for obtaining a CMS specialty code, which are available at
In section III.M.4.f. of this final rule with comment period, we discuss the final CY 2018 payment adjustment amounts for groups that consist of nonphysician EPs and solo practitioners who are nonphysician EPs that fall in Category 1 and Category 2 for the CY 2018 VM.
We finalized in the CY 2015 PFS final rule with comment period (79 FR 67937) that, beginning in CY 2018, all of the nonphysician EPs who bill under a group's TIN will be subject to the same VM that will apply to the physicians who bill under that TIN, and physicians and nonphysician EPs will be subject to the same VM policies established in earlier rulemakings and under subpart N. Because the CY 2018 VM will apply only to certain types of nonphysician EPs, all of the PAs, NPs, CNSs, and CRNAs who bill under a group's TIN will be subject to the same VM adjustment that will apply to the
We are also finalizing our proposal to define PAs, NPs, and CNSs as defined in section 1861(aa)(5) of the Act and to define CRNAs as defined in section 1861(bb)(2) of the Act. We are codifying these definitions under § 414.1205 without modification. We are also codifying in § 414.1270(d) without modification that PAs, NPs, CNSs, and CRNAs in groups that consist of nonphysician EPs and PAs, NPs, CNSs, and CRNAs who are solo practitioners will be held harmless from downward adjustments under the quality-tiering methodology in CY 2018.
Section 1848(p)(4)(B)(iii)(II) of the Act requires the Secretary to apply the VM to items and services furnished under the PFS beginning not later than January 1, 2017, for all physicians and groups of physicians. Therefore, in the CY 2015 PFS final rule with comment period (79 FR 67936), we established that, beginning with the CY 2017 payment adjustment period, the VM will apply to physicians in groups with two or more EPs and to physicians who are solo practitioners based on the applicable performance period. In the CY 2015 PFS final rule with comment period (79 FR 67938 to 67939), we adopted a two-category approach for the CY 2017 VM based on participation in the PQRS by groups and solo practitioners. For purposes of the CY 2017 VM, we finalized that Category 1 includes those groups that meet the criteria for satisfactory reporting of data on PQRS quality measures via the GPRO (through use of the web-interface, EHR, or registry reporting mechanism) for the CY 2017 PQRS payment adjustment. We finalized that Category 1 also includes groups that do not register to participate in the PQRS as a group practice participating in the PQRS GPRO in CY 2015 and that have at least 50 percent of the group's EPs meet the criteria for satisfactory reporting of data on PQRS quality measures as individuals (through the use of claims, EHR, or registry reporting mechanism) for the CY 2017 PQRS payment adjustment, or in lieu of satisfactory reporting, satisfactorily participate in a PQRS-qualified clinical data registry (QCDR) for the CY 2017 PQRS payment adjustment. Lastly, we finalized that Category 1 includes those solo practitioners that meet the criteria for satisfactory reporting of data on PQRS quality measures as individuals (through the use of claims, registry, or EHR reporting mechanism) for the CY 2017 PQRS payment adjustment, or in lieu of satisfactory reporting, satisfactorily participate in a PQRS QCDR for the CY 2017 PQRS payment adjustment. We finalized that Category 2 includes those groups and solo practitioners that are subject to the CY 2017 VM and do not fall within Category 1. The CY 2017 VM payment adjustment amount for groups and solo practitioners in Category 2 is −4.0 percent for groups with 10 or more EPs and −2.0 percent for groups with between 2 to 9 EPs and solo practitioners.
We proposed (80 FR 41896) to use a similar two-category approach for the CY 2018 VM based on participation in the PQRS by groups and solo practitioners. However, we note that during the 2014 PQRS submission period, we received feedback from groups who experienced difficulty reporting through the reporting mechanism they had chosen at the time of 2014 PQRS GPRO registration. For example, some groups registered for the group EHR reporting mechanism and were subsequently informed that their EHR vendor could not support submission of group data for the group EHR reporting mechanism. To address these concerns and continue to accommodate the various ways in which EPs and groups can participate in the PQRS, for purposes of the CY 2018 VM, we proposed that Category 1 would include those groups that meet the criteria to avoid the PQRS payment adjustment for CY 2018 as a group practice participating in the PQRS GPRO, as proposed in Table 21 of the proposed rule. We also proposed to include in Category 1 groups that have at least 50 percent of the group's EPs meet the criteria to avoid the PQRS payment adjustment for CY 2018 as individuals, as shown in Table 20 of the proposed rule. We proposed to add corresponding regulation text to § 414.1270(d)(1).
We note that the proposed criteria for groups to be included in Category 1 for the CY 2018 VM differ from the criteria we finalized for the CY 2017 VM in the CY 2015 PFS final rule with comment period. Under the policy for the CY 2017 VM, we would only consider whether at least 50 percent of a group's EPs met the criteria to avoid the PQRS payment adjustment as individuals if the group did not register to participate in a PQRS GPRO. In contrast, under our proposal for the CY 2018 VM, in determining whether a group would be included in Category 1, we would consider whether the 50 percent threshold has been met regardless of whether the group registers for a PQRS GPRO. We believe this proposal would allow groups that register for a PQRS GPRO but fail as a group to meet the criteria to avoid the PQRS payment adjustment an additional opportunity for the quality data reported by individual EPs in the group to be taken into account for purposes of applying the CY 2018 VM.
We also proposed to revise the criteria for groups to be included in Category 1 for the CY 2017 VM, if it is operationally feasible for our systems to utilize data reported through a mechanism other than the one through which a group registered to report under PQRS GPRO. At this time of the proposed rule, it was unclear whether CMS systems could support this type of assessment as soon as the CY 2017 VM, and thus our proposal was contingent upon operational feasibility. For the CY 2017 VM, we proposed that Category 1 would include those groups that meet the criteria to avoid the PQRS payment adjustment for CY 2017 as a group practice participating in the PQRS GPRO in CY 2015. We also proposed to include in Category 1 groups that have at least 50 percent of the group's EPs meet the criteria to avoid the PQRS payment adjustment for CY 2017 as individuals. We proposed that if operationally feasible, we would apply these criteria to identify which groups would fall in Category 1 for the CY 2017 VM regardless of whether or how the group registered to participate in the PQRS as a group practice in CY 2015. We proposed that, if our systems were not able to accomplish this, then we would apply our existing policy for the CY 2017 VM, as finalized in the CY 2015 PFS final rule with comment period (79 FR 67938 through 67939), to consider whether at least 50 percent of a group's EPs meet the criteria to avoid the PQRS payment adjustment for CY 2017 as individuals only in the event that the group did not register to report as a group under the PQRS GPRO.
We proposed to include in Category 1 for the CY 2018 VM those solo practitioners that meet the criteria, in Table 20 of the proposed rule, to avoid the CY 2018 PQRS payment adjustment as individuals,
We proposed that Category 2 would include those groups and solo
We proposed that for a group or solo practitioner that would be subject to the CY 2018 VM to be included in Category 1, the criteria for satisfactory reporting (or the criteria for satisfactory participation, in the case of solo practitioners and the 50 percent option described above for groups) would need to be met during the reporting periods occurring in CY 2016 for the CY 2018 PQRS payment adjustment. In section III.M.4.h. of the proposed rule, we proposed to use CY 2016 as the performance period for the VM adjustments that will apply during CY 2018. We solicited comment on these proposals.
The following is a summary of the comments we received on these proposals.
As discussed above, under section 101 of the MACRA, CY 2018 will be the final year of the separate PQRS and VM payment adjustments, and the MIPS will apply to payments for items and services furnished on or after January 1, 2019. We believe the creation of the MIPS may help alleviate the concerns raised in the comment, and we encourage the commenter to review our future rulemaking for the MIPS.
For a group or solo practitioner subject to the CY 2018 VM to be included in Category 1, the criteria for satisfactory reporting (or the criteria for satisfactory participation, in the case of solo practitioners and the 50 percent option described above for groups) must be met during the reporting periods occurring in CY 2016 for the CY 2018 PQRS payment adjustment. As finalized in section III.M.4.h. of this final rule with comment period, CY 2016 will be the performance period for the VM adjustments that will apply during CY 2018. In section III.M.4.f. of this final rule with comment period, we discuss the CY 2018 payment adjustment amounts for groups and solo practitioners that fall in Category 1 and Category 2 for the CY 2018 VM.
We are also finalizing our proposal to revise the criteria for groups to be included in Category 1 for the CY 2017 VM. We determined that it is operationally feasible for our system to utilize data reported through a mechanism other than the one through which a group registered to report under PQRS GPRO. Therefore, for the CY 2017 VM, we are finalizing that Category 1 will include those groups that meet the criteria to avoid the PQRS payment adjustment for CY 2017 as a group practice participating in the PQRS GPRO in CY 2015. Category 1 will also include groups that have at least 50 percent of the group's EPs meet the criteria to avoid the PQRS payment adjustment for CY 2017 as individuals. Under our final policies for the CY 2017 VM, in determining whether a group will be included in Category 1, we will consider whether the 50 percent threshold has been met regardless of whether the group registered to participate in the PQRS GPRO in CY 2015. We believe this policy will allow groups that register for a PQRS GPRO, but fail as a group to meet the criteria to avoid the PQRS payment adjustment an additional opportunity for the quality data reported by individual EPs in the group to be taken into account for purposes of applying the CY 2017 VM. Please note that if a group registers for a PQRS GPRO and meets the criteria to avoid the PQRS payment adjustment as a group, then the quality data reported
In the CY 2015 PFS final rule with comment period (79 FR 67939 to 67941), we finalized that the quality-tiering methodology will apply to all groups and solo practitioners in Category 1 for the VM for CY 2017, except that groups with between 2 to 9 EPs and solo practitioners would be subject only to upward or neutral adjustments derived under the quality-tiering methodology, while groups with 10 or more EPs would be subject to upward, neutral, or downward adjustments derived under the quality-tiering methodology. That is, groups with between 2 to 9 EPs and solo practitioners in Category 1 would be held harmless from any downward adjustments derived from the quality-tiering methodology for the CY 2017 VM.
As stated earlier in this final rule with comment period, in CY 2018, the same VM would apply to all of the physicians, PAs, NPs, CNSs, and CRNAs who bill under a TIN. The VM would not apply to other types of nonphysician EPs who may also bill under the TIN. For the CY 2018 VM, we proposed to continue to apply the quality-tiering methodology to all groups and solo practitioners in Category 1. We proposed that groups and solo practitioners would be subject to upward, neutral, or downward adjustments derived under the quality-tiering methodology, with the exception finalized in the CY 2015 PFS final rule with comment period (79 FR 67937), that groups consisting only of nonphysician EPs and solo practitioners who are nonphysician EPs will be held harmless from downward adjustments under the quality-tiering methodology in CY 2018. Based on our proposal to apply the CY 2018 VM only to certain types of nonphysician EPs, only the PAs, NPs, CNSs, and CRNAs in groups consisting of nonphysician EPs and those who are solo practitioners will be held harmless from downward adjustments under the quality-tiering methodology in CY 2018. We proposed to revise § 414.1270 to reflect these proposals. We solicited comments on these proposals. In section III.M.4.f. of this final rule with comment period, we discuss the CY 2018 payment adjustment amounts for groups and solo practitioners that fall in Category 1 and Category 2 for the CY 2018 VM.
For groups with between 2 to 9 EPs and physician solo practitioners, we stated our belief in the proposed rule that it is appropriate to begin both the upward and downward payment adjustments under the quality-tiering methodology for the CY 2018 VM. As stated in the CY 2015 PFS final rule with comment period (79 FR 67935), in September 2014, we made available QRURs based on CY 2013 data to all groups of physicians and physicians who are solo practitioners. These QRURs contain performance information on the quality and cost measures used to calculate the quality and cost composites of the VM and show how TINs fare under the policies established for the VM for the CY 2015 payment adjustment period. As discussed in section III.M.5.a. of this final rule with comment period, in April 2015, we made available 2014 Mid-Year QRURs to groups of physicians and physician solo practitioners nationwide. The Mid-Year QRURs provide interim information about performance on the claims-based quality outcome measures and cost measures that are a subset of the measures that will be used to calculate the CY 2016 VM and are based on performance from July 1, 2013 through June 30, 2014. As we stated that we intended to do, in September of 2015, we made annual QRURs, based on CY 2014 data, available to all groups and solo practitioners. The reports show TINs their performance during CY 2014 on all of the quality and cost measures that were used to calculate the CY 2016 VM. Thus, we believe groups with between 2 to 9 EPs and physician solo practitioners will have had adequate data to improve performance on the quality and cost measures that will be used to calculate the VM in CY 2018. We note that the quality and cost measures in the QRURs that these groups received are similar to the measures that will be used to calculate the CY 2018 VM. In addition, we believe that these groups and solo practitioners have had sufficient time to understand how the VM works and how to participate in the PQRS. As a result, we expressed our belief that it would be appropriate to apply both upward and downward adjustments under the quality-tiering methodology to groups with between 2 to 9 EPs and physician solo practitioners in CY 2018.
We stated that we would continue to monitor the VM program and continue to examine in the VM Experience Report the characteristics of those groups and solo practitioners that would be subject to an upward or downward payment adjustment under our quality-tiering methodology to determine whether our policies create anomalous effects in ways that do not reflect consistent differences in performance among physicians and physician groups.
The following is a summary of the comments we received on these proposals.
For the comments concerning small sample size, we note that in recent analyses based on the measure specifications used for the 2016 VM and the proposed case sizes for the 2017 VM, average reliabilities for TINs with less than 10 EPs for all claims-based measures, except the all-cause hospital readmissions measure and the Medicare Spending per Beneficiary (MSPB) measure, exceeded the threshold for moderate reliability (that is, 0.4). The average reliability for the all-cause hospital readmissions measure and MSPB measure were near the threshold
Our new analysis reveals that, in order for solo practitioners and groups with two to five EPs to meet the average reliability threshold of 0.4 that we discussed in the CY 2013 PFS rulemaking (77 FR 45009, 69322), a minimum number of 125 episodes is required for the MSPB measure, and even at 200 cases, the reliability of the all-cause hospital readmission measure does not meet our threshold for these solo practitioners and small groups. Because these measures do not meet the threshold for what we consider to be moderate reliability for solo practitioners and groups of two to five EPs, we are finalizing our proposed policy to apply upward, neutral, and downward adjustments under quality-tiering in CY 2018 to all physician solo practitioners and groups of physicians, with modifications to address reliability concerns for smaller groups and solo practitioners. For the CY 2017 and CY 2018 payment adjustment periods, we will increase the minimum number of episodes required for inclusion of the MSPB measure in the cost composite of the VM to 125 episodes (discussed in section III.M.4.k. of this final rule), and we will not include the all-cause hospital readmission measure in the calculation of the quality composite of the VM for solo practitioners or groups of two to nine EPs. For 2018 VM payment adjustments, the policies to increase the minimum number of episodes required for inclusion of the MSPB measure to 125 episodes and to remove the all-cause hospital readmission measure in the calculation of the 2018 VM will also apply for nonphysician Eps who are solo practitioners and groups consisting of nonphysician EPs. We continue to believe it is important to apply upward, neutral, or downward adjustments under quality-tiering to these solo practitioners and groups of EPs, in order to maintain the momentum of improving quality and to continue to emphasize the importance of quality and cost performance under the VM and the upcoming MIPS.
With regard to comments that there are an insufficient number of specialist-specific measures, we do not believe that this would disadvantage smaller groups or solo practitioners. We note that our current policies for the VM, as well as our proposals for the CY 2018 payment adjustment period, include all available PQRS reporting mechanisms, including registries that may be specialty-focused. We also note that the VM methodology includes additional safeguards to guard against misclassification—we finalized in the CY 2013 PFS final rule with comment period (77 FR 69325) the adoption of the quality-tiering model where we classify quality composite scores and cost composite scores each into high, average, and low categories based on whether these scores are at least one standard deviation from the mean and are also statistically significantly different from the mean at the 5.0 percent level of significance, in order to apply the VM upward or downward adjustment only when a group's performance is significantly different from the national mean. The result of this focus on outliers is that quality-tiering leads to a small percentage of TINs receiving downward adjustments based on performance— for the 2015 VM, out of the 106 groups that elected quality-tiering and had sufficient data, 11 groups (10.4 percent) received a downward VM adjustment and 14 groups (13.2 percent) received an upward VM adjustment based on performance. Cost measures are also risk-adjusted (77 FR 69318) and specialty-adjusted (78 FR 74784) to account for patient characteristics and specialty-composition of the group, respectively.
As discussed in section III.M.4.m. of this final rule with comment period, we are finalizing the policies that, beginning with the CY 2016 payment adjustment period, a group or solo practitioner subject to the VM will receive a quality composite score that is classified as average under the quality-tiering methodology if the group or solo practitioner does not have at least one quality measure that meets the minimum number of cases required for the measure to be included in the calculation of the quality composite. This policy is consistent with the policy we previously finalized in the CY 2015 PFS final rule with comment period (79 FR 67934) that, beginning with the CY 2016 payment adjustment period, a group or solo practitioner subject to the VM will receive a cost composite score that is classified as average under the quality-tiering methodology if the group or solo practitioner does not have at least one cost measure that meets the minimum number of cases required for the measure to be included in the calculation of the cost composite.
With regard to commenters' concern about lack of episode-based cost measures, we believe that the total per capita cost measure, condition-specific total per capita cost measures, and MSPB measure provide sufficient cost performance data for VM cost composite calculation and are inclusive of episode cost-based measures.
In the proposed rule (80 FR 41896-41897), we stated that we believe it is appropriate to apply both the upward and the downward payment adjustments under the quality-tiering methodology for the CY 2018 VM to these groups and solo practitioners and also stated the reasons for our belief. We
With regard to the commenters' suggestion that smaller groups lack awareness of the VM program, we believe that they have been given sufficient time and data with which to become familiar with the program. In September 2015, we made available QRURs based on CY 2014 data to all groups and solo practitioners. These QRURs contain performance information on the quality and cost measures used to calculate the quality and cost composites of the VM and show how all TINs fare under the policies established for the VM for the CY 2016 payment adjustment period. As discussed in section III.M.5.a. of this final rule with comment period, in April 2015, we made available 2014 Mid-Year QRURs to groups of physicians and physician solo practitioners nationwide. The Mid-Year QRURs provide interim information about performance on the claims-based quality outcome measures and cost measures that are a subset of the measures that will be used to calculate the CY 2016 VM and are based on performance from July 1, 2013 through June 30, 2014. Then, during spring of 2016, we intend to disseminate the 2015 Mid-Year QRURs to all groups and solo practitioners. Thus, we believe groups with between 2 to 9 EPs and physician solo practitioners will have adequate data to improve performance on the quality and cost measures that will be used to calculate the VM in CY 2018. We note that the quality and cost measures in the QRURs that these groups will receive are similar to the measures that will be used to calculate the CY 2018 VM. We strongly encourage EPs subject to the VM to proactively educate themselves about the VM program and QRURs by visiting the VM/QRUR Web site
We note that we work with medical and specialty associations and have National Provider Calls throughout the year to educate physicians and other professionals about the VM program and the QRURs. Further outreach also will be undertaken by our Quality Improvement Organizations (QIOs), which will provide technical assistance to physicians and groups of physicians in an effort to help them improve quality and consequently, performance under the VM program.
In the CY 2015 PFS final rule with comment period, we finalized a policy to apply the VM, beginning with the CY 2017 payment adjustment period, to physicians in groups with two or more EPs and physicians who are solo practitioners that participate in an ACO under the Shared Savings Program, and beginning with the CY 2018 payment adjustment period, to nonphysician EPs in groups with two or more EPs and nonphysician EPs who are solo practitioners that participate in an ACO under the Shared Savings Program. We finalized that the determination of whether a group or solo practitioner is considered to be in an ACO under the Shared Savings Program would be based on whether that group or solo practitioner, as identified by TIN, was an ACO participant in the performance period for the applicable payment adjustment period for the VM. For groups and solo practitioners determined to be ACO participants, we finalized a policy that we would classify the group or solo practitioner's cost composite as “average” and calculate its quality composite based on the quality-tiering methodology using quality data submitted by the Shared Savings Program ACO for the performance period and apply the same quality composite to all of the groups and solo practitioners, as identified by TIN, under that ACO. For further explanation of the final policies for applying the VM to ACO participants in Shared Savings Program ACOs, we refer readers to 79 FR 67941 through 67947 and 67956 through 67957.
Under the Shared Savings Program regulations (§ 425.306(b)), an ACO participant TIN upon which beneficiary assignment is dependent may only participate in one Shared Savings Program ACO. ACO participant TINs that do not bill for primary care services, however, are not required to be exclusive to one Shared Savings
Beginning with the CY 2017 payment adjustment period, we proposed that TINs that participate in multiple Shared Savings Program ACOs in the applicable performance period would receive the quality composite score of the ACO that has the highest numerical quality composite score. For this determination, we will only consider the quality data of an ACO that completes quality reporting under the Shared Savings Program. We proposed to apply this policy in situations where the VM is determined based on quality-tiering or the ACO's failure to successfully report quality data as required by the Shared Savings Program. We provided several examples to illustrate the proposal.
We believe our proposed approach is appropriate because it is straightforward for TINs participating in multiple Shared Savings Program ACOs to understand. The policy is transparent and would allow Shared Savings Program ACO participant TINs the ability to compare the performance of the highest-performing ACO in which they participate to national benchmarks. It also allows us to determine peer group means for the purposes of determining statistical significance and determining whether a given quality composite score is at least one standard deviation from the peer group mean. We proposed to make corresponding changes to § 414.1210(b)(2).
In developing this policy, we considered several alternative options. We considered proposing that the above policy would apply as long as all ACOs in which the TIN participates complete reporting under the Shared Savings Program. If one of the ACOs failed to report, the TIN would be categorized as Category 2 even though it participated in another ACO that successfully reported. We believe this would create unnecessary complexity and would not be fair to TINs that were not made aware of this policy prior to the start of the CY 2015 performance period for the 2017 payment adjustment period. We also considered proposing a policy under which the TIN would be required to indicate which ACO it wanted to be associated with for purposes of the VM. We did not make this proposal because we believed it created additional operational complexity for the TINs and us, and would put the TIN in a position of having to predict which ACO would perform better under the VM, which we do not believe would be appropriate. We solicited comments on our proposal as well as the alternatives we considered.
The following is a summary of the comments we received on the proposal and alternatives considered:
Under the Shared Savings Program statute and regulations, ACO participants may not participate in another Medicare initiative that involves shared savings payments (§ 425.114(b)). As noted above, ACO participants who do not provide primary care services may participate in multiple Shared Savings Program ACOs, but under section 1899(b)(4) of the Act, providers and suppliers that participate in a Shared Savings Program ACO may not participate in an Innovation Center model that involves shared savings, or any other program or demonstration project that involving shared savings. There are Medicare initiatives, including models authorized by the Innovation Center that do not involve shared savings payments, and in some cases a TIN that is a Shared Savings Program participant may also include EPs who participate in an Innovation Center model. Because the Shared Savings Program identifies participants by a TIN and many Innovation Center models allow some EPs under a TIN to participate in the model while other EPs under that TIN do not, we believe it is more appropriate to apply the VM policies finalized for Shared Savings Program participants to these TINs than to apply the policies for Innovation Center models in section III.M.4.e. of this final rule with comment period. We proposed that, beginning with the 2017 payment adjustment period for the VM, we would determine the VM for groups and solo practitioners (as identified by TIN) who participated in a Shared Savings Program ACO in the performance period in accordance with the VM policies for Shared Savings Program participants under § 414.1210(b)(2), regardless of whether any EPs under the TIN also participated in an Innovation Center model during the performance period. We proposed to make corresponding changes to § 414.1210(b)(2)(i)(E). We solicited comment on this proposal.
The following is a summary of the comments we received on this proposal.
In the CY 2015 PFS proposed rule, we did not specifically address the scenario in which a Shared Savings Program ACO does not successfully report on quality as required under the Shared Savings Program during the performance period for the VM. We clarified in the CY 2015 PFS final rule with comment period that we intended to adopt for groups and solo practitioners that participate in a Shared Savings Program ACO the same policy that is generally applicable to groups and solo practitioners that fail to satisfactorily report or participate under PQRS and thus fall in Category 2 and are subject to an automatic downward adjustment under the VM in CY 2017 (79 FR 67946). We stated that, consistent with the application of the VM to other groups and solo practitioners that report under PQRS, if the ACO does not successfully report quality data as required by the Shared Savings Program under § 425.504, all groups and solo practitioners participating in the ACO will fall in Category 2 for the VM, and therefore, will be subject to a downward payment adjustment. We finalized this policy for the 2017 payment adjustment period for the VM at § 414.1210(b)(2)(i)(C). We proposed to continue this policy in the CY 2018 payment adjustment period for all groups and solo practitioners subject to the VM, including groups composed of nonphysician EPs and solo practitioners who are nonphysician EPs. We proposed corresponding revisions to § 414.1210(b)(2)(i)(D). This policy is consistent with our policy for groups and solo practitioners who are subject to the VM and do not participate in the Shared Savings Program, and we believe it would further encourage quality reporting. We solicited comment on this proposal.
The following is a summary of the comments we received on this proposal.
In the CY 2015 PFS final rule with comment period, we finalized at § 414.1275(d)(2) that groups and solo practitioners that are classified as high quality/low cost, high quality/average cost, or average quality/low cost under the quality-tiering methodology for the CY 2017 payment adjustment period would receive an additional upward payment adjustment of +1.0x, if their attributed patient population has an average beneficiary risk score that is in the top 25 percent of all beneficiary risk scores nationwide. We proposed a similar policy for the CY 2018 payment adjustment period as discussed in section III.M.4.f. of this final rule with comment period.
Beginning in the CY 2017 payment adjustment period, we proposed to apply a similar additional upward adjustment to groups and solo practitioners that participated in high performing Shared Savings Program ACOs that cared for high-risk beneficiaries (as evidenced by the average HCC risk score of the ACO's attributed beneficiary population as determined under the VM methodology) during the performance period. We finalized in the CY 2015 PFS final rule with comment period that the quality composite score for TINs that participated in Shared Savings Program ACOs during the performance period will be calculated using the quality data
In the CY 2015 PFS proposed rule (79 FR 40500), we proposed that groups and solo practitioners participating in ACOs under the Shared Savings Program would be eligible for the additional upward payment adjustment +1.0x for caring for high-risk beneficiaries; however, the proposal was not finalized in the CY 2015 PFS final rule with comment period. We noted that our proposal above is based on using the ACO's assigned beneficiary population; whereas, our proposal in the CY 2015 PFS proposed rule was based on using the group or solo practitioner's attributed beneficiary population.
The following is a summary of the comments we received on this proposal.
We established a policy in the CY 2013 PFS final rule with comment period (77 FR 69313) to not apply the VM in the CY 2015 and CY 2016 payment adjustment periods to groups of physicians that participate in Shared Savings Program ACOs, the Pioneer ACO Model, the Comprehensive Primary Care (CPC) initiative, or other similar Innovation Center models or CMS initiatives. We stated in the CY 2014 PFS final rule with comment period (78 FR 74766) that from an operational perspective, we will apply this policy to any group of physicians that otherwise would be subject to the VM, if one or more physician(s) in the group participate(s) in one of these programs or initiatives during the relevant performance period (CY 2013 for the CY 2015 payment adjustment period, and CY 2014 for the CY 2016 payment adjustment period). In the CY 2015 PFS final rule with comment period (79 FR 67949), we finalized a policy that for solo practitioners and groups subject to the VM with at least one EP participating in the Pioneer ACO Model or CPC Initiative during the performance period, we will classify the cost composite as “average cost” and the quality composite as “average quality” for the CY 2017 payment adjustment period. We did not finalize a policy for any payment adjustment period after CY 2017. We believed this policy was appropriate because it would enable groups and solo practitioners participating in these Innovation Center models to focus on the goals of the models and would minimize the risk of potentially creating conflicting incentives with regard to the evaluation of the quality and cost of care furnished for the VM and evaluation of cost and quality under these models. In addition, given that these models include groups in which some EPs participate in the model and others do not participate, it is challenging to meaningfully evaluate the quality of care furnished by these groups. and the timing and availability of that quality data may not be aligned with the availability of quality data under PQRS that is used in the VM calculations.
We received many comments on the proposals made in the CY 2015 PFS proposed rule indicating that we should exempt Pioneer ACO Model and CPC Initiative participants from the VM. As we noted in response to comments in the CY 2015 final rule with comment period (79 FR 67947), a few commenters also suggested that the application of the VM to Innovation Center initiatives should be waived under section 1115A of the Act. In considering potential policy options to include in the CY 2016 PFS proposed rule, and in consideration of comments previously received, we believed that it would be appropriate to use the waiver authority with regard to the Pioneer ACO Model and CPC Initiative. Accordingly, under section 1115A(d)(1) of the Act, we proposed to waive application of the VM as required by section 1848(p) of the Act for groups and solo practitioners, as identified by TIN, if at least one EP who billed for PFS items and services under the TIN during the applicable performance period for the VM participated in the Pioneer ACO Model or CPC Initiative during the performance period. This policy, as well as the use of the waiver authority under section 1115A(d)(1) of the Act for this purpose, will no longer apply in CY 2019 when the Value Modifier adjustment under section 1848(p) of the Act has ended. We believe a waiver is necessary to test these models because their effectiveness would be impossible to isolate from the
We believe we could have waived application of the VM for these models with regard to the CY 2017 payment adjustment period, and we proposed the waiver would apply beginning with the CY 2017 payment adjustment period. We noted that in practice, this proposal would not affect a TIN's payments differently as compared with the current policy for the CY 2017 payment adjustment period. A TIN that is classified as “average cost” and “average quality” would receive a neutral (0 percent) adjustment, and thus its payments during the CY would not increase or decrease as a result of the application of the VM. We also noted that we have established a policy to apply the VM at the TIN level (77 FR 69308-69310), and as a result, this proposed waiver would affect the payments for items and services billed under the PFS for the CY 2017 and 2018 payment adjustment periods for the EPs who participate in the Pioneer ACO Model and the CPC Initiative during the performance period, as well as the EPs who do not participate in one of these models but bill under the same TIN as the EPs who do participate. We proposed to revise § 414.1210(b)(3) to reflect these proposals and sought comment on these proposals.
In the CY 2015 PFS final rule with comment period (79 FR 67949-67950), we finalized criteria that we will use to determine if future Innovation Center models or CMS initiatives are “similar” to the Pioneer ACO Model and CPC Initiative. We finalized that we will apply the same VM policies adopted for participants in the Pioneer ACO Model and CPC Initiative to groups and solo practitioners who participate in similar Innovation Center models and CMS initiatives. The previously finalized criteria are: (1) The model or initiative evaluates the quality of care and/or requires reporting on quality measures; (2) the model or initiative evaluates the cost of care and/or requires reporting on cost measures; (3) participants in the model or initiative receive payment based at least in part on their performance on quality measures and/or cost measures; (4) potential for conflict between the methodologies used for the VM and the methodologies used for the model or initiative; or (5) other relevant factors specific to a model or initiative. We noted that a model or initiative would not have to satisfy or address all of these criteria to be considered a similar model or initiative.
We proposed that in the event we finalize our proposal to waive application of the VM under section 1115A(d)(1) of the Act for the Pioneer ACO Model and CPC Initiative as discussed in the preceding section, we would also waive application of the VM for Innovation Center models that we determine are similar models based on the criteria above and for which we determined such a waiver would be necessary for purposes of testing the model in accordance with section 1115A(d)(1) of the Act. For models that we determine are similar and require a waiver, we would waive application of the VM as required by section 1848(p) of the Act for groups and solo practitioners, as identified by TIN, if at least one EP who billed for PFS items and services under the TIN during the applicable performance period for the VM participated in the model during the performance period. We noted that this policy and use of the waiver authority under section 1115A(d)(1) of the Act would sunset prior to CY 2019 when the VM is replaced by MIPS. We would publish a notice of the waiver in the
(a) Application of the VM to Solo Practitioners and Groups with EPs Who Participate in the Comprehensive ESRD Care Initiative (CEC), Oncology Care Model (OCM), and the Next Generation ACO Model.
There are several new Innovation Center models starting in 2015 or 2016, including the Comprehensive ESRD Care Initiative, Oncology Care Model, and the Next Generation ACO Model. We evaluated these models based on the criteria for “similar” models and initiatives described in the preceding section and determined that they are similar to the Pioneer ACO Model and CPC Initiative. We believe a waiver of the VM under section 1115A(d)(1) of the Act is necessary to test these models. These new models may include groups in which some EPs participate in the model and others do not, which will make it challenging to meaningfully calculate the quality and cost composite for these TINs needed for the application of the VM. We refer readers to the proposed rule (80 FR 41901) for an explanation of our determination that these models are similar to the Pioneer ACO Model and the CPC Initiative and our belief that a waiver is necessary to test these models.
We proposed that in the event we finalize our proposal to waive application of the VM as required by section 1848(p) of the Act under section 1115A(d)(1) of the Act for the Pioneer ACO Model and CPC Initiative, we would also waive application of the VM for the Next Generation ACO Model, the Oncology Care Model, and the Comprehensive ESRD Care Initiative as similar models. Specifically, we would waive application of the VM for the CY 2018 payment adjustment period for groups and solo practitioners, as identified by TIN, if at least one EP who billed for PFS items and services under the TIN during the CY 2016 performance period for the VM participated in the Next Generation ACO Model, the Oncology Care Model, or the Comprehensive ESRD Care Initiative during the CY 2016 performance period. We solicited comment on this proposal.
The following is a summary of the comments we received on the proposals to waive application of the VM for the Pioneer ACO Model; CPC Initiative; and other similar Innovation Center models, including the Next Generation ACO Model, Oncology Care Model, and Comprehensive ESRD Care Initiative.
In the CY 2015 PFS final rule with comment period (79 FR 67949-67950), we finalized criteria that we will use to determine if future Innovation Center models or CMS initiatives are “similar” to the Pioneer ACO Model and CPC Initiative. We finalized that we will apply the same VM policies adopted for participants in the Pioneer ACO Model and CPC Initiative to groups and solo practitioners who participate in similar Innovation Center models and CMS initiatives. We are finalizing in section III.M.4.e.1. of this final rule with comment period our proposal to waive the VM for solo practitioners and groups with at least one EP participating in the Pioneer ACO Model or CPC Initiative under section 1115A(d)(1) of the Act. The waiver authority under section 1115A(d)(1) of the Act does not apply to CMS initiatives that are not Innovation Center models. Therefore, we stated in the event that we finalize the waiver, we proposed to remove the references to “CMS initiatives” from § 414.1210(b)(4). We solicited comment on this proposal, but did not receive comments specific to this proposal.
Section 1848(p) of the Act does not specify the amount of payment that should be subject to the adjustment for the VM; however, section 1848(p)(4)(C) of the Act requires the VM be implemented in a budget neutral manner. Budget neutrality means that payments will increase for some groups and solo practitioners based on high performance and decrease for others based on low performance, but the aggregate expected amount of Medicare spending in any given year for physician and nonphysician EP services paid under the Medicare PFS will not change as a result of application of the VM.
In the CY 2015 PFS final rule with comment period (79 FR 67952 to 67954), we finalized that we will apply a −2.0 percent VM to groups with between 2 to 9 EPs and physician solo practitioners that fall in Category 2 for the CY 2017 VM. We also finalized that the maximum upward adjustment under the quality-tiering methodology in CY 2017 for groups with between 2 to 9 EPs and physician solo practitioners that fall in Category 1 will be +2.0x if a group or solo practitioner is classified as high quality/low cost and +1.0x if a group or solo practitioner is classified as either average quality/low cost or high quality/average cost. These groups and solo practitioners will be held harmless from any downward adjustments under the quality-tiering methodology in CY 2017, if classified as low quality/high cost, low quality/average cost, or average quality/high cost.
For groups with 10 or more EPs, we finalized for CY 2017 that we will apply a “−4.0” percent VM to a group that falls in Category 2. In addition, we finalized that we will set the maximum downward adjustment under the quality-tiering methodology in CY 2017 to “−4.0” percent for groups with 10 or more EPs classified as low quality/high cost and set the adjustment to “−2.0” percent for groups classified as either low quality/average cost or average quality/high cost. We finalized that we will also set the maximum upward adjustment under the quality-tiering methodology in CY 2017 to +4.0x for groups with 10 or more EPs classified as high quality/low cost and set the adjustment to +2.0x for groups classified as either average quality/low cost or high quality/average cost. We also finalized that we will continue to provide an additional upward payment adjustment of +1.0x to groups with two or more EPs and solo practitioners that care for high-risk beneficiaries (as evidenced by the average HCC risk score of the attributed beneficiary population).
As noted in section III.M.4.b. of this final rule with comment period, under section 1848(p)(4)(B)(iii) of the Act, as amended by section 101(b)(3) of MACRA, the VM shall not be applied to payments for items and services furnished on or after January 1, 2019. Section 1848(q) of the Act, as added by section 101(c) of MACRA, establishes the MIPS that shall apply to payments for items and services furnished on or after January 1, 2019. To maintain stability in the payment adjustment amounts applicable under the VM as we transition to the MIPS in 2019, we proposed to maintain the payment adjustment amounts in CY 2018 that we finalized for the CY 2017 VM in the CY 2015 PFS final rule with comment period for groups with 2 or more EPs and physician solo practitioners, with the exception discussed in section III.M.4.c. of this final rule with comment period that in CY 2018 we proposed to apply both the upward and downward adjustments under the quality-tiering methodology to groups with 2 to 9 EPs and physician solo practitioners that are in Category 1.
For CY 2018, we proposed to apply a −4.0 percent VM to physicians, PAs, NPs, CNSs, and CRNAs in groups with 10 or more EPs that fall in Category 2. In addition, we proposed to set the maximum downward adjustment under the quality-tiering methodology in CY
For CY 2018, we proposed to apply a negative “−2.0” percent VM to physicians, PAs, NPs, CNSs, and CRNAs in groups with between 2 to 9 EPs and physician solo practitioners that fall in Category 2. In addition, we propose to set the maximum downward adjustment under the quality-tiering methodology in CY 2018 to negative “−2.0” percent for physicians, PAs, NPs, CNSs, and CRNAs in groups with between 2 to 9 EPs and physician solo practitioners classified as low quality/high cost and to set the adjustment to negative “−1.0” percent for groups and physician solo practitioners classified as either low quality/average cost or average quality/high cost. We also proposed to set the maximum upward adjustment under the quality-tiering methodology in CY 2018 to +2.0x for physicians, PAs, NPs, CNSs, and CRNAs in groups with between 2 to 9 EPs and physician solo practitioners classified as high quality/low cost and to set the adjustment to +1.0x for groups and physician solo practitioners classified as either average quality/low cost or high quality/average cost. Table 34 of the proposed rule (80 FR 41903) shows the quality-tiering payment adjustment amounts for CY 2018 for physicians, PAs, NPs, CNSs, and CRNAs in groups with between 2 to 9 EPs and physician solo practitioners. These payment adjustment amounts would be applicable to all of the physicians, NPs, PAs, CNSs, and CRNAs who bill under a group's TIN and to physician solo practitioners in CY 2018.
For CY 2018, we proposed to apply a negative “−2.0” percent VM to PAs, NPs, CNSs, and CRNAs in groups that consist of nonphysician EPs and solo practitioners who are PAs, NPs, CNSs, and CRNAs that fall in Category 2 for the CY 2018 VM. As noted in section III.M.4.b. of this final rule with comment period, the nonphysician EPs to which the CY 2018 VM payment adjustments would apply are PAs, NPs, CNSs, and CRNAs. We also proposed that the maximum upward adjustment under the quality-tiering methodology in CY 2018 for PAs, NPs, CNSs, and CRNAs in groups that consist of nonphysician EPs and solo practitioners who are PAs, NPs, CNSs, and CRNAs that fall in Category 1 would be +2.0x if a group or solo practitioner is classified as high quality/low cost and +1.0x if a group or solo practitioner is classified as either average quality/low cost or high quality/average cost. As established in the CY 2015 PFS final rule with comment period (79 FR 67937), these groups and solo practitioners will be held harmless from any downward adjustments under the quality-tiering methodology in CY 2018, if classified as low quality/high cost, low quality/average cost, or average quality/high cost. Table 35 of the proposed rule (80 FR 41903) shows the quality-tiering payment adjustment amounts for CY 2018 for PAs, NPs, CNSs, and CRNAs in groups that consist of nonphysician EPs and PAs, NPs, CNSs, and CRNAs who are solo practitioners. These groups and solo practitioners will have had less time to become familiar with the QRURs since they have received QRURs for the first time in the Fall of 2015; whereas, groups consisting of both physicians and nonphysician EPs and physician solo practitioners received QRURs in fall of 2014 or in previous years, which enable them to understand and improve performance on the measures used in the VM. We believe our proposed approach would reward groups and solo practitioners that provide high-quality/low-cost care. In addition, a smaller increase in the maximum amount of payment at risk would be consistent with our stated focus on gradual implementation of the VM.
We also proposed to continue to provide an additional upward payment adjustment of +1.0x to groups and solo practitioners that are eligible for upward adjustments under the quality-tiering methodology and have average beneficiary risk score that is in the top 25 percent of all beneficiary risk scores. Lastly, we proposed to revise § 414.1270 and § 414.1275(c)(4) and (d)(3) to reflect the changes to the payment adjustments under the VM for the CY 2018 payment adjustment period. We solicited comments on all of these proposals.
Consistent with the policy adopted in the CY 2013 PFS final rule with comment period (77 FR 69324 through 69325), we noted that the estimated funds derived from the application of the downward adjustments to groups and solo practitioners in Category 1 and Category 2 would be available to all groups and solo practitioners eligible for upward adjustments under the VM. Consequently, the upward payment adjustment factor (“x” in Tables 33, 34, and 35 of the proposed rule) would be determined after the performance period has ended based on the aggregate amount of downward payment adjustments.
The following is a summary of the comments we received on these proposals.
For CY 2018, we are finalizing that we will apply a negative “−4.0” percent VM to physicians, PAs, NPs, CNSs, and CRNAs in groups with 10 or more EPs that fall in Category 2. In addition, we will set the maximum downward adjustment under the quality-tiering methodology in CY 2018 to negative “−4.0” percent for physicians, PAs, NPs, CNSs, and CRNAs in groups with 10 or more EPs classified as low quality/high cost and set the adjustment to negative “−2.0” percent for groups classified as either low quality/average cost or average quality/high cost. We will also set the maximum upward adjustment under the quality-tiering methodology in CY 2018 to +4.0x for physicians, PAs, NPs, CNSs, and CRNAs in groups with 10 or more EPs classified as high quality/low cost and set the adjustment to +2.0x for groups classified as either average quality/low cost or high quality/average cost. Table 47 shows the final quality-tiering payment adjustment amounts for CY 2018 for physicians, PAs, NPs, CNSs, and CRNAs in groups with 10 or more EPs. These payment amounts will be applicable to all of the physicians, NPs, PAs, CNSs, and CRNAs who bill under a group's TIN in CY 2018.
For CY 2018, we are finalizing that we will apply a negative “−2.0” percent VM to physicians, PAs, NPs, CNSs, and CRNAs in groups with between 2 to 9 EPs and physician solo practitioners that fall in Category 2. In addition, we will set the maximum downward adjustment under the quality-tiering methodology in CY 2018 to negative “−2.0” percent for physicians, PAs, NPs, CNSs, and CRNAs in groups with between 2 to 9 EPs and physician solo practitioners classified as low quality/high cost and set the adjustment to negative “−1.0” percent for groups and physician solo practitioners classified as either low quality/average cost or average quality/high cost. We will also set the maximum upward adjustment under the quality-tiering methodology in CY 2018 to +2.0x for physicians, PAs, NPs, CNSs, and CRNAs in groups with between 2 to 9 EPs and physician solo practitioners classified as high quality/low cost and set the adjustment to +1.0x for groups and physician solo practitioners classified as either average quality/low cost or high quality/average cost. Table 48 shows the final quality-tiering payment adjustment amounts for CY 2018 for physicians, PAs, NPs, CNSs, and CRNAs in groups with between 2 to 9 EPs and physician solo practitioners. These payment adjustment amounts will be applicable to all of the physicians, NPs, PAs, CNSs, and CRNAs who bill under a group's TIN and to physician solo practitioners in CY 2018.
For CY 2018, we are finalizing that we will apply a negative “−2.0” percent VM to PAs, NPs, CNSs, and CRNAs in groups that consist of nonphysician EPs and solo practitioners who are PAs, NPs, CNSs, and CRNAs that fall in Category 2 for the CY 2018 VM. As finalized in section III.M.4.b. of this final rule with comment period, the nonphysician EPs to which the CY 2018 VM payment adjustments would apply are PAs, NPs, CNSs, and CRNAs. We are also finalizing that the maximum upward adjustment under the quality-tiering methodology in CY 2018 for PAs, NPs, CNSs, and CRNAs in groups that consist of nonphysician EPs and solo practitioners who are PAs, NPs, CNSs, and CRNAs that fall in Category 1 will be +2.0x if a group or solo practitioner is classified as high quality/low cost and +1.0x if a group or solo practitioner is classified as either average quality/low cost or high quality/average cost. As established in the CY 2015 PFS final rule with comment period (79 FR 67937), these groups and solo practitioners will be held harmless from any downward adjustments under the quality-tiering methodology in CY 2018, if classified as low quality/high cost, low quality/average cost, or average quality/high cost. Table 49 shows the final quality-tiering payment adjustment amounts for CY 2018 for PAs, NPs, CNSs, and CRNAs in groups that consist of nonphysician EPs and PAs, NPs, CNSs, and CRNAs who are solo practitioners. Consistent with the policy adopted in the CY 2013 PFS final rule with comment period (77 FR 69324 through 69325), we note that the estimated funds derived from the application of the downward adjustments to groups and solo practitioners in Category 1 and Category 2 will be available to all groups and solo practitioners eligible for upward adjustments under the VM. Consequently, the upward payment adjustment factor (“x” in Tables 47, 48, and 49) will be determined after the performance period has ended based on the aggregate amount of downward payment adjustments.
Beginning with the CY 2015 VM (77 FR 69324 through 69325), we established that the upward payment adjustment factor (“x”) would be determined after the performance period has ended based on the aggregate amount of downward payment adjustments. We also proposed a similar
In the CY 2014 PFS final rule with comment period (78 FR 74772), we adopted a policy that we will use performance on quality and cost measures during CY 2015 to calculate the VM that would apply to items and services for which payment is made under the PFS during CY 2017. Likewise, we proposed to use CY 2016 as the performance period for the VM adjustments that will apply during CY 2018. Accordingly, we proposed to add § 414.1215(d) to indicate that the performance period is CY 2016 for VM adjustments made in the CY 2018 payment adjustment period. We solicited comment on this proposal.
The following is a summary of the comments we received on this proposal.
As discussed in section III.M.5.a. of this final rule with comment period, in April 2015, we made available 2014 Mid-Year QRURs to groups of physicians and physician solo practitioners nationwide based on performance from July 1, 2013, through June 30, 2014. We plan to make available the 2015 and 2016 Mid-Year QRURs during the spring of 2016 and 2017, respectively. The Mid-Year QRURs are intended to provide groups and solo practitioners with interim information about their performance on the claims-based quality outcome measures and cost measures that are a subset of the measures that were used to calculate the VM. Therefore, we are finalizing our proposal to use CY 2016 as the performance period for the VM adjustments that will apply during CY 2018.
As discussed in section III.M.4.b. of this final rule with comment period, under section 1848(p)(4)(B)(iii) of the Act, as amended by section 101(b)(3) of MACRA, the VM shall not be applied to payments for items and services furnished on or after January 1, 2019. Therefore, CY 2018 will be the final payment adjustment period and CY 2016 will be the final performance period under the VM.
In the CY 2016 PFS proposed rule (80 FR 41904), we stated our belief that it is important to continue to align the VM for CY 2018 with the requirements of the PQRS, because quality reporting is a necessary component of quality improvement. We also sought to avoid placing an undue burden on EPs to report such data. Accordingly, for purposes of the VM for CY 2018, we proposed to continue to include in the VM all of the PQRS GPRO reporting mechanisms available to groups for the PQRS reporting periods in CY 2016 and all of the PQRS reporting mechanisms available to individual EPs for the PQRS reporting periods in CY 2016. These reporting mechanisms are described in Tables 20 and 21 of the proposed rule (80 FR, 41825).
We proposed to continue to use all of the quality measures that are available to be reported under these various PQRS reporting mechanisms to calculate a group or solo practitioner's VM in CY 2018 to the extent that a group (or individual EPs in the group, in the case of the “50 percent option”) or solo practitioner submits data on these measures. These PQRS quality measures are described in Tables 22 through 30 of the proposed rule (80 FR 41830).
The following is the summary of comments we received on these proposals.
Currently, the VM program utilizes quality of care measure benchmarks for a given performance year that are calculated as the case-weighted mean of the prior year's performance rates, inclusive of all available PQRS reporting mechanisms for that measure (claims, registries, Electronic Health Record (EHR), or Web Interface (WI)). We finalized this policy in CY 2013 and stated we would consider the effects of our policy as we implemented the VM and that we may consider changes and refinements in the future (77 FR 69322).
From experience in utilizing PQRS measures in the VM, we have become aware that a given measure may be calculated differently when it is collected through an EHR, and made a proposal to address this issue. We referred to quality measures collected through EHRs as “eCQMs.” We noted several variances with eCQMs compared to equivalent measures reported via a different reporting mechanism. First, the inclusion of all-payer data for the eCQMs differentiates them sufficiently from their equivalent measures reported via the other PQRS reporting mechanisms, which utilize Medicare FFS data. The inclusion of all-payer data may increase the cohort size and incorporate a pool of beneficiaries with different characteristics than those captured with Medicare FFS data. As our goal is to focus on how groups of EPs or individual EPs' performance differs from the benchmark on a measure-by-measure basis, we recognize the need to utilize separate eCQM benchmarks that allow us to compare eCQM measure performance rates to a benchmark that better reflects the measures' specifications. Second, eCQMs follow a different annual update cycle than do other versions of measures, and consequently, they are not always consistent with the current version of a measure as it is reported via claims, registries, or Web Interface. For example, during a given performance period, an eCQM's specifications might require data collection on a different age range than the specifications of the same measure reported via other reporting mechanisms. This means that the eCQM version of a measure may differ from the specifications of the all-mechanism benchmark, to which it is currently compared. Because of these differences, we proposed to change our benchmark policy to indicate that eCQMs, as identified by their CMS eMeasure IDs, which are distinct from the CMS/PQRS measure numbers for other reporting mechanisms, will be recognized as distinct measures under the VM. As such, we would exclude eCQM measures from the overall benchmark for a given measure and create separate eCQM benchmarks, based on the CMS eMeasure ID. We proposed to make this change beginning with the CY 2016 performance period, for which the eCQM benchmarks would be calculated based on CY 2015 performance data.
We solicited comment on this proposal. The following is a summary of the comments we received on this proposal:
In our efforts to maintain alignment with the PQRS quality reporting requirements, we noted in the proposed rule that the criteria for administration of the CAHPS for PQRS survey for the CY 2016 performance period will contain 6 months of data (80 FR 41904). We believe that the CAHPS for PQRS data administered during this 6-month period would be sufficiently reliable so that we could meaningfully include it in a group's quality composite score under the VM, should they elect to have CAHPS for PQRS included in their VM calculation. For us to use the data to calculate the score, we would require data for each summary survey measure on at least 20 beneficiaries which is the reliability standard for the VM (77 FR 69322-69323). We noted that we took a similar approach in the CY 2014 PFS final rule with comment period (78 FR 74772) with regard to the 6-month reporting period for individual eligible professionals reporting via qualified registries under PQRS for the CY 2014 PQRS incentive and CY 2016 payment adjustment. Additionally, in the CY 2015 PFS final rule with comment period (79 FR 67956), we noted that groups with two or more EPs could elect to include the patient experience of care measures collected through the PQRS CAHPS survey for CY 2015 in their VM for CY 2017. We proposed to continue this policy for the CY 2016 performance period for the CY 2018 VM. We did not receive comments on this proposal, and therefore, are finalizing our policy that groups with 2 or more EPs could elect to include the patient experience of care measures collected through the PQRS CAHPS survey for the CY 2016 performance period for the CY 2018 VM. We note that this policy for the VM is separate from the CAHPS reporting requirements under the PQRS.
In the CY 2015 PFS final rule with comment period (79 FR 67957), we finalized a policy to use the ACO GPRO Web Interface measures and the Shared Savings Program ACO all-cause readmission measure to calculate a quality composite score for groups and solo practitioners who participate in an ACO under the Shared Savings Program. Also, we finalized a policy to apply the benchmark for quality measures for the VM as described under § 414.1250 to determine the standardized score for quality measures for groups and solo practitioners participating in ACOs under the Shared Savings Program.
We believe patient surveys are important tools for assessing beneficiary experience of care and outcomes. Accordingly, we proposed that starting with the CY 2018 payment adjustment period, the ACO CAHPS survey will be required as an additional component of the VM quality composite for TINs participating in the Shared Savings Program. CAHPS surveys for Shared Savings Program ACOs have been collected since 2013, for the 2012 reporting period. In the 2014 reporting period, we provided two versions of the CAHPS for ACOs survey to assess patient experience ACO-8 and ACO-12, with Shared Savings Program ACOs having the option to use either survey. We note that under the VM CAHPS for PQRS is optional for groups that report it and these groups must elect to have their CAHPS performance used in their VM quality composite calculations. As both PQRS and Shared Savings Program ACOs report on CAHPS for their Medicare FFS populations, there is an overlap between the CAHPS survey data collected for both programs and we have calculated 2014 performance period prior year benchmarks on 11 of the 12 ACO CAHPS summary survey measures for the VM. We believe that by the CY 2016 performance period, we will have sufficient data and experience with calculating these survey measures in the VM, to require the ACO CAHPS measures in conjunction with the GPRO WI measures and the all-cause readmission measure in the calculation of a quality composite score for groups and solo practitioners participating in an ACO under Shared Savings Program. We proposed to include the CAHPS for ACOs survey in the quality composite of the VM for TINs participating in ACOs in the Shared Savings Program, beginning with the CY 2016 performance period and the CY 2018 payment adjustment period. We proposed that whichever version of the CAHPS for ACOs survey the ACO chooses to administer will be included in the TIN's quality composite for the VM. We proposed to make corresponding changes to § 414.1210(b)(2)(i)(B). We solicited comment on this proposal.
The following is a summary of the comments we received on this proposal.
Section 1848(p)(10) of the Act provides that there shall be no administrative or judicial review under section 1869 of the Act, section 1878 of the Act, or otherwise of the following:
• The establishment of the VM.
• The evaluation of the quality of care composite, including the establishment of appropriate measures of the quality of care.
• The evaluation of the cost composite, including the establishment of appropriate measures of costs.
• The dates of implementation of the VM.
• The specification of the initial performance period and any other performance period.
• The application of the VM.
• The determination of costs.
These statutory requirements regarding limitations of review are reflected in § 414.1280. We previously indicated in the CY 2013 PFS final rule with comment period (77 FR 69326) that we believed an informal review mechanism is appropriate for groups of physicians to review and to identify any possible errors prior to application of the VM, and we established an informal inquiry process at § 414.1285. We stated that we intended to disseminate reports containing CY 2013 data in fall 2014 to groups of physicians subject to the VM in 2015 and that we would make a help desk available to address questions related to the reports, and we have since followed through on those actions.
In the CY 2015 final rule with comment period (79 FR 67960), for the CY 2015 payment adjustment period, we finalized: (1) a February 28, 2015, deadline for a group to request correction of a perceived error made by CMS in the determination of its VM; and (2) a policy to classify a TIN as “average quality” in the event we determined that we have made an error in the calculation of the quality composite. Beginning with the CY 2016 payment adjustment period, (1) we finalized a deadline of 60 days that would start after the release of the QRURs for the applicable performance period for a group or solo practitioner to request a correction of a perceived error related to the VM calculation, and (2) we stated we would take steps to establish a process for accepting requests from physicians to correct certain errors made by CMS or a third-party vendor (for example, PQRS-qualified registry). Our intent was to design this process as a means to recompute a TIN's quality composite and/or cost composite in the event we determine that we initially made an erroneous calculation. We noted that if the operational infrastructure was not available to allow this recomputation, we would continue the approach for the CY 2015 payment adjustment period to classify a TIN as “average quality” in the event we determine that we have made an error in the calculation of the quality composite. We finalized that we would recalculate the cost composite in the event that an error was made in the cost composite calculation. We noted that we would provide additional operational details as necessary in subregulatory guidance.
Moreover, for both the CY 2015 payment adjustment period and future adjustment periods, we finalized a policy to adjust a TIN's quality-tier if we make a correction to a TIN's quality and/or cost composites because of this correction process.
We further noted that there is no administrative or judicial review of the determinations resulting from this expanded informal inquiry process under section 1848(p)(10) of the Act.
In the CY 2015 final rule for the CY 2016 payment adjustment period, we noted that if the operational infrastructure is not available to allow the recomputation of quality measure data we would continue the approach of the initial corrections process to classify a TIN as “average quality” in the event we determine a third-party vendor error or CMS made an error in the calculation of the quality composite. We proposed
The following is a summary of the comments we received on this proposal.
Our overall approach to the VM is based on participation in the PQRS. Beginning with the CY 2016 payment adjustment period for the VM, groups of physicians (or individual EPs in the group, in the case of the 50 percent option) must meet the criteria to avoid the CY 2016 PQRS payment adjustment, to be classified as Category 1 for the VM and avoid an automatic downward adjustment under the VM. The payment adjustment for the VM is applied at the TIN level whereas the PQRS payment adjustment is applied at the TIN/NPI level. We believe that we need a policy to address the circumstance in which a group is initially determined not to have met the criteria to avoid the PQRS payment adjustment and subsequently, through the PQRS informal review process, at least 50 percent of its EPs are determined to have met the criteria to avoid the PQRS payment adjustment as individuals. We note that the PQRS and VM informal review submission periods will occur during the 60 days following release of the QRURs for the 2016 VM and subsequent years. We believe that this will allow us sufficient time to process the majority of the requests before finalizing the adjustment factor. We proposed to reclassify a TIN as Category 1 when PQRS determines on informal review that at least 50 percent of the TIN's EPs meet the criteria for satisfactory reporting of data on PQRS quality measures as individuals for the relevant CY PQRS payment adjustment, or in lieu of satisfactory reporting, satisfactorily participate in a PQRS QCDR for the relevant CY PQRS payment adjustment. Moreover, we noted that if the group was initially classified as Category 2, then we do not expect to have data for calculating their quality composite, in which case they would be classified as “average quality”; however, if the data is available in a timely manner, then we would recalculate the quality composite.
We solicited comments on this proposal. The following is a summary of the comments we received on this proposal:
In the CY 2014 PFS final rule with comment period (78 FR 74780), we finalized inclusion of the MSPB measure as proposed in the cost composite beginning with the CY 2016 VM, with a CY 2014 performance period. We finalized a minimum of 20 MSPB episodes for inclusion of the MSPB measure in a TIN's cost composite. We stated that the non-specialty-adjusted version of the measure using 2011 data had high reliability with a 20-episode minimum (79 FR 74779).
The reliability results presented in the CY 2014 PFS final rule with comment period (79 FR 74779), which supported the 20-episode case minimum, were based on the non-specialty-adjusted measure instead of the specialty-adjusted measure. We refined the methodology to account for the change in measure specifications and the results showed that the specialty-adjusted measure was more reliable at higher episode case minimums. Using a more appropriate methodology for calculating reliability, we found that the specialty-adjusted measure did not have moderate or high reliability with a 20 episode minimum for many groups (80 FR 41906).
Given that our analysis demonstrated the measure had moderate reliability (above 0.4) for only 40.1 percent of all groups and solo practitioners and is as low as 18.1 percent for solo practitioners with an episode minimum of 20, we proposed to increase the episode minimum to 100 episodes beginning with the CY 2017 payment adjustment period and CY 2015 performance period. We also noted that we had considered revising the case minimum for the MSPB measure beginning with the CY 2016 payment adjustment period and CY 2014 performance period, but did not propose this policy, because this PFS rule will be finalized after the 2014 QRURs with the 2016 VM payment adjustment information are released. We noted that, using an episode minimum of 20 for the 2016 VM, the MSPB measure has moderate reliability for the majority of the groups that will be subject to the VM in 2016 (60.9 percent of groups with 10-24 EPs, 66.5 percent of groups with 25-99 EPs and 89.7 percent of groups with 100 or more EPs).
We believe that it is important to ensure that only reliable measures are included in the VM. We also noted that we had considered increasing the episode minimum to 75 instead of 100. This would have allowed us to include the MSPB measure in the cost composite for a larger number of groups but we stated that we believed that the reliability for solo practitioners with a minimum of 100 episodes was preferable to the reliability when using a 75 episode minimum.
Therefore, we proposed to add § 414.1265(a)(2) to reflect a case minimum of 100 episodes for the MSPB measure beginning with the CY 2017 payment adjustment period and CY 2015 performance period. We solicited comment on this proposal, as well as on a 75-episode minimum or other potential minimum case thresholds for this measure.
The following is a summary of the comments we received on this proposal to establish a case minimum of 100 episodes for the MSPB measure.
We acknowledged in the proposed rule (80 FR 41906) that this change in policy could create a situation in which a group that would have performed well on this measure would no longer have this measure included in its cost composite, which could negatively impact their cost composite, and ultimately their VM adjustment. However, we continue to believe that it would not be appropriate to include this measure in the cost composite with a 20-episode minimum at a sample size that does not produce reliable results even for those groups that performed well. Rather, we believe that it is more important to ensure that only reliable measures are included in the VM, and we want to avoid a situation in which groups or solo practitioners who may have performed poorly on the measure using a 20-episode minimum may receive a downward adjustment to payments under the VM as a result of a measure that was not reliable.
In the CY 2014 PFS final rule with comment period (78 FR 74780), we finalized inclusion of the MSPB measure as proposed in the cost composite beginning with the CY 2016 VM, with a CY 2014 performance period. We indicated in the 2014 proposed rule with comment period (78 FR 43494) that we would use the MSPB measure as specified for the Hospital Inpatient Quality Reporting (IQR) and Hospital Value Based Purchasing (VBP) Program with the exception of changes to the attribution methodology. The MSPB measure used for the Hospital IQR and Hospital VBP Programs does not include hospitalizations at Maryland hospitals as an index admission that would trigger an episode because Maryland hospitals are not paid under the Inpatient Prospective Payment System (IPPS) and do not participate in the Hospital VBP Program. The result is that groups and solo practitioners in Maryland would not have the MSPB measure included in their cost composite under the Value Modifier. We proposed that, beginning with the 2018 VM, we change the definition of index admission used for the MSPB measure used in the VM program to include inpatient hospitalizations at Maryland hospitals. This change would allow CMS to include this measure in the calculation of the cost composite for groups and solo practitioners in Maryland, consistent with what is done in other states. Under this proposal, we would continue to standardize all Medicare claims as described in the “CMS Price Standardization” document, which can be found in the “Measure Methodology” section at
The following is a summary of the comments we received on this proposal.
In the CY 2015 PFS final rule with comment period (79 FR 67934), we clarified a policy that was finalized at § 414.1270, that beginning with the CY 2016 payment adjustment period, a group or solo practitioner subject to the VM would receive a cost composite score that is classified as average under the quality-tiering methodology if the group or solo practitioner does not have at least one cost measure with at least 20 cases. We observed that groups that do not provide primary care services are not attributed beneficiaries or are attributed fewer than 20 beneficiaries, and thus, we are unable to calculate reliable cost measures for those groups of physicians (77 FR 69323). We stated in the CY 2014 PFS final rule with comment period (78 FR 74780) that we believe this policy is reasonable because we would have insufficient information on which to classify the groups' costs as “high” or “low” under the quality-tiering methodology. Moreover, we believed that to the extent a group's quality composite is classified as high or low, the group's VM should reflect that classification. As discussed in section III.M.4.k. of this final rule with comment period, beginning with the CY 2017 payment adjustment period, we proposed to increase the minimum number of episodes for inclusion of the MSPB measure in the cost composite to 100 episodes. Therefore, we proposed to revise § 414.1265(b) to indicate that a group or solo practitioner subject to the VM would receive a cost composite score that is classified as average under the quality-tiering methodology if the group or solo practitioner does not have at least one cost measure that meets the minimum number of cases required for the measure to be included in the calculation of the cost composite, as required in § 414.1265. To improve the organization of the regulation text, we also proposed to move the provisions at § 414.1270(b)(5) and (c)(5) to § 414.1265(b)(3).
The quality composite score calculated for each group and solo practitioner subject to the VM is based on the PQRS measures reported by the group or solo practitioner and three claims-based outcome measures, as described in § 414.1225 and § 414.1230, respectively. A quality measure must have 20 or more cases to be included in the calculation of the quality composite; however, beginning with the CY 2017 payment adjustment period, the all-cause hospital readmissions measure must have 200 or more cases to be included. Section 414.1265(a) describes the minimum number of cases required for the quality and cost measures to be included in the calculation of the quality and cost composites, respectively. We believe it is important to have a policy to determine the designation of the quality composite when a quality measure cannot be calculated reliably that is similar to the one established for the cost composite. Therefore, we proposed that beginning in the CY 2016 payment adjustment period, a group or solo practitioner subject to the VM would receive a quality composite score that is classified as average under the quality-tiering methodology if the group or solo practitioner does not have at least one quality measure that meets the minimum number of cases required for the measure to be included in the calculation of the quality composite, as required at § 414.1265. Consequently, to the extent a group or solo practitioner's cost composite is classified as high, average, or low, the group or solo practitioner's VM would reflect that classification. We proposed to incorporate this proposal at § 414.1265(b)(2).
Current § 414.1265(b) states that in a performance period, if a reliable quality of care composite or cost composite cannot be calculated, payments will not be adjusted under the VM. In light of our proposals discussed in this section of the final rule with comment period, we do not believe this policy is necessary beginning with the CY 2016 payment adjustment period. As proposed above, the cost composite for a group or solo practitioner would be classified as average if there is not at least one cost measure that can be calculated reliably. Furthermore, we proposed that the quality composite for a group or solo practitioner would be classified as average if there is not at least one quality measure that can be calculated reliably. Therefore, we proposed to specify in § 414.1265(b)(1) that this policy was applicable only for the CY 2015 payment adjustment period.
The following is a summary of the comments we received on this proposal.
In our analysis of the groups that are subject to the 2016 VM (without accounting for the informal inquiry process), we found that no TIN received a downward adjustment under the quality-tiering methodology as a result of being classified as average quality and high cost under this policy. We also found that 2 TINs received an upward adjustment under the quality-tiering methodology as a result of being classified as average quality and low cost under this policy. Therefore, we expect these policies to have minimal negative impact on groups and solo practitioners.
We are finalizing that beginning in the CY 2016 payment adjustment period, a group or solo practitioner subject to the VM will receive a quality composite score that is classified as average under the quality-tiering methodology if the group or solo practitioner does not have at least one quality measure that meets the minimum number of cases required for the measure to be included in the calculation of the quality composite, as required at § 414.1265. Consequently, to the extent a group or solo practitioner's cost composite is classified as high, average, or low, the group or solo practitioner's VM will reflect that classification. We are finalizing the incorporation of this policy at § 414.1265(b)(2). This policy is consistent with the policy we finalized in the CY 2015 PFS final rule with comment period (79 FR 67934), that beginning with the CY 2016 payment adjustment period, a group or solo practitioner subject to the VM will receive a cost composite score that is classified as average under the quality-tiering methodology if the group or solo practitioner does not have at least one cost measure with at least 20 cases and thus a reliable cost composite cannot be calculated for the group or solo practitioner.
Current § 414.1265(b) states that in a performance period, if a reliable quality of care composite or cost composite cannot be calculated, payments will not be adjusted under the VM. In light of our final policies that the cost composite for a group or solo practitioner would be classified as average if there is not at least one cost measure that can be calculated reliably and that the quality composite for a group or solo practitioner would be classified as average if there is not at least one quality measure that can be calculated reliably, we are also finalizing our proposal to specify in § 414.1265(b)(1) that this policy was applicable only for the CY 2015 payment adjustment period.
In the CY 2014 PFS final rule with comment period (78 FR 74781 to 74784), we finalized a policy to use the specialty adjustment method to create the standardized score for each group's cost measure beginning with the CY 2016 VM that refines the peer group methodology to account for specialty mix. We also amended § 414.1255 to include this policy in the cost composite methodology. We proposed to move § 414.1255(b) and (c) (describing specialty adjustment of cost measures and benchmarks for cost measures) to § 414.1235(c)(4) and (5) (Cost measure adjustments) and revise the regulation text to align with the specialty adjustment methodology finalized in the CY 2014 PFS final rule with comment period. This is a technical change to the regulation text only and will not impact how the cost measures will be specialty-adjusted beginning with the CY 2016 VM.
For the CY 2015 VM, the peer group for calculating the benchmarks for cost measures was all groups of physicians to which beneficiaries are attributed and that are subject to the VM (for example, for CY 2015, the cost measures of groups with 100 or more EPs was compared to the cost measures of other groups of 100 or more EPs). About the specialty adjustment method, we stated in the CY 2014 PFS final rule (78 FR 74783) that this methodology creates one national benchmark for each cost measure against which all groups (regardless of size) would be assessed in creating the group's standardized score. We did not codify this policy in the regulation text in the CY 2014 PFS final rule with comment period. We also noted that the benchmark for a cost measure includes the performance data for groups and solo practitioners that meet the minimum number of cases for that measure as described under § 414.1265(a). We believe this policy ensures that only the data for measures that are considered statistically reliable are included in the benchmarks, in addition to being included in the calculation of the cost composite. Therefore, we proposed to codify at § 414.1255(b) that beginning with the CY 2016 payment adjustment period, the benchmark for each cost measure is the national mean of the performance rates calculated for all groups and solo practitioners that meet the minimum number cases for that measure under § 414.1265(a). We noted that we were not proposing any revisions to the specialty adjustment method finalized in the CY 2014 PFS final rule with comment period (78 FR 74781 through 74784).
We did not receive any comments on these proposals, and therefore, we are finalizing these technical changes to the regulation text without modification.
In response to our previously-finalized policies, stakeholders have suggested that the CMS-hierarchical condition categories (HCC) Risk Adjustment methodology used in the total per capita cost measures for the VM does not accurately capture the additional costs associated with treating the sickest beneficiaries. Some of these commenters stated that groups that work exclusively in post-acute and long-term care settings would be unable to perform well on cost measures under the current methodology. Another commenter stated that beneficiaries who receive care at home typically have high HCC scores and higher costs. We appreciate the concerns raised by commenters and agree that it is important to make adjustments for differences in beneficiary characteristics that impact health and cost outcomes and are outside of the control of the physician or other eligible professional. We continue to believe that our current methodology of using HCC scores that include adjustments for Medicare and Medicaid eligibility status in addition to diagnoses, and replacing the highest 1 percent of costs with the cost of the 99th percentile for the highest cost beneficiaries, help address these concerns. To address concerns regarding specialties that might routinely treat more complex and consequently more costly beneficiaries, we finalized in the CY 2013 PFS final rule with comment period that we would apply a specialty adjustment to all cost measures used in the VM (78 FR 74776). This enables groups' costs to be compared to similarly-comprised groups, based on specialty. As discussed in section III.M.4.c. of this final rule with comment period, we also note that the VM methodology includes additional safeguards to guard against misclassification—we finalized in the CY 2013 PFS final rule with comment period (77 FR 69325) the adoption of the quality-tiering model where we classify quality composite scores and cost composite scores each into high, average, and low categories based on
We noted that high costs within the post-acute and long-term care settings present a unique opportunity for these professionals to improve performance on cost and quality measures. Although we continue to encourage professionals to report quality measures for patients in these settings and to use the information contained in their QRUR to improve and achieve high levels of performance, we stated in the CY 2015 PFS final rule with comment period (79 FR 67932) that we would continue to monitor these groups and solo practitioners' performance under the VM and continue to explore potential risk adjustment refinements. One option we are considering would be to stratify the cost measure benchmarks so that groups and solo practitioners are compared to other groups and individual practitioners treating beneficiaries with similar risk profiles. In this way, within a given grouping (for example, a quartile or decile), there remains an opportunity to gain efficiencies in care and lower costs, while beneficiary severity of illness and practice characteristics may be more fully recognized at a smaller, and likely less-heterogeneous, attributed beneficiary level. We did not make any proposals on this matter at this time. We solicited feedback on this potential approach, as well as other approaches. The following is a summary of the comments we received on this potential approach.
After consideration of the comments received, we will continue to work with stakeholders to further explore options for risk stratified comparisons. If we determine that further changes may be appropriate, we will make a proposal through future rulemaking. We will continue to learn from and incorporate more information about this issue and impacted groups in the annual experience report.
In fall 2015, we expanded the Physician Feedback Program by making QRURs, containing data on cost and quality performance during calendar year 2014, available to all solo practitioner EPs and groups of EPs of all sizes, as identified by TIN, including nonphysician EP solo practitioners and groups comprised of nonphysician EPs. We made the 2014 QRURs available to Shared Savings Program ACO participant TINs and groups that include one or more EPs who participated in a Pioneer ACO or the CPC Initiative. The reports contain valuable information about a TIN's actual performance during CY 2014 on the quality and cost measures that will be used to calculate the CY 2016 VM. For physicians in groups of 10 or more, the 2014 QRURs provide information on how a group's quality and cost performance will affect their Medicare payments in 2016 through the application of the VM based on performance in 2014.
The report provides data on a group's or solo practitioner's performance on quality measures they report under the PQRS, as well as the three claims-based outcome measures calculated for the VM and described at § 414.1230. The 2014 QRUR accommodates new PQRS reporting options, including QCDRs and CAHPS for PQRS. In addition, the reports present data assessing a group practice's or solo practitioner's performance on cost measures and information about the services and procedures that contributed most to costs. The cost measures in the 2014 QRUR are payment-standardized and risk-adjusted and are also specialty-adjusted to reflect the mix of physician specialties in a TIN. For the 2014 QRURs, we provided more detailed per capita cost of service breakdowns for all six cost measures. The reports also contain additional supplementary information on the individual PQRS measures for EPs reporting PQRS measures as individuals; enhanced drill down tables; and a dashboard with key performance measures.
In response to stakeholder feedback to provide more timely and actionable information on outcomes and cost measures, we provided for the first time a mid-year report, the 2014 Mid-Year QRUR (MYQRUR) in spring 2015. The 2014 MYQRUR was provided to physician solo practitioners and groups of physicians nationwide who billed for Medicare-covered services under a single TIN over the period of July 1, 2013, through June 30, 2014. We will disseminate Mid-Year QRURs in the spring of each year to provide interim information about performance only on those cost and quality outcomes measures that we calculate directly from Medicare administrative claims, based on the most recent 12 months of data that are available. The MYQRURs are for informational purposes and do not estimate performance for the calculation of the VM. Beginning in spring 2016, we intend to expand the distribution of MYQRURs to nonphysician EPs, solo practitioners, and groups composed of nonphysician EPs.
We will continue to refine the QRURs based on stakeholder feedback, and we invited comment on which aspects of the QRUR reports have been most useful and how we can improve access to and usability of performance reports.
The following is a summary of the comments we received.
Section 1848(n)(9)(A) of the Act requires CMS to develop an episode grouper and include episode-based costs in the QRURs. An episode of care consists of medical and/or procedural services that address a specific medical condition or procedure that are delivered to a patient within a defined time period and are captured by claims data. An episode grouper organizes administrative claims data into episodes.
In summer 2014, we distributed the Supplemental QRUR: Episodes of Care based on 2012 data to groups with 100 or more EPs. The 2012 Supplemental QRUR provided information on 20 episode subtypes and 6 clinical episode-based measures. In fall 2015, we provided the 2014 Supplemental QRURs to all groups and solo practitioners nationwide who billed for Medicare-covered services under a single TIN in 2014 and for whom we were able to calculate at least one episode measure. The supplemental QRURs are provided in addition to the Annual and Mid-Year QRURs. They provide information on performance on episode-based cost measures that are not included in the VM, to help groups and solo practitioners understand the cost of care they provide to beneficiaries and work toward the provision of more efficient care. The 2014 Supplemental QRURs included 26 major episode measures and 38 sub types of episodes and were made available to over 300,000 groups and solo practitioners. We will continue to seek stakeholder input as we develop the episode framework.
Lastly, we direct readers to the Physician Compare policies in this rule (section III.H. of this final rule with comment period), which did not finalize the proposal to add a green check mark to the profile page of the Physician Compare Web site for physicians and other eligible professionals receiving an upward adjustment under the VM starting in CY 2018. More information is available about Physician Compare on the CMS Web site at
Section 1877 of the Act, also known as the physician self-referral law: (1) prohibits a physician from making referrals for certain designated health services (DHS) payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership or compensation), unless an exception applies; and (2) prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third party payer) for those referred services. The statute establishes a number of specific exceptions, and grants the Secretary the authority to create regulatory exceptions for financial relationships that pose no risk of program or patient abuse. Section 13624 of the Omnibus Budget Reconciliation Act of 1993 (Pub. L. 103-66) (OBRA 1993), entitled “Application of Medicare Rules Limiting Certain Physician Referrals,” added a new paragraph (s) to section 1903 of the Act, to extend aspects of the physician self-referral prohibitions to Medicaid. For additional information about section 1903(s) of the Act, see 66 FR 857 through 858.
Several more recent statutory changes have also affected the physician self-referral law. Section 6001 of the Affordable Care Act amended section 1877 of the Act to impose additional requirements for physician-owned hospitals to qualify for the rural provider and hospital ownership exceptions. Section 6409 of the Affordable Care Act required the Secretary, in cooperation with the Inspector General of the Department of Health and Human Services, to establish a Medicare self-referral disclosure protocol (SRDP) that sets forth a process to enable providers of services and suppliers to self-disclose actual or potential violations of the physician self-referral law.
This rulemaking follows a history of rulemakings related to the physician self-referral law. The following discussion provides a chronology of our more significant and comprehensive rulemakings; it is not an exhaustive list of all rulemakings related to the physician self-referral law. After the passage of section 1877 of the Act, we proposed rulemakings in 1992 (related only to referrals for clinical laboratory services) (57 FR 8588) (the 1992 proposed rule) and 1998 (addressing referrals for all DHS) (63 FR 1659) (the 1998 proposed rule). We finalized the proposals from the 1992 proposed rule in 1995 (60 FR 41914) (the 1995 final rule), and issued final rules following the 1998 proposed rule in three stages. The first final rulemaking (Phase I) was published in the
In addition to Phase I, Phase II, and Phase III, we issued final regulations on August 19, 2008 in the “Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2009 Rates” final rule with comment period (72 FR 48434) (the FY 2009 IPPS final rule). That rulemaking made various revisions to the physician self-referral regulations, including: (1) revisions to the “stand in the shoes” provisions; (2) establishment of provisions regarding the period of
After passage of the Affordable Care Act, we issued final regulations on November 29, 2010 in the CY 2011 PFS final rule with comment period (75 FR 73170) that codified a disclosure requirement established by the Affordable Care Act for the in-office ancillary services exception. We also issued final regulations on November 24, 2010 in the CY 2011 OPPS final rule with comment period (75 FR 71800), on November 30, 2011 in the CY 2012 OPPS final rule with comment period (76 FR 74122), and on November 10, 2014 in the CY 2015 OPPS final rule with comment period (79 FR 66770) that established or revised certain regulatory provisions concerning physician-owned hospitals to codify and interpret the Affordable Care Act's revisions to section 1877 of the Act.
This rule updates the physician self-referral regulations to accommodate delivery and payment system reform, to reduce burden, and to facilitate compliance. We have learned from stakeholder inquiries, review of relevant literature, and self-disclosures submitted to the SRDP that additional clarification of certain provisions of the physician self-referral law would be helpful. In addition to clarifying the regulations, we are also interested in expanding access to needed health care services. In keeping with those goals, the final rule with comment period expands the regulations to establish two new exceptions and clarifies certain regulatory terminology and requirements.
In the proposed rule, we proposed to establish new policies and revise certain existing policies regarding recruitment assistance and retention payments. Specifically, we proposed a new exception for assistance to physicians to employ nonphysician practitioners (NPPs). In addition, we proposed to clarify for federally qualified health centers (FQHCs) and rural health clinics (RHCs) how to determine the geographic areas that they serve for the purposes of the exception at § 411.357(e) and to change the language at § 411.357(e)(1)(iii) to ensure the consistency we intend for the “volume or value” standard found throughout the statute and our regulations. We also proposed to lengthen the required record retention period at § 411.357(e)(4)(iv) from 5 years to 6 years to ensure consistency with the proposed exception at § 411.357(x) and other CMS record retention policies. For the exception for retention payments to physicians in underserved areas, we proposed to clarify how parties should calculate the maximum amount for permissible retention payments. Those proposals are described in detail below.
Section 1877(e)(5) of the Act sets forth an exception for remuneration provided by a hospital to a physician to induce the physician to relocate to the geographic area served by the hospital to be a member of the hospital's medical staff, subject to certain requirements. This exception is codified at § 411.357(e). In Phase III, we declined to expand § 411.357(e) to cover the recruitment of NPPs into a hospital's service area, including into an existing group practice (72 FR 51049).
Significant changes in our health care delivery and payment systems, as well as alarming trends in the primary care workforce shortage projections, have occurred since the publication of Phase III. The demand for primary care is increasing, especially in rural and underserved areas, because the Affordable Care Act expanded health care coverage to the previously uninsured, and because the population is growing and aging. The supply of physicians is projected to not keep pace with the increasing demand for primary care (see 80 FR 41910). We have identified similar trends with respect to mental health care services. NPPs, the fastest growing segment of the primary care workforce, may help to mitigate these shortages. In addition, new and evolving care delivery models, which feature an increased role for NPPs (often as care coordination facilitators or in team-based care) have been shown to improve patient outcomes while reducing costs, both of which are important Department goals as we move further toward quality- and value-based purchasing of health care services in the Medicare program and the health care system as a whole.
In light of the changes in the health care delivery and payment systems since we last considered the issue of NPP recruitment assistance to physicians, using the authority granted to the Secretary in section 1877(b)(4) of the Act, we proposed a limited exception for hospitals, FQHCs, and RHCs that wish to provide remuneration to a physician to assist with the employment of an NPP.
The proposed exception at § 411.357(x) would permit remuneration from a hospital, FQHC, or RHC to a physician to assist the physician in employing an NPP in the geographic area served by the hospital, FQHC, or RHC providing the remuneration. (See 80 FR 41910 through 41911 for an explanation of how the proposed exception would apply to remuneration from a hospital, FQHC, or RHC to a group practice or other type of physician practice, both of which qualify as a “physician organization,” as defined at § 411.351.) The exception as proposed would have applied only where the NPP is a bona fide employee of the physician receiving the remuneration from the hospital (or of the physician's practice) and the purpose of the employment is to provide primary care services to patients of the physician practice. However, we solicited comments regarding whether we should also permit remuneration to physicians to assist in attracting NPPs to their medical practices in an independent contractor capacity, and, if so, what requirements we should include for such arrangements (for example, a requirement that the arrangement between the physician and the NPP have a minimum term, such as 1 year).
Because our goal in proposing the exception at § 411.357(x) was to promote the expansion of access to primary care services—which we consider to include general family practice, general internal medicine, pediatrics, geriatrics, and obstetrics and gynecology patient care services—we proposed to define “nonphysician practitioner,” for the purposes of this exception, to include only physician assistants (PAs), nurse practitioners (NPs), clinical nurse specialists (CNSs), and certified nurse midwives (CNMs). We solicited comments regarding
We also proposed at § 411.357(x)(1)(vi) a requirement that the NPP provide only primary care services to patients of the physician's practice. We solicited comments regarding whether we should consider other, more, or fewer types of services to be “primary care services” for the purposes of proposed § 411.357(x), whether there is a compelling need to expand the scope of the proposed exception to NPPs who provide services that are not considered “primary care services” and, if so, safeguards that could be included in a final exception to ensure no risk of program or patient abuse. We proposed two alternatives for establishing the minimum amount of primary care services furnished to patients of the physician's practice by the NPP: (1) At least 90 percent of the patient care services furnished by the NPP must be primary care services; or (2) substantially all of the patient care services furnished by the NPP must be primary care services. We proposed to define “substantially all” patient care services consistent with our regulations. (See § 411.352(d) and § 411.356(c)(1).) We solicited comments regarding which of these alternatives is most appropriate and the nature of the documentation necessary to measure the NPP's services.
Because we do not intend to permit remuneration to physicians through ongoing or permanent subsidies of their NPP's compensation and other practice costs, we proposed a cap on the amount of remuneration from the hospital to the physician and a requirement that the hospital may not provide assistance for a period longer than the first 2 consecutive years of the NPP's employment by the physician. Under § 411.357(x)(1)(iii) as proposed, the amount of remuneration from the hospital, FQHC, or RHC would have been capped at the lower of: (1) 50 percent of the actual salary, signing bonus, and benefits paid by the physician to the NPP; or (2) an amount calculated by subtracting the receipts attributable to services furnished by the NPP from the actual salary, signing bonus, and benefits paid to the NPP by the physician. We proposed to interpret “benefits” to include only health insurance, paid leave, and other routine non-cash benefits offered to similarly situated employees of the physician's practice. Because the proposed exception would protect only remuneration to reimburse a physician for amounts actually paid to the NPP, the hospital, FQHC, or RHC providing the remuneration could not increase it to account for any tax implications to the physician. We solicited comments regarding the cap on the amount of remuneration in the proposed exception, including whether the offset of receipts attributable to services furnished by the NPP should include all receipts for all services furnished by the NPP, regardless of payor and regardless of whether the services were primary care services. We also solicited comments regarding whether we should structure the exception with additional or different safeguards to ensure that the remuneration from the hospital, FQHC, or RHC directly benefits the NPP and whether it is necessary to address the issue of the tax implications that could result from the use of the exception to provide remuneration to a physician to assist in the employment an NPP. We also solicited comments specifically addressing the time limitations set forth in our proposal.
The proposed exception at § 411.357(x) closely tracked the structure and requirements of the exception for physician recruitment at § 411.357(e). Similar to the exception at § 411.357(e), the proposed exception for assistance to employ NPPs would include requirements that reference hospitals, but would apply in the same manner to FQHCs and RHCs that wish to provide assistance to physicians to employ NPPs.
We proposed requirements to safeguard against program or patient abuse similar to the requirements found in most of our exceptions in § 411.357. Specifically, we proposed that an arrangement covered by the exception must be set out in writing and signed by the hospital providing the remuneration, the physician receiving the remuneration, and the NPP. In addition, the arrangement may not be conditioned on the physician's or the NPP's referral of patients to the hospital providing the remuneration. Further, the proposed exception would require that the remuneration from the hospital is not determined (directly or indirectly) in a manner that takes into account the volume or value of any actual or anticipated referrals by the physician or the NPP (or any other physician or NPP in the physician's practice) or other business generated between the parties. Because the definition of “referral” at § 411.351 relates to the request, ordering of, or certifying or recertifying the need for DHS by a physician, for the purposes of the requirements of the new exception, we proposed at § 411.357(x)(3) a definition of the term “referral” as it relates to NPPs that is modeled closely on the definition of a physician's “referral” at § 411.351. We also proposed that the arrangement may not violate the Federal anti-kickback statute or any Federal or State law or regulation governing billing or claims submission. Finally, we proposed that records of the actual amount of remuneration provided to the physician (and to the NPP) be maintained for a period of at least 6 years and be made available to the Secretary upon request. We solicited comment regarding whether these “general” safeguards are sufficient to protect against program or patient abuse resulting from arrangements to assist with NPP employment, or if additional safeguards are necessary.
We also proposed requirements for the compensation arrangement between the physician receiving remuneration and the NPP that the remuneration assists the physician to recruit. Specifically, we proposed that the aggregate salary, signing bonus, and benefits paid by the physician to the NPP must be consistent with fair market value. In addition, we proposed a requirement that the physician may not impose practice restrictions on the NPP that unreasonably restrict the NPP's ability to provide patient care services in the geographic area served by the hospital, FQHC, or RHC, and stated that we would interpret this provision in the same way that we interpret the requirement at § 411.357(e)(4)(vi) for physician recruitment arrangements.
We proposed to include requirements to prevent gaming by “rotating” or “cycling” NPPs through multiple physician practices located in the geographic area served by the hospital, FQHC, or RHC, an abuse that would effectively shift the long-term costs of employing NPPs to the hospital, FQHC, or RHC. We noted our concern that parties may misuse the exception to shift to a hospital, FQHC, or RHC the costs of an NPP who is currently employed by a physician but provides patient care services in a medical office of the physician that is located outside of the geographic area served by the hospital, FQHC, or RHC. To address these concerns, we proposed that the hospital, FQHC, or RHC may not provide assistance to a physician to employ an NPP if: (1) the NPP has practiced in the geographic area served by the hospital, FQHC, or RHC within the 3 years prior to becoming employed by the physician (or the physician organization in whose shoes the physician stands); or (2) the NPP was employed or otherwise engaged by a physician (or a physician organization in whose shoes the physician stands) with a medical office in the geographic
Finally, we solicited comments regarding whether additional safeguards are necessary to protect against program or patient abuse that might result from arrangements that would be covered by proposed § 411.357(x), including comments addressing whether we should limit the number of times a hospital, FQHC, or RHC may assist the same physician with the employment of NPPs and, if so, during what time period that limitation should apply. We sought comments on whether we should limit the use of the exception to no more than once every 3 years for a particular physician or no more than three times in the aggregate (regardless of time period) for a particular physician. We sought comments as to whether this type of limitation potentially undermines the goal of increased access to primary care in the event the NPP(s) employed by the physician receiving the assistance from the hospital, FQHC, or RHC left such employment after only a short period of time or moved from the geographic area served by the hospital, FQHC, or RHC. We were also interested in comments addressing whether the exception should include a requirement that there be a documented, objective need for additional primary care services in the geographic area served by the hospital, FQHC, or RHC. We also solicited comments specifically from FQHCs and RHCs regarding whether this exception would be useful to such entities and any barriers to its use that they perceive.
With several modifications, described below in response to the comments we received, we are finalizing an exception at § 411.357(x) for remuneration provided by a hospital, FQHC, or RHC to a physician to assist the physician with compensating an NPP to provide primary care services or mental health care services to patients of the physician's practice. The following is a summary of the comments we received.
We are utilizing the authority in section 1877(b)(4) of the Act to establish the exception for assistance from a hospital, FQHC, or RHC to a physician to compensate an NPP. Because the exception for physician recruitment in section 1877(e)(5) of the Act and § 411.357(e) of our regulations only permits remuneration to a physician to induce
In support of its recommended expansion of the definition to include registered dieticians and nutritional professionals, the commenter asserted that these professionals are an important part of the collaborative care system. With respect to expanding the definition of “nonphysician practitioner” to include CRNAs, a commenter noted that CRNAs may be licensed in their jurisdictions to furnish evaluation and management (E/M) services, as well as other services that would fit the proposed definition of primary care services, and that, because of this, elsewhere in the proposed rule CMS proposed to add CRNAs to the list of practitioners under section 1834(m)(4)(E) of the Act who may provide Medicare telehealth services. The commenter asserted that CMS should follow the same policy for CRNAs under the proposed exception at § 411.357(x). According to the commenter, CMS has proposed a range of safeguards which, when applied to NPPs, including CRNAs, should alleviate any concerns regarding risk of fraud and abuse. The commenters that supported the inclusion of physical therapists in the definition of “nonphysician practitioner” for the purposes of the new exception claimed that a substantial number of primary care practice patients have musculoskeletal complaints.
Because we are not persuaded that registered dieticians or nutritional professionals provide the types of services we consider to be primary care services or mental health care services for the purposes of the exception, we do not believe that including registered dieticians or nutritional professionals in the definition of NPP would further the goals of increasing access to primary care services and mental health care services. Moreover, the commenters did not demonstrate a compelling need to include such practitioners in the definition of NPP for the purposes of the exception.
With respect to CRNAs, the commenter is correct that we proposed to revise the regulation at § 410.78(b)(2) to include a CRNA, as described under § 410.69, to the list of distant site practitioners who may furnish Medicare telehealth services (80 FR 41784). Under section 1834(m)(1) of the Act, Medicare makes payment for telehealth services furnished by physicians and practitioners. Section 1834(m)(4)(E) of the Act specifies that,
Not all E/M services are primary care services. The commenter did not provide sufficient information for us to determine whether the “other services” which it claims CRNAs are licensed to furnish in certain States would qualify as general family practice, general internal medicine, pediatrics, geriatrics, or obstetrics and gynecology services. Moreover, although some CRNAs may be licensed to furnish some E/M services, we are not convinced that CRNAs generally furnish primary care services to the extent that the exception mandates. We are similarly not convinced that CRNAs would furnish mental health care services under the expanded exception finalized here. Therefore, we see no compelling need to include CRNAs in the definition of “nonphysician practitioner” for the purposes of the exception at § 411.357(x).
We do not believe that physical therapists furnish primary care services or mental health care services to patients. The commenters suggested only that physical therapists may serve the needs of patients of a primary care practice, not that they furnish primary care services themselves. We do not find this a compelling reason to expand the scope of the exception to include physical therapists in the definition of “nonphysician practitioner.”
The demand for mental health services is considerable; one in every five adults will suffer from a mental illness or substance abuse disorder in a given year. In 2013, national surveyors found that 43.8 million adults in the United States (18.5 percent of the national population) had a mental illness during the year. (Substance Abuse and Mental Health Administration,
A large portion of those suffering from mental illness are not receiving treatment. Of the adults suffering from a mental illness in 2013, only 19.6 million (44.7 percent) received mental health services. (
We agree with the commenters that there is a compelling need for more mental health care professionals. We believe further that permitting hospitals, FQHCs, and RHCs to provide assistance to a physician to compensate NPPs to provide mental health care services to patients of the physician's practice may improve access to such critically needed services. In turn, we anticipate that increased access will promote treatment, improve outcomes, and may reduce the societal costs of mental illness. We are expanding the scope of the exception at § 411.357(x) to permit an NPP for whom a physician receives assistance from a hospital, FQHC, or RHC to furnish mental health care services to patients of the physician's practice.
We agree with the commenters that a “substantially all” standard is the appropriate standard for the minimum amount of primary care services or mental health care services that an NPP must furnish to patients of the physician's practice. Therefore, we are finalizing § 411.57(x)(1)(vi) to require that substantially all of the patient care services furnished by the NPP must be primary care services or mental health care services. We expect that physician organizations that qualify as “group practices” are familiar with this standard, as are rural providers. As we have throughout the physician self-referral regulations, we are defining “substantially all” patient care services to mean at least 75 percent of the NPP's services to patients of the physician's practice. To ensure consistency in the interpretation of identical terms used in our regulations, we are requiring that “patient care services” be measured by one of the following: (1) The total time the NPP spends on patient care services documented by any reasonable means (including, but not limited to, time cards, appointment schedules, or personal diaries); or (2) any alternative measure that is reasonable, fixed in advance of the performance of the services being measured, uniformly applied over time, verifiable, and documented. See § 411.352(d)(1). For clarity, we are including this requirement in § 411.357(x) as finalized in this final rule.
We recognize the challenges posed by a standard under which a hospital's, FQHC's, or RHC's compliance with the law depends on precise determinations of which services are “attributable” to an NPP, adequate record keeping of the physician, and the cooperation of the physician in sharing information regarding the receipts for services furnished by the NPP's services. Compliance challenges would be exacerbated where the NPP furnishes services that are incident to a physician's service and billed under the name (or NPI) of the physician. The third commenter's recommended approach of an “either/or” standard, rather than a “lower of” standard, while providing flexibility to hospitals, FQHCs, and RHCs, does not alleviate the significant compliance challenges posed by the “receipts minus salary, signing bonus, and benefits” standard, and we are not adopting it. We note that our goal in establishing the exception at § 411.357(x) is to expand access to critically needed primary care services and mental health care services. The exception is not intended to provide a physician with the means to increase profit from the services of an NPP in his or her practice at the expense of a hospital, FQHC, or RHC. We intend to monitor the use and impact of the exception for potential program or patient abuse.
However, we agree that a 3-year “disqualification” period could undermine the important goals of the exception and are finalizing § 411.357(x)(1)(v) to include a 1-year limitation on the NPP's prior practice in the geographic area served by the hospital, FQHC, or RHC. As finalized, the exception would not be available unless the NPP, within 1 year of being compensated by the physician (or the physician organization in whose shoes the physician stands under § 411.354(c)): (1) Has not practiced in the geographic area served by the hospital, FQHC, or RHC providing the assistance; and (2) has not been employed or otherwise engaged to provide patient care services by a physician or physician organization that has a medical practice in the geographic area served by the hospital, FQHC, or RHC providing the assistance, regardless of whether the NPP furnished services at the medical practice site located in the geographic area served by the hospital, FQHC, or RHC. We believe that a 1-year “disqualification” period (to use the commenter's terminology) will serve adequately to prevent gaming by rotating or cycling NPPs through multiple physician practices located in the geographic area served by the hospital, FQHC, or RHC. Similarly, retaining the requirement that the NPP may not have been employed or otherwise engaged to provide patient care services by a physician or physician organization that has a medical practice in the geographic area served by the hospital, FQHC, or RHC providing the assistance for at least 1 year prior to the remuneration to the physician, regardless of whether the NPP furnished services at the medical practice site located in the geographic area served by the hospital, FQHC, or RHC, will serve to prevent physicians from shifting the cost of currently employed NPPs to hospitals, FQHCs, and RHCs. In addition, these limitations may serve to protect against potentially competitive practices, such as a physician luring an NPP from another physician practice using hospital funding.
After careful consideration of the comments regarding the exception for assistance from a hospital, FQHC, or RHC to a physician to compensate an NPP, we are finalizing our proposed exception at § 411.357(x) with the following modifications: (1) We are including in the definition of “nonphysician practitioner,” for the purposes of the exception at § 411.357(x) clinical social workers and clinical psychologists; (2) we are expanding the type of services that may be furnished by the NPP to patients of the physician's practice to include mental health care services; (3) we are including a requirement that the NPP furnish substantially all primary care services or mental health services (rather than “only” such services) to patients of the physician's practice; (4) we are not limiting the type of compensation arrangement between the physician (or physician organization in whose shoes the physician stands) and the NPP, but we are requiring that the contractual relationship for which assistance is provided by a hospital, FQHC, or RHC is directly between the physician (or a physician organization in whose shoes the physician stands under § 411.354(c)) and the NPP; (5) we are establishing a bright-line approach to the amount of permissible remuneration from the hospital, FQHC, or RHC to the physician, limiting it to 50 percent of the actual aggregate compensation, signing bonus, and benefits paid to the NPP; (6) we are finalizing a limit on the frequency with which a hospital, FQHC, or RHC may provide assistance to the same physician and setting the limitation at no more than once every 3 years, with an exception if the NPP does not remain with the physician's practice for at least 1 year; and (7) we are shortening from 3 years to 1 year the period of time that the NPP must not have practiced in the geographic area served by the hospital, FQHC, or RHC providing the assistance.
Section 1877(e)(5) of the Act sets forth an exception for remuneration provided by a hospital to an individual physician to induce the physician to relocate his or her medical practice to the geographic area served by the hospital to become a member of the hospital's medical staff. This exception was codified in our regulations at § 411.357(e) in the 1995 final rule. In Phase II and Phase III, we expanded the exception to FQHCs and RHCs, respectively, and revised the definitions of “geographic area served by a hospital.” As we explained at 80 FR 41913, the definition of “geographic area served by a hospital” adopted in Phase III does not provide guidance as to the geographic area into which an FQHC or RHC may recruit a physician, a concept critical for compliance with the exception's requirements. Therefore, we proposed to revise § 411.357(e)(6) to add a new definition of the geographic area served by an FQHC or RHC.
We proposed two alternative approaches for this policy, which aligns closely with the special optional rule for rural hospitals at § 411.357(e)(2)(iii) in recognition that rural hospitals, FQHCs, and RHCs often serve patients who are dispersed in wider geographic areas and may need to recruit physicians into more remote areas to achieve their goals of providing needed services to the communities that they serve. The first proposed approach closely mirrors our current definition of a rural hospital's geographic service area. It would define the geographic area served by an FQHC or RHC as the area composed of the lowest number of
In the alternative, we proposed to define the geographic area served by an FQHC or RHC as the area composed of the lowest number of
We are finalizing our proposal to define, for the purposes of the exception at § 411.357(e), the geographic area served by an FQHC or RHC as the lowest number of
After careful consideration of the comments, we are finalizing our proposal to define the geographic area served by an FQHC or RHC, for the purposes of the exception at § 411.357(e), as the lowest number of contiguous or noncontiguous zip codes from which the FQHC or RHC draws at least 90 percent of its patients, as determined on an encounter basis. We are also permitting FQHCs and RHCs to include one or more zip codes from which they draw no patients, provided that such zip codes are entirely surrounded by zip codes in the geographic area from which the FQHC or RHC draws at least 90 percent of its patients, determined on an encounter basis.
Several exceptions for compensation arrangements in section 1877(e) of the Act contain provisions pertaining to the volume or value of a physician's referrals. In each case, the statutory language consistently states that compensation cannot be determined in a manner that “takes into account” the volume or value of a physician's referrals. (See sections 1877(e)(1)(A)(iv), (e)(1)(B)(iv), (e)(2)(B)(ii), (e)(3)(A)(v), (e)(3)(B)(i), (e)(5)(B), (e)(6)(A), and (e)(7)(A)(v).) As we explained in the proposed rule (80 FR 41914), our longstanding policy is to interpret the volume or value standard in all provisions under section 1877(e) of the Act uniformly.
Despite our uniform interpretation of the volume or value standard, the phrase “takes into account” is not used consistently in the exceptions for compensation arrangements in § 411.357. In particular, the regulatory exception for the recruitment of physicians at § 411.357(e) has two provisions relating to the volume or value standard, and the provisions use different terms. Current § 411.357(e)(1)(iii) excepts payments to a recruited physician if the hospital does not determine the amount of compensation (directly or indirectly) “based on” the volume or value of referrals. Where the recruited physician joins a physician practice, § 411.357(e)(4)(v) provides that the amount of remuneration may not be determined in a manner that “takes into account” (directly or indirectly) the volume or value of any actual or anticipated referrals by the recruited physician or the physician practice (or any physician affiliated with the physician practice) receiving the direct payments from the hospital. Like the physician recruitment exception, the following exceptions do not use the phrase “takes into account” in reference to the volume or value standard: The exception for medical staff incidental benefits at § 411.357(m); the exception for obstetrical malpractice insurance subsidies at § 411.357(r); and the exception for professional courtesy at § 411.357(s). The exception for obstetrical malpractice insurance premiums at § 411.357(r) provides that the amount of payment cannot be “based on” the volume or value of actual or anticipated referrals. The exceptions at § 411.357(m) and § 411.357(s) require that medical staff incidental benefits and professional courtesies, respectively, are offered to physicians “without regard to” the volume or value of referrals.
We are concerned that the use of different phrases pertaining to the volume or value of referrals (“takes into account,” “based on,” and “without regard to”) may cause some to conclude incorrectly that there are different volume or value standards in the compensation exceptions. See 80 FR 41914. To clarify the regulations, we proposed to modify § 411.357(e)(1)(iii) to conform to the exact language in section 1877(e)(5)(B) of the Act. Specifically, we proposed to amend § 411.357(e) to require that the compensation provided to a recruited physician may not take into account (directly or indirectly) the volume or value of the recruited physician's referrals to the hospital, FQHC, or RHC providing the recruitment remuneration. We also proposed to amend § 411.357(r) to require that the amount of payment under the arrangement may not take into account the volume or value of any actual or anticipated referrals. Lastly, we proposed to revise the language of § 411.357(m) and (s) to provide that the offer of medical staff incidental benefits or professional courtesy, respectively, may not take into account the volume or value of a physician's referrals. Taken together, these revisions would make the use of the phrase “takes into account” consistent throughout the compensation exceptions in § 411.357. The consistent terminology would reflect our longstanding policy that the volume or value standard in the various compensation exceptions should be interpreted uniformly.
The following is a summary of the comments we received.
As a result of the comments, we are finalizing the proposed changes to the regulations at § 411.357(e), (m), (r), and (s). The revision of the regulatory language reflects our policy that the volume or value standard is uniform and consistent in the exceptions for compensation arrangements in § 411.357.
Our regulation at § 411.357(t) permits certain retention payments made to a physician with a practice located in an underserved area. This exception was first established in Phase II, and covered only retention payments made to a physician who has a
In Phase III, we explained that a retention payment based on a physician
The policy stated in the Phase III preamble is correct and remains our policy at this time. Therefore, to avoid confusion due to conflicting regulation text, we proposed to modify our regulations at § 411.357(t)(2)(iv)(A) to reflect the regulatory intent we articulated in Phase III. The following is a summary of the comments we received.
After reviewing the comments, we are finalizing our proposal to modify our regulations at § 411.357(t)(2)(iv)(A). The revised regulatory text clearly states our intention, as formulated in Phase III, that entities contemplating retention payments must consider the entire 24-month period prior to the payment.
The SRDP enables providers and suppliers to disclose actual or potential violations of the physician self-referral law to CMS and authorizes the Secretary to reduce the amount potentially due and owing for disclosed violations. Since the SRDP was established, we have received numerous submissions to the SRDP disclosing actual or potential violations relating to the writing requirement of various compensation exceptions (for example, failure to set an arrangement out in writing, failure to obtain the signatures of the parties in a timely fashion, or failure to renew an arrangement that expired on its own terms after at least 1 year). This final rule with comment period clarifies the writing requirement of various compensation exceptions by making the terminology in the compensation exceptions more consistent and by providing policy guidance on the writing and 1-year minimum term requirements in many exceptions. In addition, to reduce regulatory burden, we proposed to except certain holdover arrangements, provided that certain safeguards are met.
The exceptions for the rental of office space and the rental of equipment (section 1877(e)(1) of the Act; § 411.357(a) and (b)) require that a lease be set out in writing. Several other compensation exceptions have a similar writing requirement: The exception at § 411.357(d) for personal service arrangements; the exception at § 411.357(e) for physician recruitment; the exception at § 411.357(h) for certain group practice arrangements with a hospital; the exception at § 411.357(l) for fair market value compensation; the exception at § 411.357(p) for indirect compensation arrangements; the exception at § 411.357(r) for obstetrical malpractice insurance subsidies; the exception at § 411.357(t) for retention payments in underserved areas; the exception at § 411.357(v) for electronic prescribing items and services; and the exception at § 411.357(w) for electronic health records items and services. Through our experience administering the SRDP, we have learned that there is uncertainty in the provider community regarding the writing requirement of the leasing and other compensation exceptions. In particular, we have been asked whether an arrangement must be reduced to a single “formal” written contract (that is, a single document that includes all material aspects of the arrangement) to satisfy the writing requirement of the applicable exception.
The original exception for the rental of office space required “a written
Despite the different terminology in the statutory and regulatory exceptions, we believe that the writing requirement for the leasing exceptions and the personal service arrangements exception is the same. Specifically, we interpret the term “lease” in sections 1877(e)(1)(A) and (B) of the Act to refer to the lease
In most instances, a single written document memorializing the key facts of an arrangement provides the surest and most straightforward means of establishing compliance with the applicable exception. However, there is no requirement under the physician
Through the SRDP, we have learned that some stakeholders interpret the term “agreement,” as it is used at § 411.357(a)(1) and (b)(1), to mean that a single written contract is necessary to satisfy the writing requirement of the applicable exception. To clarify the exceptions for the rental of office space and the rental of equipment, we proposed to substitute the term “lease arrangement” for the term “agreement” at § 411.357(a)(1) and (b)(1). We believe that this revision underscores the fact that the writing requirement at § 411.357(a)(1) and (b)(1) for the rental of office space and the rental of equipment, respectively, is identical to the writing requirement at § 411.357(d)(1)(i) for personal service arrangements. Broadly speaking, we believe that there is no substantive difference among the writing requirements of the various compensation exceptions that require a writing. To emphasize the uniformity of the writing requirement in the compensation exceptions, we proposed to remove the term “agreement” from the exception for physician recruitment at § 411.357(e)(4)(i), the exception for fair market value compensation at § 411.357(l)(1), the special rule on compensation that is set in advance at § 411.354(d)(1), and the special rule on physician referrals to a particular provider, practitioner, or supplier at § 411.354(d)(4)(i).
In light of our proposal to clarify the writing requirement at § 411.354(d)(1), (d)(4)(i), (a)(1), (b)(1), (e)(4)(i), and (1)(1) by removing the term “agreement,” we proposed to make conforming changes where possible to other provisions in the compensation exceptions and the special rules on compensation. Specifically, we proposed to replace the term “agreement” with the term “lease arrangement” in § 411.357(a)(2), (a)(4), (a)(5), (a)(6), (b)(3), (b)(4), and (b)(5). We proposed to replace the term “agreement” with the term “arrangement” in § 411.357(c)(3) (the exception for
Certain compensation exceptions use the phrase “written agreement”: The exception at § 411.357(h) for certain group practice arrangements with a hospital; the exception at § 411.357(v) for electronic prescribing items and services; and the exception at § 411.357(w) for electronic health records items and services. Although these exceptions use the term “written agreement,” we did not propose any revisions. The exception at § 411.357(h) is rarely used, because it only protects arrangements that began before, and continued without interruption since, December 19, 1989. The exceptions at § 411.357(v) and (w) are aligned with the Federal anti-kickback statute safe harbors at § 1001.952(x) and (y) that protect the provision of these items and services. To avoid creating apparent inconsistencies between the physician self-referral law exceptions and the corresponding anti-kickback statute safe harbors, we are not modifying § 411.357(v) or (w). However, we believe that the principles elucidated above regarding the writing requirement of the other compensation exceptions to the physician self-referral law also apply to § 411.357(v) and (w).
We are finalizing the proposed changes to clarify that parties need not reduce the key terms of an arrangement to a single formal contract to satisfy the writing requirement of the compensation exceptions at § 411.357 that require a writing. The following is a summary of the comments we received.
Although State law contract principles do not definitively determine compliance with the writing requirement of the physician self-referral law, the physician self-referral law does not negate or preempt State contract law. (See 72 FR 51049). Nothing prevents a party from drawing on State law contract principles, as well as other bodies of relevant law, to inform the analysis of whether an arrangement is set out in writing. The important point is this: What determines compliance with the writing requirement of the physician self-referral law is not whether the writings form a valid and enforceable contract under State law, but rather whether the contemporaneous writings would permit a reasonable person to verify that the arrangement complied with an applicable exception at the time a referral is made. For this reason, a written contract that is enforceable under State law may not satisfy the writing requirement if the actual arrangement differed in material respects from the terms and conditions of the written contract.
We remind parties that DHS entities have the burden of proof to establish that services were not furnished as a result of prohibited referrals, and that all requirements of an exception must be met at the time a referral is made. (See § 411.353(c)(2)(i) and 73 FR 48703.) If an arrangement with a physician fails to comply with the writing requirement of an applicable exception when the arrangement commences, then the entity is not permitted to bill for DHS furnished as a result of the physician's referrals unless and until the arrangement is sufficiently documented over the course of the arrangement (and all other requirements of the applicable exception are met). Contemporaneous documents evidencing the course of conduct between the parties cannot be relied upon to protect referrals that predate the documents. Likewise, parties cannot meet the set in advance requirement from the inception of an arrangement if the only documents stating the compensation term of an arrangement were generated after the arrangement began; however, depending on the facts and circumstances, if parties create contemporaneous documents during the course of the arrangement, and the documents set the compensation out in writing, then parties may be able to satisfy the set in advance requirement for referrals made
After careful consideration of the comments, we are finalizing our proposal to substitute the word “arrangement” for “agreement” in various provisions of § 411.354 and § 411.357 identified in the proposed rule. The revision of the regulatory language reflects our existing policy that a single formal contract is not required to satisfy the writing requirement of those compensation exceptions at § 411.357 that require a writing.
The exceptions at § 411.357(a), (b), and (d) for the rental of office space, the rental of equipment, and personal service arrangements, respectively, require that the compensation arrangement between an entity furnishing DHS and a referring physician has a term of at least 1 year. Parties submitting self-disclosures to the SRDP have asked whether the term of the arrangement must be in writing to satisfy the requirements of the relevant exceptions. We proposed to revise § 411.357(a)(2), (b)(3), and (d)(1)(iv) to clarify the documentation requirements related to the term of lease arrangements for the rental of office space, lease arrangements for the rental of equipment, and personal service arrangements.
The statutory exceptions for the rental of office space and the rental of equipment in sections 1877(e)(1)(A)(iii) and (B)(iii) of the Act, respectively, require that the lease arrangement provides for a term of rental or lease for at least 1 year. The statutory exception for personal service arrangements in section 1877(e)(3)(A)(iv) of the Act requires that the term of the arrangement is at least 1 year. Although our regulations at § 411.357(d)(1)(iv) (the exception for personal service arrangements) use language similar to the statutory exception for personal service arrangements, our current regulations at § 411.357(a)(2) and (b)(3) (the exceptions for the rental of office space and equipment, respectively) use the term “agreement” in addressing the minimum term requirement. As explained elsewhere in this section, we interpreted “lease” in section 1877(e)(1) of the Act to refer to the lease arrangement between the parties, and we also believe that the writing requirement of sections 1877(e)(1)(A) and (B) of the Act is identical to the requirement in section 1877(e)(3) of the Act.
We believe that some stakeholders have interpreted the term “agreement” at § 411.357(a)(2) and (b)(3) to mean that a formal written contract or other document with an explicit provision identifying the term of the arrangement is necessary to satisfy the 1-year term requirement of the exceptions. As we noted in the 1998 proposed rule, the 1-year term requirement is satisfied “as long as the arrangement clearly establishes a business relationship that will last for at least 1 year” (63 FR 1713). An arrangement that lasts as a matter of fact for at least 1 year satisfies this requirement. Parties must have contemporaneous writings establishing that the arrangement lasted for at least 1 year, or be able to demonstrate that the arrangement was terminated during the first year and that the parties did not enter into a new arrangement for the same space, equipment, or services during the first year, as required by § 411.357(a)(2), (b)(3), and (d)(1)(iv), as applicable. As is the case with the writing requirement in these and other exceptions, depending on the facts and circumstances of the arrangement and the available documentation, a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties, can establish that the arrangement in fact lasted for the required period of time. A formal contract or other document with an explicit “term” provision is generally not necessary to satisfy this element of the exception. To clarify that a written contract with a formalized “term” provision is not necessary to satisfy the regulations at § 411.357(a)(2) and (b)(3), we proposed to remove the word “agreement” and to revise the first sentence of these provisions to mirror the 1-year term requirement in the personal service arrangements exception at § 411.357(d)(1)(iv).
We are finalizing revised regulatory language that clearly reflects the policy stated in the proposed rule, namely that an arrangement need only last at least 1 year as a matter of fact to satisfy the 1-year term requirement at § 411.357(a)(2), (b)(3), and (d)(1)(iv). The following is a summary of the comments we received.
Upon review and consideration of the comments regarding the 1-year term requirement, we are finalizing revised regulatory language for the exceptions at § 411.357(a)(2), (b)(3), and (d)(1)(iv). The revised language at § 411.357(a)(2) provides that the duration of the lease arrangement is at least 1 year. To meet this requirement, if the lease arrangement is terminated with or without cause, the parties may not enter a new lease arrangement for the same space during the first year of the original lease arrangement. We are finalizing similar language for § 411.357(b)(3) and (d)(iv). The revised regulatory text clearly states our current policy that an arrangement need only last 1 year to satisfy the 1-year term requirement of the exceptions for the rental of office space, the rental of equipment, and personal service arrangements.
The exceptions at § 411.357(a), (b), and (d) currently permit a “holdover” arrangement for up to 6 months if an arrangement of at least 1 year expires, the arrangement satisfies the requirements of the exception when it expires, and the arrangement continues on the same terms and conditions after its stated expiration. We proposed to amend the holdover provisions at § 411.357(a)(7), (b)(6), and (d)(1)(vii) to permit indefinite holdovers, provided that certain additional safeguards are met. In the alternative, we proposed to extend the holdover to a definite period that is greater than 6 months (for example, 1 year, 2 years, or 3 years), provided that additional safeguards are met. Finally, we proposed to revise the exception for fair market value compensation at § 411.357(l)(2) to permit renewals of arrangements of any length of time, including arrangements for 1 year or greater.
The holdover provisions in § 411.357(a), (b), and (d) developed over the course of our rulemaking in
Through our administration of the SRDP, we have reviewed numerous rental and personal service arrangements that failed to satisfy the requirements of an applicable exception solely because the arrangement expired by its terms and the parties continued the arrangement on the same (compliant) terms and conditions after the 6-month holdover period ended. In our experience, an arrangement that continues beyond the 6-month period does not pose a risk of program or patient abuse, provided that the arrangement continues to satisfy the specific requirements of the applicable exception, including the requirements related to fair market value, compensation that does not take into account the volume or value of referrals or other business generated between the parties, and reasonableness of the arrangement. We reconsidered our previous position and proposed to eliminate the time limitations on holdovers with safeguards to address two potential sources of program or patient abuse: frequent renegotiation of short term arrangements that take into account a physician's referrals and compensation or rental changes that become inconsistent with fair market value over time.
To prevent frequent renegotiation of short term arrangements, the holdover must continue on the same terms and conditions as the original arrangement. If the parties change the original terms and conditions of the arrangement during the holdover, we would consider this a new arrangement. The new arrangement would be subject to the 1-year term requirement at § 411.357(a)(2), (b)(3), or (d)(1)(iv) (or it must satisfy the requirements of the exception for fair market value compensation at § 411.357(l), if applicable). We believe that these safeguards, which are already incorporated into the current exceptions, prevent frequent renegotiations of short-term arrangements.
To ensure that compensation is consistent with or does not exceed fair market value, as applicable, the proposed holdover provisions require that the holdover arrangement satisfy all the elements of the applicable exception when the arrangement expires and on an ongoing basis during the holdover. Thus, if office space rental payments are fair market value when the lease arrangement expires, but the rental amount falls below fair market value at some point during the holdover, the lease arrangement would fail to satisfy the requirements of the applicable exception at § 411.357(a) as soon as the fair market value requirement is no longer satisfied, and DHS referrals by the physicians to the entity that is party to the arrangement would no longer be permissible. In addition, the entity could not bill the Medicare program for DHS furnished as a result of a referral made by the physician after the rental charges were no longer consistent with fair market value. The requirement that the arrangement is set out in writing continues to apply during the holdover. To satisfy this requirement, the parties must have documentary evidence that the arrangement in fact continued on the same terms and conditions. Depending on the facts and circumstances of the arrangement and the available documentation, the expired written agreement and a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties, may satisfy the writing requirement for the holdover.
As noted above, we proposed to revise the holdover provisions at § 411.357(a)(7), (b)(6), and (d)(1)(vii) to permit indefinite holdovers under certain conditions. Specifically, the arrangement must comply with the applicable exception when it expires by its own terms; the holdover must be on the same terms and conditions as the
In addition to our proposals to extend the holdover provisions at § 411.357(a)(7), (b)(6), and (d)(1)(vii), we proposed to amend the exception at § 411.357(l) for fair market value compensation arrangements. Section 411.357(l)(2) currently allows arrangements for less than 1 year to be renewed any number of times, provided that the terms of the arrangement and the compensation for the same items or services do not change. Currently, the renewed arrangement must continue to satisfy all the requirements of the exception, including the requirement that the compensation is consistent with fair market value. We proposed to amend § 411.357(l)(2) to permit arrangements of any timeframe, including arrangements for more than 1 year, to be renewed any number of times. We believe that the proposal does not pose a risk of patient or program abuse, because the arrangement must be renewed on the same terms and conditions. In addition, as is the case currently, the renewed arrangement must satisfy all the requirements of the exception at the time the physician makes a referral for DHS and the entity bills Medicare for the DHS. We solicited comments as to whether the proposed revision of § 411.357(l)(2) would be necessary if we revise § 411.357(d)(1)(vii) to permit indefinite holdovers.
We are finalizing the proposed indefinite holdover provisions for the exceptions at § 411.357(a)(7), (b)(6), and (d)(1)(vii). We are also finalizing our proposal to remove the phrase “made for less than 1 year” at § 411.357(l)(2). The following is a summary of the comments we received.
We caution that, depending on the facts and circumstances, the failure to apply a holdover premium that is legally required by the original arrangement may constitute a change in the terms and conditions of the original arrangement. In such circumstances, the “holdover” arrangement will not meet the requirement at § 411.357(a)(7)(ii) that the arrangement continue on the same terms and conditions as the immediately preceding arrangement. In addition, the failure to charge a holdover premium may constitute the forgiveness of a debt, thus creating a secondary financial relationship between the parties that must satisfy the requirement of an applicable exception.
It is true that the exception as currently written does not expressly prohibit parties from renewing arrangements of 1 year or longer. Nonetheless, given the purpose of the exception when it was first established, we believe the better reading of the exception does not rely on reading missing words into the text and, therefore, we are not retracting our statement from the proposed rule.
After reviewing the comments, we are finalizing the proposed indefinite holdover provisions for the exceptions at § 411.357(a)(7), (b)(6), and (d)(1)(vii). We are also finalizing our proposal to remove the phrase “made for less than 1 year” at § 411.357(l)(2). We believe
The indefinite holdover provisions will be available to parties on the effective date of this final rule. Parties who are in a valid holdover arrangement under the current 6-month holdover provisions on the effective date of this final rule may make use of the indefinite holdover provisions that we are finalizing, provided that all the requirements of the new holdover provisions are met. On the other hand, if an arrangement does not qualify for the 6-month holdover under the current regulations at § 411.357(a)(7), (b)(6), or (d)(1)(vii) on the effective date of this rule (for example, if the holdover has lasted for more than 6 months as of the effective date of the rule), then the parties cannot make use of the indefinite holdover provisions.
In the proposed rule, we proposed to revise several definitions in our regulations to improve clarity and ensure proper application of our policies. We describe below the specific proposals. We are now finalizing the revised definitions as proposed, without additional modification.
A compensation arrangement between a physician (or an immediate family member of such physician) and a DHS entity implicates the referral and billing prohibitions of the physician self-referral law. Section 1877(h)(1)(A) of the Act defines the term “compensation arrangement” as any arrangement involving any “remuneration” between a physician (or an immediate family member of such physician) and an entity. However, section 1877(h)(1)(C) of the Act identifies certain types of remuneration which, if provided, would not create a compensation arrangement subject to the referral and billing prohibitions of the physician self-referral law. Under section 1877(h)(1)(C)(ii) of the Act, the provision of the following items, devices, or supplies does not create a compensation arrangement between the parties: Items, devices, or supplies that are “used solely” to collect, transport, process, or store specimens for the entity providing the items, devices, or supplies, or to order or communicate the results of tests or procedures for such entity. Furthermore, under our regulations at § 411.351, the provision of such items, devices, or supplies is not considered to be remuneration. As explained at 80 FR 41918, we proposed to revise the definition of “remuneration” at § 411.351 to make it clear that the provision of an item, device, or supply that is used for one or more of the six purposes listed in the statute, and no other purpose, does not constitute remuneration.
We received two comments in support of our proposed revision of the definition of “remuneration.” We are finalizing the revisions to § 411.351 as proposed.
Although we did not propose regulatory revisions, we noted in the proposed rule that we are concerned about potential confusion regarding whether remuneration is conferred by a hospital to a physician when both facility and professional services are provided to patients in a hospital-based department. Following commentary by the Third Circuit Court of Appeals in its decision in
In a “split bill” arrangement, a physician makes use of a DHS entity's resources (for example, examination rooms, nursing personnel, and supplies) to treat the DHS entity's patients. The DHS entity bills the appropriate payor for the resources and services it provides (including the examination room and other facility services, nursing and other personnel, and supplies) and the physician bills the payor for his or her professional fees only. We do not believe that such an arrangement involves remuneration between the parties, because the physician and the DHS entity do not provide items, services, or other benefits to one another. Rather, the physician provides services to the patient and bills the payor for his or her services, and the DHS entity provides its resources and services to the patient and bills the payor for the resources and services. There is no remuneration between the parties for the purposes of section 1877 of the Act.
In contrast, if a physician or a DHS entity bills a non-Medicare payor (that is, a commercial payor or self-pay patient) globally for both the physician's services and the hospital's resources and services, a benefit is conferred on the party receiving payment. Specifically, the party that bills globally receives payment for items or services provided by the other party. Such a global billing arrangement involves remuneration between the parties that implicates the physician self-referral law.
The following is a summary of the comments we received.
Following our review of the comments, we are confirming our existing policy that a physician's use of a hospital's resources (for example, examination rooms, nursing personnel, and supplies) when treating hospital patients does not constitute remuneration under the physician self-referral law, when the hospital bills the appropriate payor for the resources and services it provides (including the examination room and other facility services, nursing and other personnel, and supplies) and the physician bills the payor for his or her professional fees only. We emphasize that this statement reflects our interpretation of the term “remuneration” and policy on the issue.
Phase III included provisions under which all physicians would be treated as “standing in the shoes” of their physician organizations for the purposes of applying the rules regarding direct and indirect compensation arrangements at § 411.354(c) (72 FR 51026 through 51030). (Since Phase II, we have considered a referring physician and the professional corporation of which he or she is the sole owner to be the same for the purposes of the physician self-referral regulations (69 FR 16131).) The FY 2009 IPPS final rule amended § 411.354(c) to: (1) Treat a physician with an ownership or investment interest in a physician organization as standing in the shoes of that physician organization; and (2) permit parties to treat a physician who does not have an ownership or investment interest in a physician organization as standing in the shoes of that physician organization. An exception to the mandatory treatment of physicians with ownership or investment interests as standing in the shoes of their physician organizations was made for physicians with “titular” ownership or investment interests only (73 FR 48691 through 48700). A “physician organization” is defined at § 411.351 as a physician, a physician practice, or a group practice that complies with the requirements of § 411.352. Therefore, as of October 1, 2008, for the purposes of determining whether a direct or indirect compensation arrangement exists between a physician and an entity to which the physician makes referrals for the furnishing of DHS, if the physician has an ownership or investment interest in the physician organization that is not merely titular, the physician stands in the shoes of the physician organization. The physician is considered to have the same compensation arrangements (with the same parties and on the same terms) as the physician organization in whose shoes he or she stands.
In Phase III, we established the rule at § 411.354(c)(3)(i), which provides that a physician who stands in the shoes of his or her physician organization is deemed to have the same compensation arrangements (with the same parties and on the same terms) as the physician organization. The regulation also states that, when applying the exceptions in § 411.355 and § 411.357 to arrangements in which a physician stands in the shoes of his or her physician organization, the relevant referrals and other business generated “between the parties” are referrals and other business generated between the entity furnishing DHS and the physician organization (including all members, employees, and independent contractor physicians). Our intent for this provision was to make clear that, under the Phase III “stand in the shoes” policy (which considered all physicians in a physician organization to stand in the shoes of the physician organization), each physician in the physician organization was considered a “party” to an arrangement between the physician organization and a DHS entity.
Following the FY 2009 IPPS final rule changes limiting the “stand in the shoes” rules only to physicians with ownership or investment interests in their physician organizations (other than those with merely a titular ownership or investment interests) and physicians who voluntarily stand in the shoes of their physician organizations, stakeholders inquired whether the change in the “stand in the shoes” policy meant that, when applying the exceptions in § 411.355 and § 411.357, for the purposes of determining whether compensation takes into account the volume or value of referrals or other business generated between the “parties,” the only “parties” to consider are the physicians with ownership or investment interests in their physician organizations. This was not our intent in revising the “stand in the shoes” rules in the FY 2009 IPPS final rule.
To address the issue raised by the stakeholders, we proposed to revise § 411.354(c)(3)(i) so that it is consistent with our work in the FY 2009 IPPS final rule. Our intent there was, and currently remains, that only physicians who stand in the shoes of their physician organization are considered parties to an arrangement for the purposes of the signature requirements of the exceptions. For such purposes, we do not consider employees and independent contractors to be parties to a physician organization's arrangements unless they voluntarily stand in the shoes of the physician organization as permitted under § 411.354(c)(1)(iii) or (c)(2)(iv)(B). Guidance regarding physicians who stand in the shoes of their physician organizations may be found on our Web site at
For purposes other than satisfying the signature requirements of the exceptions, we remain concerned about the referrals of
The following is a summary of the comments we received.
As the commenter correctly recognized, the referrals of all physicians in a physician organization—regardless of whether the physicians stand in the shoes of the physician organization—must be considered when determining compliance with the volume or value standard in the exceptions at § 411.355 and § 411.357. Thus, the physicians who do not stand in the shoes of the physician organization would nonetheless be considered “parties” for the purposes of analyzing compliance with the volume or value standard. Given our uniform interpretation of terms and phrases used in the physician self-referral regulations, under our current regulations, even physicians who do not stand in the shoes of their physician organizations may be required to meet the signature requirements for “parties.” We do not believe there is a need to include these physicians as “parties” that must sign the writing evidencing the arrangement between a DHS entity and a physician organization. The revision to § 411.354(c)(3)(i) is merely intended to alleviate the burden on physician organizations related to the signature requirements in many of the exceptions at § 411.355 and § 411.357 that would otherwise require the signatures of physicians who do not stand in the shoes of their physician organizations. It does not affect the regulations at § 411.354(c)(1)(ii) or (c)(2)(iv), which identify physicians who are deemed to stand in the shoes of their physician organizations and have the same compensation arrangements as their physician organizations. Moreover, we note that our determination of which physicians are “parties” for the purposes of applying the exceptions at § 411.355 and § 411.357 should not affect which physicians and entities are considered parties to a contract under State or any other law.
We are uncertain what “downstream compensation” the commenter believes is factored into the analysis of the direct compensation between a DHS entity and the physician organization with which it has a compensation arrangement. As noted earlier, compensation between a
As a result of the comments, we are finalizing our proposed revisions to the “stand in the shoes” regulations at § 411.354(c)(3)(i).
The term “
We proposed to revise the definition of
We received no comments opposing our proposal to revise the definition of
Section 1877(c)(1) of the Act sets forth an exception for ownership in certain publicly traded securities and mutual funds. The exception applies to several categories of securities, including securities that are traded under the automated interdealer quotation system operated by the National Association of Securities Dealers (NASD). This exception is codified in our regulations at § 411.356(a), which closely mirrors section 1877(c) of the Act.
Through a question posed to us by a stakeholder, it has come to our attention that the NASD no longer exists and that it is no longer possible to purchase a publicly traded security traded under the automated interdealer quotation system it formerly operated. In response, we researched whether we could modernize the exception for ownership of publicly traded securities by including currently existing systems that are equivalent to the NASD's now-obsolete automated interdealer quotation system. (See 80 FR 41920 for a summary of our research).
We proposed to use our authority in section 1877(b)(4) of the Act to revise the regulations at § 411.356(a)(1) to include securities listed for trading on an electronic stock market or OTC quotation system in which quotations are published on a daily basis and trades are standardized and publicly transparent. Trades made through a physical exchange (such as the NYSE or the American Stock Exchange) are standardized and publicly transparent. To protect against risk of program or patient abuse, we believe that trades on the electronic stock markets and OTC quotation systems that are eligible for this exception must also be standardized and publicly transparent. Accordingly, we did not propose to include any electronic stock markets or OTC quotation systems that trade unlisted stocks or that involve decentralized dealer networks. We also believe it is appropriate to limit the proposed exception to those electronic stock markets or OTC quotation systems that publish quotations on a daily basis, as physical exchanges must publish on that basis. We solicited comments regarding whether fewer, different, or additional restrictions on electronic stock markets or OTC quotation systems are necessary to effectuate the Congress' intent and to protect against patient or program abuse.
We received no comments on our proposal to update the provision at § 411.356(a)(1) to except ownership or investment interest in securities listed for trading on an electronic stock market or over-the-counter quotation system, provided that quotations are published on a daily basis and trades are standardized and publicly transparent. We are finalizing the revisions to § 411.356(a) as proposed.
Section 1877(e)(1)(A) of the Act sets forth an exception for the rental of office space. Under this exception, lease arrangements must satisfy six specific criteria, one of which is that the office space rented or leased is used exclusively by the lessee when being used by the lessee (and is not shared with or used by the lessor or any other person or entity related to the lessor). The exception also permits payments by the lessee for the use of space consisting of common areas (which do not afford exclusive use to the lessee) if the payments do not exceed the lessee's pro rata share of expenses for the space based upon the ratio of the space used exclusively by the lessee to the total amount of space (other than common areas) occupied by all persons using the common areas. The 1995 final rule (60 FR 41959) incorporated the provisions of section 1877(e)(1)(A) of the Act into our regulations at § 411.357(a).
Section 1877(e)(8) of the Act sets forth an exception for: (1) Payments made by a physician to a laboratory in exchange for the provision of clinical laboratory services; and (2) payments made by a physician to an entity as compensation for items or services other than clinical laboratory services if the items or services are furnished at fair market value (the “payments by a physician exception”). The 1995 final rule (60 FR 41929) incorporated the provisions of section 1877(e)(8) of the Act into our regulations at § 411.357(i). In the 1998 proposed rule (63 FR 1703), we proposed to interpret “other items or services” to mean any kind of items or services that a physician might purchase, but not including clinical laboratory services or those specifically excepted under another provision in §§ 411.355 through 411.357. In that proposal, we stated that we did not believe that the Congress meant for the payments by a physician exception to cover a rental arrangement as a service that a physician might purchase, because it had already included in the statute specific exceptions, with specific standards for such arrangements, in section 1877(e)(1) of the Act. In Phase II (69 FR 16099), we responded to commenters that disagreed with our position that the exception for payments by a physician is not available for arrangements involving items and services addressed by another exception, stating that our position is consistent with the overall statutory scheme and purpose and is necessary to prevent the exception from negating the statute (69 FR 16099). We made no changes to the exception in Phase II to accommodate the commenters' concerns.
In the 1998 proposed rule (63 FR 1699), we proposed an exception for compensation arrangements that are based upon fair market value and meet certain other criteria. We finalized the exception at § 411.357(l) in Phase I, noting that, although it only covered services provided by a physician (or an immediate family member of a physician) to an entity furnishing DHS, it was available for some arrangements that are covered by other exceptions (66 FR 917 through 919). Although commenters requested that we expand the exception to cover the transfer, lease or license of real property, intangible property, property rights, or a covenant not to compete (69 FR 16111), we made no substantive changes to the exception for fair market value compensation in Phase II. In Phase III, we expanded the exception at § 411.357(l) for fair market value compensation to include arrangements involving compensation from a physician to an entity furnishing DHS. We reiterated that the exception for fair market value compensation does not protect office space lease arrangements; rather, arrangements for the rental of office space must satisfy the requirements of the exception at § 411.357(a) (72 FR 51059 through 51060).
In Phase III, a commenter suggested that “timeshare” leasing arrangements would be addressed more appropriately in the exception for fair market value compensation at § 411.357(l) or the exception for payments by a physician at § 411.357(i), instead of the exception for the rental of office space at § 411.357(a) (72 FR 51044). The commenter described a timeshare lease arrangement under which a physician or group practice pays the lessor for the right to use office space exclusively on a turnkey basis, including support personnel, waiting areas, furnishings, and equipment, during a schedule of time intervals for a fair market value rate per interval of time or in the aggregate, and urged us to clarify that such timeshare arrangements may qualify under § 411.357(i) or (l), the exceptions for payments by a physician and fair market value compensation, respectively. We note that the commenter specifically described lease arrangements where the lessee had exclusive, but only periodic, use of the premises, equipment, and personnel. In response, we declined to permit office space lease arrangements to be eligible for the fair market value exception at § 411.357(l), and stated that we were not persuaded that § 411.357(i) should protect office space leases (72 FR 51044 through 51045).
Through our administration of the SRDP, as well as stakeholder inquiries, we have been made aware of arrangements for the use of another person or entity's premises, equipment, personnel, items, supplies, or services by physicians who, for various legitimate reasons, do not require or are not interested in a traditional office space lease arrangement. For example, in a rural or underserved area, there may be a need in the community for certain specialty services but that need is not great enough to support the full-time services of a physician specialist. Under “timeshare” arrangements, a hospital or local physician practice may ask a specialist from a neighboring community to provide services in space owned by the hospital or practice on a limited or as-needed basis. Most often, under such an arrangement, the specialist does not establish an additional medical practice office by renting office space and equipment, hiring personnel, and purchasing services and supplies necessary for the operation of a medical practice. Rather, it is common for a hospital or local physician practice to make available to the visiting independent physician on a “timeshare” basis the space, equipment and services necessary to treat patients. Under the “timeshare” arrangement, the hospital or physician practice may provide the physician with a medical office suite that is fully furnished and operational. The physician does not need to make any improvements to the space or to bring any medical or office supplies to begin seeing patients. “Timeshare” arrangements also may be attractive to a relocating physician whose prior medical practice office lease has not expired or to a new physician establishing his or her medical practice.
In general, a license—or permission—to use the property of another person differs from a lease in that ownership and control of the property remains with the licensor. That is, a lease transfers dominion and control of the property from the lessor to the lessee, giving the lessee an exclusive “right against the world” (including a right against the lessor) with respect to the leased property, but a license is a mere privilege to act on another's property and does not confer a possessory interest in the property. A license may be granted in writing or orally, and ordinarily does not convey an exclusive right. For a license to convey the right
Under our current regulations, an arrangement that includes the use of office space, as timeshare arrangements commonly do, must be analyzed under the exception for the rental of office space. The exceptions for payments by a physician and fair market value compensation arrangements are unavailable under our current regulations because of the inclusion of office space in the bundle of items and services in a typical timeshare arrangement.
We believe that timeshare arrangements that permit the use of office space, equipment, personnel, items, supplies, or services can be structured in a way that does not pose a risk of program or patient abuse. To address such arrangements, which we believe are often necessary to ensure adequate access to needed health care services (especially in rural and underserved areas), we proposed a new exception at § 411.357(y) that would have applied to timeshare arrangements that meet certain criteria, including that: (1) The arrangement is set out in writing, signed by the parties, and specifies the premises, equipment, personnel, items, supplies, and services covered by the arrangement; (2) the arrangement is between a hospital or physician organization (licensor) and a physician (licensee) for the use of the licensor's premises, equipment, personnel, items, supplies, or services; (3) the licensed premises, equipment, personnel, items, supplies, and services are used predominantly to furnish E/M services to patients of the licensee; (4) the equipment covered by the arrangement, if any: (i) Is located in the office suite where the physician performs E/M services, (ii) is used only to furnish DHS that is incidental to the physician's E/M services and furnished at the time of such E/M services, and (iii) is not advanced imaging equipment, radiation therapy equipment, or clinical or pathology laboratory equipment (other than equipment used to perform CLIA-waived laboratory tests); (5) the arrangement is not conditioned on the licensee's referral of patients to the licensor; (6) the compensation over the term of the arrangement is set in advance, consistent with fair market value, and not determined in a manner that takes into account (directly or indirectly) the volume or value of referrals or other business generated between the parties; (7) the arrangement would be commercially reasonable even if no referrals were made between the parties; and (8) the arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act) or any Federal or State law or regulation governing billing or claims submission.
The proposed exception at § 411.357(y) would have applied only to timeshare arrangements where the licensor is a hospital or physician organization; it would not protect arrangements where the licensor is another type of DHS entity. We solicited comments regarding whether the scope of the exception is sufficiently broad to improve beneficiary access to care (especially in rural or underserved areas), whether there is a compelling need to allow DHS entities other than hospitals and physician organizations to enter into timeshare arrangements with referring physicians, and whether the exception should apply if the licensor is a physician who is a source of DHS referrals to the licensee. We also solicited comments on whether the exception should be limited to arrangements in rural and underserved areas.
We proposed to protect only those timeshare arrangements under which the physician uses the licensed premises, equipment, personnel, items, supplies, and services predominantly for the E/M of patients. The proposed exception at § 411.357(y) would not protect the license of office space used by the physician solely or primarily to furnish DHS to patients. We solicited comments regarding whether “predominant use” is an appropriate measure of the use of the licensed premises and, if so, how we might define this standard, or whether we should include a different measure, such as one that would require that “substantially all” of the services furnished to patients on the licensed premises are not DHS. We also proposed to limit the type and location of the equipment that may be licensed to only that which is used to furnish DHS that is incidental to the patient's E/M visit and furnished contemporaneously with that visit. We noted that such a requirement would not affect the manner in which the DHS is billed (for example, “incident to” a physician's service or directly by an NPP). Because we believe that DHS that is “incidental to” the patient's E/M includes a limited universe of diagnostic tests and other procedures (such as x-rays, rapid strep tests, and urine dipstick tests to diagnose pregnancy) that assist the physician in his or her diagnosis and treatment of the patient, we proposed to exclude from the protection of the exception the license of advanced imaging equipment, radiation therapy equipment, and clinical and pathology laboratory equipment (other than that which is used to furnish CLIA-waived laboratory tests). Finally, we proposed to require that the equipment be located on the licensed premises; that is, in the office suite. We solicited comments on these requirements and limitations. Specifically we solicited comments regarding whether the equipment location requirement should be expanded to include equipment located in the same building (as defined at § 411.351) as the licensed office suite or an off-site location, and whether we should prohibit the license of equipment in the absence of a corresponding license of office space.
We also proposed to prohibit certain per unit-of-service and percentage compensation methodologies for determining the license fees under timeshare arrangements. Under the exception as proposed, parties could determine license fees on an hourly, daily, or other time-based basis, but would not be permitted to use a compensation methodology based on, for example, the number of patients seen. Parties also would not be permitted to use a compensation methodology based on the amount of revenue raised, earned, billed, collected, or otherwise attributable to the services provided by the licensee while using the licensor's premises, equipment, personnel, items, supplies or services. We solicited comments on whether these limitations on compensation methodologies for license fees are necessary and whether a timeshare arrangement for the use of a licensor's premises, equipment, personnel, items, supplies, or services would pose a risk of program or patient abuse in the absence of this prohibition on per-click and percentage compensation methodologies for the license fees paid by the licensee to the licensor.
We solicited comments on the proposed new exception for timeshare arrangements and any additional criteria that may be necessary to safeguard against program or patient abuse.
We are finalizing an exception at § 411.357(y) for timeshare arrangements with several modifications to our proposal. Importantly, the exception as
The following is a summary of the comments we received.
As we described in the proposed rule, we believe that timeshare arrangements may improve access to needed care, especially in rural and underserved areas, by facilitating part-time or periodic access to physicians in communities where the need for the physician is not great enough to support the full-time services of the physician or where physicians, for various legitimate reasons, do not require or are not interested in a traditional office space lease arrangement (80 FR 41921). The new exception at § 411.357(y) is intended to promote access to needed services and provide parties with an option for structuring arrangements in the way that best suits the needs of the parties and the community in which the timeshare arrangement is located.
We note that we do not agree with the commenter's description of a timeshare arrangement as one in which a physician is embedded in another party's medical practice with permission to use the space, equipment, and personnel of the practice for a fair market payment. Although such an arrangement may qualify as a timeshare arrangement under the new exception depending on the facts and circumstances, we do not intend to limit the types of arrangements that may qualify as timeshare arrangements to those in which a physician is located within another physician's practice.
We used the term “license” in the proposed exception at § 411.357(y) to describe the type of arrangement that could qualify for the exception. Generally, a license grants permission to do something which, without the license, would not be allowable.
Upon further reflection and after careful consideration of the issues raised by the commenters, we agree that the use of the term “license” without a definition that is specific to the exception at § 411.357(y) could introduce unnecessary confusion into the regulations and potentially exclude non-abusive arrangements that we believe should qualify for the exception. The terminology used by the parties in the documentation that describes and supports the timeshare arrangement should not control whether the parties can satisfy the requirements of the exception. Whether the arrangement is styled as a “license” or otherwise is not dispositive when determining compliance with new § 411.357(y). Rather, the facts and circumstances of the arrangement are critical to its compliance with the requirements of the exception. Therefore, we are not finalizing § 411.357(y) to include the terms “license,” “licensor,” or “licensee.” As finalized, § 411.357(y) includes a set of requirements for arrangements that we consider to be “timeshare” arrangements that do not violate the physician self-referral law's referral and billing prohibitions.
Parties wishing to avail themselves of the exception at § 411.357(y) need not utilize any particular terminology, provided that the arrangement itself grants one party the permission to use the premises, equipment, personnel, items, supplies, or services of the other party to the arrangement. Moreover, the arrangement may qualify for protection under the final exception even if the grant of permission to use the premises, equipment, personnel, items, supplies, or services provides for exclusive use of the premises, equipment, personnel, items, supplies, or services or has a duration of 1 year of more. However, the timeshare arrangement may not convey a possessory leasehold interest in the office space that is the subject of the arrangement. Where control over office space is conferred on a party such as to give that party a “right against the world” (including a right against the owner or sub-lessor of the office space), the arrangement must qualify for the exception for the rental of office space at § 411.357(a) in order not to run afoul of the physician self-referral law.
Again, what is imperative for compliance with the physician self-referral law when relying on the exception at § 411.357(y) is that the timeshare arrangement grant to one party the permission to use the premises, equipment, personnel, items, supplies, or services of the other party without conveying a possessory leasehold interest in the office space that is the subject of the arrangement. Of course, the arrangement must also satisfy the other requirements of the exception for timeshare arrangements as finalized at § 411.357(y) in this final rule. And, regardless of the structure of the arrangement or the terminology used by the parties, we do not intend to protect potentially abusive arrangements such as exclusive-use timeshare arrangements that essentially function as full-time leases for medical practice sites; arrangements in which physicians are selected or given preferred time slots based on their referrals to the party granting permission to use the premises, equipment, personnel, items, supplies, or services; or consecutive short-term arrangements that are modified frequently in ways that take into account a physician's referrals.
A financial relationship between a physician (or immediate family member of the physician) and a DHS entity must satisfy the requirements of an applicable exception to the physician self-referral law to avoid the law's billing and referral prohibitions. Where more than one exception is available to protect a financial relationship, we do not dictate which exception the parties must use. The exception for timeshare arrangements finalized at § 411.357(y) establishes another—not a replacement—exception for parties to a timeshare arrangement. If a timeshare arrangement includes the exclusive use of office space but does not convey a possessory leasehold interest in the office space that is the subject of the arrangement, the new exception at § 411.357(y) is available to protect the arrangement (provided that all other requirements of the exception are satisfied). Depending on the facts and circumstances of the arrangement, it may also qualify for the exception at § 411.357(a). In short, the parties to a timeshare arrangement may elect to use any available exception(s) to protect the arrangement. However, where control over office space is conferred on a party such as to give that party a “right against the world” (including a right against the owner or sub-lessor of the office space), the arrangement must qualify for the exception for the rental of office space at § 411.357(a) in order not to run afoul of the physician self-referral law.
As to the request that we permit a physician organization, rather than a physician in his or her personal capacity, to enter into a timeshare arrangement, we refer readers to the discussion in the proposed rule regarding the analysis of arrangements between DHS entities and physician organizations where physicians may stand in the shoes of the physician organizations (80 FR 41911). There, we explained that, under our regulations at § 411.354(c), remuneration from an entity furnishing DHS to a physician organization would be deemed to be a direct compensation arrangement between each physician who stands in the shoes of the physician organization and the entity furnishing DHS. A “deemed” direct compensation arrangement must satisfy the requirements of an applicable exception if the physician makes referrals to the DHS entity and the DHS entity bills the Medicare program for DHS furnished as a result of the physician's referrals. The exception at § 411.357(y) would be
Timeshare arrangements between physicians and organizations, such as real estate subsidiaries and management service organizations, that are not themselves DHS entities should be analyzed under the rules regarding indirect compensation arrangements at § 411.354(c). To protect an indirect compensation arrangement that exists as a result of a chain of financial relationships that runs hospital or physician organization—affiliate—physician, the arrangement must satisfy the requirements of the exception at § 411.357(p) for indirect compensation arrangements.
In contrast, two commenters supported our proposal to limit the scope of the exception for timeshare arrangements to those arrangements that do not include the use of radiation therapy equipment, and another supported our proposal to prohibit the use of advanced imaging equipment. A different commenter urged us to prohibit the furnishing of physical therapy services on the premises protected by the new exception.
We also disagree with the first commenter's statement that DHS furnished under a timeshare arrangement would need to satisfy the requirements of the in-office ancillary services exception and, therefore, the safeguards built into that exception are sufficient to address any risk of program and patient abuse. Other exceptions, such as the exceptions for
We do not believe that it is necessary at this time to prohibit additional types of equipment under a timeshare arrangement, including equipment that is used to furnish physical therapy services. As discussed in the response to a previous comment, we are finalizing the requirement that the equipment covered by a timeshare arrangement is not used to furnish DHS other than those incidental to the patient's E/M visit and furnished contemporaneously with that visit. To be protected under the exception, physical therapy services furnished using timeshare equipment must be incidental to the patient's E/M services and furnished at the time of the evaluation and management service to which they are incidental. We question whether it would be medically necessary for a patient to receive an E/M service at the time of each physical therapy visit. Moreover, we doubt that a physician furnishes an E/M service prior to each physical therapy session, which would be necessary to satisfy the requirement at final § 411.357(y)(4).
Finally, we note that parties may use the existing exceptions for the rental of office space at § 411.357(a) and the rental of equipment at § 411.357(b), which include different safeguards against program and patient abuse, if they wish to include advanced imaging equipment, radiation therapy equipment, or clinical or pathology laboratory equipment (other than equipment used to perform CLIA-waived laboratory tests) in their arrangements.
We recognize that many timeshare arrangements include compensation formulas that are set as a pre-determined amount for each hour, half-day or full-day spent using the premises, equipment, personnel, items, supplies, or services that are covered under the arrangement. We do not believe such compensation formulas raise the same risks as formulas that result in a payment to the party that provides the timeshare premises, equipment, personnel, items, supplies, or services each time that party refers a patient to the party using the timeshare. Under time-based compensation formulas, the “usage” fee is paid regardless of the number of patients referred by the timeshare grantor or the number of services furnished to such patients (or any other patients). We do not wish to call into question non-abusive timeshare arrangements with time-based compensation terms. Therefore, we are finalizing the requirement at § 411.357(y)(6)(ii) to require that compensation under a timeshare arrangement is not determined using a formula based on per-unit of service fees, and we expressly do not prohibit compensation using a formula that is time-based (for example, per-hour or per-day). We are not prescribing a minimum amount of time per unit for compensation that utilizes a time-based formula and we remind readers that a compensation formula based on per-unit of service “usage” fees is prohibited under the exception only to the extent that such fees reflect services furnished to patients referred by the party granting permission to use its premises, equipment, personnel, items, supplies, or services to the party that receives such permission.
Although not addressed by any commenter, we are also aware of the recent DC Circuit decision in
The conferees intend that charges for space and equipment leases may be based on . . . time-based rates or rates based on units of service furnished, so long as the amount of time-based or units of service rates does not fluctuate during the contract period. (H.R. Rep. No. 103-213, at 814 (1993).)
We noted in the FY 2009 IPPS final rule that CMS had previously interpreted this legislative history as indicating a view that per-click leases do not run afoul of section 1877(e)(1)(B)(iv), but we then stated that this language could also be interpreted as suggesting the Congress's disapproval of per-click leases. We explained, though, that our prohibition on per-click leasing arrangements was ultimately based on our authority to promulgate “other requirements” under section 1877(e)(1)(B)(vi) of the Act, and not on an interpretation of section 1877(e)(1)(B)(iv) of the Act.
In the
The text of the statute does not unambiguously preclude the Secretary from using her authority to add a requirement that bans per-click leases. (Council for Urological Interests, 790 F.3d at 219.)
The Court further concluded that the relevant language in the House Conference Report merely interpreted section 1877(e)(1)(B)(iv) of the Act, and thus did not preclude CMS from imposing additional requirements under section 1877(e)(1)(B)(vi) of the Act. See id. at 222 (explaining that the legislative history “simply indicates that, as written, the rental-charge clause [in section 1877(e)(1)(B)(iv)] does not preclude per-click leases” and “[n]othing in the legislative history suggests a limit on [CMS's] authority” to prohibit per-click leases under section 1877(e)(1)(B)(vi) of the Act).
The Court concluded, however, that CMS's revised interpretation of the House Conference Report was arbitrary and capricious, and it remanded the case to the agency to permit a fuller consideration of the legislative history. As previously noted, we are considering options as to how to comply with the court's ruling.
Nonetheless, our current decision to prohibit per-unit of service compensation formulas under § 411.357(y) is not affected by the Court's decision in
After careful consideration of the comments we received in response to the proposed exception, we are
Several compensation arrangement exceptions to the physician self-referral law require that an arrangement be signed by the parties. Our current regulations at § 411.353(g) include a special rule for arrangements involving temporary noncompliance with signature requirements. The regulation permits an entity to submit a claim or bill and receive payment for DHS if an arrangement temporarily does not satisfy the applicable exception's signature requirement but otherwise fully complies with the exception. Under the current rule, if the failure to comply with the signature requirement is inadvertent, the parties must obtain the required signature(s) within 90 days. If the failure to comply is not inadvertent, the parties must obtain the required signature(s) within 30 days.
In the FY 2009 IPPS final rule, we stated that we would evaluate our experience with the regulation at § 411.353(g) and propose more or less restrictive modifications at a later date (73 FR 48707). In the proposed rule, we proposed to modify the current regulation to allow parties 90 days to obtain the required signatures, regardless of whether or not the failure to obtain the signature(s) was inadvertent. We recognize that it is not uncommon for parties who are aware of a missing signature to take up to 90 days to obtain all required signatures. We also proposed to revise § 411.353(g) to include reference to the new regulatory exceptions for payments to a physician to employ an NPP and timeshare arrangements that we proposed at new § 411.357(x) and § 411.357(y), respectively, to ensure that all compensation exceptions with signature requirements are treated uniformly. We do not believe that allowing parties 90 days to obtain signatures while the arrangement otherwise complies with the physician self-referral law poses a risk of program or patient abuse.
The proposed regulation maintains the safeguards of the current rule. Specifically, the proposed regulation applies narrowly to the signature requirement only. To make use of the proposed revised provisions at § 411.353(g), an arrangement would have to satisfy all other requirements of an applicable exception, including the requirement that the arrangement be set out in writing. In addition, an entity may make use of the proposed regulation only once every 3 years for the same referring physician. Given these safeguards, we believe that the proposed revision poses no risk of program or patient abuse. We are finalizing our proposed revision to the special rule at § 411.353(g).
The following is a summary of the comments we received.
The compensation arrangement with the physician organization is deemed to be a compensation arrangement with Dr. A and a compensation arrangement with Dr. B. If the parties do not sign the arrangement until February 15, 2014, but the arrangement otherwise satisfies the requirements of § 411.353(g), the DHS entity may bill the program for DHS performed as a result of referrals by both Dr. A and Dr. B for the period from January 1, 2014 through February 14, 2014. That is to say that the special rule at § 411.353(g) affords the DHS entity protection for referrals from each of the physicians who stand in the shoes of the physician organization. For precisely this reason, however, if the DHS entity enters into a different arrangement with the physician organization on March 1, 2015 for Dr. B's services, and the parties do not sign the arrangement until May 1, 2015, the entity may not rely on the rule at § 411.353(g) for either Dr. A or Dr. B for the period of March 1, 2015 through April 30, 2015. The entity already made use of the special rule for Dr. A and Dr. B's referrals from January 1, 2014 through February 14, 2014. On the other hand, if the DHS entity entered into direct compensation
We decline to state whether the examples provided by the commenter comply with the signature requirement for the following reasons: First, the exceptions require the arrangement to be signed by the parties. Even a document bearing the handwritten signature of one of the parties will not satisfy this requirement if the document, when considered in the context of the collection of documents and the underlying arrangement, does not clearly relate to the arrangement. Second, the intent of the party purportedly “signing” the standalone document is not clear in certain examples provided. Third, we are concerned that, by judging the examples in isolation from their context, we might unduly narrow parties' ability to comply with the signature requirement. In sum, whether an arrangement is signed by the parties depends on the facts and circumstances of the arrangement and the writings that document the arrangement.
After careful consideration of the comments, we are finalizing our proposal to remove the distinction between inadvertent and not inadvertent failure to obtain a signature at § 411.353(g). Under the final regulation, all parties have 90 days to obtain missing signatures. The regulation, as finalized, continues to limit the use of § 411.353(g) by an entity to once every 3 years for a particular physician. At this time, we believe that this limitation is necessary to prevent program or patient abuse.
Section 6001(a) of the Affordable Care Act amended the rural provider and hospital ownership or investment interest exceptions to the physician self-referral law to impose additional restrictions on physician ownership and investment in hospitals. For the purposes of these exceptions, the new legislation defined a “physician owner or investor” as a physician, or immediate family member of a physician, who has a direct or indirect ownership or investment interest in a hospital. We refer to hospitals with direct or indirect physician owners or investors as “physician-owned hospitals.”
Section 6001(a)(3) of the Affordable Care Act established new section 1877(i) of the Act, which imposes additional requirements for physician-owned hospitals to qualify for the rural provider or hospital ownership exceptions. In part, section 1877(i) of the Act requires a physician-owned hospital to disclose the fact that the hospital is partially owned or invested in by physicians on any public Web site for the hospital and in any public advertising for the hospital; provides that a physician-owned hospital must have had a provider agreement in effect as of December 31, 2010; and provides that the percentage of the total value of the ownership or investment interests held in a hospital, or in an entity whose assets include the hospital, by physician owners or investors in the aggregate cannot exceed such percentage as of March 23, 2010.
In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72240), we addressed many of the additional requirements that were established by the Affordable Care Act for a physician-owned hospital to avail itself of the rural provider or hospital ownership exceptions. In that final rule with comment period, among other things, we finalized regulations at § 411.362(b)(3)(ii)(C) that required a physician-owned hospital to disclose on any public Web site for the hospital and in any public advertising that the hospital is owned or invested in by physicians. We also finalized regulations at § 411.362(b)(1) that required a physician-owned hospital to have had a provider agreement in effect on December 31, 2010, and at § 411.362(b)(4)(i) to provide that the percentage of the total value of the ownership or investment interests held in a hospital (or in an entity whose assets include the hospital) by physician owners or investors in the aggregate cannot exceed such percentage as of
Following publication of the CY 2011 OPPS/ASC final rule with comment period (75 FR 72240), we received numerous inquiries about many of the additional requirements that were established by the Affordable Care Act for the rural provider and hospital ownership exceptions, including the requirement that a physician-owned hospital must disclose on any public Web site for the hospital and in any public advertising that the hospital is owned or invested in by physicians. Specifically, industry stakeholders requested additional guidance to clarify the terms “public Web site for the hospital” and “public advertising for the hospital,” the range of statements that constitute a sufficient disclosure, and the period of noncompliance for a failure to disclose. We also received disclosures through the SRDP where the disclosing parties reasonably assessed that, based on existing CMS guidance, they could not certify compliance with this disclosure requirement and, therefore, the conduct constituted a violation of the law.
Given the inquiries and disclosures that we received, we have carefully considered both the disclosure requirement's purpose and our existing regulations addressing the requirement. We believe that, in establishing this requirement, the Congress decided that the public should be on notice if a hospital is physician-owned because that fact may inform an individual's medical decision-making. We do not interpret the public Web site and advertising disclosure requirements to be prescriptive requirements for the inclusion of specific wording in an undefined range of communication. Accordingly, we proposed to provide physician-owned hospitals more certainty regarding the forms of communication that require a disclosure statement and the types of language that would constitute a sufficient statement of physician ownership or investment. We believe that our proposals would appropriately balance the industry's need for greater clarity with the public's need to be apprised of such information. Finally, we note that, in the event that a physician-owned hospital discovers that it failed to satisfy the public Web site or public advertising disclosure requirements, the SRDP is the appropriate means for reporting such overpayments. For more information, see the
For the public Web site disclosure requirement, we proposed to amend existing § 411.362(b)(3)(ii)(C) to list examples of the types of Web sites that do not constitute a “public Web site for the hospital.” We proposed to revise § 411.362(b)(3)(ii)(C) to specify that a “public Web site for the hospital” does not include certain types of Web sites, even though limited information about the hospital may be found on such Web sites. For example, we do not consider social media Web sites to be “public Web sites for the hospital,” and the proposed regulation would clarify this. We do not believe that a hospital's communications (such as maintaining an individual page on a Web site, posting a video, or posting messages) via a social media Web site should be construed as a Web site that is “for the hospital,” given that the Web site is operated and maintained by a social networking service and that a multitude of users typically can become members of such a service. Further, we note that social media communications, which are used primarily for the development of social and professional contacts and for sharing information between interested parties, differ in scope from the provision of information typically found on a hospital's main Web site, such as the hospital's history, leadership and governance structure, mission, and a list of staff physicians. We also proposed to specify at § 411.362(b)(3)(ii)(C) that a “public Web site for the hospital” does not include electronic patient payment portals, electronic patient care portals, or electronic health information exchanges, as these are not available to the general public. These portals are for the convenience of only those patients who have already been treated at the hospital and to whom the hospital's physician ownership likely would have already been disclosed. Our proposed examples of Web sites that do not constitute a “public Web site for the hospital” is not exhaustive. We recognize the difficulty in identifying every type of Web site that either currently exists or may emerge as technology develops that would not require a disclosure statement. We solicited public comments on whether our proposed examples are appropriate given the statutory language and whether we should include different or additional examples of Web sites in the list. We also solicited public comment on whether, in the alternative, we should provide an inclusive definition of what would be considered a “public Web site for the hospital” and, if so, we solicited recommendations for such a definition. Finally, we note that, even if a Web site does not constitute a public Web site for the hospital under our proposal, the online content may, depending on the facts and circumstances, constitute public advertising for the hospital that would require a disclosure statement.
For the public advertising disclosure requirement, we proposed to define “public advertising for the hospital” at § 411.362(a). We note that our existing regulations at § 411.362(b)(3)(ii)(C) reference “public advertising” without explicitly specifying “for the hospital,” which is different from the statutory language of section 1877(i)(1)(C)(iv) of the Act. We proposed to include that phrase in the definition and in the disclosure requirement to conform our regulations to the statutory language. To determine how best to clarify what we consider to be “public advertising for the hospital,” we consulted numerous sources for definitions of “advertise” and “advertising.” After considering the results of our research, we proposed to define “public advertising for the hospital,” for the purposes of the physician self-referral law, as any public communication paid for by the hospital that is primarily intended to persuade individuals to seek care at the hospital. We proposed that the definition of “public advertising for the hospital” does not include, by way of example, communication made for the primary purpose of recruiting hospital staff (or other similar human resources activities), public service announcements issued by the hospital, and community outreach issued by the hospital. We believe that, as a general matter, communications related to recruitment are for the primary purpose of fulfilling a hospital's basic need for staff and that communications issued via public service announcements and community outreach are for the primary purpose of providing the general public healthcare-related information.
We note that a determination as to whether a certain communication constitutes public advertising for the hospital depends on the specific facts and circumstances of the communication. In the CY 2011 OPPS/ASC final rule with comment period, commenters stated that a hospital should not be required to include disclosures in certain advertising, such as the kind found on billboards, or the kind aired via radio and television and that the requirement should be confined to print media such as newspapers, magazines, and other internally produced print material for public use (75 FR 72248). In response to the commenters, we stated that we have no flexibility to exclude certain types of advertising media, as the statute was very straightforward in its statement that the disclosure appear in “any public advertising” for the hospital. In the proposed rule, we clarified that the facts and circumstances of the communication, rather than the medium by which the message is communicated, determine whether a communication constitutes “public advertising for the hospital.”
We also proposed to clarify the types of statements that constitute a sufficient statement of physician ownership or investment. Specifically, we proposed to amend § 411.362(b)(3)(ii)(C) to specify that any language that would put a reasonable person on notice that the hospital may be physician-owned is deemed a sufficient statement of physician ownership or investment. A statement such as “this hospital is owned or invested in by physicians” or “this hospital is partially owned or invested in by physicians” would certainly meet this standard. However, statements that the hospital is “founded by physicians,” “managed by physicians,” “operated by physicians,” or “part of a health network that includes physician-owned hospitals” would also meet this standard. We also believe that a hospital's name, by itself, could constitute language that meets this standard. For example, we believe that “Doctors Hospital at Main Street, USA” would put a reasonable person on notice that the hospital may be physician-owned. We sought public comment on our proposed revision to the public Web site and advertising disclosure requirements and on our proposed examples of language that would satisfy that standard. We also invited suggestions regarding alternative standards for deeming language sufficient for these requirements.
For the location and legibility of disclosure statements, we continue to believe, as stated in the CY 2011 OPPS/ASC final rule with comment period, that the disclosure should be located in a conspicuous place on the Web site and on a page that is commonly visited by current or potential patients, such as the home page or “about us” section (75 FR 72248). Further, we believe that the disclosure should be displayed in a clear and readable manner and in a size that is generally consistent with other text on the Web site. We did not propose to prescribe a specific location or font size for disclosure statements on either a public Web site or public advertising; rather, physician-owned hospitals have flexibility in determining exactly where and how to include the disclosure statements, provided that the disclosure would put a reasonable person on notice that the hospital may be physician-owned.
For those physician-owned hospitals that have identified non-compliance with the public Web site disclosure requirement, we are taking this opportunity to clarify that the period of noncompliance is the period during which the physician-owned hospital failed to satisfy the requirement. We note that September 23, 2011 is the date by which a physician-owned hospital had to be in compliance with the public Web site and advertising disclosure requirements (75 FR 72241), and, therefore, would be the earliest possible beginning date for noncompliance. For those physician-owned hospitals that have identified noncompliance with the public advertising disclosure requirement, we are clarifying that the period of noncompliance is the duration of the applicable advertisement's predetermined initial circulation, unless the hospital amends the advertisement to satisfy the requirement at an earlier date. For example, if a hospital pays for an advertisement to be included in one issue of a monthly magazine and the hospital fails to include the disclosure in the advertisement, the period of noncompliance likely would be the applicable month of circulation, even if the magazine continued to be available in the archives of the publisher, in waiting rooms of physician offices, or other public places. We sought public comment on additional guidance that may be necessary regarding the periods of noncompliance for both disclosure requirements.
We are finalizing without modification our proposals regarding the public Web site and public advertising disclosure requirement at § 411.362(b)(3)(ii)(C). The following is a summary of the comments we received.
After careful review and consideration of the comments, we are finalizing our proposal, without revision, to amend § 411.362(b)(3)(ii)(C) to specify that a public Web site for the hospital does not include, by way of example: Social media Web sites; electronic patient payment portals; electronic patient care portals; and electronic health information exchanges. We are finalizing our proposal, without revision, to add our proposed definition of “public advertising for the hospital” at § 411.362(a). We are also finalizing, without revision, our clarifications regarding the periods of noncompliance associated with a failure to satisfy either the public Web site or public advertising disclosure requirements (80 FR 41925).
As stated above, section 6001(a)(3) of the Affordable Care Act established new requirements for physician-owned hospitals to avail themselves of either the rural provider or hospital ownership exceptions to the physician self-referral law, including the requirement that the percentage of the total value of the ownership or investment interests held in a hospital, or in an entity whose assets include the hospital, by physician owners or investors in the aggregate cannot exceed such percentage as of March 23, 2010. In this rule, we refer to the percentage of ownership or investment interests held by physicians in a hospital as the “
In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72251), we codified the
Following publication of the CY 2011 OPPS/ASC final rule with comment period, we received inquiries from
Given the inquiries that we received after publication of the CY 2011 OPPS/ASC final rule with comment period, we have reconsidered our position that our regulations at § 411.354 necessarily limit the definition of physician owner or investor for the purposes of establishing the baseline
To support our proposal and implement the requirements of the statute, we proposed to amend our existing regulations to specify that, for the purposes of § 411.362 (including for the purposes of determining the baseline
We believe that our proposed revision would make the prohibition set forth at § 411.362(b)(4)(i) better align with the statutory definition of “physician owner or investor” in a hospital without unsettling long-standing definitions in our regulations. We solicited public comments on our proposed revision to § 411.362, including whether such revision would adequately address the concerns expressed by the stakeholders after publication of the CY 2011 OPPS/ASC final rule with comment period.
We solicited public comments on an alternate proposal that we believe also supports our policy and, thereby, effectuates the statute's purpose. Specifically, we solicited public comments on whether, in the alternative, we should revise our regulations in an even more comprehensive manner and remove the references to a “referring physician” throughout existing § 411.354. We invited public comments on whether it would be helpful to retain the references to a “referring physician” for those specific provisions where the concept of a physician's referrals to a DHS entity is essential to the provision, such as our definition of an indirect compensation arrangement at § 411.354(c)(2)(ii).
Finally, in the proposed rule we recognized that some physician-owned hospitals may have relied on the position that was articulated in the CY 2011 OPPS/ASC final rule with comment period concerning non-referring physicians and the baseline
The following is a summary of the comments we received.
After consideration of the comments, we are amending our existing regulations to specify that, for the purposes of § 411.362 (including for the purposes of determining the baseline
Since the enactment of section 1877 of the Act in 1989, significant changes in the delivery of health care services and the payment for such services have occurred, both within the Medicare and Medicaid programs and for non-federal payors and patients. For over a decade, we have engaged in efforts to align payment under the Medicare program with the quality of the care provided to our beneficiaries. Laws such as the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), the Deficit Reduction Act of 2005 (DRA), and the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) have guided our efforts to move toward health care delivery and payment reform. More recently, the Affordable Care Act required significant changes to the Medicare program's payment systems and provides the Secretary with broad authority to test models to implement these reforms. In our proposed rule, we highlighted certain provisions of the Affordable Care Act that grant the Secretary broad authority to test models implementing health care delivery and payment reform. (See 80 FR 41927-28.)
As noted in our proposed rulemaking, we are moving away from Medicare payments to providers and suppliers that do not incorporate the value of the care provided. The Secretary recently set a goal of tying 30 percent of traditional, fee-for-service Medicare payments to quality or value through alternative payment models, such as ACOs or bundled payment arrangements, by the end of 2016, and 50 percent of payments to these models by the end of 2018. The Secretary also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016, and 90 percent of payments to quality or value by 2018, through programs such as the Hospital VBP Program and the Hospital Readmissions Reduction Program. (See press release titled “Better, Smarter, Healthier: In historic announcement, HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value,” U.S. Department of Health & Human Services (Jan. 26, 2015),
The physician self-referral law, by design, separates entities furnishing DHS from the physicians who refer Medicare patients to them. Evolving health care delivery and payment models, within both the Medicare and Medicaid programs and programs sponsored by non-Federal payors, are premised on the close integration of a variety of different health care providers to achieve the goals of improving the experience of care, improving the health of populations, and reducing per capita costs of health care, often referred to as the “three-part aim.” Entities furnishing DHS face the predicament of trying to achieve clinical and financial integration with other health care providers, including physicians, while simultaneously having to satisfy the requirements of an exception to the physician self-referral law's prohibitions if they wish to compensate physicians to help them meet the three-part aim and avoid financial penalties that may be imposed on low-value health care providers. Because all inpatient and outpatient services are considered DHS, hospitals must consider each and every service referred by a physician in their attempts to ensure that compensation paid to a physician does not take into account the volume or value of his or her referrals to the hospital. According to stakeholders, structuring incentive compensation and other payments can be particularly challenging for hospitals, even where the payments are to hospital-employed physicians.
Stakeholders have expressed concern that, outside of the Medicare Shared Savings Program or certain Center for Medicare and Medicaid Innovation-sponsored care delivery and payment models—for which we have issued waivers of the prohibitions of the physician self-referral law—the physician self-referral law prohibits financial relationships necessary to achieve the clinical and financial integration required for successful health care delivery and payment reform. These concerns apply equally to the participation of physicians and entities furnishing health care services in models sponsored and paid for solely
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10), enacted April 16, 2015, includes certain Medicare program integrity and fraud and abuse provisions. Notably, MACRA requires the Secretary to undertake two studies relating to the promotion of alternative payment models and to provide the Congress with a gainsharing study and report.
Section 101(e)(7) of MACRA requires the Secretary, in consultation with the Office of Inspector General (OIG), to study and report to the Congress on fraud related to alternative payment models under the Medicare program (the APM Report). The Secretary must study the applicability of the Federal fraud prevention laws to items and services furnished under title XVIII of the Act for which payment is made under an alternative payment model, identify aspects of alternative payment models that are vulnerable to fraudulent activity, and examine the implications of waivers to the fraud prevention laws to support alternative payment models. The Secretary must include in the APM Report the results of her study and recommendations for actions to reduce the vulnerabilities of Medicare alternative payment models, including possible changes in Federal fraud prevention laws to reduce such vulnerabilities. This report must be issued no later than 2 years after the enactment of MACRA.
Section 512(b) of MACRA requires the Secretary, in consultation with OIG, to submit to the Congress a report with options for amending existing fraud and abuse laws and regulations through exceptions, safe harbors or other narrowly tailored provisions, to permit gainsharing arrangements that would otherwise be subject civil money penalties in paragraphs (1) and (2) of section 1128A(b) of the Act and similar arrangements between physicians and hospitals that improve care while reducing waste and increasing efficiency (the Gainsharing Report). The Gainsharing Report must address whether the recommended changes should apply to ownership interests, compensation arrangements, or other relationships. The Gainsharing Report must also describe how the recommendations address accountability, transparency, and quality, including how best to limit inducements to stint on care, discharge patients prematurely, or otherwise reduce or limit medically necessary care. Further, the Secretary's Gainsharing Report must consider whether a portion of any savings generated by such arrangements should accrue to the Medicare program. This report must be issued no later than 12 months after the enactment of MACRA.
To help inform the APM Report and Gainsharing Report required under sections 101(e)(7) and 512(b) of MACRA, respectively, and to aid us in determining whether additional rulemaking or guidance is desirable or necessary, we solicited comments regarding the impact of the physician self-referral law on health care delivery and payment reform. On this subject, we specifically solicited comments regarding the “volume or value” and “other business generated” standards, but welcomed comments concerning any of our rules for determining physician compensation.
We received a number of thoughtful comments on the issues raised in the solicitation. We thank the commenters for their input, and we will carefully consider their comments as we prepare the reports to Congress required under sections 101(e)(7) and 512(b) of MACRA and determine whether additional rulemaking on these issues is necessary. We would like to note that our silence in this rule should not be viewed as an affirmation of any commenter's interpretations or views.
We have become aware that some of the manual citations listed in our regulations are no longer correct. We therefore proposed to update regulations at § 411.351, definitions of “entity”, “ `incident to' services or services `incident to' ”, “parenteral and enteral nutrients, equipment, and supplies”, and “physician in the group practice”, with the correct citations. We also proposed to modernize the regulatory text by changing “Web site” to “Web site” in § 411.351, definition of “list of CPT/HCPCS Codes”, § 411.357(k)(2), (m)(2) through (m)(3), and (m)(5), § 411.362(c)(2)(iv) through (v) and (c)(5), and § 411.384(b). Lastly, we are removing the hyphen from “publicly-traded” at § 411.356(a) and § 411.361(d), and we are correcting a minor typographical error at § 411.357(p)(1)(ii)(A).
After the proposed rule went on display, the term “Web site” was inadvertently changed to “Web site.” Our intention in the proposed rule was to change all instances of the term “Web site” to “Web site.” We are making this change in the final rule.
Effective January 1, 1998, section 1802(b) of the Act permits certain physicians and practitioners to opt out of Medicare if certain conditions are met, and to furnish through private contracts services that would otherwise be covered by Medicare. For those
The private contracting/opt out provisions at section 1802(b) of the Act were recently amended by section 106(a) of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10). Prior to the MACRA amendments, the law specified that physicians and practitioners may opt out for a 2-year period. Individuals that wished to renew their opt-out at the end of a 2-year opt-out period were required to file new affidavits with their MAC. Section 106(a) of the MACRA amends section 1802(b)(3) of the Act to require that opt-out affidavits filed on or after June 16, 2015, automatically renew every 2 years. Therefore, physicians and practitioners that file opt-out affidavits on or after June 16, 2015, will no longer be required to file renewal affidavits to continue their opt-out status. The amendments further provide that physicians and practitioners who have filed opt-out affidavits on or after June 16, 2015, and who do not want their opt-out status to automatically renew at the end of a 2-year opt-out period may cancel the automatic extension by notifying us at least 30 days prior to the start of the next 2-year opt-out period.
We proposed to revise the regulations governing the requirements and procedures for private contracts at 42 CFR part 405, subpart D so that they conform with these statutory changes. Specifically, we proposed to revise the following:
• The definition of “Opt-out period” at § 405.400 so that opt-out affidavits automatically renew unless the physician or practitioner properly cancels opt-out.
• Sections 405.405(b); 405.410(c)(1) and (2); 405.415(h), (m), and (o); 405.425; 405.435(a)(4); 405.435(b)(8); 405.435(d); and 405.445(b)(2) so those sections conform with the revised definition of “Opt-out period”.
• Section 405.445(a) so that proper cancellation of opt-out requires a physician or practitioner to submit written notice, not later than 30 days before the end of the current 2-year opt-out period, that the physician or practitioner does not want to extend the application of the opt-out affidavit for a subsequent 2-year period.
• Section 405.450(a) so that failure to properly cancel opt-out is included as an initial determination for purposes of § 498.3(b).
To update the terminology in our regulations, we also proposed to amend §§ 405.410(d), 405.435(d), and 405.445(b)(2) so that the term “carrier” is replaced with “Medicare Administrative Contractor”.
We received 13 comments on our private contracting/opt-out proposal.
To effectuate the changes made by the MACRA, we are finalizing these provisions of the rule as proposed with the exception of minor editorial changes to § 405.445. These changes clarify this section consistent with plain language principles but do not alter the meaning of the proposal.
Section 1877 of the Act prohibits a physician from referring a Medicare beneficiary for certain designated health services (DHS) to an entity with which the physician (or a member of the physician's immediate family) has a financial relationship, unless an exception applies. Section 1877 of the Act also prohibits the DHS entity from submitting claims to Medicare or billing the beneficiary or any other entity for Medicare DHS that are furnished as a result of a prohibited referral.
Section 1877(h)(6) of the Act and § 411.351 of our regulations specify that the following services are DHS:
• Clinical laboratory services.
• Physical therapy services.
• Occupational therapy services.
• Outpatient speech-language pathology services.
• Radiology services.
• Radiation therapy services and supplies.
• Durable medical equipment and supplies.
• Parenteral and enteral nutrients, equipment, and supplies.
• Prosthetics, orthotics, and prosthetic devices and supplies.
• Home health services.
• Outpatient prescription drugs.
• Inpatient and outpatient hospital services.
In § 411.351, we specify that the entire scope of four DHS categories is defined in a list of CPT/HCPCS codes (the Code List), which is updated annually to account for changes in the most recent CPT and HCPCS Level II publications. The DHS categories defined and updated in this manner are:
• Clinical laboratory services.
• Physical therapy, occupational therapy, and outpatient speech-language pathology services.
• Radiology and certain other imaging services.
• Radiation therapy services and supplies.
The Code List also identifies those items and services that may qualify for either of the following two exceptions to the physician self-referral prohibition:
• EPO and other dialysis-related drugs furnished in or by an ESRD facility (§ 411.355(g)).
• Preventive screening tests, immunizations, or vaccines (§ 411.355(h)).
The definition of DHS at § 411.351 excludes services for which payment is made by Medicare as part of a composite rate (unless the services are specifically identified as DHS and are themselves payable through a composite rate, such as home health and inpatient and outpatient hospital services). Effective January 1, 2011, EPO and dialysis-related drugs furnished in or by an ESRD facility (except drugs for which there are no injectable equivalents or other forms of administration), have been reimbursed under a composite rate known as the ESRD prospective payment system (ESRD PPS) (75 FR 49030). Accordingly, EPO and any dialysis-related drugs that are paid for under ESRD PPS are not DHS and are not listed among the drugs that could qualify for the exception at § 411.355(g) for EPO and other dialysis-related drugs furnished by an ESRD facility.
Drugs for which there are no injectable equivalents or other forms of administration were scheduled to be paid under ESRD PPS beginning January 1, 2014 (75 FR 49044). However, there have been several delays of the implementation of payment of these drugs under ESRD PPS. Most recently, on December 19, 2014, section 204 of the Achieving a Better Life Experience Act of 2014 (ABLE) (Pub. L. 113-295) was enacted and delayed the inclusion of these drugs under the ESRD PPS until 2025. Until that time, such drugs furnished in or by an ESRD facility are not paid as part of a composite rate and thus, are DHS. For purposes of the exception at § 411.355(g), only those drugs that are required for the efficacy of dialysis may be identified on the List of CPT/HCPCS Codes as eligible for the exception. As we have explained previously in the CY 2010 PFS final rule with comment period (75 FR 73583), we do not believe any of these drugs are required for the efficacy of dialysis. Therefore, we have not included any such drugs on the list of drugs that can qualify for the exception.
The Code List was last updated in Tables 90 and 91 of the CY 2015 PFS final rule with comment period (79 FR 67973-67975).
We received three public comments relating to the Code List that became effective January 1, 2015.
The updated, comprehensive Code List effective January 1, 2016, is available on our Web site at
Additions and deletions to the Code List conform it to the most recent publications of CPT and HCPCS Level II, and to changes in Medicare coverage policy and payment status.
Tables 50 and 51 identify the additions and deletions, respectively, to the comprehensive Code List that become effective January 1, 2016. Tables 50 and 51 also identify the additions and deletions to the list of codes used to identify the items and services that may qualify for the exception in § 411.355(g) (regarding dialysis-related outpatient prescription drugs furnished in or by an ESRD facility) and in § 411.355(h) (regarding preventive screening tests, immunizations, and vaccines).
We will consider comments regarding the codes listed in Tables 50 and 51. Comments will be considered if we receive them by the date specified in the “DATES” section of this final rule with comment period. We will not consider any comment that advocates a substantive change to any of the DHS definitions in § 411.351.
Under the Paperwork Reduction Act of 1995 (PRA), we are required to publish a 30-day notice in the
To fairly evaluate whether an information collection should be approved by OMB, PRA section 3506(c)(2)(A) requires that we solicit comment on the following issues:
• The need for the information collection and its usefulness in carrying out the proper functions of our agency.
• The accuracy of our burden estimates.
• The quality, utility, and clarity of the information to be collected.
• Our effort to minimize the information collection burden on the affected public, including the use of automated collection techniques.
In the CY 2016 PFS proposed rule (80 FR 41930 through 41937) we solicited public comment on each of the section 3506(c)(2)(A)-required issues for the following information collection requirements. PRA-related comments were received as indicated below under section IV.B.
To derive average costs, we used data from the U.S. Bureau of Labor Statistics' May 2014 National Occupational Employment and Wage Estimates for all salary estimates (
Except where noted, we are adjusting our employee hourly wage estimates by a factor of 100 percent. This is necessarily a rough adjustment, both because fringe benefits and overhead costs vary significantly from employer to employer, and because methods of estimating these costs vary widely from study to study. Nonetheless, there is no practical alternative and we believe that doubling the hourly wage to estimate total cost is a reasonably accurate estimation method.
Section 106(a) of MACRA indicates that valid opt-out affidavits filed on or after June 16, 2015, automatically renew every 2 years. Previously, physicians and practitioners wanting to renew their opt-out were required to file new valid affidavits with their Medicare Administrative Contractors (MACs).
To be consistent with section 106(a), we revised 42 CFR part 405, subpart D, governing the submission of opt-out affidavits. We estimate that 150 physicians/practitioners will submit new affidavits at 2 hr per submission or 300 hr (total). Previously, we estimated that 600 physicians/practitioners would submit renewal affidavits at 2 hr per submission or 1,200 hr (total). In this regard, the burden will decrease by −900 hr (300 hr − 1,200 hr) when physicians and practitioners no longer need to submit renewal affidavits starting on June 16, 2017. We also estimate that a medical secretary will perform this duty at $32.24/hr for a savings of −$29,016 (−900 hr × $32.24/hr).
Under § 405.445(a), physicians and practitioners that file valid opt-out affidavits on or after June 16, 2015 and do not want to extend their opt-out status at the end of a 2 year opt-out period may cancel by notifying us at least 30 days prior to the start of the next 2 year opt-out period. The burden associated with this new requirement is the time to draft, sign and submit the written request to the MAC. We estimate it will take 60 physicians/practitioners approximately 10 min each for a total of 10 hr. We also estimate that a medical secretary will perform this duty at $32.24/hr for a total cost of $322.40 (10 hr x $32.24/hr).
We did not receive any public comments regarding the proposed requirements or burden and are adopting them without change. The requirements and burden will be submitted to OMB under control number 0938-0730 (CMS-R-234).
For a clinic that was billing as if it were provider-based to an IHS hospital as of April 7, 2000, and is now a tribally-operated clinic contracted or compacted under the ISDEAA, §§ 405.2462(d) and 405.2463(c)(4) provides that the clinic may seek to become certified as a grandfathered tribal FQHC. To become certified, an eligible tribe or tribal organization must submit an enrollment application (CMS-855A, OMB control number 0938-0685) and all required documentation, including an attestation of compliance with the Medicare FQHC Conditions for Coverage at part 491, to
We estimate that between 3 and 5 grandfathered tribal clinics that were provider-based to an IHS hospital on or before April 7, 2000, and are now tribally-operated clinics contracted or compacted under the ISDEAA, will seek to become certified as grandfathered tribal FQHCs. Since we estimate fewer than 10 respondents, the information collection requirements are exempt (5 CFR 1320.3(c)) from the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Section 405.2462(g)(3) requires that RHCs report Healthcare Common Procedure Coding System (HCPCS) and other codes as required in reporting services furnished to a Medicare beneficiary during a RHC visit.
The ongoing burden associated with the requirements under § 405.2462(g)(3) is the time and effort it will take each of the approximately 4,000 Medicare certified RHCs to report the services furnished to a Medicare beneficiary during a RHC visit using HCPCS and other codes as required. We believe that most RHCs are already familiar with the use of HCPCS coding since RHCs typically record HCPCS coding through their billing software or electronic health record systems and they could be subject to HCPCS reporting in accordance with the National Uniform Billing Committee and Accredited Standards Committee X12 standards. In our estimates below, we do not disregard any RHCs that may already be reporting HCPCS coding but we do take into the account the range of time it will take for inexperienced RHCs compared to experienced RHCs. We recognize some RHCs may need to make minor updates in their systems, but some RHC billing staff will need training in HCPCS coding associated with Medicare payable RHC visits. Due to the scope of services payable as a RHC visit, we do not anticipate RHCs will face a significant burden in the training of billing staff. We plan to provide educational information on how RHCs are to report HCPCS and other codes as required and clarify other appropriate RHC billing procedures through sub-regulatory guidance.
We estimate that it will take 2 to 5 additional minutes to report HCPCS codes on RHC claims to Medicare and, for most RHCs, we believe that billing staff will require closer to 2 min when the RHCs become more experienced with including HCPCS coding on Medicare claims. As noted previously, for some RHCs, this policy may not require any additional coding time since they are already capturing HCPCS coding in their billing or electronic health record systems. For those RHCs that are not already capturing HCPCS coding in their billing or electronic health record systems, they may need up to 5 additional minutes to include HCPCS coding on Medicare claims. In this regard, we estimate a median of 3.5 additional minutes in the following calculations:
In deriving these figures, we analyzed claims data and RHC certification data maintained by CMS and used BLS wage data (see Table 52).
We did not receive any public comments regarding our proposed burden estimates. We are finalizing the reporting requirement as proposed with an effective date of April 1, 2016, to allow the MACs additional time to implement the necessary claims processing systems changes completely. The burden for the aforementioned requirements will be submitted to OMB for approval under control number 0938-1287 (CMS-10568).
Section 411.357 is revised to establish two new exceptions: (1) An exception to permit remuneration to independent physicians to assist in compensating nonphysician practitioners in the geographic service area of the hospital, FQHC, or RHC providing the remuneration, and (2) an exception to permit timeshare arrangements for the use of premises, equipment, personnel, items, supplies or services. Arrangements covered by these new exceptions must be in writing. We have also clarified the writing requirements for compensation arrangements in § 411.357(a), (b), (d), (e), (l), (p), and (r). The burden associated with these requirements is the time and effort necessary to prepare written documents and obtain signatures of the parties.
While these requirements are subject to the PRA, we believe the associated burden is exempt from the PRA in accordance with 5 CFR 1320.3(b)(2). Since financial arrangements are usually and routinely documented in writing as a standard good business practice, we believe that the time, effort, and financial resources necessary to comply with the aforementioned requirements would be incurred by persons during the normal course of their activities and, therefore, should be considered exempt as a usual and customary business practice.
We did not receive any public comments regarding our position that the burden associated with these requirements is a usual and customary business practice that is exempt from the PRA.
With respect to the PQRS, the burden associated with the requirements of this voluntary reporting initiative is the time and effort associated with individual eligible professionals and group practices (1) identifying applicable quality measures for which they can report the necessary information, (2) selecting a reporting option, (3) collecting the necessary information, and (4) reporting the information on their selected measures or measures group to CMS using their selected reporting option. We assume that most eligible professionals participating in the PQRS will attempt to meet the criteria for satisfactory reporting for the 2018 PQRS payment adjustment.
We believe it is difficult to accurately quantify the burden because eligible professionals may have different processes for integrating the PQRS into their practice's work flows. Moreover, the time needed for an eligible professional to review the quality measures and other information, select measures applicable to his or her patients and the services he or she furnishes to them, and incorporate the use of quality data codes into the office work flows is expected to vary along with the number of measures that are potentially applicable to a given professional's practice. Since eligible professionals are generally required to report on at least nine measures covering at least three National Quality Strategy domains criteria for satisfactory reporting (or, in lieu of satisfactory reporting, satisfactory participation in a QCDR) for the 2018 PQRS payment adjustment, we will assume that each eligible professional reports on an average of nine measures for this burden analysis.
For eligible professionals who are participating in PQRS, we estimate that it will take 5 hr for an eligible professional's billing clerk to (1) review the PQRS Measures List, (2) review the various reporting options, (3) select the most appropriate reporting option, (4) identify the applicable measures or measures groups for which they can report the necessary information, (5) review the measure specifications for the selected measures or measures groups, and (6) incorporate reporting of the selected measures or measures groups into the office work flows. The measures list contains the measure title along with a summary for the eligible professional to review. Assuming the eligible professional has received no training from his/her specialty society, we estimate it will take an eligible professional's billing clerk up to 2 hr to review this list, review the reporting options, select a reporting option, and select the measures on which to report. If an eligible professional has received training, we believe this will take less time. CMS believes that 3 hr is sufficient time for an eligible professional to review the measure specifications of nine measures or one measures group they select to report for purposes of participating in PQRS and to develop a mechanism for incorporating reporting of the selected measures or measures groups into the office work flows. Therefore, we believe that the start-up cost for an eligible professional to report PQRS quality measures data is 5 hr × $26.68/hr = $133.40.
We continue to expect the ongoing cost associated with PQRS participation to decline based on an eligible professional's familiarity with and understanding of the PQRS, experience with participating in the PQRS, and increased efforts by CMS and stakeholders to disseminate useful educational resources and best practices.
We believe the burden associated with reporting the quality measures will vary depending on the reporting mechanism selected by the eligible professional. As such, we break down our burden estimates by eligible professionals and group practices participating in the GPRO according to the reporting mechanism used.
Under the claims-based reporting option, eligible professionals must gather the required information, select the appropriate quality data codes (QDCs), and include the appropriate QDCs on the claims they submit for payment. The PQRS collects QDCs as additional (optional) line items on the CMS-1500 claim form or the electronic equivalent HIPAA transaction 837-P, approved by OMB under control number 0938-0999. This rule does not revise either of these forms. We note that the claims-based reporting option is only available to individual eligible professionals and is not available for group practice reporting under the GPRO.
Based on our experience with the Physician Voluntary Reporting Program (PVRP), we continue to estimate that the time needed to perform all the steps necessary to report each measure (that is, reporting the relevant quality data code(s) for nine measures) would range from 15 sec (0.25 min) to over 12 min for complicated cases and/or measures, with the median time being 1.75 min. To report nine measures, we estimate that it will take approximately 2.25 min (0.25 min × 9) to 108 min (12 min × 9) to perform all of the necessary steps.
At an adjusted labor rate of $83.96/hr for a computer systems analyst, the per measure cost will range from $0.35 [($83.96/hr/60) × 0.25 min] to $16.79 [($83.96/hr/60) × 12 min], with a median cost of $2.45 [($83.96/hr/60) × 1.75 min]. To report nine measures we estimate that the cost will range from
The total estimated annual burden will vary along with the volume of claims on which quality data is reported. In previous years, when we required reporting on 80 percent of eligible cases for claims-based reporting we found that, on average, the median number of reporting instances for each of the PQRS measures was nine. Since we reduced the required reporting rate by over one-third to 50 percent, we assume that an eligible professional or eligible professional in a group practice will need to report each selected measure for six reporting instances. The actual number of cases on which an eligible professional or group practice is required to report quality measures data will vary with the eligible professional's or group practice's patient population and the types of measures on which the eligible professional or group practice chooses to report (each measure's specifications includes a required reporting frequency). For the 2018 payment adjustment, eligible professionals will also report on one cross-cutting measure if they see at least one Medicare patient. However, we do not see any additional burden impact as they are still reporting on the same number of measures.
Based on these assumptions, we estimate that the per individual eligible professional reporting burden will range from 13.5 min (0.25 min per measure × 9 measures × 6 cases per measure) to 648 min (12 min per measure × 9 measures × 6 cases per measure), with a median burden of 94.5 min (1.75 min per measure × 9 measures × 6 cases). We also estimate that the cost will range from
Based on the assumptions discussed above, Table 53 summarizes the range of total annual burden associated with eligible professionals using the claims-based reporting mechanism.
We received comments related to the estimates in Table 53 and how they relate to reporting using other reporting mechanisms, such as the registry, EHR, and QCDR reporting mechanisms. Please note that the figures in Table 53 only reflect our estimates for reporting via the claims-based reporting mechanism, and not the other PQRS reporting mechanisms.
There is no additional time for individual eligible professionals or group practices to report data to a qualified registry since eligible professionals and group practices opting for qualified registry-based reporting or the use of a QCDR will already be reporting data to the qualified registry for other purposes and the qualified registry will merely be re-packaging the data for use in the PQRS. Little, if any, additional data will need to be reported to the qualified registry or QCDR solely for purposes of participation in the PQRS.
Eligible professionals and group practices need to authorize or instruct the qualified registry or QCDR to submit quality measures results and numerator and denominator data on quality measures to CMS on their behalf. We estimate that the time and effort associated with this requirement is 5 min per eligible professional or eligible professional within a group practice.
Based on the assumptions discussed above, Table 54 summarizes the total annual burden associated with eligible professionals and group practices using the qualified registry-based or QCDR-based reporting mechanism. Please note that, unlike the claims-based reporting mechanism that would require an eligible professional to report data to CMS on quality measures on multiple occasions, an eligible professional or group practice would not be required to submit this data to CMS since the qualified registry or QCDR would perform this function on their behalf.
We did not receive any public comments regarding the proposed requirements or burden and are adopting them without change.
For EHR-based reporting, which includes EHR reporting via a direct EHR product and an EHR data submission vendor's product, the eligible professional or group practice must (1) review the quality measures on which we will be accepting PQRS data extracted from EHRs, (2) select the appropriate quality measures, (3) extract the necessary clinical data from his or her EHR, and (4) submit the necessary data to the CMS-designated clinical data warehouse.
Under this reporting mechanism the individual eligible professional or group practice may either submit the quality measures data directly to CMS from their EHR or utilize an EHR data submission vendor to submit the data to CMS on the eligible professional's or group practice's behalf. To submit data to CMS directly from their EHR, the eligible professional or eligible professional in a group practice must have access to a CMS-specified identity management system, such as IACS, which we believe takes less than 1 hr to obtain. Once an eligible professional or eligible professional in a group practice has an account, he or she needs to extract the necessary clinical data from his or her EHR and submit the data to the CMS-designated clinical data warehouse.
With respect to submitting the actual data file for the respective reporting period, we believe that this will take an eligible professional or group practice no more than 2 hr, depending on the number of patients on which the eligible professional or group practice is submitting. We also believe that once the EHR is programmed by the vendor to allow data submission to CMS, the burden for the eligible professional or group practice to submit data on quality measures should be minimal since the information should already reside in the eligible professional's or group practice's EHR.
In this rule, group practices with 100 or more eligible professionals must report on CAHPS for PQRS (the survey is approved by OMB under control number 0938-1222, CMS-10450). Therefore, a group practice of 100 or more eligible professionals is required to report six or more measures covering two domains of their choosing. At this point, we do not believe the requirement to report CAHPS for PQRS adds or reduces the burden on group practices, as we consider reporting the CAHPS for PQRS survey as reporting three measures covering one domain.
Based on the assumptions discussed above, Table 55 summarizes the total annual burden associated with EHR-based reporting for individual eligible professionals or group practices. Please note that, unlike the claims-based reporting mechanism that would require an eligible professional to report data to CMS on quality measures on multiple occasions, an eligible professional would not be required to submit this data to CMS since the EHR product would perform this function on the eligible professional's behalf.
We did not receive any public comments regarding the proposed requirements or burden and are adopting them without change.
With respect to the process for group practices to be treated as satisfactorily submitting quality measures data under the PQRS, group practices interested in participating in the PQRS through the group practice reporting option (GPRO) must complete a self-nomination process similar to the self-nomination process required of qualified registries. Since a group practice using the GPRO web interface would not need to determine which measures to report under PQRS, we believe that the self-nomination process is handled by a group practice's administrative staff (billing and posting clerk).
We estimate that the self-nomination process will require 2 hr for a group practice to review the PQRS GPRO and decide whether to participate as a group or individually. We also estimate an additional 2 hr for a group practice to draft their letter of intent for self-nomination, gather the requested TIN and NPI information, and provide this requested information. It is estimated that each self-nominated entity will also spend 2 hr undergoing the vetting process with CMS officials. We assume that the group practice staff involved in the self-nomination process (BLS occupation: billing and posting clerks) has an adjusted labor rate of $26.68/hr. By projecting 6 hr (per group practice) for the self-nomination process, we estimate a total of 3,000 hr (500 group practices × 6 hr) at a cost of $80,040 (3,000 hr $26.68/hr).
The burden associated with the group practice reporting requirements under the GPRO mechanism is the time and effort for group practices to submit the quality measures data. For physician group practices, this is the time for the physician group to complete the web interface. We believe that the burden associated with using the GPRO web interface is comparable to that of using the Performance Assessment Tool (PAT). The PAT was the precursor to the current PQRS GPRO Web Interface and was used in several physician pay for performance demonstrations. The information collection components of the PAT have been reviewed by OMB and are approved under control number 0938-0941 (CMS-10136) for use in the PGP, MCMP, and EHR demonstrations. As the GPRO was only recently implemented in 2010, it is difficult to determine the time and effort associated with the group practice submitting the quality measures data. As such, we will use the same burden estimate for group practices participating in the GPRO as we use for group practices participating in the PGP, MCMP, and EHR demonstrations using the PAT. We estimate that the burden associated with a group practice completing data for PQRS under the web interface will be the same as for the group practice to complete the PAT for the PGP demonstration. In other words, we estimate that, on average, it will take each group practice 79 hr to submit quality measures data via the GPRO web interface at a cost of $6,632.84 (79 hr × $83.96/hr). In aggregate, we estimate 39,500 hr (500 group practices × 79 hr) and $3,316,420 (39,500 hr × $83.96/hr).
Based on the assumptions discussed above, Table 56 summarizes the total annual burden associated with the group practice reporting of quality measures.
We did not receive any public comments regarding the proposed requirements or burden and are adopting them without change.
It is difficult to accurately estimate the total annual burden associated with the submission of the quality measure data for the PQRS. Since there are a number of reporting mechanisms that eligible professionals can use to report the PQRS measures, it may be more burdensome for certain practices to use a particular reporting mechanism to report their PQRS measures and/or electronic prescribing measures than others. As indicated, this will vary with each practice. We have no way of determining which reporting mechanism an individual eligible professional will use in a given year, especially since EHR reporting and group practice reporting were new options for the 2010 PQRS and the QCDR option was new for the 2014 PQRS. Therefore, Table 57 provides a range of estimates for individual eligible professionals or group practices using the claims, qualified registry, or EHR-based reporting mechanisms. The upper range represents the sum of the estimated maximum hours and cost per eligible professional from Tables 53, 54, and 55. We are updating our currently approved figures for the upper range of estimates provided in Table 57. Changes to the estimated burden for 2016 are due to updated BLS wage figures, inclusion of benefits and overhead allowance, a change in participation estimates for eligible professionals using the qualified registry (QCDR) and EHR-based reporting mechanisms and a change in reporting requirements in the PQRS for the 2018 PQRS payment adjustment.
For purposes of estimating the burden for group practices, Table 58 reiterates the burden (see Table 56) to participate in PQRS under the group practice reporting option using the GPRO web interface.
The requirements and burden estimates will be submitted to OMB under control number 0938-1059 (CMS-10276).
Consistent with section 1834(q) of Title XVIII of the Act (as amended by section 218(b) of the PAMA), we have adopted specific requirements for the development of appropriate use criteria (AUC) that can be specified under § 414.94 as part of the Medicare program. PLEs that use processes that meet certain requirements and want to be recognized as qualified PLEs for the purpose of this section may apply to CMS.
Applications must be submitted electronically and demonstrate how the organization's processes for developing AUC meet the requirements specified in § 414.94(c)(1) which include: A systematic literature review of the clinical topic and relevant imaging studies; led by at least one multidisciplinary team with autonomous governance; a process for
To be identified as a qualified PLE by CMS, organizations must meet the definition of PLE, and demonstrate adherence to the requirements in their application for CMS review and use the application process identified in § 414.94(c)(2) of the regulations. Applicant PLEs must submit applications documenting adherence to each AUC development requirement; applications will be accepted annually by January 1; all qualified PLEs approved in each year will be posted to the CMS Web site by June 30; and all qualified PLEs must re-apply every 5 years and applications must be submitted by January 1 during the 5th year after the qualified PLE's most recent approval date. If a qualified PLE is found to be non-adherent to the requirements identified above, CMS may terminate its qualified status or may consider this information during re-qualification.
The one-time burden associated with the requirements under § 414.94(c)(2) is the time and effort it will take each of the 30 organizations that have expressed interest in developing AUC to compile, review and submit documentation demonstrating adherence to the AUC development requirements. We anticipate 30 respondents based on the number of national professional medical specialty societies and other organizations that have expressed interest in participating in this program as well as other entities we have not heard from but would expect to participate.
We estimate it will take 20 hours at $67.38/hr for a business operations specialist to compile, prepare and submit the required information, 5 hours at $99.68/hr for a medical and health services manager to review and approve the submission, and 5 hours at $187.48/hr for a physician to review and approve the submission materials. In this regard, we estimate 30 hours per submission at a cost of $2,783.40 per organization. In aggregate, we estimate 900 hours (30 hr × 30 submissions) at $83,502 ($2,783.40 × 30 submissions).
After the anticipated initial 30 respondents, we expect less than 10 applicants to apply to become qualified PLEs annually. Since we estimate fewer than ten respondents, the information collection requirements are exempt (5 CFR 1320.3(c)) from the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Qualified PLEs must re-apply every 5 years. Therefore in years 5-10, we expect that the initial 30 entities will re-apply. The ongoing burden for re-applying is expected to be half the burden of the initial application process. The PLEs will be able to make modifications to their original application which should result in a burden of 10 hours at $67.38/hr for a business operations specialist to compile, prepare and submit the required information, 2.5 hours at $99.68/hr for a medical and health services manager to review and approve the submission, and 2.5 hours at $187.48/hr for a physician to review and approve the submission materials. Annually, we estimate 15 hours per submission at a cost of $1,391.70 per organization. In aggregate, we estimate 450 hours (15 hr × 30 submissions) at $41,751 ($1,391.70 × 30 submissions).
Section 414.94(f)(3) provides that CMS may terminate the qualified status of a PLE if it finds that the PLE is not adherent to the requirements in § 414.94(c). In this instance the PLE would need to re-qualify to reinstate their status. The requalification requirements are associated with an administrative action. In accordance with the implementing regulations of the PRA at 5 CFR 1320.4(a)(2) and (c), the associated burden is exempt from the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
While we received public comments (see below) regarding our proposed requirements and burden, we have considered the comments and are adopting the proposed provisions with minimal changes. The requirements and burden will be submitted to OMB under control number 0938-New (CMS-10570).
We believe the reapplication timeline is appropriate and allows for PLEs, CDS mechanism developers and ordering practitioners to enter into longer term agreements without the constant concern that the PLE will lose its qualified status. We will assess whether a qualified PLE consistently has developed evidence-based AUC and met our other requirements at the time of requalification. We note, however, that if qualified PLEs are not maintaining compliance with our requirements for AUC development, we may terminate their qualified status.
Section L outlines an aligned reporting option between the CPC initiative and the Medicare EHR
While the proposed measures discussed in section M of this preamble is a collection of information, section 3022 of the Affordable Care Act exempts any collection of information associated with the Medicare Shared Savings Program from the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
We have submitted a copy of this rule's information collection and recordkeeping requirements to OMB for review and approval. The requirements are not effective until they have been approved by the OMB.
To obtain copies of the supporting statement and any related forms for the proposed collections discussed above, please visit CMS' Web site at
We invite public comments on these potential information collection requirements. If you wish to comment, please identify the rule (CMS-1631-FC) and submit your comments to the OMB desk officer via one of the following transmissions:
Because of the large number of public comments we normally receive on
We ordinarily publish a notice of proposed rulemaking in the
We utilize HCPCS codes for Medicare payment purposes. The HCPCS is a national coding system comprised of Level I (CPT) codes and Level II (HCPCS National Codes) that are intended to provide uniformity to coding procedures, services, and supplies across all types of medical providers and suppliers. Level I (CPT) codes are copyrighted by the AMA and consist of several categories, including Category I codes which are 5-digit numeric codes, and Category III codes which are temporary codes to track emerging technology, services, and procedures.
The AMA issues an annual update of the CPT code set each Fall, with January 1 as the effective date for implementing the updated CPT codes. The HCPCS, including both Level I and Level II codes, is similarly updated annually on a CY basis. Annual coding changes are not available to the public until the Fall immediately preceding the annual January update of the PFS. Because of the timing of the release of these new codes, it is impracticable for us to provide prior notice and solicit comment on all of these codes and the RVUs assigned to them in advance of publication of the final rule that implements the PFS. Yet, it is imperative that these coding changes be accounted for and recognized timely under the PFS for payment because services represented by these codes will be provided to Medicare beneficiaries by physicians and non-physician practitioners during the CY in which they become effective. Moreover, regulations implementing HIPAA (42 CFR parts 160 and 162) require that the HCPCS be used to report health care services, including services paid under the PFS. In general, we assign interim RVUs to any new codes based on a review of the AMA RUC recommendations for valuing these services. We also assign interim RVUs to certain codes for which we did not receive specific AMA RUC recommendations, but that are components of new combined codes. We set interim RVUs for the component codes in order to conform them to the value of the combined code. Finally, we assign interim RVUs to certain codes for which we received AMA RUC recommendations for only one component (work or PE) but not both. By reviewing the AMA RUC recommendations for the new codes, we are able to assign RVUs to services based on input from the medical community and to establish payment for them, on an interim basis, that corresponds to the relative resources associated with furnishing the services. We are also able to determine, on an interim final basis, whether the codes will be subject other payment policies. We also note, as explained in section II.A. of this final rule, that we finalized a new process for establishing values for new, revised and potentially misvalued codes in the CY 2015 final rule. In rulemaking to adopt this new process, we assessed the trade-offs involved and determined that, on balance, we should move to a process that involves greater transparency and stakeholder input. We also noted our desire to work with the RUC to receive recommendations for new, revised and potentially misvalued codes within a timeframe to support our new process. CY 2016 is a transition year for this new process, and we anticipate this will be the last year we will need to establish payment for these codes on an interim basis, with the infrequent exception for codes that describe wholly new services. If we did not assign RVUs to new codes on an interim basis, the alternative would be to either not pay for these services during the initial CY or have each Medicare contractor establish a payment rate for these new codes. We believe both of these alternatives are contrary to the public interest, particularly since the AMA RUC process allows for an assessment of the valuation of these services by the medical community prior to our establishing payment for these codes on an interim basis. Therefore, we believe it would be contrary to the public interest to delay establishment of fee schedule payment amounts for these codes until notice and comment procedures could be completed.
For the reasons previously outlined in this section, we find good cause to waive the notice of proposed rulemaking for the interim RVUs for selected procedure codes identified in Addendum C and to establish RVUs for these codes on an interim final basis. We are providing a 60-day public comment period.
Section II.H. of this final rule with comment period discusses our review and decisions regarding the AMA RUC recommendations. Similar to the AMA RUC recommendations for new and revised codes previously discussed, due to the timing of the AMA RUC recommendations for the services identified as potentially misvalued codes, and because, as noted earlier, this is the transition year for the new process for establishing values for new, revised and potentially misvalued codes that we finalized in the CY 2015 final rule, it is impracticable for CMS to provide for notice and comment regarding specific revisions for all codes prior to publication of this final rule with comment period. Beginning with rulemaking for CY 2017, we will propose values for the vast majority of new, revised, and potentially misvalued
We believe it is in the public interest to implement the revised RVUs for the codes that were identified as misvalued, and that have been reviewed and re-evaluated by the AMA RUC, on an interim final basis for CY 2016. The revisions of RVUs for these codes will establish a more appropriate payment that better corresponds to the relative resources associated with furnishing these services. A delay in implementing revised values for these misvalued codes would not only perpetuate the known misvaluation for these services, it would also perpetuate a distortion in the payment for other services under the PFS. Implementing the changes on an interim basis allows for a more equitable distribution of payments across all PFS services. We believe a delay in implementation of these revisions would be contrary to the public interest, particularly since the AMA RUC process allows for an assessment of the valuation of these services by the medical community prior to the AMA RUC's recommendation to CMS. For the reasons previously described, we find good cause to waive notice and comment procedures with respect to the misvalued codes and to revise RVUs for these codes on an interim final basis. We are providing a 60-day public comment period.
This final rule with comment period makes payment and policy changes under the Medicare PFS and makes required statutory changes under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the Achieving a Better Life Experience Act of 2014 (ABLE). This final rule with comment period rule also makes changes to Part B payment policy and other Part B related policies.
We examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (February 2, 2013), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). We estimate, as discussed in this section, that the PFS provisions included in this final rule with comment period will redistribute more than $100 million in 1 year. Therefore, we estimate that this rulemaking is “economically significant” as measured by the $100 million threshold, and hence also a major rule under the Congressional Review Act. Accordingly, we prepared a RIA that, to the best of our ability, presents the costs and benefits of the rulemaking. The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals, practitioners and most other providers and suppliers are small entities, either by nonprofit status or by having annual revenues that qualify for small business status under the Small Business Administration standards. (For details see the SBA's Web site at
The RFA requires that we analyze regulatory options for small businesses and other entities. We prepare a regulatory flexibility analysis unless we certify that a rule would not have a significant economic impact on a substantial number of small entities. The analysis must include a justification concerning the reason action is being taken, the kinds and number of small entities the rule affects, and an explanation of any meaningful options that achieve the objectives with less significant adverse economic impact on the small entities.
Approximately 95 percent of practitioners, other providers, and suppliers are considered to be small entities, based upon the SBA standards. There are over 1 million physicians, other practitioners, and medical suppliers that receive Medicare payment under the PFS. Because many of the affected entities are small entities, the analysis and discussion provided in this section as well as elsewhere in this final rule with comment period is intended to comply with the RFA requirements.
In addition, section 1102(b) of the Act requires us to prepare an RIA if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. We did not prepare an analysis for section 1102(b) of the Act because we determined, and the Secretary certified, that this final rule with comment period would not have a significant impact on the operations of a substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits on State, local, or tribal governments or on the private sector before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2015, that threshold is approximately $144 million. This final rule with comment period would impose no mandates on state, local, or tribal governments or on the private sector.
Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has Federalism implications. Since this regulation does not impose any costs on state or local governments, the requirements of Executive Order 13132 are not applicable.
We prepared the following analysis, which together with the information provided in the rest of this preamble, meets all assessment requirements. The analysis explains the rationale for and purposes of this final rule with comment period; details the costs and benefits of the rule; analyzes alternatives; and presents the measures we would use to minimize the burden
Section 1848(c)(2)(B)(ii)(II) of the Act requires that increases or decreases in RVUs may not cause the amount of expenditures for the year to differ by more than $20 million from what expenditures would have been in the absence of these changes. If this threshold is exceeded, we make adjustments to preserve budget neutrality.
Our estimates of changes in Medicare revenues for PFS services compare payment rates for CY 2015 with proposed payment rates for CY 2016 using CY 2014 Medicare utilization. The payment impacts in this final rule with comment period reflect averages by specialty based on Medicare utilization. The payment impact for an individual physician could vary from the average and would depend on the mix of services the practitioner furnishes. The average percentage change in total revenues would be less than the impact displayed here because practitioners and other entities generally furnish services to both Medicare and non-Medicare patients. In addition, practitioners and other entities may receive substantial Medicare revenues for services under other Medicare payment systems. For instance, independent laboratories receive approximately 83 percent of their Medicare revenues from clinical laboratory services that are paid under the Clinical Lab Fee Schedule.
The annual update to the PFS conversion factor (CF) was previously calculated based on a statutory formula; for details about this formula, we refer readers to the CY 2015 PFS final rule with comment period (79 FR 67741 through 67742). The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 repealed the previous statutory update formula and specified the update adjustment factors for calendar years 2015 and beyond.
We note that section 220(d) of the PAMA added a new paragraph at section 1848(c)(2)(O) of the Act to establish an annual target for reductions in PFS expenditures resulting from adjustments to relative values of misvalued codes. Under section 1848(c)(2)(O)(ii) of the Act, if the net reduction in expenditures for the year is equal to or greater than the target for the year, reduced expenditures attributable to such adjustments shall be redistributed in a budget-neutral manner within the PFS in accordance with the existing budget neutrality requirement under section 1848(c)(2)(B)(ii)(II) of the Act. Section 1848(c)(2)(O)(iii) of the Act specifies that, if the estimated net reduction in PFS expenditures for the year is less than the target for the year, an amount equal to the target recapture amount shall not be taken into account when applying the budget neutrality requirements specified in section 1848(c)(2)(B)(ii)(II) of the Act. We estimate the CY 2016 net reduction in expenditures resulting from adjustments to relative values of misvalued codes to be 0.23 percent. Since this does not meet the 1 percent target established by the Achieving a Better Life Experience Act of 2014 (ABLE), payments under the fee schedule must be reduced by the difference between the target for the year and the estimated net reduction in expenditures (the “Target Recapture Amount”). As a result, we estimate that the CY 2016 Target Recapture Amount will produce a reduction to the CF of −0.77 percent.
To calculate the conversion factor for the year, we multiply the product of the current year conversion factor and the update adjustment factor by the budget neutrality adjustment, and then adjust that figure by the target recapture amount, if applicable. We estimate the CY 2016 PFS conversion factor to be $35.8279, which reflects the budget neutrality adjustment, the 0.5 percent update adjustment factor specified under the MACRA, and the 0.77 percent target recapture amount required under Section 1848(c)(2)(O)(iv) of the Act and described above. We estimate the CY 2016 anesthesia conversion factor to be $22.3309, which reflect the same adjustments, with the addition of anesthesia-specific PE and MP adjustments.
Table 62 shows the payment impact on PFS services of the proposals contained in this final rule with comment period. To the extent that there are year-to-year changes in the volume and mix of services provided by practitioners, the actual impact on total Medicare revenues will be different from those shown in Table 62 (CY 2016
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The most widespread specialty impacts of the RVU changes are generally related to two major factors. The first factor, as discussed in section II. of this final rule with comment period, is the number of changes to RVUs for specific services resulting from the Misvalued Code Initiative, including the establishment of RVUs for new and revised codes. Several specialties, including gastroenterology and radiation oncology, will experience significant decreases to payments to services that they frequently furnish as a result of widespread revisions to the structure and the inputs used to develop RVUs for the codes that describe particular services. Other specialties, including pathology and independent laboratories, will experience significant increases to payments for similar reasons.
The second factor relates to a technical improvement that refines the MP RVU methodology, which we proposed to make as part of our annual update of malpractice RVUs. This technical improvement will result in small negative impacts to the portion of PFS payments attributable to malpractice for gastroenterology, colon and rectal surgery, and neurosurgery.
Column F of Table 62 displays the estimated CY 2016 combined impact on total allowed charges by specialty of all the RVU changes. Table 63 (Impact on CY 2016 Payment for Selected Procedures) shows the estimated impact on total payments for selected high volume procedures of all of the changes. We selected these procedures for sake of illustration from among the most commonly furnished by a broad spectrum of specialties. The change in both facility rates and the nonfacility rates are shown. For an explanation of facility and nonfacility PE, we refer readers to Addendum A found on the CMS Web site at
As discussed in section II.I. of this final rule with comment period, we proposed to add several new codes to the list of Medicare telehealth services. Although we expect these changes to increase access to care in rural areas, based on recent utilization of similar services already on the telehealth list, we estimate no significant impact on PFS expenditures from the additions.
As discussed in section III.A.2 of this final rule with comment period, section 203 of the Medicare Access and CHIP Reauthorization Act of 2015 amended section 1834(l)(12)(A) and (l)(13)(A) of the Act to extend the payment add-ons set forth in those subsections through December 31, 2017. These statutory ambulance extender provisions are self-implementing. As a result, there are no policy proposals associated with these provisions or associated impact in this rule. We are finalizing our proposal to correct the dates in the Code of Federal Regulations (CFR) at § 414.610(c)(1)(ii) and (c)(5)(ii) to conform the regulations to these self-implementing statutory provisions.
As discussed in section III.A.3 of this final rule with comment period, we are finalizing our proposal to continue, for CY 2016 and subsequent CYs,
As previously discussed in this section, most providers and suppliers, including ambulance companies, are small entities, either by their nonprofit status or by having annual revenues that qualify for small business status under the Small Business Administration standards. Although, we do not believe that the continued implementation of the revised OMB delineations and updated RUCA codes will have a significant economic impact on ambulance providers and suppliers as compared to CY 2015, we have included an analysis in section III.A.3. of this final rule with comment period describing certain impacts associated with implementation of these geographic delineations. As further discussed in section III.A.3. of this final rule with comment period, Table 23 sets forth an analysis of the number of ZIP codes that changed urban and rural status in each U.S. state and territory after CY 2014 due to our implementation of the revised OMB delineations and updated RUCA codes, using an updated August 2015 USPS ZIP code file, the revised OMB delineations, and the updated RUCA codes (including the RUCA ZIP code approximation file discussed in that section).
In addition, as discussed in section III.A.4. of this final rule with comment period, we are revising § 410.41(b) to require that all Medicare-covered ambulance transports must be staffed by at least two people who meet both the requirements of applicable state and local laws where the services are being furnished and the current Medicare requirements under § 410.41(b). In addition, we are revising the definition of Basic Life Support (BLS) in § 414.605 to include the revised staffing requirements discussed above for § 410.41(b). Since we expect ambulance providers and suppliers are already in compliance with their state and local laws, we expect that these revisions will have a minimal impact on ambulance providers and suppliers. Similarly, we do not expect any significant impact on the Medicare program.
Furthermore, we are revising § 410.41(b) and the definition of BLS in § 414.605 to clarify that, for BLS vehicles, at least one of the staff members must be certified at a minimum as an EMT-Basic, which we believe more clearly states our current policy. Also, for the reasons discussed in section III.A.4. of this final rule with comment period, we are deleting the last sentence of our definition of BLS in § 414.605. Because these revisions do not change our current policies, we expect they will have a minimal impact on ambulance providers and suppliers and do not expect any significant impact on the Medicare program.
As discussed in section III.B. of this final rule with comment period, we proposed to establish payment, beginning on January 1, 2016, for RHCs and FQHCs who furnish a minimum of 20 minutes of qualifying CCM services during a calendar month to patients with multiple (two or more) chronic conditions that are expected to last at least 12 months or until the death of the patient, and that place the patient at significant risk of death, acute exacerbation/decompensation, or functional decline. We also proposed that payment for CCM be based on the PFS national average non-facility payment rate when CPT code 99490 is billed alone or with other payable services on a RHC or FQHC claim.
In the CY 2015 PFS final rule (79 FR 67715 through 67730), we estimated that 65 percent of Medicare beneficiaries in fee-for-service practices had 2 or more chronic conditions, and that 3.4 percent of those beneficiaries would choose to receive CCM services. We also estimated that for those patients, there would be an average of 6 CCM billable payments per year.
We do not have the data to determine the percentage of Medicare beneficiaries in RHCs or FQHCs with 2 or more chronic conditions, but we have no reason to believe that the percentage would be different for patients in a RHC or FQHC. We also assume that the rate of acceptance, and the number of billable visits per year, would be the same for RHCs and FQHCs as it is for practitioners in non-RHC and FQHC settings that are billing under the PFS.
Based on these assumptions, we estimate that the 5-year cost impact of CCM payment in RHCs and FQHCs would be $60 million in Part B payments. We estimate that the 10-year cost impact of CCM payment in RHCs and FQHCs would be $190 million, of which $30 million is the premium offset and $160 million is the Part B payment.
These estimates were derived by first multiplying the number of Medicare beneficiaries in RHCs and FQHCs per year by 0.65 percent, (the estimated percentage of Medicare beneficiaries with 2 or more chronic conditions). This number was then multiplied by 0.034 (the estimated percentage of Medicare beneficiaries with 2 or more chronic conditions that will choose to receive CCM services). This number was then multiplied by $42.91 (the national average payment rate per beneficiary per calendar month). Finally, this number
As discussed in section III.C. of this final rule with comment period, we proposed to require HCPCS coding for all services furnished by RHCs to Medicare beneficiaries effective for dates of service on or after January 1, 2016. We are finalizing the reporting requirement as proposed with an effective date of April 1, 2016 to allow the MACs additional time to implement the necessary claims processing systems changes completely. There will be no cost impact on the Medicare program since this requirement does not change the payment methodology for RHC services. This requirement would necessitate some RHCs to make changes to their billing practices; however, we estimate no significant cost impact on RHCs.
As discussed in section III.D. of this final rule with comment period, we proposed that clinics that were provider-based to an IHS hospital on or before April 7, 2000, and are now tribally-operated clinics contracted or compacted under the ISDEAA, may seek to become certified as grandfathered tribal FQHCs. We also proposed that these grandfathered tribal FQHCs retain their Medicare outpatient per visit payment rate, as set annually by the IHS, rather than the FQHC PPS per visit base rate of $158.85. Since we did not propose any changes to their payment rate, there will be no cost impact as a result of this proposal.
In section III.E. of this final rule with comment period, we discuss the payment of biosimilar biological products under section 1847A of the Act and the proposal to clarify existing regulation text. The updated regulation text states that the payment amount for a biosimilar biological product is based on the average sales prices (ASP) of all NDCs assigned to the biosimilar biological products included within the same billing and payment code.
We anticipate that biosimilar biological products will have lower ASPs than the corresponding reference products, and we expect the Medicare Program will realize savings from the utilization of biosimilar biological products. However, at the time of writing this final rule, we had not yet received ASP data for any biosimilar biological products that had been approved under the FDA's biosimilar approval pathway. Information from pharmaceutical pricing compendia for one approved biosimilar product has become available since the proposed rule was written, and a comparison of compendia prices for the biosimilar product and its reference product agrees with our expectation that the Medicare program will see some degree of savings from biosimilars. At this time, it is still not clear how many biosimilar products will be approved, when approval and marketing of various products will occur, or what the market penetration of biosimilars in Medicare will be. It is also not clear what the cost differences between the each of the biosimilars will be or what the price differences between the biosimilars and the reference products will be as the market develops. Therefore, using available data, we are not able to quantify with certainty the potential savings to Medicare part B. Similarly, we are not able to quantify the impact, if any, on physician offices that administer biosimilar biological products.
The Appropriate Use Criteria (AUC) development process requirements, as well as an application process that organizations must comply with to become qualified provider-led entities (PLEs) do not impact CY 2016 physician payments under the PFS.
We do not estimate any impact as a result of the final policies for the Physician Compare Web site.
According to the 2013 Reporting Experience, “more than 1.25 million eligible professionals were eligible to participate in the 2013 PQRS, Medicare Shared Savings Program, and Pioneer ACO Model.”
Historically, the PQRS has never experienced 100 percent participation in reporting for the PQRS. In the 2013 PQRS and eRx Reporting Experience Report more than 1.25 million professionals were eligible to participate in the 2013 PQRS (including group practices reporting under the GPRO, Medicare Shared Savings Program, and Pioneer ACO Model). Therefore, we believe that although 1.25 million eligible professionals will be subject to the 2018 PQRS payment adjustment, not all eligible participants will actually report quality measures data for purposes of the 2018 PQRS payment adjustment. In this burden estimate, we will only provide burden estimates for the eligible professionals and group practices who attempt to submit quality measures data for purposes of the 2018 PQRS payment adjustment.
In 2013, 641,654 eligible professionals (51 percent) eligible professionals (including those who belonged to group practices that reported under the GPRO and eligible professionals within an ACO that participated in the PQRS via the GPRO) participated in the PQRS, Medicare Shared Savings Program, or Pioneer ACO Model.
With respect to the PQRS, the burden associated with the requirements of this voluntary reporting initiative is the time and effort associated with individual eligible professionals and group practices identifying applicable quality measures for which they can report the necessary information, selecting a reporting option, and reporting the information on their selected measures or measures group to CMS using their selected reporting option. We assume that most eligible professionals participating in the PQRS will attempt to meet both the criteria for satisfactory reporting for the 2018 PQRS payment adjustment.
We believe the labor associated with eligible professionals and group practices reporting quality measures data in the PQRS is primarily handled by an eligible professional's or group practice's billing clerk or computer analyst trained to report quality measures data. Therefore, we will consider the hourly wage of a billing clerk and computer analyst in our estimates. For purposes of this burden estimate, we will assume that a billing clerk will handle the administrative duties associated with participating in the PQRS.
For individual eligible professionals, the burden associated with the requirements of this reporting initiative is the time and effort associated with eligible professionals identifying applicable quality measures for which they can report the necessary information, collecting the necessary information, and reporting the information needed to report the eligible professional's measures. We believe it is difficult to accurately quantify the burden because eligible professionals may have different processes for integrating the PQRS into their practice's work flows. Moreover, the time needed for an eligible professional to review the quality measures and other information, select measures applicable to his or her patients and the services he or she furnishes to them, and incorporate the use of quality data codes into the office work flows is expected to vary along with the number of measures that are potentially applicable to a given professional's practice. Since eligible professionals are generally required to report on at least 9 measures covering at least 3 National Quality Strategy domains criteria for satisfactory reporting (or, in lieu of satisfactory reporting, satisfactory participation in a QCDR) for the 2018 PQRS payment adjustment, we will assume that each eligible professional reports on an average of 9 measures for this burden analysis.
For eligible professionals who are participating in PQRS, we will assign 5 total hours as the amount of time needed for an eligible professional's billing clerk to review the PQRS Measures List, review the various reporting options, select the most appropriate reporting option, identify the applicable measures or measures groups for which they can report the necessary information, review the measure specifications for the selected measures or measures groups, and incorporate reporting of the selected measures or measures groups into the office work flows. The measures list contains the measure title and brief summary information for the eligible professional to review. Assuming the eligible professional has received no training from his/her specialty society, we estimate it will take an eligible professional's billing clerk up to 2 hours to review this list, review the reporting options, and select a reporting option and measures on which to report. If an eligible professional has received training, then we believe this would take less time. CMS believes 3 hours is plenty of time for an eligible professional to review the measure specifications of 9 measures or 1 measures group they select to report for purposes of participating in PQRS and to develop a mechanism for incorporating reporting of the selected measures or measures groups into the office work flows. Therefore, we believe that the start-up cost for an eligible professional to report PQRS quality measures data is 5 hr × $26.68/hr = $127.25.
We continue to expect the ongoing costs associated with PQRS participation to decline based on an eligible professional's familiarity with and understanding of the PQRS, experience with participating in the PQRS, and increased efforts by CMS and stakeholders to disseminate useful educational resources and best practices.
We believe the burden associated with actually reporting the quality measures will vary depending on the reporting mechanism selected by the eligible professional. As such, we break down the burden estimates by eligible professionals and group practices participating in the GPRO according to the reporting mechanism used.
According to the 2011 PQRS and eRx Experience Report, 229,282 of the 320,422 eligible professionals (or 72 percent) of eligible professionals used the claims-based reporting mechanism. According to the 2012 Reporting Experience, 248,206 eligible professionals participated in the PQRS using the claims-based reporting mechanism in 2012.
According to the historical data cited above, although the claims-based reporting mechanism is still the most widely-used reporting mechanism, we are seeing a decline in the use of the claims-based reporting mechanism in the PQRS. There was a slight increase in 2013, which may be reflected by the use of administrative claims-based reporting mechanism by individual eligible professionals and group practices only for the 2015 PQRS payment adjustment (in CY2013).
Although these eligible professionals continue to participate in the PQRS, these eligible professionals have started to shift towards the use of other reporting mechanisms—mainly the GPRO web interface (whether used by a PQRS GPRO or an ACO participating in the PQRS via the Medicare Shared Savings Program), registry, or the EHR-based reporting mechanisms. For purposes of this burden estimate, based on PQRS participation using the claims-based reporting mechanism in 2012 and 2013, we will assume that approximately 350,000 eligible professionals will participate in the PQRS using the claims-based reporting mechanism.
For the claims-based reporting option, eligible professionals must gather the required information, select the appropriate quality data codes (QDCs), and include the appropriate QDCs on the claims they submit for payment.
We estimate the cost for an eligible professional to review the list of quality measures or measures groups, identify the applicable measures or measures groups for which they can report the necessary information, incorporate reporting of the selected measures into the office work flows, and select a PQRS reporting option to be approximately $419.80 per eligible professional ($83.96 per hour × 5 hours).
Based on our experience with the Physician Voluntary Reporting Program (PVRP), we continue to estimate that the time needed to perform all the steps necessary to report each measure (that is, reporting the relevant quality data code(s) for 9 measures measure) would range from 15 seconds (0.25 minutes) to over 12 minutes for complicated cases and/or measures, with the median time being 1.75 minutes. To report 9 measures, we estimate that it would take approximately 2.25 minutes to 108 minutes to perform all the steps necessary to report 9 measures.
Per measure, at an average labor cost of $83.96/hour per practice, the cost associated with this burden will range from $0.17 in labor to about $8.40 in labor time for more complicated cases and/or measures, with the cost for the median practice being $1.20. To report 9 measures, using an average labor cost of $42/hour, we estimated that the time cost of reporting for an eligible professional via claims would range from $3.15 (2.25 minutes or 0.0375 hours × $83.96/hour) to $151.13 (108 minutes or 1.8 hours × $83.96/hour) per reported case.
The total estimated annual burden for this requirement will also vary along with the volume of claims on which quality data is reported. In previous years, when we required reporting on 80 percent of eligible cases for claims-based reporting, we found that on average, the median number of reporting instances for each of the PQRS measures was 9. Since we reduced the required reporting rate by over one-third to 50 percent, then for purposes of this burden analysis we will assume that an eligible professional or eligible professional in a group practice will need to report each selected measure for 6 reporting instances. The actual number of cases on which an eligible professional or group practice is required to report quality measures data will vary, however, with the eligible professional's or group practice's patient population and the types of measures on which the eligible professional or group practice chooses to report (each measure's specifications includes a required reporting frequency). For the 2018 payment adjustment, EPs will also report on 1 cross-cutting measure if they see at least 1 Medicare patient. However, we do not see any additional burden impact as they are still reporting on the same number of measures.
In 2011, approximately 50,215 (or 16 percent) of the 320,422 eligible professionals participating in PQRS used the qualified registry-based reporting mechanism. In 2012, 36,473 eligible professionals reported individual measures via the registry-based reporting mechanism, and 10,478 eligible professionals reporting measures groups via the registry-based reporting mechanism in 2012.
We believe that the rest of the eligible professionals not participating in other PQRS reporting mechanisms will use either the registry or QCDR reporting mechanisms for the following reasons:
• The PQRS measures set is moving away from use of claims-based measures and moving towards the use of registry-based measures.
• We believe the number of QCDR vendors will increase as the QCDR reporting mechanism evolves.
Therefore, based on these assumptions, we expect to see a significant jump from 47,000 eligible professionals to approximately 212,000 eligible professionals using either the registry-based reporting mechanism or QCDR in 2016. We believe the majority of these eligible professionals will participate in the PQRS using a QCDR, as we presume QCDRs will be larger entities with more members.
For qualified registry-based and QCDR-based reporting, there will be no additional time burden for eligible professionals or group practices to report data to a qualified registry as eligible professionals and group practices opting for qualified registry-based reporting or use of a QCDR will more than likely already be reporting data to the qualified registry for other purposes and the qualified registry will merely be repackaging the data for use in the PQRS. Little, if any, additional data will need to be reported to the qualified registry or QCDR solely for purposes of participation in the PQRS. However, eligible professionals and group practices will need to authorize or instruct the qualified registry or QCDR to submit quality measures results and numerator and denominator data on quality measures to CMS on their behalf. We estimate that the time and effort associated with this will be approximately 5 minutes per eligible professional or eligible professional within a group practice.
Please note that, unlike the claims-based reporting mechanism that would require an eligible professional to report data to CMS on quality measures on
For CY 2014, 90 qualified registries and 50 QCDRs were qualified to report quality measures data to CMS for purposes of the PQRS.
Qualified registries or QCDRs interested in submitting quality measures results and numerator and denominator data on quality measures to CMS on their participants' behalf will need to complete a self-nomination in order to be considered qualified to submit on behalf of eligible professionals or group practices unless the qualified registry or clinical data qualified registry was qualified to submit on behalf of eligible professionals or group practices for prior program years and did so successfully. We estimate that the self-nomination process for qualifying additional qualified registries or qualified clinical data registries to submit on behalf of eligible professionals or group practices for the PQRS will involve approximately 1 hour per qualified registry or qualified clinical data registry to draft the letter of intent for self-nomination.
In addition to completing a self-nomination statement, qualified registries and QCDRs will need to perform various other functions, such as develop a measures flow and meet with CMS officials when additional information is needed. In addition, QCDRs must perform other functions, such as benchmarking and calculating their measure results. We note, however, that many of these capabilities may already be performed by QCDRs for purposes other than to submit data to CMS for the PQRS. The time it takes to perform these functions may vary depending on the sophistication of the entity, but we estimate that a qualified registry or QCDR will spend an additional 9 hours performing various other functions related to being a PQRS qualified entity.
We estimate that the staff involved in the qualified registry or QCDR self-nomination process will have an average labor cost of $83.96/hour. Therefore, assuming the total burden hours per qualified registry or QCDR associated with the self-nomination process is 10 hours, we estimate that the total cost to a qualified registry or QCDR associated with the self-nomination process will be approximately $839.60 ($83.96 per hour × 10 hours per qualified registry).
The burden associated with the qualified registry-based and QCDR reporting requirements of the PQRS will be the time and effort associated with the qualified registry calculating quality measures results from the data submitted to the qualified registry or QCDR by its participants and submitting the quality measures results and numerator and denominator data on quality measures to CMS on behalf of their participants. We expect that the time needed for a qualified registry or QCDR to review the quality measures and other information, calculate the measures results, and submit the measures results and numerator and denominator data on the quality measures on their participants' behalf will vary along with the number of eligible professionals reporting data to the qualified registry or QCDR and the number of applicable measures. However, we believe that qualified registries and QCDRs already perform many of these activities for their participants. Therefore, there may not necessarily be a burden on a particular qualified registry or QCDR associated with calculating the measure results and submitting the measures results and numerator and denominator data on the quality measures to CMS on behalf of their participants. Whether there is any additional burden to the qualified registry or QCDR as a result of the qualified registry's or QCDR's participation in the PQRS will depend on the number of measures that the qualified registry or QCDR intends to report to CMS and how similar the qualified registry's measures are to CMS's PQRS measures.
In this final rule with comment period, we proposed that group practices of 25 or more eligible professionals must report on CAHPS for PQRS. Therefore, a group practice of 25 or more eligible professionals would be required to report on the CAHPS for PQRS, 6 or more measures covering 2 domains of their choosing. At this point, we do not believe the requirement to report CAHPS for PQRS adds or reduces the burden to the group practices, as we consider reporting the CAHPS for PQRS survey as reporting 3 measures covering 1 domain.
According to the 2011 PQRS and eRx Experience Report, 560 (or less than 1 percent) of the 320,422 eligible professionals participating in PQRS used the EHR-based reporting mechanism. In 2012 there was a sharp increase in reporting via the EHR-based reporting mechanism. Specifically, according to the 2012 Reporting Experience, 19,817 eligible professionals submitted quality data for the PQRS through a qualified EHR.
As can be seen in the 2013 Experience Report, the number of eligible professionals and group practices using the EHR-based reporting mechanism are steadily increasing as eligible professionals become more familiar with EHR products and more eligible professionals participate in programs encouraging use of an EHR, such as the EHR Incentive Program. In particular, we believe eligible professionals will transition from using the claims-based to the EHR-based reporting mechanisms. To account for this anticipated increase, we continue to estimate that approximately 50,000 eligible professionals, whether participating as an individual or part of a group practice under the GPRO, would use the EHR-based reporting mechanism in CY 2016.
For EHR-based reporting, which includes EHR reporting via a direct EHR product and an EHR data submission vendor's product, the eligible professional or group practice must review the quality measures on which we will be accepting PQRS data extracted from EHRs, select the appropriate quality measures, extract the necessary clinical data from his or
For EHR-based reporting for the PQRS, the individual eligible professional or group practice may either submit the quality measures data directly to CMS from their EHR or utilize an EHR data submission vendor to submit the data to CMS on the eligible professional's or group practice's behalf. To submit data to CMS directly from their EHR, the eligible professional or eligible professional in a group practice must have access to a CMS-specified identity management system, such as IACS, which we believe takes less than 1 hour to obtain. Once an eligible professional or eligible professional in a group practice has an account for this CMS-specified identity management system, he or she will need to extract the necessary clinical data from his or her EHR, and submit the necessary data to the CMS-designated clinical data warehouse. With respect to submitting the actual data file for the respective reporting period, we believe that this will take an eligible professional or group practice no more than 2 hours, depending on the number of patients on which the eligible professional or group practice is submitting. We believe that once the EHR is programmed by the vendor to allow data submission to CMS, the burden to the eligible professional or group practice associated with submission of data on quality measures should be minimal as all of the information required to report the measure should already reside in the eligible professional's or group practice's EHR.
In this final rule with comment period, we are finalizing a policy that group practices of 100 or more eligible professionals must report on CAHPS for PQRS. Therefore, a group practice of 100 or more eligible professionals would be required to report on the CAHPS for PQRS, 6 or more measures covering 2 domains of their choosing. At this point, we do not believe the requirement to report CAHPS for PQRS adds or reduces the burden to the group practices, as we consider reporting the CAHPS for PQRS survey as reporting 3 measures covering 1 domain.
Please note that, unlike the claims-based reporting mechanism that would require an eligible professional to report data to CMS on quality measures on multiple occasions, an eligible professional would not be required to submit this data to CMS, as the EHR product would perform this function on the eligible professional's behalf.
As noted in the 2011 Experience Report, approximately 200 group practices participated in the GPRO in 2011. According to the 2012 Reporting Experience, 66 practices participated in the PQRS GPRO.
With respect to the process for group practices to be treated as satisfactorily submitting quality measures data under the PQRS, group practices interested in participating in the PQRS through the group practice reporting option (GPRO) must complete a self-nomination process similar to the self-nomination process required of qualified registries. However, since a group practice using the GPRO web interface would not need to determine which measures to report under PQRS, we believe that the self-nomination process is handled by a group practice's administrative staff. Therefore, we estimate that the self-nomination process for the group practices for the PQRS involves approximately 2 hours per group practice to review the PQRS GPRO and make the decision to participate as a group rather than individually and an additional 2 hours per group practice to draft the letter of intent for self-nomination, gather the requested TIN and NPI information, and provide this requested information. It is estimated that each self-nominated entity will also spend 2 hours undergoing the vetting process with CMS officials. We assume that the group practice staff involved in the group practice self-nomination process has an average practice labor cost of $26.68 per hour. Therefore, assuming the total burden hours per group practice associated with the group practice self-nomination process is 6 hours, we estimate the total cost to a group practice associated with the group practice self-nomination process to be approximately $160.08 ($26.68 per hour × 6 hours per group practice).
The burden associated with the group practice reporting requirements under the GPRO is the time and effort associated with the group practice submitting the quality measures data. For physician group practices, this would be the time associated with the physician group completing the web interface. We estimate that the time and effort associated with using the GPRO web interface will be comparable to the time and effort associated to using the PAT. As stated above, the information collection components of the PAT have been reviewed by OMB and was approved under OMB control number 0938-0941- Form 10136, with an expiration date of December 31, 2011 for use in the PGP, MCMP, and EHR demonstrations. As the GPRO was only recently implemented in 2010, it is difficult to determine the time and effort associated with the group practice submitting the quality measures data. As such, we will use the same burden estimate for group practices participating in the GPRO as we use for group practices participating in the PGP, MCMP, and EHR demonstrations. Since these changes will not have any impact on the information collection requirements associated with the PAT and we will be using the same data submission process used in the PGP demonstration, we estimate that the burden associated with a group practice completing data for PQRS under the web interface will be the same as for the group practice to complete the PAT for the PGP demonstration. In other words, we estimate that, on average, it will take each group practice 79 hours to submit quality measures data via the GPRO web interface at a cost of $83.96 per hour.
The changes to the EHR Incentive Program in section III.J of this final rule with comment period would not impact the current burden estimate for the EHR Incentive Program.
The establishment of an aligned reporting option between CPC and the Medicare EHR Incentive Program does not impact the CY 2016 payments under PFS.
The solicitation of public input regarding potential CPC expansion does not impact CY2016 payments under the PFS, because no actual expansion is being proposed at this time.
The requirements for participating in the Medicare Shared Saving Program and the impacts of these requirements were established in the final rule implementing the Medicare Shared Savings Program that appeared in the
Section 1848(p) of the Act requires that we establish a value-based payment modifier (VM) and apply it to specific physicians and groups of physicians the Secretary determines appropriate starting January 1, 2015 and to all physicians and groups of physicians by January 1, 2017. Section 1848(p)(4)(C) of the Act requires the VM to be budget neutral. Budget-neutrality means that, in aggregate, the increased payments to high performing physicians and groups of physicians equal the reduced payments to low performing physicians and groups of physicians as well as those groups of physicians and physicians that fail to avoid the PQRS payment adjustment as a group or as individuals.
Unless specified, the changes to the VM in section III.M of this final rule with comment period would not impact CY 2016 physician payments under the PFS. We finalized the VM policies that would impact the CY 2016 physician payments under the PFS in the CY 2013 PFS final rule with comment period (77 FR 69306 through 69326) and the CY 2014 PFS final rule with comment period (78 FR 74764 through 74787).
In the CY 2013 PFS final rule with comment period, we finalized policies to phase-in the VM by applying it starting January 1, 2015 to payments under the Medicare PFS for physicians in groups of 100 or more eligible professionals (EPs). We identify a group of physicians as a single taxpayer identification number (TIN). We apply the VM to the items and services billed by physicians under the TIN, not to other EPs that also may bill under the TIN. We established CY 2014 as the performance period for the VM that will be applied to payments during CY 2016 (77 FR 69314). We also finalized that we will not apply the VM in CYs 2015 and 2016 to any group of physicians that is participating in the Medicare Shared Savings Program, the Pioneer ACO Model, or the Comprehensive Primary Care Initiative, or other similar Innovation Center or CMS initiatives (77 FR 69313).
In the CY 2014 PFS final rule with comment period (78 FR 74765-74770), we finalized a policy to apply the VM in CY 2016 to physicians in groups with 10 or more EPs.
We also adopted a policy to categorize groups of physicians subject to the VM in CY 2016 based on a group's participation in the PQRS. Specifically, we categorize groups of physicians eligible for the CY 2016 VM into two categories. Category 1 includes groups of physicians that (a) meet the criteria for satisfactory reporting of data on PQRS quality measures through the GPRO for the CY 2016 PQRS payment adjustment or (b) do not register to participate in the PQRS as a group practice in CY 2014 and that have at least 50 percent of the group's EPs meet the criteria for satisfactory reporting of data on PQRS quality measures as individuals for the CY 2016 PQRS payment adjustment, or in lieu of satisfactory reporting, satisfactorily participate in a PQRS-qualified clinical data registry for the CY 2016 PQRS payment adjustment. For a group of physicians that is subject to the CY 2016 VM to be included in Category 1, the criteria for satisfactory reporting (or the criteria for satisfactory participation, if the PQRS-qualified clinical data registry reporting mechanism is selected) must be met during the CY 2014 reporting period for the PQRS CY 2016 payment adjustment. For the CY 2016 VM, Category 2 includes those groups of physicians that are subject to the CY 2016 VM and do not fall within Category 1. For those groups of physicians in Category 2, the VM for CY 2016 is −2.0 percent.
In addition, for the CY 2016 VM, we adopted that quality-tiering, which is the method for evaluating performance on quality and cost measures for the VM, is mandatory for groups of physicians with 10 or more EPs. In CY 2016, groups of physicians with between 10 and 99 EPs would not be subjected to a downward payment adjustment (that is, they will either receive an upward or neutral adjustment) determined under the quality-tiering methodology, and groups of physicians with 100 or more EPs, however, would either receive upward, neutral, or downward adjustments under the quality-tiering methodology.
Under the quality-tiering approach, each group's quality and cost composites are classified into high, average, and low categories depending upon whether the composites are at least one standard deviation above or below the mean and statistically different from the mean. We compare the group's quality of care composite classification with the cost composite classification to determine the VM adjustment for the CY 2016 payment adjustment period according to the amounts in Table 65.
To ensure budget neutrality, we first aggregate the Category 1 groups' downward payment adjustments under quality-tiering, in Table 65 with the Category 2 groups' −2.0 percent automatic downward payment adjustments. Using the aggregate downward payment adjustment amount, we then calculate the upward payment adjustment factor (x). These calculations will be done after the performance period has ended.
On September 8, 2015, we made the 2014 Annual QRURs available to all groups and solo practitioners based on their performance in CY 2014. We also completed a preliminary analysis (prior to accounting for the informal review process) of the impact of the VM in CY 2016 on physicians in groups with 10 or more EPs based on their performance in CY 2014 and present a summary of the findings below. Please note that the impact of the policies for the CY 2018 VM finalized in this final rule with comment period will be discussed in the PFS rule for CY 2018.
Based on the methodology codified in § 414.1210(c), there are 13,785 groups of 10 or more EPs (as identified by their Taxpayer Identification Numbers (TINs)) whose physicians' payments under the Medicare PFS will be subject to the VM in the CY 2016 payment adjustment period. Of these 13,785 groups subject to the CY 2016 VM, preliminary results show that 8,357 groups met the criteria for inclusion in Category 1 and are subject to the quality-tiering methodology in order to calculate their CY 2016 VM. Of the 8,357 groups in Category 1, there are 7,639 groups of physicians with between 10 and 99 EPs and 718 groups of physicians with 100 or more EPs. As noted in this section, these are preliminary numbers and may be subject to change as a result of the informal review process. We release the actual number of upward and downward adjustments, along with the adjustment factor after the conclusion of the informal review process.
Of the 7,639 groups of physicians with between 10 and 99 EPs, preliminary results found that 110 groups are in tiers that will result in an upward adjustment of between +1.0x and +3.0x; 42 of those groups qualify for the additional +1.0x adjustment to their Medicare payments for treating high-risk beneficiaries; and 7,529 groups are in tiers that will result in a neutral adjustment to their payments in CY 2016. Of the 718 groups of physicians with 100 or more EPs, our preliminary results showed that 9 groups are in tiers that will result in an upward adjustment of between +1.0x and +3.0x, with 4 of those groups qualifying for the additional +1.0x adjustment to their Medicare payments for treating high-risk beneficiaries; 54 groups are in tiers that will result in a downward adjustment of between −1.0 and −2.0 percent; and 655 groups are in tiers that will result in a neutral adjustment to their payments in CY 2016. We will announce the final quality-tiering results along with the upward payment adjustment factor (x) in the late 2015 on the CMS Web site at
Of the 13,785 groups subject to the CY 2016 VM, preliminary results found that 5,428 groups met the criteria for inclusion in Category 2. As noted above, Category 2 includes groups that do not fall within Category 1. Groups in Category 2 will be subject to a −2.0 percent payment adjustment under the VM during the CY 2016 payment adjustment period.
In CY 2016, only the physicians in groups with 10 or more EPs will be subject to the VM.
We note that in the 2014 QRUR Experience Report, which we intend to release in early 2016, we will provide a detailed analysis of the impact of the 2016 VM policies on groups of 10 or more EPs subject to the VM in CY 2016, including findings based on the data contained in the 2014 QRURs for all groups and solo practitioners.
The physician self-referral update provisions are discussed in section III.N. of this final rule with comment period. We did not receive any comments on the physician self-referral updates regulatory impact section of the proposed rule.
Physicians and Designated Health Services (DHS) entities have been complying with the requirements set forth in the physician self-referral law for many years, specifically in regard to clinical laboratory services since 1992 and to referrals for all other DHS since 1995. The majority of the physician self-
We are also issuing new exceptions and a new definition that will accommodate legitimate financial arrangements while continuing to protect against program and patient abuse:
• In section III.N.2.a of this final rule with comment period, we discuss a limited new exception for hospitals, FQHCs, and RHCs that wish to provide remuneration to physicians to assist with the compensation of a nonphysician practitioner. This new exception would promote access to primary medical and mental health care services, a goal of the Secretary and the Affordable Care Act.
• In section III.N.2.b of this final rule with comment period, we describe the new definition of the geographic area served by an FQHC or RHC we are adding to physician recruitment exception. This new definition will provide certainty to FQHCs and RHCs that their physician recruitment arrangements satisfy the requirements of the exception.
• In section III.N.7 of this final rule with comment period, we discuss a new exception that will protect timeshare arrangements that meet certain criteria. This new exception will help ensure beneficiary access to care, particularly in rural and underserved areas.
To the extent that the new exceptions and definition permit additional legitimate arrangements to comply with the law, this rule will reduce the potential costs of restructuring such arrangements, and the consequences of noncompliance may be avoided entirely.
• In section III.N.9.b of this final rule with comment period, we discuss the requirement that the physician-owned hospital baseline bona fide investment level and the bona fide investment level include direct and indirect ownership and investment interests held by a physician regardless of whether the physician refers patients to the hospital. We recognize that some physician-owned hospitals may have relied on earlier guidance that the ownership or investment interests of non-referring physicians need not be considered when calculating the baseline bona fide physician ownership level and may have revised bona fide investment levels that may exceed the baseline bona fide investment levels calculated under our previous guidance. As discussed in section III.N.9.b, while we do not have the discretion to continue implementing a policy that is inconsistent with the statute, we recognize that we need to give physician-owned hospitals a reasonable amount of time to come into compliance with the revised policy. Accordingly, we are delaying the effective date of this revision for one year from the effective date of this final rule to January 1, 2017.
We revised the regulations governing the requirements and procedures for private contracts at part 405, subpart D so that they conform with the statutory changes made by section 106(a) of the MACRA. We anticipate no or minimal impact as a result of these revisions.
This final rule with comment period contains a range of policies, including some provisions related to specific statutory provisions. The preceding preamble provides descriptions of the statutory provisions that are addressed, identifies those policies when discretion has been exercised, presents rationale for our final policies and, where relevant, alternatives that were considered.
There are a number of changes in this final rule with comment period that would have an effect on beneficiaries. In general, we believe that many of these changes, including those intended to improve accuracy in payment through revisions to the inputs used to calculate payments under the PFS will have a positive impact and improve the quality and value of care provided to Medicare beneficiaries.
Most of the aforementioned policy changes could result in a change in beneficiary liability as relates to coinsurance (which is 20 percent of the fee schedule amount, if applicable for the particular provision after the beneficiary has met the deductible). To illustrate this point, as shown in Table 63, the CY 2015 national payment amount in the nonfacility setting for CPT code 99203 (Office/outpatient visit, new) was $109.60, which means that in CY 2015, a beneficiary would be responsible for 20 percent of this amount, or $21.92. Based on this final rule with comment period, using the CY 2016 CF, the CY 2016 national payment amount in the nonfacility setting for CPT code 99203, as shown in Table 63, is $109.28, which means that, in CY 2016, the proposed beneficiary coinsurance for this service would be $21.86.
As required by OMB Circular A-4 (available at
The analysis in the previous sections, together with the remainder of this preamble, provides an initial Regulatory Flexibility Analysis. The previous analysis, together with the preceding portion of this preamble, provides a Regulatory Impact Analysis.
In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget.
Administrative practice and procedure, Health facilities, Health professions, Kidney diseases, Medical devices, Medicare, Reporting and recordkeeping requirements, Rural areas, X-rays.
Health facilities, Health professions, Kidney diseases, Laboratories, Medicare, Reporting and recordkeeping requirements, Rural areas, X-rays.
Kidney diseases, Medicare, Physician referral, Reporting and recordkeeping requirements.
Administrative practice and procedure, Health facilities, Health professions, Kidney diseases, Medicare, Reporting and recordkeeping requirements.
Administrative practice and procedure, Health facilities, Health professions, Medicare, Reporting and recordkeeping requirements.
Administrative practice and procedure, Electronic health records, Health facilities, Health professions, Health maintenance organizations (HMO), Medicaid, Medicare, Penalties, Privacy, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services amends 42 CFR chapter IV as set forth below:
Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874, 1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a), 1302, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and 1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C. 263a).
(b) A physician or practitioner who enters into at least one private contract with a Medicare beneficiary under the conditions of this subpart, and who submits one or more affidavits in accordance with this subpart, opts out of Medicare for the opt-out period described in § 405.400 unless the opt-out is terminated early according to § 405.445.
(b) The physician or practitioner must submit an affidavit that meets the specifications of § 405.420 to each Medicare Administrative Contractor with which he or she would file claims absent the opt-out.
(c) * * *
(1) The initial 2-year opt-out period begins the date the affidavit meeting the requirements of § 405.420 is signed, provided the affidavit is filed within 10 days after he or she signs his or her first private contract with a Medicare beneficiary.
(2) If the physician or practitioner does not timely file the opt-out affidavit(s) as specified in the previous paragraph, the initial 2-year opt-out period begins when the last such affidavit is filed. Any private contract entered into before the last required affidavit is filed becomes effective upon the filing of the last required affidavit, and the furnishing of any items or services to a Medicare beneficiary under such contract before the last required affidavit is filed is subject to standard Medicare rules.
(d) A participating physician may properly opt-out of Medicare at the beginning of any calendar quarter, provided that the affidavit described in § 405.420 is submitted to the participating physician's Medicare Administrative Contractors at least 30 days before the beginning of the selected calendar quarter. A private contract entered into before the beginning of the selected calendar quarter becomes effective at the beginning of the selected calendar quarter, and the furnishing of any items or services to a Medicare beneficiary under such contract before the beginning of the selected calendar quarter is subject to standard Medicare rules.
(h) State the expected or known effective date and the expected or known expiration date of the current 2-year opt-out period.
(m) Be retained (original signatures of both parties required) by the physician or practitioner for the duration of the current 2-year opt-out period.
(o) Be entered into for each 2-year opt-out period.
If a physician or practitioner opts-out of Medicare in accordance with this subpart, the following results obtain during the opt-out period:
(a) * * *
(4) He or she fails to retain a copy of each private contract that he or she has entered into for the duration of the current 2-year period for which the contracts are applicable or fails to permit CMS to inspect them upon request.
(b) * * *
(8) The physician or practitioner may not attempt to once more meet the criteria for properly opting-out until the current 2-year period expires.
(d) If a physician or practitioner demonstrates that he or she has taken good faith efforts to maintain opt-out (including by refunding amounts in excess of the charge limits to beneficiaries with whom he or she did not sign a private contract) within 45 days of a notice from the Medicare Administrative Contractor of a violation of paragraph (a) of this section, then the requirements of paragraphs (b)(1) through (8) of this section are not
(a) A physician or practitioner may cancel opt-out by submitting a written notice to each Medicare Administrative Contractor to which he or she would file claims absent the opt-out, not later than 30 days before the end of the current 2-year opt-out period, indicating that the physician or practitioner does not want to extend the application of the opt-out affidavit for a subsequent 2-year period.
(b) * * *
(2) Notify all Medicare Administrative Contractors, with which he or she filed an affidavit, of the termination of the opt-out no later than 90 days after the effective date of the initial 2-year period.
(a) A determination by CMS that a physician or practitioner has failed to properly opt out, failed to maintain opt-out, failed to timely renew opt-out, failed to privately contract, failed to properly terminate opt-out, or failed to properly cancel opt-out is an initial determination for purposes of § 498.3(b) of this chapter.
(b) * * *
(1) For RHCs that are authorized to bill on the basis of the reasonable cost system—
(i) A coinsurance amount that does not exceed 20 percent of the RHC's reasonable customary charge for the covered service; and
(a) * * *
(2) Are furnished by a or under the direct supervision of a physician, nurse practitioner, physician assistant, certified nurse midwife, clinical psychologist or clinical social worker employed by or under contract with the FQHC.
The revisions and additions read as follows:
(a)
(b)
(c)
(d)
(i) Is operated by a tribe or tribal organization under the Indian Self-Determination Education and Assistance Act (ISDEAA);
(ii) Was billing as if it were provider-based to an IHS hospital on or before April 7, 2000; and
(iii) Is not operating as a provider-based department of an IHS hospital.
(2) A grandfathered tribal FQHC is paid at the Medicare outpatient per visit rate as set annually by the IHS.
(3) The payment rate is not adjusted:
(i) By the FQHC Geographic Adjustment Factor;
(ii) For new patients, annual wellness visits, or initial preventive physical examinations; or
(iii) Annually by the Medicare Economic Index or a FQHC PPS market basket.
(4) The payment rate is adjusted annually by the IHS under the authority of sections 321(a) and 322(b) of the Public Health Service Act (42 U.S.C. 248 and 249(b)), Pub. L. 83-568 (42 U.S.C. 2001(a)), and the Indian Health Care Improvement Act (25 U.S.C. 1601
(e) * * *
(1) * * *
(i) Eighty (80) percent of the lesser of the FQHC's actual charge or the PPS encounter rate for FQHCs authorized to bill under the PPS; or
(ii) Eighty (80) percent of the lesser of a grandfathered tribal FQHC's actual charge, or the outpatient rate for Medicare as set annually by the IHS for grandfathered tribal FQHCs that are authorized to bill at this rate.
(g) * * *
(3)
(c) * * *
(4) For FQHCs billing under the PPS, and grandfathered tribal FQHCs that are authorized to bill as a FQHC at the outpatient per visit rate for Medicare as set annually by the Indian Health Service—
The revisions and additions read as follows:
(a)
(2) The rate is determined by dividing the estimated total allowable costs by estimated total visits for RHC services.
(5) The RHC may request the MAC to review the rate to determine whether adjustment is required.
(b)
(c)
(d)
(a)
(1) The PPS rate if the FQHC is authorized to bill under the PPS; or
(2) The Medicare outpatient per visit rate as set annually by the Indian Health Service for grandfathered tribal FQHCs.
(b)* * *
(2) Payments received by the FQHC from the MA plan as determined on a per visit basis and the FQHC PPS rate as set forth in this subpart, less any amount the FQHC may charge as described in section 1857(e)(3)(B) of the Act; or
(3) Payments received by the FQHC from the MA plan as determined on a per visit basis and the FQHC outpatient rate as set forth in this section under paragraph (a)(2) of this section, less any amount the FQHC may charge as described in section 1857(e)(3)(B) of the Act.
Secs. 1102, 1834, 1871, 1881, and 1893 of the Social Security Act (42 U.S.C. 1302. 1395m, 1395hh, 1395rr, and 1395ddd.
The revisions and additions read as follows:
(a) * * *
(x) At the discretion of the beneficiary, furnish advance care planning services to include discussion about future care decisions that may need to be made, how the beneficiary can let others know about care preferences, and explanation of advance directives which may involve the completion of standard forms.
(xi) Any other element determined appropriate through the national coverage determination process.
(viii) At the discretion of the beneficiary, furnish advance care planning services to include discussion about future care decisions that may need to be made, how the beneficiary can let others know about care preferences, and explanation of advance directives which may involve the completion of standard forms.
(ix) Any other element determined appropriate through the national coverage determination process.
(a) * * *
(1)
(b) * * *
(5) In general, services and supplies must be furnished under the direct supervision of the physician (or other practitioner). Services and supplies furnished incident to transitional care management and chronic care
(b)
(1)
(ii) Be legally authorized to operate all lifesaving and life-sustaining equipment on board the vehicle;
(2)
(ii) Be certified as a paramedic or an emergency medical technician, by the State or local authority where the services are being furnished, to perform one or more ALS services.
(b) * * *
(2) * * *
(ix) A certified registered nurse anesthetist as described in § 410.69.
(b) * * *
(8) Beginning January 1, 2011, for a surgical service, and beginning January 1, 2015, for an anesthesia service, furnished in connection with, as a result of, and in the same clinical encounter as a planned colorectal cancer screening test. A surgical or anesthesia service furnished in connection with, as a result of, and in the same clinical encounter as a colorectal cancer screening test means—a surgical or anesthesia service furnished on the same date as a planned colorectal cancer screening test as described in § 410.37.
Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 of the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-152, 1395hh, and 1395nn).
The revisions read as follows:
(3) For purposes of this subpart, “entity” does not include a physician's practice when it bills Medicare for the technical component or professional component of a diagnostic test for which the anti-markup provision is applicable in accordance with § 414.50 of this chapter and Pub. 100-04, Medicare Claims Processing Manual, Chapter 1, Section 30.2.9.
“Incident to” services or services “incident to” means those services and supplies that meet the requirements of section 1861(s)(2)(A) of the Act, § 410.26 of this chapter, and Pub. 100-02, Medicare Benefit Policy Manual, Chapter 15, Sections 60, 60.1, 60.2, 60.3, and 60.4.
(1)
(2)
(2) The furnishing of items, devices, or supplies (not including surgical items, devices, or supplies) that are used solely for one or more of the following purposes:
(i) Collecting specimens for the entity furnishing the items, devices or supplies;
(ii) Transporting specimens for the entity furnishing the items, devices or supplies;
(iii) Processing specimens for the entity furnishing the items, devices or supplies;
(iv) Storing specimens for the entity furnishing the items, devices or supplies;
(v) Ordering tests or procedures for the entity furnishing the items, devices or supplies; or
(vi) Communicating the results of tests or procedures for the entity furnishing the items, devices or supplies.
(g) * * *
(1) * * *
(i) The compensation arrangement between the entity and the referring physician fully complies with an applicable exception in § 411.355, § 411.356, or § 411.357, except with respect to the signature requirement in § 411.357(a)(1), (b)(1), (d)(1)(i), (e)(1)(i), (e)(4)(i), (l)(1), (p)(2), (q) (incorporating the requirement contained in § 1001.952(f)(4) of this title), (r)(2)(ii), (t)(1)(ii) or (t)(2)(iii) (both incorporating the requirements contained in § 411.357(e)(1)(i)), (v)(7)(i), (w)(7)(i), (x)(1)(i), or (y)(1); and
(ii) The parties obtain the required signature(s) within 90 consecutive calendar days immediately following the date on which the compensation arrangement became noncompliant (without regard to whether any referrals occur or compensation is paid during such 90-day period) and the compensation arrangement otherwise complies with all criteria of the applicable exception.
(c) * * *
(3)(i) For purposes of paragraphs (c)(1)(ii) and (c)(2)(iv) of this section, a physician who “stands in the shoes” of his or her physician organization is deemed to have the same compensation arrangements (with the same parties and on the same terms) as the physician organization. When applying the exceptions in §§ 411.355 and 411.357 to arrangements in which a physician stands in the shoes of his or her physician organization, the “parties to the arrangements” are considered to be—
(A) With respect to a signature requirement, the physician organization and any physician who “stands in the shoes” of the physician organization as required under paragraph (c)(1)(ii) or (c)(2)(iv)(A) of this section; and
(B) With respect to all other requirements of the exception, including the relevant referrals and other business generated between the parties, the entity furnishing DHS and the physician organization (including all members, employees, and independent contractor physicians).
(d) * * *
(1) Compensation is considered “set in advance” if the aggregate compensation, a time-based or per-unit of service-based (whether per-use or per-service) amount, or a specific formula for calculating the compensation is set out in writing before the furnishing of the items or services for which the compensation is to be paid. The formula for determining the compensation must be set forth in sufficient detail so that it can be objectively verified, and the formula may not be changed or modified during the course of the arrangement in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.
(4) A physician's compensation from a bona fide employer or under a managed care contract or other arrangement for personal services may be conditioned on the physician's referrals to a particular provider, practitioner, or supplier, provided that the compensation arrangement meets all of the following conditions. The compensation arrangement:
(i) Is set in advance for the term of the arrangement.
(iv) * * *
(A) The requirement to make referrals to a particular provider, practitioner, or supplier is set out in writing and signed by the parties.
(v) The required referrals relate solely to the physician's services covered by the scope of the employment, the arrangement for personal services, or the contract, and the referral requirement is reasonably necessary to effectuate the legitimate business purposes of the compensation arrangement. In no event may the physician be required to make referrals that relate to services that are not provided by the physician under the scope of his or her employment, arrangement for personal services, or contract.
(a)
(1) * * *
(i) Listed for trading on the New York Stock Exchange, the American Stock Exchange, or any regional exchange in which quotations are published on a daily basis, or foreign securities listed on a recognized foreign, national, or regional exchange in which quotations are published on a daily basis;
(ii) Traded under an automated interdealer quotation system operated by the National Association of Securities Dealers; or
(iii) Listed for trading on an electronic stock market or over-the-counter quotation system in which quotations are published on a daily basis and trades are standardized and publicly transparent.
The revisions and additions read as follows:
(a)
(1) The lease arrangement is set out in writing, is signed by the parties, and specifies the premises it covers.
(2) The duration of the lease arrangement is at least 1 year. To meet this requirement, if the lease arrangement is terminated with or without cause, the parties may not enter into a new lease arrangement for the same space during the first year of the original lease arrangement.
(3) The space rented or leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement and is used exclusively by the lessee when being used by the lessee (and is not shared with or used by the lessor or any person or entity related to the lessor), except that the lessee may make payments for the use of space consisting of common areas if the payments do not exceed the lessee's pro rata share of expenses for the space based upon the ratio of the space used exclusively by the lessee to the total amount of space (other than common areas) occupied by all persons using the common areas.
(4) The rental charges over the term of the lease arrangement are set in advance and are consistent with fair market value.
(5) The rental charges over the term of the lease arrangement are not determined—
(6) The lease arrangement would be commercially reasonable even if no referrals were made between the lessee and the lessor.
(7) If the lease arrangement expires after a term of at least 1 year, a holdover lease arrangement immediately following the expiration of the lease arrangement satisfies the requirements of paragraph (a) of this section if the following conditions are met:
(i) The lease arrangement met the conditions of paragraphs (a)(1) through (6) of this section when the arrangement expired;
(ii) The holdover lease arrangement is on the same terms and conditions as the immediately preceding arrangement; and
(iii) The holdover lease arrangement continues to satisfy the conditions of paragraphs (a)(1) through (6) of this section.
(b) * * *
(1) The lease arrangement is set out in writing, is signed by the parties, and specifies the equipment it covers.
(2) The equipment leased does not exceed that which is reasonable and necessary for the legitimate business purposes of the lease arrangement and is used exclusively by the lessee when being used by the lessee (and is not shared with or used by the lessor or any person or entity related to the lessor).
(3) The duration of the lease arrangement is at least 1 year. To meet this requirement, if the lease arrangement is terminated with or without cause, the parties may not enter into a new lease arrangement for the same equipment during the first year of the original lease arrangement.
(4) The rental charges over the term of the lease arrangement are set in advance, are consistent with fair market value, and are not determined—
(5) The lease arrangement would be commercially reasonable even if no referrals were made between the parties.
(6) If the lease arrangement expires after a term of at least 1 year, a holdover lease arrangement immediately following the expiration of the lease arrangement satisfies the requirements of paragraph (b) of this section if the following conditions are met:
(i) The lease arrangement met the conditions of paragraphs (b)(1) through (5) of this section when the arrangement expired;
(ii) The holdover lease arrangement is on the same terms and conditions as the immediately preceding lease arrangement; and
(iii) The holdover lease arrangement continues to satisfy the conditions of paragraphs (b)(1) through (5) of this section.
(c) * * *
(3) The remuneration is provided under an arrangement that would be commercially reasonable even if no referrals were made to the employer.
(d) * * *
(1) * * *
(iii) The aggregate services covered by the arrangement do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement(s).
(iv) The duration of each arrangement is for at least 1 year. To meet this requirement, if an arrangement is terminated with or without cause, the parties may not enter into the same or substantially the same arrangement during the first year of the original arrangement.
(vii) If the arrangement expires after a term of at least 1 year, a holdover arrangement immediately following the expiration of the arrangement satisfies the requirements of paragraph (d) of this section if the following conditions are met:
(A) The arrangement met the conditions of paragraphs (d)(1)(i) through (vi) of this section when the arrangement expired;
(B) The holdover arrangement is on the same terms and conditions as the immediately preceding arrangement; and
(C) The holdover arrangement continues to satisfy the conditions of paragraphs (d)(1)(i) through (vi) of this section.
(e) * * *
(1) * * *
(iii) The amount of remuneration under the arrangement is not determined in a manner that takes into account (directly or indirectly) the volume or value of any actual or anticipated referrals by the physician or other business generated between the parties; and
(iv) The physician is allowed to establish staff privileges at any other hospital(s) and to refer business to any other entities (except as referrals may be restricted under an employment or services arrangement that complies with § 411.354(d)(4)).
(4) * * *
(i) The writing in paragraph (e)(1) of this section is also signed by the physician practice.
(iv) Records of the actual costs and the passed-through amounts are maintained for a period of at least 6 years and made available to the Secretary upon request.
(6)(i) This paragraph (e) applies to remuneration provided by a federally qualified health center or a rural health clinic in the same manner as it applies to remuneration provided by a hospital, provided that the arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission.
(ii) The “geographic area served” by a federally qualified health center or a rural health clinic is the area composed of the lowest number of contiguous or noncontiguous zip codes from which the federally qualified health center or rural health clinic draws at least 90 percent of its patients, as determined on an encounter basis. The geographic area served by the federally qualified health center or rural health clinic may include one or more zip codes from which the federally qualified health center or rural health clinic draws no patients, provided that such zip codes are entirely surrounded by zip codes in the geographic area described above from which the federally qualified health center or rural health clinic draws at least 90 percent of its patients.
(f) * * *
(2) The remuneration is provided under an arrangement that would be commercially reasonable even if the physician made no referrals to the entity.
(k) * * *
(2) The annual aggregate nonmonetary compensation limit in this paragraph (k) is adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index—Urban All Items (CPI-U) for the 12-month period ending the preceding September 30. CMS displays after September 30 each year both the increase in the CPI-U for the 12-month period and the new nonmonetary compensation limit on the physician self-referral Web site at
(l)
(1) The arrangement is in writing, signed by the parties, and covers only identifiable items or services, all of which are specified in writing.
(2) The writing specifies the timeframe for the arrangement, which can be for any period of time and contain a termination clause, provided that the parties enter into only one arrangement for the same items or services during the course of a year. An arrangement may be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change.
(m) * * *
(1) The compensation is offered to all members of the medical staff practicing in the same specialty (but not necessarily accepted by every member to whom it is offered) and is not offered in a manner that takes into account the volume or value of referrals or other business generated between the parties.
(2) Except with respect to identification of medical staff on a hospital Web site or in hospital advertising, the compensation is provided only during periods when the medical staff members are making rounds or are engaged in other services or activities that benefit the hospital or its patients.
(3) The compensation is provided by the hospital and used by the medical staff members only on the hospital's campus. Compensation, including, but not limited to, internet access, pagers, or two-way radios, used away from the campus only to access hospital medical records or information or to access patients or personnel who are on the hospital campus, as well as the identification of the medical staff on a hospital Web site or in hospital advertising, meets the “on campus” requirement of this paragraph (m).
(5) The compensation is of low value (that is, less than $25) with respect to each occurrence of the benefit (for example, each meal given to a physician while he or she is serving patients who are hospitalized must be of low value). The $25 limit in this paragraph (m)(5) is adjusted each calendar year to the nearest whole dollar by the increase in the Consumer Price Index—Urban All Items (CPI-I) for the 12 month period ending the preceding September 30. CMS displays after September 30 each year both the increase in the CPI-I for the 12 month period and the new limits on the physician self-referral Web site at
(p) * * *
(1) * * *
(ii) * * *
(A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services performed or business generated in the office space or to the services performed on or business generated through the use of the equipment; or
(2) The compensation arrangement described in § 411.354(c)(2)(ii) is set out in writing, signed by the parties, and specifies the services covered by the arrangement, except in the case of a bona fide employment relationship between an employer and an employee, in which case the arrangement need not be set out in writing, but must be for identifiable services and be commercially reasonable even if no referrals are made to the employer.
(r) * * *
(2) * * *
(iv) The hospital, federally qualified health center, or rural health clinic does not determine the amount of the payment in a manner that takes into account (directly or indirectly) the volume or value of any actual or anticipated referrals by the physician or any other business generated between the parties.
(v) The physician is allowed to establish staff privileges at any hospital(s), federally qualified health center(s), or rural health clinic(s) and to refer business to any other entities (except as referrals may be restricted under an employment arrangement or services arrangement that complies with § 411.354(d)(4)).
(s) * * *
(1) The professional courtesy is offered to all physicians on the entity's bona fide medical staff or in such entity's local community or service area, and the offer does not take into account the volume or value of referrals or other business generated between the parties;
(t) * * *
(2) * * *
(iv) * * *
(A) An amount equal to 25 percent of the physician's current annual income (averaged over the previous 24 months), using a reasonable and consistent methodology that is calculated uniformly; or
(x)
(i) The arrangement is set out in writing and signed by the hospital, the
(ii) The arrangement is not conditioned on—
(A) The physician's referrals to the hospital; or
(B) The nonphysician practitioner's referrals to the hospital.
(iii) The remuneration from the hospital—
(A) Does not exceed 50 percent of the actual compensation, signing bonus, and benefits paid by the physician to the nonphysician practitioner during a period not to exceed the first 2 consecutive years of the compensation arrangement between the nonphysician practitioner and the physician (or the physician organization in whose shoes the physician stands); and
(B) Is not determined in a manner that takes into account (directly or indirectly) the volume or value of any actual or anticipated referrals by—
(1) The physician (or any physician in the physician's practice) or other business generated between the parties; or
(2) The nonphysician practitioner (or any nonphysician practitioner in the physician's practice) or other business generated between the parties.
(iv) The compensation, signing bonus, and benefits paid to the nonphysician practitioner by the physician does not exceed fair market value for the patient care services furnished by the nonphysician practitioner to patients of the physician's practice.
(v) The nonphysician practitioner has not, within 1 year of the commencement of his or her compensation arrangement with the physician (or the physician organization in whose shoes the physician stands under § 411.354(c))—
(A) Practiced in the geographic area served by the hospital; or
(B) Been employed or otherwise engaged to provide patient care services by a physician or a physician organization that has a medical practice site located in the geographic area served by the hospital, regardless of whether the nonphysician practitioner furnished services at the medical practice site located in the geographic area served by the hospital.
(vi)(A) The nonphysician practitioner has a compensation arrangement with the physician or the physician organization in whose shoes the physician stands under § 411.354(c); and
(B) Substantially all of the services that the nonphysician practitioner furnishes to patients of the physician's practice are primary care services or mental health care services.
(vii) The physician does not impose practice restrictions on the nonphysician practitioner that unreasonably restrict the nonphysician practitioner's ability to provide patient care services in the geographic area served by the hospital.
(viii) The arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission.
(2) Records of the actual amount of remuneration provided under paragraph (x)(1) of this section by the hospital to the physician, and by the physician to the nonphysician practitioner, must be maintained for a period of at least 6 years and made available to the Secretary upon request.
(3) For purposes of this paragraph (x), “nonphysician practitioner” means a physician assistant as defined in section 1861(aa)(5) of the Act, a nurse practitioner or clinical nurse specialist as defined in section 1861(aa)(5) of the Act, a certified nurse-midwife as defined in section 1861(gg) of the Act, a clinical social worker as defined in section 1861(hh) of the Act, or a clinical psychologist as defined in § 410.71(d) of this subchapter.
(4) For purposes of paragraphs (x)(1)(ii)(B) and (x)(1)(iii)(B)(2) of this section, “referral” means a request by a nonphysician practitioner that includes the provision of any designated health service for which payment may be made under Medicare, the establishment of any plan of care by a nonphysician practitioner that includes the provision of such a designated health service, or the certifying or recertifying of the need for such a designated health service, but not including any designated health service personally performed or provided by the nonphysician practitioner.
(5) For purposes of paragraph (x)(1) of this section, “geographic area served by the hospital” has the meaning set forth in paragraph (e)(2) of this section.
(6) For purposes of paragraph (x)(1) of this section, a “compensation arrangement” between a physician (or the physician organization in whose shoes the physician stands under § 411.354(c) and a nonphysician practitioner—
(i) Means an employment, contractual, or other arrangement under which remuneration passes between the parties; and
(ii) Does not include a nonphysician practitioner's ownership or investment interest in a physician organization.
(7)(i) This paragraph (x) may be used by a hospital, federally qualified health center, or rural health clinic only once every 3 years with respect to the same referring physician.
(ii) Paragraph (x)(7)(i) of this section does not apply to remuneration provided by a hospital, federally qualified health center, or rural health clinic to a physician to compensate a nonphysician practitioner to provide patient care services if—
(A) The nonphysician practitioner is replacing a nonphysician practitioner who terminated his or her employment or contractual arrangement to provide patient care services with the physician (or the physician organization in whose shoes the physician stands) within 1 year of the commencement of the employment or contractual arrangement; and
(B) The remuneration provided to the physician is provided during a period that does not exceed 2 consecutive years as measured from the commencement of the compensation arrangement between the nonphysician practitioner who is being replaced and the physician (or the physician organization in whose shoes the physician stands).
(8)(i) This paragraph (x) applies to remuneration provided by a federally qualified health center or a rural health clinic in the same manner as it applies to remuneration provided by a hospital.
(ii) The “geographic area served” by a federally qualified health center or a rural health clinic has the meaning set forth in paragraph (e)(6)(ii) of this section.
(y)
(1) The arrangement is set out in writing, signed by the parties, and specifies the premises, equipment, personnel, items, supplies, and services covered by the arrangement.
(2) The arrangement is between a physician (or the physician organization in whose shoes the physician stands under § 411.354(c) and—
(i) A hospital; or
(ii) Physician organization of which the physician is not an owner, employee, or contractor.
(3) The premises, equipment, personnel, items, supplies, and services covered by the arrangement are used—
(i) Predominantly for the provision of evaluation and management services to patients; and
(ii) On the same schedule.
(4) The equipment covered by the arrangement is—
(i) Located in the same building where the evaluation and management services are furnished;
(ii) Not used to furnish designated health services other than those incidental to the evaluation and management services furnished at the time of the patient's evaluation and management visit; and
(iii) Not advanced imaging equipment, radiation therapy equipment, or clinical or pathology laboratory equipment (other than equipment used to perform CLIA-waived laboratory tests).
(5) The arrangement is not conditioned on the referral of patients by the physician who is a party to the arrangement to the hospital or physician organization of which the physician is not an owner, employee, or contractor.
(6) The compensation over the term of the arrangement is set in advance, consistent with fair market value, and not determined—
(i) In a manner that takes into account (directly or indirectly) the volume or value of referrals or other business generated between the parties; or
(ii) Using a formula based on—
(A) A percentage of the revenue raised, earned, billed, collected, or otherwise attributable to the services provided while using the premises, equipment, personnel, items, supplies, or services covered by the arrangement; or
(B) Per-unit of service fees that are not time-based, to the extent that such fees reflect services provided to patients referred by the party granting permission to use the premises, equipment, personnel, items, supplies, or services covered by the arrangement to the party to which the permission is granted.
(7) The arrangement would be commercially reasonable even if no referrals were made between the parties.
(8) The arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act) or any Federal or State law or regulation governing billing or claims submission.
(9) The arrangement does not convey a possessory leasehold interest in the office space that is the subject of the arrangement.
(d)
a. In paragraph (a):
The additions and revisions read as follows:
(a) * * *
(1) A direct ownership or investment interest in a hospital exists if the ownership or investment interest in the hospital is held without any intervening persons or entities between the hospital and the owner or investor.
(2) An indirect ownership or investment interest in a hospital exists if—
(i) Between the owner or investor and the hospital there exists an unbroken chain of any number (but no fewer than one) of persons or entities having ownership or investment interests; and
(ii) The hospital has actual knowledge of, or acts in reckless disregard or deliberate ignorance of, the fact that the owner or investor has some ownership or investment interest (through any number of intermediary ownership or investment interests) in the hospital.
(3) An indirect ownership or investment interest in a hospital exists even though the hospital does not know, or acts in reckless disregard or deliberate ignorance of, the precise composition of the unbroken chain or the specific terms of the ownership or investment interests that form the links in the chain.
(b) * * *
(3) * * *
(ii) * * *
(C) Disclose on any public Web site for the hospital and in any public advertising for the hospital that the hospital is owned or invested in by physicians. Any language that would put a reasonable person on notice that the hospital may be physician-owned would be deemed a sufficient statement of physician ownership or investment. For purposes of this section, a public Web site for the hospital does not include, by way of example: social media Web sites; electronic patient payment portals; electronic patient care portals; and electronic health information exchanges.
(c) * * *
(2) * * *
(iv)
(v)
(5)
(b) Promptly after CMS issues an advisory opinion and releases it to the requestor, CMS makes available a copy of the advisory opinion for public inspection during its normal hours of operation and on the CMS Web site.
Secs. 1102, 1871, and 1881(b)(l) of the Social Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)).
The additions and revisions read as follows:
(j) * * *
(8)
(i)
(
(
(
(B) [Reserved]
(ii)
(
(
(
(B) [Reserved]
(iii)
(iv)
(9)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(B) [Reserved]
(viii) If the CAHPS for PQRS survey is applicable to the practice, group practices comprised of 100 or more eligible professionals that register to participate in the GPRO must administer the CAHPS for PQRS survey, regardless of the GPRO reporting mechanism selected.
(k)
(2)
(5)
(i) For the 12-month 2018 PQRS payment adjustment reporting period, report at least 9 measures available for reporting under a QCDR covering at least 3 of the NQS domains, and report each measure for at least 50 percent of the eligible professional's patients. Of these measures, report on at least 3 outcome measures, or, if 3 outcomes measures are not available, report on at least 2 outcome measures and at least 1 of the following types of measures—resource use, patient experience of care, or efficiency/appropriate use.
(ii) [Reserved]
(a)
(1) Section 1834(q)—Recognizing Appropriate Use Criteria for Certain Imaging Services.
(2) Section 1834(q)(1)—Program Established.
(3) Section 1834(q)(2)—Establishment of Applicable Appropriate Use Criteria.
(b)
(i) One or more applicable appropriate use criteria apply;
(ii) There are one or more qualified clinical decision support mechanisms listed; and
(iii) One or more of such mechanisms is available free of charge.
(c)
(1)
(i) Utilize an evidentiary review process when developing or modifying AUC that includes:
(A) A systematic literature review of the clinical topic and relevant imaging studies; and
(B) An assessment of the evidence using a formal, published and widely recognized methodology for grading evidence. Consideration of relevant published consensus statements by professional medical specialty societies must be part of the evidence assessment.
(ii) Utilize at least one multidisciplinary team with autonomous governance, decision-making and accountability for developing or modifying AUC. At a minimum the team must be comprised of seven members including at least one practicing physician with expertise in the clinical topic related to the appropriate use criterion being developed or modified, at least one practicing physician with expertise in the imaging studies related to the appropriate use criterion, at least one primary care physician or practitioner as described in sections 1833(u)(6), 1833(x)(2)(A)(i)(I), and 1833(x)(2)(A)(i)(II) of the Act, at least one expert in statistical analysis and at least one expert in clinical trial design. A given team member may be the team's expert in more than one domain.
(iii) Utilize a publicly transparent process for identifying potential conflicts of interest and for resolving conflicts of interest of members on the multidisciplinary team, the PLE and any other party participating in AUC development or modification, to include recusal or exclusion of individuals as appropriate. The PLE must document the following information and make it available in timely fashion to a public request, for a period of not less than 5 years after the most recent published update of the relevant AUC:
(A) Direct or indirect financial relationships that exist between individuals or the spouse or minor child of individuals who have substantively participated in the development of AUC and companies or organizations including the PLE and any other party participating in AUC development or modification that may financially benefit from the AUC. These financial relationships may include, for example, compensation arrangements such as salary, grant, speaking or consulting fees, contract, or collaboration agreements.
(B) Ownership or investment interests between individuals or the spouse or minor child of individuals who have substantively participated in the development of AUC and companies or organizations including the PLE or any other party participating in AUC development or modification that may financially benefit from the AUC.
(iv) Publish each individual criterion on the PLE's Web site and include an identifying title, authors (at a minimum, all members of the multidisciplinary AUC development team must be listed as authors), and key references used to establish the evidence.
(v) Identify each appropriate use criterion or AUC subset that are relevant to a priority clinical area with a statement on the PLE's Web site. To be identified as being relevant to a priority clinical area, the criterion or AUC subset must reasonably address the entire clinical scope of the corresponding priority clinical area.
(vi) Identify key points in an individual criterion as evidence-based or consensus-based, and grade such key points in terms of strength of evidence using a formal, published and widely recognized methodology.
(vii) Utilize a transparent process for the timely and continual updating of each criterion. Each criterion must be reviewed and, when appropriate, updated at least annually.
(viii) Publicly post the process for developing or modifying the AUC on the PLE's Web site.
(ix) Disclose parties external to the PLE when such parties have involvement in the AUC development process.
(2)
(i) PLEs must submit an application to CMS for review that documents adherence to each of the AUC development requirements outlined in paragraph (c)(1) of this section;
(ii) Applications will be accepted by CMS only from PLEs that meet the definition of PLE in paragraph (b) of this section;
(iii) Applications must be received by CMS annually by January 1;
(iv) All approved qualified PLEs in each year will be included on the list of qualified PLEs posted to the CMS Web site by June 30 of that year; and
(v) Approved PLEs are qualified for a period of 5 years.
(vi) Qualified PLEs are required to re-apply. The application must be received by CMS by January 1 of the 5th year after the PLE's most recent approval date.
(d)
(e)
(2) CMS will consider incidence and prevalence of disease, the volume and variability of use of particular imaging services, and strength of evidence supporting particular imaging services. We will also consider applicability of the clinical area to a variety of care settings and to the Medicare population.
(3) The Medicare Evidence Development & Coverage Advisory Committee (MEDCAC) may make recommendations to CMS.
(4) Priority clinical areas will be used by CMS to identify outlier ordering professionals (section 1834(q)(5) of the Act).
(f)
(2) The evidentiary basis of the identified AUC may be reviewed by the MEDCAC.
(3) If a qualified PLE is found non-adherent to the requirements in paragraph (c) of this section, CMS may terminate its qualified status or may consider this information during re-qualification.
(j)
The revisions and additions read as follows:
(a) * * *
(4) For the CY 2018 payment adjustment period, to nonphysician eligible professionals who are physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists in groups with 2 or more eligible professionals and to physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists who are solo practitioners based on the performance period for the payment adjustment period as described at § 414.1215.
(b) * * *
(2) * * *
(i) * * *
(B) The quality composite score is calculated under § 414.1260(a) using quality data reported by the ACO for the performance period through the ACO GPRO Web interface as required under § 425.504(a)(1) of this chapter or another mechanism specified by CMS and the ACO all-cause readmission measure. Groups and solo practitioners that participate in two or more ACOs during the applicable performance period receive the quality composite score of the ACO that has the highest numerical quality composite score. For the CY 2018 payment adjustment period, the CAHPS for ACOs survey also will be included in the quality composite score.
(C) For the CY 2017 payment adjustment period, the value-based payment modifier adjustment will be equal to the amount determined under § 414.1275 for the payment adjustment period, except that if the ACO does not successfully report quality data as described in paragraph (b)(2)(i)(B) of this section for the performance period, such adjustment will be equal to −4% for groups of physicians with 10 or more eligible professionals and equal to −2% for groups of physicians with two to nine eligible professionals and for physician solo practitioners. If the ACO has an assigned beneficiary population during the performance period with an average risk score in the top 25 percent of the risk scores of beneficiaries nationwide, and a group of physician or physician solo practitioner that participates in the ACO during the performance period is classified as high quality/average cost under quality-tiering for the CY 2017 payment adjustment period, the group or solo practitioner receives an upward adjustment of +3 × (rather than +2 ×) if the group has 10 or more eligible professionals or +2 × (rather than +1 ×) for a solo practitioner or the group has two to nine eligible professionals.
(D) For the CY 2018 payment adjustment period, the value-based payment modifier adjustment will be equal to the amount determined under § 414.1275 for the payment adjustment
(E) For the CY 2017 payment adjustment period and each subsequent calendar year payment adjustment period, the value-based payment modifier for groups and solo practitioners that participate in an ACO under the Shared Savings Program during the applicable performance period is determined as described under paragraph (b)(2) of this section, regardless of whether any eligible professionals in the group or the solo practitioner also participate in an Innovation Center model during the performance period.
(F) The same value-based payment modifier adjustment will be applied in the payment adjustment period to all groups based on size as specified under § 414.1275 and solo practitioners that participated in the ACO during the performance period.
(3)
(ii) For the CY 2018 payment adjustment period, the value-based payment modifier is waived under section 1115A(d)(1) of the Act for physicians and nonphysician eligible professionals in groups with 2 or more eligible professionals and for physicians and nonphysician eligible professionals who are solo practitioners that participate in the Pioneer ACO Model or the Comprehensive Primary Care (CPC) Initiative during the performance period for the payment adjustment period as described at § 414.1215.
(iii) For purposes of the value-based payment modifier, a group or solo practitioner is considered to be participating in the Pioneer ACO Model or CPC Initiative if at least one eligible professional billing under the TIN in the performance period for the payment adjustment period as described at § 414.1215 is participating in the Pioneer ACO Model or CPC Initiative in the performance period.
(4)
(ii) For the CY 2018 payment adjustment period, the value-based payment modifier is waived under section 1115A(d)(1) of the Act for physicians and nonphysician eligible professionals in groups with 2 or more eligible professionals and for physicians and nonphysician eligible professionals who are solo practitioners that participate in other similar Innovation Center models during the performance period for the payment adjustment period as described at § 414.1215.
(iii) For purposes of the value-based payment modifier, a group or solo practitioner is considered to be participating in a similar Innovation Center model if at least one eligible professional billing under the TIN in the performance period for the payment adjustment period as described at § 414.1215 is participating in the similar model in the performance period.
(c)
(2) Beginning with the CY 2016 payment adjustment period, the size of a group during the applicable performance period will be determined by the lower number of eligible professionals as indicated by the PECOS-generated list or claims analysis.
(3) For the CY 2018 payment adjustment period, the composition of a group during the applicable performance period will be determined based on whether the group includes physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and/or other types of nonphysician eligible professionals as indicated by the PECOS-generated list or claims analysis.
(d) The performance period is calendar year 2016 for value-based payment modifier adjustments made in the calendar year 2018 payment adjustment period.
(c) Rates of an all-cause hospital readmissions measure, except for groups with between two to nine eligible professionals and solo practitioners starting with the CY 2017 payment adjustment period.
(c) * * *
(4) Beginning with the CY 2016 payment adjustment period, the cost measures of a group and solo practitioner subject to the value-based payment modifier are adjusted to account for the group's and solo practitioner's specialty mix, by computing the weighted average of the national specialty specific expected costs and comparing this to the group's actual risk adjusted costs. Each national specialty-specific expected cost is weighted by the proportion of Part B payments incurred by each specialty within the group.
(5) The national specialty-specific expected costs referenced in paragraph (c)(4) of this section are derived by calculating, for each specialty, the weighted average of the risk-adjusted costs computed across all groups, where the weight for each group is equal to the number of beneficiaries attributed to the group, times the number of eligible professionals in the group with the relevant specialty, times the proportion of eligible professionals in the group with the relevant specialty.
(a) The benchmark for quality of care measures reported through the PQRS using the claims, registries, QCDR, or web interface is the national mean for that measure's performance rate (regardless of the reporting mechanism) during the year prior to the performance period. In calculating the national benchmark, solo practitioners' and groups' (or individual eligible professionals' within such groups) performance rates are weighted by the number of beneficiaries used to calculate the solo practitioners' or groups' (or individual eligible professionals' within such groups) performance rate. Beginning with the CY 2016 performance period, eCQMs reported via EHRs are excluded from the overall benchmark for quality of care measures and separate eCQM benchmarks will be developed. The eCQM benchmark is the national mean for the measure's performance rate during the year prior to the performance period. In calculating the national benchmark, solo practitioners' and groups' (or individual eligible professionals' within such groups) performance rates are weighted by the number of beneficiaries used to calculate the solo practitioners' or groups' (or individual eligible professionals' within such groups) performance rate.
(b) Beginning with the CY 2016 payment adjustment period, the benchmark for each cost measure is the national mean of the performance rates calculated among all groups and solo practitioners that meet the minimum number of cases for that measure under § 414.1265(a). In calculating the national benchmark, groups and solo practitioners' performance rates are weighted by the number of beneficiaries used to calculate the group or solo practitioner's performance rate.
(a) * * *
(1) Starting with the CY 2017 payment adjustment period, the exception to this paragraph (a) is the all-cause hospital readmissions measure described at § 414.1230(c). In a performance period, if a group has fewer than 200 cases for this all-cause hospital readmissions measure, that measure is excluded from its domain and the remaining measures in the domain are given equal weight.
(2) Starting with the CY 2017 payment adjustment period, the Medicare Spending Per Beneficiary measure described at § 414.1235(a)(6) is an exception to this paragraph (a). In a performance period, if a group or a solo practitioner has fewer than 125 episodes for this MSPB measure, that measure is excluded from its domain and the remaining measures in the domain are given equal weight.
(b)(1) For the CY 2015 payment adjustment period, if a reliable quality of care composite or cost composite cannot be calculated, payments will not be adjusted under the value-based payment modifier.
(2) Beginning with the CY 2016 payment adjustment period, a group and a solo practitioner subject to the value-based payment modifier will receive a quality composite score that is classified as “average” under § 414.1275(b)(1) if such group and solo practitioner do not have at least one quality measure that meets the minimum number of cases under paragraph (a) of this section.
(3) Beginning with the CY 2016 payment adjustment period, a group and a solo practitioner subject to the value-based payment modifier will receive a cost composite score that is classified as “average” under § 414.1275(b)(2) if such group and solo practitioner do not have at least one cost measure that meets the minimum number of cases under paragraph (a) of this section.
(c) * * *
(1) * * *
(i) Such group does not meet the criteria as a group to avoid the PQRS payment adjustment for CY 2017 as specified by CMS; and
(d) For the CY 2018 payment adjustment period:
(1) A downward payment adjustment of −2.0 percent will be applied to a group with two to nine eligible professionals and a solo practitioner, a downward payment adjustment of −4.0 percent will be applied to a group with 10 or more eligible professionals, and a downward payment adjustment of −2.0 percent will be applied to a group or solo practitioner consisting of nonphysician eligible professionals subject to the value-based payment modifier if, during the applicable performance period as defined in § 414.1215, the following apply:
(i) Such group does not meet the criteria as a group to avoid the PQRS payment adjustment for CY 2018 as specified by CMS; and
(ii) Fifty percent of the eligible professionals in such group do not meet the criteria as individuals to avoid the PQRS payment adjustment for CY 2018 as specified by CMS; or
(iii) Such solo practitioner does not meet the criteria as an individual to avoid the PQRS payment adjustment for CY 2018 as specified by CMS.
(2) For a group composed of 10 or more eligible professionals that is not included in paragraph (d)(1) of this section, the value-based payment modifier adjustment will be equal to the amount determined under § 414.1275(c)(4)(i).
(3) For a group composed of between two to nine eligible professionals and a solo practitioner that are not included in paragraph (d)(1) of this section, the value-based payment modifier
(4) For a group and a solo practitioner consisting of nonphysician eligible professionals that are not included in paragraph (d)(1) of this section, the value-based payment modifier adjustment will be equal to the amount determined under § 414.1275(c)(4)(iii).
(5) If at least 50 percent of the eligible professionals in the group meet the criteria as individuals to avoid the PQRS payment adjustment for CY 2018 as specified by CMS, and all of those eligible professionals use a qualified clinical data registry and CMS is unable to receive quality performance data for them, the quality composite score for such group will be classified as “average” under § 414.1275(b)(1).
(c) * * *
(4) The following value-based payment modifier percentages apply to the CY 2018 payment adjustment period:
(i) For physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists in groups with 10 or more eligible professionals:
(ii) For physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists in groups with two to nine eligible professionals and physician solo practitioners:
(iii) For physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists in groups that consist of nonphysician eligible professionals, and solo practitioners who are physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists:
(d) * * *
(3) Groups and solo practitioners subject to the value-based payment modifier that have an attributed beneficiary population with an average risk score in the top 25 percent of the risk scores of beneficiaries nationwide and for the CY 2018 payment adjustment period are subject to the quality-tiering approach, receive a greater upward payment adjustment as follows:
(i) Classified as high quality/low cost receive an upward adjustment of +5x (rather than +4x) if the group has 10 or more eligible professionals, +3x (rather than +2x) if a solo practitioner or the group has two to nine eligible professionals, or +3x (rather than +2x) if a solo practitioner or group consisting of nonphysician eligible professionals; and
(ii) Classified as either high quality/average cost or average quality/low cost receive an upward adjustment of +3x (rather than +2x) if the group has 10 or more eligible professionals, +2x (rather than +1x) if a solo practitioner or the group has two to nine eligible professionals, or +2x (rather than +1x) if a solo practitioner or group consisting of nonphysician eligible professionals.
Secs. 1102, 1106, 1871, and 1899 of the Social Security Act (42 U.S.C. 1302 and 1395hh).
(2) For performance year 2016 as follows:
(v) G0463 for services furnished in ETA hospitals.
(4) For performance years 2017 and subsequent years as follows:
(i) 99201 through 99215.
(ii) 99304-99318 (excluding claims including the POS 31 modifier) and 99319-99340.
(iii) 99341 through 99350.
(iv) 99495, 99496 and 99490.
(v) G0402 (the code for the Welcome to Medicare visit).
(vi) G0438 and G0439 (codes for the annual wellness visits).
(vii) Revenue center codes 0521, 0522, 0524, 0525 submitted by FQHCs (for services furnished prior to January 1, 2011), or by RHCs.
(viii) G0463 for services furnished in ETA hospitals.
The addition reads as follows:
(a) * * *
(8) Teaching hospitals that have elected under § 415.160 of this subchapter to receive payment on a reasonable cost basis for the direct medical and surgical services of their physicians.
(d) When considering services furnished by ACO professionals in teaching hospitals that have elected under § 415.160 of this subchapter to receive payment on a reasonable cost basis for the direct medical and surgical services of their physicians in the assignment methodology under paragraph (b) of this section, CMS uses an estimated amount based on the amounts payable under the physician fee schedule for similar services in the geographic location of the teaching hospital as a proxy for the amount of the allowed charges for the service.
The addition reads as follows:
(a) * * *
(5) CMS reserves the right to redesignate a measure as pay for reporting when the measure owner determines the measure no longer aligns with clinical practice or causes patient harm.
Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).
Certified electronic health record technology (CEHRT) * * *
(1) * * *
(ii) * * *
(B) * * *
(3) Clinical quality measure certification criteria that support the calculation and reporting of clinical quality measures at 45 CFR 170.314(c)(2) and (3); or 45 CFR 170.315(c)(3)(i) and (ii); and can be electronically accepted by CMS if the provider is submitting electronically.
(2) * * *
(ii) * * *
(B) Clinical quality measure certification criteria that support the calculation and reporting of clinical quality measures at 45 CFR 170.315(c)(2) and (c)(3)(i) and (ii), and can be electronically accepted by CMS.
Securities and Exchange Commission.
Final rule.
The Securities and Exchange Commission is adopting new Regulation Crowdfunding under the Securities Act of 1933 and the Securities Exchange Act of 1934 to implement the requirements of Title III of the Jumpstart Our Business Startups Act. Regulation Crowdfunding prescribes rules governing the offer and sale of securities under new Section 4(a)(6) of the Securities Act of 1933. Regulation Crowdfunding also provides a framework for the regulation of registered funding portals and broker-dealers that issuers are required to use as intermediaries in the offer and sale of securities in reliance on Section 4(a)(6). In addition, Regulation Crowdfunding conditionally exempts securities sold pursuant to Section 4(a)(6) from the registration requirements of Section 12(g) of the Securities Exchange Act of 1934.
The final rules and forms are effective May 16, 2016, except that instruction 3 adding part 227 and instruction 15 amending Form ID are effective January 29, 2016.
With regard to requirements for issuers, Eduardo Aleman, Julie Davis, or Amy Reischauer, Division of Corporation Finance, at (202) 551-3460, and with regard to requirements for intermediaries, Joseph Furey, Joanne Rutkowski, Timothy White, Devin Ryan, or Erin Galipeau, Division of Trading and Markets, at (202) 551-5550, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549.
Crowdfunding is a relatively new and evolving method of using the Internet to raise capital to support a wide range of ideas and ventures. An entity or individual raising funds through crowdfunding typically seeks small individual contributions from a large number of people. Individuals interested in the crowdfunding campaign—members of the “crowd”—may share information about the project, cause, idea or business with each other and use the information to decide whether to fund the campaign based on the collective “wisdom of the crowd.”
The Jumpstart Our Business Startups Act (the “JOBS Act”),
In the United States, crowdfunding generally has not involved the offer of a share in any financial returns or profits that the fundraiser may expect to generate from business activities financed through crowdfunding. Such a profit or revenue-sharing model—sometimes referred to as the “equity model” of crowdfunding—could trigger the application of the federal securities laws because it likely would involve the offer and sale of a security. Under the Securities Act of 1933 (“Securities Act”), the offer and sale of securities is required to be registered unless an exemption is available. Some observers have stated that registered offerings are not feasible for raising smaller amounts of capital, as is done in a typical crowdfunding transaction, because of the costs of conducting a registered offering and the resulting ongoing reporting obligations under the Securities Exchange Act of 1934 (“Exchange Act”) that may arise as a result of the offering. Limitations under existing regulations, including purchaser qualification requirements for offering exemptions that permit general solicitation and general advertising, have made private placement exemptions generally unavailable for crowdfunding transactions, which are intended to involve a large number of investors
Moreover, someone who operates a Web site to effect the purchase and sale of securities for the account of others generally would, under pre-existing regulations, be required to register with the Commission as a broker-dealer and comply with the laws and regulations applicable to broker-dealers.
Title III of the JOBS Act (“Title III”) added new Securities Act Section 4(a)(6),
• The amount raised must not exceed $1 million in a 12-month period;
• individual investments in all crowdfunding issuers in a 12-month period are limited to:
○ The greater of $2,000 or 5 percent of annual income or net worth, if annual income or net worth of the investor is less than $100,000; and
○ 10 percent of annual income or net worth (not to exceed an amount sold of $100,000), if annual income or net worth of the investor is $100,000 or more; and
• transactions must be conducted through an intermediary that either is registered as a broker-dealer or is registered as a new type of entity called a “funding portal.”
In addition, Title III:
• Adds Securities Act Section 4A,
• adds Exchange Act Section 3(h),
• mandates that the Commission establish disqualification provisions under which an issuer would not be able to avail itself of the Section 4(a)(6) exemption if the issuer or an intermediary was subject to a disqualifying event; and
• adds Exchange Act Section 12(g)(6),
On October 23, 2013, we proposed new rules and forms to implement Title III of the JOBS Act.
Regulation Crowdfunding, among other things, permits individuals to invest in securities-based crowdfunding transactions subject to certain thresholds, limits the amount of money an issuer can raise under the crowdfunding exemption, requires issuers to disclose certain information about their offers, and creates a regulatory framework for the intermediaries that facilitate the crowdfunding transactions. As an overview, under the final rules:
• An issuer is permitted to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period;
• Individual investors, over the course of a 12-month period, are permitted to invest in the aggregate across all crowdfunding offerings up to:
○ If either their annual income or net worth is less than $100,000, then the greater of:
$2,000 or
5 percent of the lesser of their annual income or net worth.
○ If both their annual income and net worth are equal to or more than $100,000, then 10 percent of the lesser of their annual income or net worth; and
• During the 12-month period, the aggregate amount of securities sold to an investor through all crowdfunding offerings may not exceed $100,000.
Certain companies are not eligible to use the Regulation Crowdfunding exemption. Ineligible companies include non-U.S. companies, companies that already are Exchange Act reporting companies, certain investment companies, companies that are disqualified under Regulation Crowdfunding's disqualification rules, companies that have failed to comply with the annual reporting requirements under Regulation Crowdfunding during the two years immediately preceding the filing of the offering statement, and companies that have no specific business plan or have indicated their business plan is to engage in a merger or acquisition with an unidentified company or companies.
Securities purchased in a crowdfunding transaction generally cannot be resold for a period of one year. Holders of these securities do not count toward the threshold that requires an issuer to register its securities with the Commission under Section 12(g) of the Exchange Act if the issuer is current in its annual reporting obligation, retains the services of a registered transfer agent and has less than $25 million in assets.
• Information about officers and directors as well as owners of 20 percent or more of the issuer;
• A description of the issuer's business and the use of proceeds from the offering;
• The price to the public of the securities or the method for determining the price, the target offering amount, the deadline to reach the target offering amount, and whether the issuer will accept investments in excess of the target offering amount;
• Certain related-party transactions;
• A discussion of the issuer's financial condition; and
• Financial statements of the issuer that are, depending on the amount offered and sold during a 12-month period, accompanied by information from the issuer's tax returns, reviewed by an independent public accountant, or audited by an independent auditor. An issuer relying on these rules for the first time would be permitted to provide reviewed rather than audited financial statements, unless financial statements of the issuer are available that have been audited by an independent auditor.
Issuers are required to amend the offering document during the offering period to reflect material changes and provide updates on the issuer's progress toward reaching the target offering amount.
In addition, issuers relying on the Regulation Crowdfunding exemption are required to file an annual report with the Commission and provide it to investors.
• Provide investors with educational materials;
• Take measures to reduce the risk of fraud;
• Make available information about the issuer and the offering;
• Provide communication channels to permit discussions about offerings on the platform; and
• Facilitate the offer and sale of crowdfunded securities.
The rules prohibit funding portals from:
• Offering investment advice or making recommendations;
• Soliciting purchases, sales or offers to buy securities offered or displayed on its platform;
• Compensating promoters and others for solicitations or based on the sale of securities; and
• Holding, possessing, or handling investor funds or securities.
The rules provide a safe harbor under which funding portals can engage in certain activities consistent with these restrictions.
The staff will undertake to study and submit a report to the Commission no later than three years following the effective date of Regulation Crowdfunding on the impact of the regulation on capital formation and investor protection. The report will include, but not be limited to, a review of: (1) Issuer and intermediary compliance; (2) issuer offering limits and investor investment limits; (3) incidence of fraud, investor losses, and compliance with investor aggregates; (4) intermediary fee and compensation structures; (5) measures intermediaries have taken to reduce the risk of fraud, including reliance on issuer and investor representations; (6) the concept of a centralized database of investor contributions; (7) intermediary policies and procedures; (8) intermediary recordkeeping practices; and (9) secondary market trading practices.
Section 4(a)(6) provides an exemption from the registration requirements of Securities Act Section 5 for certain crowdfunding transactions. To qualify for this exemption, crowdfunding transactions by an issuer must meet specified requirements, including limits on the dollar amount of the securities that may be sold by an issuer and the dollar amount that may be invested by an individual in a 12-month period. The crowdfunding transaction also must be conducted through a registered
The exemption from registration provided by Section 4(a)(6) is available to a U.S. issuer provided that “the aggregate amount sold to all investors by the issuer, including any amount sold in reliance on the exemption provided under [Section 4(a)(6)] during the 12-month period preceding the date of such transaction, is not more than $1,000,000.” Under Securities Act Section 4A(h), the Commission is required to adjust the dollar amounts in Section 4(a)(6) “not less frequently than once every five years, by notice published in the
Consistent with the statute, we proposed in Rule 100(a) of Regulation Crowdfunding to limit the aggregate amount sold to all investors by the issuer in reliance on the new exemption to $1 million during a 12-month period. Capital raised through other exempt transactions would not be counted in determining the aggregate amount sold in reliance on Section 4(a)(6).
We also provided guidance clarifying our view that offerings made in reliance on Section 4(a)(6) will not be integrated
Under Section 4(a)(6), the amount of securities sold in reliance on Section 4(a)(6) by entities controlled by or under common control with the issuer must be aggregated with the amount to be sold by the issuer in the current offering to determine the aggregate amount sold in reliance on Section 4(a)(6) during the preceding 12-month period. Under the proposed rules, for purposes of determining whether an entity is “controlled by or under common control with” the issuer, an issuer would be required to consider whether it has “control” based on the definition in Securities Act Rule 405.
A few commenters supported a $1 million limit on capital raised by an issuer in reliance on Section 4(a)(6),
Commenters were divided on the proposed guidance that other exempt offerings should not be integrated when determining the amount sold during the preceding 12-month period for purposes of the $1 million limit, with some supporting this approach,
We are adopting as proposed rules that limit to $1 million the aggregate amount that may be sold to all investors by the issuer in a 12-month period in reliance on the new exemption.
Title III provides that the $1 million limit applies to the “aggregate amount sold to all investors by the issuer, including any amount sold in reliance on the exemption provided under [Section 4(a)(6)].” Securities Act Section 4A(g), however, provides that “[n]othing in the exemption shall be construed as preventing an issuer from raising capital through means other than [S]ection 4[(a)](6).” Considered together, these two provisions create statutory ambiguity because the first provision could be read to provide for the aggregation of amounts raised in all exempt transactions, even those that do not involve crowdfunding, while the second provision could be read to provide that nothing in the Section 4(a)(6) exemption should limit an issuer's capital raising through other methods. We believe that the overall intent of providing the exemption under Section 4(a)(6) was to provide an additional mechanism for capital raising for startup and small businesses and not to affect the amount an issuer could raise outside of that exemption. Thus, we believe that only the capital raised in reliance on the exemption provided by Section 4(a)(6) should be counted toward the limit. Capital raised through other means should not be counted in determining the aggregate amount sold in reliance on Section 4(a)(6). The opposite approach—requiring aggregation of amounts raised in any exempt transaction—would be inconsistent with the goal of alleviating the funding gap for startups and small businesses because, by electing crowdfunding, such issuers would be placing a cap on the amount of capital they could raise. An issuer that already sold $1 million in reliance on the exemption provided under Section 4(a)(6), for example, would be prevented from raising capital through other exempt methods and, conversely, an issuer that sold $1 million through other exempt methods would be prevented from raising capital under Section 4(a)(6).
In determining the amount that may be sold in reliance on Section 4(a)(6), an issuer should aggregate amounts it sold (including amounts sold by entities controlled by, or under common control with, the issuer, as well as any amounts sold by any predecessor of the issuer) in reliance on Section 4(a)(6) during the 12-month period preceding the expected date of sale and the amount the issuer intends to raise in reliance on the exemption. An issuer should not include amounts sold in other exempt offerings during the preceding 12-month period.
Further, in light of Section 4A(g) and for the reasons discussed above, we continue to believe that an offering made in reliance on Section 4(a)(6) should not be integrated with another exempt offering made by the issuer, provided that each offering complies with the requirements of the applicable exemption that is being relied upon for the particular offering. For example, an issuer conducting a concurrent exempt offering for which general solicitation is not permitted will need to be satisfied that purchasers in that offering were not solicited by means of the offering made in reliance on Section 4(a)(6).
The amount of securities sold in reliance on Section 4(a)(6) by entities controlled by or under common control with the issuer must be aggregated with the amount to be sold by the issuer in the current offering to determine the aggregate amount sold in reliance on Section 4(a)(6) during the preceding 12-month period. The statute does not define the term “controlled by or under common control with” the issuer; however, the term “control” is defined in Securities Act Rule 405.
Under the final rules, the amount of securities sold in reliance on Section 4(a)(6) also includes securities sold by any predecessor of the issuer in reliance on Section 4(a)(6) during the preceding 12-month period.
Under the exemption from registration set forth in Securities Act Section 4(a)(6)(B), the aggregate amount of securities sold to any investor by an issuer, including any amount sold in reliance on the exemption during the 12-month period preceding the date of such transaction, cannot exceed: “(i) the greater of $2,000 or 5 percent of the annual income or net worth of such investor, as applicable, if either the annual income or the net worth of the investor is less than $100,000; and (ii) 10 percent of the annual income or net worth of such investor, as applicable, not to exceed a maximum aggregate amount sold of $100,000, if either the annual income or net worth of the investor is equal to or more than $100,000.”
In the Proposing Release, we noted that this statutory language may present ambiguity in some cases about which of the two investment limits governs, because paragraph (i) applies if “either” annual income or net worth is less than $100,000 and paragraph (ii) applies if “either” annual income or net worth is equal to or more than $100,000. Accordingly, in a situation in which annual income is less than $100,000 and net worth is equal to or more than $100,000 (or vice versa), the language of the statute may be read to cause both paragraphs to apply. Paragraph (i) also fixes the maximum annual investment by an investor at 5 percent of “the annual income or net worth of such investor, as applicable” and paragraph (ii) fixes the maximum annual investment by an investor at 10 percent of “the annual income or net worth of such investor, as applicable,” but neither states when that percentage should be applied against the investor's
Under proposed Rule 100(a) of Regulation Crowdfunding, the aggregate amount of securities sold to any investor by any issuer in reliance on Section 4(a)(6) during the 12-month period preceding the date of such transaction, including the securities sold to such investor in such transaction, could not exceed the greater of: (i) $2,000 or 5 percent of the annual income or net worth of the investor, whichever is greater, if both annual income and net worth are less than $100,000; or (ii) 10 percent of the annual income or net worth of the investor, whichever is greater, not to exceed an amount sold of $100,000, if either annual income or net worth is equal to or more than $100,000.
We did not propose to alter these investment limits for any particular type of investor or create a different exemption based on different investment limits. Under the proposal, the annual income and net worth of a natural person would be calculated in accordance with the Commission's rules for the calculation of annual income and net worth of an accredited investor, and an investor's annual income or net worth could be calculated jointly with the annual income or net worth of the investor's spouse. An issuer would be able to rely on the efforts of an intermediary to determine that the aggregate amount of securities purchased by an investor will not cause the investor to exceed the investment limits, provided the issuer does not have knowledge to the contrary.
Commenters were divided on the proposed investment limits. Many commenters supported some type of investment limit without necessarily expressing a specific opinion on the proposed investment limits,
While some commenters supported the proposal to apply the higher investment limit (10 percent, as set forth in Section 4(a)(6)(B)(ii)) if only one of the annual income or net worth of the investor is equal to or more than $100,000,
A number of commenters supported the proposal that within each of the two levels of investment limits, the limits would be calculated based on the “greater of” an investor's annual income or net worth,
Many commenters supported the proposal that an issuer may rely on the efforts of an intermediary to determine that the aggregate amount of securities purchased by an investor will not cause the investor to exceed the investment limits, provided that the issuer does not have knowledge that the investor had exceeded, or would exceed, the investment limits as a result of purchasing securities in the issuer's offering.
Commenters were divided about the joint calculation of annual income and net worth with the investor's spouse. Several commenters supported the proposal that an investor's annual income and net worth be calculated jointly with that of the investor's spouse,
A number of commenters favored different or no investment limits for accredited and institutional investors. Many commenters supported exempting accredited and institutional investors from the investment limits,
Consistent with the statute, we are adopting investment limits for securities-based crowdfunding transactions, but with some modifications from the proposed rules. We have modified the final rules from the proposal to clarify that the investment limit reflects the aggregate amount an investor may invest in all offerings under Section 4(a)(6) in a 12-month period across all issuers. In addition, as noted above, some commenters supported a “greater of” approach to implementing the two statutory investment limits, while others supported a “lesser of” approach. After
Under this approach, an investor with annual income of $50,000 a year and $105,000 in net worth would be subject to an investment limit of $2,500, in contrast to the proposed rules in which that same investor would have been eligible for an investment limit of $10,500.
The chart below illustrates a few examples:
A number
Consistent with the proposed rules, the final rules allow an issuer to rely on efforts that an intermediary is required to undertake in order to determine that the aggregate amount of securities purchased by an investor does not cause the investor to exceed the investment limits, provided that the issuer does not have knowledge that the investor had exceeded, or would exceed, the investment limits as a result of purchasing securities in the issuer's offering.
We are adopting, as proposed, final rules that allow an investor's annual income and net worth to be calculated as those values are calculated for purposes of determining accredited investor status.
While a number of commenters supported the creation of a different investment limit for accredited or institutional investors, or exempting them altogether, we are not making such a change. As noted above, crowdfunding is an innovative approach to raising capital in which the entity or individual raising capital typically seeks small individual contributions from a large number of people. As such, we believe that crowdfunding transactions were intended under Section 4(a)(6) to be available equally to all types of investors.
Section 4(a)(6)(C) requires that a transaction in reliance on Section 4(a)(6) be conducted through a broker or funding portal that complies with the requirements of Securities Act Section 4A(a). To implement this provision, we proposed in Rule 100(a)(3) of Regulation Crowdfunding that for any transaction conducted in reliance on Section 4(a)(6), an issuer use only one intermediary (that complies with the requirements of Section 4A(a) and the related requirements in Regulation Crowdfunding) and that the transaction be conducted exclusively on the intermediary's platform. We also proposed to permit the intermediary to engage in back office
Commenters were divided about the proposed prohibition on an issuer using more than one intermediary for any transaction conducted pursuant to Section 4(a)(6). Supporters of the proposed prohibition expressed the view that the prohibition would benefit communication between issuers and investors.
Commenters were generally divided about the proposed requirement that transactions made in reliance on Section 4(a)(6) be conducted exclusively through the intermediary's platform. Commenters who supported
A few commenters supported, but suggested technical revisions to, our proposed definition of “platform.”
After considering the comments, we are adopting as proposed Rule 100(a)(3). We also are adopting the definition of “platform” with one clarifying amendment and with a change in location to Rule 300(c).
As stated in the Proposing Release, we believe that requiring an issuer to use only one intermediary to conduct an offering or concurrent offerings in reliance on Section 4(a)(6) would help foster the creation of a “crowd” and better accomplish the purpose of the statute. In order for a crowd to effectively share information, we believe it would be most beneficial to have one meeting place for the crowd to obtain and share information, thus avoiding dilution or dispersement of the “crowd.” We also believe that limiting a crowdfunding transaction to a single intermediary's online platform helps to minimize the risk that issuers and intermediaries would circumvent the requirements of Regulation Crowdfunding. For example, allowing an issuer to conduct an offering using more than one intermediary would make it more difficult for intermediaries to determine whether an issuer is exceeding the $1 million aggregate offering limit.
We continue to believe that crowdfunding transactions made in reliance on Section 4(a)(6) and activities associated with these transactions should occur over the Internet or other similar electronic medium that is accessible to the public. Such an “online-only” requirement enables the public to access offering information and share information publicly in a way that will allow members of the crowd to share their views on whether to participate in the offering and fund the business or idea. While we acknowledge, as one commenter observed, that there are forms of communication that cannot be achieved
In a change from the proposed rules, and consistent with the suggestions of commenters, the final rules define “platform” as “
Securities Act Section 4A(f) excludes certain categories of issuers from eligibility to rely on Section 4(a)(6) to engage in crowdfunding transactions. These are: (1) Issuers that are not organized under the laws of a state or territory of the United States or the District of Columbia; (2) issuers that are subject to Exchange Act reporting requirements;
Rule 100(b) of Regulation Crowdfunding, as proposed, would exclude the categories of issuers specifically identified in Section 4A(f). In addition, the proposed rules would exclude: (1) Issuers that are disqualified from relying on Section 4(a)(6) pursuant to the disqualification provision in Rule 503(a) of Regulation Crowdfunding; (2) issuers that have sold securities in reliance on Section 4(a)(6) if they have not filed with the Commission and provided to investors, to the extent required, the ongoing annual reports required by Regulation Crowdfunding during the two years immediately preceding the filing of the required new offering statement; and (3) issuers that have no specific business plan or that have indicated that their business plan is to engage in a merger or acquisition with an unidentified company or companies.
We also received comments about whether the exclusion should extend to issuers that are delinquent in other reporting requirements (
We are adopting the issuer eligibility requirements as proposed, with the addition of two clarifications. As noted above, Section 4A(f) expressly excludes foreign issuers, Exchange Act reporting companies and companies that are investment companies as defined in the Investment Company Act or companies that are excluded from the definition of investment company under Section 3(b) or 3(c) of the Investment Company Act from the exemption for crowdfunding transactions provided by Section 4(a)(6). Although some commenters expressed concerns about these statutory exclusions, including that such exclusions could limit the investment choices of crowdfunding investors, we are not creating additional exemptions for these categories of issuers. In reaching this determination, we have considered that the primary purpose of Section 4(a)(6), as we understand it, is to facilitate capital formation by early stage companies that might not otherwise have access to capital.
We are not creating, as suggested by some commenters,
In addition to these statutorily excluded categories of issuers, the final rules also exclude, as proposed, several additional categories of issuers. Below we discuss each of these additional categories:
We note that some commenters read the provision requiring issuers to have filed their two most recent annual reports to mean that the disqualification would be triggered only after the issuer was delinquent for two consecutive years or that an issuer would be disqualified for two years.
Consistent with the proposal and the recommendations of commenters,
As discussed in the proposal, we are cognizant of the challenges noted by some commenters
Overall, we believe that the exclusions in the final rules appropriately consider the need to limit the potential risks to investors that could result from extending issuer eligibility to certain types of entities without unduly limiting the benefits of the exemption as a tool for capital formation.
Securities Act Section 4A(b)(1) sets forth specific disclosures that an issuer offering or selling securities in reliance on Section 4(a)(6) must “file with the Commission and provide to investors and the relevant broker or funding portal, and make available to potential investors”. These disclosures include:
• The name, legal status, physical address and Web site address of the issuer;
• the names of the directors and officers (and any persons occupying a similar status or performing a similar function), and each person holding more than 20 percent of the shares of the issuer;
• a description of the business of the issuer and the anticipated business plan of the issuer;
• a description of the financial condition of the issuer;
• a description of the stated purpose and intended use of the proceeds of the offering sought by the issuer with respect to the target offering amount;
• the target offering amount, the deadline to reach the target offering amount and regular updates about the progress of the issuer in meeting the target offering amount;
• the price to the public of the securities or the method for determining the price;
• a description of the ownership and capital structure of the issuer.
In addition, Section 4A(b)(1)(I) specifies that the Commission may require additional disclosures for the protection of investors and in the public interest.
As discussed further in Section II.B.3 below, we are requiring issuers to file these disclosures with the Commission on Form C.
By filing Form C with the Commission and providing it to the relevant intermediary, issuers will satisfy the requirement of Securities Act Section 4A(b) that issuers relying on Section 4(a)(6) must “file with the Commission and provide to investors and the relevant broker of funding portal, and make available to potential investors” certain information. In a clarifying change from the proposal, we have moved the definition of “investor” from proposed Rule 300(c)(4) to Rule
Additionally, as we clarify in the final rules, to the extent that some of the required disclosures overlap, issuers are not required to duplicate disclosures.
To implement Sections 4A(b)(1)(A) and (B), we proposed in Rule 201 of Regulation Crowdfunding to require an issuer to disclose information about its legal status, directors, officers and certain shareholders and how interested parties may contact the issuer. Specifically, we proposed to require that an issuer disclose:
• Its name and legal status, including its form of organization, jurisdiction in which it is organized and date of organization;
• its physical address and its Web site address; and
• the names of the directors and officers, including any persons occupying a similar status or performing a similar function, all positions and offices with the issuer held by such persons, the period of time in which such persons served in the positions or offices and their business experience during the past three years, including:
○ Each person's principal occupation and employment, including whether any officer is employed by another employer; and
○ the name and principal business of any corporation or other organization in which such occupation and employment took place.
We proposed to define “officer” consistent with the definition in Securities Act Rule 405 and in Exchange Act Rule 3b-2. We further proposed to require disclosure of the business experience of directors and officers of the issuer during the past three years.
Section 4A(b)(1)(B) requires disclosure of “the names of . . . each person holding more than 20 percent of the shares of the issuer.” In contrast, Section 4A(b)(1)(H)(iii) requires disclosure of the “name and ownership level of each existing shareholder who owns more than 20 percent
Of the commenters that addressed the proposed issuer, officer and director disclosure rules, some generally supported them,
Some commenters supported the proposed three-year time period to be covered by the officer and director disclosure rules,
A few commenters commented on the proposed 20 Percent Beneficial Owner rules. One commenter supported the requirement to disclose the names of persons who are the 20 Percent Beneficial Owners,
We are adopting the issuer, officer and director, and 20 Percent Beneficial Owners disclosure requirements largely as proposed.
The required disclosure about the business experience of the directors and officers (and any persons occupying a similar status or performing a similar function) must cover the past three years,
Notwithstanding the suggestion of one commenter, and consistent with the statute, the final rules require disclosure of an issuer's Web site.
We also are adopting the 20 Percent Beneficial Owner disclosure requirement as proposed with one modification.
As stated in the Proposing Release, we believe that the universe of 20 Percent Beneficial Owners should be the same for the disclosure requirements and the disqualification provisions
Consistent with Section 4A(b)(1)(C), we proposed in Rule 201(d) of Regulation Crowdfunding to require an issuer to disclose information about its business and business plan. The proposed rules did not specify the disclosures that an issuer would need to include in the description of the business and the business plan.
While several commenters expressed concerns about requiring an issuer to disclose a description of its business and business plan,
Some commenters recommended that the Commission provide a non-exclusive list of the types of information an issuer should consider disclosing, templates, examples or other guidance to assist the issuer in complying with this disclosure requirement.
Consistent with the proposal, Rule 201(d) requires an issuer to disclose information about its business and business plan. We are not modifying the proposed rule, as some commenters
Consistent with Section 4A(b)(1)(E), we proposed in Rule 201(i) of Regulation Crowdfunding to require an issuer to provide a description of the purpose of the offering and intended use of the offering proceeds. We expected that such disclosure would provide a sufficiently detailed description of the intended use of proceeds to permit investors to evaluate the investment. Under the proposed rules, if an issuer did not have definitive plans for the proceeds, but instead had identified a range of possible uses, then the issuer would be required to identify and describe each probable use and factors affecting the selection of each particular use. In addition, if an issuer indicated that it would accept proceeds in excess of the target offering amount,
Most commenters supported the requirement that issuers disclose the intended use of the offering proceeds.
We are adopting the use of proceeds disclosure requirement substantially as proposed in Rule 201(i). An issuer will be required to provide a reasonably detailed description of the purpose of the offering, such that investors are provided with enough information to understand how the offering proceeds will be used.
The disclosure requirement is designed to provide investors with sufficient information to evaluate the investment. For example, an issuer may intend to use the proceeds of an offering to acquire assets or businesses, compensate the intermediary or its own employees or repurchase outstanding securities of the issuer. In providing its description, an issuer would need to consider the appropriate level of detail to provide investors about the assets or businesses that the issuer anticipates acquiring, based on its particular facts and circumstances, so that the investors could make informed decisions. If the proceeds will be used to compensate existing employees or to hire new employees, the issuer should consider disclosing whether the proceeds will be used for salaries or bonuses and how many employees it plans to hire, as applicable. If the issuer will repurchase outstanding issuer securities, it should consider disclosing its plans, terms and purpose for repurchasing the securities. An issuer also should consider disclosing how long the proceeds will satisfy the operational needs of the business. If an issuer does not have definitive plans for the proceeds, but instead has identified a range of possible uses, then the issuer should identify and describe each probable use and the factors the issuer may consider in allocating proceeds among the potential uses.
Consistent with Section 4A(b)(1)(F), we proposed in Rule 201(g) of Regulation Crowdfunding to require issuers to disclose the target offering amount and the deadline to reach the target offering amount. In addition, we proposed in Rule 201(h) to require an issuer to disclose whether it would accept investments in excess of the target offering amount, and, if it would, we proposed to require the issuer to disclose, at the commencement of the offering, the maximum amount it would accept. The issuer also, under proposed Rule 201(h), would be required to disclose, at the commencement of the offering, how shares in oversubscribed offerings would be allocated. We further proposed in Rule 201(j) to require issuers to describe the process to cancel an investment commitment or to complete the transaction once the target amount is met, including a statement that:
• Investors may cancel an investment commitment until 48 hours prior to the deadline identified in the issuer's offering materials;
• the intermediary will notify investors when the target offering amount has been met;
• if an issuer reaches the target offering amount prior to the deadline identified in its offering materials, it may close the offering early if it provides at least five business days'
• if an investor does not cancel an investment commitment before the 48-hour period prior to the offering deadline, the funds will be released to the issuer upon closing of the offering and the investor will receive securities in exchange for his or her investment.
In addition, proposed Rule 201(k) would require issuers to disclose that if an investor does not reconfirm his or her investment commitment after a material change is made to the offering, the investor's investment commitment will be cancelled and committed funds will be returned. Proposed Rule 201(g) also would require issuers to disclose that if the sum of the investment commitments does not equal or exceed the target offering amount at the time of the offering deadline, no securities will be sold in the offering, investment commitments will be cancelled and committed funds will be returned.
Commenters were supportive of the proposed rules, and we are adopting the target offering amount and deadline disclosure rules as proposed.
We do not believe it is necessary for us to prescribe how oversubscribed offerings must be allocated if the issuer is required to disclose, at the commencement of the offering, how shares in oversubscribed offerings will be allocated. Commenters were supportive of this approach,
We believe that investors in a crowdfunding transaction will benefit from clear disclosure about their right to cancel, the circumstances under which an issuer may close an offering early and the need to reconfirm the investment commitment under certain circumstances, as they will be more aware of their rights to rescind an investment commitment. Therefore, we are adopting disclosure requirements covering these points, as proposed.
Consistent with Section 4A(b)(1)(G), we proposed in Rule 201(l) of Regulation Crowdfunding to require an issuer to disclose the offering price of the securities or, in the alternative, the method for determining the price, so long as before the sale each investor is provided in writing the final price and all required disclosures.
Commenters were supportive of the proposed disclosure
Consistent with Section 4A(b)(1)(H), we proposed in Rule 201(m) of Regulation Crowdfunding to require an issuer to provide a description of its ownership and capital structure. This disclosure would include:
• The terms of the securities being offered and each other class of security of the issuer, including the number of securities being offered and those outstanding, whether or not such securities have voting rights, any limitations on such voting rights, how the terms of the securities being offered may be modified and a summary of the differences between such securities and each other class of security of the issuer, and how the rights of the securities being offered may be materially limited, diluted or qualified by the rights of any other class of security of the issuer;
• a description of how the exercise of the rights held by the principal shareholders of the issuer could affect the purchasers of the securities;
• the name and ownership level of persons who are 20 Percent Beneficial Owners;
• how the securities being offered are being valued, and examples of methods for how such securities may be valued by the issuer in the future, including during subsequent corporate actions;
• the risks to purchasers of the securities relating to minority ownership in the issuer and the risks associated with corporate actions including additional issuances of securities, issuer repurchases of securities, a sale of the issuer or of assets of the issuer or transactions with related parties; and
• a description of the restrictions on the transfer of the securities.
As proposed, the rules would require disclosure of the number of securities being offered and those outstanding, whether or not such securities have voting rights, any limitations on such voting rights and a description of the restrictions on the transfer of the securities.
A number of commenters supported the proposed ownership and capital structure disclosure rules,
We are adopting the ownership and capital structure disclosure rules as proposed, with the addition of language specifying that beneficial ownership must be calculated no earlier than 120 days prior to the date of the filing of the offering statement or report,
We also proposed to require the following additional disclosures:
• Disclosure of the name, SEC file number and Central Registration Depository number (“CRD number”) (as applicable)
• disclosure of the amount of compensation paid to the intermediary for conducting the offering, including the amount of any referral or other fees associated with the offering;
• certain legends in the offering statement;
• disclosure of the current number of employees of the issuer;
• a discussion of the material factors that make an investment in the issuer speculative or risky;
• a description of the material terms of any indebtedness of the issuer, including the amount, interest rate, maturity date and any other material terms;
• disclosure of any exempt offerings conducted within the past three years; and
• disclosure of related-party transactions since the beginning of the issuer's last fiscal year in excess of five percent of the aggregate amount of capital raised by the issuer in reliance on Section 4(a)(6) during the preceding 12-month period, inclusive of the amount the issuer seeks to raise in the current offering.
One commenter supported the proposal to limit the disclosure of related-party transactions to transactions since the beginning of the issuer's last fiscal year.
Other commenters recommended that we require issuers to disclose general information;
As discussed in Section II.B.2 below in connection with ongoing annual reports, a number of commenters recommended ways to make it easier for investors to locate an issuer's annual reports.
We are adopting the additional disclosure requirements as proposed in Rule 201 with several modifications. As discussed below, we have added a requirement to disclose any material information necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.
We agree with the suggestion by some commenters that issuers should not be required to disclose in multiple places the information required to be provided
In addition, we are modifying the rule text from the proposal to require issuers to disclose any other direct or indirect interest in the issuer held by the intermediary, or any arrangement for the intermediary to acquire such an interest.
While one commenter recommended that we require issuers to disclose the
The final rule also includes an instruction to clarify that, for purposes of Rule 201(r), a transaction includes, but is not limited to, any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships.
Given the early stage of development of the small businesses and startups that we expect will seek to raise capital pursuant to Section 4(a)(6), as well as the investment limits prescribed by the rules, we believe that limiting the disclosure of related-party transactions to transactions occurring since the beginning of the issuer's last fiscal year, as proposed, will help to limit compliance costs for issuers while still providing investors with sufficient information to evaluate the relationship between related parties and the issuer.
As suggested by one commenter,
The first is a requirement that an issuer disclose the location on its Web site where investors will be able to find the issuer's annual report and the date by which such report will be available on its Web site.
The second additional disclosure requirement, as suggested by a commenter,
The third additional requirement, similar to suggestions from some commenters,
Although we appreciate that commenters made various suggestions for additional issuer disclosure requirements, such as those relating to executive compensation, market risk and material contracts, we are not mandating further disclosures. In adopting issuer requirements for Regulation Crowdfunding, we have been mindful of the limited resources and start-up operations of issuers likely to use security-based crowdfunding and have sought to consider the need to provide investors with relevant information to make an informed investment decision while limiting the compliance costs for issuers. We believe the issuer disclosure requirements we are adopting along with other protections, such as investment limits, achieve this goal.
Section 4A(b)(1)(D) requires “a description of the financial condition of the issuer.” It also establishes a framework of tiered financial disclosure requirements based on aggregate target offering amounts of the offering and all other offerings made in reliance on Section 4(a)(6) within the preceding 12-month period.
Consistent with Section 4A(b)(1)(D), we proposed in Rule 201(s) of Regulation Crowdfunding to require an issuer to provide a narrative discussion of its financial condition.
Commenters generally supported the proposed requirement that issuers provide a narrative discussion of their financial condition.
We are adopting this requirement as proposed, with a few technical modifications.
We expect that the discussion required by the final rule and instructions will inform investors about the financial condition and results of operations of the issuer by providing management's perspective on the issuer's operations and financial results, including information about the issuer's liquidity and capital resources and any known trends or uncertainties that could materially affect the company's results. Because issuers seeking to engage in crowdfunding transactions will likely be smaller, less complex and at an earlier stage of development than issuers conducting registered offerings or Exchange Act reporting companies, we expect that the discussion generally will not, contrary to the concern of at least one commenter,
Proposed Rule 201(t) of Regulation Crowdfunding would have established financial statement disclosure requirements that are based on aggregate target offering amounts within the preceding 12-month period:
• Issuers offering $100,000 or less would be required to file with the Commission and provide to investors and the relevant intermediary income tax returns filed by the issuer for the most recently completed year (if any) and financial statements that are certified by the principal executive officer to be true and complete in all material respects;
• issuers offering more than $100,000, but not more than $500,000, would be required to file with the Commission and provide to investors and the relevant intermediary financial statements reviewed by a public accountant that is independent of the issuer; and
• issuers offering more than $500,000 would be required to file with the Commission and provide to investors and the relevant intermediary financial statements audited by a public accountant that is independent of the issuer.
Under proposed Rule 201(t), issuers would be permitted to voluntarily provide financial statements that meet the requirements for a higher aggregate target offering amount.
The proposed rules also would have set forth the following requirements for the financial statements:
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Commenters were divided on the proposed financial statement requirements,
For an example of those who generally opposed,
Commenters were divided on the requirement that issuers offering $100,000 or less file and provide to investors their federal income tax returns. Supporters of the tax return requirement noted that income tax returns would be a source of credible information for investors that should be readily available without requiring issuers to bear significant additional preparation expenses.
Several commenters suggested approaches to allow access by investors to the information available from a tax return,
Two commenters recommended that the timing of financial statement disclosures correspond to any extended tax filing deadlines,
A number of commenters recommended raising the maximum offering amount for issuers that provide this level of financial information.
We received a number of comments expressing concern about the anticipated costs associated with audited financial statements.
For opponents,
A number of commenters recommended that, as a less expensive alternative to requiring U.S. GAAP, the Commission allow financial statements prepared in accordance with a comprehensive basis of accounting other than U.S. GAAP.
A few commenters recommended that issuers relying on Section 4(a)(6) be permitted to take advantage of the extended transition period applicable to private companies for complying with new or revised accounting standards.
With respect to audit standards, several commenters supported our proposal to require that financial statements be audited in accordance with the auditing standards issued by either the AICPA or the PCAOB,
We are adopting financial disclosure requirements for Title III issuers in Rule
• For issuers offering $100,000 or less: Disclosure of the amount of total income, taxable income and total tax as reflected in the issuer's federal income tax returns certified by the principal executive officer to reflect accurately the information in the issuer's federal income tax returns (in lieu of filing a copy of the tax returns), and financial statements certified by the principal executive officer to be true and complete in all material respects.
• Issuers offering more than $100,000 but not more than $500,000: Financial statements reviewed by a public accountant that is independent of the issuer.
• Issuers offering more than $500,000:
○ For issuers offering more than $500,000 but not more than $1 million of securities in reliance on Regulation Crowdfunding for the first time: Financial statements reviewed by a public accountant that is independent of the issuer. If, however, financial statements of the issuer are available that have been audited by a public accountant that is independent of the issuer, the issuer must provide those financial statements instead and need not include the reviewed financial statements.
○ For issuers that have previously sold securities in reliance on Regulation Crowdfunding: Financial statements audited by a public accountant that is independent of the issuer.
The final rule also includes an instruction to clarify that references to the issuer in Rule 201(t) refer to the issuer and its predecessors, if any.
Instead of mandating that issuers offering $100,000 or less provide copies of their federal income tax returns as proposed, the final rules require an issuer to disclose the amount of total income, taxable income and total tax, or the equivalent line items from the applicable form, exactly as reflected in its filed federal income tax returns, and to have the principal executive officer certify that those amounts reflect accurately the information in the issuer's federal income tax returns.
As we stated in the Proposing Release, it remains unclear to us to what extent all of the information presented in a tax return would be useful for an investor evaluating whether to purchase securities from the issuer. We believe, however, that certain information such as total income, taxable income and total tax could be informative and would likely be available to the issuer in tax documentation. The final rules, therefore, provide that an issuer must disclose its total income, taxable income and total tax, or the equivalent line items from its federal income tax documentation and have the principal executive officer certify that those amounts reflect accurately the information in the issuer's federal income tax returns.
Under the final rules, an issuer that offers securities in reliance on Section 4(a)(6) before filing its tax return for the most recently completed fiscal year will be allowed to use information from the tax return filed for the prior year. An issuer that uses information from the prior year's tax return will be required to provide tax return information for the most recently completed fiscal year when filed with the U.S. Internal Revenue Service (if the tax return is filed during the offering period). An issuer that has requested an extension from the U.S. Internal Revenue Service would not be required to provide the information until the date when the return is filed, which is consistent with the concept of not requiring tax information until that information has been filed with the U.S. Internal Revenue Service. If an issuer has not yet filed a tax return and is not required to file a tax return before the end of the offering period, then the tax return information does not need to be provided.
We are adding to Rule 201(t)(1) a requirement that if financial statements of the issuer are available that have either been reviewed or audited by a public accountant that is independent of the issuer, the issuer must provide those financial statements instead, and need not include the information reported on the federal income tax returns or the certification of the principal executive officer.
We are adding this accommodation for first-time issuers in response to commenters' concerns about the expense of obtaining audited financial statements. While some commenters expressed support for the proposed audit requirement,
Additionally, as suggested by one commenter,
• Must disclose such choice at the time the issuer files the offering statement; and
• May not take advantage of the extended transition period for some standards and not others, but must apply the same choice to all standards.
However, consistent with the treatment of emerging growth companies and offerings relying on Regulation A,
On December 23, 2013, after we proposed rules for Regulation Crowdfunding, the Financial Accounting Standards Board (FASB) and Private Company Council (PCC) issued a guide for evaluating financial accounting and reporting for non-public business entities.
Issuers that offer securities pursuant to Regulation Crowdfunding will be considered “public business entities” as defined by the FASB
The final rules do not allow Regulation Crowdfunding issuers to use the alternatives available to non-public business entities under U.S. GAAP in the preparation of their financial statements. One of the significant factors considered by the FASB in developing its definition of “public business entity” was the number of primary users of the financial statements and their access to management.
In addition, consistent with the proposal and with the views of many commenters,
While some commenters expressed concern that this accommodation would not provide investors with sufficiently current financial information,
We are not adopting the alternative proposed by one commenter to require unaudited financial statements through the end of the month that ends no more than two months before the month in which the offering began.
Consistent with the recommendation of one commenter,
Consistent with the proposal and recommendations in response to our request for comments, we are not requiring audits to be conducted by a PCAOB-registered firm. We believe the final rules will result in a greater number of public accountants being eligible to audit the issuers' financial statements, which may reduce issuers' costs.
We believe that audits conducted in accordance with U.S. GAAS will provide sufficient protection for investors in these offerings, especially in light of the requirement that auditors must be independent under Rule 2-01 of Regulation S-X or AICPA independence standards. Moreover, we believe that the flexibility adopted in the final rules is appropriately tailored for the different types of issuers that are likely to conduct offerings under Regulation Crowdfunding.
Because issuers under Regulation Crowdfunding are not “issuers” as defined by Section 2(a)(7) of the Sarbanes-Oxley Act of 2002 nor broker-dealers registered with the Commission under Section 15(b) of the Securities Exchange Act of 1934, AICPA rules would require the audit to be compliant with U.S. GAAS even if the auditor has conducted the audit in accordance with PCAOB standards. Staff of the Commission consulted with the AICPA on this issue and has been advised that an audit performed by its members of an issuer conducting an offering under Regulation Crowdfunding would be required to comply with U.S. GAAS in accordance with the AICPA's Code of Professional Conduct.
We are adopting as proposed the provision that an audit report that includes an adverse opinion or disclaimer of opinion will not be in compliance with the audited financial statement requirements.
The final rules also provide that a review report that includes modifications will not satisfy the requirement for reviewed financial statements.
Consistent with Securities Act Section 4A(b)(1)(F), proposed Rule 201(v) and Rule 203(a)(3) of Regulation Crowdfunding would require an issuer to file with the Commission and provide investors and the relevant intermediary regular updates on the issuer's progress in meeting the target offering amount no later than five business days after each of the dates that the issuer reaches particular intervals—
Commenters were generally opposed to the progress update requirements, noting that progress updates filed with the Commission would be duplicative of what is available from the intermediary's Web site and generate unnecessary costs.
The final rules maintain the proposed progress update requirements, with a significant modification. Based on concerns expressed by commenters, the final rules permit issuers to satisfy the progress update requirement by relying on the relevant intermediary to make publicly available on the intermediary's platform frequent updates about the issuer's progress toward meeting the target offering amount.
As stated in the proposal, we continue to believe that the information available in progress updates will be important to investors by allowing them to gauge whether interest in the offer has increased gradually or whether it was concentrated at the beginning or at the end of the offering period. We believe that these same benefits can be achieved through information available on the intermediary's platform about the progress toward the target offering amount. Whether an issuer provides the required progress update report or relies on the intermediary's reporting, we believe investors will benefit by being able to stay informed during the offering of an issuer's progress.
Under the final rules, all issuers must file a Form C-U to report the total amount of securities sold in the offering. For issuers that are offering only up to a certain target offering amount, this requirement will be triggered five business days from the date they reach the target offering amount.
Proposed Rule 203(a)(2) of Regulation Crowdfunding would require that an issuer amend its disclosure for any material change in the offer terms or disclosure previously provided to investors. The amended disclosure would be filed with the Commission on Form C-A: Amendment and provided to investors and the relevant intermediary. Material changes would require reconfirmation by investors of their investment commitments within five business days. In addition, an issuer would be permitted, but not required, to file amendments for changes that are not material.
Commenters were mixed on the proposed rules relating to amendments to the offering statement, with those opposed citing the burden on issuers.
For commenters generally opposed,
We are adopting requirements for the amendment to the offering statement as
The amended disclosure must be filed with the Commission on Form C and provided to investors and the relevant intermediary. Under the final rules, the issuer is required to check the box for “Form C/A: Amendment” on the cover of the Form C and explain, in summary manner, the nature of the changes, additions or updates in the space provided.
With respect to what constitutes a “material change,” as we stated in the Proposing Release, information is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether or not to purchase the securities.
In addition, as discussed further in Section II.C.6 below, if any change, addition or update constitutes a material change to information previously disclosed, the issuer must check the box on the cover of Form C indicating that investors must reconfirm their investment commitments.
A number of commenters recommended that we specify a filing deadline for amendments reflecting a material change,
Issuers will be permitted, but not required, to amend the Form C to provide information with respect to other changes that are made to the information presented on the intermediary's platform and provided to investors.
Securities Act Section 4A(b)(4) requires, “not less than annually, [the issuer to] file with the Commission and provide to investors reports of the results of operations and financial statements of the issuer, as the Commission shall, by rule, determine appropriate, subject to such exceptions and termination dates as the Commission may establish, by rule.”
To implement the ongoing reporting requirement in Section 4A(b)(4), we proposed in Rules 202 and 203 of Regulation Crowdfunding to require an issuer that sold securities in reliance on Section 4(a)(6) to file a report annually, no later than 120 days after the end of the most recently completed fiscal year covered by the report. To implement the requirement that issuers provide the report to investors, we proposed in Rule 202(a) to require issuers to post the annual report on their Web sites. Under proposed Rule 202(a), the issuer would be required to disclose information similar to that required in the offering statement, including disclosure about its financial condition that meets the highest financial statement requirements that were applicable to its offering statement.
We also proposed in Rule 202(b) to require issuers to file the annual report until one of the following events occurs: (1) The issuer becomes a reporting company required to file reports under Exchange Act Sections 13(a) or 15(d); (2) the issuer or another party purchases or repurchases all of the securities issued pursuant to Section 4(a)(6), including any payment in full of debt securities or any complete redemption of redeemable securities; or (3) the issuer liquidates or dissolves in accordance with state law.
Commenters expressed a range of views on the proposed ongoing reporting requirements.
For commenters generally opposing the proposed ongoing reporting requirements,
We also received a range of comments about when the ongoing reporting requirements should terminate, with two supporting requiring issuers to file an annual report until one of the enumerated events occurs,
Some commenters recommended that the ongoing reporting requirements be a condition to the Section 4(a)(6) exemption
After considering the comments received, we are adopting the ongoing reporting requirements generally as proposed, with a substantial modification to the level of public accountant involvement required and another modification to provide for termination of the ongoing reporting obligation in two additional circumstances.
We recognize the view of some commenters
Consistent with the proposal, the final rule does not require an issuer to provide direct notification via email or otherwise of the posting of the report, as was suggested by some commenters.
Many commenters expressed concerns with the costs associated with preparing reviewed and audited financial statements on an ongoing basis. Commenters also noted the absence of comparable ongoing reporting requirements under Tier 1 of Regulation A and other offering exemptions.
(1) The issuer is required to file reports under Exchange Act Sections 13(a) or 15(d);
(2) the issuer has filed at least one annual report and has fewer than 300 holders of record;
(3) the issuer has filed at least three annual reports and has total assets that do not exceed $10 million;
(4) the issuer or another party purchases or repurchases all of the securities issued pursuant to Section 4(a)(6), including any payment in full of debt securities or any complete redemption of redeemable securities; or
(5) the issuer liquidates or dissolves in accordance with state law.
We believe the addition of the two termination events, which are generally consistent with the suggestions of commenters,
As proposed, Rule 203(b)(3) provides that any issuer terminating its annual reporting obligations will be required to file with the Commission, within five business days from the date on which the issuer becomes eligible to terminate its reporting obligation, a notice that it will no longer file and provide annual reports pursuant to the requirements of Regulation Crowdfunding. The issuer also must check the box for “Form C-TR: Termination of Reporting” on the cover of Form C.
We are not persuaded by the suggestion of one commenter
Securities Act Section 4A(b)(1) requires issuers who offer or sell securities in reliance on Section 4(a)(6) to “file with the Commission and provide to investors and the relevant broker or funding portal, and make available to potential investors” certain disclosures. The statute does not specify a format that issuers must use to present the required disclosures and file these disclosures with the Commission. We proposed in Rule 203 of Regulation Crowdfunding to require issuers to file the mandated disclosure using new Form C, which would require certain disclosures to be presented in a specified format, while allowing the issuer to customize the presentation of other disclosures required by Section 4A(b)(1) and the related rules.
We proposed to require issuers to use an XML-based fillable form to input certain information. Information not required to be provided in text boxes in the XML-based fillable form would be filed as attachments to Form C.
Under the proposed rules, Form C would be used for all of an issuer's filings with the Commission related to the offering made in reliance on Section 4(a)(6). The issuer would check one of the following boxes on the cover of the Form C to indicate the purpose of the Form C filing:
• “Form C: Offering Statement” for issuers filing the initial disclosures required for an offering made in reliance on Section 4(a)(6);
• “Form C-A: Amendment” for issuers seeking to amend a previously-filed Form C for an offering;
• “Form C-U: Progress Update” for issuers filing a progress update required by Section 4A(b)(1)(H) and the related rules;
• “Form C-AR: Annual Report” for issuers filing the annual report required by Section 4A(b)(4) and the related rules; and
• “Form C-TR: Termination of Reporting” for issuers terminating their reporting obligations pursuant to Section 4A(b)(4) and the related rules.
EDGAR would automatically provide each filing with an appropriate tag depending on which box the issuer checks so that investors could distinguish among the different filings.
Section 4A(b)(1) requires issuers to file the offering information with the Commission, provide it to investors and the relevant intermediary and make it available to potential investors.
Commenters generally supported the proposed Form C requirement.
Commenters were divided on the EDGAR filing requirement. Some commenters supported the filing requirement, with a few of those specifically supporting the proposal that issuers file the Form C in electronic format only.
A few commenters requested clarification whether all offering material made available on the intermediary's platform must be filed on Form C.
We also received several comments prior to the Proposing Release on whether the Commission should require a specific format for the required disclosure. Several commenters recommended that the Commission require the disclosure on a form modeled after, or require the use of NASAA's Small Company Offering Registration Form (U-7).
A number of commenters generally supported the proposal to refer investors to information on the intermediary's platform.
We are adopting Form C and the related filing requirements
First, the final rules will amend Regulation S-T to permit an issuer to submit exhibits to Form C in Portable Document Format (“PDF”) as official filings.
We are adopting the XML-based fillable form as proposed with a few modifications.
We believe that requiring certain information to be submitted in XML format will support the assembly and transmission of those required disclosures to EDGAR on Form C.
In addition, in a change from the proposed rules, the final Form C includes an optional Question and Answer (“Q&A”) format that issuers may elect to use to provide the disclosures that are not required to be filed in XML format.
Consistent with the proposal, we are adopting a single Form C for all filings under Regulation Crowdfunding.
We also are adopting, largely as proposed, the requirements to provide the offering information to investors and the relevant intermediary and make it available to potential investors under Section 4A(b)(1).
The final rules provide that issuers will satisfy the requirement to file the offering information with the Commission and provide it to the relevant intermediary by filing the Form C: Offering Statement and any amendments and progress updates and providing to the relevant intermediary a copy of the disclosures filed with the Commission.
To satisfy the requirement to provide the disclosures, or make them available, as applicable, to investors, the final rules allow issuers to provide the information to investors electronically by referring investors to the information on the intermediary's platform through a posting on the issuer's Web site or by email.
Securities Act Section 4A(b)(2) provides that an issuer shall “not advertise the terms of the offering, except for notices which direct investors to the funding portal or broker.” Consistent with the statute, proposed Rule 204 of Regulation Crowdfunding would allow an issuer to publish a notice advertising the terms of an offering in reliance on Section 4(a)(6) so long as the notice includes the address of the intermediary's platform on which additional information about the issuer and the offering may be found. The proposal did not impose limitations on how the issuer distributes the notices. As proposed, the notice could include no more than: (1) A statement that the issuer is conducting an offering, the name of the intermediary through which the offering is being conducted and a link directing the investor to the intermediary's platform; (2) the terms of the offering; and (3) factual information about the legal identity and business location of the issuer, limited to the name of the issuer of the security, the address, phone number and Web site of the issuer, the email address of a representative of the issuer and a brief description of the business of the issuer. Under the proposed rules, “terms of the offering” would include: (1) The amount of securities offered; (2) the nature of the securities; (3) the price of the securities; and (4) the closing date of the offering period. The proposed rules would not, however, restrict an issuer's ability to communicate other information that does not refer to the terms of the offering.
The proposed rules also would allow an issuer to communicate with investors about the terms of the offering through communication channels provided by the intermediary on the intermediary's platform, so long as the issuer identifies itself as the issuer in all communications.
Commenters were mostly supportive of these provisions. Several commenters expressed support for the proposed content of advertising notices
Several commenters recommended that, consistent with the proposal, the Commission not restrict the media or format that may be used for advertising notices,
Some commenters opposed the proposed advertising rules, with some stating that the advertising restrictions are unnecessary because sales must occur through an intermediary's platform, which would contain all of the relevant disclosures and investor acknowledgments.
Two other commenters recommended that any advertising notices be filed with the Commission and/or the relevant intermediary.
c. Final Rules
We are adopting the prohibition on advertising terms of the offering substantially as proposed, with minor changes to the rule text for clarity.
The permitted notices will be similar to “tombstone ads” under Securities Act Rule 134,
Although at least one commenter recommended allowing advertising notices to have a section for supplemental information highlighting certain intangible purposes such as a particular social cause,
Two commenters
We believe that this approach will provide flexibility for issuers while protecting investors by limiting the advertising of the terms of the offering to the information permitted in the notice and directing them to the intermediary's platform where they can access the disclosures necessary for them to make informed investment decisions.
Consistent with the recommendation of several commenters,
Further, the final rules allow an issuer to communicate with investors about the terms of the offering through communication channels provided by the intermediary on the intermediary's platform, so long as the issuer identifies itself as the issuer in all communications. We believe that one of the central tenets of the concept of crowdfunding is that the members of the crowd decide whether or not to fund an idea or business after sharing information with each other. As part of those communications, we believe it is important for the issuer to be able to respond to questions about the terms of the offering or even challenge or refute statements made through the communication channels provided by the intermediary. Therefore, the final rules do not restrict issuers from participating in those communications so long as the issuer identifies itself as the issuer in all communications.
Based on the suggestion of a few commenters,
In addition, the final rules do not restrict an issuer's ability to communicate other information that might occur in the ordinary course of its operations and that does not refer to the terms of the offering. As stated in the Proposing Release, we believe that this is consistent with the statute because Section 4A(b)(2) restricts the advertising of the terms of the offer. The Commission has interpreted the term “offer” broadly, however, and has explained that “the publication of information and publicity efforts, made in advance of a proposed financing which have the effect of conditioning the public mind or arousing public interest in the issuer or in its securities constitutes an offer. . .”
While one commenter requested a safe harbor for regularly released factual business information so long as it does not refer to the terms of the offering,
Consistent with Securities Act Section 4A(b)(3), proposed Rule 205 of Regulation Crowdfunding would prohibit an issuer from compensating, or committing to compensate, directly or indirectly, any person to promote the issuer's offering through communication channels provided by the intermediary, unless the issuer takes reasonable steps to ensure that the person clearly discloses the receipt (both past and prospective) of compensation each time the person makes a promotional communication. Further, a founder or an employee of the issuer that engages in promotional activities on behalf of the issuer through the communication channels provided by the intermediary would be required to disclose, with each posting, that he or she is engaging in those activities on behalf of the issuer.
Under the proposed rules, an issuer would not be able to compensate or commit to compensate, directly or indirectly, any person to promote its offerings outside of the communication channels provided by the intermediary, unless the promotion is limited to notices that comply with the proposed advertising rules.
Commenters were generally supportive of promoter disclosure and the proposed rule.
A number of commenters also supported the requirement in the proposal that an issuer not compensate or commit to compensate, directly or indirectly, any person to promote its offerings outside of the communication channels provided by the intermediary, unless the promotion is limited to notices that comply with the proposed advertising rules.
We are adopting, as proposed, final rules about the compensation of persons promoting the offering, with one clarifying change.
A number of commenters supported the broad applicability of the proposed rules to persons acting on behalf of the issuer.
While we appreciate the views of commenters who suggested that we impose additional requirements on issuers or intermediaries to ensure that the identity of promoters is prominently disclosed, we believe the requirement that the issuer take reasonable steps to ensure that promoters clearly disclose the receipt of compensation for communications is sufficient to achieve the objectives of this provision without being overly prescriptive. There are a number of reasonable steps the issuer can take to ensure compliance. An issuer could, for example, contractually require any promoter to include the required statement about receipt of compensation, confirm that the promoter is adhering to the intermediary's terms of use that require promoters to affirm whether or not they are compensated by the issuer, monitor communications made by such persons and take the necessary steps to have any communications that do not have the required statement removed promptly from the communication channels, or retain a person specifically identified by the intermediary to promote all issuers on its platform.
As proposed, the final rules also specify that the issuer shall not compensate or commit to compensate, directly or indirectly, any person to promote its offerings outside of the communication channels provided by the intermediary, unless the promotion is limited to notices that comply with the advertising rules discussed above in Section II.B.4.
The proposed rules would not limit an issuer's ability to accept investments in excess of the target offering amount, subject to the $1 million annual limit.
Commenters were generally supportive of this approach to oversubscriptions.
We are adopting the rule relating to oversubscriptions as proposed, with one clarifying change.
As discussed above in Section II.B.1.a.i.(e), proposed Rule 201(l) would require an issuer to disclose the offering price of the securities or, in the alternative, the method for determining the price, provided that prior to any sale of securities, each investor is provided in writing the final price and all required disclosure. The proposed rules would not require issuers to set a fixed price or prohibit dynamic pricing.
We received a few comments supporting the proposed approach or expressing opposition to requiring a fixed price,
We are adopting the final rules as proposed.
The proposed rules would not limit the type of securities that may be offered in reliance on Section 4(a)(6) nor prescribe a method for valuing the securities. Issuers would be required to describe the terms of the securities and the valuation method in their offering materials.
A number of commenters generally supported not limiting the types of securities that may be offered and sold in reliance of Section 4(a)(6).
We are adopting, as proposed, final rules that neither limit the type of securities that may be offered in reliance on Section 4(a)(6) nor prescribe a method for valuing the securities.
While some commenters suggested that the Commission should provide specific valuation methods or standards for securities-based crowdfunding transactions, we are not persuaded that there would be sufficient benefits to being prescriptive in this regard. Methods and valuations of early stage companies vary significantly, and any attempt to choose a particular valuation methodology could limit flexibility and have the result of endorsing one approach over another without necessarily having a sound basis for doing so. We believe the requirement that issuers describe the methods they use to value their securities in their offering materials, including the requirement that they describe examples of methods for how such securities may be valued by the issuer in the future, will provide investors with the information they need to make an informed investment decision.
The final rules do not limit the types of securities that may be offered in reliance on Section 4(a)(6), and thus debt securities may be offered and sold in crowdfunding transactions. As we stated in the Proposing Release, in general, the issuance of a debt security
Securities Act Section 4(a)(6)(C) requires a crowdfunding transaction to be conducted through a broker or funding portal that complies with the requirements of Securities Act Section 4A(a). The term “broker” is generally defined in Exchange Act Section 3(a)(4) as any person that effects transactions in securities for the account of others. Exchange Act Section 3(a)(80) defines the term “funding portal” as any person acting as an intermediary in a transaction involving the offer or sale of securities for the account of others, solely pursuant to Securities Act Section 4(a)(6), that does not: (1) Offer investment advice or recommendations; (2) solicit purchases, sales or offers to buy the securities offered or displayed on its Web site or portal; (3) compensate employees, agents or other persons for such solicitation or based on the sale of securities displayed or referenced on its Web site or portal; (4) hold, manage, possess or otherwise handle investor funds or securities; or (5) engage in such other activities as the Commission, by rule, determines appropriate.
In the Proposing Release, we explained that because a funding portal would be engaged in the business of effecting securities transactions for the accounts of others through crowdfunding, it would be a “broker” within the meaning of Section 3(a)(4) of the Exchange Act.
We also stated in the Proposing Release that the proposed rules would apply not only to funding portals, but also to their associated persons in many instances. The terms “person associated with a broker or dealer” and “associated person of a broker or dealer” are defined in Exchange Act Section 3(a)(18).
In proposed Rule 300(c)(4), we also defined “investor” as any investor or any potential investor, as the context requires.
The Proposing Release requested comments on whether there were funding portal activities, other than those in Exchange Act Section 3(a)(80), that we should prohibit, and whether any prohibitions should be modified or removed. We also requested comments about whether further guidance was necessary on the provisions of the Exchange Act and the rules and regulations thereunder that would apply to funding portals.
Some commenters stated that the Commission should not provide any further guidance or prohibitions on funding portal activity in addition to those required by statute.
After considering the comments, we are adopting, as proposed, the definitions of “associated person of a funding portal or person associated with a funding portal” and “funding portal” in Rules 300(c)(1) and(2), respectively. In particular, we believe that, at the present time, the statutory prohibitions on a funding portal in Exchange Act Section 3(a)(80), as reflected in the final rule definition of a funding portal, provide appropriate investor protections.
We also are adopting the definition of “investor” from the proposed rules but have moved the definition to Rule 100(d), and made a modification to clarify that the definition applies to all of Regulation Crowdfunding.
Securities Act Section 4A(a)(1) requires that a person acting as an intermediary in a crowdfunding transaction register with the Commission as a broker or as a funding portal.
Securities Act Section 4A(a)(2) requires an intermediary to register with any applicable self-regulatory organization (“SRO”), as defined in Exchange Act Section 3(a)(26).
We also proposed definitions for the terms “intermediary” and “SRO” in proposed Rules 300(c)(3) and 300(c)(5) of Regulation Crowdfunding, respectively. As proposed, intermediary would mean a broker registered under Section 15(b) of the Exchange Act or a funding portal registered under proposed Rule 400 of Regulation Crowdfunding and would include, where relevant, an associated person of the registered broker or registered funding portal. SRO was proposed to have the same meaning as in Section 3(a)(26) of the Exchange Act.
Commenters generally supported FINRA being the appropriate SRO and national securities association for intermediaries.
Certain commenters expressed concern about potential competitive advantages of registered broker-dealers over funding portals, suggesting that the Commission should prohibit brokers from engaging in transactions conducted pursuant to Section 4(a)(6) until funding portals can become registered,
In response to our requests for comment in the Proposing Release, commenters were also divided on whether the Commission should require minimum qualification, testing and licensure requirements for funding portals and their associated persons.
After considering the comments, we are adopting Rule 300(a) generally as proposed but deleting specific references to FINRA in the final rule, as well as the rest of Regulation Crowdfunding and Form Funding Portal, when referring to a registered national securities association. Although we recognize that FINRA is currently the only registered national securities, we believe it is redundant to specifically include its name when referring to registered national securities associations in the rule text and Form Funding Portal.
We are cognizant of the fact that funding portals must register with the Commission and become compliant with an entirely new set of rules. The effective date for the final rules (which is 180 days after publication in the
While FINRA is the only registered national securities association at present, we recognize that a new national securities association or associations could register with us in the future. At that time, a funding portal could choose to become a member of the new association(s) instead of, or in
After considering comments, we have determined not to impose any licensing, testing or qualification requirements for associated persons of funding portals. We believe that a registered national securities association is well-positioned, given the requirements for registration as a national securities association, as well as the statutory and regulatory requirements that apply to such a registered entity, to determine whether to propose additional requirements such as licensing, testing or qualification requirements for associated persons of funding portals.
We also are adopting as proposed the definitions for the terms “intermediary” in Rule 300(c)(3). However, we are removing the definition of “self-regulatory organization” and “SRO” from the final rules because the term is already defined in Exchange Act Section 3(a)(26).
Securities Act Section 4A(a)(11) requires an intermediary to prohibit its directors, officers or partners (or any person occupying a similar status or performing a similar function) from having any financial interest in an issuer using its services. In the Proposing Release, we proposed to use our discretion to extend the prohibition to the intermediary itself. Thus, proposed Rule 300(b) of Regulation Crowdfunding would prohibit the intermediary, as well as its directors, officers or partners (or any person occupying a similar status or performing a similar function), from having: (1) A financial interest in an issuer using its services; and (2) from receiving a financial interest in the issuer as compensation for services provided to, or for the benefit of, the issuer, in connection with the offer and sale of its securities. Proposed Rule 300(b) defined “a financial interest in an issuer” to mean a direct or indirect ownership of, or economic interest in, any class of the issuer's securities.
In general, commenters supported the Commission's proposed financial interest prohibition as it applies to an intermediary's directors, officers or partners (or any person occupying a similar status or performing a similar function),
Commenters who supported our proposal to extend the prohibition on financial interests to the intermediary suggested that such prohibitions may help to mitigate conflicts of interests.
Several commenters who opposed the prohibition on an intermediary having a financial interest in the issuer suggested that the prohibition would reduce the number and types of intermediaries that might otherwise participate in crowdfunding activities.
The Community Development Financial Institutions Fund, which was established by the Riegle Community Development and Regulatory Improvement Act of 1994, is a government program that promoted access to capital and local economic growth by, among other things, investing in, supporting and training CDFIs that provide loans, investments, financial services and technical assistance to underserved populations and communities.
After considering the comments, we are adopting Rule 300(b), as proposed, with respect to an intermediary's directors, officers or partners (or any person occupying a similar status or performing a similar function). Rule 300(b), as adopted, prohibits an intermediary's directors, officers or partners (or any person occupying a similar status or performing a similar function) from having any financial interest in an issuer using its services. Rule 300(b) also specifically prohibits these persons from receiving a financial interest in the issuer as compensation for services provided to, or for the benefit of, the issuer, in connection with the offer and sale of its securities. Consistent with the proposal, Rule 300(b), as adopted, defines “a financial interest in an issuer” to mean a direct or indirect ownership of, or economic interest in, any class of the issuer's securities.
We are not adopting, however, the proposed complete prohibition on the intermediary itself having or receiving a financial interest in an issuer using its services. Although intermediaries are generally prohibited under the rule as adopted from having such a financial interest, as discussed below, in response to comments, we have amended the rule to permit an intermediary to have a financial interest in an issuer that is offering or selling securities in reliance on Section 4(a)(6) through the intermediary's platform, provided that: (1) The intermediary receives the financial interest from the issuer as compensation for the services provided to, or for the benefit of, the issuer in connection with the offer or sale of such securities being offered or sold in reliance on Section 4(a)(6) through the intermediary's platform; and (2) the financial interest consists of securities of the same class and having the same terms, conditions and rights as the securities being offered or sold in reliance on Section 4(a)(6) through the intermediary's platform.
We are mindful of concerns raised by commenters that a prohibition could have a chilling effect on the ability of small issuers to use the crowdfunding exemption. These issuers may be small businesses or neighborhood establishments that may not have the liquid capital to compensate intermediaries for services. As commenters noted, allowing an intermediary to have or receive a financial interest in the issuer could provide a method for the issuer to pay an intermediary for its services, which may facilitate capital formation. This may, in turn, encourage the development of funding portals that are, for example, affiliated with CDFIs, as one commenter suggested.
However, we are cognizant of the potential conflicts of interest that may arise, and therefore we are placing certain conditions on the ability of intermediaries to have a financial interest in an issuer that is offering or selling securities in reliance on Section 4(a)(6) through the intermediary's platform.
We are persuaded that the disclosures otherwise required by Regulation Crowdfunding also will help to address any potential conflicts of interest arising from an intermediary having or receiving a financial interest in an issuer. Among other things, Rule 302(d) requires an intermediary to clearly disclose the manner in which it will be compensated in connection with offerings and sales of securities made in reliance on Section 4(a)(6) at account opening and Rule 303(f) requires disclosure of remuneration received by an intermediary (including securities received as remuneration) on confirmations.
Commission staff expects to review the compensation structure of intermediaries during the study of the federal crowdfunding exemption it plans to undertake no later than three years following the effective date of Regulation Crowdfunding.
Securities Act Section 4A(a)(5) requires an intermediary to “take such measures to reduce the risk of fraud with respect to [transactions made in reliance on Section 4(a)(6)], as established by the Commission, by rule, including obtaining a background and securities enforcement regulatory history check on each officer, director, and person holding more than 20 percent of the outstanding equity of every issuer whose securities are offered by such person.” As discussed below, after considering the comments, we are adopting Rule 301 of Regulation Crowdfunding substantially as proposed, with a few changes to Rule 301(c)(2).
We proposed in Rule 301(a) of Regulation Crowdfunding to require that an intermediary have a reasonable basis for believing that an issuer seeking to offer or sell securities though the intermediary's platform complies with the requirements of Section 4(a)(6) and the related requirements of Regulation Crowdfunding. For this requirement, we proposed that an intermediary may reasonably rely on an issuer's representations about compliance unless the intermediary has reason to question the reliability of those representations.
Commenters generally agreed that intermediaries play a significant role in preventing and detecting fraud and should take measures to reduce potential fraud. Some commenters, however, expressed concerns about the proposed “reasonable basis” standard for an intermediary's belief about an issuer's compliance with applicable laws stating that the standard should be higher.
A number of commenters expressed concern about the proposed reliance on issuer representations.
One commenter argued that the language of the proposed rule was contradictory because relying on representations made by the issuer is not the same as establishing a reasonable basis for believing the issuer is in compliance.
One commenter recommended that the Commission “consider a tiered approach to compliance obligations” where, as the size of the offering or other risk factors increased, intermediaries would be required to conduct more rigorous compliance reviews.
Rule 301(a), as adopted, requires that an intermediary have a reasonable basis for believing that an issuer seeking to offer and sell securities in reliance on Section 4(a)(6) through the intermediary's platform complies with the requirements in Securities Act Section 4A(b) and the related requirements in Regulation Crowdfunding. While some commenters argued for higher or different standards, such as requiring intermediaries to conduct due diligence on issuers or monitor communications by issuers during the course of the offering, we believe that a reasonable basis standard is appropriate, particularly in view of the issuer's own obligation to comply with the requirements in Section 4A(b) and the related requirements in Regulation Crowdfunding. We are mindful as well of the associated costs of a potentially higher standard. Consistent with the proposal, Rule 301(a) also permits intermediaries to reasonably rely on representations of the issuer, unless the intermediary has reason to question the reliability of those representations.
In satisfying the requirements of Rule 301(a), we emphasize that an intermediary has a responsibility to assess whether it may reasonably rely on an issuer's representation of compliance through the course of its interactions with potential issuers.
We proposed in Rule 301(b) of Regulation Crowdfunding a requirement that an intermediary have a reasonable basis for believing that an issuer has established means to keep accurate records of the holders of the securities it would offer and sell through the intermediary's platform. We proposed that an intermediary may reasonably rely on an issuer's representations about compliance unless the intermediary has reason to question the reliability of those representations. We did not propose a particular form or method of recordkeeping of securities, nor did we propose to require that an issuer use a transfer agent or other third party.
Commenters agreed that an intermediary should have a basis for believing that an issuer has established a means to keep accurate records.
Commenters that opposed the mandatory use of a registered transfer
After considering the comments, we are adopting Rule 301(b), as proposed, with one modification. Rule 301(b) as adopted requires an intermediary to have a reasonable basis for believing that an issuer has established means to keep accurate records of the holders of the securities it would offer and sell through the intermediary's platform, and provides that in satisfying this requirement, an intermediary may rely on the representations of the issuer concerning its means of recordkeeping unless the intermediary has reason to question the reliability of those representations. We also are adding a provision to Rule 301(b) as adopted stating that an intermediary will be deemed to have satisfied this requirement if the issuer has engaged the services of a transfer agent that is registered under Section 17A of the Exchange Act.
At the same time, mindful of the role that may be played by registered transfer agents in maintaining accurate shareholder records, we are providing a safe harbor for compliance with Rule 301(b) for those issuers that use a registered transfer agent. While we do not intend to provide regulated entities with a competitive advantage over other recordkeeping options that comply with the rule's requirements, we believe it is appropriate to provide certainty as to Rule 301(b) compliance in instances in which an issuer has engaged the services of a transfer agent that is registered under Section 17A of the Exchange Act.
We also proposed in Rule 301(c)(1) of Regulation Crowdfunding a requirement that an intermediary deny access by an issuer to its platform if it has a reasonable basis for believing that an issuer, or any of its officers, directors or any person occupying a similar status or performing a similar function, or any 20 Percent Beneficial Owner is subject to a disqualification under proposed Rule 503.
We further proposed in Rule 301(c)(2) to require an intermediary to deny access to its platform if the intermediary believes the issuer or offering presents the potential for fraud or otherwise raises concerns about investor protection. In satisfying this requirement, the proposed rule would require that an intermediary deny access if it believes that it is unable to adequately or effectively assess the risk of fraud of the issuer or its potential offering. In addition, we proposed in Rule 301(c)(2) that if an intermediary becomes aware of information after it has granted access that causes it to believe the issuer or the offering presents the potential for fraud or otherwise raises concerns about investor protection, the intermediary would be required to promptly remove the offering from its platform, cancel the offering, and return (or, for funding portals, direct the return of) any funds that have been committed by investors in the offering.
Commenters generally supported proposed Rule 301(c).
Commenters had varied views on the proposed requirement in Rule 301(c)(1) for an intermediary to perform a background check on the issuer and certain of its affiliated persons. Several commenters supported the requirement,
Commenters were divided as to whether we should set specific requirements for background checks. One commenter stated that the proposal “fails to set even the most general of standards for these checks” and “instead relies on intermediaries to use their experience and judgment to reduce the risk of fraud.”
With respect to our request for comment on whether intermediaries should be required to make the results of background checks public, several commenters opposed the requirement,
As to proposed Rule 301(c)(2) requiring a funding portal to deny access if the intermediary believes the issuer or offering presents the potential for fraud or otherwise raises concerns regarding investor protection, one commenter stated that the proposed requirement conflicts with the restrictions on a funding portal's ability to limit the offerings on its platform in proposed Rule 402(b)(1).
Regarding the standard for denial based on potential fraud or investor protection concerns in the proposed rule, one commenter suggested a stronger standard,
One commenter stated the intermediaries should be required to report denied issuers, noting that it would not only help prevent fraud but also assist other intermediaries in excluding issuers already discovered to be disqualified.
After considering the comments, we are adopting Rule 301(c)(1) as proposed. Rule 301(c)(1) requires an intermediary to deny access to its platform if the intermediary has a reasonable basis for believing that an issuer, or any of its officers, directors (or any person occupying a similar status or performing a similar function), or any 20 Percent Beneficial Owner is subject to a disqualification under Rule 503 of Regulation Crowdfunding. We believe that a “reasonable basis” standard for denying access is an appropriate standard for Rule 301(c)(1), in part because this requirement on an intermediary is buttressed by the fact that an issuer independently is subject to the disqualification provisions under Rule 503, as discussed below.
While we understand commenters' concerns about the cost of the requirement that intermediaries conduct background checks on issuers and certain affiliated persons, we are not eliminating or limiting the requirement as suggested by commenters because we believe the requirement is an important tool for intermediaries to employ when determining whether or not they have a reasonable basis to allow issuers on their platforms. Even though a number of commenters requested that the
We are not developing a database of denied issuers as suggested by some commenters because we do not believe it would significantly increase investor protection. The requirement to deny an issuer access to a crowdfunding platform under the final rules based on fraud or other investor protection concerns is important to the viability of crowdfunding, and the legitimacy of the intermediary. This obligation is the responsibility of each intermediary, which must make a determination about whether to deny access to an issuer. While a third party may decide to create a database of denied issuers at some point and an intermediary could use such a database to help make its determination as to whether it was required to deny access to an issuer, such a database could not be used as a substitute for an intermediary making its own determination.
We also are not requiring an intermediary to make publicly available the results of the background checks or the sources consulted. We believe that the goal of the background check is sufficiently served by the exclusion of an issuer from the intermediary's platform. We do not believe that making the results or sources publicly available adds a significant degree of investor protection under these circumstances, given the potential problems that could arise from such public disclosure of the results, such as the risk of disclosing personally identifiable information or other information with significant potential for misuse. In addition, we are concerned that such requirements could add to the cost of administration and could expose the individuals at the issuer that are subject to a background check to harm, for example, if there were errors in the information made publicly available.
We are adopting Rule 301(c)(2) substantially as proposed, but with certain revisions. As adopted, Rule 301(c)(2) now contains a “reasonable basis” standard as opposed to the initially proposed “believes” standard. Rule 301(c)(2) requires denial of access to its platform when the intermediary has a reasonable basis for believing that the issuer or offering presents the potential for fraud or otherwise raises concerns about investor protection.
We believe that a “reasonable basis” standard is appropriate for Rule 301(c)(2) because it is a more objective standard.
We are not requiring that an intermediary report the issuers that have been denied access to its platforms, as some commenters suggested, or that the intermediary post a summary of the sources consulted as part of the background check on its platform along with a description of the intermediary's standards for determining which offerings present a risk of fraud. We also are not adopting a requirement, as suggested by a commenter, that an intermediary notify a potential issuer when the intermediary utilizes third-party information to deny access to the issuer. As with background checks, discussed above, we believe that the investor protection goal is sufficiently served by the exclusion of an issuer from the intermediary's platform. In addition, we are concerned that such requirements could add to the cost of administration and could expose the issuers in question to harm, for example, if there were errors in the information made publicly available. Likewise, we do not believe that requiring an intermediary to post to its Web site a summary of the sources consulted as part of the background check and a description of the intermediary's standards for determining which offerings present a risk of fraud would sufficiently increase investor protection to justify the burdens, such as those outlined above, that would be associated with imposing such requirements. We also note that providing this information on an intermediary's Web site may give potentially fraudulent issuers or those that otherwise present investor protection concerns a roadmap to an intermediary's proprietary procedures for screening for fraud that could assist such issuers with impeding or obstructing intermediaries from detecting offerings that present a risk of fraud.
Proposed Rule 302(a)(1) of Regulation Crowdfunding would prohibit an intermediary or its associated persons from accepting an investment commitment in a transaction involving the offer or sale of securities in reliance on Section 4(a)(6) unless the investor has opened an account with the intermediary, and the intermediary has obtained from the investor consent to electronic delivery of materials. Proposed Rule 302(a)(2) would require an intermediary to provide all information required by Subpart C of Regulation Crowdfunding, including, but not limited to, educational materials, notices and confirmations, through electronic means.
Proposed Rule 302(a)(2) also would require an intermediary to provide such information through an electronic message that either contains the information, includes a specific link to the information as posted on the intermediary's platform, or provides notice of what the information is and that it is located on the intermediary's platform or the issuer's Web site. As proposed, Rule 302(a)(2) stated that electronic messages would include, but not be limited to, messages sent via email.
One commenter suggested that intermediaries who are brokers should not be required to open new accounts for persons who are existing customers of the broker.
With respect to electronic delivery, some commenters urged that it should be sufficient for the intermediary simply to make Subpart C materials, such as educational materials, notices and confirmations, available on the intermediary's platform for investors to access.
One commenter stated it was concerned that earlier Commission policies on electronic delivery might be read as implying that paper delivery might be permitted in certain circumstances.
In response to our request for comments on whether exceptions to the consent to electronic delivery should be allowed, one commenter stated that account creation and delivery of communication should be completed digitally and that there should be no exemption to allow paper delivery as a substitute.
After considering the comments, we are adopting as proposed the account opening and electronic delivery requirements in Rule 302(a). We are not prescribing particular requirements for account opening. Rather, we believe that the final rule provides flexibility to intermediaries given that intermediaries are better positioned than the Commission to determine what information and processes it will require, both as a business decision and to ensure compliance with all applicable regulatory requirements. Therefore, for example, an intermediary can decide whether or not to open a new account for an existing customer. We also are not prescribing under the final rule, as a commenter suggested, that an intermediary be required to collect identifying information that could help prevent duplicative or fraudulent accounts. We believe that even without prescribing particular account opening requirements intermediaries should be able to identify, by collecting basic account opening information, those accounts that appear to be duplicative or present red flags of potential fraud.
However, the final rules do not permit investors to waive the electronic delivery requirements entirely, as one commenter suggested.
As explained in Section II.A.3, Rule 100(a)(3) of Regulation Crowdfunding requires that crowdfunding transactions be conducted exclusively through an intermediary's platform. Rule 302(a) implements this requirement by requiring that investors consent to electronic delivery of materials in connection with crowdfunding offerings.
We are adopting substantially as proposed Rule 302(a)(2), which requires that all information required to be provided by an intermediary under Subpart C be provided through electronic means. We have considered the comments but do not believe that it would be sufficient—or consistent with our previous statements about electronic media—for the intermediary simply to make Subpart C materials, such as educational materials, notices and confirmations, available on the intermediary's platform for investors to access.
Securities Act Section 4A(a)(3) states that an intermediary must “provide such disclosures, including disclosures related to risks and other investor education materials, as the Commission shall, by rule, determine appropriate,” but it does not elaborate on the scope of this requirement. As described in further detail below, proposed Rule 302(b)(1) of Regulation Crowdfunding would require intermediaries to deliver to investors, at account opening, educational materials that are in plain language and otherwise designed to communicate effectively and accurately certain specified information. Proposed Rules 302(b)(1)(i)-(viii) would require the materials to include:
• The process for the offer, purchase and issuance of securities through the intermediary;
• the risks associated with investing in securities offered and sold in reliance on Section 4(a)(6);
• the types of securities that may be offered on the intermediary's platform and the risks associated with each type of security, including the risk of having limited voting power as a result of dilution;
• the restrictions on the resale of securities offered and sold in reliance on Section 4(a)(6);
• the types of information that an issuer is required to provide in annual reports, the frequency of the delivery of that information, and the possibility that the issuer's obligation to file annual reports may terminate in the future;
• the limits on the amounts investors may invest, as set forth in Section 4(a)(6)(B);
• the circumstances in which the issuer may cancel an investment commitment;
• the limitations on an investor's right to cancel an investment commitment;
• the need for the investor to consider whether investing in a security offered and sold in reliance on Section 4(a)(6) is appropriate for him or her; and
• that following completion of an offering, there may or may not be any ongoing relationship between the issuer and intermediary.
Proposed Rule 302(b)(2) would further require intermediaries to make the current version of the educational materials available on their platforms, and to make revised materials available to all investors before accepting any additional investment commitments or effecting any further transactions in securities offered and sold in reliance on Section 4(a)(6).
Commenters generally supported distribution of educational materials through intermediaries.
Some commenters suggested that additions be made to the scope of information proposed to be required in an intermediary's educational materials,
Some commenters suggested that intermediaries should be required to design questionnaires to increase investor knowledge and to monitor whether investors actually access materials.
Some commenters stated that we should develop model educational materials for investors or specify the content for intermediaries.
One commenter stated that we should not limit or specify the type of electronic media being used to communicate educational material.
After considering the comments, we are adopting Rule 302(b) relating to educational materials substantially as proposed, but adding one further requirement as to the content of the materials. We believe that, consistent with Section 4A(a)(3) it is appropriate that intermediaries, rather than the Commission (as a commenter suggested), be required to provide such disclosures, including disclosures related to risks and other investor education materials as the Commission determines to be appropriate. We believe that intermediaries are better equipped and positioned, as compared to the Commission, to provide educational materials to investors that are reasonably tailored to an intermediary's offerings and investors, particularly in light of their access to and interactions with investors.
We further believe that the scope of information that we are requiring to be included in an intermediary's educational materials is appropriate. In the Proposing Release we discussed our rationales for requiring the different types of disclosures in the educational materials. As we noted in the Proposing Release, we generally drew upon the statutory provisions when including disclosures required in the educational materials relating to the risks of investing in securities offered and sold in reliance on Section 4(a)(6), investors' cancellation rights, resale restrictions and issuer reporting.
The final rule provides each intermediary with sufficient flexibility to determine: (1) The content of the educational materials, outside of the minimum specified information required to be included under Rule 302(b)(1)(i)-(viii), and (2) the overall format and manner of presentation of the materials. We believe this flexibility will allow the intermediary to prepare and present educational materials in a manner reasonably tailored to the types of offerings on the intermediary's platform and the types of investors accessing its platform. While we have determined not to provide model educational materials, impose additional content (beyond those proposed) or format requirements, mandate particular language or manner of presentation, or require that an intermediary design an investor questionnaire, as suggested by commenters, the final rules do not prohibit an intermediary from providing additional educational materials if they
We also recognize that FINRA or any other registered national securities association may implement additional educational materials requirements. We are not, however, as one commenter suggested,
Rule 302(b)(2) requires an intermediary to keep its educational materials accurate. Accordingly, an intermediary must update the materials as needed to keep them current. In addition, if an intermediary makes a material revision to its educational materials, the rule requires that the intermediary make the revised educational materials available to all investors before accepting any additional investment commitments or effecting any further crowdfunding transactions. An intermediary will also be required to obtain a representation that an investor has reviewed the intermediary's most recent educational materials before accepting an investment commitment from the investor.
We believe that these requirements will benefit investors by helping to ensure that they receive information about key aspects of investing through the intermediary's platform, including aspects that may have changed since the last time they received the materials, prior to making investment commitments, as that information can influence their investment decisions. We also believe that requiring intermediaries to update materials on an ongoing basis, rather than at certain specified intervals, will help to ensure that those materials are updated as circumstances warrant, which, in turn, will provide investors with more current information and increase investor protection.
Securities Act Section 4A(b)(3) provides that an issuer shall “not compensate or commit to compensate, directly or indirectly, any person to promote its offerings through communication channels provided by a broker or funding portal, without taking such steps as the Commission shall, by rule, require to ensure that such person clearly discloses the receipt, past or prospective, of such compensation, upon each instance of such promotional communication.” Under Rule 205 of Regulation Crowdfunding, as discussed above, an issuer can compensate persons to promote its offerings through communications channels provided by the intermediary on its platform, where certain conditions are met.
We separately proposed in Rule 302(c) of Regulation Crowdfunding to require the intermediary to inform investors, at the account opening stage, that any person who promotes an issuer's offering for compensation, whether past or prospective, or who is a founder or an employee of an issuer that engages in promotional activities on behalf of the issuer on the intermediary's platform, must clearly disclose in all communications on the platform the receipt of the compensation and the fact that he or she is engaging in promotional activities on behalf of the issuer.
Some commenters suggested that the promoter disclosures should not be made at account opening where they may be ignored.
We are adopting, as proposed, Rule 302(c) requiring intermediaries to inform investors, at the time of account opening, that promoters must clearly disclose in all communications on the platform the receipt of the compensation and the fact that he or she is engaging in promotional activities on behalf of the issuer. As noted in the Proposing Release, in addition to the information required under Rule 302(c), promoters will also be required to comply with Section 17(b) of the Securities Act, which requires promoters to fully disclose to investors the receipt, whether past or prospective, of consideration and the amount of that compensation.
Proposed Rule 302(d) of Regulation Crowdfunding would require that intermediaries, when establishing an account for an investor, clearly disclose the manner in which they will be compensated in connection with offerings and sales of securities made in reliance on Section 4(a)(6). This requirement would help to ensure investors are aware of any potential conflicts of interest that may arise from the manner in which the intermediary is compensated. Rule 201(o) of Regulation Crowdfunding, which is discussed in Section II.B.1, separately requires an issuer to disclose in its offering materials, among other things, the amount of compensation paid to the intermediary for conducting a particular offering, including the amount of referral and any other fees associated with the offering.
Several commenters supported the disclosure of intermediary compensation.
We are adopting Rule 302(d) as proposed. We believe that requiring intermediaries to provide information to investors about the manner in which they will be compensated at account opening, rather than at a subsequent time, will provide investors with notice of how the intermediary is being compensated at a threshold stage in the relationship (
Securities Act Section 4A(a)(6) requires each intermediary to make available to the Commission and investors, not later than 21 days prior to the first day on which securities are sold to any investor (or such other period as the Commission may establish), any information provided by the issuer pursuant to Section 4A(b).
Several commenters suggested that so long as issuer information is made available on the intermediary's platform, the rules should not mandate the delivery of this information, in addition to or in lieu of, making the information available on the intermediary's platform.
One commenter stated that having information about a deal publicly available on the intermediary's Web site will increase the potential for fraud—specifically, potential fraud involving “data scraping” from Web sites (
As to the amount of time that an intermediary should display issuer materials prior to the first day on which securities are sold to any investor, some commenters supported the 21-day time frame as a sufficient minimum period that offering information should be made available through the intermediary's platform.
Although one commenter objected to intermediaries displaying any issuer materials,
We also requested comments as to whether an intermediary should make efforts to ensure that an investor has actually reviewed the relevant issuer information. A few commenters expressed concern with requiring intermediaries to ensure that an investor has reviewed the relevant issuer information.
After considering the comments, we are adopting, as proposed, Rule 303(a). As stated in the Proposing Release, we believe that the requirement in Rule 303(a) that the information must be made publicly available on the intermediary's Web site satisfies the requirement under Section 4A(d) for the Commission to “make [available to the states], or . . . cause to be made [available] by the relevant broker or funding portal, the information” issuers are required to provide under Section 4A(b) and the rules thereunder. Moreover, this approach should help investors, the Commission, FINRA (and any other applicable registered national securities association) and other interested parties, such as state regulators, to access information without impediment. Therefore, we believe that this rule is not only consistent with the statute but that it also enhances investor protection by having issuer information about a crowdfunding security publicly available on the intermediary's Web site. While we considered the concern expressed by one commenter that having such information available on the intermediary's Web site would increase the potential for “data scraping,”
We note that commenters who addressed the issue generally supported a 21-day time frame as the minimum period that offering information should be made available through the intermediary's platform prior to the first day on which securities are sold to any investor. Under the final rules, the information must remain available on the platform until the offering is completed or canceled. While some commenters suggested that the rule should require intermediaries to continue to display issuer materials for some period of time after completion of the offering, we are not prescribing such a requirement nor are we prohibiting intermediaries from doing so if they so choose. Although we appreciate that historical issuer information may provide helpful background for investors generally, we are concerned that imposing such a requirement could potentially result in persons relying on potentially stale issuer information particularly given the nature of the crowdfunding market (
While the intermediary plays an important gatekeeper function, the investor has responsibility for his or her actions as well. To that end, we are not requiring that an intermediary ensure that an investor has actually reviewed the relevant issuer information. We believe that the requirements of Rule 303(a) provide an investor with the relevant issuer information and an adequate period of time in which to evaluate the investment opportunity before investing. We are not at this time imposing additional requirements on the intermediary in this regard.
Securities Act Section 4(a)(6)(B) limits the aggregate amount of securities that can be sold by an issuer to an investor in reliance on Section 4(a)(6) during a 12-month period. Securities Act Section 4A(a)(8) requires that intermediaries “make such efforts as the Commission determines appropriate, by rule” to ensure that no investor has made purchases in the aggregate, from all issuers, that exceed the limits in Section 4(a)(6).
Proposed Rule 303(b)(1) of Regulation Crowdfunding would implement this latter provision by requiring that, each time before accepting an investment commitment on its platform (including any additional investment commitment from the same person), an intermediary must have a reasonable basis for believing that the investor satisfies the investment limits established by Section 4(a)(6)(B). The proposed rule would allow an intermediary to rely on an investor's representations concerning
A number of commenters supported the proposed requirements for enforcing investment limits and intermediary responsibility for investor compliance,
Several commenters opposed the proposal to allow an intermediary to rely on the representations of an investor.
Other commenters supported the proposal to allow an intermediary to rely on the representations of an investor.
Several commenters supported requiring an intermediary to confirm investment limits compliance using a centralized database, should one become established.
Others commenters expressed concern that the proposed rule included no mechanism to prevent investors from registering with multiple platforms and investing far in excess of the statutory limits.
After considering the comments, we are adopting Rule 303(b)(1) as proposed. As a threshold matter, we note that a number of commenters supported the proposed approach for establishing compliance with investment limits. Although we appreciate some of the additional suggestions provided by commenters, as outlined above, we believe the approach in Rule 303(b)(1) for establishing compliance with investment limits is an appropriate means of implementing the provisions of Section 4A(a)(8), which is designed to help ensure that an investor has not made purchases, in the aggregate from all issuers, that exceed those limits during a 12-month period. We note, however, that intermediaries can, in their discretion, take additional measures for evaluating investors' compliance with investment limits, including those suggested by commenters, such as: Using a centralized data repository, to the extent that one is created; requiring verification of income or net worth electronically by uploading financial documents; or creating a tool for investors to use, such as a questionnaire, to assemble the underlying data.
While several commenters opposed permitting an intermediary to rely on the representations of an investor about investment limits and some suggested requiring intermediaries to take certain affirmative steps to verify compliance, we believe that it would be difficult for intermediaries to monitor or independently verify whether each investor remains within his or her investment limits where the investor may be participating in offerings on multiple platforms. We note, however, that reliance on investor representations must be reasonable. At a minimum, it would not be reasonable, and therefore would be a violation of the rule and potentially subject to an enforcement action by the Commission, for an intermediary to ignore investments made by an investor in other offerings on the intermediary's platform, to not obtain information and take into account investments made by an investor in other offerings (made in reliance on Section 4(a)(6)) on platforms that are controlled by or under common control with the intermediary, or to ignore other information or facts about an investor within its possession.
Under the final rules, an intermediary will be permitted to reasonably rely on a centralized data repository of investor information, should one be created in the future. We are not mandating the creation of such a database at this time, in part to help to minimize the obstacles that intermediaries may face in getting this newly formed marketplace up and running.
Securities Act Section 4A(a)(4) requires an intermediary to ensure that each investor: (1) Reviews educational materials; (2) positively affirms that the investor understands that he or she is risking the loss of the entire investment and that the investor could bear such a loss; and (3) answer questions demonstrating an understanding of the level of risk generally applicable to investments in startups, emerging businesses and small issuers, the risk of illiquidity and such other matters as the Commission determines appropriate. As discussed above, Rule 302(b) of Regulation Crowdfunding requires an intermediary to provide to investors certain educational materials in connection with the opening of an account. In addition, proposed Rule 303(b)(2) of Regulation Crowdfunding would require an intermediary, each time before accepting an investment commitment, to obtain from the investor a representation that the investor has reviewed the intermediary's educational materials, understands that the entire amount of his or her investment may be lost and is in a financial condition to bear the loss of the investment.
Several commenters supported the requirement that intermediaries obtain investor acknowledgments.
One commenter stated that investors should be required to complete and sign “subscription forms” that set forth, in addition to what the proposed rules would require, additional information concerning the investor's level of investment experience, the identity of any person from whom the investor acquired any information about the investment and the percentage of the investor's liquid net worth represented by the proposed investment.
One commenter supported the Commission providing recommended forms of questions and representations, noting that “any material examples provided by the Commission will be helpful to both the investor and the intermediary.”
After considering the comments, we are adopting Rule 302(b)(2) as proposed. As noted in the Proposing Release, this rule is intended to help ensure that investors engaging in transactions made in reliance on Section 4(a)(6) are fully informed and reminded of the risks associated with their particular investment before making any investment commitment. While an intermediary cannot ensure that all investors understand the risks involved, the rule requires intermediaries to confirm that an investor: (1) Has reviewed the intermediary's educational materials delivered pursuant to Rule 302(b); (2) understands that the entire amount of his or her investment may be lost, and is in a financial condition to bear the loss of the investment; and (3) has completed a questionnaire demonstrating an understanding of the risks of any potential investment and other required statutory elements. In addition, the questionnaire required under the rule may help to address, at least in part, the concerns expressed by some commenters that Section 4A(a)(4) requires more than a mere self-certification.
Our final rule does not provide a model form of acknowledgment or questionnaire. Rather, the rule permits an intermediary to develop the representation and questionnaire in any format that is reasonably designed to demonstrate the investor's receipt of the information and compliance with the other requirements under the final rules. As with the educational material requirements, we continue to believe that rather than providing sample content or a model form of acknowledgment or questionnaire, intermediaries should be provided with sufficient flexibility to choose both the content, within the requirements of Rule 302(b), and the format used to present the required materials. Likewise, we also believe that an intermediary's familiarity with its business and likely investor base make it best able to determine the format in which to present the required materials. We note that any format used must be reasonably designed to demonstrate receipt and understanding of the information. There are many ways, especially on a Web-based system, to convey information to, and obtain effective acknowledgment from, investors. As explained in the Proposing Release, the requirements of the rule would not be satisfied if, for example, an intermediary were to pre-select answers for an investor.
Further, an intermediary in its discretion may require additional information, such as information concerning the investor's level of investment experience, the identity of any person from whom the investor acquired any information about the investment and the percentage of the investor's liquid net worth represented by the proposed investment, or impose additional requirements on prospective investors, such as imposing express acknowledgments of the investor's responsibilities with respect to compliance.
Finally, although several commenters suggested that once an account has been created on an intermediary's platform, an investor should be able to invest in multiple offerings on the same intermediary platform without having to re-certify and review the educational material, we continue to believe that, in order to realize the statute's investor protection goals, it is prudent to require an intermediary to obtain an investor representation and completed questionnaire each time an investor seeks to make an investment commitment. Accordingly, under Rule 303(b), an intermediary will be required to obtain these items each time an investor seeks to make an investment commitment.
Proposed Rule 303(c) of Regulation Crowdfunding would require an intermediary to provide, on its platform, channels through which investors can communicate with one another and with representatives of the issuer about offerings made available on the intermediary's platform. An intermediary that is a funding portal would be prohibited from participating in communications in these channels.
We received comments both supporting
Some commenters stated there should be more privacy or control in the manner in which comments are posted to the communications channels, such as submitting comments to intermediaries to review prior to posting or restricting the publicly viewable comments.
Several commenters generally supported the disclosure requirement on communications by issuers or intermediaries and agreed that these communications should be made transparent to investors.
One commenter generally supported the proposed rule requiring each promotional communication to be accompanied by disclosure of the receipt of past or prospective compensation.
In response to our request for comments, several commenters supported requiring intermediaries to keep the communication channels available to investors post-offering.
After considering the comments, we are adopting Rule 303(c) as proposed. We considered commenters' suggestions that the issuer's Web site is a better place for communication between investors and issuers and that ongoing communication between issuers and investors should be an obligation of issuers alone. We believe, however, that communication channels on the intermediary's platform will provide a centralized and transparent means for members of the public that have opened an account with an intermediary to share their views about investment opportunities and to communicate with representatives of the issuer to better assess the issuer and investment opportunity.
Although one commenter stated that it interpreted the proposed rule to permit issuers to post videos and other promotional content, aside from Rule 303(c)(4) and its requirements for promotional activity, Rule 303(c) itself does not address the content or form used by issuers when communicating with investors through the channels provided on an intermediary's platform. Rather, Rule 204 of Regulation Crowdfunding sets forth the advertising requirements for issuers and, as explained above, Rule 204 allows an issuer to communicate with investors about the terms of the offering through communication channels provided by the intermediary on the intermediary's platform, so long as the issuer identifies
We are requiring intermediaries to make the communications on the channels publicly available for viewing. We believe that this requirement is consistent with the concept of crowdfunding, as it provides for transparent crowd discussions about a potential investment opportunity. We also are requiring in Rule 303(c)(3) that intermediaries limit the posting in communication channels to those individuals who have opened an account with the intermediary on its platform. As stated in the Proposing Release, while we recognize that this requirement could narrow the range of views represented by excluding posts by anyone who has not opened an account with the intermediary, we believe that it will help to establish accountability for comments made in the communication channels. We continue to believe that, without this measure, there would be greater risk of the communications including unfounded, potentially abusive or biased statements intended to promote or discredit the issuer and improperly influence the investment decisions of members of the crowd.
With respect to one commenter's suggestion that the Commission provide an investor “hotline” where investors can report concerns relating to crowdfunding communications or transactions, we note that the Commission has an existing “Tips, Complaints and Referrals Portal” available on its Web site,
We are mindful of the cost associated with the communications channel, and, therefore, we are not requiring that intermediaries keep the communication channels available to investors post-offering, as suggested by some commenters.
Consistent with the prohibition on a funding portal offering investment advice or recommendations,
Finally, under the rule as adopted an intermediary must require any person posting on the communication channel to clearly and prominently disclose with each posting whether he or she is a founder or an employee of an issuer engaging in promotional activities on behalf of the issuer, or is otherwise compensated, whether in the past or prospectively, to promote the issuer's offering. This disclosure will apply to officers, directors and other representatives of the issuer, and also will be required of an intermediary that is a broker and its associated persons. We continue to believe that intermediaries, as the hosts of the communication channels, are well placed to take measures to ensure that promoters clearly identify themselves in their communication channels, in accordance with Securities Act Section 4A(b)(3).
Proposed Rule 303(d) of Regulation Crowdfunding would require an intermediary, upon receipt of an investment commitment from an investor, to promptly give or send to the investor a notification disclosing: (1) The dollar amount of the investment commitment; (2) the price of the securities, if known; (3) the name of the issuer; and (4) the date and time by which the investor may cancel the investment commitment. Pursuant to proposed Rule 302(a)(2) of Regulation Crowdfunding, this notification would be provided by email or other electronic media, and would be documented in accordance with applicable recordkeeping rules.
Commenters generally supported the requirement that intermediaries send these notifications to investors.
After considering the comments, we are adopting Rule 303(d) as proposed. As stated in the Proposing Release, the notification is intended, among other things, to provide the investor with a written record of the basic terms of the transaction, as well as a reminder of his or her ability to cancel the investment commitment. We believe that the adopted notification requirements will be useful to investors and provide transparency. We also believe that requiring that this notification be sent once—promptly upon receipt of an investment commitment from an investor—rather than multiple times as commenters suggested—will help to minimize the costs associated with providing additional notification, while still providing the investor with, among other things, an important reminder about the ability to cancel the investment commitment. Although an intermediary can decide, in its discretion, to provide additional notifications to its customers as a business decision, we believe at this time that adopting additional notification requirements could hamper flexibility in the evolving crowdfunding market and potentially impair the development of best practices that are
Securities Act Section 4A(a)(7) requires that an intermediary “ensure that all offering proceeds are only provided to the issuer when the aggregate capital raised from all investors is equal to or greater than a target offering amount, . . . as the Commission shall, by rule, determine appropriate.” Proposed Rule 303(e)(1) of Regulation Crowdfunding would implement this provision and address the maintenance and protection of investor funds, pending completion of a transaction made in reliance on Section 4(a)(6), by requiring an intermediary that is a registered broker to comply with established requirements in Exchange Act Rule 15c2-4
Proposed Rule 303(e)(2) would establish separate requirements for an intermediary that is a funding portal. Because a funding portal cannot receive any funds, it would be required to direct investors to transmit money or other consideration directly to a “qualified third party” that has agreed in writing to hold the funds for the benefit of the investors and the issuer and to promptly transmit or return the funds to the persons entitled to such funds. Proposed Rule 303(e)(2) would define “qualified third party” to mean a bank
Proposed Rule 303(e)(3) would require an intermediary that is a funding portal to promptly direct transmission of funds from the qualified third party to the issuer when the aggregate amount of investment commitments from all investors is equal to or greater than the target amount of the offering and the cancellation period for each investor has expired, provided that in no event may the funding portal direct this transmission of funds earlier than 21 days after the date on which the intermediary makes publicly available on its platform the information required to be provided by the issuer under Rules 201 and 203(a) of proposed Regulation Crowdfunding.
Several commenters generally supported the proposed fund maintenance and transmission requirements.
In the Proposing Release, we requested comment on various alternatives to the proposed rules. As to whether the proposed rules should prohibit any variations of a contingency offering, such as minimum-maximum, offerings, one commenter stated that the target amount of a crowdfunding campaign “should represent the minimum to avoid investor confusion” and that “oversubscription should be allowed.”
As to whether other types of custody arrangements should be permitted, one commenter requested clarification that a carrying broker would not be deemed to accept any part of the sale price of any security for purposes of Exchange Act Rule 15c2-4 under specific circumstances.
As to whether there should be a fixed deadline for transmission of funds (such as three business days), one commenter stated that “fixed deadlines should be set to protect investor and issuer interests.” This commenter suggested that “one week (7 days) should be sufficient to disburse collected funds.”
As to whether SRO and staff guidance on Exchange Act Rule 15c2-4 should be expressly incorporated into the rules, one commenter suggested that there was no need for incorporation of prior guidance about Rule 15c2-4 into the proposed rules.
As to whether the definition of “qualified third party” should be expanded to include entities other than a bank, one commenter stated that the Commission should “consider [permitting] non-bank custodians, such as internet services that specialize in escrow and payment transfer.”
Commenters generally agreed with our proposed approach not to require funding portals to maintain net capital, noting among other things that imposing “net capital requirements would increase the cost of starting a new funding portal and reduce the potential number of intermediaries, while providing little additional protection to investors and issuers.”
As to whether certain methods of payment for the purchase of securities should either be required or prohibited, one commenter suggested that the types of payment methods not be limited in any way.
After considering the comments, we are adopting Rule 303(e) substantially as proposed, but with certain revisions in response to comments. Rule 303(e)(1), as adopted, requires an intermediary that is a registered broker-dealer to comply with established requirements in Exchange Act Rule 15c2-4 for the maintenance and transmission of investor funds. Rule 15c2-4 requires, in relevant part, that in connection with a contingency offering of a security, any money or other consideration received by a broker-dealer participating in the distribution must be promptly deposited in a separate bank account, as agent or trustee for the persons who have the beneficial interest therein, until the appropriate event or contingency has occurred, and thereafter promptly transmitted or returned to the persons entitled thereto;
Rule 303(e)(2) as adopted establishes separate requirements for an intermediary that is a funding portal (as compared to an intermediary that is a broker-dealer) because a funding portal cannot, by statute, hold, manage, possess, or otherwise handle investor funds or securities.
We are revising the definition of a “qualified third party” to include for purposes of the final rule: a registered broker or dealer that carries customer or broker or dealer accounts and holds funds or securities for those persons,
After considering the comments, we further believe that the definition of “qualified third party” should be expanded to include certain types of registered broker-dealers. We are expanding the definition to include registered broker-dealers that carry customer or broker or dealer accounts and holds funds or securities for those persons. We believe such brokers-dealers are appropriate entities to serve as qualified third parties as they are subject to various regulatory obligations, which are designed to provide enhanced protection of investor funds through the imposition of capital and other requirements.
The statute does not limit or require a particular payment mechanism, and we are not imposing such a restriction because we believe that the rules should provide reasonable flexibility regarding the payment mechanisms intermediaries employ. We believe that restrictions on particular payment mechanisms would not serve to significantly increase investor protection, particularly in light of the established investment limits. We note, however that an intermediary can, in its discretion, decline to accept certain payment methods, such as credit cards, or accept them only in certain circumstances.
We also are not adopting additional requirements that would, for example, (1) prohibit variations of a contingency offering, such as minimum-maximum offerings; (2) establish a fixed deadline for transmission of funds as compared to the proposed requirement to transmit funds “promptly”; or (3) require funding portals to maintain a certain amount of net capital. We believe that additional restrictions, such as prohibiting variations of a contingency offering or establishing a fixed deadline for the transmission of funds could hamper flexibility in the nascent crowdfunding market and prohibit the development of best practices specifically tailored to this unique form of capital raising. Finally, we are not requiring in the final rule net capital standards for funding portals. As noted above, funding portals are prohibited from handling, managing or possessing investor funds or securities.
As proposed, Rule 303(f)(1) of Regulation Crowdfunding would require that an intermediary, at or before the completion of a transaction made pursuant to Section 4(a)(6), give or send to each investor a notification disclosing: (1) The date of the transaction; (2) the type of security that the investor is purchasing; (3) the identity, price and number of securities purchased by the investor, as well as the number of securities sold by the issuer in the transaction and the price(s) at which the securities were sold; (4) certain specified terms of the security, if it is a debt or callable security; and (5) the source and amount of any remuneration received or to be received by the intermediary in connection with the transaction, whether from the issuer or from other persons. This notification would be required to be provided by email or other electronic media,
Commenters generally supported the proposed confirmation requirements.
After considering the comments, we are adopting Rule 303(f), as proposed, but with one clarifying change. As proposed, Rule 303(f)(1)(vi) would have required an intermediary to give or send to each investor a notification disclosing: “[t]he source and amount of any remuneration received or to be received by the intermediary in connection with the transaction, including the amount and form of any remuneration that is received, or will be received, by the intermediary from persons other than the issuer. We are
As explained in the Proposing Release, we believe that transaction confirmations serve an important and basic investor protection function by, among other things, conveying information and providing a reference document that allows investors to verify the terms of their transactions, acting as a safeguard against fraud and providing investors a means by which to evaluate the costs of their transactions.
As for the concern raised by one commenter about the delivery requirements for transaction confirmations,
In addition, under Rule 303(f)(2) as adopted, an intermediary that gives or sends to each investor the notification described above is exempt from the requirements of Exchange Act Rule 10b-10 for the subject transaction.
Under Securities Act Section 4A(a)(7), an intermediary is required to allow investors to cancel their commitments to invest as the Commission shall, by rule, determine appropriate. Securities Act Section 4A(b)(1)(G) requires an issuer, prior to sale, to provide investors “a reasonable opportunity to rescind the commitment to purchase the securities.” We proposed, therefore, in Rule 304(a) of Regulation Crowdfunding, to give investors an unconditional right to cancel an investment commitment for any reason until 48 hours prior to the deadline identified in the issuer's offering materials. Under this approach, an investor could reconsider his or her investment decision with the benefit of the views of the crowd and other information, until the final 48 hours of the offering. Thereafter, an investor would not be able to cancel any investment commitments made within the final 48 hours of the offering (except in the event of a material change to the offering, as discussed below).
We also proposed in Rule 304(b) that if an issuer reached the target offering amount prior to the deadline identified in its offering materials, it could close the offering once the target offering amount was reached, provided that: (1) The offering had been open for a minimum of 21 days; (2) the intermediary provided notice about the new offering deadline at least five business days prior to the new offering deadline; (3) investors would be given the opportunity to reconsider their investment decision and to cancel their investment commitment until 48 hours prior to the new offering deadline; and (4) at the time of the new offering deadline, the issuer continued to meet or exceed the target offering amount.
In addition, we proposed in Rule 304(c) that if there was a material
Finally, we proposed in Rule 304(d) that if an issuer did not complete an offering, for example, because the target was not reached or the issuer decided to terminate the offering, the intermediary would be required, within five business days, to: (1) Give or send to each investor who had made an investment commitment a notification disclosing the cancellation of the offering, the reason for the cancelation, and the refund amount that the investor should expect to receive; (2) direct the refund of investor funds; and (3) prevent investors from making investment commitments with respect to that offering on its platform. This notification, like other notifications from an intermediary, would be required to be provided by email or other electronic media, and to be documented in accordance with applicable recordkeeping rules.
One commenter supported the unconditional right of investors to cancel an investment commitment for any reason until 48 hours prior to the close of an offering.
One commenter stated that the rule on early closure of an offering should be more narrowly defined.
Some commenters supported the proposal that existing disclosure materials can be modified in the event of a material change, with the original offering remaining open,
Some commenters supported the proposed five-day reconfirmation period for investors.
We are adopting Rule 304 as proposed, with a technical change to correct a cross-cite in the rule text. We believe that the final rule appropriately takes into consideration the needs of investors to be able to consider material
In regards to one commenter's request for clarification as to whether an intermediary may continue to receive investment commitments during the five business day period prior to an early closure of an offering (even if the commitment may be oversubscribed), we note that intermediaries are permitted to continue to receive investment commitments during that time period, provided that the intermediary informs investors about the continuation of such acceptance in accordance with Rule 304(b).
In addition, we believe that when material changes arise during the course of an offering, an investor who had made a prior investment commitment should have a reasonable period during which to review the new information and to decide whether to invest by reconfirming the investment commitment. Despite some commenters' concerns outlined above, we continue to believe that a five business day period is appropriate because it reasonably reflects the need to allow an investor sufficient time to consider material changes to the terms of the offering while giving issuers certainty about their ability to close an offering. For the same reasons noted above, we also believe that five business days is a sufficient amount of time for intermediaries to notify investors about offerings that are not completed or terminated. Finally, we believe that requiring an investor to reconfirm his or her investment commitment within five business days of receipt of the notice of a material change is sufficiently clear as to when the reconfirmation period begins and provides additional investor protection and is therefore an appropriate requirement for the final rule.
Securities Act Section 4A(a)(10) provides that an intermediary in a transaction made in reliance on Section 4(a)(6) shall not compensate “promoters, finders, or lead generators for providing the broker or funding portal with the personal identifying information of any potential investor.”
We proposed in Rule 305(a) of Regulation Crowdfunding to prohibit an intermediary from compensating any person for providing it with the “personally identifiable information”
Proposed Rule 305(b), however, would permit an intermediary to compensate a person for directing issuers or investors to the intermediary's platform if: (1) The person does not provide the intermediary with the personally identifiable information of any investor, and (2) the compensation, unless it is paid to a registered broker or dealer, is not based, directly or indirectly, on the purchase or sale of a security offered in reliance on Securities Act Section 4(a)(6) on or through the intermediary's platform.
Some commenters generally supported the portion of the proposed rule that allows intermediaries to compensate third parties for directing investors to the platform.
We are adopting Rule 305 with modifications. Rule 305(a), like the proposed rule, states that an intermediary may not compensate any person for providing the intermediary with the personally identifiable information of any investor in securities offered and sold in reliance on Section 4(a)(6) of the Securities Act. However, we are not including in the final rule
We agree with those commenters who believe intermediaries should be permitted to compensate third parties for general business advertising including, for example, web search engine direction or other standard Internet marketing techniques so long as that compensation is not based, directly or indirectly, on the purchase or sale of a security offered in reliance on Securities Act Section 4(a)(6).
Finally, we are adopting as proposed the definition of personally identifiable information, which will be renumbered as Rule 305(b).
Securities Act Section 4A(a)(1) requires that an intermediary facilitating a transaction made in reliance on Securities Act Section 4(a)(6) register with the Commission as a broker or a funding portal. The statute does not, however, prescribe the manner in which a funding portal would register with the Commission.
We proposed to establish a streamlined registration process under which a funding portal would register with the Commission by filing a form with information consistent with, but less extensive than, the information required for broker-dealers on the Uniform Application for Broker-Dealer Registration (“Form BD”).
Proposed Rule 400(b) would require a funding portal to file an amendment to Form Funding Portal within 30 days of any of the information previously submitted on the form becoming inaccurate for any reason.
In addition, proposed Rule 400(c)(1) would permit a funding portal that succeeds to and continues the business of a registered funding portal to also succeed to the registration of the predecessor on Form Funding Portal. As proposed in Rule 400(c)(1), the registration would remain effective as the registration of the successor if the successor, within 30 days after such succession, files a registration on Form Funding Portal and the predecessor files a withdrawal on Form Funding Portal.
In certain circumstances, proposed Rule 400(c)(2) would allow the successor to file an amendment to the predecessor's Form Funding Portal rather than requiring the successor and predecessor, respectively, to follow the registration filing and withdrawal process under Rule 400(c)(1) described above. Specifically, proposed Rule 400(c)(2) provides that, if the succession is based solely on a change of the predecessor's date or state of incorporation, form of organization or composition of a partnership, the successor may, within 30 days after the succession, amend the notice registration of the predecessor on Form Funding Portal to reflect these changes. Successions by amendment would be limited to those successions that
The instructions to the proposed Form Funding Portal would limit the term “successor” to an entity that assumed or acquired substantially all of the assets and liabilities of the predecessor funding portal's business.
We also proposed in Rule 400(d) to require a funding portal to promptly file a withdrawal of registration on Form Funding Portal upon ceasing to operate as a funding portal. The withdrawal would be effective on the later of 30 days after receipt by the Commission, after the funding portal was no longer operational, or within a longer period of time consented to by the funding portal or that the Commission, by order, determined as necessary or appropriate in the public interest or for the protection of investors.
Proposed Rule 400(e) would provide that each application for registration, amendment thereto, successor registration or withdrawal would be considered filed when a complete Form Funding Portal was submitted with the Commission or its designee. Proposed Rule 400(e) also would require duplicate originals of the application to be filed with surveillance personnel designated by the registered national securities association of which the funding portal is a member.
We received some comments generally supporting the proposed registration method,
In the Proposing Release, we requested comments on whether we should impose other restrictions or prohibitions on affiliations of the funding portal, such as affiliation with a registered broker-dealer or registered transfer agent. Some commenters opposed the imposition of other restrictions or prohibitions on affiliations of the funding portal.
We are adopting Rule 400(a)-(e) generally as proposed with one change. We are deleting from Rule 400(e) as proposed the language stating that Form Funding Portal may be filed with a Commission designee, as we have determined not to designate this function. Rather, these filings will be made through the EDGAR system as explained in more detail below.
Rule 400 establishes a streamlined registration process for a funding portal to register with the Commission. We have considered the general comment suggesting that the registration requirement for funding portals is too stringent and creates financial overhead. We believe, however, that the rules as adopted provide a reasonable approach to funding portal registration—they are based on broker-dealer registration requirements, which we believe have been effective in providing investor protection and allowing the Commission to perform its oversight function. At the same time, the registration requirement takes into account the more limited activities of funding portals as compared to broker-dealers. As such, the registration requirements we are imposing on funding portals are generally consistent with those imposed on broker-dealers, while not as extensive in every aspect. As we note in Section III.B.5, we have considered the costs of funding portal registration and believe that the anticipated costs to funding portals are justified in light of the expected benefits investors will receive from utilizing funding portals that are subject to registration requirements, which include public disclosure of registration information on Form Funding Portal in EDGAR, as described in more detail in Section II.D.1.b below. We believe that having such a registration system will promote investor confidence in this new and emerging market, while providing us and FINRA (and any other applicable national securities association registered pursuant to Exchange Act Section 15A) with information integral to effective oversight.
Finally, consistent with the proposal, we are not imposing additional restrictions or prohibitions on affiliations of the funding portal in the final rules. We note, however, that Form Funding Portal, which will be publicly available, requires a funding portal to disclose information about its control relationships and the disciplinary history of associated persons.
As noted above, proposed Rule 400(a) requires a funding portal seeking to register with the Commission, through an initial application, to file a completed Form Funding Portal with the Commission. As proposed, Rule 400(b)-(d) would have also required funding portals to use proposed Form Funding Portal to amend any part of the funding portal's most recent Form Funding Portal, including certain successor registrations, or to withdraw from registration as a funding portal with the Commission.
As proposed, Form Funding Portal appropriately considered the need to provide efficiency in completing the
Upon a filing to withdraw from registration, a funding portal would be required to provide certain books and records information. In addition, as discussed in detail in Section II.D.1.d. below, applicants that are incorporated in or organized under the laws of a jurisdiction outside of the United States or its territories, or whose principal place of business is not in the United States or its territories, would have been required to complete Schedule C to Form Funding Portal, which would require information about the applicant's arrangements to have an agent for service of process in the United States, as well as a certification and an opinion of counsel addressing the ability of the applicant to provide the Commission and the national securities association of which it is a member with prompt access to its books and records and to submit to onsite inspection and examination by the Commission and the national securities association.
We also proposed that a person duly authorized to bind the funding portal be required to sign Form Funding Portal in order to execute the documents.
Finally, we proposed to make all current Forms Funding Portal, including amendments and registration withdrawal requests, immediately accessible and searchable by the public, with the exception of certain personally identifiable information or other information with significant potential for misuse (including the contact employee's direct phone number and email address and any IRS Employer Identification Number, social security number, date of birth, or any other similar information).
We received one comment in support of using EDGAR for all funding portal filing and registration requirements.
We are adopting Form Funding Portal generally as proposed,
• The final rules amend Regulation S-T to permit a funding portal to file PDF exhibits and attachments to Form Funding Portal on EDGAR as “official filings.”
• The following has been added to the title of the form: “Application or Amendment to Application for Registration or Withdrawal from Registration as Funding Portal” to clarify that the form will be used for all funding portal registration applications, amendments and withdrawals;
• Amendments to Form Funding Portal will require a narrative explaining the amendment, which we believe will clarify to investors and potential investors the particular information being amended by the funding portal in its filing;
• Form Funding Portal will not require information about fidelity bonds since we are not adopting the fidelity bond requirement in the proposed rules;
• Item 1 also will require information about Web site URL changes on the most recent Form Funding Portal, title of the contact employee and the month the applicant funding portal's fiscal year ends;
• The title of Item 4 is changed from “Control Persons,” as proposed, to “Control Relationships,” as adopted, to clarify that Item 4 may capture information not being captured in Schedules A and B;
• The language in Item 5 “to determine whether to approve an
• Item 7, as adopted, references “qualified third party arrangements” rather than “escrow arrangements,” as proposed, to indicate that, in addition to holding the funds in escrow, a qualified third party may also hold investor funds in an account for the benefit of investors and the issuer;
• “G—Other (general partner, trustee, or elected member)” has been added as an ownership code in Schedule A;
• Schedules A and B have been changed from the proposal to clarify that the Schedules are collecting information about whether direct owners and executive officers are “control” persons;
• The language to Schedule C of Form Funding Portal has been changed to track more closely the requirements of Rule 400(f) for nonresident funding portals and to add an execution section for these entities; and
• Withdrawal information for funding portals proposed to be collected under Item 8 will instead be collected in a new “Schedule D”.
We continue to believe that the information required by Form Funding Portal is important for our oversight of funding portals and to allow us to assess a funding portal's application for registration and perform examinations of funding portals. We also note that the information required by the Form will be available to investors and potential investors and will provide transparency regarding intermediaries. Although we generally modeled Form Funding Portal on Form BD, we have tailored the questions to the activities of funding portals. For example, Form Funding Portal, in contrast to Form BD, does not include any questions about holding customer funds and securities because funding portals are statutorily prohibited from holding or maintaining customer funds or securities. We also included questions in Form Funding Portal to address specific restrictions that are imposed upon funding portals but not upon broker-dealers. For example, Form Funding Portal requires specific information about a funding portal's qualified third party arrangements because a funding portal is prohibited from holding and maintaining customer funds.
In developing these requirements, we have taken into account that funding portals are limited purpose brokers that are conditionally exempt from registration as broker-dealers, and accordingly have sought to require appropriate information from these entities, while, at the same time, not making the process of completing and filing the required form inappropriately burdensome for funding portals.
As noted above, we proposed to make a blank Form Funding Portal available through our Web site or another electronic database. At the time of the Proposing Release, we had not yet determined the appropriate database through which to access and electronically file Form Funding Portal. We requested comments in the Proposing Release on the type of web-based registration that funding portals should use for accessing and filing Form Funding Portal, and as noted above, received one comment in support of using EDGAR for funding portal filing and registration requirements.
As proposed, a funding portal will be required to check a box indicating the purpose for which the funding portal was filing the form:
• To register as a funding portal with the Commission, through an initial application;
• to amend any part of the funding portal's most recent Form Funding Portal, including a successor registration; or
• to withdraw from registration as a funding portal with the Commission.
The funding portal will receive an SEC file number after it files its Form Funding Portal initial application, and thereafter must provide us that file number when submitting an amendment or withdrawal from registration on Form Funding Portal. We will use this number to cross-reference amendments and withdrawals to the original registration.
When a funding portal's registration becomes effective, the information on Form Funding Portal will be made available to the public through EDGAR, with the exception of certain personally identifiable information or other information with significant potential for misuse (including the contact employee's direct phone number, fax number and email address and any IRS Employer Identification Number, IRS Tax Identification Number, social security number, date of birth or any other similar information). In addition to current versions of Form Funding Portal, investors and potential investors also will be able to access historical versions of a funding portal's filings on EDGAR. We believe that making these documents publicly available and searchable will provide the public with information about the registration process and the funding portal industry, thereby increasing transparency into this developing market.
The final rule permits a funding portal to operate multiple Web site addresses under a single funding portal registration. As we noted in the Proposing Release, we believe that allowing a funding portal to utilize more than one Web site address, if it chooses to do so, may allow the portal to minimize its regulatory costs while having the flexibility to customize each Web site to fit its specific needs, such as appealing to certain industries or
Proposed Rule 400(f) would have required that funding portals, as a condition of registration, have in place, and thereafter maintain for the duration of such registration, a fidelity bond that: (1) Has a minimum coverage of $100,000; (2) covers any associated person of the funding portal unless otherwise excepted in the rules set forth by FINRA or any other registered national securities association of which it is a member; and (3) meets any other applicable requirements set forth by FINRA or any other registered national securities association of which it is a member. While fidelity bond coverage was not mandated by statute, the proposed requirement was intended to help insure against the loss of investor funds that might occur if a funding portal were to violate the express prohibition set forth in Exchange Act Section 3(a)(80) on holding, managing, possessing or otherwise handling investor funds or securities.
We received comments both in support of,
After taking into account the comments and upon further consideration, we have determined not to adopt a fidelity bond requirement for funding portals. We have been persuaded by the comments that such a requirement may not be appropriate. We believe that the statutory protections and prohibitions set forth in Exchange Act Section 3(a)(80) on holding, managing, possessing or otherwise handling investor funds or securities provide substantial protections to investors. We recognize, as some commenters observed, that there may be potential risks to investors if a funding portal were to violate the prohibitions in Regulation Crowdfunding, including the potential loss of investor funds. As we discussed in the Proposing Release, funding portals will not be members of the Securities Investor Protection Corporation (“SIPC”) and their customers, therefore, will not receive SIPC protection.
Under proposed Rule 400(g), registration pursuant to Rule 400 of Regulation Crowdfunding by a “nonresident funding portal”
Proposed Rule 400(g)(2)(iv) would require a registered nonresident funding portal to promptly appoint a successor agent if it discharges its identified agent for service of process or if its agent for service of process is unwilling or unable to accept service on its behalf. In addition, proposed Rule 400(g)(2)(iii) would require a registered funding portal to promptly amend Schedule C to its Form Funding Portal if its agent, or the agent's name or address, changes. Finally, proposed Rule 400(g)(2)(v) would require the registered nonresident funding portal to maintain, as part of its books and records, the agreement with the agent for service of process for at least three years after termination of the agreement.
In addition, we proposed in Rule 400(g)(3)(ii) to require a registered nonresident funding portal to re-certify, on Schedule C to Form Funding Portal, within 90 days after any changes in the legal or regulatory framework that would affect: (1) Its ability to provide (or the manner in which it provides) the Commission, or the national securities association of which it is a member, with prompt access to its books and records; or (2) the ability of the Commission or the national securities association to inspect and examine the nonresident funding portal. The re-certification would be accompanied by a revised opinion of counsel describing how, as a matter of law, the entity can continue to meet its obligations to provide the Commission and the national securities association with prompt access to its books and records and to be subject to inspection and examination.
One commenter stated its view that the definition of a nonresident funding portal will create a competitive advantage for foreign intermediary platforms.
In the Proposing Release, we requested comments about other actions or requirements that could address our concern that the Commission and the applicable national securities association be able to have direct access to books and records and be able to adequately examine and inspect a nonresident funding portal, if it would be impossible or impractical for such funding portal to obtain the required opinion of counsel. In response, a commenter suggested an arrangement between a nonresident funding portal and a domestic funding portal in which the nonresident funding portal would be required to make and keep current books and records, but the domestic funding portal would have the ability to obtain and be responsible for the accuracy of such books and records.
One commenter suggested that nonresident funding portals be required to clearly indicate on their Web sites that they are organized and operating outside of the U.S. and indicate whether a U.S. or non-U.S. bank will be used to process investors' funds.
We are adopting Rule 400(g) as proposed with certain minor changes, and renumbering it as Rule 400(f) due to the elimination of the fidelity bond requirement proposed as subparagraph (f).
• Add the term “registered” to any references to national securities association in the Rule to be more consistent with the terminology in the Exchange Act; and
• Require the nonresident funding portal also to certify that it “will” provide the Commission and any national securities association of which it “becomes” (rather than “is”) a member with prompt access to the books and records and “will” submit to onsite inspection and examination by the Commission and such national securities association.
As we noted in the Proposing Release, the rule aims to help ensure that we and any applicable registered national securities association can access the books and records of, conduct examinations and inspections of, and enforce U.S. laws and regulations with respect to, funding portals that are not based in the United States, or that are subject to laws other than those of the United States. We believe that these rules will further our goal of promoting the ability of the Commission and any applicable national securities association to conduct effective regulatory oversight of funding portals.
We have considered the comments and believe that the final rule appropriately takes into consideration the need to provide more choices for U.S. issuers seeking to use intermediaries or access investors outside of the United States, while meeting the challenges associated with supervising, examining, and enforcing rules regarding activities of intermediaries based outside the United States. For example, as we noted in the Proposing Release, the requirement for an information sharing arrangement is designed to provide us with greater assurance that we will be able to obtain information about a nonresident funding portal necessary for our oversight of the funding portal. The ability to obtain information and secure
We have also considered the comment submitted in response to our question about the use of books and records arrangements in situations where it would be impossible or impractical for a nonresident funding portal to obtain the required opinion of counsel.
We have also considered the comment suggesting that a nonresident funding portal be required to clearly indicate on its Web site that it is organized and operating outside of the United States and whether it will use a U.S. or non-U.S. bank to process investors' funds.
Finally, we have considered the comments suggesting that a nonresident funding portal should be required to have a U.S. agent for potential proceedings,
Exchange Act Section 3(h)(1), which was added by Section 304(a) of the JOBS Act, directs the Commission by rule to exempt, conditionally or unconditionally, a registered funding portal from the requirement to register as a broker or dealer under Exchange Act Section 15(a), provided that the funding portal: (1) Remains subject to the examination, enforcement and other rulemaking authority of the Commission; (2) is a member of a registered national securities association; and (3) is subject to other requirements that the Commission determines appropriate.
As explained earlier, the role contemplated by Title III of the JOBS Act for an entity acting as an intermediary in a crowdfunding transaction would bring that entity within the definition of “broker” under Exchange Act Section 3(a)(4).
We proposed Rule 401(a) to provide an exemption for registered funding portals from the broker registration requirements of Exchange Act Section 15(a)(1) in connection with its activities as a funding portal. Consistent with the JOBS Act, the funding portal would remain subject to the full range of our examination and enforcement authority, even though it is not registered as a broker.
We had further proposed in Rule 401(b) that, notwithstanding the exemption from broker registration, for purposes of Chapter X of Title 31 of the Code of Federal Regulations, a funding portal would be a broker or dealer “required to be registered” with the Commission under the Exchange Act, thereby requiring funding portals to comply with Chapter X, including certain anti-money laundering (“AML”) provisions thereunder.
Commenters generally agreed with the funding portal exemption from registration as a broker-dealer.
One commenter stated that the exemption from broker-dealer registration actually precludes funding portals from becoming members of FINRA,
We are adopting, as proposed, paragraph (a) under Rule 401, but renumbering it as Rule 401 as we not adopting proposed Rule 401(b). We note, however, that the exemption from broker registration is applicable only to funding portals that are registered under Rule 400. Therefore, a funding portal that ceases to be registered under Rule 400 will no longer be exempt from broker registration under Rule 401. In response to the comment that this exemption precludes funding portals from becoming members of FINRA, as we noted above, because a funding portal will be engaged in the business of effecting securities transactions for the accounts of others through crowdfunding, it will be a “broker” within the meaning of Section 3(a)(4) of the Exchange Act. We also note that Exchange Act Section 3(h)(2) states that for purposes of sections 15(b)(8) and 15A, the term “broker or dealer” includes a funding portal and the term “registered broker or dealer” includes a registered funding portal. Therefore, funding portals are explicitly permitted by statute to become members of FINRA.
We are not, however, adopting proposed Rule 401(b). As described in more detail in Section II.D.4.b. below, we have determined that the imposition of AML requirements on funding portals should be addressed outside of the rules that we are adopting in this release.
Under Exchange Act Section 3(a)(80), which was added by Section 304(b) of the JOBS Act, a funding portal is defined as an intermediary that does not: (i) Offer investment advice or make recommendations; (ii) solicit purchases, sales or offers to buy the securities offered or displayed on its platform or portal; (iii) compensate employees, agents or other persons for such solicitation or based on the sale of securities displayed or referenced on its platform or portal; (iv) hold, manage, possess or otherwise handle investor funds or securities; or (v) engage in such other activities as the Commission, by rule, determines appropriate. As noted in the Proposing Release, commenters have raised questions about the scope of permissible activities for funding portals consistent with these prohibitions.
Proposed Rule 402(a) also stated that no presumption shall arise that a funding portal has violated the prohibitions under Section 3(a)(80) of the Exchange Act or Regulation Crowdfunding by reason of the funding portal or its associated persons engaging in activities in connection with the offer or sale of securities in reliance on Section 4(a)(6) of the Securities Act that do not meet the conditions specified in the safe harbor, and that the antifraud provisions and all other applicable provisions of the federal securities laws continue to apply to the activities described in the safe harbor.
Commenters strongly supported the idea of a safe harbor for funding portals,
Proposed Rule 402(b)(1) would permit a funding portal to apply objective criteria to limit the securities offered in reliance on Section 4(a)(6) of the Securities Act through the funding portal's platform where: (i) The criteria are reasonably designed to result in a broad selection of issuers offering securities through the funding portal's platform, are applied consistently to all potential issuers and offerings and are clearly displayed on the funding portal's platform; and (ii) the criteria could include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities), the geographic location of the issuer and the industry or business segment of the issuer,
We received a significant number of comments on the ability of a funding portal to limit the offerings on its platform. Many of these comments suggested a broader standard than the standard that we proposed. Several commenters expressed concern that the proposed safe harbor placed funding portals at a competitive disadvantage to registered brokers because it did not provide funding portals with the flexibility to limit the offerings on their platforms,
Commenters asserted that a funding portal's ability to limit the offerings on its platform is important for investor protection. They stated that funding portals should be permitted to screen out clearly unprepared or ill-conceived offerings,
In addition, some commenters pointed to a tension in the statute under which a funding portal is potentially subject to liability for material misstatements and omissions in the issuer's offering materials but, at the same time, may be limited in its ability to deny access to its platform.
In view of the comments, and upon further consideration, we are modifying Rule 402(b)(1) to expressly provide that a funding portal may, consistent with the prohibitions under Exchange Act Section 3(a)(80) (including the prohibition against offering investment advice or recommendations in Section 3(a)(80)(A)), determine whether and under what terms to allow an issuer to offer and sell securities in reliance on Securities Act Section 4(a)(6) through its platform.
We agree with commenters that the ability of a funding portal to determine which issuers may use its platform is important for the protection of investors, as well as to the viability of the funding portal industry, and thus the crowdfunding market. We acknowledge the concerns raised by commenters that the proposed rules could otherwise have unduly restricted a funding portal's ability to limit offerings conducted on its platform, and we are modifying the safe harbor contained in Rule 402(b)(1) to address these concerns. Specifically, we are revising Rule 402(b)(1) to read that a funding portal may “[d]etermine whether and under what terms to allow an issuer to offer and sell securities in reliance on Section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) through its platform, provided that the funding portal otherwise complies with Regulation Crowdfunding (§§ 227.100
In making this change, we recognize that the activities in which a funding portal may engage are, by definition, far more limited than the activities in which a registered broker-dealer may engage. At the same time, we believe that the JOBS Act established an important role for intermediaries, both broker-dealers and funding portals, to play in crowdfunding offerings. While we are providing funding portals with broad discretion to determine whether and under what circumstances to allow an issuer to offer and sell securities through its platform in reliance on Section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)), a funding portal must comply with all applicable provisions of Regulation Crowdfunding, including the prohibition on providing investment advice or recommendations. In this regard and as more fully discussed below, among other things, a funding portal cannot advertise, make statements or otherwise represent that the offerings listed on its platform are safer or better investments than those listed on other platforms. Given this statutory restriction, we are not, as some commenters suggested, requiring a funding portal to provide a disclaimer stating that limiting the offerings on its platform does not constitute investment advice or a recommendation, nor are we requiring that its criteria for limiting offerings on its platform be publicly displayed. We do not believe that requiring a funding portal to display its criteria for limiting offerings on its platform will add significant investor protection. While a funding portal may decide to make such criteria public, we caution that a funding portal must avoid any appearance that it is giving investment advice or recommendations or that the funding portal believes its offerings are investment worthy.
Proposed Rule 402(b)(2) would permit a funding portal to apply objective criteria to highlight offerings on the funding portal's platform where: (i) The criteria are reasonably designed to highlight a broad selection of issuers offering securities through the funding portal's platform, are applied consistently to all issuers and offerings and are clearly displayed on the funding portal's platform; (ii) the criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the number or amount of investment commitments made, progress in meeting the issuer's target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount;
Several commenters suggested additional criteria for the safe harbor, including for example: (i) How long the issuer has been operational or profitable;
Several commenters stated that the criteria used to highlight offerings should be clearly displayed on the platform.
Several commenters suggested that the safe harbor should include the ability of a funding portal to provide mechanisms by which investors can rate an issuer or an offering, which then could be highlighted on the platform.
After considering the comments, we are adopting Rule 402(b)(2) as proposed. Specifically, Rule 402(b)(2) allows a funding portal to highlight particular issuers or offerings of securities made in reliance on Section 4(a)(6) on its platform based on objective criteria where the criteria are reasonably designed to highlight a broad selection of issuers offering securities through the funding portal's platform, are applied consistently to all issuers and offerings and are clearly displayed on the funding portal's platform. Consistent with the proposal, the final rule specifies in subparagraph (b)(2)(ii) that objective criteria may include, for example: The type of securities being offered (
It is important to note that the criteria must be reasonably designed to highlight a broad selection of issuers and offerings, so as not to recommend
To help prevent conflicts of interest and incentives for funding portals to favor certain issuers over others, the final rule also prohibits a funding portal from receiving any special or additional compensation for highlighting (or offering to highlight) one or more issuers or offerings on its platform.
Although some commenters suggested that we include additional criteria in subparagraph (b)(2)(ii), we emphasize that the rule does not establish an exclusive list. The listed criteria are intended as examples, and the safe harbor is non-exclusive. Crowdfunding is a new and evolving market, and we believe that providing principles in the safe harbor by which a funding portal can highlight offerings on its platform will provide it with the flexibility to adapt to the crowdfunding market as it develops while maintaining investor protection. In this regard, the examples listed in Rule 402(b)(2)(ii) are intended to provide guidance to funding portals as they develop their platform and related tools.
Although we are not including additional criteria in Rule 402(b)(2)(ii) at this time, we note that certain of the suggested highlighting criteria are covered by the criteria listed in the rule, such as the issuer's industry; the type of securities being offered; and the geographic location of the issuer's business. Others, while not listed in the final rule, we believe are based on objective criteria, such as the amount of money being raised or size of the offering; soonest offering to close; most or least money invested; how long the issuer has been operational or profitable; the size of the management team of the issuer; the stage and operating history of the issuer; valuation methodology; “trending”; earnings before interest, taxes, depreciation and amortization (EBITDA); and highlighting on a purely random basis. However, we caution that a funding portal must be cognizant not to present highlighted issuers in a manner that, directly or implicitly, results in the provision of investment advice or recommendations.
Proposed Rule 402(b)(3) would permit a funding portal to provide search functions or other tools that investors can use to search, sort, or categorize the offerings available through the funding portal's platform according to objective criteria where: (i) The objective criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the number or amount of investment commitments made, progress in meeting the issuer's target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount; and (ii) the objective criteria may not include, among other things, the advisability of investing in the issuer or its offering, or an assessment of any characteristic of the issuer, its business plan, its key management or risks associated with an investment.
Several commenters suggested that the safe harbor be broadened to include additional criteria.
After considering comments, we are adopting Rule 402(b)(3) substantially as proposed. The final rule permits a funding portal to provide search functions or other tools on its platform that users could use to search, sort or categorize available offerings according to objective criteria.
Rule 402(b)(3) does not preclude the use of computational sorting algorithms using objective searching and sorting criteria.
Proposed Rule 402(b)(4) would address the terms under which a funding portal could provide communication channels by which investors can communicate with one another and with representatives of the issuer through the funding portal's platform about offerings conducted through the platform, as required by Rule 303(c). Under the terms of Rule 402(b)(4) as proposed, the safe harbor would apply so long as the funding portal (and its associated persons): (i) Does not participate in these communications, other than to establish guidelines for communication and remove abusive or potentially fraudulent communications; (ii) permits public access to view the discussions made in the communication channels; (iii) restricts posting of comments in the communication channels to those persons who have opened an account on its platform; and (iv) requires that any person posting a comment in the communication channels clearly disclose with each posting whether he or she is a founder or an employee of an issuer engaging in promotional activities on behalf of the issuer, or is otherwise compensated, whether in the past or prospectively, to promote an issuer's offering.
Several commenters supported permitting a funding portal to provide communication channels on its platform through which investors can make comments, rate issuers and provide other feedback, and through which issuers can respond to investor comments.
We are adopting, as proposed, Rule 402(b)(4) to address the terms under which a funding portal can provide communication channels by which investors can communicate with one another and with representatives of the issuer through the funding portal's platform about offerings conducted through the platform, as required by Rule 303(c).
We agree with commenters that investors should be permitted to communicate with one other, and with representatives of the issuer, over communication channels on the platform provided by the funding portal.
We reiterate that while a funding portal must provide for a communication channel and may develop certain features or tools as a part of that channel (such as a crowd-based rating system), a funding portal (including its associated persons, such as its employees) may not engage or participate in such communications.
Proposed Rule 402(b)(5) would permit a funding portal to advise an issuer about the structure or content of the issuer's offering, including assisting the issuer in preparing offering documentation.
We did not receive any comments that specifically addressed the ability of a funding portal to advise issuers and are adopting Rule 402(b)(5) as proposed. The rule permits a funding portal to advise an issuer about the structure or content of the issuer's offering, including preparing offering documentation. We believe funding portals will be in a position to provide experience and assistance to issuers relatively efficiently, and should be able to leverage their expertise to increase the viability of crowdfunding.
We believe that funding portals, as well as broker-dealers, should be permitted to provide certain services to issuers to facilitate the offer and sale of securities in reliance on Section 4(a)(6). Without these services, crowdfunding as a method to raise capital might not be viable. Rule 404(b)(5) permits funding portals to advise an issuer about the structure and content of the issuer's offering in a number of ways. A funding portal can, for example, provide pre-drafted templates or forms for an issuer to use in its offering that will help it comply with its proposed disclosure obligations. Other examples of permissible assistance can include advice about the types of securities the issuer can offer, the terms of those securities and the procedures and regulations associated with crowdfunding.
Proposed Rule 402(b)(6) would permit a funding portal to compensate a third party for referring a person to the funding portal, so long as the third party does not provide the funding portal with personally identifiable information of any investor and the compensation, other than that paid to a registered broker or dealer, is not based, directly or indirectly, on the purchase or sale of a security in reliance on Section 4(a)(6) of the Securities Act offered on or through the funding portal's platform.
One commenter requested clarification as to: (i) Whether and when compensation paid to a non-broker-dealer will be deemed improperly based on the purchase or sale of a security; (ii) whether a funding portal may pay a registered broker-dealer a referral fee without a formal agreement; and (iii) whether a funding portal may charge issuers fees based on the success of the offering.
We are adopting Rule 402(b)(6) as proposed. Rule 402(b)(6) permits a funding portal to compensate a third party for referring a person to the funding portal if the third party does not provide the funding portal with personally identifiable information about any investor and the compensation, other than that paid to a registered broker or dealer, is not based, directly or indirectly, on the purchase or sale of a security in reliance on Section 4(a)(6) of the Securities Act offered on or through the funding portal's platform. We believe the safe harbor in this regard addresses the prohibition in Rule 305 against an intermediary compensating any person for providing the intermediary with the personally identifiable information of any investor in securities offered and sold in reliance on Section 4(a)(6). We also believe that Rule 402(b)(6)'s prohibition on funding portals paying transaction-based compensation to third parties, other than that paid to a registered broker or dealer, will help to minimize the incentive for high-pressure sales tactics and other abusive practices in this area. One commenter requested additional guidance as to what types of compensation would equate to compensation based on the offer or sale of a security.
In response to a commenter's inquiry, a funding portal may not pay a registered broker-dealer a referral fee without a written agreement under the safe harbor. Such an arrangement would be covered by Rule 402(b)(7), which is discussed below.
Proposed Rule 402(b)(7) would permit a funding portal to pay or offer to pay any compensation to a registered broker or dealer for services in connection with the offer or sale of securities by the funding portal in reliance on Section 4(a)(6) of the Act, provided that: (i) Such services are provided pursuant to a written agreement between the funding portal and the registered broker or dealer; (ii) such services and compensation are permitted under Regulation Crowdfunding and are not otherwise prohibited under Rule 305; and (iii) such compensation complies with and is not prohibited by the rules of any registered national securities association of which the funding portal is required to be a member.
Proposed Rule 402(b)(8) would permit a funding portal to receive any compensation from a registered broker or dealer for services provided by the funding portal in connection with the offer or sale of securities by the funding portal in reliance on Section 4(a)(6) of the Act, provided that: (i) Such services are provided pursuant to a written agreement between the funding portal and the registered broker or dealer; (ii) such compensation is permitted under Regulation Crowdfunding; and (iii) such compensation complies with and is not prohibited by the rules of any registered national securities association of which the funding portal is required to be a member.
Several commenters expressed concerns about the permitted relationships between funding portals and broker-dealers.
We are adopting Rule 402(b)(7) generally as proposed, but with minor modifications for clarity and consistency. Rule 402(b)(7) specifies that a funding portal may pay or offer to pay compensation to a registered broker or dealer for services, including for referring a person to the funding portal, in connection with the offer or sale of securities by the funding portal in reliance on Section 4(a)(6) of the Securities Act, provided that (i) such services are provided pursuant to a written agreement between the funding portal and the registered broker or dealer; (ii) such compensation is permitted under Regulation Crowdfunding; and (iii) such compensation complies with the rules of any registered national securities association of which the funding portal is a member. As discussed above, proposed Rule 402(b)(7) did not contain a reference to “referrals,” while proposed Rule 402(b)(6) included the language “for referring a person to the funding portal.” We have added a reference to “referrals pursuant to [Rule 402](b)(7)” to make clear that all payment arrangements with a broker-dealer, including paying a broker-dealer for referrals as permitted under subparagraph (b)(6), must be in writing.
Proposed Rule 402(b)(7)(ii) had also stated that “such compensation is permitted under this part and is not otherwise prohibited under § 227.305”; and subparagraph (b)(7)(iii) stated “such compensation complies with and is not prohibited by-the rules of any registered national securities association of which the funding portal is required to be a member.” We are deleting the phrases “and is not otherwise prohibited under § 227.305” and “and is not prohibited by” to make the language in Rule 402(b)(7) and Rule 402(b)(8) consistent, and because the phrases are redundant. Also, we are deleting the phrase “required to be a member” and replacing it with “is a member” in recognition of the fact that additional national securities associations may exist in the future and that a funding portal would only have to be a member of one such association.
Consistent with Rule 402(b)(7), a funding portal may, for example, pay a broker-dealer for certain services, such as information technology services, qualified third party services or referral services, pursuant to a written agreement. Each party to this type of arrangement will need to comply with all applicable regulations, including the rules of the registered national securities association of which it is a member.
Similarly, we are adopting Rule 402(b)(8) as proposed with minor modifications. Rule 402(b)(8) permits a funding portal to provide services to, and receive compensation from, a registered broker-dealer in connection with the funding portal's offer or sale of securities in reliance on Section 4(a)(6), provided that: (i) Such services are provided pursuant to a written agreement between the funding portal and the registered broker or dealer; (ii) such compensation is permitted under Regulation Crowdfunding; and (iii) such compensation complies with the rules of any registered national securities association of which the funding portal is a member. The proposed rules had stated that “such compensation complies with and is not prohibited by the rules of any registered national securities association of which the funding portal is required to be a member.” For the reasons discussed above with regard to Rule 402(b)(7)(ii), we are deleting the phrase “and is not prohibited” because it is redundant and deleting the phrase “required to be a member” and replacing it with “is a member.”
Pursuant to Rule 402(b)(8), a funding portal may receive compensation, including transaction-based compensation, from a broker-dealer for providing referrals to that broker-dealer relating to an offering made pursuant to Section 4(a)(6). It is important to emphasize that the safe harbor does not permit a funding portal to receive transaction-based compensation for referrals of investors in other types of offerings, such as Rule 506 offerings, that are effected by a registered broker-dealer.
We disagree with the commenter who suggested that Rules 402(b)(7) and (8) create an unmanageable conflict between funding portals and broker-dealers.
While a commenter questioned whether a funding portal may pay introducing brokers a fee for referring persons to the funding portal without a formal written arrangement,
Proposed Rule 402(b)(9) would permit a funding portal to advertise the existence of the funding portal and identify one or more issuers or offerings available on the portal on the basis of objective criteria, as long as: (i) The criteria are reasonably designed to identify a broad selection of issuers offering securities through the funding portal's platform and are applied consistently to all potential issuers and offerings; (ii) the criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the expressed interest by investors, as measured by number or amount of investment commitments made, progress in meeting the issuer's target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount; and (iii) the funding portal does not receive special or additional compensation for identifying the issuer or offering in this manner.
Several commenters supported the proposed safe harbor on funding portal advertising.
In contrast, one commenter stated that, while funding portals should be allowed to advertise, funding portals should not be able to display specific issuers in their advertising materials.
One commenter suggested the Commission clarify that it would be inappropriate for a funding portal to send out soliciting emails recommending investment in particular companies to investors who have signed up with that portal.
We are adopting Rule 402(b)(9) as proposed. Rule 402(b)(9) permits a funding portal to advertise its existence and identify one or more issuers or offerings available on the portal on the basis of objective criteria, as long as: (i) The criteria are reasonably designed to identify a broad selection of issuers offering securities through the funding portal's platform and are applied consistently to all potential issuers and offerings; (ii) the criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the expressed interest by investors, as measured by number or amount of investment commitments made, progress in meeting the issuer's target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount; and (iii) the funding portal does not receive special or additional compensation for identifying the issuer or offering in this manner. However, a funding portal may not base its decision as to which issuers to include in its advertisements on whether it has a financial interest in the issuer,, and any advertising may not directly or indirectly favor issuers in which the funding portal has invested or will invest.
After considering the comment letters, we believe that the requirements of the safe harbor, including the requirement for objective criteria designed to result in a broad selection of highlighted issuers or offerings, will result in advertisements that are focused on the funding portal itself, as opposed to recommending a particular offering or offerings.
We recognize that advertisements can take many varied forms, including non-traditional means, such as blogs, emails through social media or other methods. We believe that these types of communications, when made by a funding portal to investors can be a permissible means of advertising within the scope of Rule 402(b)(9). We agree, however, with a commenter's statement that it would be inconsistent with the statutory prohibition on providing investment advice or recommendations for a funding portal to send out soliciting emails recommending investments in particular companies as part of its advertising.
Proposed Rule 402(b)(10) would permit a funding portal to deny access to its platform to, or cancel an offering of, an issuer that the funding portal believes may present the potential for fraud or otherwise raises investor protection concerns.
Some commenters asserted that the proposed rules are ambiguous, and that the lack of specificity exposes funding portals to potential liability. The commenters were concerned that the perceived lack of specificity may also lead funding portals to unintentionally violate the ban on providing investment advice with their attempts to mitigate liability.
We are adopting Rule 402(b)(10) substantially as proposed with modifications to make it consistent with Rule 301(c)(2), which requires an intermediary to deny access if it has a reasonable basis for believing that the issuer or the offering presents the potential for fraud or otherwise raises concerns about investor protection.
We changed the standard in Rule 402(b)(10) to a “reasonable basis for believing”—rather than “believes”—to conform the safe harbor to the requirements of Rule 301(c)(2) as adopted. Thus, the standard in Rule 402(b)(10) is consistent with the modifications that we made to the standard in Rule 301(c)(2).
Proposed Rule 402(b)(11) would permit a funding portal to accept, on behalf of an issuer, an investment commitment for securities offered in reliance on Section 4(a)(6) of the Securities Act by that issuer on the funding portal's platform.
One commenter noted that the statute prohibits funding portals from handling investor funds or securities, and that the proposed rule requiring the use of third-party entities would create additional transaction costs for funding portals.
We are adopting Rule 402(b)(11) as proposed. Rule 402(b)(11) permits a funding portal, on behalf of an issuer, to accept investment commitments from investors for securities offered in reliance on Section 4(a)(6) by that issuer on the funding portal's platform. We are not broadening the safe harbor to permit funding portals to handle customer funds, as suggested by one commenter. Although we recognize that the requirement to use a third party entity to handle customer funds imposes an additional expense on a funding portal, Exchange Act Section 3(a)(80)(D) explicitly prohibits funding portals from handling customer funds and securities. Similarly, we believe it would be inconsistent with the statute for a funding portal to facilitate a securities registration system for issuers and investors because such activity implicitly requires funding portals to handle customer funds and securities, which is prohibited by the statute. In this regard, we note that the activities that a funding portal is permitted to engage in are limited in scope, and as such are subject to a more limited regulatory scheme as compared to registered broker-dealers.
Proposed Rule 402(b)(12) would permit a funding portal to direct investors where to transmit funds or remit payment in connection with the purchase of securities offered and sold in reliance on Section 4(a)(6) of the Securities Act.
Proposed Rule 402(b)(13) would permit a funding portal to direct a qualified third party, as required by Rule 303(e), to release proceeds to an issuer upon completion of a crowdfunding offering or to return proceeds to investors in the event an investment commitment or an offering is cancelled.
We did not receive comments on the ability of a funding portal to direct investment funds and are adopting Rules 402(b)(12) and (13) as proposed. Rules 402(b)(12) and (13) provide that a funding portal can fulfill its obligations with respect to the maintenance and transmission of funds and securities, as set forth in Rule 303, without violating the prohibition in Exchange Act Section 3(a)(80)(D). Specifically, a funding portal can direct investors where to transmit funds or remit payment in connection with the purchase of securities offered and sold in reliance on Section 4(a)(6),
In the Proposing Release, we asked whether we should adopt a safe harbor that permits a funding portal to post news, such as market news and news about a particular issuer or industry, on its platform. In response to our request for comment, some commenters stated that the safe harbor should permit funding portals to post third party news related to issuers or offerings on their platform.
While we believe it is possible for funding portals to post news on their platforms in a manner that would not violate the prohibitions in Exchange Act Section 3(a)(80), we are not including such activities within the safe harbor because we believe the permissibility of posting news should be a facts and circumstances determination. When posting news, funding portals will need to ensure that they do not violate the prohibition on giving investment advice and recommendations. For example, if a funding portal selectively determines which news articles to post or posts only flattering or positive news, then the funding portal is more likely to be giving impermissible investment advice or recommendations.
Proposed Rule 402(a) also stated that no presumption shall arise that a funding portal has violated the prohibitions under Section 3(a)(80) of the Exchange Act or Regulation Crowdfunding by reason of the funding portal or its associated persons engaging in activities in connection with the offer or sale of securities in reliance on Section 4(a)(6) of the Securities Act that do not meet the conditions specified in the safe harbor and that the antifraud provisions and all other applicable provisions of the federal securities laws continue to apply to the activities described in the safe harbor.
We did not receive any comments on the proposed “no presumption” and anti-fraud provisions and are adopting Rule 402(a) as proposed. We also reiterate that Rule 402(b) is a non-exclusive safe harbor. Rule 402(a) expressly provides that the failure of a funding portal to meet the conditions of the safe harbor does not give rise to a presumption that the funding portal is in violation of the statutory prohibitions of Exchange Act Section 3(a)(80) or Regulation Crowdfunding.
Further, the safe harbor under Rule 402 does not prohibit funding portals from engaging third party service providers to assist the funding portal in operating its platform, such as providers of software, Web site maintenance and development, communication channel applications, recordkeeping systems, and other technology.
As proposed, Rule 403(a) would require a funding portal to implement written policies and procedures reasonably designed to achieve compliance with the federal securities laws and the rules and regulations thereunder, relating to its business as a funding portal.
One commenter agreed that the Commission should not specify requirements for a funding portal's policies and procedures, while another commenter thought the Commission should provide guidance concerning the policies and procedures.
We are adopting Rule 403(a) as proposed. We believe that the requirement to implement written policies and procedures will provide important investor protections as it will necessitate that funding portals remain aware of the various regulatory requirements to which they are subject and take appropriate steps for complying with such requirements. We recognize, however, that funding portals may have various business models and, therefore, consistent with the views of one commenter, we are not imposing specific requirements for a funding portal's policies and procedures, provided the policies and procedures are reasonably designed to achieve compliance with the federal securities laws and the rules relating to their business as funding portals. Rather, we are providing a funding portal with discretion to establish, implement, maintain and enforce its policies and procedures based on its relevant facts and circumstances.
We note, however, that a funding portal may rely on the representations of others when meeting certain requirements under Regulation Crowdfunding, unless the funding portal has reason to question the reliability of those representations. For example, a funding portal may rely on an issuer's representation to establish a reasonable basis for believing that an issuer seeking to offer and sell securities in reliance on Section 4(a)(6) through its platform complies with the requirements in Securities Act Section 4A(b) and the related requirements in Regulation Crowdfunding, unless the funding portal has reason to question the reliability of that representation.
We note one commenter's suggestion that we require funding portals to update their policies and procedures to reflect changes in applicable rules and regulations within a specified time period after the change occurs. However, as explained in the Proposing Release, we believe that the requirement for reasonably designed policies and procedures includes an ongoing obligation for a funding portal to promptly update its policies and procedures if necessary to reflect changes in applicable rules and regulations, a funding portal's business practices, and/or the marketplace.
Commission staff expects to review intermediaries' compliance policies and procedures relating to their activities in connection with the offer or sale of securities in reliance on Section 4(a)(6) during the study of the federal crowdfunding exemption that it plans to undertake no later than three years following the effective date of Regulation Crowdfunding.
Proposed Rule 403(b) would require that funding portals comply with certain AML provisions,
Among other things, the BSA and its implementing regulations require a “broker or dealer in securities” (sometimes referred to in the regulations as a “broker-dealer”) to: (1) Establish and maintain an effective AML program;
A few commenters generally suggested that since funding portals are prohibited from handling customer funds and securities they should not be required to comply with AML provisions.
Upon further consideration, we have determined not to adopt proposed Rule 403(b). The BSA requirements play a critical role in detecting, preventing, and reporting money laundering and other illicit financing, such as market manipulation and fraud. However, after careful consideration, we believe that AML obligations for funding portals are better addressed outside of the rules that we are currently adopting in this release, and that it would be more appropriate to work with other regulators to develop consistent and effective AML obligations for funding portals.
Section 4A(a)(9) of the Securities Act requires intermediaries to take such steps to protect the privacy of information collected from investors as the Commission shall, by rule, determine appropriate. Proposed Rule 403(c) would implement the requirements of Section 4A(a)(9) by subjecting funding portals to the same privacy rules as those applicable to brokers. Proposed Rule 403(c), therefore, would have required funding portals to comply with Regulation S-P (Privacy of Consumer Financial Information and Safeguarding Personal Information),
Regulation S-P governs the treatment of nonpublic personal information by brokers, among others.
We are adopting Rule 403(c) as proposed, but renumbering it as Rule 403(b).
Exchange Act Section 3(h)(1)(A) specifies that funding portals must remain subject to our examination authority to, among other things, rely on any exemptions from broker-dealer registration that we impose. Under proposed Rule 403(d) of Regulation Crowdfunding, a funding portal would be required to permit the examination and inspection of all of its business and business operations that relate to its activities as a funding portal, such as its premises, systems, platforms and records, by our representatives and by representatives of the registered national securities association of which it is a member.
We are adopting Rule 403(d) as proposed, but renumbering it as 403(c).
As proposed, Rule 404(a) would require funding portals to make and preserve certain records for five years, with the records retained in a readily accessible place for at least the first two years. The required records would include the following:
• All records relating to investors who purchase or attempt to purchase securities through the funding portal;
• All records relating to issuers that offer and sell, or attempt to offer and sell, securities through the funding portal and to persons having control with respect to those issuers;
• Records of all communications that occur on or through its platform;
• All records related to persons that use communication services provided by a funding portal to promote an issuer's securities or to communicate with potential investors;
• All records demonstrating a funding portal's compliance with requirements of Subparts C (intermediary obligations) and D (additional funding portal requirements);
• All notices provided by the funding portals to issuers and investors generally through the funding portal's platform or otherwise;
• All written agreements (or copies thereof) entered into by a funding portal, relating to its business as such;
• All daily, monthly and quarterly summaries of transactions effected through the funding portal;
• A log reflecting the progress of each issuer who offers and sells securities through the funding portal toward meeting the target offering amount.
As proposed, Rule 404(b) would require that a funding portal make and preserve its organizational documents during its operation as a funding portal and also those of any successor funding portal. These would include, but not be limited to: (1) Partnership agreements; (2) articles of incorporation or charter; (3) minute books; and (4) stock certificate books (or other similar type documents).
We also proposed in Rule 404(c) that the records required to be maintained and preserved pursuant to Rule 404(a) be produced, reproduced, and maintained in the original, non-alterable format in which they were created or as permitted under Section 17a-4(f) of the Exchange Act. We proposed in Rule 404(d) to allow third parties to prepare or maintain the required records on behalf of the funding portal, provided that there is a written undertaking in place between the funding portal and the third party stating that the required records are the property of the funding portal and will be surrendered promptly, on request by the funding portal, to the Commission or the national securities association of which the funding portal is a member.
With respect to any books and records maintained or preserved on behalf of [name of funding portal], the undersigned hereby acknowledges that the books and records are the property of [name of funding portal], and hereby undertakes to permit examination of such books and records at any time, or from time to time, during business hours by representatives of the Securities and Exchange Commission, and the national securities association of which the funding portal is a member, and to promptly furnish to the Commission and national securities association of which the funding portal is a member, a true, correct, complete and current hard copy of any, all, or any part of, such books and records.
This provision is consistent with the recordkeeping provisions applicable to brokers under Exchange Act Rules 17a-4(f) (17 CFR 17a-4(f)) and 17a-4(j) (17 CFR 240.17a-4(j)), but has been scaled to be more appropriate for funding portals.
As proposed, Rule 404(e) would require all records of a funding portal to be subject at any time, or from time to time, to such reasonable periodic, special or other examination by our representatives and representatives of the registered national securities association of which the funding portal is a member.
Finally, we proposed in Rule 404(f) that funding portals would be required to comply with the reporting, recordkeeping and record retention requirements of Chapter X of Title 31 of the Code of Federal Regulations. Where Chapter X of Title 31 and proposed rules 404(a) and 404(b) would require the same records or reports to be preserved for different periods of time, we proposed requiring the records or reports to be preserved for the longer period of time.
Commenters generally did not object to the proposed recordkeeping requirements. Some commenters suggested that the cost for a funding portal to maintain the proposed books and records would not be significant.
We are adopting Rule 404 as proposed, with a modification to subparagraph (e) to require that books and records subject to review under the subsection be produced promptly to representatives of the Commission and the national securities association of which the funding portal is a member,
We believe that it is important for funding portals to be subject to the recordkeeping requirements in order to create a meaningful record of crowdfunding transactions and communications. For example, we are requiring records of all notices provided by the funding portals to issuers and investors generally through the funding portal's platform or otherwise. We believe that, in addition to the list of examples provided in the rule, this encompasses any notices relating to the funding portal's business as such, including communications in electronic form sent from an associated person of a funding portal to issuers or investors (including potential investors). Every funding portal is required under Rule 404 to furnish promptly to the Commission and its representatives, and the registered national securities association of which the funding portal is a member, legible, true, complete and current copies of such records of the funding portal that are requested by the representatives of the Commission and the national securities association.
The requirements will enable regulators to more effectively gather information about the activities in which a funding portal has been engaged, as well as about the other parties involved in crowdfunding (
While some commenters suggest a longer record retention period, we believe the requirement that funding portals preserve their records for five years, with the records retained in a readily accessible place for at least the first two years, provides sufficient investor protection, while not imposing overly burdensome recordkeeping costs.
Because permissible funding portal activity is far more limited than that of broker-dealers and a relatively high proportion of funding portals will be new market entrants that have not been subject to regulation before (rather than broker-dealers switching their business models to become funding portals) and, therefore, may not have formal recordkeeping practices in place, the recordkeeping requirements for funding portals are relatively streamlined compared to those for broker-dealers. Funding portals are intended to be subject to less regulation than broker-dealers, and recordkeeping requirements adopted in the final rules are consistent with this intent.
Finally, as described above, we are not adopting the proposed requirement that a funding portal comply with the BSA.
Commission staff expects to review the books and records practices of intermediaries during the study of the federal crowdfunding exemption that it plans to undertake no later than three years following the effective date of Regulation Crowdfunding.
We proposed Rule 502 of Regulation Crowdfunding to provide issuers a safe harbor for insignificant deviations from a term, condition or requirement of Regulation Crowdfunding. As proposed in Rule 502(a), to qualify for the safe harbor, the issuer relying on the exemption would have to show that: (1) The failure to comply with a term, condition or requirement was insignificant with respect to the offering as a whole; and (2) the issuer made a good faith and reasonable attempt to comply with all applicable terms, conditions and requirements of Regulation Crowdfunding; and (3) the issuer did not know of the failure to comply, where the failure to comply with a term, condition or requirement was the result of the failure of the intermediary to comply with the requirements of Section 4A(a) and the related rules, or such failure by the intermediary occurred solely in offerings other than the issuer's offering. As proposed in Rule 502(b), notwithstanding this safe harbor, any failure to comply with Regulation Crowdfunding would nonetheless be actionable by the Commission.
Commenters were generally in favor of the proposed safe harbor.
We are adopting the Rule 502(a) safe harbor as proposed.
We are adopting the third prong of the safe harbor in Rule 502(a) because, under the statute, an issuer could lose the exemption and potentially violate Section 5 because of the failure of the intermediary to comply with the requirements of Section 4A(a). We believe that an issuer should not lose the offering exemption due to a failure by the intermediary, which likely will be out of the issuer's control, if the issuer did not know of such failure or such failure related to offerings other than the issuer's offering. Absent this safe harbor, we believe that issuers may be hesitant to participate in offerings in reliance on Section 4(a)(6) due to uncertainty about their ability to rely on, and to control their ongoing eligibility for, the exemption, which could undermine the facilitation of capital raising for startups and small businesses.
We believe that the potential harm to investors that might result from the applicability of this safe harbor would be minimal because the deviations must be insignificant to the offering as a whole for the safe harbor to apply. We also believe the safe harbor appropriately protects an issuer who made a diligent attempt to comply with the rules from losing the exemption as a result of insignificant deviations from Regulation Crowdfunding.
We also are adopting Rule 502(b) largely as proposed to set forth clearly that the safe harbor for insignificant deviations in Rule 502(a) does not preclude the Commission from bringing an enforcement action seeking appropriate relief for an issuer's failure to comply with all applicable terms, conditions, and requirements of Regulation Crowdfunding. Despite the suggestion of two commenters,
Section 4A(e) provides that securities issued in reliance on Section 4(a)(6) may not be transferred by the purchaser for one year after the date of purchase, except when transferred: (1) To the issuer of the securities; (2) to an accredited investor; (3) as part of an offering registered with the Commission; or (4) to a family member of the purchaser or the equivalent, or in connection with certain events, including death or divorce of the purchaser, or other similar circumstances, in the discretion of the Commission. Section 4A(e) further provides that the Commission may establish additional limitations on securities issued in reliance on Section 4(a)(6).
Proposed Rule 501 largely tracked the provisions of Section 4A(e). We also proposed definitions of “accredited investor” and a “member of the family of the purchaser or the equivalent.” Under the proposed rules, the term “accredited investor” would have the same definition in Rule 501 of Regulation D.
The statute does not define “member of the family of the purchaser or the equivalent.” We proposed to define the phrase to include a “child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the purchaser, and shall include adoptive relationships.” This definition tracks the definition of “immediate family” in Exchange Act Rule 16a-1(e),
Two commenters supported the proposed restrictions on resales,
One commenter noted that the investors who are eligible to purchase securities from the initial purchasers in the first year would be able to circumvent the investment limits of the proposed rules by purchasing securities from the initial purchasers in an amount greater than they would be able to purchase through intermediaries.
We are adopting the restrictions on resales in Rule 501 as proposed, with certain revisions as described below.
As adopted, the rule provides that securities issued in a transaction pursuant to Section 4(a)(6) may not be transferred by any purchaser of such securities during that one-year period unless such securities are transferred: (1) To the issuer of the securities; (2) to an accredited investor; (3) as part of an offering registered with the Commission; or (4) to a member of the family of the purchaser or the equivalent, to a trust controlled by the purchaser, to a trust created for the benefit of a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance. We recognize that several commenters expressed concerns about the exception for resales to accredited investors and the potential unfair advantage this could provide to such investors. While we appreciate these concerns, we note that this treatment will provide some measure of liquidity for holders of these securities within the first year of the offering without undermining the investor protections otherwise provided by the statute and our rules.
Under Section 4A(d), the Commission shall make available, or shall cause to be made available by the relevant intermediary, the information required under Section 4A(b) and such other information as the Commission, by rule, determines appropriate to the securities commission (or any agency or office performing like functions) of each state and territory of the United States and the District of Columbia. We proposed to require issuers to file on EDGAR the information required by Section 4A(b) and the related rules. Information filed on EDGAR is publicly available and would, therefore, be available to each state, territory and the District of Columbia. As we stated in the Proposing Release, we believe this approach will satisfy the statutory requirement to make the information available to each state and territory of the United States, and the District of Columbia. Commenters who addressed this issue agreed with our proposed approach,
Section 303 of the JOBS Act amended Exchange Act Section 12(g) to provide that “the Commission shall, by rule, exempt, conditionally or unconditionally, securities acquired pursuant to an offering made under [S]ection 4[(a)](6) of the Securities Act of 1933 from the provisions of this subsection.” As amended by the JOBS Act, Section 12(g) requires, among other things, that an issuer with total assets exceeding $10,000,000 and a class of securities held of record by either 2,000 persons, or 500 persons who are not accredited investors, register such class of securities with the Commission.
Consistent with the statute, the Commission's proposed Rule 12g-6 would provide that securities issued pursuant to an offering made under Section 4(a)(6) would be permanently exempted from the record holder count under Section 12(g). An issuer seeking to exclude a person from the record holder count would have the responsibility for demonstrating that the securities held by the person were initially issued in an offering made under Section 4(a)(6).
Commenters generally supported the permanent exemption from the record holder count under Section 12(g).
In response to comments received, we are adopting Rule 12g-6 with certain modifications.
An issuer that exceeds the $25 million total asset threshold, in addition to exceeding the thresholds in Section 12(g), will be granted a two-year transition period before it will be required to register its class of securities pursuant to Section 12(g), provided it timely files all its ongoing reports pursuant to Rule 202 of Regulation Crowdfunding during such period.
An issuer seeking to exclude a person from the record holder count has the responsibility for demonstrating that the securities held by the person were initially issued in an offering made under Section 4(a)(6). As noted in the proposal, we believe that allowing issuers to sell securities pursuant to Section 4(a)(6) without becoming Exchange Act reporting issuers is consistent with the intent of Title III.
In determining to provide a conditional exemption from the provisions of Section 12(g), we have considered a number of factors. First, we believe that conditioning the exemption on the issuer being current in its ongoing reporting requirements is consistent with the intent behind the original enactment of Section 12(g) because this condition requires that relevant, current information about issuers will be made routinely available to investors and the marketplace.
Rule 12g-6 does not extend the exclusion from the Section 12(g) record holder count to different securities issued in exchange for Section 4(a)(6)-issued securities in a subsequent restructuring, recapitalization or similar transaction. While some commenters requested such an extension in instances where the parties to the transaction are affiliates of the original issuer, or in certain restructuring transactions, we do not believe that such an expansion in the context of shares initially issued using Regulation Crowdfunding would be appropriate because certain restructuring and recapitalization transactions could change the pool of holders of the securities beyond those who initially acquired the securities in a crowdfunding transaction, denying those holders the protections of Section 12(g) registration.
Securities Act Section 4A(c) provides that an issuer will be liable to a purchaser of its securities in a transaction exempted by Section 4(a)(6) if the issuer, in the offer or sale of the securities, makes an untrue statement of a material fact or omits to state a material fact required to be stated or necessary in order to make the statements, in light of the circumstances under which they were made, not misleading, provided that the purchaser did not know of the untruth or omission, and the issuer does not sustain the burden of proof that such issuer did not know, and in the exercise
In describing the statutory liability provision in the Proposing Release, the Commission noted that it appears likely that intermediaries would be considered issuers for purposes of the provision. Several commenters agreed that Section 4A(c) liability should apply to intermediaries noting that it “may serve as a meaningful backstop against fraud”
However, a large number of other commenters disagreed that Section 4A(c) liability should apply to intermediaries.
One commenter suggested that the Commission retract its statement in the Proposing Release that “it appears likely that intermediaries, including funding portals, would be considered issuers for purposes of this liability provision.”
We have considered the comments both in support of and against funding portals being considered issuers for purposes of Section 4A(c) liability. Specifically, we acknowledge commenters' concerns that statutory liability may adversely affect funding portals, and suggestions that, under the statutory scheme, funding portals and broker-dealers engage in different activities that do not warrant a funding portal being subject to statutory liability. One difference commenters highlighted was the inability of a funding portal to limit the offerings on its platform under the proposed rules, and the untenable position of imposing statutory liability while precluding funding portals' ability to limit the offerings on their platforms. In response to this comment, as described above, we have modified the language of the Rule 402 safe harbor from the proposal to permit funding portals to exercise discretion to limit the offerings and issuers that they allow on their platforms.
Accordingly, we believe that the determination of “issuer” liability for an intermediary under Section 4A(c) will turn on the facts and circumstances of the particular matter in question. While we acknowledge the concerns of commenters about the potential application of Section 4A(c) liability, we note that Congress provided a defense to any such liability if an intermediary did not know, and in the exercise of reasonable care could not have known, of the untruth or omission. We continue to believe, as we identified in the Proposing Release, that there are appropriate steps that intermediaries might take in exercising reasonable care in light of this liability provision. These steps may include establishing policies
Section 302(d) of the JOBS Act requires the Commission to establish disqualification provisions under which an issuer would not be eligible to offer securities pursuant to Section 4(a)(6) and an intermediary would not be eligible to effect or participate in transactions pursuant to Section 4(a)(6). Section 302(d)(2) specifies that the disqualification provisions must be “substantially similar” to the “bad actor” disqualification provisions contained in Rule 262 of Regulation A
The disqualification provisions included in Section 302(d) of the JOBS Act are modeled on the disqualification provisions included in Section 926 of the Dodd-Frank Act, which also required the Commission to adopt rules “substantially similar” to Rule 262 of Regulation A that disqualify securities offerings involving certain “felons and other `bad actors' ” from reliance on Rule 506 of Regulation D. On July 10, 2013, we adopted rules to implement Section 926 of the Dodd-Frank Act to disqualify certain securities offerings from reliance on Rule 506 of Regulation D.
As described in more detail below, the proposed disqualification rules as they relate to issuers and certain other associated persons would have been substantially similar to the disqualification rules in Rules 262 and 506. Under those rules, disqualification arises only with respect to events occurring after effectiveness of the rules and disqualified persons may seek a waiver from the Commission from application of the disqualification provisions.
Commenters were generally supportive of the proposed disqualification rules.
We are adopting bad actor disqualification provisions for Regulation Crowdfunding
Under the final disqualification rules, covered persons include the issuer and any predecessor of the issuer or affiliated issuer; directors, officers, general partners or managing members of the issuer; beneficial owners of 20% or more of the issuer's outstanding voting equity securities (which we believe should be calculated based on the present right to vote for the election of directors, irrespective of the existence of control or significant influence); any promoter connected with the issuer in any capacity at the time of such sale; compensated solicitors of investors; and general partners, directors, officers or managing members of any such solicitor.
The disqualifying events include:
• Felony and misdemeanor convictions within the last five years in the case of issuers, their predecessors and affiliated issuers, and 10 years in the case of other covered persons in connection with the purchase or sale of a security, involving the making of a false filing with the Commission; or arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser, funding portal or paid solicitor of purchasers of securities;
• injunctions and court orders within the last five years against engaging in or continuing conduct or practices in connection with the purchase or sale of securities; involving the making of any false filing with the Commission; or arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser, funding portal or paid solicitor of purchasers of securities;
• certain final orders and bars of certain state and other federal regulators;
• Commission cease-and-desist orders relating to violations of scienter-based anti-fraud provisions of the federal securities laws or Section 5 of the Securities Act;
• filing, or being named as an underwriter in, a registration statement or Regulation A offering statement that is the subject of a proceeding to determine whether a stop order or
• United States Postal Service false representation orders within the last five years;
• for covered persons other than the issuer:
○ Being subject to a Commission order:
revoking or suspending their registration as a broker, dealer, municipal securities dealer, investment adviser or funding portal;
placing limitations on their activities as such;
barring them from association with any entity; or
barring them from participating in an offering of penny stock;
○ being suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or national securities association for conduct inconsistent with just and equitable principles of trade.
Consistent with Rules 262 and 506 and the proposal, we also are adopting provisions allowing for a waiver from and a reasonable care exception to the disqualification provisions.
The final rules also specify that triggering events that pre-date effectiveness of the final rules will not cause disqualification, but instead must be disclosed on a basis consistent with Rules 262 and 506(e).
We believe this disclosure will put investors on notice of events that would, but for the timing of such events, have disqualified the issuer from relying on Section 4(a)(6). We also believe that this disclosure is particularly important because, as a result of the implementation of Section 302(d), investors may have the impression that all bad actors are disqualified from participating in offerings under Section 4(a)(6). If disclosure of a pre-existing, otherwise disqualifying event is required and not provided to an investor, we would not view this as an insignificant deviation from Regulation Crowdfunding under Rule 502.
Consistent with the proposal and with Rule 506, the final disqualification rules provide that events relating to certain affiliated issuers are not disqualifying if the events pre-date the affiliate relationship. Specifically, Rule 503(c) provides that events relating to any affiliated issuer that occurred before the affiliation arose will be not considered disqualifying if the affiliated entity is not (1) in control of the issuer or (2) under common control with the issuer by a third party that was in control of the affiliated entity at the time of such events.
We also have modified the final rules to expressly include funding portals in the list of entities that could be subject to felony and misdemeanor convictions, injunctions and court orders that would constitute disqualifying events.
Section 302(d)(1)(B) requires the Commission to establish disqualification provisions under which an intermediary would not be eligible to effect or participate in transactions conducted pursuant to Securities Act Section 4(a)(6). Section 302(d)(2) requires that the disqualification provisions be substantially similar to the provisions of Securities Act Rule 262, which applies to issuers. Exchange Act Section 3(a)(39)
As proposed, Rule 503(d) would have prohibited any person subject to a statutory disqualification as defined in Exchange Act Section 3(a)(39) from acting as, or being an associated person of, an intermediary unless permitted to do so by Commission rule or order. The term “subject to a statutory disqualification” has an established meaning under Exchange Act Section 3(a)(39) and defines circumstances that subject a person to a statutory disqualification with respect to membership or participation in, or association with a member of, a self-regulatory organization.
In addition, we proposed to clarify that associated persons of intermediaries engaging in transactions in reliance on Section 4(a)(6) must comply with Exchange Act Rule 17f-2,
We are adopting Rule 503(d) as proposed. We received two comments on the proposed rule. One commenter was in favor,
In addition to the actions the Commission is taking today to permit the offer and sale of securities in reliance on Section 4(a)(6), the Commission also recently adopted rules that exempt from the registration requirements of the Securities Act certain offerings of up to $50 million of securities annually,
The anti-fraud provisions of the federal securities laws, and rules adopted thereunder, apply to the secondary market trading of securities, including securities offered and sold in reliance on Section 4(a)(6). For example, Exchange Act Rule 15c2-11 governs broker-dealers' publication of quotations for certain over-the-counter securities in a quotation medium other than a national securities exchange.
To be clear, the rules adopted today do not affect the obligations of a broker-dealer under Exchange Rule 15c2-11 to have a reasonable basis under the circumstances for believing that the information required by Rule 15c2-11 is accurate in all material respects, and that the sources of the information are reliable, prior to publishing any quotation, absent an exception,
Title III sets forth a comprehensive regulatory structure for startups and small businesses to raise capital through securities-based crowdfunding transactions using the Internet. In particular, Title III provides an exemption from registration for certain offerings of securities by adding Securities Act Section 4(a)(6). In addition, Title III:
• Adds Securities Act Section 4A, which requires, among other things, that issuers and intermediaries that facilitate transactions between issuers and investors provide certain information to investors, take certain actions and provide notices and other information to the Commission;
• adds Exchange Act Section 3(h), which requires the Commission to adopt rules to exempt, either conditionally or unconditionally, funding portals from having to register as broker-dealers or dealers pursuant to Exchange Act Section 15(a)(1);
• mandates that the Commission adopt disqualification provisions under which an issuer would not be able to avail itself of the exemption for crowdfunding if the issuer or other related parties, including an intermediary, were subject to a disqualifying event; and
• adds Exchange Act Section 12(g)(6), which requires the Commission to adopt rules to exempt from Section 12(g), either conditionally or unconditionally, securities acquired pursuant to an offering made in reliance on Section 4(a)(6).
As discussed in detail above, we are adopting Regulation Crowdfunding to implement the requirements of Title III. The final rules implement the new exemption for the offer and sale of securities pursuant to the requirements of Section 4(a)(6) and provide a framework for the regulation of issuers and intermediaries, which include broker-dealers and funding portals engaging in such transactions. The final rules also permanently exempt securities offered and sold in reliance on Section 4(a)(6) from the record holder count under Exchange Act Section 12(g).
We are mindful of the costs imposed by, and the benefits to be obtained from, our rules. Securities Act Section 2(a) and Exchange Act Section 3(f) require us, when engaging in rulemaking that requires us to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition and capital formation. Exchange Act Section 23(a)(2) requires us, when adopting rules under the Exchange Act, to consider the impact that any new rule would have on competition and to not adopt any rule that would impose a burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. The discussion below addresses the economic effects of the final rules, including the likely costs and benefits of Regulation Crowdfunding, as well as the likely effect of the final rules on efficiency, competition and capital formation. Given the specific language of the statute and our understanding of Congress's objectives, we believe that it is appropriate for the final rules generally to follow the statutory provisions. We nonetheless also rely on our discretionary authority to adopt certain additional provisions and make certain other adjustments to the final rules. While the costs and benefits of the final rules in large part stem from the statutory mandate of Title III, certain costs and benefits are affected by the discretion we exercise in connection with implementing this mandate. For purposes of this economic analysis, we address the costs and benefits resulting from the mandatory statutory provisions and our exercise of discretion together because the two types of benefits and costs are not separable.
The baseline for our economic analysis of Regulation Crowdfunding, including the baseline for our consideration of the effects of the final rules on efficiency, competition and capital formation, is the situation in existence today, in which startups and small businesses seeking to raise capital through securities offerings must register the offer and sale of securities under the Securities Act unless they can rely on an existing exemption from registration under the federal securities laws. Moreover, under existing requirements, intermediaries intending to facilitate such transactions generally are required to register with the Commission as broker-dealers under Exchange Act Section 15(a).
The potential economic impact of the final rules, including their effects on efficiency, competition and capital formation, will depend on how the crowdfunding method of raising capital compares to existing methods that startups and small businesses currently use for raising capital. Startups and small businesses can potentially access a variety of external financing sources in the capital markets through registered or unregistered offerings of debt, equity and hybrid securities and bank loans.
Issuers seeking to raise capital must register the offer and sale of securities under the Securities Act or qualify for an exemption from registration. Registered offerings, however, are generally too costly to be viable alternatives for startups and small businesses. Issuers conducting registered offerings incur Commission registration fees, legal and accounting fees and expenses, transfer agent and registrar fees, costs associated with periodic reporting requirements and other regulatory requirements and various other fees. Two surveys concluded that the average initial compliance cost associated with conducting an initial public offering is $2.5 million, followed by an ongoing compliance cost for issuers, once public, of $1.5 million per year.
Title I of the JOBS Act provided certain accommodations to issuers that qualify as emerging growth companies (EGCs). According to a recent working paper, the underwriting, legal and accounting fees of EGC and non-EGC initial public offerings were similar (based on a time period from April 5, 2012 to April 30, 2014). For a median EGC initial public offering, gross spread comprised 7% of proceeds and accounting and legal fees comprised 2.4% of proceeds.
An alternative to raising capital through registered offerings is to offer and sell securities by relying on an existing exemption from registration under the federal securities laws. For example, startups and small businesses could rely on current exemptions from registration under the Securities Act, such as Section 3(a)(11),
Based on Regulation D filings by issuers that are not pooled investment vehicles from 2009 to 2014,
Based on the table above, from 2009 to 2014, almost
Each of these exemptions, however, includes restrictions that may limit its suitability for startups and small businesses. The table below lists the main requirements of these exemptions. For example, the exemption under Securities Act Section 3(a)(11) is limited
The table below
At present, startups
Family and
Startups and small businesses also may seek loans from financial institutions.
Additionally, although covering the pre-recessionary period, a Federal Reserve Board staff study analyzing data from the 2003 Survey of Small Business Finance suggests that 60 percent of small businesses have outstanding credit in the form of a credit line, a loan or a capital lease.
Various loan guarantee programs of the Small Business Administration (“SBA”) make credit more accessible to small businesses by either lowering the interest rate of the loan or enabling a market-based loan that a lender would not be willing to provide absent a guarantee.
As of the end of SBA fiscal year 2014, the SBA Microloans outstanding equaled $136.7 billion.
Many startups and small businesses may find loan requirements imposed by financial institutions difficult to meet and may not be able to rely on these institutions to secure funding. For example, financial institutions generally require a borrower to provide collateral and/or a guarantee,
Another source of debt financing for startups and small businesses is peer-to-peer lending, which began developing in 2005.
Technology has facilitated the growth of alternative models of small business lending. According to one study,
Microfinance is another source of debt financing for startups and small businesses. Microfinance consists of small, working capital loans provided by microfinance institutions (“MFIs”) that are invested in microenterprises or
The microfinance market has evolved and grown considerably in the past decades. While data on the size of the overall industry is sparse, according to one report, in fiscal year 2012, the U.S. microfinance industry was estimated to have disbursed $292.1 million across 36,936 microloans and was estimated to have $427.6 million in outstanding microloans (across 45,744 in microloans).
Startups and small businesses also may seek funding from venture capitalists (“VCs”) and angel investors. Entrepreneurs seek VC and angel financing usually after they have exhausted sources of capital that generally do not require the entrepreneurs to relinquish control rights (
According to data from the National Venture Capital Association, in calendar year 2014, VCs invested approximately $49.3 billion in 4,361 transactions involving 3,665 companies, which included seed, early-stage, expansion, and late-stage companies. Seed and early-stage deals represented 1.5% and 32.2%, respectively, of the dollar volume of deals and 4.4% and 49.7%, respectively of the overall number of VC deals.
Some startups, however, may struggle to attract funding from VCs because VCs tend to invest in startups with certain characteristics. A defining feature of VCs is that they tend to focus on startup companies with high-growth potential and a high likelihood of going public after a few years of financing. VCs also tend to invest in companies that have already used some other sources of financing, tend to be concentrated in certain geographic regions (
According to a recent report, angel investments amounted to $24.1 billion in 2014, with approximately 73,400 entrepreneurial ventures receiving angel funding and approximately 316,600 active angel investors.
A recent crowdfunding industry report
The industry report indicates that, in 2014, crowdfunding platforms raised approximately $16.2 billion globally, which represented a 167% increase over the amount raised in 2013.
The industry report further indicates that, in 2014 the worldwide average size of a funded campaign was less than $4,000 for consumer lending-based, reward-based, and donation-based crowdfunding types.
Since the passage of the JOBS Act, many U.S. states have made changes to their securities laws to accommodate intrastate securities-based crowdfunding transactions. Based on information from NASAA, as of September 2015, 29 states and the District of Columbia have enacted state crowdfunding provisions that rely, at the federal level, on the intrastate offering exemptions under Securities Act Section 3(a)(11) and Rule 147 or on Rule 504 of Regulation D. These state crowdfunding rules allow businesses in a state to use securities-based crowdfunding to raise capital from investors within that state.
Startups and small businesses that lack tangible assets or business experience needed to obtain conventional financing might turn to
Similarly, other studies suggest that startups and small businesses financed by venture capitalists also tend to have high failure rates. One study finds that for 16,315 VC-backed companies that received their first institutional funding round between 1980 and 1999, approximately one-third failed after the first funding round.
Taken all together, the failure rates documented in these studies are high for startups and small businesses, even with the involvement of sophisticated investors like VCs. Because we expect that issuers that will engage in offerings made in reliance on Section 4(a)(6) will be in an earlier stage of business development than the businesses included in the above studies, we believe that issuers that engage in securities-based crowdfunding may have higher failure rates than those in the studies cited above.
The final rules will have their most significant impact on the market for the financing of startups and small businesses. The number of participants in this market and the amounts raised through alternative sources indicate that this is a large market. In 2013, there were more than 5 million small businesses, defined by the U.S. Census Bureau as having fewer than 500 paid employees.
Below, we analyze the economic effect of the final rules on the following parties: (1) Issuers, typically startups and small businesses, that seek to raise capital by issuing securities; (2) intermediaries through which issuers seeking to engage in transactions in reliance on Section 4(a)(6) will offer and sell their securities; (3) investors who purchase or may consider purchasing securities in such offerings; and (4) other capital providers, broker-dealers and finders who currently participate in private offerings. The potential economic impact of the final rules will depend on how these market participants respond to the final rules. Each of these parties is discussed in further detail below.
The final rules will permit certain entities to raise capital by issuing securities for the first time. The number, type and size of the potential issuers that will seek to use crowdfunding to offer and sell securities in reliance on Section 4(a)(6) is uncertain, but data on current market practices may help identify the number and characteristics of potential issuers.
It is challenging to precisely predict the number of future securities offerings that might rely on Section 4(a)(6), particularly because rules governing the process are being adopted today.
According to filings made with the Commission, from 2009 to 2014, there were approximately 4,559 issuers per year in new Regulation D offerings with offer sizes of up to $1 million (excluding issuers that are pooled investment vehicles), including approximately 1,020 (22%) per year that reported having no revenue and approximately 861 (19%) per year that reported revenues of up to $1 million.
It is expected that many future issuers of securities in crowdfunding offerings would have otherwise raised capital from one of the alternative sources of financing discussed above, while others would have been financed by friends and family or not financed at all. Due to the differences between small business loans (including SBA-guaranteed loans) and securities-based crowdfunding offerings that can be conducted under the final rules, we are not able to estimate how many small businesses utilizing these forms of financing may instead pursue an offering in reliance on Section 4(a)(6). Similarly, due to the differences between the terms of crowdfunding campaigns in existence today and the provisions of the final rules, is not clear how many current campaigns can instead become offerings in reliance on Section 4(a)(6).
We believe that many potential issuers of securities through crowdfunding will be startups and small businesses that are close to the “idea” stage of the business venture and that have business plans that are not sufficiently well-developed or do not offer the growth potential or business model to attract VCs or angel investors. In this regard, a study of one large platform revealed that relatively few companies on that platform operate in technology sectors that typically attract VC investment activity.
Section 4(a)(6)(C) requires that an offer and sale of securities in reliance on Section 4(a)(6) be conducted through a registered funding portal or a broker. Registered broker-dealers, both those that are already registered with the Commission and those that will register, might wish to facilitate securities-based crowdfunding transactions. New entrants that do not wish to register as broker-dealers might decide to register as funding portals to facilitate securities-based crowdfunding transactions in reliance on Section 4(a)(6). Donation-based or reward-based crowdfunding platforms with established customer relationships might seek to leverage these relationships and register as funding portals, or register as or associate with registered broker-dealers. Although the number of potential intermediaries that will fill these roles is uncertain, practices of existing broker-dealers and crowdfunding platforms provide insight into how the market might develop.
Based on FOCUS Reports filed with the Commission, as of December 2014, there were 4,267 broker-dealers registered with the Commission, with average total assets of approximately $1.1 billion per broker-dealer. The aggregate total assets of these registered broker-dealers are approximately $4.9 trillion. Of these registered broker-dealers, 816 also are dually registered as investment advisers.
Existing crowdfunding platforms are diverse and actively involved in financing, allowing thousands of projects to search for capital. A recent industry report estimates that, as of 2014, 1,250 crowdfunding platforms were operating worldwide, including 375 platforms operating in North America.
We do not know at present which market participants will become intermediaries under Section 4(a)(6) and Regulation Crowdfunding, but we believe that existing crowdfunding platforms might seek to leverage their already-existing Internet-based platforms, brand recognition and user bases to facilitate offerings in reliance on Section 4(a)(6).
Under the statute and the final rules, funding portals are constrained in the services they can provide, and persons (or entities) seeking the ability to participate in activities unavailable to funding portals, such as offering investment advice or holding, managing, possessing or otherwise handling investor funds, would instead need to register as broker-dealers or investment advisers, depending on their activities. Although we expect that initially, upon adoption of the final rules, more new registrants will register as funding portals than as broker-dealers given the less extensive regulatory requirements imposed on funding portals, it is possible that market competition to offer broker-dealer services as part of intermediaries' service capabilities might either drive more broker-dealer growth in the longer term or provide registered funding portals with the incentive to form long-term partnerships with registered broker-dealers. One commenter suggested that funding portals may find it beneficial to cooperate with registered broker-dealers and transfer agents.
It is unclear what types of investors will participate in offerings made in reliance on Section 4(a)(6), but given the investment limitations in the final rules, we believe that many investors affected by the final rules will likely be individual retail investors who currently do not have broad access to investment opportunities in early-stage ventures. Offerings made in reliance on Section 4(a)(6) may provide retail investors with additional investment opportunities, although the extent to which they invest in such offerings will likely depend on their view of the potential return on investment as well as the risk for fraud.
In contrast, larger, more sophisticated or well-funded investors may be less likely to invest in offerings made in reliance on Section 4(a)(6). The relatively low investment limits set by the statute for crowdfunding investors may make these offerings less attractive for professional investors, including VCs and angel investors.
The final rules may affect other parties that provide sources of capital, such as small business lenders, VCs, family and friends and angel investors that currently finance small private businesses. The current scope of financing provided by these capital providers is discussed above. As discussed below, the magnitude of the final rules' economic impact will depend on whether crowdfunding in reliance on Section 4(a)(6) emerges as a substitute or a complement to these financing sources.
In addition, issuers conducting private offerings may, outside of offerings in reliance on Section 4(a)(6), currently use broker-dealers to help them with various aspects of the offering and to help ensure compliance with the ban on general solicitation and advertising that exists for most private offerings. Private offerings also could involve finders who connect issuers with investors for a fee.
Although we are unable to predict the exact size of the market for broker-dealers and finders in private offerings that are comparable to those that the final rules permit, data on the use of broker-dealers and finders in the Regulation D markets suggest that they may not currently play a large role in private offerings. Based on a staff study, only 21% of all new Regulation D offerings from 2009 to 2014 used an intermediary such as a broker-dealer or a finder.
As noted above, we are mindful of the costs and benefits of the final rules, as well as the impact that the final rules may have on efficiency, competition and capital formation. In enacting Title III, Congress established a framework for a new type of exempt offering and required us to adopt rules to implement that framework. To the extent that crowdfunding rules are successfully utilized, the crowdfunding provisions of the JOBS Act are expected to provide startups and small businesses with the means to raise relatively modest amounts of capital, from a broad cross section of investors, through securities offerings that are exempt from registration under the Securities Act. They also are expected to permit small investors to participate in a wider range of securities offerings than may be currently available.
In the sections below, we analyze the costs and benefits associated with the crowdfunding regulatory regime, as well as the potential impacts of such a regulatory regime on efficiency, competition and capital formation, in light of the baseline discussed above.
In this release, we discuss the potential costs and benefits of the final rules. Many of these costs and benefits are difficult to quantify or estimate with any degree of certainty, especially considering that Section 4(a)(6) provides a new method for raising capital in the United States. Some costs are difficult to quantify or estimate because they represent transfers between various participants in a market that does not yet exist. For instance, costs to issuers can be passed on to investors and costs to intermediaries can be passed on to issuers and investors. These difficulties in estimating and quantifying such costs are exacerbated by the limited public data that indicates how issuers, intermediaries and investors will respond to these new capital raising opportunities.
The discussion below highlights several general areas where uncertainties about the new crowdfunding market might affect the potential costs and benefits of the final rules, as well as our ability to quantify those costs and benefits. It also highlights the potential effects on
The extent to which the statute and the final rules affect capital formation and the cost of capital to issuers depends in part on the issuers that choose to participate. In particular, if offerings in reliance on Section 4(a)(6) only attract issuers that are otherwise able to raise capital through another type of exempt offering, the statute and the final rules may result in a redistribution of capital flow, which may enhance allocative efficiency but have a limited impact on the aggregate level of capital formation.
Notwithstanding the existence of these alternative methods of capital raising, we believe that offerings pursuant to Section 4(a)(6) will likely represent a new source of capital for many small issuers that currently have difficulty raising capital. Startups and small businesses usually have smaller and more variable cash flows than larger, more established companies, and internal financing from their own business operations tends to be limited and unstable. Moreover, these businesses tend to have smaller asset bases
If startups and small businesses find other capital raising options more attractive than securities-based crowdfunding, the impact of Section 4(a)(6) on capital formation may be limited. Even so, the availability of securities-based crowdfunding as a financing option may increase competition among suppliers of capital, resulting in a potentially lower cost of capital for all issuers, including those that choose not to use securities-based crowdfunding.
For issuers that pursue offerings in reliance on Section 4(a)(6), establishing an initial offering price might be challenging. Offerings relying on Section 4(a)(6) will not involve an underwriter who, for larger offerings, typically assists the issuer with pricing and placing the offering. Investors in offerings relying on Section 4(a)(6) may lack the sophistication to evaluate the offering price. Thus, the involvement of these investors, who are likely to have a more limited capacity for conducting due diligence on deals, may contribute to less accurate valuations.
Moreover, because of the investment limitations in securities-based crowdfunding transactions, there may not be a strong incentive, even assuming adequate knowledge and experience, for an investor to perform a thorough analysis of the issuer disclosures. To the extent that these potential information asymmetries resulting from the lack of a thorough analysis of the disclosures are anticipated by prospective investors, investor participation in offerings made in reliance on Section 4(a)(6) may decline and the associated benefits of capital formation may be lower.
Uncertainty surrounding exit strategies for investors in crowdfunding offerings also may limit the benefits. In particular, it is unlikely that purchasers in crowdfunding transactions will be able to follow the typical path to liquidity that investors in other exempt offerings follow. For instance, investors in a VC-backed startup may eventually sell their securities in an initial public offering on a national securities exchange or to another company in an acquisition.
Further, the likely broad geographical dispersion of crowdfunding investors may make shareholder coordination difficult. It may also exacerbate information asymmetries between issuers and investors, if the distance between them diminishes the ability for investors to capitalize on local knowledge that may be of value in assessing the viability of the issuer's business. The use of electronic means may mitigate some of these difficulties. Even if an issuer can execute a sale or otherwise offer to buy back or retire the securities, it might be difficult for investors to determine whether the issuer is offering a fair market price. These uncertainties may limit the use of the Section 4(a)(6) exemption.
The potential benefits of the final rules also may depend on how investors respond to potential liquidity issues unique to the securities-based crowdfunding market. It is currently unclear how securities offered and sold in transactions conducted in reliance on Section 4(a)(6) will be transferred in the secondary market after the one-year restricted period ends, and investors who purchased securities in transactions conducted in reliance on Section 4(a)(6) and who seek to divest their securities may not find a liquid market.
Even with the mandated disclosures, unsophisticated investors purchasing securities issued in reliance on Section 4(a)(6) may face certain expropriation risks, potentially limiting the upside of their investment, even when they select investments in successful ventures. This can occur if issued securities include certain features (
The final rules also may have an effect on broker-dealers and finders participating in private offerings. Some issuers that previously relied on broker-dealers and finders to assist with raising capital through private offerings may, instead, begin to rely on the Section 4(a)(6) exemption to find investors. The precise impact of the final rules on these intermediaries will depend on whether (and, if so, to what extent) issuers switch from using existing exemptions to using the exemption provided by Section 4(a)(6) or whether the final rules primarily attract new issuers. The impact of the final rules on registered broker-dealers will also depend on the extent to which broker-dealers participate as intermediaries in the securities-based crowdfunding market. If a significant number of issuers switch from raising capital under existing private offering exemptions to relying on the exemption provided by Section 4(a)(6), this may negatively affect the revenue of finders and broker-dealers in the private offerings market. While this may disadvantage existing private offering market intermediaries, the new competition may ultimately lead to more efficient allocation of capital.
If securities-based crowdfunding primarily attracts new issuers to the market, the impact on broker-dealers and finder revenue may be negligible and the final rules may even have a positive effect on their revenues by revealing more potential clients for them, particularly to the extent that they chose to operate a funding portal. Additionally, greater investor interest in private company investment may increase capital formation, creating new opportunities for broker-dealers and finders that otherwise would have been unavailable.
The final rules also may encourage current participants in the crowdfunding market to diversify their funding models to attract a broader group of companies and to provide additional investment opportunities for investors. For example, donation-based crowdfunding platforms that currently offer investment opportunities in micro-loans generally do not permit donors to collect interest on their investments because of concerns that this activity will implicate the federal securities laws unless an exemption from registration is available.
However, many projects that are well suited for reward-based or donation-based crowdfunding (
The statute imposes certain limitations on the total amount of securities that may be sold by an issuer during the 12-month period preceding the date of the transaction made in reliance on Section 4(a)(6). Specifically, Section 4(a)(6)(A) provides for a maximum aggregate amount of $1 million sold in reliance on the exemption during a 12-month
As an alternative, we could have defined the $1 million limit to be net of intermediary fees, as suggested by some commenters.
The costs associated with not increasing the investment limit above $1 million are mitigated in part by the ability of issuers to concurrently seek additional financing in reliance on another type of exempt offering, such as Regulation D or Regulation A, in addition to the offering in reliance on Section 4(a)(6). In this release, we provide guidance clarifying our view that issuers may conduct other exempt offerings without having those offerings integrated with the offering made in reliance on Section 4(a)(6), provided that each offering complies with the applicable exemption relied upon for that particular offering. Several commenters opposed this approach on the ground that it could result in fewer investor protections than if the offerings were integrated. Some commenters noted that a potential cost to investors associated with not requiring integration is a reduction in investor protection due to the possibility of an issuer's use of advertising for one offering to indirectly promote another exempt offering that would have been subject to more stringent advertising restrictions.
As an alternative, in line with the suggestions of some commenters,
Since offering documents for offerings made in reliance on Section 4(a)(6) will not be subject to review by Commission staff prior to the sale of securities, we are sensitive to potential investor protection concerns arising from the participation of less sophisticated investors in these exempt offerings. Some commenters
Consistent with the statute, the final rules incorporate several important investor protections, including limits on the amount that can be raised, issuer eligibility criteria, and issuer and intermediary requirements, including statutorily mandated investor education requirements. The statute and the final rules also impose certain limitations on the aggregate dollar amount of securities in offerings in reliance on Section 4(a)(6) that may be sold to an investor during a 12-month period.
We recognize that these provisions also will limit the potential upside for investors. This may particularly affect the decisions of investors with large portfolios who might be able to absorb losses and understand the risks associated with risky investments and who may have more expertise and stronger incentives to acquire and analyze information about an issuer. For these investors, the $100,000 aggregate limit may reduce their incentive to participate in the securities-based crowdfunding market, compared to other types of investments, potentially depriving the securities-based crowdfunding market of more experienced and knowledgeable investors and impeding capital formation. Moreover, limiting the participation of such investors may negatively affect the informational efficiency of the securities-based crowdfunding market because sophisticated investors are better able to accurately price such offerings. These investors also can add value to the discussions taking place through an intermediary's communication channels about a potential offering by providing their views on the issuer's financial viability and potential for fraud. Persons with larger portfolios are also likely to be in a better position to monitor the issuer's insiders, which can reduce the extent of moral hazard and the risk of fraud on the part of the issuer and the issuer's insiders, yielding benefits for all investors. Such investors also can add value by advising the issuer and contributing strategic expertise, which can be particularly beneficial for early-stage issuers. Some of these potential benefits, however, may still be available to issuers that seek to attract such investors through another type of exempt offering, such as a Regulation D offering.
The aggregate limit on crowdfunding investments also can impede the ability of investors to diversify within the securities-based crowdfunding market. As securities-based crowdfunding investments might have inherently high failure rates,
In a change from the proposed rules, both the investor's annual income and net worth must be above $100,000 for the 10 percent limitation to apply. This change is intended to strengthen investor protections for investors whose annual income or net worth is below $100,000. Such investors may not be as well situated to bear the risk of loss (
Within each investment limitation tier, the investment limitation percentage is multiplied by the “lesser of” an investor's annual income or net worth in the investment limitation calculation, which was suggested by several commenters.
Investment limitations will likely have a negative effect on capital formation. For example, investment limitations may make it more difficult for some issuers to reach their funding targets. However, these limits also are expected to reduce the risk and impact of potential loss for investors that accompany the high failure rates associated with investments in small businesses and startups, thus potentially improving investor protection. There is no available market data that would allow us to empirically evaluate the magnitude of these effects.
Consistent with the proposed rules, the final rules allow an issuer to rely on the efforts that an intermediary is required to undertake in order to determine that the aggregate amount of securities purchased by an investor will not cause the investor to exceed the investor limits, provided that the issuer does not have knowledge that the investor had exceeded, or would exceed, the investor limits as a result of purchasing securities in the issuer's offering, which was supported by various commenters.
Section 4A(f) of the statute excludes certain categories of issuers from eligibility to engage in securities-based crowdfunding transactions in reliance on Section 4(a)(6). The final rules exclude those categories of issuers.
Second, the final rules exclude a company that has no specific business plan or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, as suggested by several commenters.
Overall, categories of issuers that are excluded from eligibility under the final rules may be at a competitive disadvantage relative to those that are eligible to offer securities under the final rules, to the extent that excluded issuers may raise less external capital or incur a higher direct or indirect cost of financing, or additional restrictions, when seeking financing from alternative sources.
We recognize that there are benefits and costs associated with Regulation Crowdfunding's requirements pertaining to issuers, including the final rule's disclosure requirements. In the Proposing Release, we provided cost estimates for each of these requirements and requested comment on our estimates.
In general, commenters identified the following as the main costs for issuers in securities-based crowdfunding offerings: The intermediary fees; the costs of preparing, ensuring compliance with, and filing of Form C and Form C-AR; and the cost of accounting review or audit of financial statements.
With regard to intermediary fees, the estimates of the commenters that quantified these fees
The next major cost driver for issuers in securities-based crowdfunding offerings, as suggested by commenters, is the cost of preparing and filing disclosure documents and the internal burden of ensuring compliance with the disclosure requirements of the final rules. Issuers will incur costs to comply with the disclosure requirements and file the information in the new Form C: Offering Statement and Form C-U: Progress Update before the offering is funded. Thus, issuers will incur those costs regardless of whether their offerings are successful. In addition, for successful offerings, issuers will incur costs to comply with the ongoing reporting requirements and file information in the new Form C-AR: Annual Report.
Several commenters provided estimates of these costs. One commenter stated that Form C could be prepared by third-party service providers, such as itself, at much lower costs than those estimated by the Commission, noting that it can prepare Form C and other required disclosure documents, perform “bad actor” checks, verify investor status and fulfill other compliance requirements for an estimated total cost of $2,500 for an offering of $100,000 and that, in most cases, its services and associated legal fees will cost an issuer between $2,500 and $5,000 for an offering up to $500,000 and between $5,000 and $10,000 for an offering between $500,000 and $1,000,000.
Other commenters indicated that the compliance costs for issuers are likely to be higher than the Commission's estimates. One commenter indicated that the burden of completing Form C would likely exceed the 60 burden hours estimated by the Commission in the proposed rules and that the sum of attorney and accounting fees and management and administrative time and other costs to prepare these required disclosures will likely exceed $10,500, except in cases of start-ups with no operating history.
One commenter submitted several estimates of the compliance costs associated with the final rules' disclosure requirements. In one comment letter, the commenter estimated the upfront compliance costs of the proposed rules to be potentially hundreds of hours in internal company time and $20,000 to $50,000 in outside professional costs and noted that such costs will likely be a significant deterrent to crowdfunding.
Based on these comments, we have revised our estimates of the compliance costs associated with the disclosure requirements of the final rules and Forms C and C-AR. On the lower end of the spectrum, one commenter suggested that the cost of preparing and filing these forms and the associated compliance costs would range from $3,000 to $9,000.
We expect that the cost of preparing and filing Forms C and C-AR will vary based on the characteristics of issuers, but we do not have the information to quantify such variation. For example, issuers with little operating activity may have less to disclose than issuers with more complex operations. Further, some issuers may rely to a greater extent on the services of outside professionals in preparing the required filings,
The other significant cost for crowdfunding issuers, as identified by commenters, is the cost of an independent accounting review or audit. As discussed above, reviewed financial statements will be required in offerings of more than $100,000 but not more than $500,000, unless the issuer has audited statements otherwise available. Audited financial statements
In a change from the proposal, issuers that have not previously sold securities in reliance on Section 4(a)(6) will be permitted to provide reviewed financial statements in offerings of more than $500,000 but not more than $1,000,000, unless the issuer has audited statements otherwise available. This change is expected to greatly reduce the initial costs associated with providing financial statements for first-time crowdfunding issuers offering more than $500,000 but not more than $1,000,000. According to one commenter, the difference in cost for reviewed versus audited financial statements could easily run into tens of thousands of dollars.
Some commenters argued that the cost of reviewed or audited financial statements of startup companies, which is the type of companies expected to use Regulation Crowdfunding, would be lower than our estimates because such companies would be less complex and because a competitive industry would develop to support the compliance and disclosure needs of securities-based crowdfunding issuers.
Commenters provided several estimates of the cost of an audit for securities-based crowdfunding issuers, most of which ranged from $2,500 to $10,000.
As discussed below, in a change from the proposal, the final rules do not require issuers to provide reviewed or audited financial statements in the annual report, unless such statements are otherwise available, which is expected to yield cost savings on an annual basis compared with the proposal.
The table below presents the main adjusted cost estimates for the final rules.
We do
The statute and the final rules related to issuer disclosures are intended to reduce the information asymmetries that currently exist between small businesses and investors. Small private businesses typically do not disclose information as frequently or as extensively as public companies, if at all. Moreover, unlike public companies, small private businesses generally are not required to hire an independent accountant to review financial statements. When information about a company is difficult to obtain or the quality of the information is uncertain, investors are at risk of making poorly-informed investment decisions about that company.
Such information asymmetries may be especially acute in the securities-based crowdfunding market because the market includes startups and small businesses that have significant risk factors and other characteristics that may have led them to be rejected by other potential funding sources, including banks, VCs and angel investors. In addition, the securities-based crowdfunding market may attract unsophisticated investors who may not have the resources necessary to gather and analyze information about issuers before investing or to effectively monitor issuers after investing. Moreover, investment limits in securities-based crowdfunding offerings in reliance on Section 4(a)(6) will likely lead to investors having smaller stakes in the firm, which may reduce their incentives to monitor or gather information for a given investor. These considerations may give rise to adverse selection and moral hazard in offerings in reliance on Section 4(a)(6). For instance, some issuers may use capital to fund riskier projects than what was disclosed to investors, or they may not pursue their stated business objectives. If investors in securities-based crowdfunding have limited information about issuers or a limited ability to monitor such issuers, they may seek higher returns for their investment or choose to withdraw from the securities-based crowdfunding market altogether, which would increase the cost of capital to issuers and limit the capital formation benefits of the final rules. In addition, investors in offerings made in reliance on Section 4(a)(6) may make relatively small investments, due in part to the application of investment limitations. This potential dispersed investor base may make it difficult for investors to solve collective action problems in monitoring the issuer.
The statute and the final rules seek to reduce information asymmetries by requiring issuers to file specified disclosures with the Commission for offerings made in reliance on Section 4(a)(6) during the offering and on an annual basis thereafter.
The disclosure requirements also may improve informational efficiency in the market. Specifically, the required disclosure may provide investors with a useful benchmark to evaluate the issuer and compare the issuer to other private issuers both within and outside of the securities-based crowdfunding market.
We recognize, however, that the disclosure requirements also will have associated limitations and costs, including the direct costs of preparation, certification, independent accounting review (when necessary) and dissemination of the disclosure documents. As noted above, the disclosure requirements for offerings made in reliance on Section 4(a)(6) are more extensive, in terms of breadth and frequency, than those for other exempt offerings. The statute also provides us with the discretion to impose additional requirements on issuers engaging in crowdfunding transactions, and in some cases, the final rules require issuers to disclose information beyond what is specifically mandated by the statute.
We note that the disclosure requirements may have indirect costs to the extent that information disclosed by issuers relying on Section 4(a)(6) can be used by their competitors, resulting in a potential loss of a competitive advantage or intellectual property, particularly for high-growth issuers and issuers engaged in significant research and development. Requiring significant levels of disclosure at an early stage of an issuer's lifecycle may affect an issuer's competitive position and may limit the use of the exemption in Section 4(a)(6) by issuers who are especially concerned with confidentiality. These disclosure costs also may make other types of private offerings more attractive to potential securities-based crowdfunding issuers. For example, the 2013 changes to Rule 506 of Regulation D,
In addition, under the statute and the final rules, issuers that complete a crowdfunding offering in reliance on Section 4(a)(6) are subject to ongoing reporting requirements,
Consistent with the statute, the final rules require narrative disclosure about the issuer's financial condition, including, to the extent material, liquidity, capital resources and the issuer's historical results of operations.
With respect to the requirement to provide financial statements, the final rules implement tiered financial disclosure requirements based on the aggregate amount of securities offered and sold in reliance on Section 4(a)(6) during the preceding 12-month period, inclusive of the offering amount in the offering for which disclosure is being provided.
The final rules, consistent with the proposed rules, require issuers to provide a complete set of their financial statements (balance sheets, statements of comprehensive income, statements of cash flows and statement of changes in stockholders' equity) that are prepared in accordance with U.S. GAAP and cover the shorter of the two most recently completed fiscal years or the period since inception.
The final rules also specify that an issuer may conduct an offering in reliance on Section 4(a)(6) using financial statements for the fiscal year prior to the most recently completed fiscal year, provided that not more than 120 days have passed since the end of the issuer's most recently completed fiscal year, and financial statements for the most recently completed fiscal year are not otherwise available.
Requiring financial statements covering the two most recently completed fiscal years is expected to benefit investors by providing a basis for comparison against the most recently completed fiscal year and by allowing investors to identify changes in the development of the business. Compared to an alternative that we could have selected, that of requiring financial statements covering only the most recently completed fiscal year, as some commenters suggested,
For offerings of $100,000 or less, the final rules require the issuer to provide financial statements that are certified by the principal executive officer to be true and complete in all material respects.
The proposed rules would have required income tax returns for the most recently completed year (if any). In a change from the proposed rules, consistent with the suggestions of some commenters and to respond to privacy concerns,
Moreover, the final rules specify that if an issuer is offering securities in reliance on Section 4(a)(6) before filing a tax return for the most recently completed fiscal year, the issuer may use information from the tax return filed for the prior year, on the condition that the issuer provides information from the tax return for the most recently completed fiscal year when it is filed, if it is filed during the offering period.
The proposed rules would have required financial statements for offerings exceeding $100,000 but not exceeding $500,000 to be reviewed by a public accountant independent of the issuer and financial statements for offerings exceeding $500,000 to be audited by a public accountant independent of the issuer. The final rules specify that the required financial statements must be reviewed by a public accountant that is independent of the issuer for offerings exceeding $100,000 but not exceeding $500,000.
Similar to the proposal, issuers in offerings exceeding $500,000 must provide audited financial statements. In a change from the proposal, the final rules specify that issuers that have not previously sold securities in reliance on Section 4(a)(6) and are conducting offerings with a target offering amount exceeding $500,000 but not exceeding $1,000,000 can provide reviewed financial statements, unless audited financial statements are otherwise available.
As discussed above
Tiered disclosure requirements aim to partially mitigate the impact of the fixed component of compliance costs on issuers in smaller securities-based crowdfunding offerings. However, it is possible that the thresholds may have an adverse competitive effect on some issuers. For example, the cost of reviewed financial statements may cause issuers in offerings exceeding but close to $100,000 to incur significantly higher offering costs as a percentage of the amount offered compared to issuers offering less than but close to $100,000. Similarly, the cost of audited financial statements may cause issuers in follow-on crowdfunding offerings exceeding but close to $500,000 to incur significantly higher offering costs as a percentage of the amount offered compared to issuers in offerings of less than but close to $500,000. We note, however, that the issuer has the ability to select its offering amount, and since the choice of offering amount determines which financial statement requirements will apply to its offering, the issuer, by choosing its offering amount, effectively also chooses its financial statement requirements.
We considered the alternative of exempting issuers with no operating history or issuers that have been in existence for fewer than 12 months from the requirement to provide financial statements. We believe that financial statements contain valuable information that can aid investors in making better informed decisions, particularly, when evaluating early-stage issuers characterized by a high degree of information asymmetry. We also expect that other accommodations in the final rules will help alleviate some of these issuer compliance costs.
Similar to the proposed rules, financial statements must be reviewed in accordance with SSARS issued by the AICPA.
As described above, the final rules require certain financial statements to be reviewed or audited by a public accountant that is independent of the issuer.
In addition, the final rules require an issuer to file a signed review report or audit report, whichever is applicable, and notify the public accountant of the issuer's intended use of the report in the offering.
In a change from the proposed rules, the final rules do not require financial statements in the annual report that meet a standard of review equal to the highest standard provided in a prior offering.
As discussed above, issuers will incur costs to prepare and file the various disclosures required under Regulation Crowdfunding.
Form C requires certain disclosures to be submitted using an XML-based filing,
We expect that requiring certain disclosures to be submitted using XML-based filings will produce benefits for issuers, investors and the Commission. For instance, using information filed pursuant to these requirements, investors can track capital generated through crowdfunding offerings without manually inspecting each filing. The ability to efficiently collect information on all issuers also can provide an incentive for data aggregators or other market participants to offer services or analysis that investors can use to compare and choose among different offerings. For example, reporting key financial information using XML-based filings will allow investors, analysts and data aggregators to more easily compile, analyze and compare information about the capital structure and financial position of various issuers. XML-based filings also will provide the Commission with data about the use of the new crowdfunding exemption that will allow the Commission to evaluate whether the rules implementing the exemption include appropriate investor protections and are effectively facilitating capital formation.
Certain provisions of the filing requirements in the final rules provide flexibility and potentially reduce the compliance burden compared with the proposal. The final rules allow issuers to customize the presentation of their non-XML disclosures and file those disclosures as exhibits to Form C in PDF format as official filings, consistent with the suggestions of some commenters.
The final rules require that issuers file a Form C-U: Progress Update to describe the progress of the issuer in meeting the target offering amount.
As noted above, the statute also requires an issuer to file and provide to investors information about the issuer's financial condition on at least an annual basis, as determined by the Commission.
As an alternative, we could have added a current reporting requirement, consistent with the view of some commenters that there may be major events that occur between annual reports about which investors would want to be updated.
Any issuer terminating its annual reporting obligations will be required to file a notice under cover of Form C-TR: Termination of Reporting to notify investors and the Commission that it will no longer file and provide annual reports pursuant to the requirements of Regulation Crowdfunding.
In a change from the proposed rules, after considering the comments, the final rules also permit termination of ongoing reporting in two additional circumstances: (1) The issuer has filed at least one annual report and has fewer than 300 holders of record, or (2) the issuer has filed annual reports for at least the three most recent years and has total assets not exceeding $10,000,000.
This change may, however, make relevant information about the financial condition of certain issuers no longer available to investors, resulting in less informed investor decisions. This change may affect a large number of securities-based crowdfunding offerings, since it is likely that many crowdfunding issuers will either have fewer than 300 holders of record or assets below $10 million. Termination of ongoing reporting may result in a decrease in investor protection, particularly in the presence of an investor base with a limited degree of sophistication. Allowing issuers to terminate ongoing reporting can make monitoring of the issuer more difficult for investors and can potentially make it more difficult to detect fraud. We note, however, that the investment limits in the final rules serve to limit the amount of each investor's capital that is exposed to these and other risks of securities-based crowdfunding offerings. We further note that the investment amounts involved in these transactions might limit a typical investor's incentives to analyze the information contained in ongoing disclosures and to monitor issuers, even if all issuers are required to provide ongoing disclosures.
Nevertheless, the risk that an issuer in a securities-based crowdfunding offering may terminate ongoing reporting in the future may discourage prospective investors from making an initial investment in offerings in reliance on Section 4(a)(6) or may cause issuers to obtain lower valuations for the securities they offer, which may limit some of the capital formation benefits of the final rules. We note that issuers who believe that increased investor confidence justifies the cost of annual reporting would be able to continue ongoing reporting voluntarily.
Termination of ongoing reporting may also reduce the informational efficiency of prices and secondary market liquidity, making it more difficult for investors to exit their holdings after the expiration of resale restrictions. A lack of ongoing reporting may reduce the likelihood that a secondary market for such securities develops. We recognize, however, that a secondary market for securities in offerings in reliance on Section 4(a)(6) may not develop even if all issuers are required to provide ongoing reports.
The asset size cap in one of the termination thresholds may create adverse competitive effects for issuers close to but above the termination threshold.
The statute and the final rules prohibit an issuer from advertising the terms of the offering, except for notices that direct investors to an intermediary's platform.
We believe this approach will allow issuers to generate interest in offerings and to leverage the power of social media to attract investors, potentially resulting in enhanced capital formation. At the same time, we believe it also will protect investors by limiting the ability of issuers to provide certain advertising materials without also directing
As an alternative, we could have required communications about the offering to be conducted through the intermediary, as suggested by some commenters.
Some commenters, suggesting that advertising restrictions are unnecessary because sales must occur through an intermediary's platform,
The statute and the final rules prohibit an issuer from compensating, or committing to compensate, directly or indirectly, any person to promote the issuer's offering through communication channels provided by the intermediary unless the issuer takes reasonable steps to ensure that such person clearly discloses the receipt of such compensation (both past and prospective) each time a promotional communication is made.
We believe this requirement will benefit the securities-based crowdfunding market by allowing investors to make better informed investment decisions. Although the requirement to take steps to ensure disclosure of compensation paid to persons promoting the offering will impose compliance costs on issuers, we believe that investors will benefit from knowing if the comments about the investment they are considering are being made by a promoter who is compensated by the issuer and therefore may not be providing an independent, disinterested perspective.
The final rules also require that an issuer not compensate or commit to compensate, directly or indirectly, any person to promote its offerings outside of the communication channels provided by the intermediary, unless the promotion is limited to notices that comply with the advertising rules.
The final rules permit an issuer to accept investments in excess of the target offering amount, subject to the $1 million limitation, but require the issuer to disclose the maximum amount the issuer will accept and how shares in oversubscribed offerings will be allocated.
The final rules do not require issuers to set a fixed price, as suggested by one commenter.
The final rules do not limit the type of securities that may be offered in reliance on Section 4(a)(6). This provision gives issuers the flexibility to offer the types of securities that are most compatible with their desired capital structure and financing needs. Such flexibility may benefit issuers to the extent that capital structure decisions can be relevant for an issuer's firm value.
The final rules do not prescribe a method for valuing the securities but instead require issuers to describe the terms of the securities and the valuation method in their offering materials. The required disclosure of valuation method is intended to facilitate informed investment decisions. As an alternative, as suggested by commenters, we could have prescribed the use of particular valuation standards,
The statute and the final rules include restrictions on the transfer of securities for one year, subject to limited exceptions (
We recognize that resale restrictions will impose costs. The one-year restriction on transfers of securities purchased in a transaction conducted in reliance on Section 4(a)(6) may impede price discovery, raise capital costs to issuers and limit investor participation, particularly among investors who are unable or unwilling to risk locking up their investments for this period. The illiquidity cost resulting from the resale restriction may be mitigated, in part, by provisions that allow investors to transfer the securities within one year of issuance by reselling the securities to accredited investors, back to the issuer or in a registered offering or transferring them to certain family members or trusts of those family members. The effect of resale restrictions on the extent to which investors make informed investment decisions is unclear. While resale restrictions may disincentivize investors from continuing to gather and analyze information about the issuer after investing while the resale restrictions are in effect, resale restrictions may also strengthen the incentive to conduct due diligence on the issuer and gather and analyze information before the initial investment. Nevertheless, at the investment amounts involved in these transactions, a typical purchaser's incentives to gather and analyze information before or after investing likely will remain limited, regardless of the presence of resale restrictions.
The statute and the final rules require that offerings in reliance on Section 4(a)(6) be conducted through an intermediary that is a registered broker-dealer or registered funding portal. The use of a registered intermediary to match issuers and investors will cause issuers to incur certain transaction costs associated with the intermediation activity
We believe that existing non-securities-based crowdfunding platforms will initially be the primary funding portals in the securities-based crowdfunding market. The entry of registered broker-dealers and new funding portals in the securities-based crowdfunding market will increase competition among existing non-securities-based crowdfunding intermediaries and potentially lower the cost of intermediation to issuers. One commenter stated that it has “a serious concern with Broker/Dealers having an unfair advantage in the market, by already being regulated and registered with the Commission as well as FINRA. Therefore, they may be able to service the market well ahead of Portals.”
We acknowledge that, to the extent that it may take less time and cost for registered broker-dealers to comply with the requirements of Regulation Crowdfunding as compared to funding portals, registered broker-dealers may be at a competitive advantage compared to new entities that seek to register as funding portals and enter the crowdfunding market. However, as we discuss below, the registration requirements for funding portals are tailored to the more limited scope of funding portal activities and are thus expected to result in a lower compliance cost for these entities. Further, the effective dates of the final rules are expected to provide time for funding portals to register and comply with the other requirements of Regulation Crowdfunding before crowdfunding offerings can occur.
Both existing non-securities-based crowdfunding platforms and registered broker-dealers will need to invest resources to comply with the requirements of the statute and final rules. In addition, registered broker-dealers will need to develop Internet-based crowdfunding platforms while existing non-securities-based crowdfunding platforms will need to register as funding portals or broker-dealers and modify their existing platforms to conform to the requirements of the statute and the final rules. Although the eventual extent of broker-dealer involvement in the securities-based crowdfunding market is difficult to estimate, we believe that some broker-dealers may acquire or form partnerships with funding portals to obtain access to a new and diverse investor base. In addition, some existing non-securities-based crowdfunding platforms may eventually form partnerships with registered broker-dealers or funding portals. It is challenging to exactly predict the future number of persons (or entities) who will register as either broker-dealers or funding portals to act as intermediaries in securities-based crowdfunding transactions. For purposes of the PRA,
We note that these estimates are the same as the estimates of potential crowdfunding intermediaries set forth in the Proposing Release. We did not receive comments about these estimates.
As a result of the uncertainty over how the market may develop, any estimates of the potential number of market participants, their services or fees charged are subject to significant estimation error. While we recognize that there are benefits as well as costs associated with the statutory requirements and the final rules pertaining to intermediaries, there are significant limitations to our ability to estimate these potential benefits and costs.
The statute requires that the offer or sale of securities in reliance on Securities Act Section 4(a)(6) be conducted through a broker-dealer or a funding portal that complies with the requirements of Securities Act Section 4A(a).
While the benefits and costs are described in further detail below, the following tables summarize the estimated direct costs to intermediaries, including broker-dealers and funding portals. Some of the direct costs of the rules will be incurred by all intermediaries, while others are specific to whether the intermediary is a new entrant (registering as a broker-dealer or a funding portal) or is already registered as a broker-dealer.
Although we have attempted to estimate the direct costs of the statute and the final rules on intermediaries, we recognize that some costs can vary significantly across intermediaries, and within categories of intermediaries. For example, some intermediaries may choose to leverage existing platforms or systems and so may not need to incur significant additional expenses to develop a platform or comply with specific requirements of Regulation Crowdfunding. In the Proposing Release we provided cost estimates for the various intermediary requirements and requested comment on our estimates. Several commenters discussed the estimates of the costs associated with intermediaries or provided cost estimates of their own.
We estimate that the cost for an entity to register as a broker-dealer and become a member of a national securities association in order to engage in crowdfunding pursuant to Section 4(a)(6) will be approximately $275,000, with an ongoing annual cost of approximately $50,000 to maintain this registration and membership.
If instead an entity were to register as a funding portal and become a funding portal member of a national securities association, we estimate the initial registration and membership cost will be approximately $100,000, with an ongoing cost of approximately $10,000 in each year thereafter to maintain this registration and membership.
We also only include domestic entities in these estimates, which do not need to comply with the requirements in Regulation Crowdfunding that apply to nonresident funding portals. Nonresident funding portals are subject to an additional cost of completing Schedule C to Form Funding Portal, hiring and maintaining an agent for service of process and providing the required opinion of counsel.
Finally, we estimate that the incremental initial cost for an intermediary that is already registered as a broker-dealer to comply with the requirements of the final rules will be approximately $45,000, with an ongoing cost of approximately $30,000 in each year thereafter.
These estimated costs are consistent with those set forth in the Proposing Release and are exclusive of the cost of establishing and maintaining a platform and related functionality. For purposes of the PRA, we estimate that for the average intermediary, the mid-range initial external platform development cost will be approximately $425,000 and the ongoing cost will be approximately $85,000 per year.
Commenters suggested
The estimated costs in the tables above reflect the direct costs that intermediaries will incur in connection with registering as a broker-dealer on Form BD or as a funding portal on Form Funding Portal, submitting amendments to registrations and withdrawing registrations. For the purposes of the PRA, we estimate that approximately 50 intermediaries will be broker-dealers that have already registered with the Commission
The final rules also require that an intermediary execute transactions exclusively through its online platform. This requirement may lower the potential for abusive sales practices. However, it may also prevent investors who lack Internet access from investing through crowdfunding, as suggested by one commenter.
The final rules further require that an issuer conduct an offering or concurrent offerings in reliance on Section 4(a)(6) using a single intermediary.
Some commenters suggested that the statutory and rule requirements for establishing a funding portal and ongoing maintenance and compliance expenses create a significant burden on funding portals.
The statute and final rules include disclosure and dissemination provisions designed to provide information to security-based crowdfunding investors. These provisions, together with the issuer disclosure provisions discussed above, are expected to limit information asymmetries and promote the efficient allocation of capital amongst crowdfunding offerings. These provisions also will provide information intended to ensure that investors are aware of the risks associated with their investment, which can enhance investor protection. As discussed above, many of the costs and benefits of these provisions are difficult to quantify or estimate with any degree of certainty, especially considering that securities-based crowdfunding will constitute a new method for raising capital in the United States. Although we are not able to quantify the direct costs specifically associated with each of these requirements, these costs are reflected in our general estimates of the initial and ongoing costs for intermediaries to register, comply with their obligations under the final rules and develop a crowdfunding platform, as reflected in the tables above.
The final rules prohibit an intermediary or its associated persons from accepting an investment commitment until the investor has opened an account with the intermediary and the intermediary has obtained the investor's consent to electronic delivery of materials.
The statute requires intermediaries to provide disclosures related to risks and other investor education materials. The final rules implement this statutory mandate by requiring intermediaries to deliver educational materials that explain how the offering process works and the risks associated with investing in crowdfunding securities.
Under the final rules, the educational materials can be in any electronic format, including video format, and the intermediary will have the flexibility to determine how best to communicate the contents of the educational material. Accordingly, the cost for intermediaries to develop educational materials is expected to vary widely. For purposes of the PRA, we estimate that the initial cost for an intermediary using a third-party firm to develop and produce educational materials will be approximately $10,000 to $30,000 and the ongoing cost will be approximately $5,000 to $15,000 per year.
The final rules also require that intermediaries obtain representations from investors about their review of the investor education materials and their understanding of the risks.
Under the final rules, an intermediary must clearly disclose the manner in which the intermediary is compensated in connection with offers and sales of securities in reliance on Section 4(a)(6).
The statute and the final rules further require that intermediaries make available certain issuer-provided information.
The issuer disclosure requirements are expected to benefit investors by enabling them to better evaluate the issuer and the offering. Requiring intermediaries to make the issuer information publicly available and easily accessible on their platforms will reduce information asymmetries between issuers and investors and will enhance both transparency and efficiency of the crowdfunding market. Greater accessibility of issuer information may reduce incremental costs to investors of locating issuer information and may increase their willingness to participate in a securities-based crowdfunding offering, thereby enhancing capital formation.
The final rules also require an intermediary to provide communication channels on its platform, meeting certain conditions, which will allow investors who have opened accounts with intermediaries and representatives of the issuer to interact and exchange comments about the issuer's offering on that intermediary's platform, and which will be publicly available for viewing (
Compared with the alternative of not requiring intermediaries to provide communication channels, we believe this requirement will allow investors, particularly those who may be less familiar with online social media, to participate in online discussions about ongoing offerings without having to actively search for such discussions on external Web sites. Moreover, the requirement that promoters be clearly identified on these channels will enhance transparency, allowing those investors that draw information from an intermediary's online platform to make potentially better informed investment decisions. The direct costs of this requirement are reflected in the tables above as part of costs of developing a crowdfunding platform, and we believe that once the platform has been set up, the ongoing burden to comply will be minimal. We recognize, however, that this requirement will not assure that participants in online discussions on the intermediary's online platform convey accurate or relevant information in their postings, and it will not preclude investors from participating in discussions on external Web sites or other external social media.
The final rules also require intermediaries, upon receipt of an investment commitment from an investor, promptly to provide or send to the investor a notification of that investment commitment.
The final rules implement the statutory requirement for intermediaries to allow investors to cancel their commitments to invest, by requiring investors to have until 48 hours prior to the deadline identified in the issuer's offering materials to cancel their investment commitments.
We believe that investors will benefit from receiving these notices because the notifications and accompanying information will keep investors informed about the status of the offering and thereby facilitate better investment decisions. This approach also will benefit investors by providing them with a specified period of time to review and assess information and communications about the issuer.
We recognize that allowing investors to cancel their investment commitments up to 48 hours prior to the deadline identified in the issuer's offering materials may impose a cost on issuers who, because of investors cancelling commitments late in the offering period, may fall below the target offering amount and so decide to cancel the offering or to extend the offering period. Accordingly, we recognize that this requirement may reduce the overall amount of capital raised in offerings in
The statute and final rules require intermediaries to have a reasonable basis for believing that an issuer seeking to offer and sell securities in reliance on Section 4(a)(6) through the intermediary's platform complies with the requirements in the final rules
As noted above, the specific costs and benefits of these provisions are difficult to quantify or estimate with any degree of certainty. However, we have attempted to reflect the direct costs of these provisions in the tables above as part of our general estimates for the cost of complying with requirements to act as an intermediary in transactions pursuant to Section 4(a)(6). For purposes of the PRA, the cost for an intermediary to fulfill the required background checks and securities enforcement regulatory history checks is estimated to be approximately $13,818 to $34,546 in the first year and approximately the same in subsequent years.
Each of these requirements is intended to help reduce the risk of fraud in securities-based crowdfunding. As a result of these requirements, investors will be able to rely on the efforts of the intermediary that conducted a background and securities enforcement check, solving a collective action problem that would be prohibitively costly if left to individual investors. To the extent that these checks help prevent fraudulent activity, they may increase investor willingness to participate in crowdfunding offerings, thereby facilitating capital formation. We anticipate that most intermediaries will employ third parties to perform these background checks.
We received several suggestions from commenters aimed at reducing or scaling the costs of the proposed requirements. One commenter suggested that the checks be required only after an issuer has met its target offering amount, so as to prevent unnecessary expense to the intermediary.
While intermediaries are required to take certain steps to reduce the risk of fraud, the final rules provide intermediaries with the flexibility to decide the specific steps to take, consistent with some of the commenters' suggestions.
The statute and final rules place certain limitations on intermediaries. These limitations are expected to increase investor protection in the securities-based crowdfunding market.
The final rules require an intermediary before accepting an investment commitment to have a reasonable basis for believing that an investor has not exceeded the final rules' investment limits but permit an intermediary to rely on investor representations concerning compliance unless the intermediary has reason to question the reliability of the representations.
Under the final rules, intermediaries must require any person, when posting a comment in the communication channels, to clearly disclose with each posting whether he or she is a founder or an employee of an issuer engaging in promotional activities on behalf of the issuer or a compensated promoter
Under the final rules, intermediaries will incur direct costs in complying with the requirements to disclose compensation to promoters, and certain additional costs from time to time to ensure continued compliance. These costs are reflected in the table above as part of the costs of complying with the requirements to act as an intermediary in a Section 4(a)(6) transaction. In addition, if this requirement discourages the use of promoters by issuers, it may limit the investor pool for an offering made in reliance on Section 4(a)(6), thus limiting the ability of an issuer to raise capital.
The statute prohibits the directors, officers or partners of an intermediary, or any person occupying a similar status or performing a similar function, from having any financial interest in an issuer that uses the services of the intermediary. The final rules implement this statutory requirement. In a change from the proposed rules, the final rules provide exceptions to the prohibition on an intermediary having a financial interest in a crowdfunding issuer. The intermediary may hold a financial interest in the crowdfunding issuer if the financial interest represents compensation for the services provided to or for the benefit of the issuer in connection with the offer or sale of securities in a crowdfunding offering and consists of securities of the same class and having the same terms, conditions and rights as the securities being offered or sold in the crowdfunding offering through the intermediary's platform. By not extending the prohibition from having any financial interest in an issuer to intermediaries in all instances, the final rules allow for more flexibility in the payment arrangements between issuers and intermediaries. This additional option by which the issuer may pay an intermediary for its services may be beneficial for issuers by allowing them to use more of the capital raised in an offering for future investments rather than paying a portion of it as a fee to the intermediaries. It also allows funding portals to share in the upside of successful issuers, generating potentially larger revenue than the offering fee. While allowing intermediaries to have a financial interest in issuers can align incentives between intermediaries and investors,
The statute requires that intermediaries ensure that all offering proceeds are provided to the issuer only when the aggregate capital raised from all investors is equal to or greater than a target offering amount.
These requirements will benefit investors and issuers by helping ensure that funds are appropriately refunded or transmitted in accordance with the terms of the offering. In particular, the requirement that the account in which funds are deposited be exclusively for the benefit of investors and the issuer will help prevent the intermediary or other parties from claiming or otherwise unlawfully appropriating funds from that account. Expanding the definition of “qualified third parties” will increase the number of third parties available to hold funds in an escrow or in an account for the benefit of investors and the issuer, potentially reducing the cost of the service due to increased competition. We do not expect any significant costs due to this change from the proposed rules because credit unions insured by the NCUA offer similar protections to banks while registered broker-dealers that carry customer or broker or dealer accounts and hold funds or securities for those persons are subject to various regulatory obligations, which are designed to provide protection of investor funds through the imposition of capital and other requirements.
Under the statute, intermediaries may not compensate promoters, finders or lead generators for providing broker-dealers or funding portals with the personally identifiable information of any potential investor. The final rules implement this statutory requirement by prohibiting an intermediary from
Under the final rules, a funding portal must register with the Commission by filing a complete Form Funding Portal with information concerning the funding portal's operation.
The requirement that funding portals register with the Commission and become a member of a national securities association will benefit investors by providing regulatory oversight for these new entities, which will help to reduce the risk for fraud. Although there are costs associated with this requirement, we believe that the protections deriving from this requirement will benefit investors, issuers and potentially intermediaries by helping to create a marketplace in which investors are more willing to participate and issuers are more comfortable using this method of capital formation.
The final rules also require that funding portals use Form Funding Portal to provide updates whenever information on file becomes inaccurate for any reason, to register successor funding portals and to withdraw from funding portal registration. Although funding portals would incur time and compliance costs to update Form Funding Portal, we expect funding portals will have experience with the filing process for Form Funding Portal from their registration and, as a result, will be familiar with the filing process by the time they update the form. In the tables above, this cost is reflected in the $10,000 annual compliance cost associated with registering on Form Funding Portal and becoming a member of a registered national securities association.
The final rules allow nonresident funding portals to register with the Commission, provided that certain conditions are met.
Compared to the alternative of not allowing nonresident entities to operate as funding portals in the U.S. crowdfunding market, the final rules may increase competition among crowdfunding intermediaries, which in turn may reduce the fees that intermediaries charge to issuers. Lower costs of raising capital can also attract more potential issuers to the crowdfunding market, thus enhancing capital formation. Due to lack of data, we are not able to estimate the magnitude of these potential effects.
Although the requirements with respect to the appointment of an agent for service of process, a certification and a legal opinion will impose costs on nonresident funding portals, these requirements are expected to enhance investor protection by requiring steps designed to ensure that the books and records of funding portals that are not based in the United States, or that are subject to laws other than those of the United States, nevertheless are accessible to the Commission and other relevant regulators for purposes of conducting examinations of, and enforcing U.S. laws and regulations against these entities. For PRA purposes, we estimate that nonresident intermediaries will face an additional cost for outside professional services of $25,179 per intermediary to retain an agent for service of process and provide an opinion of counsel to register as a nonresident funding portal.
The statute also provides an exemption from broker-dealer registration for funding portals. The final rules implement the statutory requirement by stating that a registered funding portal is exempt from the broker-dealer registration requirements of Exchange Act Section 15(a)(1) in connection with its activities as a funding portal.
Exchange Act Section 3(a)(80) prohibits funding portals from (1) offering investment advice or recommendations, (2) soliciting purchases, sales or offers to buy securities offered or displayed on the funding portal's platform, (3) compensating employees, agents or other such persons for solicitation or based on the sale of securities displayed or referenced on the funding portal's platform, or (4) holding, managing, possessing or otherwise handling investor funds or securities. The final rules give funding portals, their associated persons, affiliates and business associates, a measure of clarity on activities that are permissible without violating these statutory prohibitions, while also helping to protect investors from activities that create potential conflicts of interest.
The safe harbor for a funding portal to provide communication channels on its platform
In a change from the proposal, the final rules include a conditional safe harbor that will permit funding portals, consistent with the prohibitions under Exchange Act Section 3(a)(80), to determine whether and under what circumstances to allow an issuer to offer and sell securities in reliance on Section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) through their platforms.
The final rules also allow a funding portal to highlight particular issuers or offerings of securities made in reliance on Section 4(a)(6) on its platform based on objective criteria, for example: (1) The type of securities being offered (
A funding portal may choose to categorize offerings into general subject areas or provide search functions that, for example, allowing an investor to sort through offerings based on a combination of different objective criteria. We believe that these safe harbor provisions will benefit investors by facilitating investor access to information about offerings characterized by certain broad, objective criteria, to the extent that funding portals provide such features and tools in reliance on the final rules. By enabling issuers to utilize technology to lower the costs of each investor to search for information about a particular category of offerings, these provisions also may enhance efficiency. To the extent that the availability of these features and tools encourages investor participation in crowdfunding offerings, these provisions may have a beneficial effect on capital formation in the crowdfunding market.
The final rules prohibit a funding portal from receiving any special or additional compensation for
Under the final rules, funding portals are permitted to provide advice to an issuer on the structure and content of its offerings, including assistance to the issuer in preparing offering documentation.
The final rules also provide a safe harbor for a funding portal to compensate a third party for referring a person to the funding portal in certain circumstances.
The final rules also provide a safe harbor for a funding portal to pay or offer to pay compensation to a registered broker-dealer for services provided in connection with the offer or sale of securities in reliance on Section 4(a)(6), subject to conditions set forth in the rule.
The final rules permit a funding portal to advertise its existence and identify one or more issuers or offerings available through its platform subject to certain conditions.
As discussed above, the final rules require an intermediary to deny access to its platform to an issuer that the intermediary has a reasonable basis for believing presents the potential for fraud or otherwise raises concerns about investor protection.
The final rules specify that a funding portal may accept, on behalf of an issuer, investment commitments for crowdfunding offerings from investors.
The final rules require that a funding portal implement written policies and procedures, reasonably designed to achieve compliance with the federal securities laws and the rules and regulations thereunder, relating to its business as a funding portal.
In contrast to the proposal, the final rules do not impose anti-money laundering (AML) obligations for funding portals. Some commenters generally suggested that since funding portals are prohibited from handling customer funds and securities, they should not be required to comply with AML provisions.
Additionally, the statute requires that intermediaries take such steps to protect the privacy of information collected from investors as we determine appropriate. In the final rules, we implement this statutory provision by requiring a funding portal to comply with Regulation S-P, S-ID and Regulation S-AM, as they apply to broker-dealers.
As a condition to exempting funding portals from the requirement to register as broker-dealers under Exchange Act Section 15(a)(1), Exchange Act Section 3(h)(1)(A) requires that registered funding portals remain subject to, among other things, the Commission's examination authority. Under the final rules, a funding portal is required to permit the examination and inspection of all its business and business operations relating to its activities as a funding portal, such as its premises, systems, platforms and records, by Commission representatives and by representatives of the registered national securities association of which it becomes a member.
Further, the final rules require a registered funding portal to maintain and preserve certain books and records relating to its business for a period of not less than five years and in an easily-accessible place for the first two years.
Funding portals may incur costs in establishing the systems necessary to comply with the books and records requirements. We note that the records required to be made and preserved under the final rules are those that would ordinarily be made and preserved in the ordinary course of business by a regulated broker-dealer engaging in these activities. Entities that newly register as broker-dealers will be subject to the recordkeeping requirements of Rules 17a-3 and 17a-4. While these costs will constitute part of the cost of compliance for entities that choose to become intermediaries in crowdfunding transactions by registering as broker-dealers, the cost of broker-dealer compliance with recordkeeping requirements of Rules 17a-3 and 17a-4 is not by itself a result of the final rule. Entities solely intending to serve as intermediaries in crowdfunding transactions for which the cost of compliance with broker-dealer recordkeeping requirements is too high may elect to register as funding portals. Funding portals will be required to make and keep records related to their activities to facilitate transactions in reliance on Section 4(a)(6), which we estimate for the purposes of the PRA to result in an initial burden of 325 hours and an initial cost of $5,350 per funding portal. We estimate that ongoing recordkeeping burden and cost will be similar to the initial burden and cost.
We are providing a safe harbor for issuers for certain insignificant deviations from a term, condition or requirement of Regulation Crowdfunding.
The safe harbor is expected to decrease the costs incurred by issuers compared to the alternative of not providing a safe harbor. In the absence of a safe harbor, issuers might be hesitant to participate in this new marketplace for fear of inadvertently violating an applicable regulatory requirement, thereby reducing the benefits of Regulation Crowdfunding on efficiency, competition and capital formation. We recognize that providing a safe harbor can impose costs on investors, intermediaries and regulators, compared with the alternative of not providing a safe harbor, to the extent that issuers lessen the vigor with which they develop and implement systems and controls to achieve compliance with the requirements of Regulation Crowdfunding, which may result in a decrease in investor protection. Accordingly, we have designed the conditions of the safe harbor—specifically, the issuer must show that the failure to comply was insignificant with respect to the offering as a whole; it made a good faith and reasonable attempt to comply; and it did not know of the failure or such failure occurred solely in offerings other than the issuer's offering—to lessen the potential impact on investor protection.
Several commenters suggested that the safe harbor for insignificant deviations should not apply with respect to state regulatory enforcement actions.
Section 305 of the JOBS Act amended Securities Act Section 18(b)(4)
Rule 12g-6 provides that securities issued pursuant to an offering made under Section 4(a)(6) are exempted from the record holder count under Section 12(g) provided the issuer is current in its ongoing annual reports required pursuant to Rule 202 of Regulation Crowdfunding, has total assets as of the end of its last fiscal year not in excess of $25 million, and has engaged the services of a transfer agent registered with the Commission pursuant to Section 17A of the Exchange Act. The issuer size test is broadly consistent with some commenters' suggestions.
An issuer that exceeds the $25 million total asset threshold in addition to exceeding the thresholds in Section 12(g) will be granted a two-year transition period before it is required to register its class of securities pursuant to Section 12(g), provided it timely files all its ongoing reports due pursuant to Rule 202 of Regulation Crowdfunding during such period.
The conditional 12(g) exemption will defer the more extensive Exchange Act reporting requirements until the issuer either sells securities in a registered transaction or registers a class of securities under the Exchange Act. Consequently, smaller issuers will not be required to become an Exchange Act reporting company as a result of a Section 4(a)(6) offering. These offerings may have a large number of investors due to the limits on the amount each investor may invest and the absence of investor eligibility restrictions, or as a result of secondary market transactions in crowdfunding securities after the expiration of resale restrictions. Given the $1 million offering limitation, the potential cost of becoming an Exchange Act reporting company could have made many offerings in reliance on Section 4(a)(6) prohibitively costly.
The condition that the issuer remain current in its ongoing reporting, as suggested by one commenter,
The issuer size limit condition is designed to be broadly consistent with the crowdfunding exemption being tailored to facilitate small company capital formation and the likely small size of a typical issuer in the crowdfunding market. This condition is expected to strengthen investor protection by reducing the likelihood that an issuer will grow and accumulate a significant number of investors as a result of multiple offerings in reliance on Section 4(a)(6) while remaining permanently exempt from the more extensive reporting requirements of the Exchange Act that would otherwise be required pursuant to Section 12(g) (unless the issuer registers a class of securities). The size limit condition will require larger issuers to provide investors with the more extensive disclosures required by the Exchange Act for reporting companies. However, we recognize that this condition also may subject crowdfunding issuers that are larger than the size threshold or that have a higher rate of growth, and are thus more likely to exceed the size threshold in the future, to the costs of Section 12(g) registration and Exchange Act reporting, potentially placing them at a competitive disadvantage to issuers that are close to but below the size threshold. It may also discourage some high-growth issuers from relying on Section 4(a)(6) or may lead issuers approaching the size threshold to divest assets to remain under the threshold, potentially resulting in inefficient investment decisions.
While the condition requiring an issuer to use a registered transfer agent to rely on the exemption will impose costs on issuers,
The statute and the final rules impose disqualification provisions under which an issuer is not eligible to offer securities pursuant to Section 4(a)(6) and an intermediary is not eligible to effect or participate in transactions pursuant to Section 4(a)(6).
The final rules are expected to induce issuers to implement measures to restrict bad actor participation in offerings made in reliance on Section 4(a)(6). This will help reduce the potential for fraud in the market for such offerings, which in turn may reduce the cost of raising capital to issuers that rely on Section 4(a)(6), to the extent that disqualification standards lower the risk premium associated with the presence of bad
The final rules will, however, impose costs on some issuers, other covered persons and investors. If issuers are disqualified from relying on Section 4(a)(6) to make their offerings, they may experience increased costs in raising capital through alternative methods that do not require bad actor disqualification, if available, or they may be precluded from raising capital altogether. This can result in negative effects on capital formation. In addition, issuers may incur costs in connection with internal personnel changes that issuers may make to avoid the participation of those covered persons who are subject to disqualifying events. Issuers also may incur costs associated with restructuring share ownership positions to avoid having 20 Percent Beneficial Owners who are subject to disqualifying events. Finally, issuers may incur costs in connection with seeking waivers of disqualification from the Commission or determinations by other authorities that existing orders do not give rise to disqualification.
The final rules provide a reasonable care exception whereby an issuer will not lose the benefit of the Section 4(a)(6) exemption if it is able to show that it did not know, and in the exercise of reasonable care could not have known, of the existence of a disqualification.
The requirement under the final rules that issuers disclose matters that would have triggered disqualification, had they occurred after the effective date of Regulation Crowdfunding,
We believe the inclusion of Commission cease-and-desist orders in the list of disqualifying events will not impose a significant, incremental cost on issuers and other covered persons because many of these actors may already be subject to disqualifying orders issued by the states, federal banking regulators and the National Credit Union Administration.
Under the final rules, orders issued by the CFTC will trigger disqualification to the same extent as orders of the regulators enumerated in Section 302(d)(2)(B)(i) of the JOBS Act (
As discussed above, the baseline for our economic analysis of Regulation Crowdfunding, including the baseline for our consideration of the effects of the final rules on efficiency, competition and capital formation, is the situation in existence today, in which startups and small businesses seeking to raise capital through securities offerings must register the offer and sale of securities under the Securities Act unless they can comply with an existing exemption from registration under the federal securities laws. Relative to the current baseline, we believe that the disqualification provisions will not impose significant incremental costs on issuers and other covered persons because the final rules are substantially similar to the disqualification provisions under existing exemptions.
As an alternative, we could have specified that pre-existing events are subject to the disqualification rules, as suggested by some commenters.
With regard to intermediaries, the final rules apply the disqualification provisions under Section 3(a)(39) of the Exchange Act, rather than a standard based on Rule 262.
The final rules implement the statutory requirement for intermediaries by providing that a person subject to a statutory disqualification, as defined in Exchange Act Section 3(a)(39), may not act as, or be an associated person of, an intermediary in a transaction involving the offer or sale of securities in reliance on Section 4(a)(6) unless so permitted by Commission rule or order. While this requirement will potentially reduce the number of intermediaries for Section 4(a)(6) transactions, we expect that it will strengthen investor protection by preventing bad actors from entering the securities-based crowdfunding market, thereby reducing the potential for fraud and other abuse.
As discussed above, the baseline for our economic analysis of Regulation Crowdfunding, including the baseline for our consideration of the effects of the final rules on efficiency, competition and capital formation, is the situation in existence today, in which intermediaries intending to facilitate securities transactions are required to register with the Commission as broker-dealers under Exchange Act Section 15(a). Relative to this baseline, we believe that the disqualification provisions will not impose significant incremental costs to broker-dealers because the final rules include the same disqualification provisions that are already imposed on broker-dealers.
Certain provisions of the final rules contain “collection of information” requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).
In the Proposing Release, we solicited comment on the assumptions and estimates in our PRA analysis. We received no comments on our estimates of and assumptions about the number of issuers and intermediaries that will participate in securities-based crowdfunding transactions or the size and frequency of those transactions. We received several comments on our estimates of the time and expense required of issuers to meet their filing obligations.
The titles for the collections of information are:
(1) “Form ID” (OMB Control Number 3235-0328);
(2) “Form C” (OMB Control Number 3235-0716) (a new collection of information);
(3) “Form BD” (OMB Control Number 3235-0012); and
(4) “Crowdfunding Rules 300-304—Intermediaries” (OMB Control Number 3235-0726)
(5) “Crowdfunding Rules 400-404—Funding Portals” (OMB Control Number 3235-0727)
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. We applied for OMB control numbers for the new collections of information in accordance with 44 U.S.C. 3507(j) and 5 CFR 1320.13, and as of the date of this release, OMB has assigned a control number to each new collection as specified above. Responses to these new collections of information will be mandatory for issuers raising capital under Regulation Crowdfunding and intermediaries participating in offerings under Regulation Crowdfunding.
The hours and costs associated with preparing disclosure, filing forms, and retaining records constitute reporting and cost burdens imposed by the collections of information. In deriving estimates of these hours and costs, we recognize that the burdens likely will vary among individual issuers and intermediaries based on a number of factors, including the stage of development of the business, the amount of capital an issuer seeks to raise, the number of offerings an intermediary hosts on its platform, and the number of years since inception of the business. We believe that some issuers and intermediaries will experience costs in excess of the average and some issuers and intermediaries may experience less than the average costs.
The number, type and size of the issuers that will participate in securities-based crowdfunding transactions are uncertain, but data on current market practices may help identify the number and characteristics of potential issuers that may offer and sell securities in reliance on Section 4(a)(6).
We received no comments on our estimate of the number of issuers expected to participate in securities-based crowdfunding transactions or the number of offerings in reliance on Section 4(a)(6) we expect those issuers to conduct. In developing the estimate for the number of issuers in the final rule, we refined the methodology used in the Proposing Release and applied that methodology to more recent data, resulting in an updated estimate that we believe is reasonable and appropriate.
The final rules require intermediaries to register with us as either a broker-dealer or as a funding portal. Consistent with the Proposing Release, we estimate that the collection of information requirements in the final rules will apply to approximately 10 intermediaries per year that are not currently registered with the Commission and that will choose to register as brokers, rather than as funding portals, to act as intermediaries for offerings made in reliance on Section 4(a)(6). However, we believe that, given the cost that an unregistered entity will incur to register as a broker compared with the lower cost of becoming a funding portal, unregistered entities that choose to act as crowdfunding intermediaries will generally be more likely to register as funding portals than as brokers.
Consistent with the Proposing Release, we further estimate that approximately 50 intermediaries per year that are already registered as brokers with the Commission will choose to add to their current service offerings by also serving as crowdfunding intermediaries. These entities will not have to file a new application for registration with us, and if currently doing business with the public, they will already be members of FINRA (the applicable national securities association registered under Exchange Act Section 15A). We note, however, that given the nascent nature of the equity-based crowdfunding market, we do not have any data or other evidence indicating the number of currently-registered brokers that will be interested in becoming crowdfunding intermediaries. Therefore, we recognize that the number of brokers per year that may engage in crowdfunding activities could differ significantly from our current estimate. We received no comments on our estimates of the number of broker-dealers that will act as intermediaries.
Consistent with the Proposing Release, we estimate that on average approximately 50 intermediaries per year that are
Under the final rules, an issuer conducting a transaction in reliance on Section 4(a)(6) will be required to file with us specified disclosures on a Form C: Offering Statement.
As discussed in more detail in the Economic Analysis, above, we received a number of comments concerning the burdens and costs of the proposed rules.
Based on these comments and our Economic Analysis, we have revised our estimate of the burden associated with the preparation and filing of Form C. We acknowledge that a number of commenters suggested that we underestimated the burdens of the proposed rule, but believe that changes in the final rule, particularly with respect to the financial statement requirements for first-time crowdfunding issuers, may mitigate the impact of those costs. Accordingly, we estimate that the average total burden to prepare and file the Form C, including any amendment to disclose any material change, will be approximately 100 hours, which, while higher than our proposed estimate, is still substantially less than the burden to prepare a Form 1-A for an offering under Regulation A, as recently amended. We continue to estimate that 75 percent of the burden of preparation will be carried by the issuer internally and that 25 percent will be carried by outside professionals
We recognize that the costs of retaining outside professionals may vary depending on the nature of the professional services, but for purposes of this PRA analysis, we estimate that such costs would be an average of $400 per hour. This is the rate we typically estimate for outside legal services used in connection with public company reporting.
Under the final rules, the issuer also will be required to file with us regular updates on the progress of the issuer in meeting the target offering amount.
Overall, we estimate that compliance with the requirements of a Form C filed in connection with offerings made in reliance on Section 4(a)(6) will require 190,000 burden hours (1,900 offering statements × 100 hours/offering statement) in aggregate each year, which corresponds to 142,500 hours carried by the issuer internally (1,900 offering statements × 100 hours/offering statement × 0.75) and costs of $19,000,000 (1,900 offering statements × 100 hours/offering statement × 0.25 × $400) for the services of outside professionals. We also estimate that compliance with the requirements of Form C-U filed during an offering will require 950 burden hours (1,900 offering statements × 1 progress update per offering × 0.50 hours per progress update) in aggregate each year.
Under the final rules, unless the reporting has been terminated, any
As discussed in the Economic Analysis, we received some comments on the costs of Form C-AR.
Additionally, in light of the change to the final rules for Form C-AR to require financial statements that are certified by the principal executive officer of the issuer to be true and complete in all material respects, rather than requiring financial statements that meet the highest level of review previously provided, we estimate that for Form C-AR there will be a further reduction of PRA burden compared with the burden of Form C. Accordingly, we estimate that compliance with Form C-AR will be approximately one-half of the burden of Form C, resulting in a burden of 50 hours per response. We further estimate that 75 percent of the burden of preparation will be carried by the issuer internally and that 25 percent will be carried by outside professionals
We estimate that compliance with the requirements of Form C-AR in the first year after issuers sell securities pursuant to Section 4(a)(6) will require 95,000 burden hours (1,900 issuers × 50 hours/issuer) in the aggregate, which corresponds to 71,250 hours carried by the issuer internally (1,900 issuers × 50 hours/issuer × 0.75) and costs of $9,500,000 (1,900 issuers × 50 hours/issuer × 0.25 × $400) for the services of outside professionals.
Under the final rules, any issuer terminating its annual reporting obligations will be required to file a notice under cover of Form C-TR: Termination of Reporting to notify investors and the Commission that it no longer will file and provide annual reports pursuant to the requirements of Regulation Crowdfunding.
Under the final rules, an issuer will be required to file specified disclosures with us on EDGAR.
Below, we discuss our estimates of the internal burdens and professional costs associated with the collections of information required under the final rules as they relate to intermediaries. Where relevant, we discuss any comments received on these estimates and any changes to estimates, including changes made in response to comments on them.
The final rules will require intermediaries to register with us as either a broker or as a funding portal. As noted above, we believe that some intermediaries for transactions made in
We estimate the burden for registering with the Commission as a broker based upon the existing burdens for completing and filing Form BD, currently estimated as 2.75 hours.
We have taken into consideration that brokers that register to engage in crowdfunding transactions conducted in reliance on Section 4(a)(6) may eventually decide to withdraw their registration. Withdrawal requires an entity to complete and file with us a Form BDW.
In the Proposing Release, we also included an estimate of PRA burdens and costs for newly-registered intermediaries to become members of FINRA or any other registered national securities association. Specifically, the Proposing Release included a discussion of an estimate of the paperwork burdens and costs that would be incurred by an intermediary to register with a national securities association as well as an estimate of the ongoing fees (
Once registered, a broker must promptly file an amended Form BD when information originally reported on Form BD changes or becomes inaccurate. Similarly, a registered funding portal must file amendments relating to changes in information filed in a Form Funding Portal filing.
We estimate that two intermediaries will face a cost per intermediary of $25,179 to retain an agent for service of process and provide an opinion of counsel to register as a nonresident funding portal.
The final rules envision that intermediaries will develop electronic platforms to offer securities to the public in reliance on Section 4(a)(6). We anticipate that an intermediary's platform will incorporate related systems functionality to comply with our final rules (including the collection of information associated with, for example, the requirements of Rules 302, 303 and 304) as well as execute other platform capabilities and system operations. The estimated time burdens and costs for platform development discussed in this section include the estimated time burdens and costs for the functionalities that will allow funding portals to comply with their disclosure, communication channel, and investor notification requirements.
Intermediaries that develop their platforms in-house will incur an initial time burden associated with setting up their systems. Based on our discussions with potential intermediaries prior to the publication of our proposed rules, we estimate that intermediaries creating the initial platform in-house will typically have a team of approximately four to six developers that will work on all aspects of platform development, including, but not limited to, front-end programming, data management, systems analysis, communication channels, document delivery, and Internet security.
It is difficult to estimate the number of intermediaries that will develop their initial platforms in-house, but assuming that half of the 110 newly-registered intermediaries
We estimate that annually updating the features and functionality of an intermediary's platform will require approximately 20% of the hours required to initially develop the platform, for an average burden of 300 hours per year. If we assume that half of the 110 crowdfunding intermediaries update their systems accordingly each year, the total ongoing time burden will be 16,500 hours per year (55 intermediaries × 300 hours = 16,500 hours).
There will be a cost associated with developing a platform for an intermediary that hires a third-party to develop its platform rather than developing it in-house. Based on our discussions with potential intermediaries prior to the publication of our proposed rules, we estimate that it will cost an intermediary approximately $250,000 to $600,000
We estimate that it will typically cost an intermediary approximately one-fifth of the initial development cost per year to use a third-party developer to provide annual maintenance on an Internet-based crowdfunding portal, including updating and basic functionality, or $85,000 per year on average.
The final rules will require intermediaries to have a reasonable basis for believing that an issuer seeking to offer and sell securities in reliance on Section 4(a)(6) through the intermediary's platform complies with the requirements in Section 4A(b) and the related requirements in Regulation Crowdfunding.
Based on our estimate that there will be approximately 1,900 offerings per year, that each issuer will conduct one offering per year, and that there will be 110 intermediaries, we estimate that each intermediary will facilitate an average of approximately 17 offerings per year (1,900 offerings/(10 newly registered broker-dealers + 50 previously registered broker-dealers + 50 funding portals)). Therefore, we estimate that the total initial burden hours will be approximately 740 hours ((5 hours/intermediary × (10 newly-registered broker-dealers + 50 previously-registered broker-dealers + 50 funding portals)) + (0.1 hours/issuer × 17 offerings × 110 intermediaries).
We believe that the ongoing time burdens for this requirement will be approximately one hour per intermediary per year to review and confirm that the standard representations it requests from issuers remain appropriate, and six minutes (0.1 hours) per intermediary per issuer to obtain an issuer's representation. Therefore, we estimate that the ongoing total burden hours necessary for intermediaries to rely on the representations of the issuers will be approximately 300 hours per year ((1 hour/intermediary × (10 newly-registered broker-dealers + 50 previously-registered broker-dealers + 50 funding portals)) + (0.1 hours/issuer × 17 offerings × 110 intermediaries).
The final rules will require intermediaries to conduct a background and securities enforcement regulatory history check on each issuer and each officer, director or 20 Percent Beneficial Owner of an issuer to determine whether the issuer or such person is subject to a disqualification. We anticipate that most intermediaries will employ third parties to perform background and securities enforcement regulatory history checks in light of the costs of developing an in-house capability to conduct such checks. Therefore, for the purposes of this PRA analysis, we assume that 100% of intermediaries will use these third-party service providers.
The cost for a third party to perform a background check is estimated to be between $200 and $500, depending on the nature and extent of the information provided.
One commenter noted, as a general matter, that the “costs incurred by the intermediary in dealing with an issuer, doing the required due diligence and background screening, establishing a Web page describing the offering and so on do not vary linearly with the offering size. As a percentage of the offering amount, they will be disproportionately high for smaller offerings.”
We believe that, on an ongoing basis, intermediaries will continue to use third-party services to conduct background and securities enforcement regulatory history checks. We also believe that the total estimated ongoing cost for all intermediaries to fulfill the required background and securities enforcement regulatory history checks will be the same as the estimated initial cost, or on average $24,182 per intermediary per year.
The final rules provide that no intermediary or associated person of an intermediary may accept an investment commitment in a transaction involving the offer or sale of securities made in reliance on Section 4(a)(6) until an investor has opened an account with the intermediary and consented to electronic delivery of materials.
We believe that the ongoing time burdens for this requirement will be significantly less than the initial time burden, and thus we estimate approximately two hours per intermediary per year to review and assess the related processes. Therefore, we estimate that the ongoing total burden hours necessary for this functionality will be approximately 220 hours per year (2 hours/intermediary × (10 newly-registered broker-dealers + 50 previously-registered broker-dealers + 50 funding portals)).
The final rules require intermediaries to provide educational materials to investors,
Assuming that half of the intermediaries will develop their educational materials in-house, we also expect that these intermediaries will update their educational materials in-house, as needed. We estimate that to update their educational materials in-house, each intermediary will incur an ongoing time burden of approximately 10 hours per year. Therefore, the total ongoing burden will be approximately 550 hours per year (55 intermediaries × 10 hours/intermediary).
As stated above, for the purposes of this PRA analysis, we assume that half of the intermediaries will employ third-party firms to produce educational materials, such as professional-quality online video presentations, instead of developing materials in-house. Public sources indicate that the typical cost to produce a professional corporate training video ranges from approximately $1,000 to $3,000 per production minute.
We estimate that, on an ongoing basis, when using a third-party company to update their video educational materials, each intermediary will spend approximately half of the initial average cost. We estimate, therefore, that the average ongoing annual cost for an intermediary to update its video educational materials will range from approximately $5,000 to $15,000 and that the total ongoing annual cost across all intermediaries will range from approximately $275,000 to $825,000 per year.
The final rules require an intermediary, at the account opening stage, to disclose to users of its platform that any person who receives compensation to promote an issuer's offering, or who is a founder or employee of an issuer engaging in promotional activities on behalf of the issuer, must clearly disclose the receipt of compensation and his or her engagement in promotional activities on the platform.
We believe that the ongoing time burdens for this requirement will be approximately one hour per intermediary per year to review and check that the disclosures remain appropriate. Therefore, we estimate that the ongoing total burden hours necessary for intermediaries to comply with this requirement will be approximately 110 hours per year (1 hour/intermediary × (10 newly-registered broker-dealers + 50 previously-registered broker-dealers + 50 funding portals)).
The final rules require an intermediary to make publicly available on its platform the information that an issuer of crowdfunding securities is required to provide to investors, in a manner that reasonably permits a person accessing the platform to save, download or otherwise store the information, until the offer and sale of securities is completed or cancelled.
For purposes of the PRA, our estimate of the hourly burdens related to the public availability of the issuer information is included in our estimate of the hourly burdens associated with overall platform development, discussed above in Section IV.C.2.b. We note that the platform functionality will include not only the ability to display, upload and download issuer information as required under the final rules, but also the ability to provide users with required online disclosures
We recognize that, over time, intermediaries may need to update their systems that allow issuer information to be uploaded to their platforms. We do not expect a significant ongoing burden related to the requirement for providing issuer disclosures, primarily because the functionality required for required issuer disclosure information to be uploaded is a standard feature offered
We do not expect a significant ongoing cost for providing issuer disclosures, primarily because the functionality required to upload required issuer disclosure information is a standard feature offered on many Web sites and will not require frequent updates. To the extent an intermediary uses a third party to develop the functionality for this requirement, the initial costs relevant to this requirement will be incorporated into the cost of hiring a third party to develop the platform, discussed above in subsection IV.C.2.b.2.
Intermediaries will be required to implement and maintain systems to comply with the information disclosure, communication channels, and investor notification requirements of Regulation Crowdfunding, including providing disclosure about compensation at account opening, obtaining investor acknowledgments to confirm investor qualifications and review of educational materials, providing investor questionnaires, maintaining communication channels with third parties and among investors, notifying investors of investment commitments, confirming completed transactions and confirming or reconfirming offering cancellations.
For purposes of the PRA analysis, our estimate of the hourly burdens related to these information disclosure, communication channel and investor notification requirements of Regulation Crowdfunding is included in our estimate of the hourly burdens associated with overall platform development, discussed above in Section IV.C.2.b. Based on our discussions with industry participants, we expect that these functionalities will generally be part of the overall platform development process and costs. We discuss the burdens of platform development above, and note that these will include developing the functionality that will allow intermediaries to comply with disclosure and notification requirements.
We do not expect a significant ongoing burden for providing disclosures, as required by the final rules, because the functionality required to provide information and communication channels will likely not require frequent updates. We incorporate the total burden to update the required functionality for processing investor disclosures and investor acknowledgment information in the total burden estimates relating to platform development discussed above.
We recognize that some intermediaries may implement the required functionality for processing investor disclosures and investor acknowledgments by using a third-party developer. The total cost for issuers to use third-party developers to add the required functionality for processing investor disclosures and investor acknowledgments, as well as to update the required functionality for processing investor disclosures and investor acknowledgments, is incorporated into our discussion of the total cost estimates relating to platform development in Section IV.C.2.b.
We also do not expect there to be a significant ongoing cost for developing the functionality to process these disclosures and acknowledgments, primarily because this functionality will likely not require frequent updates by third-party developers.
The final rules contain requirements related to the maintenance and transmission of funds. A registered broker will be required to comply with the requirements of Rule 15c2-4 of the Exchange Act (Transmission or Maintenance of Payments Received in Connection with Underwritings).
Based on discussion with industry participants, we estimate that funding portals will incur an initial burden of approximately 20 hours each to comply with these requirements, for a total burden of 1,000 hours (20 hours per funding portal × 50 funding portals). We expect that the burden associated with the Web site functionality required to send directions to third parties will be included as part of the platform development discussed above.
We expect that, on an ongoing basis, a registered funding portal will have to periodically review and update its written agreement with the qualified third party to hold its client funds. A registered funding portal will also be required to send directions on an ongoing basis to a qualified third party depending on whether an investing target is met or an investment commitment or offering is cancelled. Based on discussion with industry participants, we estimate that funding portals will incur an ongoing annual burden of approximately 5 hours each to comply with these requirements, or 250 hours total (5 hours per funding portal × 50 funding portals).
The final rules require a funding portal to implement written policies and procedures reasonably designed to achieve compliance with the federal securities laws and the rules and regulations thereunder, relating to its business as a funding portal. We anticipate that funding portals will comply with this requirement by using internal personnel and internal information technology resources integrated into their platforms. Based on discussion with industry participants, we estimate that a funding portal will spend approximately 40 hours to establish written policies and procedures to achieve compliance with these requirements. This will result in a total aggregate initial recordkeeping burden of 2,000 hours (40 hours × 50 funding portals).
We estimate that, on an ongoing basis, funding portals will spend approximately 5 hours per year updating, as necessary, the policies and procedures required by the final rules. This will result in an aggregate ongoing recordkeeping burden of 250 hours (5 hours × 50 funding portals).
Funding portals will be required to comply with the Privacy Rules as they
Under Rule 403(b), a funding portal will be required to comply with Regulation S-P, which will require the funding portal to provide notice to investors about its privacy policies and practices; describe the conditions under which a broker may disclose nonpublic personal information about investors to nonaffiliated third parties; and provide a method for investors to prevent a funding portal from disclosing that information to most nonaffiliated third parties by “opting out” of that disclosure, subject to certain exceptions. For funding portals, we expect that the privacy and opt-out notices will be delivered electronically, thereby reducing the delivery burden as compared to paper delivery.
We estimate that under the final rules all 50 funding portals will be subject to the requirements of Regulation S-P pursuant to Rule 403(b). In developing an estimate of the burden relating to the Regulation S-P requirements under Rule 403(b), we have considered: (1) The minimal recordkeeping burden imposed by Regulation S-P;
Funding portals will be required to comply with Regulation S-AM, which will require funding portals to provide notice to each affected individual informing the individual of his or her right to prohibit such marketing before a receiving affiliate may make marketing solicitations based on the communication of certain consumer financial information from the broker. Based on our discussions with industry participants, we estimate that approximately 20 funding portals will have affiliations that will subject them to the requirements of Regulation S-AM under the final rules, and that they will incur an average one-time burden of one hour to review affiliate marketing practices, for a total of 20 burden hours (1 hour/respondent × 20 funding portals).
We estimate that these 20 funding portals will be required to provide notice and opt-out opportunities to consumers pursuant to the requirements of Regulation S-AM, as imposed by Rule 403(b), and that they will incur an average initial burden of 18 hours to do so, for a total estimated initial burden of 360 hours (18 hours/respondent × 20 funding portals). We also estimate that funding portals will incur an ongoing burden related to Regulation S-AM's requirements for providing notice and opt-out opportunities of approximately four hours per respondent per year. This burden will cover the creation and delivery of notices to new investors and the recording of any opt-outs that are received on an ongoing basis, for a total of approximately 80 annual burden-hours (4 hours/respondent × 20 funding portals).
Funding portals will be required to comply with rule S-ID, which will require funding portals to develop and implement a written identity theft prevention program that is designed to detect, prevent and mitigate identity theft in connection with certain existing accounts or the opening of new accounts. We estimate that the initial burden for funding portals to comply with the applicable portions of Regulation S-ID, as imposed by Rule 403(b), will be (1) 25 hours to develop and obtain board approval of a program; (2) four hours to train staff; and (3) two hours to conduct an initial assessment of relevant accounts, for a total of 31 hours per funding portal. We estimate that all 50 funding portals will incur these initial burdens, resulting in an aggregate time burden of 1,550 hours ((25 + 4 + 2 hours/respondent) × 50 funding portals).
With respect to the requirements of Rule 403(b) relating to Regulation S-ID, we estimate that the ongoing burden per year will include: (1) Two hours to periodically review and update the program, review and preserve contracts with service providers and review and preserve any documentation received from service providers; (2) four hours to prepare and present an annual report to a compliance director; and (3) two hours to conduct periodic assessments to determine if the entity offers or maintains covered accounts, for a total of eight hours, of which we estimate 7 seven hours will be spent by internal counsel and 1 one hour will be spent by a compliance director. We estimate that all 50 funding portals will incur these ongoing burdens, for a total ongoing burden 400 hours (8 hours/respondent × 50 funding portals).
All funding portals will be required to make and keep records related to their activities to facilitate transactions in reliance on Section 4(a)(6) and the related rules.
We currently estimate the annual recordkeeping burden for broker-dealer compliance with Rule 17a-3 to be 394.16 hours per respondent, and the most recently approved annual recordkeeping burden for broker-dealer compliance with Rule 17a-4 to be 249 hours per respondent.
Given the more limited scope of a funding portal's business as compared to that of a broker, the more targeted scope of the books and records rules, and the fact that funding portals will be required to make, deliver and store records electronically, we expect the burden of the final rules will likely be less than that of Rules 17a-3 and 17a-4. For the purposes of the PRA, we assume that the recordkeeping burden, on average, for a funding portal to comply with the final rules will be 50% of the burdens of a broker-dealer to comply with Rules 17a-3 and 17a-4. Therefore, we estimate the initial burden to be approximately 325 hours per respondent,
We currently estimate the annual recordkeeping cost for broker-dealer compliance with Rule 17a-3 to be $5,706.67 per respondent. These ongoing recordkeeping costs reflect the costs of systems and equipment
Given the more limited scope of a funding portal's business as compared to that of a broker, the more targeted scope of the books and records rules, and the fact that funding portals will be required to make, deliver and store records electronically, we expect the annual recordkeeping cost of the final rule requirements will likely be less than that of Rules 17a-3 and 17a-4. For purposes of the PRA, we assume that the annual recordkeeping cost on average for a funding portal to comply with the requirements that records be made and kept will be about 50% less than burdens of a broker-dealer to comply with Rules 17a-3 and 17a-4. We expect the initial recordkeeping cost for funding portals, therefore, to be approximately $5,350 per respondent,
One commenter stated that “[u]nder the expectation that crowdfunding portals will be online operations and will almost certainly retain records through digital methods, the burden of collection should be minimal.”
The collections of information required under Rules 201 through 203 will be mandatory for all issuers. The collections of information required under Rules 300 through 304 will be mandatory for all intermediaries. The collections of information required under Rules 400 through 404 will be mandatory for all funding portals.
Responses on Form C, Form C-A, Form C-U, Form C-AR and Form C-TR will not be kept confidential. Responses on Form ID will be kept confidential by the Commission, subject to a request under the Freedom of Information Act.
Issuers are not subject to recordkeeping requirements under Regulation Crowdfunding. Intermediaries that are brokers will be required to retain records and information relating to Regulation Crowdfunding for the required retention periods specified in Exchange Act Rule 17a-4. Intermediaries that are funding portals will be required to retain records and information under Regulation Crowdfunding for the required retention periods specified in Rule 404.
The Commission has prepared the following Final Regulatory Flexibility Analysis (“FRFA”), in accordance with the provisions of the Regulatory Flexibility Act,
The regulation is designed to implement the requirements of Title III of the JOBS Act. Title III added Securities Act Section 4(a)(6), which provides a new exemption from the registration requirements of Securities Act Section 5 for securities-based crowdfunding transactions, provided the transactions are conducted in the manner set forth in new Securities Act Section 4A. Section 4A includes requirements for issuers that offer or sell securities in reliance on the crowdfunding exemption, as well as for persons acting as intermediaries in those transactions. The rules prescribe requirements governing the offer and sale of securities in reliance on Section 4(a)(6) and provide a framework for the regulation of registered funding portals and brokers that act as intermediaries in the offer and sale of securities in reliance on Section 4(a)(6).
As discussed above, the crowdfunding provisions of the JOBS Act, which we implement through this regulation, are intended to help alleviate the funding gap and accompanying regulatory concerns faced by small businesses by making relatively low dollar offerings of securities less costly and by providing crowdfunding platforms a means by which to facilitate the offer and sale of securities without registering as brokers, with a framework for regulatory oversight to protect investors.
In the Proposing Release, we requested comment on every aspect of the IRFA, including the number of small entities that would be affected by the proposed amendments, the existence or nature of the potential impact of the proposals on small entities discussed in the analysis, and how to quantify the impact of the proposed rules.
Some commenters expressed concern that the IRFA did not comply with the Regulatory Flexibility Act because it did not, in their view, adequately describe the costs of the proposed rule on small entities, and did not set forth significant alternatives which accomplish the rule's objectives and which minimize the significant economic impact of the proposal on small entities.
Commenters suggested several alternatives which in their view could reduce costs while accomplishing the rule's objectives.
One commenter suggested that smaller entities tend to be more volatile and more illiquid than larger entities.
For purposes of the Regulatory Flexibility Act, under our rules, an issuer (other than an investment company) is a “small business” or “small organization” if it has total assets of $5 million or less as of the end of its most recently completed fiscal year and is engaged or proposing to engage in an offering of securities which does not exceed $5 million.
For purposes of the Regulatory Flexibility Act when used with reference to a broker or dealer, the Commission has defined the term “small entity” to mean a broker-dealer that: (1) Had total capital (net worth plus subordinated liabilities) of less than $500,000 on the date in the prior fiscal year as of which its audited financial statements were prepared pursuant to Rule 17a-5(d) or, if not required to file such statements, a broker or dealer that had total capital (net worth plus subordinated debt) of less than $500,000 on the last business day of the preceding fiscal year (or in the time that it has been in business if shorter); and (2) is not affiliated with any person (other than a natural person) that is not a small business or small organization as defined in this release.”
As discussed above, the final rules include reporting, recordkeeping and other compliance requirements. In particular, the final rules impose certain disclosure requirements on issuers offering and selling securities in a transaction relying on the exemption provided by Section 4(a)(6). The final rules require that issuers relying on the exemption provided by Section 4(a)(6) file with the Commission certain specified information about the issuer and the offering, including information about the issuer's contact information; directors, officers and certain beneficial owners; business and business plan; current number of employees; financial condition; target offering amount and the deadline to reach the target offering amount; use of proceeds from the offering and price or method for calculating the price of the securities being offered; ownership and capital structure; material factors that make an investment in the issuer speculative or risky; indebtedness; description of other offerings of securities; and transactions with related parties. Issuers also will be required to file updates with the Commission to describe the progress of the issuer in meeting the target offering amount, unless the issuer relies on the
Intermediaries will be required to register with the Commission as either brokers or as funding portals. Intermediaries also will be required to provide quarterly reports to the Commission. Funding portals will be required to make and keep certain records in accordance with the rules. Registered broker-dealers are already required to make and keep certain records in accordance with existing Exchange Act Rules 17a-3 and 17a-4. In addition, the final rules impose specific compliance requirements on intermediaries, such as the maintenance of written policies and procedures.
In adopting this regulation, we took into account that the regulation, as mandated by the JOBS Act, aimed to address difficulties encountered by small entities. Accordingly, we designed the final rules for intermediaries, to the extent possible in light of investor protection concerns, with the needs and constraints of small entities in mind, including small intermediaries. We believe that the reporting, recordkeeping and other compliance requirements of the final rules applicable to intermediaries will impact, in particular, small entities that decide to register as funding portals. We believe that most of these requirements will be performed by internal compliance personnel of the broker or funding portal, but we expect that at least some funding portals may decide to hire outside counsel and third-party service providers to assist in meeting the compliance requirements. Given the statutory limitations on crowdfunding, we believe that the potential impact of the final rules on larger brokers and funding portals will be proportionally less than on small brokers and small intermediaries.
In response to comments, the final rules include a number of changes from the proposal, many of which were made to minimize the effect of the rules on small entities. These changes are outlined in detail above in the discussions of the rules adopted.
To address commenters' concerns about the cost of the rules to small issuers, we have considered the alternatives suggested by commenters and are adopting final rules which implement certain alternatives we believe will minimize the cost of the final rules to small issuers while also preserving necessary investor protection measures.
First, the final rules include an accommodation for issuers conducting an offering for the first time in reliance on Regulation Crowdfunding. Under the final rules, issuers conducting an offering of more than $500,000 but not more than $1,000,000 that have not previously sold securities in reliance on Section 4(a)(6) will not be required to provide audited financial statements, unless audited financial statements are otherwise available. Instead, the final rules permit these issuers to provide reviewed financial statements. As discussed above, this is a change from the proposal that is responsive to concerns raised by many commenters about the expense of obtaining audited financial statements, especially for start-up issuers without a track record of successfully raising capital.
As suggested by one commenter,
The final rules also maintain the progress update requirement, but with a significant modification from the proposed rule which is intended to reduce duplicative disclosure and minimize the burden on small issuers. The final rules will require an issuer to file a Form C-U at the end of the offering to disclosure the total amount of securities sold in the offering, but the rules permit issuers to satisfy the 50% and 100% progress update requirements by relying on the relevant intermediary to make publicly available on the intermediary's platform frequent updates about the issuer's progress toward meeting the target offering amount.
With respect to ongoing reporting requirements, rather than requiring an issuer to provide financial statements in the annual report that meet the highest standard previously provided, as proposed, the final rules require financial statements of the issuer certified by the principal executive officer of the issuer to be true and complete in all material respects. We expect that reducing the required level of public accountant involvement will minimize the costs and burdens for all issuers, including small issuers, associated with preparing reviewed and audited financial statements on an ongoing basis.
In addition, the final rules provide for termination of the ongoing reporting obligation in two additional circumstances: (1) The issuer has filed at least one annual report and has fewer than 300 holders of record, or (2) the
Overall, we considered whether to establish different compliance or reporting requirements or timetables or to clarify, consolidate or simplify compliance and reporting requirements for small issuers. As noted above, we have made significant revisions to the final rules to address commenters' concerns about compliance and reporting burdens faced by issuers, especially small issuers. With respect to using performance rather than design standards, we used performance standards to the extent appropriate under the statute. For example, issuers have the flexibility to customize the presentation of certain disclosures in their offering statements.
In response to comments, we have made a number of changes from the proposal with respect to intermediaries that will help to alleviate the compliance burdens faced by small entities. Most significantly, and in response to commenters' concerns about the application of Section 4A(c) liability,
The final rules have been tailored to the more limited role intermediaries will play in offerings made pursuant to Securities Act Section 4(a)(6) (as compared to the wide range of services that a traditional broker-dealer may provide). Registered brokers and funding portals will engage in similar activities related to crowdfunding and must comply with the adopted rules. The effective date for the registration provisions for funding portals will allow funding portals to be in a position to engage in crowdfunding at the same time as registered brokers once the rest of the rules become effective. These effective dates are designed to accommodate competitiveness concerns related to funding portals' and registered broker dealers' abilities to begin crowdfunding concurrently. While registered broker-dealers may perform services that a funding portal is prohibited from performing, the Exchange Act and rules thereunder, as well as SRO rules, already govern those activities. Therefore, we believe that the adopted rules are appropriate and properly tailored for the permissible activities of all brokers and funding portals.
We also considered whether, for small brokers or small funding portals, to establish different compliance, reporting or timing requirements, or whether to clarify, consolidate or simplify those requirements in our rules. While the final rules are based in large part on existing compliance requirements applicable to registered brokers to the extent they are applicable to activities permitted for funding portals, we do not believe we should establish different requirements for small entities (whether registered brokers or funding portals) that engage in crowdfunding because such activities are limited in scope and, as such, the adopted rules are tailored to that more limited activity.
We are adopting the rules and forms contained in this document under the authority set forth in the Securities Act (15 U.S.C. 77a
Administrative practice and procedure, Authority delegations (Government agencies), Organization and functions (Government agencies). Reporting and recordkeeping requirements.
Crowdfunding, Funding Portals, Intermediaries, Reporting and recordkeeping requirements, Securities.
Reporting and recordkeeping requirements, Securities.
Brokers, Confidential business information, Fraud, Reporting and recordkeeping requirements, Securities.
Brokers, Reporting and recordkeeping requirements, Securities.
Reporting and recordkeeping requirements, Securities, Trusts and Trustees.
Confidential business information, Fraud, Investment companies, Life insurance, Reporting and recordkeeping requirements, Securities.
In accordance with the foregoing, title 17, chapter II of the Code of Federal Regulations is amended as follows:
15 U.S.C. 77c, 77o, 77s, 77z-3, 77sss, 78d, 78d-1, 78d-2, 78o-4, 78w, 78ll(d), 78mm, 80a-37, 80b-11, 7202, and 7211
The addition reads as follows:
(d) With respect to the Securities Act of 1933 (15 U.S.C. 77a
15 U.S.C. 77d, 77d-1, 77s, 78c, 78o, 78q, 78w, 78mm, and Pub. L. 112-106, secs. 301-305, 126 Stat. 306 (2012).
(a)
(1) Thirty calendar days after the date that the registration is received by the Commission; or
(2) The date the funding portal is approved for membership by a national securities association registered under section 15A of the Exchange Act (15 U.S.C. 78
(b)
(c)
(2) Notwithstanding paragraph (c)(1) of this section, if a funding portal succeeds to and continues the business of a registered funding portal and the succession is based solely on a change of the predecessor's date or state of incorporation, form of organization, or composition of a partnership, the successor may, within 30 days after the succession, amend the registration of the predecessor on Form Funding Portal (§ 249.2000 of this chapter) to reflect these changes.
(d)
(e)
(f)
(1)
(2)
(ii) Each nonresident funding portal registered or applying for registration pursuant to this section shall, at the time of filing its application on Form Funding Portal (§ 249.2000 of this chapter), furnish to the Commission the name and address of its United States agent for service of process on Schedule C to the Form.
(iii) Any change of a nonresident funding portal's agent for service of process and any change of name or address of a nonresident funding portal's existing agent for service of process shall be communicated promptly to the Commission through amendment of the Schedule C to Form Funding Portal (§ 249.2000 of this chapter).
(iv) Each nonresident funding portal must promptly appoint a successor agent for service of process if the nonresident funding portal discharges its identified agent for service of process or if its agent for service of process is unwilling or unable to accept service on behalf of the nonresident funding portal.
(v) Each nonresident funding portal must maintain, as part of its books and records, the written consent and power of attorney identified in paragraph (f)(2)(i) of this section for at least three years after the agreement is terminated.
(3)
(A) Certify on Schedule C to Form Funding Portal (§ 249.2000 of this chapter) that the nonresident funding portal can, as a matter of law, and will provide the Commission and any registered national securities association of which it becomes a member with prompt access to the books and records of such nonresident funding portal and can, as a matter of law, and will submit to onsite inspection and examination by the Commission and any registered national securities association of which it becomes a member; and
(B) Provide an opinion of counsel that the nonresident funding portal can, as a matter of law, provide the Commission and any registered national securities association of which it becomes a member with prompt access to the books and records of such nonresident funding portal and can, as a matter of law, submit to onsite inspection and examination by the Commission and any registered national securities association of which it becomes a member.
(ii)
15 U.S.C. 77d, 77d-1, 77s, 78c, 78o, 78q, 78w, 78mm, and Pub. L. 112-106, secs. 301-305, 126 Stat. 306 (2012).
(a)
(1) The aggregate amount of securities sold to all investors by the issuer in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) during the 12-month period preceding the date of such offer or sale, including the securities offered in such transaction, shall not exceed $1,000,000;
(2) The aggregate amount of securities sold to any investor across all issuers in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) during the 12-month period preceding the date of such transaction, including the securities sold to such investor in such transaction, shall not exceed:
(i) The greater of $2,000 or 5 percent of the lesser of the investor's annual income or net worth if either the investor's annual income or net worth is less than $100,000; or
(ii) 10 percent of the lesser of the investor's annual income or net worth, not to exceed an amount sold of $100,000, if both the investor's annual income and net worth are equal to or more than $100,000;
(3) The transaction is conducted through an intermediary that complies with the requirements in section 4A(a) of the Securities Act (15 U.S.C. 77d-1(a)) and the related requirements in this part, and the transaction is conducted exclusively through the intermediary's platform; and
(4) The issuer complies with the requirements in section 4A(b) of the Securities Act (15 U.S.C. 77d-1(b)) and the related requirements in this part;
(b)
(1) Is not organized under, and subject to, the laws of a State or territory of the United States or the District of Columbia;
(2) Is subject to the requirement to file reports pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (15 U.S.C. 78m or 78o(d));
(3) Is an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3), or is excluded from the definition of investment company by section 3(b) or section 3(c) of that Act (15 U.S.C. 80a-3(b) or 80a-3(c));
(4) Is not eligible to offer or sell securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) as a result of a disqualification as specified in § 227.503(a);
(5) Has sold securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) and has not filed with the Commission and provided to investors, to the extent required, the ongoing annual reports required by this part during the two years immediately preceding the filing of the required offering statement; or
(6) Has no specific business plan or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies.
(c)
(d)
An issuer offering or selling securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) and in accordance with section 4A of the Securities Act (15 U.S.C. 77d-1) and this part must file with the Commission and provide to investors and the relevant intermediary the following information:
(a) The name, legal status (including its form of organization, jurisdiction in which it is organized and date of organization), physical address and Web site of the issuer;
(b) The names of the directors and officers (and any persons occupying a similar status or performing a similar function) of the issuer, all positions and offices with the issuer held by such persons, the period of time in which such persons served in the position or office and their business experience during the past three years, including:
(1) Each person's principal occupation and employment, including whether any officer is employed by another employer; and
(2) The name and principal business of any corporation or other organization in which such occupation and employment took place.
(c) The name of each person, as of the most recent practicable date but no earlier than 120 days prior to the date the offering statement or report is filed, who is a beneficial owner of 20 percent or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power;
(d) A description of the business of the issuer and the anticipated business plan of the issuer;
(e) The current number of employees of the issuer;
(f) A discussion of the material factors that make an investment in the issuer speculative or risky;
(g) The target offering amount and the deadline to reach the target offering amount, including a statement that if the sum of the investment commitments does not equal or exceed the target offering amount at the offering deadline, no securities will be sold in the offering, investment commitments will be cancelled and committed funds will be returned;
(h) Whether the issuer will accept investments in excess of the target offering amount and, if so, the maximum amount that the issuer will accept and how oversubscriptions will be allocated, such as on a pro-rata, first come-first served, or other basis;
(i) A description of the purpose and intended use of the offering proceeds;
(j) A description of the process to complete the transaction or cancel an investment commitment, including a statement that:
(1) Investors may cancel an investment commitment until 48 hours prior to the deadline identified in the issuer's offering materials;
(2) The intermediary will notify investors when the target offering amount has been met;
(3) If an issuer reaches the target offering amount prior to the deadline identified in its offering materials, it may close the offering early if it provides notice about the new offering deadline at least five business days prior to such new offering deadline (absent a material change that would require an extension of the offering and reconfirmation of the investment commitment); and
(4) If an investor does not cancel an investment commitment before the 48-hour period prior to the offering deadline, the funds will be released to the issuer upon closing of the offering and the investor will receive securities in exchange for his or her investment;
(k) A statement that if an investor does not reconfirm his or her investment commitment after a material change is made to the offering, the investor's investment commitment will be cancelled and the committed funds will be returned;
(l) The price to the public of the securities or the method for determining the price, provided that, prior to any sale of securities, each investor shall be provided in writing the final price and all required disclosures;
(m) A description of the ownership and capital structure of the issuer, including:
(1) The terms of the securities being offered and each other class of security of the issuer, including the number of securities being offered and/or outstanding, whether or not such securities have voting rights, any limitations on such voting rights, how the terms of the securities being offered may be modified and a summary of the differences between such securities and each other class of security of the issuer, and how the rights of the securities being offered may be materially limited, diluted or qualified by the rights of any other class of security of the issuer;
(2) A description of how the exercise of rights held by the principal shareholders of the issuer could affect the purchasers of the securities being offered;
(3) The name and ownership level of each person, as of the most recent practicable date but no earlier than 120 days prior to the date the offering statement or report is filed, who is the beneficial owner of 20 percent or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power;
(4) How the securities being offered are being valued, and examples of methods for how such securities may be valued by the issuer in the future, including during subsequent corporate actions;
(5) The risks to purchasers of the securities relating to minority ownership in the issuer and the risks associated with corporate actions including additional issuances of
(6) A description of the restrictions on transfer of the securities, as set forth in § 227.501;
(n) The name, SEC file number and Central Registration Depository (CRD) number (as applicable) of the intermediary through which the offering is being conducted;
(o) A description of the intermediary's financial interests in the issuer's transaction and in the issuer, including:
(1) The amount of compensation to be paid to the intermediary, whether as a dollar amount or a percentage of the offering amount, or a good faith estimate if the exact amount is not available at the time of the filing, for conducting the offering, including the amount of referral and any other fees associated with the offering, and
(2) Any other direct or indirect interest in the issuer held by the intermediary, or any arrangement for the intermediary to acquire such an interest;
(p) A description of the material terms of any indebtedness of the issuer, including the amount, interest rate, maturity date and any other material terms;
(q) A description of exempt offerings conducted within the past three years;
(1) The date of the offering;
(2) The offering exemption relied upon;
(3) The type of securities offered; and
(4) The amount of securities sold and the use of proceeds;
(r) A description of any transaction since the beginning of the issuer's last fiscal year, or any currently proposed transaction, to which the issuer was or is to be a party and the amount involved exceeds five percent of the aggregate amount of capital raised by the issuer in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) during the preceding 12-month period, inclusive of the amount the issuer seeks to raise in the current offering under section 4(a)(6) of the Securities Act, in which any of the following persons had or is to have a direct or indirect material interest:
(1) Any director or officer of the issuer;
(2) Any person who is, as of the most recent practicable date but no earlier than 120 days prior to the date the offering statement or report is filed, the beneficial owner of 20 percent or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power;
(3) If the issuer was incorporated or organized within the past three years, any promoter of the issuer; or
(4) Any member of the family of any of the foregoing persons, which includes a child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships. The term
(s) A discussion of the issuer's financial condition, including, to the extent material, liquidity, capital resources and historical results of operations;
(t) For offerings that, together with all other amounts sold under section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) within the preceding 12-month period, have, in the aggregate, the following target offering amounts:
(1) $100,000 or less, the amount of total income, taxable income and total tax, or the equivalent line items, as reported on the federal income tax returns filed by the issuer for the most recently completed year (if any), which shall be certified by the principal executive officer of the issuer to reflect accurately the information reported on the issuer's federal income tax returns, and financial statements of the issuer, which shall be certified by the principal executive officer of the issuer to be true and complete in all material respects. If financial statements of the issuer are available that have either been reviewed or audited by a public accountant that is independent of the issuer, the issuer must provide those financial statements instead and need not include the information reported on the federal income tax returns or the certifications of the principal executive officer;
(2) More than $100,000, but not more than $500,000, financial statements of the issuer reviewed by a public accountant that is independent of the issuer. If financial statements of the issuer are available that have been audited by a public accountant that is independent of the issuer, the issuer must provide those financial statements instead and need not include the reviewed financial statements; and
(3) More than $500,000, financial statements of the issuer audited by a public accountant that is independent of the issuer;
I, [identify the certifying individual], certify that:
(1) the financial statements of [identify the issuer] included in this Form are true and complete in all material respects; and
(2) the tax return information of [identify the issuer] included in this Form reflects accurately the information reported on the tax return for [identify the issuer] filed for the fiscal year ended [date of most recent tax return].
[Signature and title].
(i) 17 CFR 210.2-01 of this chapter, or
(ii) The American Institute of Certified Public Accountants. The public accountant that audits or reviews the financial statements provided by an issuer must be:
(A) Duly registered and in good standing as a certified public accountant under the laws of the place of his or her residence or principal office; or
(B) In good standing and entitled to practice as a public accountant under the laws of his or her place of residence or principal office.
(u) Any matters that would have triggered disqualification under § 227.503(a) but occurred before May 16, 2016. The failure to provide such disclosure shall not prevent an issuer from continuing to rely on the exemption provided by section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) if the issuer establishes that it did not know and, in the exercise of reasonable care, could not have known of the existence of the undisclosed matter or matters;
(v) Updates regarding the progress of the issuer in meeting the target offering amount, to be provided in accordance with § 227.203;
(w) Where on the issuer's Web site investors will be able to find the issuer's annual report, and the date by which such report will be available on the issuer's Web site;
(x) Whether the issuer or any of its predecessors previously failed to comply with the ongoing reporting requirements of § 227.202; and
(y) Any material information necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.
(a) An issuer that has offered and sold securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) and in accordance with section 4A of the Securities Act (15 U.S.C. 77d-1) and this part must file with the Commission and post on the issuer's Web site an annual report along with the financial statements of the issuer certified by the principal executive officer of the issuer to be true and complete in all material respects and a description of the financial condition of the issuer as described in § 227.201(s). If, however, an issuer has available financial statements that have either been reviewed or audited by a public accountant that is independent of the issuer, those financial statements must be provided and the certification by the principal executive officer will not be required. The annual report also must include the disclosure required by paragraphs (a), (b), (c), (d), (e), (f), (m), (p), (q), (r), and (x) of § 227.201. The report must be filed in accordance with the requirements of § 227.203 and Form C (§ 239.900 of this chapter) and no later than 120 days after the end of the fiscal year covered by the report.
I, [identify the certifying individual], certify that the financial statements of [identify the issuer] included in this Form are true and complete in all material respects.
[Signature and title].
(b) An issuer must continue to comply with the ongoing reporting requirements until one of the following occurs:
(1) The issuer is required to file reports under section 13(a) or section 15(d) of the Exchange Act (15 U.S.C. 78m(a) or 78o(d));
(2) The issuer has filed, since its most recent sale of securities pursuant to this part, at least one annual report pursuant to this section and has fewer than 300 holders of record;
(3) The issuer has filed, since its most recent sale of securities pursuant to this part, the annual reports required pursuant to this section for at least the three most recent years and has total assets that do not exceed $10,000,000;
(4) The issuer or another party repurchases all of the securities issued in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)), including any payment in full of debt securities or any complete redemption of redeemable securities; or
(5) The issuer liquidates or dissolves its business in accordance with state law.
(a)
(1)
(2)
(3)
(ii) If the issuer will accept proceeds in excess of the target offering amount, the issuer must file with the Commission and provide to investors and the relevant intermediary, no later than five business days after the offering deadline, a final Form C-U (§ 239.900 of this chapter) to disclose the total amount of securities sold in the offering.
(iii) The requirements of paragraphs (a)(3)(i) and (ii) of this section shall not apply to an issuer if the relevant intermediary makes publicly available on the intermediary's platform frequent updates regarding the progress of the issuer in meeting the target offering amount; however, the issuer must still file a Form C-U (§ 239.900 of this chapter) to disclose the total amount of securities sold in the offering no later than five business days after the offering deadline.
(b)
(2)
(3)
(a) An issuer may not, directly or indirectly, advertise the terms of an offering made in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)), except for notices that meet the requirements of paragraph (b) of this section.
(b) A notice may advertise any of the terms of an issuer's offering made in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) if it directs investors to the intermediary's platform and includes no more than the following information:
(1) A statement that the issuer is conducting an offering pursuant to section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)), the name of the intermediary through which the offering is being conducted and a link directing the potential investor to the intermediary's platform;
(2) The terms of the offering; and
(3) Factual information about the legal identity and business location of the issuer, limited to the name of the issuer of the security, the address, phone number and Web site of the issuer, the email address of a representative of the issuer and a brief description of the business of the issuer.
(c) Notwithstanding the prohibition on advertising any of the terms of the offering, an issuer, and persons acting on behalf of the issuer, may communicate with investors and potential investors about the terms of the offering through communication channels provided by the intermediary on the intermediary's platform, provided that an issuer identifies itself as the issuer in all communications. Persons acting on behalf of the issuer must identify their affiliation with the issuer in all communications on the intermediary's platform.
(a) An issuer, or person acting on behalf of the issuer, shall be permitted to compensate or commit to compensate, directly or indirectly, any person to promote the issuer's offerings made in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) through communication channels provided by an intermediary on the intermediary's platform, but only if the issuer or person acting on behalf of the issuer, takes reasonable steps to ensure that the person promoting the offering clearly discloses the receipt, past or prospective, of such compensation with any such communication.
(b) Other than as set forth in paragraph (a) of this section, an issuer or person acting on behalf of the issuer shall not compensate or commit to compensate, directly or indirectly, any person to promote the issuer's offerings made in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)), unless such promotion is limited to notices permitted by, and in compliance with, § 227.204.
(a)
(1) Be registered with the Commission as a broker under section 15(b) of the Exchange Act (15 U.S.C. 78
(2) Be a member a national securities association registered under section 15A of the Exchange Act (15 U.S.C. 78
(b)
(1) The intermediary receives the financial interest from the issuer as compensation for the services provided to, or for the benefit of, the issuer in connection with the offer or sale of the securities being offered or sold in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) through the intermediary's platform; and
(2) the financial interest consists of securities of the same class and having the same terms, conditions and rights as the securities being offered or sold in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) through the intermediary's platform. For purposes of this paragraph, a
(c)
(1)
(2)
(i) Offer investment advice or recommendations;
(ii) Solicit purchases, sales or offers to buy the securities displayed on its platform;
(iii) Compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on its platform; or
(iv) Hold, manage, possess, or otherwise handle investor funds or securities.
(3)
(4)
An intermediary in a transaction involving the offer or sale of securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) must:
(a) Have a reasonable basis for believing that an issuer seeking to offer and sell securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) through the intermediary's platform complies with the requirements in section 4A(b) of the Act (15 U.S.C. 77d-1(b)) and the related requirements in this part. In satisfying this requirement, an intermediary may rely on the representations of the issuer concerning compliance with these requirements unless the intermediary has reason to question the reliability of those representations;
(b) Have a reasonable basis for believing that the issuer has established means to keep accurate records of the holders of the securities it would offer and sell through the intermediary's platform, provided that an intermediary may rely on the representations of the issuer concerning its means of recordkeeping unless the intermediary has reason to question the reliability of those representations. An intermediary will be deemed to have satisfied this requirement if the issuer has engaged the services of a transfer agent that is registered under Section 17A of the Exchange Act (15 U.S.C. 78q-1(c)).
(c) Deny access to its platform to an issuer if the intermediary:
(1) Has a reasonable basis for believing that the issuer or any of its officers, directors (or any person occupying a similar status or performing a similar function) or beneficial owners of 20 percent or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power, is subject to a disqualification under § 227.503. In satisfying this requirement, an intermediary must, at a minimum, conduct a background and securities enforcement regulatory history check on each issuer whose securities are to be offered by the intermediary and on each officer, director or beneficial owner of 20 percent or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power.
(2) Has a reasonable basis for believing that the issuer or the offering presents the potential for fraud or otherwise raises concerns about investor protection. In satisfying this requirement, an intermediary must deny access if it reasonably believes that it is unable to adequately or effectively assess the risk of fraud of the issuer or its potential offering. In addition, if an intermediary becomes aware of information after it has granted access that causes it to reasonably believe that the issuer or the offering presents the potential for fraud or otherwise raises concerns about investor protection, the intermediary must promptly remove the offering from its platform, cancel the offering, and return (or, for funding portals, direct the return of) any funds that have been committed by investors in the offering.
(a)
(1) No intermediary or associated person of an intermediary may accept an investment commitment in a transaction involving the offer or sale of securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) until the investor has opened an account with the intermediary and the intermediary has obtained from the investor consent to electronic delivery of materials.
(2) An intermediary must provide all information that is required to be provided by the intermediary under subpart C of this part (§§ 227.300 through 227.305), including, but not limited to, educational materials, notices and confirmations, through electronic means. Unless otherwise indicated in the relevant rule of subpart C of this part, in satisfying this requirement, an intermediary must provide the information through an electronic message that contains the information, through an electronic message that includes a specific link to the information as posted on intermediary's platform, or through an electronic message that provides notice of what the information is and that it is located on the intermediary's platform or on the issuer's Web site. Electronic messages include, but are not limited to, email, social media messages, instant messages or other electronic media messages.
(b)
(i) The process for the offer, purchase and issuance of securities through the intermediary and the risks associated with purchasing securities offered and sold in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6));
(ii) The types of securities offered and sold in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) available for purchase on the intermediary's platform and the risks associated with each type of security, including the risk of having limited voting power as a result of dilution;
(iii) The restrictions on the resale of a security offered and sold in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6));
(iv) The types of information that an issuer is required to provide under § 227.202, the frequency of the delivery of that information and the possibility that those obligations may terminate in the future;
(v) The limitations on the amounts an investor may invest pursuant to § 227.100(a)(2);
(vi) The limitations on an investor's right to cancel an investment commitment and the circumstances in which an investment commitment may be cancelled by the issuer;
(vii) The need for the investor to consider whether investing in a security offered and sold in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) is appropriate for that investor;
(viii) That following completion of an offering conducted through the intermediary, there may or may not be any ongoing relationship between the issuer and intermediary; and
(ix) That under certain circumstances an issuer may cease to publish annual reports and, therefore, an investor may not continually have current financial information about the issuer.
(2) An intermediary must make the most current version of its educational material available on its platform at all times and, if at any time, the intermediary makes a material revision to its educational materials, it must make the revised educational materials available to all investors before accepting any additional investment commitments or effecting any further transactions in securities offered and sold in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)).
(c)
(d)
(a)
(1) This information must be made publicly available on the intermediary's platform, in a manner that reasonably permits a person accessing the platform to save, download, or otherwise store the information;
(2) This information must be made publicly available on the intermediary's platform for a minimum of 21 days before any securities are sold in the offering, during which time the intermediary may accept investment commitments;
(3) This information, including any additional information provided by the issuer, must remain publicly available on the intermediary's platform until the offer and sale of securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) is completed or cancelled; and
(4) An intermediary may not require any person to establish an account with the intermediary to access this information.
(b)
(1) Have a reasonable basis for believing that the investor satisfies the investment limitations established by section 4(a)(6)(B) of the Act (15 U.S.C. 77d(a)(6)(B)) and this part. An intermediary may rely on an investor's representations concerning compliance with the investment limitation requirements concerning the investor's annual income, net worth, and the amount of the investor's other investments made pursuant to section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) unless the intermediary has reason to question the reliability of the representation.
(2) Obtain from the investor:
(i) A representation that the investor has reviewed the intermediary's educational materials delivered pursuant to § 227.302(b), understands that the entire amount of his or her investment may be lost, and is in a financial condition to bear the loss of the investment; and
(ii) A questionnaire completed by the investor demonstrating the investor's understanding that:
(A) There are restrictions on the investor's ability to cancel an investment commitment and obtain a return of his or her investment;
(B) It may be difficult for the investor to resell securities acquired in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)); and
(C) Investing in securities offered and sold in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) involves risk, and the investor should not invest any funds in an offering made in reliance on section 4(a)(6) of the Securities Act unless he or she can afford to lose the entire amount of his or her investment.
(c)
(1) If the intermediary is a funding portal, it does not participate in these communications other than to establish guidelines for communication and remove abusive or potentially fraudulent communications;
(2) The intermediary permits public access to view the discussions made in the communication channels;
(3) The intermediary restricts posting of comments in the communication channels to those persons who have opened an account with the intermediary on its platform; and
(4) The intermediary requires that any person posting a comment in the communication channels clearly and prominently disclose with each posting whether he or she is a founder or an employee of an issuer engaging in promotional activities on behalf of the issuer, or is otherwise compensated, whether in the past or prospectively, to promote the issuer's offering.
(d)
(1) The dollar amount of the investment commitment;
(2) The price of the securities, if known;
(3) The name of the issuer; and
(4) The date and time by which the investor may cancel the investment commitment.
(e)
(2) An intermediary that is a funding portal must direct investors to transmit the money or other consideration directly to a qualified third party that has agreed in writing to hold the funds for the benefit of, and to promptly transmit or return the funds to, the persons entitled thereto in accordance with paragraph (e)(3) of this section. For purposes of this subpart C (§§ 227.300 through 227.305), a qualified third party means a:
(i) Registered broker or dealer that carries customer or broker or dealer
(ii) Bank or credit union (where such credit union is insured by National Credit Union Administration) that has agreed in writing either to hold the funds in escrow for the persons who have the beneficial interests therein and to transmit or return such funds directly to the persons entitled thereto when so directed by the funding portal as described in paragraph (e)(3) of this section, or to maintain a bank or credit union account (or accounts) for the exclusive benefit of investors and the issuer.
(3) A funding portal that is an intermediary in a transaction involving the offer or sale of securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) shall promptly direct the qualified third party to:
(i) Transmit funds from the qualified third party to the issuer when the aggregate amount of investment commitments from all investors is equal to or greater than the target amount of the offering and the cancellation period as set forth in § 227.304 has elapsed,
(ii) Return funds to an investor when an investment commitment has been cancelled in accordance with § 227.304 (including for failure to obtain effective reconfirmation as required under § 227.304(c)); and
(iii) Return funds to investors when an issuer does not complete the offering.
(f)
(i) The date of the transaction;
(ii) The type of security that the investor is purchasing;
(iii) The identity, price, and number of securities purchased by the investor, as well as the number of securities sold by the issuer in the transaction and the price(s) at which the securities were sold;
(iv) If a debt security, the interest rate and the yield to maturity calculated from the price paid and the maturity date;
(v) If a callable security, the first date that the security can be called by the issuer; and
(vi) The source, form and amount of any remuneration received or to be received by the intermediary in connection with the transaction, including any remuneration received or to be received by the intermediary from persons other than the issuer.
(2) An intermediary satisfying the requirements of paragraph (f)(1) of this section is exempt from the requirements of § 240.10b-10 of this chapter with respect to a transaction in a security offered and sold in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)).
(a)
(b)
(1) The offering remains open for a minimum of 21 days pursuant to § 227.303(a);
(2) The intermediary provides notice to any potential investors, and gives or sends notice to investors that have made investment commitments in the offering, of:
(i) The new, anticipated deadline of the offering;
(ii) The right of investors to cancel investment commitments for any reason until 48 hours prior to the new offering deadline; and
(iii) Whether the issuer will continue to accept investment commitments during the 48-hour period prior to the new offering deadline.
(3) The new offering deadline is scheduled for and occurs at least five business days after the notice required in paragraph (b)(2) of this section is provided; and
(4) At the time of the new offering deadline, the issuer continues to meet or exceed the target offering amount.
(c)
(i) Give or send the investor a notification disclosing that the commitment was cancelled, the reason for the cancellation and the refund amount that the investor is expected to receive; and
(ii) Direct the refund of investor funds.
(2) If material changes to the offering or to the information provided by the issuer regarding the offering occur within five business days of the maximum number of days that an offering is to remain open, the offering must be extended to allow for a period of five business days for the investor to reconfirm his or her investment.
(d)
(1) Give or send each investor a notification of the cancellation, disclosing the reason for the cancellation, and the refund amount that the investor is expected to receive;
(2) Direct the refund of investor funds; and
(3) Prevent investors from making investment commitments with respect to that offering on its platform.
(a)
(b) For purposes of this rule, personally identifiable information means information that can be used to distinguish or trace an individual's identity, either alone or when combined with other personal or identifying information that is linked or linkable to a specific individual.
(a)
(1) Thirty calendar days after the date that the registration is received by the Commission; or
(2) The date the funding portal is approved for membership by a national securities association registered under section 15A of the Exchange Act (15 U.S.C. 78
(b)
(c)
(2) Notwithstanding paragraph (c)(1) of this section, if a funding portal succeeds to and continues the business of a registered funding portal and the succession is based solely on a change of the predecessor's date or state of incorporation, form of organization, or composition of a partnership, the successor may, within 30 days after the succession, amend the registration of the predecessor on Form Funding Portal (§ 249.2000 of this chapter) to reflect these changes.
(d)
(e)
(f)
(1)
(2)
(ii) Each nonresident funding portal registered or applying for registration pursuant to this section shall, at the time of filing its application on Form Funding Portal (§ 249.2000 of this chapter), furnish to the Commission the name and address of its United States agent for service of process on Schedule C to the Form.
(iii) Any change of a nonresident funding portal's agent for service of process and any change of name or address of a nonresident funding portal's existing agent for service of process shall be communicated promptly to the Commission through amendment of the Schedule C to Form Funding Portal (§ 249.2000 of this chapter).
(iv) Each nonresident funding portal must promptly appoint a successor agent for service of process if the nonresident funding portal discharges its identified agent for service of process or if its agent for service of process is unwilling or unable to accept service on behalf of the nonresident funding portal.
(v) Each nonresident funding portal must maintain, as part of its books and records, the written consent and power of attorney identified in paragraph (f)(2)(i) of this section for at least three years after the agreement is terminated.
(3)
(A) Certify on Schedule C to Form Funding Portal (§ 249.2000 of this chapter) that the nonresident funding portal can, as a matter of law, and will provide the Commission and any registered national securities association of which it becomes a member with prompt access to the books and records of such nonresident funding portal and can, as a matter of law, and will submit to onsite inspection and examination by the Commission and any registered national securities association of which it becomes a member; and
(B) Provide an opinion of counsel that the nonresident funding portal can, as a matter of law, provide the Commission and any registered national securities association of which it becomes a member with prompt access to the books and records of such nonresident funding portal and can, as a matter of law, submit to onsite inspection and examination by the Commission and any registered national securities association of which it becomes a member.
(ii)
A funding portal that is registered with the Commission pursuant to § 227.400 is exempt from the broker
(a)
(b)
(1) Determine whether and under what terms to allow an issuer to offer and sell securities in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) through its platform; provided that a funding portal otherwise complies with this part;
(2) Apply objective criteria to highlight offerings on the funding portal's platform where:
(i) The criteria are reasonably designed to highlight a broad selection of issuers offering securities through the funding portal's platform, are applied consistently to all issuers and offerings and are clearly displayed on the funding portal's platform;
(ii) The criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the number or amount of investment commitments made, progress in meeting the issuer's target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount; provided that the funding portal may not highlight an issuer or offering based on the advisability of investing in the issuer or its offering; and
(iii) The funding portal does not receive special or additional compensations for highlighting one or more issuers or offerings on its platform;
(3) Provide search functions or other tools that investors can use to search, sort, or categorize the offerings available through the funding portal's platform according to objective criteria where;
(i) The criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the number or amount of investment commitments made, progress in meeting the issuer's target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount; and
(ii) The criteria may not include, among other things, the advisability of investing in the issuer or its offering, or an assessment of any characteristic of the issuer, its business plan, its key management or risks associated with an investment.
(4) Provide communication channels by which investors can communicate with one another and with representatives of the issuer through the funding portal's platform about offerings through the platform, so long as the funding portal (and its associated persons):
(i) Does not participate in these communications, other than to establish guidelines for communication and remove abusive or potentially fraudulent communications;
(ii) Permits public access to view the discussions made in the communication channels;
(iii) Restricts posting of comments in the communication channels to those persons who have opened an account on its platform; and
(iv) Requires that any person posting a comment in the communication channels clearly disclose with each posting whether he or she is a founder or an employee of an issuer engaging in promotional activities on behalf of the issuer, or is otherwise compensated, whether in the past or prospectively, to promote an issuer's offering;
(5) Advise an issuer about the structure or content of the issuer's offering, including assisting the issuer in preparing offering documentation;
(6) Compensate a third party for referring a person to the funding portal, so long as the third party does not provide the funding portal with personally identifiable information of any potential investor, and the compensation, other than that paid to a registered broker or dealer, is not based, directly or indirectly, on the purchase or sale of a security in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) offered on or through the funding portal's platform;
(7) Pay or offer to pay any compensation to a registered broker or dealer for services, including referrals pursuant to paragraph (b)(6) of this section, in connection with the offer or sale of securities by the funding portal in reliance on section 4(a)(6) of the Act(15 U.S.C. 77d(a)(6)), provided that:
(i) Such services are provided pursuant to a written agreement between the funding portal and the registered broker or dealer;
(ii) Such services and compensation are permitted under this part; and
(iii) Such services and compensation comply with the rules of any registered national securities association of which the funding portal is a member;
(8) Receive any compensation from a registered broker or dealer for services provided by the funding portal in connection with the offer or sale of securities by the funding portal in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)), provided that:
(i) Such services are provided pursuant to a written agreement between the funding portal and the registered broker or dealer;
(ii) Such compensation is permitted under this part; and
(iii) Such compensation complies with the rules of any registered national securities association of which the funding portal is a member;
(9) Advertise the existence of the funding portal and identify one or more issuers or offerings available on the portal on the basis of objective criteria, as long as:
(i) The criteria are reasonably designed to identify a broad selection of issuers offering securities through the funding portal's platform, and are applied consistently to all potential issuers and offerings;
(ii) The criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the expressed interest by investors, as measured by number or amount of investment commitments made, progress in meeting the issuer's target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount; and
(iii) The funding portal does not receive special or additional compensation for identifying the issuer or offering in this manner;
(10) Deny access to its platform to, or cancel an offering of an issuer, pursuant to § 227.301(c)(2), if the funding portal has a reasonable basis for believing that the issuer or the offering presents the potential for fraud or otherwise raises concerns about investor protection;
(11) Accept, on behalf of an issuer, an investment commitment for securities offered in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) by that issuer on the funding portal's platform;
(12) Direct investors where to transmit funds or remit payment in connection with the purchase of securities offered and sold in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)); and
(13) Direct a qualified third party, as required by § 227.303(e), to release proceeds to an issuer upon completion of a crowdfunding offering or to return proceeds to investors in the event an investment commitment or an offering is cancelled.
(a)
(b)
(c)
(a)
(1) All records related to an investor who purchases or attempts to purchase securities through the funding portal;
(2) All records related to issuers who offer and sell or attempt to offer and sell securities through the funding portal and the control persons of such issuers;
(3) Records of all communications that occur on or through its platform;
(4) All records related to persons that use communication channels provided by a funding portal to promote an issuer's securities or communicate with potential investors;
(5) All records required to demonstrate compliance with the requirements of subparts C (§§ 227.300 through 227.305) and D (§§ 227.400 through 227.404) of this part;
(6) All notices provided by such funding portal to issuers and investors generally through the funding portal's platform or otherwise, including, but not limited to, notices addressing hours of funding portal operations (if any), funding portal malfunctions, changes to funding portal procedures, maintenance of hardware and software, instructions pertaining to access to the funding portal and denials of, or limitations on, access to the funding portal;
(7) All written agreements (or copies thereof) entered into by such funding portal relating to its business as such;
(8) All daily, monthly and quarterly summaries of transactions effected through the funding portal, including:
(i) Issuers for which the target offering amount has been reached and funds distributed; and
(ii) Transaction volume, expressed in:
(A) Number of transactions;
(B) Number of securities involved in a transaction;
(C) Total amounts raised by, and distributed to, issuers; and
(D) Total dollar amounts raised across all issuers, expressed in U.S. dollars; and
(9) A log reflecting the progress of each issuer who offers or sells securities through the funding portal toward meeting the target offering amount.
(b)
(c)
(d)
With respect to any books and records maintained or preserved on behalf of [name of funding portal], the undersigned hereby acknowledges that the books and records are the property of [name of funding portal], and hereby undertakes to permit examination of such books and records at any time, or from time to time, during business hours by representatives of the Securities and Exchange Commission and the registered national securities association of which the funding portal is a member, and to promptly furnish to the Commission, its representatives, and the registered national securities association of which the funding portal is a member, a true, correct, complete and current hard copy of any, all, or any part of, such books and records.
(e)
(f)
(a) Securities issued in a transaction exempt from registration pursuant to section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) and in accordance with section 4A of the Securities Act (15 U.S.C. 77d-1) and this part may not be transferred by any purchaser of such securities during the one-year period beginning when the securities were issued in a transaction exempt from registration pursuant to section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)), unless such securities are transferred:
(1) To the issuer of the securities;
(2) To an accredited investor;
(3) As part of an offering registered with the Commission; or
(4) To a member of the family of the purchaser or the equivalent, to a trust controlled by the purchaser, to a trust created for the benefit of a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance.
(b) For purposes of this § 227.501, the term
(c) For purposes of this section, the term
(a) A failure to comply with a term, condition, or requirement of this part will not result in the loss of the exemption from the requirements of Section 5 of the Securities Act (15 U.S.C. 77e) for any offer or sale to a particular individual or entity, if the issuer relying on the exemption shows:
(1) The failure to comply was insignificant with respect to the offering as a whole;
(2) The issuer made a good faith and reasonable attempt to comply with all applicable terms, conditions and requirements of this part; and
(3) The issuer did not know of such failure where the failure to comply with a term, condition or requirement of this part was the result of the failure of the intermediary to comply with the requirements of section 4A(a) of the Securities Act (15 U.S.C. 77d-1(a)) and the related rules, or such failure by the intermediary occurred solely in offerings other than the issuer's offering.
(b) Paragraph (a) of this section shall not preclude the Commission from bringing an enforcement action seeking any appropriate relief for an issuer's failure to comply with all applicable terms, conditions and requirements of this part.
(a)
(1) Has been convicted, within 10 years before the filing of the offering statement (or five years, in the case of issuers, their predecessors and affiliated issuers), of any felony or misdemeanor:
(i) In connection with the purchase or sale of any security;
(ii) Involving the making of any false filing with the Commission; or
(iii) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser, funding portal or paid solicitor of purchasers of securities;
(2) Is subject to any order, judgment or decree of any court of competent jurisdiction, entered within five years before the filing of the information required by section 4A(b) of the Securities Act (15 U.S.C. 77d-1(b)) that, at the time of such filing, restrains or enjoins such person from engaging or continuing to engage in any conduct or practice:
(i) In connection with the purchase or sale of any security;
(ii) Involving the making of any false filing with the Commission; or
(iii) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser, funding portal or paid solicitor of purchasers of securities;
(3) Is subject to a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); an appropriate federal banking agency; the U.S. Commodity Futures Trading Commission; or the National Credit Union Administration that:
(i) At the time of the filing of the information required by section 4A(b) of the Securities Act (15 U.S.C. 77d-1(b)), bars the person from:
(A) Association with an entity regulated by such commission, authority, agency or officer;
(B) Engaging in the business of securities, insurance or banking; or
(C) Engaging in savings association or credit union activities; or
(ii) Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative or deceptive conduct entered within ten years before such filing of the offering statement;
(4) Is subject to an order of the Commission entered pursuant to section 15(b) or 15B(c) of the Exchange Act (15 U.S.C. 78
(i) Suspends or revokes such person's registration as a broker, dealer, municipal securities dealer, investment adviser or funding portal;
(ii) Places limitations on the activities, functions or operations of such person; or
(iii) Bars such person from being associated with any entity or from participating in the offering of any penny stock;
(5) Is subject to any order of the Commission entered within five years before the filing of the information required by section 4A(b) of the Securities Act (15 U.S.C. 77d-1(b)) that, at the time of such filing, orders the person to cease and desist from committing or causing a violation or future violation of:
(i) Any scienter-based anti-fraud provision of the federal securities laws, including without limitation Section 17(a)(1) of the Securities Act (15 U.S.C. 77q(a)(1)), Section 10(b) of the Exchange Act (15 U.S.C. 78j(b)) and 17 CFR 240.10b-5, section 15(c)(1) of the Exchange Act (15 U.S.C. 78o(c)(1)) and Section 206(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-6(1)) or any other rule or regulation thereunder; or
(ii) Section 5 of the Securities Act (15 U.S.C. 77e);
(6) Is suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade;
(7) Has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A (17 CFR 230.251 through 230.263) offering statement filed with the Commission that, within five years before the filing of the information required by section 4A(b) of the Securities Act (15 U.S.C. 77d-1(b)), was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is, at the time of such filing, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued; or
(8) Is subject to a United States Postal Service false representation order entered within five years before the filing of the information required by section 4A(b) of the Securities Act (15 U.S.C. 77d-1(b)), or is, at the time of such filing, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.
(b)
(1) With respect to any conviction, order, judgment, decree, suspension, expulsion or bar that occurred or was issued before May 16, 2016;
(2) Upon a showing of good cause and without prejudice to any other action by the Commission, if the Commission determines that it is not necessary under the circumstances that an exemption be denied;
(3) If, before the filing of the information required by section 4A(b) of the Securities Act (15 U.S.C. 77d-1(b)), the court or regulatory authority that entered the relevant order, judgment or decree advises in writing (whether contained in the relevant judgment, order or decree or separately to the Commission or its staff) that disqualification under paragraph (a) of this section should not arise as a consequence of such order, judgment or decree; or
(4) If the issuer establishes that it did not know and, in the exercise of reasonable care, could not have known that a disqualification existed under paragraph (a) of this section.
(c)
(1) In control of the issuer; or
(2) Under common control with the issuer by a third party that was in control of the affiliated entity at the time of such events.
(d)
15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3, 77sss(a), 78c(b), 781, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c), 80a-8, 80a-29, 80a-30, 80a-37, 7201
The addition reads as follows:
(a) * * *
(1) * * *
(xix) Form C (§ 239.900 of this chapter). Exhibits to Form C (§ 239.900 of this chapter) may be filed on EDGAR as PDF documents in the format required by the EDGAR Filer Manual, as defined in Rule 11 of Regulation S-T (§ 232.11 of this chapter). Notwithstanding Rule 104 of Regulation S-T (§ 232.104 of this chapter), the PDF documents filed under this paragraph will be considered as officially filed with the Commission; and
(xx) Form Funding Portal (§ 249.2000 of this chapter). Exhibits and attachments to Form Funding Portal (§ 249.2000 of this chapter) may be filed on EDGAR as PDF documents in the format required by the EDGAR Filer Manual, as defined in Rule 11 of Regulation S-T (§ 232.11 of this chapter). Notwithstanding Rule 104 of Regulation S-T (§ 232.104 of this chapter), the PDF documents filed under this paragraph will be considered as officially filed with the Commission.
15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 77sss, 78c, 78l, 78m, 78n, 78o(d), 78o-7 note, 78u-5, 78w(a), 78ll, 78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 80a-26, 80a-29, 80a-30, and 80a-37, unless otherwise noted.
This form shall be used for filings under Regulation Crowdfunding (part 227 of this chapter).
The text of Form C will not appear in the Code of Federal Regulations.
15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1,78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et. seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; and Public Law 111-203, 939A, 124 Stat. 1376, (2010), unless otherwise noted.
(a) For purposes of determining whether an issuer is required to register a security with the Commission pursuant to Section 12(g)(1) of the Act (15 U.S.C. 78l(g)(1)), the definition of held of record shall not include securities issued pursuant to the offering exemption under section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) by an issuer that:
(1) Is current in filing its ongoing annual reports required pursuant to § 227.202 of this chapter;
(2) Has total assets not in excess of $25 million as of the end of its most recently completed fiscal year; and
(3) Has engaged a transfer agent registered pursuant to Section 17A(c) of the Act to perform the function of a transfer agent with respect to such securities.
(b) An issuer that would be required to register a class of securities under Section 12(g) of the Act as a result of exceeding the asset threshold in paragraph (a)(2) of this section may continue to exclude the relevant securities from the definition of “held of record” for a transition period ending on the penultimate day of the fiscal year two years after the date it became ineligible. The transition period terminates immediately upon the failure of an issuer to timely file any periodic report due pursuant to § 227.202 at which time the issuer must file a registration statement that registers that class of securities under the Act within 120 days.
15 U.S.C. 78a
This form shall be used for filings by funding portals under Regulation Crowdfunding (part 227 of this chapter).
The text of Form Funding Portal will not appear in the Code of Federal Regulations.
15 U.S.C. 77ddd(c), 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77sss, and 78
15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78
The amendments to Form ID will not appear in the Code of Federal Regulations.
By the Commission.
The following Exhibit A will not appear in the Code of Federal Regulations.
On October 9, 2014, Administrative Law Judge Christopher B. McNeil (hereinafter, ALJ) issued the attached Recommended Decision (hereinafter, cited as R.D.). On October 31, 2014, one day after the due date,
According to Respondent's counsel, on the day on which his Exceptions were due, her word processing program shut down and while she was able to find a recovered document, “it was not the most recent version and did not include the final arguments or footnotes.” Resp. Mot. for the Administrator to Accept and Review the Updated Version of Respondent's Exceptions to the ALJ's Recommendations, at 1. Respondent's counsel represents that she immediately contacted the ALJ's law clerk to request an extension; according to Respondent's counsel, she spoke with the ALJ who stated that she could either submit the document “as is” or “send a motion to the [A]dministrator requesting an extension.”
Respondent's counsel chose to file his Exceptions “as is.”
Having considered the record in its entirety,
However, Respondent furthers argues that “this document shows that [the DI] received diagnosis, prognosis, and treatment [information], it further shows that Dr. Holder provided the necessary release which allowed [the DI] to meet with Ms. Hasper and discuss the process of the evaluation and its contents.”
I agree. This document does not constitute newly discovered evidence and was obviously available to Respondent at the time of the hearing. I therefore decline to consider it.
Respondent takes exception to three of the ALJ's enumerated factual findings (numbers 12, 13, and 14) asserting that they are not supported by the record. He also takes exception to five of the ALJ's conclusions of law (numbers 2, 5, 6, 9, and 13).
In Finding of Fact number 12, the ALJ found:
In the course of investigating the circumstances surrounding state medical board action pertaining to Respondent's medical licenses in Florida and Minnesota, DEA Diversion Investigator Virginia McKenna met with or spoke with Respondent on several occasions between July 19, 2012 and August 23, 2013. Throughout this period, Investigator McKenna made repeated requests for Respondent to provide the DEA with copies of monitoring and treatment records reflecting action by the medical boards in Florida and Minnesota. Initially, and for a period extending more than six months, Respondent deferred complying with these requests while assuring Investigator McKenna he would comply. By April 2013, when the records still had not been produced, Investigator McKenna presented Respondent with release forms that would authorize the DEA to receive copies of these reports. Respondent refused to sign the releases, and advised Investigator McKenna that he would not permit the DEA access to the PRN report from Florida, and gave her what appears to be an incomplete set of records reflecting the report from Minnesota.
Respondent asserts that this finding is not supported by the record, because the Diversion Investigator acknowledged in her testimony that she had received duplicate copies of a physician's report prior to obtaining some 82 pages of documents from Respondent, and that “[i]n order to receive a duplicate copy she must have received a previous copy of the report.” Exceptions at 2. Respondent argues that the DI's statement that she did not receive “ ‘much, if anything’ is contradicted by the fact that she acknowledged receipt of 82 pages of information,” which included “copies of notes [prepared by his case manager at the Minnesota Health Professionals Services Program (HPSP)], the quarterly reports[,] as well as a toxicology report provided to” the DI.
Respondent also asserts that he provided the results of a chemical assessment, which included the diagnosis, prognosis and recommended treatment, by Ms. Hasper (who he saw outside of the HPSP program), as well as reports from Dr. Albert, a psychologist he saw some fifteen times as part of the HPSP program.
While Respondent acknowledges that he did not provide his Florida PRN file to the DI, he argues that he “provide[d] a copy of his HPSP information which reflected the most recent analysis of his treatment, diagnosis and prognosis” to the DI and that she did not “articulate what information she was missing from
I do not find Respondent's Exception to establish sufficient reason to reject the ALJ's finding, which was based largely on his assessment of the credibility of the DI and Respondent. As for Respondent's contention that because the DI testified that she received duplicate copies of a physician's report, she must have received the report previously, I do not agree. The DI testified that notwithstanding numerous requests she made of Respondent to provide his HPSP records, including on July 19, 2012 and August 25, 2012, as well as on an unspecified date in November 2012, he did not provide the aforesaid 82 pages, which he represented as being the HPSP records, until the January 4, 2013 meeting. Tr. 464, 469-70, 472-73. Notably, before Government counsel even broached the subject of the January 4, 2013 meeting the DI had with Respondent, Government Counsel asked the DI: “and did you get the records?” to which the DI answered: “I did not.”
As for Respondent's contention that in January 2013, he provided his complete HPSP file, the evidence nonetheless establishes that in August 2013,
It is true that during this phone call, Respondent told the DI that he was going to undergo a chemical assessment by Ms. Hasper, which he did outside of the HSPS, as he had already completed the program.
Thus, contrary to Respondent's Exception that the DI did not “articulate what she was missing from the HPSP file,” Exceptions at 4, the DI did identify information that was likely in his HPSP file.
In Finding of Fact Number 13, the ALJ found:
In meetings and conversations conducted by DEA Diversion Investigator McKenna . . . Henderson, and . . . Capello, Respondent gave evasive and conflicting answers to questions regarding his history of drug abuse, his use and abuse of marijuana and Adderall, the sources supplying him with controlled substances, his ability to recall the events immediately prior to and after the June 13, 2008 crash, the nature and severity of injuries he and his passenger sustained due to the crash, his use of controlled substances while working at MD Now, and his reasons for answering registration application Question Three in the negative. He provided similarly evasive and conflicting answers to questions presented to him by the medical boards in Florida and Minnesota, particularly minimizing the severity of injuries he and his passenger sustained in the June 13, 2008 crash. Respondent continued providing evasive, inconsistent, and deflecting responses during the evidentiary hearing he requested upon his receipt of the pending DEA Order to Show Cause.
In excepting to this finding, Respondent takes issue with the ALJ's credibility findings with respect to multiple witnesses for the Government. These include: (1) The DI whose testimony is discussed above; (2) S.S., who testified,
As for the DI, Respondent raises a further challenge to her credibility. He notes that during her testimony regarding a meeting (on July 19, 2012) with Respondent and his attorney, during which the allegation that he materially falsified Question Three on his application was raised, the DI testified that:
He answered on the application no. When I asked him about that, he said that he didn't understand the question, that he wasn't intending to lie, at which time Mr. Harbison interjected, why would he lie when he knew it was public record, but I had no, I don't know why he would or wouldn't do such a thing, so I showed him the application. And then he said that he didn't read the question thoroughly, and that's when I showed him a sample application that I had.
Tr. 463. According to Respondent, the DI later admitted that Respondent's “application was not presented to him at the meeting.” Exceptions at 6. Respondent based this on the following colloquy during cross examination:
Resp. Counsel: And concerning the application, when Mr. Harbison first requested the application, wasn't he told that you all were not able to provide him an application because it was done on the internet?
DI: Yes, ma'am. That was my error. I spoke with . . . the section chief for Registration, and I misunderstood what he said. And I relayed that, my misunderstanding. And that's when they went further and were able to produce it.
I do not find this testimony sufficient to support Respondent's contention that the DI gave false testimony in the proceeding. The DI's testimony is simply insufficient to establish that at the July 2012 meeting, she showed the actual application filed by Respondent as opposed to the sample application she referred to in the next sentence. Notably, the DI's testimony that “so I showed him the application” does not specify that it was Respondent's actual application which she showed him, and her continuing testimony supports the inference that it was only a sample application.
Respondent further argues that the ALJ gave inappropriate weight to the testimony of S.S., who, in Respondent's words, “was willing to make many exaggerations/false statements against [him] for a get out of jail card.” Exception at 7. Respondent contends that S.S. gave “internally conflicting testimony that he provided cocaine `sporadically' and marijuana `relatively regularly to Dr. Holder,' ” and “he used these drugs with Dr. Holder.”
While S.S. testified that he was on probation during the same time-period in which he testified that he “used cocaine and marijuana with” Respondent,
S.S. further testified that in June 2008, he was smoking marijuana with Respondent at the latter's residence, when Respondent told him that he needed a favor—this being for S.S. to come by the office and fill a prescription for Adderall, which S.S. was to then return to Respondent. Tr. 208. On June 11, 2008, Respondent either called or texted S.S., who went to Respondent's clinic, picked up a prescription for 60 tablets of Adderall 30 mg which was written by Respondent and listed S.S. as the patient.
To be sure, as Respondent argues, S.S. gave conflicting testimony as to how many of the Adderall pills he took from the prescription, initially stating that he took one or two pills, which was his “best recollection,” before adding that “[i]t could have been three or four.” Tr. 213-14. While Respondent argues that S.S. was “willing to say just about anything,” Exceptions at 9, the evidence shows that following the accident, the police found in Respondent's car the prescription vial bearing S.S.'s name as the patient and listing the contents as amphetamine 30 mg, along with 41 pink tablets. GX 11, at 1. Moreover, the blood specimen obtained from Respondent following the accident showed that he had ingested amphetamines. GXs 13, 14. Thus, I find no reason to reject the ALJ's finding that S.S. gave credible testimony.
As for N.P.'s testimony, which primarily focused on the scope of the injuries she suffered in the accident, whether she had only minor injuries as Respondent suggests or more serious injuries to include a dislocated elbow, shattered cervical disc, a broken back, and neurologic damage, is of only nominal relevance in resolving whether granting Respondent's application is consistent with the public interest. 21 U.S.C. 823(f). In any event, given that the Government disclosed to Respondent that it intended to elicit testimony from N.P. regarding the injuries she sustained and that the ALJ found her testimony credible, in the absence of medical records refuting her testimony, I find no reason to reject the ALJ's credibility determination.
Finally, Respondent takes exception to the ALJ's factual finding that “[h]e provided similarly evasive and conflicting answers to questions presented to him by the medical boards in Florida and Minnesota, particularly minimizing the severity of injuries he and his passenger sustained in the June 13, 2008 crash.” R.D. at 62. As evidence for his finding that Respondent provided evasive and conflicting answers to the questions presented by the Florida Board, the ALJ did not cite any evidence in the record.
The related criminal matter has been referred for pre-trial intervention and Respondent is currently
R.D. at 37 (quoting GX 30, at 12). While the record establishes that Respondent did not complete the program because, in his words, the program was taking too long, there is no evidence that Respondent was not “currently complying” with the Drug Court program at the time of his petition. The ALJ did not cite this passage as support for his conclusion that Respondent gave evasive and conflicting answers to the questions of the Florida Board, but rather, only as support for his conclusion that although Respondent “participated in monitoring by PRN and the CARP program . . . [he] has effectively withheld from the Administrator records showing his treatment in Florida for these disorders.” R.D. at 37.
There is, however, substantial evidence that Respondent provided false information on his Minnesota application. Respondent provided a yes answer with the notation to “Please View Addendum” to questions regarding: (1) Whether his license to practice medicine in any state had been revoked, suspended, restricted or conditioned; (2) whether he had been notified of any investigation by any state board regarding the practice of medicine; (3) whether any criminal charges had ever been filed against him, regardless of whether they had been expunged; and (4) whether he had ever been charged with DWI or DUI. GX 34, at 6.
In the addendum, Respondent wrote that: “I had a seizure while driving on June 1, 2008. A collision with a sign post followed. Both the passenger and I were in seatbelts and only suffered minor injuries form [sic] airbag deployment.”
Respondent represented to the Board that “[n]o controlled substances were found in my possession or in [the] vehicle (via police report).”
The evidence also shows that the Minnesota application's question number 12 specifically included charges of disorderly conduct and required that he disclose any charge regardless of whether it had had been expunged or removed from his record by executive pardon. GX 34, at 6. In his testimony, Respondent admitted that that he had been charged with disorderly conduct on another occasion. Tr. 151-52. Yet he failed to disclose this charge on the Minnesota application. GX 34, at 9. Respondent explained the omission, asserting that while his answer to the application question “may not have been complete . . . it was truthful,” and that he was truthful about “the charges that I thought were actually most important” and that “the charges were dismissed.” Tr. 151-52.
Respondent did acknowledge that the Florida Board of Medicine suspended his license, but that it had been reinstated. GX 34, at 10. He then wrote: “Admittedly, I did use Adderall as used for ADHD without a prescription while working long hours. I acquired from a colleague who worked in the Urgent Care where I worked.”
As the record shows, several of these statements were false. These include Respondent's statement that no controlled substances were found in his possession or vehicle,
After the Minnesota Board's Licensure Committee denied his application,
In support of his request for reconsideration by the licensure committee, Respondent submitted an affidavit. Therein, Respondent again asserted that “[t]he original police report showed that no alcohol or illegal drugs were found in my vehicle.”
I obtained the Adderall only for the purpose of helping me stay alert during a period when I was working hard for many hours. I definitely do not have a “drug problem,” and have never had a history of anything even close to that. I realize and agree that what I did in obtaining the Adderall was wrong. I had never done that before and will never do it again.
However, even if it is true that the “original” police report did not state that illegal drugs were found in his vehicle, several of the supplemental police reports establish that the Adderall vial was found in his car. Thus, his statement is nonetheless misleading. Moreover, his statement that he did not use marijuana is refuted by the blood test results. As for his statement as to how he obtained the Adderall, while S.S. may have arguably been “a friend,” the statement is nonetheless misleading in that Respondent attempted to minimize his culpability as he actually obtained the drug by writing a fraudulent prescription in S.S.'s name. Finally, Respondent's assertion that he did not have a drug problem is amply refuted by the record, which includes the blood test results following the accident,
In his decision, the ALJ expressed the view “that Respondent's misrepresentations to these boards calls into question whether the actions taken by these regulators would be the same had they been told the same things [Respondent] reported as true during this administrative process.” R.D. at 48. Continuing, the ALJ explained that “[t]he Government's identification of the nature of these misrepresentations accurately reflects the many ways in which the two state medical boards were acting with less than a complete and accurate record due to [Respondent's] duplicity.”
Respondent argues, however, that the Minnesota Board “had complete information” and that the Minnesota Board “conducted [a] hearing[ ] were [sic] [he] was vigorously questioned about his explanation of events.”
The record thus clearly establishes that Respondent made multiple false statements in both his applications to the Minnesota Board and in his affidavit in support of his request for reconsideration. The record also clearly establishes that on October 20, 2011, Respondent appeared before the Board's “Licensure Committee and discussed his use of controlled substances that had not been prescribed for him” and that “[t]he Committee decided to recommend that Applicant be granted licensure with conditions and restrictions based upon a report of chemical abuse and diversion of controlled substances for his own use.” GX 39, at 4.
The evidence also includes the minutes of the Licensure Committee meeting.
Finally, Respondent takes exception to the ALJ's adverse credibility finding with respect to his testimony. He maintains, that “given his limitations in memory, [he] has made every effort to be upfront and honest about his improprieties.” Exceptions at 9. He argues that “[o]rdinarily, it would be difficult to remember specific details of occurrences that occurred over six years ago” and that he “is not only impacted by the `normal memory loss' from the passing of time, he experienced a severe brain injury.”
However, Respondent's neurologist testified only that the injury affected his ability “to form new memory” and that it only “lasted maybe up to, even up to when he left the rehabilitation center.” Tr. 510. Respondent's neurologist further explained that:
[W]ith the extent of the injury he suffered, I would expect that he would have trouble recalling events even shortly after, and even a while after, because of his problem with what we call encoding. When someone says something to you, particularly when it comes through what we call short-term memory, there is a spot it goes [to] on your brain that allows you to retain it. In his case, he didn't have the ability to use that spot on his brain.
Still later, Respondent's neurologist testified that “there's a condition” that is “very common in people with traumatic brain injury called confabulation.”
While this testimony may establish that Respondent had issues with his short-term memory, ultimately, it does not persuade me that Respondent's numerous false statements can be explained by his brain injury rather than his intent to deceive the Agency's Investigators, the ALJ, and this Office.
Moreover, even if Respondent's brain injury accounts for the disparity between his testimony and the testimony of the other witnesses (and the various exhibits) regarding the accident, the scope of both his and N.P.'s injuries, and the cause of his extensive injuries, these issues are of only tangential relevance in assessing whether granting his application would be “consistent with the public interest.” 21 U.S.C. 823(f). What is relevant is that Respondent materially falsified his application, made false statements to the Agency's Investigators who investigated the application, and gave false testimony in this proceeding.
For example, during the investigation, Respondent provided multiple accounts as to how many Adderall tablets he had taken before the crash, initially telling a DI that he took only one tablet the day before the crash (on July 19, 2012). Tr. 465. However, upon being confronted by the DI during a phone call (on August 25, 2012) that one pill would not provide a therapeutic level, Respondent then asserted that he might have taken two pills.
Likewise, when asked during the July 19, 2012 interview why the police found the Adderall in his car, Respondent asserted that he had no knowledge as to why the drugs were in his car and asserted that the police had planted them.
Moreover, when asked at this interview about the Adderall prescription issued in the name of S.S., Respondent initially said that he had met with S.S. but did not document the prescription in S.S.'s medical record “because it had already been discussed.”
In the July 19, 2012 interview, Respondent also denied having smoked marijuana, claiming that the blood test result was a false positive.
During the hearing, Respondent testified that the Adderall prescription he wrote (which listed S.S. as the patient but was actually issued to obtain the drugs for his own use) was a refill of a prescription S.S. usually got. R.D. at 28 (quoting Tr. 95). Moreover, while in his testimony Respondent admitted to using Adderall on three or four occasions during the period in which he was working at MD Now (an urgent care clinic), he claimed that he got the drug from a colleague at the clinic, who was a physician's assistant (PA). Tr. 114. He also later testified that “took no more than four pills . . . when I worked at MD Now,” and after asserting that this was four pills in total, he then testified that he never took more than one pill at a time.
Regarding his marijuana use, Respondent admitted that he had used marijuana in college and “on occasion on vacation.”
Still later, when testifying on his own behalf, Respondent testified that while there are “a lot of things that I'm very unproud of . . . I cannot remember diverting any medications with S.S. I cannot remember and I honestly cannot remember how the medication got into the car, got into my car, but I do admit completely to using Adderall without prescriptions.”
Contrary to his contention, the record amply establishes that Respondent “has not made every effort to be upfront and honest about his improprieties.” Exceptions at 9. I thus find Respondent's Exception is well taken only with respect to the ALJ's finding that “[h]e provided similarly evasive and conflicting answers to questions presented to him by the” Florida Medical Board, and only to the extent the ALJ's finding suggests that he gave “evasive and conflicting answers to questions presented to him by the” Minnesota's Boards Licensure Committee during his appearance before the Committee.
In his Finding of Fact Number 14, the ALJ discussed Respondent's evidence of remediation. While the ALJ acknowledged that Respondent successfully completed one year of monitoring under the Minnesota Health Professionals Services Program, that he produced letters of support from patients and professional colleagues, and testified that he had changed his lifestyle, learned from his experiences,
As for his reasoning, the ALJ explained that he “question[ned] the weight that can be attributed to this evidence,” noting that the monitoring program imposed by the Minnesota Board “was based on Respondent's material misrepresentation of the nature of the injuries he and his passenger sustained in the June 2008 crash, and his failure to disclose the extent and nature of his history of drug abuse.”
With respect to the reasons given by ALJ as to why he gave less weight to the Minnesota Board's Order, Respondent argues that the Order “specifically states that `. . . Respondent was licensed by the board pursuant to a Stipulation . . . based upon his unprofessional conduct, diversion of drugs for his own use, and disciplinary action taken against his license in another state or jurisdiction.' ” Exceptions at 16. As explained previously, while the record establishes that Respondent made false statements to the Minnesota Board and failed to disclose other information in both his application and the affidavit he submitted in support of his request for reconsideration, the record does not establish whether he made the same false statements, as well as withheld material information, when he appeared before the Licensure Committee to discuss his unprofessional conduct and diversion of drugs for his own use. Of note, while once the Government established its
Respondent also takes exception to the ALJ's finding that “the record establishes that Respondent surrender[ed] his [Florida] medical license . . . in order to avoid the[ ] remedial requirements” imposed by the Florida Board. Exceptions at 17. While I agree with Respondent that this finding is not supported by substantial evidence, ultimately this finding is of no consequence, because Respondent had the burden of production on the issue of whether he has undertaken sufficient remedial measures to demonstrate that he can be entrusted with a new registration.
In Finding of Fact number 14, the ALJ did not rely on Respondent's failure to provide the DI with a release for his HPSP file as one of the reasons he discounted the weight to be given to his compliance with the HPSP. However, the ALJ did decline to consider the testimony of Respondent's case manager as to his “progress in the HPSP” because it was unclear whether the Government had ever been provided with a complete record of his treatment. R.D. at 24 (citing 21 CFR 1301.15
[t]he Administrator may require an applicant to submit such documents or written statements of fact relevant to the application as he/she deems necessary to determine whether the application should be granted. The failure of the applicant to provide such documents or statements within a reasonable time after being requested to do so shall be deemed to be a waiver by the applicant of an opportunity to present such documents or facts for consideration by the Administrator in granting or denying the application.
21 CFR 1301.15.
The Order of Unconditional License does constitute some evidence of Respondent's having undertaken remedial measures. It is also acknowledged that Respondent submitted into evidence various records regarding his treatment with the HPSP. While in his testimony Respondent maintained that he had provided the Agency with the entirety of his HPSP file, even if he had never made a misrepresentation to the Agency, the Investigators were under no obligation to take him at his word that he had provided the entire file to them given his history of abusing controlled substances. As for the records Respondent submitted into evidence, the DI's testimony supports a finding that this is not a complete set of records as it does not include the treatment notes for his first two visits with his psychologist. Tr. 481-82. Absent Respondent's consent to the disclosure of his complete HPSP file, there is no way to assess the adequacy of his remedial measures, as it is unclear what he disclosed to those who evaluated him and whether he disclosed the full extent of his substance abuse to those providers who created his treatment program.
Finally, Respondent provided copies of the releases he had given to the credentialing departments of various insurers, and a local hospital, allowing them to obtain limited information from the HPSP.
The ALJ found that the record establishes that Respondent materially falsified his application for a DEA registration because he denied that his medical license had been suspended or restricted and knew this to be a false answer. R.D. at 63. Respondent takes exception to this finding, asserting that he “did not intent [sic] to provide a false response” and “that any false information was due to the fact that he did not read the question correctly.” Exceptions at 19. Continuing, Respondent argues that “[i]t would be stupid of [him] to lie about public information and he is not a stupid person.”
The evidence shows that on March 7, 2012, Respondent submitted an application for a DEA registration on which he was required to answer four questions with either a “yes” or “no.” GX 2, at 1. Question Three asked: “Has the applicant ever surrendered (for cause) or had a state professional license or controlled substance registration revoked, suspended, denied, restricted or placed on probation, or is any such action pending?” GX 2, at 3. Respondent answered “N” for no, notwithstanding that: (1) On January 26, 2009, the Florida Department of Health had ordered the emergency suspension of his medical license, GX 26, at 10-11; (2) on June 22, 2009, the Florida Board of Medicine had ordered that Respondent's medical license “be SUSPENDED until such time as he personally appear[ed] before the Board and demonstrate[d] the ability to practice medicine with appropriate skill and safety,” GX 29, at 1-3; (3) on December 17, 2010, the Florida Board of Medicine granted his petition for reinstatement while placing him on probation for five years, GX 30, at 2-9; and (4) on November 12, 2011, the Minnesota Board of Medicine had grant him a medical license subject to various restrictions and conditions. GX 39. Thus, the evidence clearly shows that Respondent's answer was false.
At the hearing, Respondent did not testify regarding the circumstances surrounding his completion of the application. However, a DI testified that during an interview, Respondent asserted that “he didn't read the question thoroughly” and that when she provided a copy of an application to him, “[h]e went through it and underlined the first word, surrender, and stopped.” Tr. 463. After the DI underlined the rest of the application, she asked Respondent if when he sat for his Boards, he “just gloss[ed] over the questions or . . . read them thoroughly in order to answer them?”
I reject Respondent's contention that he did not intentionally mislead the Agency. Notably, the question is neither lengthy nor ambiguous, and thus, I do not believe his contention that he did not thoroughly read the question. Indeed, even if he had glossed over the question, it is not credible that he did not note that the question asked about other types of state board disciplinary actions, and certainly Respondent was no stranger to state board disciplinary actions.
While in his decision, the ALJ correctly noted that “a false statement is material if it has a natural tendency to influence or was capable of influencing the decision making body to which it is addressed,” R.D. at 55 (citation omitted), he then explained that “ `[a]nswers to the liability question[s] are always material because DEA relies on the answers to these questions to determine whether it is necessary to conduct an investigation prior to granting an application.' ”
In this legal conclusion, the ALJ addressed the application of factor one under the public interest analysis, specifically—“[t]he recommendation of the appropriate State licensing board or professional disciplinary authority.” 21 U.S.C. 823(f)(1);
My concern with respect to evidence relating to the licensure actions taken by the medical boards in Florida and Minnesota rests not so much with their ultimate decisions, but with the process that led to those decisions being made. The Government is correct, in my view, in proposing that Respondent's misrepresentations to these boards call into question whether the actions taken by these regulators would be the same had they been told the same things [Respondent] reported as true during this administrative process.
The Government's identification of the nature of these misrepresentations accurately reflects the many ways in which the two state medical boards were acting with less than a complete and accurate record due to [Respondent's] duplicity. Those misrepresentations regarding [his] ability to recall what happened immediately preceding the June 2008 crash, his description of his history of abusing marijuana and Adderall, and his description of the nature of his injuries and those of his passenger, all threaten the integrity of the administrative process by which the Florida and Minnesota boards performed their assessments of [Respondent's] fitness to practice medicine in those states. Accordingly, nothing in our
Respondent takes exception to the ALJ's conclusion, noting that “where there is no specific recommendation from the state licensing board for or against an applicant's request for a . . . registration, the factor may not be considered [to] support the denial of” an application. Exceptions at 20. He then argues that “the appropriate state licensing board is the Minnesota Medical Board, which has not provided a specific recommendation for or against [Respondent's] request for a DEA registration.”
I agree with Respondent that the appropriate board is Minnesota, because it is the State where Respondent now seeks registration. With respect to the action of the Minnesota Board, I agree that the evidence shows that Respondent made multiple false statements to the Minnesota Board in both his application and his affidavit in support of his request for reconsideration. I also appreciate the ALJ's concern that his misrepresentations “threaten the integrity of the [State Board's] administrative process.” I nonetheless respectfully disagree with the ALJ's analysis because it is not supported by the evidence and takes the Agency far beyond the appropriate scope of this factor.
As explained above, the record does not establish whether Respondent continued to make the same false statements before the Licensure Committee as he did in his application and affidavit. However, even if Respondent made the same false statements to the Committee, the ALJ's analysis simply assumes—without any evidence—that the Board would have come to a different result. Notably, it is not even clear why Respondent's misrepresentations regarding [his] ability to recall what happened immediately preceding the June 2008 crash and his description of the nature of his injuries and those of his passenger would have been material to the Board's decision. I therefore conclude that factor one neither supports nor refutes the conclusion that granting Respondent's application would be “inconsistent with the public interest.”
In this legal conclusion, the ALJ summarized his conclusions regarding the evidence relevant to factor two—Respondent's experience in dispensing controlled substances. Specifically, the ALJ explained that:
Respondent takes exception to the ALJ's conclusion contending that the ALJ “minimize[d] [his] experience and training in dispensing controlled substances and assert[ed] that [he] `entered the world of drug dealers, using his association with Patient S.S. to acquire cocaine and marijuana on a regular basis.' ” Exceptions at 21 (quoting R.D. at 51). Respondent argues that “many medical doctors apply for and are granted a DEA . . . Registration while in the last stages of medical residency of [sic] immediately following the completion of their medical residency program” and “have less experience that [his] experience at MD Now [but] that experience is not used against them.”
It is true that the ALJ engaged in a lengthy discussion of Respondent's medical career and his experience in prescribing controlled substances therein. For example, the ALJ found that “[a]fter successfully completing his residency, [Respondent] continued to gain experience in a clinical practice in fields not generally associated with dispensing controlled substances” and then listed various activities Respondent engaged in in Liberia which do not appear to have involved clinical practice, let alone the dispensing of controlled substances. R.D. at 50. The ALJ then noted that Respondent's “most significant post-graduate prescribing experience . . . is that which he obtained while working at MD Now [an urgent care clinic] for seven months and while serving in his family medicine residency at the University of Miami from 2004 to 2007.”
To be sure, the word “experience” connotes that the Agency is authorized to conduct an inquiry into the adequacy of a practitioner's training in prescribing controlled substances as well as his/her “direct observation of or participation in” prescribing controlled substances.
Here, however, Respondent's experience as a dispenser of controlled substances includes not only the fraudulent June 11, 2008 Adderall prescription listing S.S. as the patient, but also the unlawful prescriptions he issued to S.S. on June 4, 2008 for Percocet (oxycodone) and Xanax (alprazolam), which the ALJ found were “issued outside the usual course of professional practice and for other than a legitimate medical purpose.” R.D. at 58-59. Moreover, the evidence shows that Respondent induced S.S. to fill the Adderall prescription as “a favor” for his having provided S.S. with the Percocet and Xanax prescriptions. Tr. 207—210-11.
As explained above, the ALJ found that Respondent “us[ed] his experience and his association with Patient S.S. to acquire cocaine and marijuana on a regular basis.” R.D. at 51. There is, however, no evidence that Respondent used his registration to trade controlled substance prescriptions for street drugs, and as the Agency has previously explained, “factor two does not call for an inquiry into a practitioner's life experience generally or even his experience related in any manner to controlled substances, but rather, only his “experience in dispensing . . . controlled substances.”
In this conclusion, the ALJ discussed the evidence relevant to factor five—“such other conduct which may threaten public health and safety.” R.D. at 65;
Respondent takes exception to the ALJ's conclusion. According to Respondent, the ALJ's conclusion “rest [sic] on the testimony of [the DI] and N.P. and ignores the testimony of [Respondent], the undisputed testimony of Dr. Nedd [the neurologist who treated him after the crash] and the fact that . . . the incident which occurred in 2008 occurred over 6 years ago.” Exceptions at 22-23. Respondent argues that he stipulated to many of the facts outlined in the Government's Pre-Hearing Statements and that at the hearing, he did not dispute paragraphs two through six of the Order to Show Cause.
For the reasons explained in my discussion of Respondent's exceptions to the ALJ's factual findings numbers 12 and 13, I reject Respondent's exception to the ALJ's conclusions of law with respect to factor five.
Accordingly, I reject Respondent's Exception to factor five and conclude that this factor supports the conclusion that granting Respondent's application would be “inconsistent with the public interest.” 21 U.S.C. 823(f)(5);
Finally, Respondent takes exception to the ALJ's legal conclusion that he has failed to produce sufficient evidence to rebut the Government's
The record . . . establishes that Respondent has failed to timely provide the DEA with reports of his treatment or monitoring from the Florida Medical Board and PRN and from the Minnesota Board of Medical Practice and HPSP; failed to acknowledge the need to provide forthright, accurate, and complete responses to questions presented regarding his prescription practice and his history of drug
Moreover, earlier in his discussion of Respondent's evidence of remediation, the ALJ explained that:
Respondent nonetheless contends that at the hearing, he “took full responsibility for his drug use and diversion of controlled substances.” Exceptions at 25. He also argues that he acknowledged his use of marijuana and his diversion of Adderall in his first meeting with the DIs, and that Minnesota Board's decision to grant him a conditional license “is evidence of his acknowledgment of his past drug use and diversion of prescription drugs,” because the Board noted that it “discussed [with him] his use of controlled substances that had not been prescribed to him.”
I reject Respondent's contention. His assertion that he acknowledged his use of marijuana at his first meeting with the DI is counterfactual, as Respondent asserted that his positive drug test following the accident “was a false positive” and that “he had not used marijuana in a long time.” Tr. 462. Moreover, while at the hearing, Respondent admitted to facts which establish that the prescriptions he issued to S.S. for Percocet and Xanax were outside of the usual course of professional practice and which lacked a legitimate medical purpose (
Accordingly, I reject Respondent's contention that he accepted responsibility for the full extent of the misconduct which has been proven on this record.
This is reason alone to conclude that Respondent has not rebutted the Government's
The ALJ did, however, consider the Board's Order as evidence in remediation.
As for Respondent's further contention that “[t]he fulfillment of these conditions cannot simple [sic] be ignored because [he] did not sign a release for [the DI] to access HPSP directly” and that he “provided her with 82 pages of documentation which included the quarterly reports, results of toxicology test [sic], his case manager's notes,”
Respondent argues that “there is nothing in the record which shows [that he] has a risk of relapse.” Exceptions at 21. He argues that “[h]e was not diagnosed with a drug problem,” but “with authority conflicts” and that he “fully shared his history of drug uses with Dr. Albert” and “completed his treatment plan.”
I agree that there is no evidence establishing what Respondent's risk of relapse is. I conclude, however, that because Respondent would not provide the Government with a release allowing it to obtain his HPSP file directly from the program so that it could verify whether he actually “fully shared his history of drug use” with his treating professional, his evidence as to his rehabilitation is insufficient.
Of further note, as found above, Respondent also unlawfully distributed Percocet (oxycodone) and Xanax (alprazolam) to S.S.
The Government has made out a
Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 28 CFR 0.100(b), I order that the application of Mark William Andrew Holder, M.D., for a DEA Certificate of Registration be, and it hereby is, denied. This Order is effective immediately.
Christopher B. McNeil, Administrative Law Judge. These are proceedings before the Drug Enforcement Administration and the United States Department of Justice, under DEA docket number 2014-13, captioned “In the Matter of Mark William Andrew Holder, M.D.” The proceedings are being held pursuant to sections 303 and 304 of the Controlled Substances Act, Title 21 United States Code sections 823 and 824.
On March 7, 2012, Respondent Mark W.A. Holder, M.D., applied for a DEA Certificate of Registration as a practitioner in Controlled Substance Schedules 2, 2N, 3, 3N, 4 and 5, identifying the business location as 2810 Nicollet Avenue South, Minneapolis, Minnesota 55408-3160.
On May 8, 2014, the Office of Administrative Law Judges for the DEA received Respondent's May 6, 2014 request for a hearing to permit him the opportunity to establish why his application should not be denied. The parties presented evidence during a hearing conducted at the DEA Hearing Facility in Arlington, Virginia, on August 4 and 5, 2014.
Prior to the hearing, the parties entered into stipulations,
In articulating the bases upon which the Administrator proposed to deny Dr. Holder's application for a Certificate of Registration, the Deputy Assistant Administrator identified the following:
(1) The Government alleged improprieties with respect to Dr. Holder's prescription practice as it concerned Patient S.S. on June 4, 2008.
(2) With respect to the prescription for Adderall dated June 11, 2008, the Administrator also alleged that Dr. Holder wrote this prescription in order to illegally obtain the medication for his own use; and that after taking control of the medication, Dr. Holder engaged in behavior resulting in a single-vehicle crash on June 13, 2008 that seriously injured Dr. Holder and his passenger, N.P., while Dr. Holder was under the influence of THC and amphetamines.
(3) The Administrator further alleged that consequent to the crash involving Dr. Holder and his passenger, the Florida Department of Health indefinitely suspended Dr. Holder's
(4) The Administrator alleged that in the course of the investigation into whether Dr. Holder's application should be granted, Dr. Holder engaged in evasive conduct, evinced a lack of candor when responding to investigators, has given inconsistent or evasive reports of his past drug use, has refused requests from the DEA investigators seeking records demonstrating compliance with drug treatment programs in Florida and Minnesota, and has tested positive for prohibited controlled substances during periods of court supervision subsequent to the June 13, 2008 motor vehicle crash.
Dr. Holder attended the University of Minnesota and Morehouse School of Medicine, completing his residency from 2004 to 2007 at Jackson Memorial Hospital in Miami, Florida, with a specialty in family medicine.
In addition to his experience as an urgent care medical doctor, Dr. Holder has evaluated the Cuban health care system to formulate a
When describing why he wanted to go to medical school, Dr. Holder stated: “I thought that medicine was a good way to kind of give back to the world. And I think there's a huge need for medicine in this nation and all over the world, and I thought this is a good way to use the energies that I had.”
In his testimony and through stipulation, Dr. Holder admitted that on June 4, 2008, he saw Patient S.S., a 25 year old male, at MD Now's Royal Palm Beach Facility.
Dr. Holder acknowledged that when he issued these prescriptions, he was acting outside the usual course of his professional practice, and that he did so for other than a legitimate medical purpose.
Patient S.S. explained the circumstances under which he obtained these prescriptions from Dr. Holder. Patient S.S. testified that in 2007 and 2008, while he had a legitimate job working part-time in a restaurant and running a mortgage branch location, he also earned money as a drug dealer.
According to Patient S.S., he had been experiencing some pain in his back, and on June 4, 2008, he visited Dr. Holder at MD Now to discuss the matter.
Dr. Holder agreed that the records of this encounter indicated his failure to document a complete medical history and physical examination, as well as his failure to determine either the nature or the intensity of the patient's pain.
Dr. Holder did not dispute the Government's claim that while Patient S.S. reported that he currently was taking Percocet, Flexeril, and Xanax, the patient's medical records contained no mention of who had prescribed these medications and no indication that Dr. Holder inquired as to the identity of the treating source or sources who prescribed these medications.
Patient S.S. testified that the only narcotic pills he ever distributed to Dr. Holder were those in the prescription for Adderall written by Dr. Holder.
Without objection, the Government presented the testimony of Mark Rubenstein, M.D., as an expert medical witness in the standard of care for patients with pain and also as an expert in biomedical engineering.
In his report, Dr. Rubenstein cited State of Florida Board of Medicine Rule 64B8-9.003, which requires that the medical record contain “sufficient information to support the diagnosis [and] justify the treatment,” in opining that “there is no evidence that the prescription for Adderall is supported by the medical records.”
Dr. Rubenstein also was present for the direct and cross examination of Dr. Holder in the Government's case in chief. Upon his consideration of the patient records and based on what Dr. Holder testified to during the first day of hearing, Dr. Rubenstein testified that nothing presented during the hearing caused him to change any of the findings set forth in his written report.
Patient S.S. explained that before June 11, 2008, he and his ex-girlfriend went to Dr. Holder's house on “multiple occasions” to drop off marijuana and “a little bit of cocaine.”
[A] couple of days prior [to June 11, 2008], we were sitting on his porch and we were actually smoking marijuana and he said, you know, I need a favor. Is there a chance that you can come by my office? I'll have a prescription for Adderall waiting for you. You're going to meet me around back of the office. I'm going to hand you the prescription, you're going to go get them filled. Bring it back here and I'll pay you for it. And he left the money in his car for, to cover my copay.
When asked about why Dr. Holder turned to Patient S.S. for this favor, Patient S.S. testified that Dr. Holder told him that “since I did you a favor, now you owe me one. And the favor was that I come in, see him, pick up the prescriptions and have them filled . . . and release them to him.”
Patient S.S. stated that as requested, he picked up the Adderall prescription, went next door to Walgreens to fill the prescription, then delivered to Dr. Holder the filled prescription, either leaving it in his Cadillac or handing it to him directly (he could not recall with certainty which), after first retaining two tablets for his own use.
Dr. Holder agreed that on June 11, 2008, he issued a handwritten prescription to Patient S.S. for 60 tablets of 30 mg Adderall, a Schedule II controlled substance.
When asked during the hearing how the police found a bottle of Adderall identified as belonging to Patient S.S. in the car Dr. Holder was driving at the time of the crash, Dr. Holder said simply, “I can't explain that,” adding that he might have offered an explanation for it in the past, but “right now, I'm at the place where I cannot explain how it got there. I do not recall how it got there.”
When questioned about the presence of the bottle of Adderall found in the Cadillac after the crash, Dr. Holder admitted to DEA Diversion Investigator Virginia McKenna that he used Adderall “on a few different occasions [and] that he obtained it from a colleague [but] he did not know where the pill bottle came from.”
According to Investigator McKenna, when she presented a copy of the Adderall prescription for Patient S.S. written by Dr. Holder,
Initially he said that he did meet with SS and provide him the prescription, but it wasn't documented because it had already been discussed. Later during the conversation, he said he didn't recall giving the prescription, that he had been in a coma, and he did not have a good memory of it. And then later in the conversation, he admitted in fact that he did give the prescription and repeated that it was not documented or charted, no exam, because that was already in the prior record.
* * *
His mother [Dr. Wilhelmina Holder] quite forcefully stated that law enforcement planted it in the car. That's when I turned to Dr. Holder and again asked him, how would law enforcement know to go specifically to that person, knowing that that person received a prescription for Adderall from you just two days prior, to get the bottle to plant. And he said he didn't know, that law enforcement had been looking through his phone and would have found his number.
The passenger in Dr. Holder's car at the time of the crash, N.P., provided details of what took place on June 13, 2008. Because her testimony was internally consistent, consistent with the evidence generally, and not contradicted by any other testimony or evidence, I found her testimony to be credible and gave it great weight.
N.P. testified that she met Dr. Holder in the early morning of June 13, 2008, when Dr. Holder introduced himself to her at a nightclub.
While making the five-minute drive from her home to the drug store, N.P. observed that at first Dr. Holder was driving within the speed limit; but that, while engaged in conversation with her, Dr. Holder missed the turn that would have brought them to the drug store.
At this point, N.P. sought to control the vehicle, with one hand reaching for the steering wheel and the other seeking the parking brake.
Taking her own condition into account, N.P. testified that she could hardly breathe and was in “a lot of pain.”
Also testifying were first responders who encountered Dr. Holder after he crashed his car. Ryan Biramontes is a driver operator and paramedic for the Palm Beach County Fire and Rescue squad, who described responding to a vehicle accident call at approximately 3 a.m. on June 13, 2008.
Mr. Biramontes reviewed reports of the crash, and described his encounters with Dr. Holder after Dr. Holder got out of the vehicle and in an “altered” state began “screaming and stumbling around.”
In addition, the Government presented testimony from Palm Beach County Sheriff's Deputy Jesse McCoy, who gave testimony that was substantially the same as that provided by Mr. Biramontes, in that he observed N.P. having sustained a dislocated elbow and finding Dr. Holder with a bloody face, grunting behind the wheel, refusing to acknowledge the deputy's presence.
Also called to the scene of the crash, although later in time, after Dr. Holder had departed for the hospital, was Palm Beach Sheriff's Office Investigator Robert Stephan.
The Government also presented the testimony of Palm Beach County Deputy Sheriff Judith Little, who testified regarding the condition of Dr. Holder's Cadillac on the morning after the crash. Specifically, Deputy Sheriff Little said she discovered the prescription bottle that had been issued to Patient S.S., located inside the vehicle.
Respondent subsequently was criminally charged in Palm Beach County with driving under the influence, possession of amphetamines, driving on a suspended license, and obtaining amphetamines by fraud. The State of Florida subsequently issued a nolle prosse for all criminal charges.
Regarding the crash, Dr. Holder presented the testimony of Kester Jimmy Nedd, M.D., who treated Dr. Holder upon his arrival at the hospital.
According to Dr. Nedd, Dr. Holder's “cognitive symptoms include trouble with judgment, reasoning, [and] executive function.”
Dr. Holder acknowledged that on January 26, 2009, the Florida Department of Health issued an Emergency Suspension of his license to practice medicine.
Dr. Holder also acknowledged that on March 25, 2011, he applied for a medical license in Minnesota; and that the licensure committee of the Minnesota Board of Medical Practice initially recommended denial of the application for his failure to show good moral character.
The application for a DEA Certificate of Registration requires applicants to answer the following question: “[h]as the applicant ever surrendered (for cause) or had a state professional license or controlled substance registration revoked, suspended, denied, restricted, or placed on probation, or is any such action pending?”
On July 19, 2012, Diversion Investigators McKenna and Joseph Cappello met with Dr. Holder and Dr. Holder's attorney, Kent G. Harbison, of Fredrikson & Byron, P.A., Minneapolis, Minnesota. Investigator McKenna said she questioned Dr. Holder about this response as part of her investigation, prior to the issuance of the Order to Show Cause. According to Investigator McKenna,
[Dr. Holder] answered on the application no. When I asked him about that, he said that he didn't understand the question, that he wasn't intending to lie, at which time Mr. Harbison interjected, “why would he lie when he knew it was public record?” but I had no, I don't know why he would or wouldn't do such a thing, so I showed him the application. And then he said that he didn't read the question thoroughly, and that's when I showed him a sample application that I had.
According to Investigator McKenna, upon being presented with the sample application, Dr. Holder:
[W]ent through it and he underlined the first word—“surrendered”—and stopped. I then went on and underlined the rest: “Revoked, suspended, denied, restricted or placed on probation, or is any other such action pending?”
MR. LAWSON: So in other words, he was trying to tell you that he answered the question properly because he had never surrendered?
MS. MCKENNA: That could have been the suggestion, and I [asked] about his training as a student for medical doctor and sitting for Boards, and I asked him if during those occasions, “did you just gloss over the questions or did you read them thoroughly in order to answer them?” And he said he didn't gloss over.
In its Order to Show Cause, the Government averred the existence of multiple instances in which it appeared Dr. Holder had been other than forthright and honest with state regulators and the DEA.
1. Dr. Holder provided inconsistent statements with respect to the number of doses of Adderall he consumed prior to the automobile crash, and gave inconsistent statements regarding how he obtained the medication, including a claim that the presence of Adderall (in the bottle bearing the prescription he wrote to Patient S.S.) was the product of Florida law enforcement officers planting the bottle in his car, or, alternatively, had been provided by an unnamed colleague at work.
2. Dr. Holder attributed a positive screen for marijuana to be the result of a false positive, rather than to his own use of the drug.
3. Dr. Holder provided evasive answers to DEA agents regarding his past use of controlled substances, and refused multiple requests from the DEA seeking the release of records showing
4. Records of drug screening results during court-ordered monitoring included positive testing for opiates on one occasion, the submission of a diluted urine sample on another, and skipping a call for random sampling on another occasion.
Diversion Investigator Jack Henderson testified with respect to the process by which his office evaluated Dr. Holder's March 2012 application for a DEA Certificate of Registration in Minnesota. Investigator Henderson is in charge of the diversion control program for the DEA in the Minneapolis/St. Paul District office.
Asked to provide specific instances that gave rise to his determination, Investigator Henderson noted first a discrepancy regarding the number of dosages of Adderall Dr. Holder admitted to consuming on the evening of the crash.
Investigator Henderson also identified the business record reflecting the answers provided by Dr. Holder to the questions appearing on the online application Dr. Holder submitted in March 2012.
Also working out of the DEA's Minneapolis/St. Paul district office,
The application includes Question Three, which asks “[h]as the applicant ever surrendered (for cause) or had a state professional license or controlled substance registration revoked, suspended, denied, restricted, or placed on probation, or is any such action pending?”
Investigator McKenna said that when assigned to review an application, her first task is to check for orders from state boards, apparently replicating the task attributed to the DEA registration specialist.
According to Investigator McKenna, Dr. Holder was not forthcoming with securing these reports:
MR. LAWSON: Okay. And if you can remember, what sort of documents were you focused on collecting before you ever spoke with Dr. Holder?
MS. MCKENNA: The Board orders, of course. And then I wanted to get the law enforcement file, the police reports, any supporting documentation to get a clearer picture of what the allegations were there.
MR. LAWSON: Okay. Now your investigation went on for quite a long time. Is that correct?
MS. MCKENNA: Yes, sir. It did.
MR. LAWSON: All right. Why did it take so long?
MS. MCKENNA: On numerous occasions, I requested the HPSP and PRN records from Dr. Holder in order to afford him the opportunity to present his side, so to speak. On those occasions, I would get, “I'll get them for you,” or I would remind him that I was still waiting for them, and I never really received much, if anything.
Investigator McKenna said she asked for these reports during the meeting on July 19, 2012, at which time Dr. Holder told her he “would look for them.”
[A]ttempted to subpoena the records and was instructed I would need a court order or a release from Dr. Holder. I then presented him with a release, one each for Florida, one for Minnesota, on August 13th of 2013, I believe it was, and asked him if he would consent to me receiving the records personally.
MR. LAWSON: And was August 13th the date that you actually presented, did you actually go ahead and complete, fill out the release forms?
MS. MCKENNA: Yes, sir. I had the release forms completed. I brought them to him at his place of business, at, Whittier Clinic, and presented them to him personally.
On August 23, 2013, however, Dr. Holder informed Investigator McKenna that he would not sign the release for either set of records.
In the course of her investigation, Investigator McKenna learned of “three different occasions where [Dr. Holder] either tested positive for opiates, had a diluted [urine] sample, or missed a testing date.”
During this conversation, Dr. Holder again stated he would look for records of his participation in PRN and HPSP, but again failed to provide the requested records, a process that repeated itself when Investigator McKenna met with Dr. Holder in person on January 4, 2013.
Testifying on behalf of Dr. Holder, Ms. Miller said she provides case management services at the Health Professionals Services Program (HSPS) in Minnesota.
Pursuant to 21 CFR 1301.15,
The record here establishes that Dr. Holder failed to provide a release that would permit Diversion Investigator McKenna to obtain a complete record of monitoring by HPSP, creating an instance where by operation of this regulation, Dr. Holder has waived the opportunity to present HPSP records for consideration in this application. The Government timely objected to the presentation of Ms. Miller's testimony, based on 21 CFR 1301.15.
I do not consider as substantive evidence Ms. Miller's proffer of facts regarding Dr. Holder's progress in the HPSP program. Although Ms. Miller testified that a substance abuse treatment plan has been established for Dr. Holder, and that Dr. Holder complied with that plan, it is not clear from the record before me that a complete record of treatment has ever been produced for the Administrator's consideration. Ms. Miller testified that while Dr. Holder provided releases authorizing potential employers and credentialing agencies to see the full record of monitoring at HPSP, Dr. Holder did not provide a similar release that would have authorized the DEA to see these records.
The evidence establishes that Dr. Holder requested and received from HPSP a copy of his case file as it existed on September 18, 2012,
Further, I note with concern Ms. Miller's testimony that established June 2008 as Dr. Holder's date of sobriety.
As of April 2013, Investigator McKenna still did not have records of treatment from PRN, and renewed her request for those and for records not yet provided from HPSP.
It bears noting that on the day testimony began in this case, Dr. Holder reported that he experienced a seizure of unknown duration the day before, one that came upon him without advance warning, during which he lost
Also noteworthy are the impressions created during this administrative proceeding, by the character of Dr. Holder's responses to questions put to him during the evidentiary hearing. In many respects, the material facts presented by the Government in its Order to Show Cause had in one form or another been stipulated to in advance of the hearing, or were not disputed when Dr. Holder was directly questioned about them. In his closing statement, Dr. Holder accurately states that “at the end of the hearing Dr. Holder . . . acknowledged that there were no factual disputes with respect to paragraph 2-6 of the Government's Notice [sic] to Show Cause.”
Despite having stipulated to key material facts, however, Dr. Holder frequently proved to be either unable or unwilling to respond directly to questions about the evidence that supported those facts. For example, in advance of the hearing the parties stipulated that on June 4, 2008, Respondent saw Patient S.S., a 25 year old male, at MD Now's Royal Palm Beach facility, and that he prescribed Patient S.S. 30 tablet of Percocet 10/325 and 30 tablets of 2 mg Xanax XR (extended release), later orally changed to 60 tablets Xanax (immediate release).
When the Government presented copies of the prescriptions (Government Exhibit 5) to Dr. Holder, however, and asked that he identify them, Dr. Holder's answers were less than direct.
MR. LAWSON: Dr. Holder would you just take a look at the documents at Exhibit 5? And those are three prescriptions issued to Patient SS, correct?
DR. HOLDER: That's what it appears to be.
MR. LAWSON: And is that your signature on those prescriptions?
DR. HOLDER: That is my signature.
MR. LAWSON: All right. And so you issued those prescriptions to Patient SS on June 4, 2008?
DR. HOLDER: Seems like it.
Similar deflection can be found when Dr. Holder was asked about his decision to prescribe Adderall to Patient S.S. When asked whether there were any factual misstatements appearing in paragraph three in the Order to Show Cause, Dr. Holder answered in the negative.
When the Government asked Dr. Holder to explain why the June 11, 2008 prescription was hand-written when others in the record were computer-generated, however, Dr. Holder offered a different account of the circumstances leading to the issuance of this prescription:
MR. LAWSON: Okay. And can you tell me why that is a handwritten prescription versus the electronically generated prescriptions in the previous exhibit?
DR. HOLDER: Yes, well what I assume what's going on here is it seems that he came to this visit, which the previous prescriptions were, and if you look, they are dated different dates as well. And then if you look at this one um, which was on 11th, meaning that we, it's not infrequent that people come in after the appointment wanting medications that they usually get and I was refilling those medicines.
MR. LAWSON: Sir, are you saying that the prescription you issued on June 11th to SS was a refill of a prescription he usually gets?
DR. HOLDER: Yes, I am.
Dr. Holder also exhibited a marked tendency not to fully disclose information that may call into question his ability to comply with the law, doing so both in his representations to the Minnesota Board, and in his testimony before me.
In the following exchange, Government's counsel brought to Dr. Holder's attention the answers appearing in Dr. Holder's application for licensure in Minnesota, with respect to criminal convictions. The application question, Question 12, provides as follows:
Have there ever been any criminal charges filed against you? This includes charges of disorderly conduct, assault or battery, or domestic abuse, whether the charges were misdemeanor, gross misdemeanor, or felony. This also includes any offenses which have been expunged or otherwise removed from your record by executive pardon. If so, give particulars, including the date of conduct, state and local jurisdiction in which the charges were filed.
In the space provided, Dr. Holder wrote “please view addendum.”
MR. LAWSON: Okay. And Question 12 asks whether any criminal charges have been filed against you and you circled yes and said, please view addendum, right?
DR. HOLDER: Yes.
MR. LAWSON: And so your addendum is part of your application, correct? Because you had to give an explanation for positive answers?
DR. HOLDER: Yes, it is.
MR. LAWSON: And I guess going back to the last question I asked you about, did you in that addendum disclose every instance in which criminal charges had been filed against you?
DR. HOLDER: I focused specifically on the incidents of June—
ADMIN. JUDGE MCNEIL: You need to answer yes or no to begin that.
DR. HOLDER: Okay. Yes. Well. Yes.
MR. LAWSON: So your addendum discloses every instance in your life in which criminal charges have been filed against you?
DR. HOLDER: In my life. Perhaps there were charges, maybe filed against me another time that I did not mention. So, so maybe it's no. The answer is no.
MR. LAWSON: So the answer then is that you didn't answer that question completely and truthfully on that form? That's a yes or no question, Dr. Holder.
DR. HOLDER: I was—
ADMIN. JUDGE MCNEIL: Answer the question, please. Completely and truthfully. So go to completely first. Did you answer it completely?
MR. LAWSON: Dr. Holder, did you answer, in your addendum did you completely disclose every instance in which criminal charges have been filed against you?
DR. HOLDER: Let me read the question again. What's the question that you are pointing to on the, the Minnesota Board application? Because I'm certain I was truthful.
MR. LAWSON: It is Question 12 on Page 6 of the form. And I will specifically point out to you that it says it includes charges of disorderly conduct, assault or battery, or domestic abuse; whether those charges were misdemeanor, gross misdemeanor or felony
DR. HOLDER: And also, it may not have been complete, but it was truthful.
MR. LAWSON: So you were truthful about the charges you chose to disclose?
DR. HOLDER: And the charges that I thought were actually most important.
MR. LAWSON: But you had, in fact, you've been charged with other crimes besides the one stemming from the June 13, 2008 accident, correct?
DR. HOLDER: I think disorderly conduct before.
MR. LAWSON: Right.
DR. HOLDER: But this was, the charges were dismissed.
MR. LAWSON: Right. They were dismissed, but they were charges for disorderly conduct, correct?
DR. HOLDER: I vaguely remember, but you know, I don't know the details about that. Nothing came of that incident.
ADMIN. JUDGE MCNEIL: I'll take that as a yes.
I also note with concern the question of whether Dr. Holder was forthright in his communication with the medical boards in Florida and Minnesota in other respects. In describing his recollection of events immediately before and after the motor vehicle crash on June 13, 2008, Dr. Holder told me he remembered none of the circumstances of the crash.
In his Minnesota application, dated March 18, 2011, Dr. Holder stated that he had a seizure while driving on June 13, 2008; and that “[a] collision with a sign post followed. Both the passenger and I were in seatbelts and only suffered minor injuries form [sic] airbag deployment.”
Beyond what appears to be Dr. Holder's tendency to minimize the injuries he and N.P. suffered as a result of this crash, there is also the unresolved inconsistency regarding his capacity to describe N.P.'s condition after the crash. During the hearing, Dr. Holder repeatedly testified that he remembered none of the circumstances of the crash,
Similarly, Dr. Holder's representations to the Minnesota Board differed significantly from what he presented during this administrative hearing with respect to his possession of Adderall at the time of the crash. As noted above, in order to demonstrate that he has accepted responsibility for engaging in the conduct attributed to him in paragraphs two through six in the Order to Show Cause, Dr. Holder “acknowledged that there were no factual disputes with respect to paragraph 2-6” of the Order to Show Cause.
Also of concern was Dr. Holder's account of his use of Adderall on the day of the crash. Initially, Dr. Holder told Diversion Investigator McKenna he had taken one tablet of Adderall on the day before the crash.
No disclosure of such use appears in his description of the events as presented to the Minnesota Medical Board.
During the hearing before me, Dr. Holder admitted using Adderall
When describing her interview of Dr. Holder (in the presence of Dr. Holder's attorney) during a meeting at the DEA on July 19, 2012, Diversion Investigator McKenna said that when she asked Dr. Holder about the bottle of Adderall found in his Cadillac immediately after the crash,
[H]e said he said he had no knowledge of how the bottle got there. He suggested that law enforcement planted it. When I asked how would the police know to go to that particular individual and ask for that particular prescription, he said that the law enforcement was rifling through his cell phone and could have found his phone number in it, that he had a criminal history or criminal record.
MR. LAWSON: Who had a criminal record?
MS. MCKENNA: The patient on the bottle, SS.
MR. LAWSON: So, he denied having any knowledge of how that bottle got in his car?
MS. MCKENNA: He did deny it.
In a similar manner, Dr. Holder gave what appear to be inconsistent accounts to the Minnesota Medical Board and to me during the hearing, with respect to his past use of Adderall. At the outset, Dr. Holder wanted me to know that while he agreed with the written statement submitted to the Minnesota Board, what was written there was not his own work but was instead written by his attorney.
Dr. Holder then acknowledged that the representation regarding his past use of Adderall appearing in his sworn statement to the Minnesota Board, dated August 8, 2011 was not true.
In his written statement to the Board, Dr. Holder makes reference to his past use of Adderall. Dr. Holder stated the following:
It is true that, because of a stupid error of judgment, I did obtain improperly from a friend tablets of Adderall. I obtained Adderall only for the purpose of helping me stay alert during a period when I was working hard for many hours. I definitely do not have a “drug problem,” and have never had a history of anything even close to that. I realize and agree that what I did in obtaining the Adderall was wrong. I had never done that before and will never do it again.
When asked if he agreed that his statement that he had never used Adderall before was a lie, Dr. Holder first denied it was a lie, then reiterated that “I don't understand what this things written [sic]. I have a problem with this because I've got, I'm, like I'm mentioning, this is not written by me.”
Under questioning by his attorney, Dr. Holder stated he knew diversion of prescription medications would be “misusing my privilege to practice medicine and serve the community that I wish to serve,” and said he would never divert medicine, under any circumstances.
The way I've lived my life back then is very different from my life now, and I think one of the things that this whole opportunity has made me do, is really kind of surrender my will to my creator and I've always believed in, you know, Jesus Christ growing up, because that's what I learned. So as long as I've known myself, I've actually believed that Jesus was the Lord of all, etc. But I've never really surrendered my will, so being a very strong-willed person, I still kind of would do what I wanted to do, even though I would pray or go to church or whatever. And I think in this case, I've had to completely surrender my will and what I've found from this, is I have actually have reached a place of joy, advancement and completion. And going from the place where I lost everything, you know, with my trust and faith, has propelled me to the place where I am right now.
Dr. Holder explained that he currently works as a doctor practicing urgent care at Whittier Clinic, in a “family medicine residency.”
Pursuant to orders from the Florida Board, Dr. Holder participated in monitoring and drug testing by Professional Resource Network, or PRN.
Dr. Holder explained that in November 2010 he submitted a petition to the Florida Medical Board, seeking reinstatement of his medical license.
The related criminal matter has been referred for pre-trial intervention and Respondent is currently complying with the requirements for successfully completing the Circuit Court's requirements to avoid prosecution for those criminal charges. These requirements include successful completion of the Comprehensive Alcoholism Rehabilitation Program (CARP) as ordered by the Court. This is a program providing a continuum of care to individuals affected by alcoholism, drug dependency and co-occurring disorders and PRN is monitoring Respondent's participation in the CARP.
Although from this description it appears Dr. Holder participated in monitoring by PRN and the CARP program, Dr. Holder elected not to complete the course of monitoring and refused to permit access to these records upon request by DEA Diversion Investigator.
The record reflects that the Florida Board, presumably having the benefit of PRN's full report of Dr. Holder's incomplete participation in CARP, did not grant Dr. Holder's request for an unconditional medical license.
Also before me is testimony from Brenda Joyce McGuire, M.D., who spoke in support of Dr. Holder's application. Dr. McGuire's association with Dr. Holder began in 2011, when she and Dr. Holder were volunteers at an organization that was at the time called the African and American Friendship Association for Cooperation and Development.
Dr. Holder also introduced the testimony of his mother, Wilhelmina Valerie Holder, M.D., a public health physician who currently serves as a community advocate who assists in decreasing “health disparities” and improving “health equity.”
Also testifying on behalf of the Respondent was Cidijah Rodney-Somersall, M.D., a pediatrician with a practice in Atlanta, Georgia.
Mark is a very enthusiastic person who was very passionate about, or he's very passionate about medicine and patient care. He's someone who is, has great bedside manner. He's very charming, he has a love for people, and he always appeared to provide excellent patient care.
He was very good in terms of gathering a full history, just finding about the patient, not only their medical problems, but socially. And I mean, I was always impressed by him as a medical student, the kind of care that he provided. He was bright, and he was a great medical student, and seemed to be a very good healthcare professional.
Also before me is the sworn statement of Jerome Potts, M.D., who is the Department Chief of Family and Community Medicine at the Whittier Clinic, Hennepin County (Minnesota) Medical Center.
[I]s very diligent in documenting his charts and they are in compliance with all of our policies and procedures. His interaction with other staff and peers can be described as respectful, professional, and kind. I believe that his past issues have made him a more empathetic physician and colleague. He has earned my trust and that of his peers and patients. . . . I continue to trust Dr. Holder and am confident that he will continue to deliver quality medical care that is above reproach and meets all applicable standards.
It is not clear the extent to which Dr. Potts is familiar with Dr. Holder's past, as his statement was received in lieu of live testimony, and as such the Government was not able to cross examine this witness.
Dr. Holder presented live testimony of Laurie Kardon, M.D., who spoke in support of his application. Dr. Kardon worked with Dr. Holder at MD Now in 2007 and 2008, and said he had an excellent bedside manner when working there, and that “[p]atients loved him” for his ability to provide “accurate diagnoses and treatment.”
I trust his medical knowledge, I trust his judgment, I trust his judgment in taking care of patients and his treatment, and his follow-up with patients. I would trust him with my life and with the life of my family.
As a person I knew him mostly in a professional capacity prior to his, his accident, and I visited him several times in the hospital, and with him and also got to know his family after his accident, from the hospital on forward, and am just as equally impressed with the hard work that he's done since his accident to regain, first, his life. That he survived that at all is miraculous, and just equally impressed with the work, the hard work that he has done to regain his personal and professional life.
Although testifying about Dr. Holder's good reputation, Dr. Kardon acknowledged that she was unaware that Dr. Holder admitted to having diverted controlled substances through other employees at MD Now.
Mr. Lawson: I'm telling you that [Dr. Holder has] admitted to [having diverted controlled substances through other employees at MD Now] in court under oath, so you can assume it's true. . . . Does the fact that he's admitted to diverting and using controlled substances unlawfully through his employment at MD Now change your stated opinion as to how much you trust him and value his professional reputation?
Dr. Kardon: It does not, because I don't think that's true.
Testifying on his own behalf, Dr. Holder sought to relate his history of conflicts with law enforcement officials, including his being repeatedly being shocked by a Taser during his encounter with first responders after the crash in 2008, and raising the claim that he had been arrested for trespassing in Minnesota under conditions he felt indicated improper police conduct.
Dr. Holder admitted to his past use of Adderall without a prescription, and to his past use of marijuana, but did so without providing specifics and without identifying a time period for this conduct.
I do take responsibility for the situation that happened in Florida. And there's a lot of things that I'm very unproud of, and the thing is, is I cannot remember diverting any medications with SS. I cannot remember and I honestly cannot remember how the medications got into the car, got into my car, but I do admit completely to using Adderall without prescriptions. And like I said, there's also a lot of my life that I'm not proud of, but I think that from there to now I've gone a long way, and I believe that I've displayed it through my actions.
Dr. Holder also pointed to his completion of the requirements imposed by the Minnesota Medical Board, but offered no apologies for failing to complete the PRN monitoring program in Florida—other than to assert that “I really could not support myself in Florida anymore because the restrictions I had on my license.”
Dr. Holder said one of the restrictions still in place at the clinic in Minnesota was imposed by his employer, in that his current employer has the right to drug test him for five years, adding that he has never failed a test since beginning at this place of employment.
Dr. Holder stated that if he had his DEA certificate of registration, “I'd be able to moonlight” and would not have the financial problems he currently is facing.
For one, I think that it's clear to me, and I want to make it clear to the Court again, that I've done some wrong things in the past and I've made some errors in the past, and I'm taking responsibility for the errors I've done. And since I've made these errors, I've worked diligently to the point where I am right now, complying with the things that I needed to comply with to get to this point.
And so I deserve my DEA registration. I put the work in school, I'm a Board-Certified Family Medicine physician, and I've worked towards these things to this point.
Number two, I think that the community actually needs me. I think that there's a need for family physicians and not only family physicians, but people that care for people, and I fall into that category where I care for people and I'll do the best job that I can to help people.
And number three, partly because of this situation as well, I am at no risk of diverting medicines, and I will be clear to say that I would never, in no circumstance would I divert medications to anybody else or myself.
Four material factual premises compel the ultimate finding required in this case. First, the record now before the Administrator demonstrates that Dr. Holder has a history of noncompliance with laws regulating controlled substances renders restoring to him a DEA Certificate of Registration inconsistent with the public interest. Second, Dr. Holder's history of false representation to professional boards and law enforcement authorities calls into question whether he can be entrusted with the authority to prescribe controlled substances. Third, there is substantial evidence that Dr. Holder made a material misstatement when applying for his DEA Certificate of Registration in 2012. And fourth, while there is some evidence of Dr. Holder's efforts at remediation, that evidence does not, by at least preponderance, overcome the Government's demonstration that granting a Certificate of Registration would be inconsistent with the public interest.
Much of what has been presented by the Administrator in the Order to Show Cause is uncontroverted. Dr. Holder acknowledged that there were no factual disputes regarding the facts appearing in paragraphs two through six of the Order.
The Government further established a history of professional disciplinary action against Dr. Holder in Florida and Minnesota, throughout which Dr. Holder gave false and misleading information to the state investigators, and followed that by providing a materially false answer regarding that history when applying for a Certificate of Registration from the DEA. Throughout the proceedings before me, Dr. Holder has provided inconsistent and evasive responses to questions presented by the Government, calling into question whether even now the Administrator has a complete record of Dr. Holder's history of misconduct.
There is substantial evidence that Dr. Holder obtained the restoration of his unrestricted state medical license by providing incomplete and misleading evidence to the Minnesota Board of Medical Practice. There is also evidence that Dr. Holder unilaterally terminated his participation in a monitoring program required of him by the Florida Board of Medicine, without completing the five-year period of Board-ordered probation and without completing the steps required by that Board to ensure his rehabilitation prior to his return to practice in Florida. Similarly, evidence of rehabilitation in the program established in Minnesota is lacking, as that program was based on a less than forthright description of Dr. Holder's illegal and improper conduct in Florida.
This administrative action began when the DEA's Administrator, through her Deputy Administrator, issued an Order proposing to deny Dr. Holder's application for a DEA Certificate of
While the burden of establishing that granting a Certificate of Registration application would contravene the public interest never shifts from the Government, once the Government meets this burden, Dr. Holder has the opportunity to present evidence that he accepts responsibility for his misconduct, and has taken appropriate steps to prevent misconduct in the future.
Regarding the first of these two bases for denying Respondent's application, under the registration requirements found in 21 U.S.C. 823(f), the Administrator is expected to consider five factors in determining the public interest when presented with the actions of a physician seeking to prescribe controlled substances These factors are:
(1) The recommendation of the appropriate State licensing board or professional disciplinary authority.
(2) The applicant's experience in dispensing, or conducting research with respect to controlled substances.
(3) The applicant's conviction record under Federal or State laws relating to the manufacture, distribution, or dispensing of controlled substances.
(4) Compliance with applicable State, Federal, or local laws relating to controlled substances.
(5) Such other conduct which may threaten the public health and safety.
Any one of these factors may constitute a sufficient basis for denying an application for a Certificate of Registration.
In its post-hearing brief, the Government argues that “Factors One, Two, Four and Five militate against the issuance of a DEA Registration to Respondent.”
I find the actions of state medical regulators in Minnesota and Florida, although not cast as “recommendation[s],” establish a basis for finding that Dr. Holder's application should be denied. Factor One considers “[t]he recommendation of the appropriate State licensing board or professional disciplinary authority.”
I note the legal premise, presented by the Government in its post-hearing brief, that the decisions of state medical boards regarding a licensee's ability to practice medicine in the jurisdiction of those boards “are not in any sense an official recommendation regarding this proceeding's outcome.”
Instead, the parties have acknowledged by stipulation that the Florida Department of Health issued an Emergency Suspension of Respondent's license to practice medicine on January 26, 2009 and filed an Administrative Complaint against Respondent on February 13, 2009.
Also before me is the parties' stipulation that on March 25, 2011, Respondent applied for a medical license from the Minnesota Board of Medical Practice (BMP); that by letter dated June 21, 2011, Respondent was informed that the BMP's Licensure committee intended to recommend denial of Respondent's application.
My concern with respect to evidence relating to the licensure actions taken by the medical boards in Florida and Minnesota rests not so much with their ultimate decisions, but with the process that led to those decisions being made. The Government is correct, in my view, in proposing that Respondent's misrepresentations to these boards call into question whether the actions taken by these regulators would be the same had they been told the same things Dr. Holder reported as true during this administrative process.
The Government's identification of the nature of these misrepresentations accurately reflects the many ways in which the two state medical boards were acting with less than a complete and accurate record due to Dr. Holder's duplicity.
With respect to Factors Two and Four, the Government in its post-hearing brief addresses both factors together.
This provision calls for an examination of a prescription writer's familiarity with the complexities associated with dispensing controlled substances under the Controlled Substances Act. Where, from the evidence, it appears a prescribing source's conduct, training, or credentials (
By Factor Two's plain language, Congress called for more than a mere consideration of violations of controlled substance laws when the Administrator engages in a review under Factor Two. In my view, evidence of deficiencies in an applicant's conduct, training, or credentials could support a finding that the public interest would not be well-served by permitting the applicant to prescribe controlled substances, even if there was no showing that the conduct amounted to a violation of laws relating to the distribution of controlled substances. Accordingly, in the analysis that follows, evidence pertaining to Factors Two and Four will be addressed separately.
The record before me includes very little evidence regarding Dr. Holder's experience dispensing controlled substances. By training, he noted experience in clinical settings here and abroad that suggest a deep understanding of the medical needs of the poor. As Dr. Kardon noted in her correspondence with the Minnesota Board of Medical Practice, Dr. Holder “is committed to the humanitarian goal of improving healthcare for the poor and underserved.”
Most of his reported experience to date, however, appears to have had little to do with prescribing controlled substances. After successfully completing his residency, Dr. Holder continued to gain experience in a clinical practice in fields not generally associated with dispensing controlled substances, including service as the program coordinator for African and American Friendship Association for Cooperation and Development, which involved planning and implementing curriculum for the Foreign Trained Health Care Professional—Medical English program; service as the founder of Land Pilot, Inc. in Crozierville, Liberia, developing “a conglomerate of various enterprises recognized for superior quality of services and products in Liberia” in 2009; service as founder of M.B.H. Wellness Report, which developed “a holistic approach to increase both the quantity and quality of life in a nontraditional medical setting” in 2009; service as founder of Liberian Initiative for Enrichment in Monrovia, Liberia, where he developed an institution that “conducts clinical research specifically for African American pollution globally”; service from 2009 to 2010 as chairman of the board of Bentol Development Association, “assisting in the economic, medical, and social planning for the development” of his mother's hometown in Liberia; and service from 2006 to 2008 as founder and president of Mperial Health PA in Miami, Florida, “operating healthcare consultation and providing medical services through emergency home visits, urgent care centers, and wellness training.”
From this record, the most significant post-graduate prescribing experience attributed to Dr. Holder is that which he obtained while working at MD Now for seven months
The record also establishes, through the testimony of Dr. Holder and Patient S.S., that Dr. Holder entered the world of drug dealers, using his experience and his association with Patient S.S. to acquire cocaine and marijuana on a regular basis. As a result of his association with Patient S.S., Dr. Holder is not only knowledgeable in the ways and means used to acquire illicit controlled substances; he is now personally experienced in those ways and means.
Coupling this character of experience with the negative features of his experience arising out of his improper prescription practice, discussed below in the analysis of Factor Four, I find the Government has presented under Factor Two preponderant evidence establishing that granting Respondent a DEA Certificate of Registration would be inconsistent with the public interest.
Under Factor Three the Administrator is to consider an applicant's conviction record under federal or state laws relating to the manufacture, distribution, or dispensing of controlled substances.
Under Factor Four, the Administrator may consider evidence regarding “[c]ompliance with applicable state, federal, or local laws relating to controlled substances.”
In its post-hearing brief, the Government urges that the Administrator make an adverse finding under Factor Five, based on Dr. Holder's “complete and utter lack of candor” to the DEA and to state regulators.
In discussing Factor Five, I exclude for the moment my assessment of the evidence pertaining to the DEA application filed by Dr. Holder. Making a material misrepresentation in a DEA application is conduct that falls within the scope of 21 U.S.C. 824(a)(1), and as such it is beyond the scope of Factor Five and will be addressed below.
The Factor Five concerns that are raised in this record arise when we examine Dr. Holder's conduct before the state medical boards, his behavior during the DEA investigation into his application, and his conduct before me during the evidentiary hearing. If I accept as true Dr. Holder's claim that because of his injuries he recalled none of the details of the 2008 automobile crash, I can only conclude Dr. Holder intentionally misled the Minnesota Medical Board when he stated, under oath, that neither he nor his passenger “was seriously hurt from the accident.”
Similarly, his inconsistent testimony regarding his history of drug use, his professed inability to recall where he obtained illicit supplies of controlled substances, his use of deflection and non-responsive answers during the hearing, and his refusal to provide DEA Diversion Investigator McKenna complete copies of his treatment and monitoring at PRN and HPSP after repeated requests for the same, all constitute preponderant evidence of “other behavior” warranting a finding that registration would be inconsistent with the public interest under Factor Five.
The record establishes that when he submitted his DEA application for registration on March 7, 2012, Dr. Holder falsely represented his medical licenses had never been suspended, denied, or restricted. “Just as materially falsifying an application provides a basis for revoking an existing registration without proof of any other misconduct,
In his post-hearing brief, Dr. Holder argues that the misrepresentation was not “material,” and that as such there was no violation of 21 U.S.C. 824(a)(1).
The factual predicate for this argument is that when an application is filed with the DEA, a registration specialist employed by the DEA checks to see if the applicant's medical license has been subject to adverse action by any state medical licensing board. Dr. Holder correctly notes that in her testimony, Diversion Investigator McKenna explained that when her office receives an application for registration, a registration specialist working at the office queries the state boards to determine if there any board actions present online.
According to Investigator McKenna, when Dr. Holder's application was brought to her attention (after the specialist determined there was a disciplinary record regarding Dr. Holder in the records of the Minnesota Board), she too checked the Board's online records.
In his argument, Dr. Holder correctly posits that the Government “has to show that the applicant provided false information in his/her application and that the false information provided is material.”
As the Government sufficiently points out in its post-hearing brief, “[a]nswers to the liability question[s] are always material because DEA relies on the answers to these questions to determine whether it is necessary to conduct an investigation prior to granting an application.”
The evidence further establishes that Dr. Holder's decision to answer Question Three in the negative was intentional. When given the opportunity to explain his response to this question during Investigator McKenna's meeting with him, Dr. Holder reviewed the language in Question Three, and underlined the first word, “surrendered” to indicate he answered in the negative after reading just this part of the question.
I am mindful that denial of an application may be appropriate based on an unintentional falsification, as noted in Dr. Holder's post-hearing brief.
Where the Government has established by at least a preponderance of the evidence that granting an application for a Certificate of Registration is not in the public interest, the applicant has the ability to present evidence of remediation. Mitigating evidence relevant to these proceedings generally includes two elements: An acknowledgement of responsibility by the applicant, and evidence of corrective measures taken by the applicant.
From the evidence before me, however, I find insufficient evidence to establish the presence of remediation efforts that would mitigate adverse findings based on Factors One, Two, Four and Five. Dr. Holder testified that “I've had to completely surrender my will and what I've found from this, is I have actually have reached a place of joy, advancement and completion.”
The most probative evidence of Dr. Holder's efforts to address any drug abuse problems he may have had would have come from the reports by monitors in the Florida PRN program and Minnesota's HPSP program. Even as he insists he has and had no drug abuse problem, the evidence of drug abuse associated with the 2008 crash, his abuse of marijuana and cocaine prior to
1. On March 7, 2012, Respondent, Mark William Andrew Holder, M.D., submitted an application for a DEA Certificate of Registration to handle controlled substances.
2. Respondent previously held DEA Certificate of Registration BH9956232, issued on November 21, 2007, with a registered address of 221 164th Street NE., Suite 329, North Miami Beach, Florida. This registration expired by its own terms on October 31, 2009.
3. On June 4, 2008, Respondent saw Patient S.S., a 25 year old male, at the MD Now Urgent Care Centers Royal Palm Beach facility. This was Patient S.S.'s initial encounter with Respondent in Respondent's professional capacity and Patient S.S.'s first visit of any kind to MD Now. Respondent prescribed Patient S.S. Percocet and Xanax, allegedly for back pain. The records of this visit indicate that Respondent failed to document a complete medical history and physical examination and that he failed to determine either the nature or the intensity of the patient's pain and the nature of the patient's current and past treatment for pain. Patient S.S. reported to Respondent that he was currently taking Percocet, Flexeril, and Xanax, yet the records contained no indication that Respondent inquired as to the identity of who previously treated and prescribed to the patient for his alleged back pain and anxiety issues. Respondent's brief treatment records indicate a diagnosis of “disc degeneration” despite the complete absence of any indication that Respondent reviewed any imaging studies or prior medical records to support this diagnosis.
4. Respondent's prescriptions for Percocet and Xanax issued on June 4, 2008 to Patient S.S. were issued outside the usual course of professional practice and for other than a legitimate medical purpose.
5. On June 11, 2008, Respondent issued a handwritten prescription to Patient S.S. for 60 tablets of 30 mg Adderall, a Schedule II controlled substance. The prescription indicates that Respondent issued the prescription from MD Now's Lake Worth, Florida facility, located at 4570 Lantana Road. MN Now has no medical records or any other documentation of Patient S.S.'s visit on June 11, 2008, nor is there any record of the issuance of this prescription. Respondent wrote the prescription without conducting an examination, without making a diagnosis for any condition necessitating the prescription, and without documenting the fact that Respondent had prescribed Adderall for this patient.
6. Respondent's prescription for Adderall issued on June 11, 2008 to Patient S.S. was issued outside the usual course of professional practice and for other than a legitimate medical purpose.
7. Respondent directed Patient S.S. to deliver the filled Adderall prescription back to him, for his own personal use. Patient S.S. complied with this direction, diverting the prescription to Respondent, who then exercised control over the filled prescription.
8. On June 13, 2008, at approximately 2:57 a.m., Respondent drove his Cadillac over a median, across three lanes of oncoming traffic into a street sign and concrete light pole, severely injuring himself and a passenger, N.P. The vial of Adderall Patient S.S. obtained from the prescription Respondent issued was located in Respondent's vehicle, with 41 of the 60 tablets remaining. Respondent's blood subsequently tested positive for amphetamines and marijuana, resulting in Respondent's arrest for driving under the influence of amphetamines and marijuana, driving on a suspended license, and obtaining amphetamines by fraud.
9. By an Order of Emergency Suspension dated January 26, 2009, the State of Florida Department of Health suspended Respondent's license to practice medicine in Florida. It did so after finding Respondent violated Section 458.331(1)(r), Florida Statutes, which prohibited Respondent from prescribing or administering controlled substances to himself. It also found Respondent violated Section 458.331(1)(q), Florida Statutes, which prohibited Respondent from prescribing Adderall to a patient without conducting an examination, without making a diagnosis for any condition necessitating the prescription, and without documenting that he had prescribed Adderall for the patient or providing a justification for the prescription. It also found Respondent violated Section 458.311(1)(cc), Florida Statutes, by prescribing Adderall for purposes other than those authorized by that Section, after determining that Respondent wrote an Adderall prescription for Patient S.S., who then filled the prescription and upon being reimbursed for the cost of the prescription delivered to Respondent the filled prescription for Respondent's own use.
10. By a Stipulation and Order dated November 12, 2011, the Minnesota Board of Medical Practice issued a restricted medical license to Respondent, upon its review of a report of chemical abuse and diversion of controlled substances for Respondent's own use. Under the terms of the Stipulation and Order, Respondent was authorized to practice medicine in Minnesota only upon agreeing to (1) participate in the Health Professionals Services Program for at least one year and complying with all of the requirements of that program; (2) submit to a minimum of six unannounced biological fluid screens per quarter; (3) execute a release authorizing the Program to release a copy of Respondent's monitoring plan to the Board; (4) practice only in a setting approved in advance by the Board; and (5) obtain a supervising physician who shall provide quarterly reports to the Board.
11. On March 7, 2012, Respondent submitted the application for a DEA Certificate of Registration to handle controlled substances under Schedules 2, 2N, 3, 3N, 4 and 5, identifying the business location as 2810 Nicollet Avenue South, Minneapolis, Minnesota 55408-3160. In this application, when asked “Has the applicant ever surrendered (for cause) or had a state professional license or controlled substance registration revoked, suspended, denied, restricted, or placed on probation, or is any such action pending?” Respondent falsely answered “No” to this question.
12. In the course of investigating the circumstances surrounding state medical board action pertaining to Respondent's medical licenses in Florida and Minnesota, DEA Diversion Investigator Virginia McKenna met with or spoke with Respondent on several occasions between July 19, 2012 and August 23, 2013. Throughout this period, Investigator McKenna made repeated requests for Respondent to provide the DEA with copies of
13. In meetings and conversations conducted by DEA Diversion Investigators McKenna, Jack Henderson, and Joseph Cappello, Respondent gave evasive and conflicting answers to questions regarding his history of drug abuse, his use and abuse of marijuana and Adderall, the sources supplying him with controlled substances, his ability to recall the events immediately prior to and after the June 13, 2008 crash, the nature and severity of injuries he and his passenger sustained due to the crash, his use of controlled substances while working at MD Now, and his reasons for answering registration application Question Three in the negative. He provided similarly evasive and conflicting answers to questions presented to him by the medical boards in Florida and Minnesota, particularly minimizing the severity of injuries he and his passenger sustained in the June 13, 2008 crash. Respondent continued providing evasive, inconsistent, and deflecting responses during the evidentiary hearing he requested upon his receipt of the pending DEA Order to Show Cause.
14. Evidence of remediation in this record takes the form of Respondent's successful completion of a one-year period of monitoring under the auspices of the Minnesota Health Professional Services Program; letters expressing support by family members, professional colleagues and patients; and Respondent's testimony averring that he has changed his lifestyle, gotten married, produced a daughter, and learned from his experiences. Circumstances calling into question the weight that can be attributed to this evidence include the fact that the monitoring program established by the Minnesota Board was based on Respondent's material misrepresentation of the nature of the injuries he and his passenger sustained in the June 2008 crash, and his failure to disclose the extent and nature of his history of drug abuse. Further, the record establishes that upon its inquiry into Respondent's actions relating to the June 13, 2008 automobile crash, medical regulators in Florida ordered Respondent to participate in monitoring and a five-year period of probation, which Respondent failed to comply with, surrendering his medical license in that state in order to avoid these remedial requirements. There is thus insufficient evidence of remediation to overcome the Government's
1. When it proposes to deny a new application for a DEA Certificate of Registration pursuant to U.S.C. 824(a)(1), the Government is required to establish by at least a preponderance of the evidence that Respondent materially falsified a DEA registration application.
2. Where preponderant evidence establishes, as is the case here, that Respondent denied having a license to practice medicine either suspended or restricted, knowing that this was a false answer, the Government has established sufficient proof of Respondent materially falsifying a DEA registration application to warrant denial of the application.
3. When it proposes to deny a new application for a DEA Certificate of Registration pursuant to U.S.C. 824(a)(4), the Government is required to establish by at least a preponderance of the evidence that the applicant's registration is inconsistent with the public interest.
4. Pursuant to U.S.C. 823(f), five factors must be considered when determining the public interest in this case pursuant to U.S.C. 824(a)(4):
(1) The recommendation of the appropriate state licensing board or professional disciplinary authority.
(2) The applicant's experience in dispensing, or conducting research with respect to controlled substances.
(3) The applicant's conviction record under federal or state laws relating to the manufacture, distribution, or dispensing of controlled substances.
(3) Compliance with applicable state, federal, or local laws relating to controlled substances.
(4) Such other conduct which may threaten the public health and safety.
5. Under 21 U.S.C. 823(f)(1) (Factor One), where the record establishes a history of Respondent's license being first suspended by the Florida Department of Health and then voluntarily surrendered for cause, based on Respondent's decision not to participate in further monitoring by the Florida Department of Health; and a history of Respondent's license being restricted by the Minnesota Medical Board and then restored based on Respondent's false and misleading statements of his history of drug abuse and the circumstances surrounding a motor vehicle crash that had precipitated the action of the Florida Department of Health, the circumstances attendant to the action of these boards constitute evidence tending to establish that Respondent's DEA registration would be inconsistent with the public interest under Factor One.
6. In order to establish a basis for denying an application for a Certificate of Registration based on the provisions of 21 U.S.C. 823(f)(2) (Factor Two), the Government must present preponderant evidence establishing that Respondent's experience in dispensing controlled substances is of such character and quality that his registration would be inconsistent with the public interest. While there is some evidence that through the course of his education, training, and employment Respondent has acquired sufficient experience to appropriately fulfill those responsibilities attendant to persons authorized to prescribe controlled substances, the preponderant evidence of Respondent's experience in procuring controlled substances creates material questions regarding the benefit Respondent obtained from his positive experiences, where those experiences should have instilled in Respondent a greater sense of responsibility when procuring and using highly addictive controlled substances. If granted the authority to prescribe often-diverted controlled substances, Respondent's experience as demonstrated in this record would, in the event of relapse, constitute a threat to the public interest, particularly where Respondent continues to deny having drug abuse problems notwithstanding a history of abuse. While this risk is attenuated during Respondent's sustained period of stable recovery, it is sufficiently present here, given the absence of any on-going monitoring or treatment, to warrant a finding that Respondent's experience in dispensing controlled substances contradicts a finding that granting this application is consistent with the public interest. Accordingly, the Government has met its burden of establishing that registration would be inconsistent with the public interest under Factor Two.
7. In order to establish a basis for denying an application for a Certificate of Registration based on the provisions of 21 U.S.C. 823(f)(3) (Factor Three), the Government must present evidence of Respondent's conviction record under federal or state laws relating to the manufacture, distribution, or dispensing of controlled substances. As this Factor is neither alleged by the Government nor suggested by the evidence, this Factor may not be considered to support the denial of Respondent's application for a DEA Certificate of Registration.
8. Under 21 U.S.C. 823(f)(4) (Factor Four), the Administrator is to consider the Respondent's compliance with applicable state, federal, or local laws relating to controlled substances. Federal law relating to controlled substances includes the requirement that all prescriptions for controlled substances must be for a legitimate medical purpose and must be issued in the ordinary course of a professional medical practice.
9. Under 21 U.S.C. 823(f)(5) (Factor Five), the Administrator is to consider, “[s]uch other conduct which may threaten the public health and safety.” Respondent's actions or omissions that threaten the public interest may constitute a basis for denying an application for a DEA registration under Factor Five, where the conduct is not within the scope of Factors One through Four.
10. Upon such evidence, the Government has met its burden and has made a prima facie case in support of the proposed order denying Respondent's application for a DEA Certificate of Registration.
11. Where the Government has made out its
12. Because “past performance is the best predictor of future performance,”
13. The record now before the Administrator establishes that Respondent has failed to timely provide the DEA with reports of his treatment or monitoring from the Florida Medical Board and PRN and from the Minnesota Board of Medical Practice and HPSP; failed to acknowledge the need to provide forthright, accurate, and complete responses to questions presented regarding his prescription practice and his history of drug abuse; and failed to account for his false statement in making this application for DEA registration. Upon such evidence, Respondent has not rebutted the Government's
As the Government has pursuant to 21 U.S.C. 824(a)(1) established by preponderant evidence that Respondent has materially falsified an application filed pursuant to subchapters I or II of Chapter 13 of Title 21, United States Code; and as the Government has pursuant to 21 U.S.C. 824(a)(4) established by preponderant evidence that granting a DEA Certificate of Registration to Respondent would be inconsistent with the public interest, and as Respondent has failed to rebut the case presented by the Government, Respondent's application for a DEA Certificate of Registration should be DENIED.
Dated: October 9, 2014.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Proposed rule; request for comments.
NMFS proposes regulations to implement Amendment 111 to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP). The proposed rule would reduce bycatch limits, also known as prohibited species catch (PSC) limits, for Pacific halibut in the Bering Sea and Aleutian Islands (BSAI) groundfish fisheries by specific amounts in four groundfish sectors: The Amendment 80 sector (non-pollock trawl catcher/processors); the BSAI trawl limited access sector (all non-Amendment 80 trawl fishery participants); the non-trawl sector (primarily hook-and-line catcher/processors); and the Western Alaska Community Development Quota Program (CDQ Program, also referred to as the CDQ sector). This action is necessary to minimize halibut bycatch in the BSAI groundfish fisheries to the extent practicable and to achieve, on a continuing basis, optimum yield from the BSAI groundfish fisheries. This action is intended to promote the goals and objectives of the Magnuson-Stevens Fishery Conservation and Management Act, the FMP, and other applicable laws.
Submit comments on or before December 16, 2015.
You may submit comments, identified by NOAA-NMFS-2015-0092, by any one of the following methods:
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Written comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in this proposed rule may be submitted by mail to NMFS at the above address; emailed to
Electronic copies of Amendment 111 to the FMP and the Environmental Assessment/Regulatory Impact Review/Initial Regulatory Flexibility Analysis (Analysis) for this action may be obtained from
Mary Alice McKeen, 907-586-7228.
NMFS manages the groundfish fisheries in the Exclusive Economic Zone (EEZ) of the BSAI under the FMP. The North Pacific Fishery Management Council (Council) prepared, and the Secretary of Commerce approved, the FMP pursuant to the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) and other applicable laws. Regulations implementing the FMP appear at 50 CFR part 679. General regulations that pertain to U.S. fisheries appear at 50 CFR part 600.
The Council submitted Amendment 111 for review by the Secretary of Commerce. A notice of availability of Amendment 111 was published in the
Pacific halibut (
The International Pacific Halibut Commission (IPHC) and NMFS manage Pacific halibut fisheries through regulations established under the authority of the Northern Pacific Halibut Act of 1982 (Halibut Act) (16 U.S.C. 773-773k). The IPHC adopts regulations governing the target fishery for Pacific halibut under the Convention between the United States and Canada for the Preservation of the Halibut Fishery of the North Pacific Ocean and Bering Sea (Convention), signed at Ottawa, Ontario, on March 2, 1953, as amended by a Protocol Amending the Convention (signed at Washington, DC, on March 29, 1979). For the United States, regulations governing the fishery for Pacific halibut developed by the IPHC are subject to acceptance by the Secretary of State with concurrence from the Secretary of Commerce. After acceptance by the Secretary of State and the Secretary of Commerce, NMFS publishes the IPHC regulations in the
Section 773c(c) of the Halibut Act also provides the Council with authority to develop regulations that are in addition to, and not in conflict with, approved IPHC regulations. The Council has exercised this authority in the development of Federal regulations for the halibut fishery such as (1) Subsistence halibut fishery management measures, codified at § 300.65; (2) the limited access program for charter vessels in the guided sport fishery, codified at § 300.67; and (3) the Individual Fishing Quota (IFQ) Program for the commercial halibut and sablefish fisheries, codified at 50 CFR part 679, under the authority of section 773 of the Halibut Act and section 303(b) of the Magnuson-Stevens Act.
In recent years, catch limits for the commercial halibut fishery in the BSAI have declined in response to changing halibut stock conditions while limits on the maximum amount of halibut bycatch allowed in the groundfish fisheries have remained constant. The proposed rule would reduce halibut bycatch limits, also referred to as halibut PSC limits, in the BSAI groundfish fisheries. This proposed reduction in halibut PSC limits is consistent with the requirements of the Magnuson-Stevens Act to minimize bycatch to the extent practicable while achieving, on a continuing basis, optimum yield from the groundfish fisheries. This section of the preamble provides background on the halibut resource, halibut management, the halibut fisheries, and halibut bycatch in the groundfish fisheries in the BSAI. The following two sections describe the rationale and impacts of Amendment 111 and the proposed rule.
This preamble cites the most recent available data consistent with the Analysis prepared to support this action. The most recent data available varies depending on the specific data source. The Analysis and this preamble use (1) data through 2015 for information on commercial halibut fishery catch limits, (2) data through 2014 for information on the halibut stock and halibut PSC use, and (3) data through 2013 for information on commercial halibut harvests and revenue and groundfish fisheries harvests and revenue.
The Analysis and this preamble describe the potential impacts on the halibut stock and commercial, personal use, sport, and subsistence halibut fisheries in terms of net pounds instead of metric tons. This is a long-standing practice by the IPHC because the IPHC measures biomass and directed fishery removals in terms of net weight in pounds (
The IPHC assesses the status of the Pacific halibut stock at a coastwide level from California to the Bering Sea. Each year, the IPHC estimates the amount of exploitable biomass. Exploitable biomass is composed of halibut that are 26 inches in length or greater (O26), the size of fish that are accessible to fishing gear used in the IPHC halibut stock survey and in the halibut fisheries. From 2000 through 2010, exploitable biomass declined primarily as a result of decreasing size at age and smaller recruitments than those observed through the 1980s and 1990s. Since 2011, the exploitable biomass has been increasing slightly from a recent low of approximately 175 million pounds in 2011 to approximately 180 million pounds in 2015 (see Table 3-1 in Section 3.1.1.1 of the Analysis).
Annually, the IPHC also assesses female spawning biomass, another important indicator of the status of the halibut stock. Female spawning biomass is composed of female halibut of reproductive size. Generally, this includes female halibut that are O26, but a small proportion of the female spawning biomass includes female halibut less than 26 inches in length (U26). Female spawning biomass is considered an important indicator of the long-term reproductive health of the halibut resource. Since 2013, the estimated female spawning biomass appears to have stabilized near 200 million pounds. The stock assessment models used by the IPHC in 2015 project a stable or slightly increasing female spawning biomass over the next 3 years assuming current removal rates from all sources (see Table 3-4 in Section 3.1.2.1 of the Analysis).
Collectively, the current status of exploitable biomass and female spawning biomass indicate that the halibut stock is stable or potentially increasing slightly in overall abundance. Section 3.1.1 of the Analysis provides additional detail on the current and projected status of halibut exploitable biomass and female spawning biomass.
It is important to note that halibut is not a groundfish species under the FMP and therefore is not subject to the provisions of the Magnuson-Stevens Act requiring the establishment of an annual overfishing limit (OFL), an acceptable biological catch (ABC), or a total allowable catch (TAC) limit. The OFL represents a level of removals that cannot be exceeded without jeopardizing the sustainability of the stock. The ABC represents the maximum permissible harvest and is less than the OFL. The TAC represents the actual permissible catch limit. The TAC may be set equal to or less than the ABC; the TAC cannot exceed the ABC. The OFL and ABC are biologically-based harvest limits that are not to be exceeded. After the OFLs and ABCs are established, the Council recommends and NMFS implements annual TACs (see Section 3.2.3 of the FMP for a description of the process for specifying OFLs, ABCs, and TACs for groundfish fisheries in the BSAI).
Although halibut is not managed under an OFL, ABC, or TAC, the IPHC has developed policy to control removals during conditions of declining or poor stock abundance. The IPHC harvest policy includes a harvest control rule that reduces commercial harvest rates linearly if the stock is estimated to have fallen below established thresholds for female spawning biomass. These harvest control rules would severely curtail removals during times of particularly poor stock conditions. These harvest control rules have not been triggered, even during the most recent years of relatively low exploitable biomass (see Section 3.1.1.1 and Section 3.1.2.1 of the Analysis).
The best available information from the most recent halibut stock assessment indicates that the halibut female spawning biomass (SB) is estimated to be 42 percent of the equilibrium condition in the absence of fishing (SB
Total annual removals of halibut from all sources at the coastwide level have been low in recent years compared to historical total annual removals. Total annual halibut removals include harvests in the commercial, personal use, sport, and subsistence fisheries, as well as bycatch and wastage (
The commercial fisheries for halibut are the largest source of coastwide removals, accounting for an average of 62 percent (31 million pounds) of total removals from 2011 through 2014. Removals from personal use, sport and subsistence fisheries are a much smaller component of total coastwide removals, collectively averaging 16 percent of total removals from 2011 through 2014. Overall, the total amount and proportion of commercial removals has varied with exploitable biomass, increasing as exploitable biomass increases and decreasing as exploitable biomass decreases. The total amount of personal use, sport, and subsistence removals has been relatively constant since 2011, but the proportion of personal use, sport and subsistence removals has increased as the exploitable biomass and commercial removals have decreased.
Bycatch is the second largest component of total coastwide removals and averaged 19 percent of total removals from 2011 through 2014. Bycatch of halibut in groundfish fisheries averaged 9.4 million pounds coastwide from 2011 through 2014. Although bycatch represents the second largest source of halibut removals, the total tonnage of bycatch removals in recent years (
Pacific halibut is allocated among fisheries by a combination of management actions taken by the IPHC, the Council, and NMFS. The IPHC annually completes a halibut stock assessment and makes recommendations for annual management measures for the halibut fishery within Convention waters. These annual management measures include specific regulations governing the commercial halibut fishery, including area-specific catch limits, authorized gear, and fishing season dates. In the United States, the IPHC recommendations are subject to acceptance by the Secretary of State and the Secretary of Commerce, as described above in the “Authority for Action” section of this preamble. See Section 3.1.2 of the Analysis and the 2015 annual management measures for additional information on the process for establishing commercial halibut fishery catch limits (80 FR 13771, March 17, 2015).
Although the halibut stock is assessed at a coastwide level, commercial catch limits are established for each IPHC regulatory area (Area). Area 2 is composed of Area 2A (Washington, Oregon, and California); Area 2B (British Columbia); and Area 2C (Southeast Alaska). Area 3 is composed of Area 3A (Central Gulf of Alaska); Area 3B (Western Gulf of Alaska); and Area 4 (BSAI) composed of Areas 4A, 4B, 4C, 4D and 4E. The IPHC combines Areas 4C, 4D, and 4E into Area 4CDE for purposes of establishing a commercial fishery catch limit. Areas 4A and 4C, 4D, and 4E roughly correspond to the Bering Sea Subarea defined in the FMP. Area 4B roughly corresponds to the Aleutian Islands Subarea in the FMP. Area 4CDE encompasses most of the Bering Sea Subarea in the FMP. See Figure 15 in Part 679 and Table 1-1 in Section 1.5 of the Analysis for Area maps and additional information on halibut and groundfish management areas in the BSAI.
The IPHC has developed a harvest policy and area apportionment model for determining commercial halibut fishery catch limits in all Areas. Under the harvest policy and area apportionment model, the total amount of allowable halibut harvest (called the Total Constant Exploitation Yield) is designated for each Area. The IPHC deducts all removals other than commercial fishery harvests (
The IPHC considers the blue line catch limit along with information on different levels of harvest above and below the blue line catch limit to accommodate greater flexibility when selecting commercial catch limits. The IPHC utilizes a decision table that estimates the consequences to halibut stock, fishery status, and trends from a range of commercial catch limits at, above, and below the blue line catch limit (see Table 3-4 in Section 3.1.2.2 of the Analysis). This decision table accommodates uncertainty in the stock status and allows the IPHC to weigh the risk and benefits of management choices as it sets the annual commercial catch limits. For example, the IPHC consistently considers the socioeconomic impacts of different commercial catch limits in an Area on fishery participants. In some instances, the IPHC has recommended an area-specific commercial catch limit that is greater than the blue line catch limit to prevent adverse economic impacts from reduced harvest levels for fishery participants and fishing communities dependent on the fishery.
The flexibility that the IPHC has in setting commercial catch limits is demonstrated in the difference between the commercial catch limits relative to the blue line catch limits derived from application of its harvest policy. From 2006 (the first year the IPHC adopted its harvest policy) through 2015, the IPHC coastwide commercial catch limit recommendation exceeded the combined blue line catch limits for all Areas in 7 of the 10 years; and Area-specific commercial catch limits have exceeded blue line catch limits in all Areas at least once, and for some Areas, in most years over the past 10 years (see Table 3-5 in Section 3.1.2.2 of the Analysis).
Although the IPHC has adopted commercial catch limits greater than the blue line catch limit in most years, the halibut stock has not fallen to levels that reach the harvest control rule thresholds described in the “Status of the Halibut Stock” section of this preamble. Although neither the blue line catch limit derived from the IPHC's harvest policy, nor any commercial catch limit adopted by the IPHC is the same as an OFL, ABC, or TAC used for management of groundfish fisheries in Alaska, Section 3.1.1.1 of the Analysis notes that “in the last four years, there is no information to suggest that halibut is subject to `overfishing' as that term is commonly applied to stocks managed under the Magnuson-Stevens Act.” For a more complete description of the IPHC process for establishing commercial catch limits, see Section 3.1.2.2 of the Analysis.
Under IPHC harvest policy, the amount of bycatch (including wastage in the commercial fishery) in an Area can affect the amounts of halibut available for harvest in commercial, personal use, sport, and subsistence fisheries in future years. Bycatch includes O26 and U26 halibut. The proportion of bycatch comprised of O26 and U26 halibut varies by Area. Under the current IPHC harvest policy, halibut bycatch in an Area that is O26 is deducted from the amount of halibut available for the commercial fishery. Therefore, reductions in the amount of O26 bycatch could provide an opportunity to increase the commercial catch limits for that Area in the year following the reduction.
The amount of U26 bycatch in the groundfish fishery or U26 wastage in the commercial halibut fishery could impact future harvests in commercial halibut fisheries and in personal use, sport, and subsistence use fisheries in all Areas coastwide. This is due to the migration of U26 halibut among Areas. Although information on the migration of U26 halibut on a coastwide basis is limited, the best available information indicates that a portion of the U26 halibut in Area 4 migrate in a southward pattern through the Gulf of Alaska (Areas 3B and 3A), Southeast Alaska (Area 2C), British Columbia (Area 2B), and ultimately to the west coast of the United States (Area 2A). Therefore, reducing U26 halibut removed as bycatch in Area 4 would be expected to contribute to the exploitable biomass in various Areas as these halibut grow to a size where they can reproduce and become available for harvest in halibut fisheries in future years in Area 4 and elsewhere along the coast. Section 3.1.3.5 of the Analysis contains additional information on the proportions of halibut bycatch that are O26 and U26 by Area. Section 3.1.1.2 of the Analysis contains additional information on the distribution and migration of halibut among Areas.
IPHC and NMFS regulations authorize the harvest of halibut in commercial, personal use, sport and subsistence fisheries only by hook-and-line gear. In the BSAI (Area 4), halibut is harvested primarily in commercial fisheries and secondarily in personal use, subsistence, and sport fisheries. Based on recent harvest data from 2011 through 2014, the sport fishery operating out of ports in the BSAI harvests approximately 20,000 pounds in Area 4 compared to approximately 40,000 pounds of personal use and subsistence harvest from Area 4, and more than 3,000,000 pounds in the Area 4 commercial fishery. Given the limited sport harvest in Area 4 and that this action is not likely to impact the sport fishery, this preamble does not address the sport fishery in additional detail. See Sections 3.1.2 and 3.1.4 of the Analysis for additional detail on personal use, sport, subsistence, and commercial halibut harvests in Area 4.
Subsistence halibut is caught by a rural resident or a member of a federally-recognized Alaska Native tribe for direct personal or family consumption as food, sharing for personal or family consumption as food, or customary trade. Pursuant to section 773c(c) of the Halibut Act, the Council developed, and NMFS implemented, the Subsistence Halibut Program to manage subsistence harvests in Alaska. Persons fishing for subsistence halibut must obtain a Subsistence Halibut Registration Certificate. Special permits for community harvest, ceremonial, and educational purposes also are available to qualified Alaska communities and federally-recognized Alaska Native tribes. A complete description of the Subsistence Halibut Program is provided in the final rule to implement the program (68 FR 18145, April 15, 2003).
In addition to subsistence harvest, IPHC annual management measures allow halibut caught in the commercial halibut fishery that are less than the legal size limit of 32 inches to be retained for personal use in the Area 4D and 4E CDQ halibut fishery as long as the fish are not sold or bartered. The CDQ groups are required to report the amount of personal use halibut retained during the CDQ halibut fishery to the IPHC. Section 3.1.4.4 of the Analysis contains a description of the personal use fishery.
The commercial halibut fishery in the BSAI is managed under the IFQ and CDQ Programs that allocate exclusive harvest privileges. The IFQ Program was implemented in 1995 (58 FR 59375, November 9, 1993). The Council and NMFS designed the IFQ Program to end a wasteful and unsafe “race for fish,” and maintain the social and economic character of the fixed-gear fisheries and the coastal fishing communities where many of these fisheries are based. Access to the halibut and sablefish fisheries is limited to those persons holding quota share (QS). Quota shares equate to exclusive harvesting privileges
The CDQ Program was established in 1992 and amended substantially in 2006 (57 FR 54936, November 23, 1992). Under Section 305(i)(1)(D) of the Magnuson-Stevens Act, a total of 65 villages are authorized to participate in the CDQ Program. Six CDQ groups represent these villages. CDQ groups manage and administer allocations of crab, groundfish, and halibut and use the revenue derived from the harvest of these CDQ allocations to fund economic development activities and provide employment opportunities on behalf of the villages they represent.
Section 305(i)(B) of the Magnuson-Stevens Act specifies the proportion of crab, groundfish, and halibut in the BSAI allocated to the CDQ Program. Section 305(i)(C) of the Magnuson-Stevens Act specifies the proportion of the overall CDQ Program allocations assigned to each CDQ group. Each year, NMFS publishes the specific annual allocations to each CDQ group on the Alaska Region Web site at:
The combined CDQ and IFQ halibut fisheries in Area 4 were harvested by, on average, approximately 330 vessels from 2008 through 2013 (see Table 4-93 in Section 4.5.2 of the Analysis). The majority of these 330 vessels participate in the CDQ halibut fishery. Most vessels participating in the CDQ halibut fishery use small vessels that make relatively small harvests of several hundred or several thousand pounds. Fewer vessels participate in the IFQ fishery, but approximately 80 percent of the overall halibut harvest in Area 4 comes from vessels participating in the IFQ fishery (see Section 4.5.1 of the Analysis for additional detail).
The CDQ and IFQ halibut fisheries provide revenue to vessel owners and crew members that harvest halibut. These fisheries also provide economic benefits to shorebased halibut processors and socioeconomic benefits to BSAI fishing communities that provide support services to the halibut harvesting and processing sectors. The Analysis estimates that halibut harvests in the Area 4 CDQ and IFQ fisheries averaged 6.8 million pounds and generated an average of $32 million in ex-vessel revenues annually from 2008 through 2013. Area 4 halibut harvests and ex-vessel revenues declined over this period, resulting in negative economic impacts for fishery participants and affected fishing communities.
Since 2008, the Area 4 catch limit has declined by 63 percent from the peak catch limit of 8.85 million pounds in 2008 to a low of 3.28 million pounds in 2014. The 2015 Area 4 commercial catch limit has increased slightly from the recent low in 2014 to 3.82 million pounds. In 2008, the Area 4 commercial ex-vessel value peaked at $38 million. In 2013, Area 4 commercial ex-vessel value was at its lowest at $18 million. The declines in commercial catch limits have been greatest in Area 4CDE. In Area 4CDE, the commercial halibut fishery catch limit declined by 67 percent from the peak catch limit of 3.89 million pounds in 2008 to a low of 1.285 million pounds in 2014 and 2015. During this period, the IPHC decided to provide additional harvest opportunity in Area 4CDE by adopting higher commercial catch limits than would have resulted if the IPHC's blue line harvest policy recommendations were actually implemented. See Section 3.1.4.1, Section 4.5, and Appendix C of the Analysis for a complete description of the Area 4 commercial halibut fishery and the fishery participants. Additional detail on the IPHC's harvest policy and catch limits is provided in Section 3.1.2.1 of the Analysis.
In Area 4, the specific proportion of removals that are taken as bycatch in the groundfish fisheries or as catch in the commercial halibut fishery has shifted over time. From 1990 to 1996 (the period prior to the recent peak and decline in removals in the halibut fishery), the commercial halibut fisheries averaged 37 percent and bycatch averaged 60 percent of total halibut removals in Area 4. From 1997 to 2011 (the period of the greatest increase and subsequent decline in the total removals of halibut), the commercial halibut fishery removals increased as a portion of total removals; the commercial halibut fisheries averaged 57 percent and bycatch averaged 41 percent of total halibut removals. In more recent years, the proportion of halibut removals from the commercial halibut fishery has declined. From 2012 through 2014 (the period of recent stability in the halibut exploitable biomass), the commercial halibut fishery averaged 41 percent and bycatch averaged 55 percent of total removals. See Figure 3-12 and Section 3.1.3 of the Analysis for additional detail.
Area 4CDE comprises most of the Bering Sea subarea and historically is the portion of Area 4 where the greatest removals of halibut from commercial fisheries and bycatch occur (see Figure 3-14 in Section 3.1.3.3 of the Analysis). From 1990 to 1996, the commercial halibut fisheries averaged 23 percent and bycatch averaged 77 percent of total halibut removals in Area 4CDE. From 1997 to 2011, commercial halibut fishery removals in Area 4CDE increased as a portion of total removals; the commercial halibut fisheries averaged 44 percent and bycatch averaged 56 percent of total halibut removals in Area 4CDE. In recent years, proportion of halibut removals from the commercial halibut fishery has declined. From 2012 through 2014, the commercial halibut fishery averaged 31 percent and bycatch averaged 68 percent of removals in Area 4CDE. See Figure 3-12 in Section 3.1.3.3 of the Analysis.
The Magnuson-Stevens Act authorizes the Council and NMFS to manage groundfish fisheries in the Alaska EEZ that take halibut as bycatch. The groundfish fisheries cannot be prosecuted without some level of halibut bycatch because groundfish and halibut occur in the same areas at the same times and no fishing gear or technique has been developed that can avoid all halibut bycatch. However, the Council and NMFS have taken a number of management actions over the past several decades to minimize halibut bycatch in the BSAI groundfish fisheries.
Most importantly, the Council has designated Pacific halibut and several other species (herring, salmon and steelhead, king crab, and Tanner crab) as “prohibited species” (Section 3.6.1 of the FMP). By regulation, the operator of any vessel fishing for groundfish in the BSAI must minimize the catch of prohibited species (§ 679.21(b)(2)(i)).
Although halibut is taken as bycatch by vessels using all types of gear (trawl, hook-and-line, pot, and jig gear), halibut bycatch primarily occurs in the trawl and hook-and-line groundfish fisheries. NMFS manages halibut bycatch in the BSAI by (1) establishing halibut PSC limits for trawl and non-trawl fisheries; (2) apportioning those halibut PSC
Consistent with National Standard 1 and National Standard 9 of the Magnuson-Stevens Act, the Council and NMFS use halibut PSC limits in the BSAI groundfish fisheries to minimize bycatch to the extent practicable while achieving, on a continuing basis, optimum yield from the groundfish fisheries. Halibut PSC limits in the groundfish fisheries provide an additional constraint on halibut PSC mortality and promote conservation of the halibut resource. With one limited exception described later in this preamble, groundfish fishing is prohibited once a halibut PSC limit has been reached for a particular sector or season. Therefore, halibut PSC limits must be set to balance the needs of fishermen, fishing communities, and U.S. consumers that depend on both halibut and groundfish resources.
The total annual halibut PSC limit in the BSAI is 4,575 metric tons (mt) (10.1 million pounds). Of this amount, 3,675 mt is apportioned to trawl gear and 900 mt is apportioned to non-trawl gear as specified at § 679.21(e). Trawl gear in the BSAI groundfish fisheries includes pelagic (midwater) trawl gear and non-pelagic (bottom) trawl gear. Non-trawl gear in the BSAI groundfish fisheries includes pot, hook-and-line, and jig gear.
The halibut PSC limit for trawl gear of 3,675 mt has been unchanged since 2000 (65 FR 31105, May 16, 2000). Section 3.6.4 of the FMP and § 679.21(e) specify that the halibut PSC limit for trawl gear will be apportioned among three groundfish sectors: (1) The CDQ Program (also called the CDQ sector in the proposed rule preamble), (2) the Amendment 80 sector, and (3) the BSAI trawl limited access sector.
A portion of the BSAI halibut PSC limit for trawl gear is first apportioned for use by the CDQ sector. The CDQ sector comprises all trawl and non-trawl vessels that harvest groundfish under the CDQ Program. The CDQ sector receives its halibut PSC apportionment as a Prohibited Species Quota (PSQ) Reserve (§ 679.2). Section 3.7.4.6 of the FMP and regulations at § 679.21(e) allocate 393 mt of the BSAI halibut PSC limit to the groundfish CDQ sector as PSQ Reserve. NMFS further apportions the halibut PSQ Reserve to each CDQ group as PSQ (§ 679.2) in proportion to the percentages specified by NMFS (71 FR 51804, August 31, 2006). PSQ serves as a halibut PSC limit for BSAI groundfish harvests by each CDQ group.
Under § 679.21(e)(3)(i)(A) and (e)(4)(i)(A), the halibut PSQ Reserve of 393 mt is deducted from the PSC limits established for both the trawl sector and the non-trawl sector: 326 mt is deducted from the trawl gear halibut PSC limit of 3,675 mt and 67 mt is deducted from the non-trawl gear halibut PSC limit of 900 mt. Sections 679.21(e)(3)(i)(A) and (e)(4)(i)(A) specify that the PSQ reserve is not further apportioned by gear or fishery or season. Therefore, the CDQ groups may use their halibut PSQ in any trawl or non-trawl gear groundfish CDQ fishery, subject to other requirements in regulation.
Following the deduction of the halibut PSQ reserve, the BSAI halibut PSC limit for trawl gear is further divided between the Amendment 80 and BSAI trawl limited access sectors as specified in Table 35 to part 679. The Amendment 80 sector is apportioned 2,325 mt. This amount is further apportioned to Amendment 80 cooperatives and the Amendment 80 limited access fishery, if any vessels elect to participate in the limited access fishery for that year. The apportionment of halibut PSC to an Amendment 80 cooperative is for exclusive use by the vessels participating in that cooperative. The method for apportioning halibut PSC between Amendment 80 cooperatives and the Amendment 80 limited access fishery is described at § 679.91(d)(2) and (3). Beginning in 2011, all participants in the Amendment 80 sector have participated in Amendment 80 cooperatives. Therefore, this preamble describes the harvesting and apportionment of halibut PSC to Amendment 80 cooperatives in greater detail.
The BSAI trawl limited access sector is assigned 875 mt of halibut PSC. This amount is further apportioned into PSC allowances among fishery categories through the annual harvest specifications process for those fishery categories in which BSAI trawl limited access fishery vessels participate. These fishery categories are (1) pollock/Atka mackerel/“other species” fishery, (2) Pacific cod fishery, (3) rockfish fishery, and the 4) yellowfin sole fishery (80 FR 11919, March 5, 2015)).
The Amendment 80 Program established provisions that do not make the full amount of the halibut PSC limit available to the trawl sector (see Table 35 to part 679). A portion of the PSC limit is left “in the water” and is not available for use as halibut PSC in the groundfish fisheries. Since 2013, the annual amount of halibut PSC limit left in the water has been 150 mt. Additional description of the impacts of implementation of the Amendment 80 Program on BSAI halibut PSC apportionment is provided in the following “Overview of the BSAI Groundfish Sectors” section of the preamble.
The BSAI halibut PSC limit for non-trawl gear of 900 mt has been in effect since 1993 (58 FR 14524, March 18, 1993). After assigning 67 mt for use by the CDQ sector as PSQ Reserve as described above, the remaining 833 mt of the non-trawl limit is further apportioned into PSC allowances among fishery categories through the annual harvest specifications process (80 FR 11919, March 5, 2015). These fishery categories are specified in § 679.21(e)(4)(ii) as: (1) Pacific cod hook-and-line catcher vessel fishery, (2) Pacific cod hook-and-line catcher/processor fishery, (3) sablefish hook-and-line fishery, (4) groundfish jig gear fishery, (5) groundfish pot gear fishery, and (6) other non-trawl fisheries.
Section 3.6 of the FMP authorizes the Council to exempt specific gear types from the non-trawl halibut PSC limits that are established through the annual harvest specifications process. In past annual consultations with the Council, NMFS has exempted pot gear, jig gear, and the sablefish IFQ hook-and-line gear fishery categories from the non-trawl halibut PSC limit. The Council and NMFS have exempted these gear types from halibut PSC limits, given the limited amount of halibut bycatch that is known to occur by pot and jig gear compared to the total halibut PSC use by other gear types. The sablefish IFQ hook-and-line fishery has not been included based on limited halibut PSC use, particularly in the BSAI. Additional rationale for exempting these gear types from halibut PSC limits is contained in the final 2015 and 2016 harvest specifications (80 FR 11919, March 5, 2015).
Figure 1 shows the process for establishing BSAI annual halibut PSC limits for each groundfish sector and the associated halibut PSC limits established for 2015 (see Section 2.1 of the Analysis for additional information).
The Amendment 80 sector comprises trawl catcher/processors in the BSAI active in groundfish fisheries other than Bering Sea pollock (
The Amendment 80 Program allocated QS for Amendment 80 species based on the historical catch of these species by Amendment 80 vessels. The Amendment 80 Program allows and facilitates the formation of Amendment 80 cooperatives among QS holders who receive an exclusive harvest privilege. This exclusive harvest privilege allows Amendment 80 cooperative participants to collaboratively manage their fishing operations and more efficiently harvest groundfish and PSC allocations.
The Amendment 80 sector can be divided between vessels that focus primarily on flatfish (
Annually, each Amendment 80 QS holder elects to participate either in a cooperative or the limited access fishery. Participants in the limited access fishery do not receive an exclusive harvest privilege for a portion of the TACs allocated to the Amendment 80 Program. Beginning in 2011, all QS holders have participated in one of two Amendment 80 cooperatives. For additional detail see Amendment 80 Cooperative Reports available on the NMFS Alaska Region Web site,
As specified in Section 3.7.5.2.1 of the FMP and at § 679.91, NMFS annually establishes a halibut PSC limit of 2,325 mt for the Amendment 80 sector. This halibut PSC limit is apportioned between Amendment 80 cooperatives and the limited access fishery according to § 679.91. Amendment 80 cooperatives are responsible for coordinating fishing activities to ensure the cooperative halibut PSC allocation is not exceeded. Section 679.91(h)(3)(xvi) prohibit each Amendment 80 cooperative from using halibut PSC in excess of the amount specified on its annual Amendment 80 Cooperative Quota permit. The regulations further specify that each member of the Amendment 80 cooperative is jointly and severally liable for any violations of the Amendment 80 Program regulations while fishing under the authority of an Amendment 80 Cooperative Quota permit.
In a year when there are vessels participating in the Amendment 80 limited access fishery, NMFS apportions the halibut PSC limit for the Amendment 80 limited access fishery into PSC allowances for the following six trawl fishery categories in which the vessels could participate: (1) Yellowfin sole fishery, (2) rock sole/flathead sole/“other flatfish” fishery, (3) Greenland turbot/arrowtooth flounder/Kamchatka flounder/sablefish fishery, (4) rockfish fishery, (5) Pacific cod fishery, and (6) pollock/Atka mackerel/“other species” fishery, which includes the midwater pollock fishery (see § 679.21(e)(3)(i)(B), (e)(3)(ii)(C), and (e)(3)(iv)).
NMFS manages the Amendment 80 limited access fishery halibut PSC allowances because participants in the Amendment 80 limited access fishery do not have exclusive privileges to use a specific amount of halibut PSC. To manage halibut PSC, NMFS monitors participation and PSC use in the Amendment 80 limited access fishery categories. Except for the pollock/Atka mackerel/“other species” fishery, NMFS has the authority to close a trawl fishery category in the Amendment 80 limited access fishery if NMFS concludes that the fishery category will, or has, exceeded its halibut PSC allowance. A halibut PSC allowance is enforced through the prohibition against conducting any fishing contrary to notification of inseason action, closure, or adjustment (§ 679.7(a)(2)). The regulations establishing the exception for the pollock/Atka mackerel/“other species” fishery are explained below in the section “BSAI Trawl Limited Access Sector.”
Section 2.2.1 of the Analysis and the final rule implementing the Amendment 80 Program provide more detailed information on the process NMFS uses to assign Amendment 80 species and halibut PSC to each Amendment 80 cooperative and the Amendment 80 limited access fishery (72 FR 52668, September 14, 2007). The allocations of Amendment 80 species TACs and apportionments of halibut PSC to each of the Amendment 80 cooperatives are provided in the final 2014 and 2015 harvest specifications for the BSAI groundfish fisheries (80 FR 11919, March 05, 2015).
The Amendment 80 groundfish fisheries provide revenue to Amendment 80 vessel owners and crew members that harvest and process groundfish. In addition, the fisheries provide socioeconomic benefits to fishing communities that provide support services for Amendment 80 vessel operations. Amendment 80 groundfish harvests in the BSAI averaged 328,000 mt and generated $325 million in wholesale revenues annually from 2008 through 2013. Three groundfish species provided over three-quarters of the wholesale revenue for the Amendment 80 fleet from 2008 through 2013: yellowfin sole (38 percent of total revenue), Atka mackerel (20 percent), and rock sole (19 percent).
The BSAI trawl limited access sector comprises all the trawl vessels in the BSAI except Amendment 80 catcher/processors. From 2008 to 2013, 141 vessels participated in the BSAI trawl limited access sector: 99 American Fisheries Act (AFA) catcher vessels that primarily target pollock and also fish for Pacific cod; 17 AFA catcher/processors that primarily target pollock and also fish for yellowfin sole and Pacific cod; and 25 non-AFA catcher vessels that primarily target Pacific cod and yellowfin sole, with some also targeting Atka mackerel and Pacific ocean perch (see Section 4.4.3 of the Analysis for additional detail).
The AFA is a limited access program for Bering Sea pollock implemented by statute in 1998 (Public Law 105-277, 16 U.S.C.A. statutory note). The AFA specified eligible vessels, established sector allocations of pollock, and allowed vessels to form cooperatives. All AFA catcher vessels and catcher/processors participate in the pollock fishery through cooperatives. The pollock fishery accounts for 64 percent of all groundfish harvests in the BSAI but takes a relatively small proportion of
The BSAI trawl limited access sector is a limited access sector because vessels must have a License Limitation Program (LLP) groundfish license to conduct directed fishing for any groundfish in BSAI (see § 679.4(k)(1)). The LLP is a limited access program because a limited number of licenses are issued and a person only received an LLP license if that person met specific eligibility requirements. However, the LLP does not allocate exclusive harvest privileges for a specific portion of a fishery TAC like the Amendment 80 Program does for the six Amendment 80 species or like the AFA does for Bering Sea pollock. Thus, for all species but pollock, vessels in the BSAI trawl limited access sector are in competition with other participants to maximize their harvest of target species before they reach either their halibut PSC limits, or in the case of Bering Sea pollock, Chinook salmon PSC limits.
As specified in Section 3.7.5.2.1 of the FMP and at § 679.91, NMFS annually establishes a halibut PSC limit of 875 mt for the BSAI trawl limited access sector. This halibut PSC limit of 875 mt is apportioned to fishery categories through the annual harvest specification process. NMFS apportions this sector's PSC limit into PSC allowances among the following trawl fishery categories: (1) Yellowfin sole fishery, (2) rock sole/flathead sole/“other flatfish” fishery, (3) Greenland turbot/arrowtooth flounder/Kamchatka flounder/sablefish fishery, (4) rockfish fishery, (5) Pacific cod fishery, and (6) pollock/Atka mackerel/“other species” fishery, which includes the midwater pollock fishery. For additional detail see Table 16 in the 2015 and 2015 final harvest specifications (80 FR 11919, March 5, 2015) and § 679.21(e)(3)(i)(B), (e)(3)(ii)(C), and (e)(3)(iv)).
After NMFS establishes PSC allowances for these trawl fishery categories, NMFS may, through the annual harvest specification process, further apportion the allowances by season, according to criteria specified in regulation (§ 679.21(e)(5)). NMFS apportions some halibut PSC allowances in specific groundfish fisheries by season to ensure that a portion of the halibut PSC allowance for that fishery is available for use earlier in the year and a portion of the halibut PSC allowance remains to support groundfish fishing in that fishery that occurs later in the year. The limits assigned to each season for a groundfish fishery reflect halibut PSC likely to be taken during that season in that fishery.
In general, the PSC regulations state that if NMFS determines that any of these trawl fisheries will reach the PSC allowance for that fishery (or a seasonal apportionment of an allowance), NMFS closes that trawl fishery in the BSAI for the rest of the year, or, if applicable, for the rest of the season (§ 679.21(e)(7)(v)). NMFS has authority under current regulations to close the following trawl fisheries if they will reach their halibut PSC allowance: (1) Yellowfin sole fishery, (2) rock sole/flathead sole/“other flatfish” fishery, (3) Greenland turbot/arrowtooth flounder/Kamchatka flounder/sablefish fishery, (4) rockfish fishery, and (5) Pacific cod fishery (§ 679.21(e)(7)(v)). For example, in May 2014, NMFS closed the yellowfin sole fishery throughout the BSAI to prevent that fishery from exceeding its halibut PSC allowance (79 FR 29136, May 21, 2014). The Pacific cod and yellowfin sole fisheries are the primary fisheries that can be constrained by halibut PSC limits in the BSAI trawl limited access sector.
The regulations include an exception for the pollock/Atka mackerel/“other species” fishery category. If the pollock/Atka mackerel/“other species” fishery category will reach its halibut PSC allowance, NMFS does not have the authority to close the pollock/Atka mackerel/“other species” fishery category. This is the result of the interaction of several regulations. As noted previously, NMFS must count all halibut PSC in the midwater pollock fishery category against the PSC allowance for the pollock/Atka mackerel/“other species” fishery category (§ 679.21(e)(3)(ii)(C)). By a regulation adopted in 1992, if the PSC allowance for the pollock/Atka mackerel/“other species” category will be reached, NMFS only has authority to close directed fishing for pollock to trawl vessels using nonpelagic trawl gear (57 FR 43926, 43935, September 23, 1992; § 679.21(e)(7)(i)). However, in 2000, NMFS prohibited directed fishing for pollock in the BSAI with nonpelagic trawl gear at all times and extended that prohibition to CDQ sector vessels in 2006 (65 FR 31105, May 16, 2000; 71 FR 36694, June 28, 2006; § 679.24(b)(4)). Thus, if the halibut PSC allowance for the trawl fishery category of pollock/Atka mackerel/“other species” will be reached, NMFS does not have authority to take additional action. The Council did not recommend, and NMFS did not propose, changes in the management of the pollock/Atka mackerel/“other species” fishery.
Even though NMFS does not have authority to close this fishery, halibut PSC use in the pollock/Atka mackerel/“other species” fishery category recently (
The BSAI trawl limited access fisheries provide revenue to vessel owners and crew members that harvest and process groundfish. In addition, the fisheries provide socioeconomic benefits to fishing communities that provide support services for BSAI trawl limited access vessel operations. Groundfish harvests in the BSAI trawl limited access fisheries averaged 1 million mt and generated $1.3 billion in wholesale revenues from 2008 through 2013. During this period, the pollock fishery was 93 percent of the groundfish harvest and wholesale revenue for the BSAI trawl limited access sector. The Pacific cod fishery was 4 percent and the yellowfin sole fishery was 2 percent of the groundfish harvest and wholesale revenue for the BSAI trawl limited access sector. Section 4.4.3 of the Analysis provides detailed information on participants, harvests, and revenues in the BSAI trawl limited access sector fisheries.
The BSAI non-trawl sector comprises all the non-trawl vessels in the BSAI except vessels fishing for groundfish in the CDQ sector. Non-trawl vessels participating in the CDQ sector are addressed in the following section of the preamble. As described in the “Annual Halibut Bycatch (PSC) Limits and Apportionments of PSC Limits” section of the preamble above, the Council and NMFS have exempted pot gear, jig gear, and the sablefish IFQ hook-and-line gear fishery categories from halibut PSC limits. Because these three fishery categories are currently exempted from halibut PSC limits, this section of the preamble does not address these fishery categories (see Section 3.1.3.1 of the
From 2008 to 2013, an average of 47 vessels participated in the portion of the BSAI non-trawl sector subject to halibut PSC limits: 35 hook-and-line catcher/processor vessels that primarily targeted Pacific cod and to a lesser extent Greenland turbot; and 12 hook-and-line catcher vessels that targeted only Pacific cod.
Hook-and-line catcher/processor vessels that target Pacific cod comprise the greatest number of vessels and amount of harvests in the non-trawl sector. The Analysis shows that from 2008 through 2013, hook-and-line catcher/processors harvested more than 98 percent of all of the fish harvested by the non-trawl sector. Most of this harvest was from the BSAI Pacific cod fishery. The BSAI hook-and-line catcher/processors harvested 99 percent of the total amount of Pacific cod harvested in the BSAI by non-trawl vessels. The BSAI Pacific cod fishery comprised 98 percent of total harvests for the hook-and-line catcher/processors from 2008 through 2013 (see Sections 4.4.4 and 4.4.5 of the Analysis). All but one hook-and-line catcher/processor fishing in the BSAI participates in a voluntary cooperative, the Freezer Longline Conservation Cooperative (FLCC). The FLCC has allowed hook-and-line catcher/processors to fish as a coordinated group and has allowed less efficient vessels to decrease fishing or stop entirely. Additional details about the FLCC are provided in Section 4.4.4.8 of the Analysis.
The BSAI non-trawl sector also includes hook-and-line catcher vessels that exclusively target Pacific cod. Data from 2008 through 2013 show that harvests of BSAI Pacific cod comprised 100 percent of the total harvests and total revenue for these vessels. The BSAI hook-and-line catcher vessels targeting Pacific cod harvested 1 percent of the total amount of Pacific cod harvested in the BSAI by non-trawl vessels from 2008 through 2013. During this period, 42 unique vessels participated in the hook-and-line catcher vessel fishery, although the number of vessels participating in this fishery has declined from 20 in 2008 to 11 in 2013 (see Section 4.4.5.1 of the Analysis).
Some non-trawl vessels also harvest groundfish other than Pacific cod, but harvests of these other species are limited. Over the past decade, only hook-and-line catcher/processors have participated in the other non-trawl fisheries, specifically targeting Greenland turbot. Hook-and-line catcher/processor harvested approximately 40 percent of the total amount of Greenland turbot harvested in the BSAI from 2008 through 2013 (see Table 4-10 in Section 4.4.1.6 and Table 4-50 in Section 4.4.4.2 of the Analysis). During this time period, 20 unique vessels participated in the hook-and-line catcher/processor fishery for Greenland turbot, although the number of vessels participating in recent years (from 2010 through 2013) has ranged between 13 and 7 each year (see Section 4.4.4.1 of the Analysis).
Under current regulations, the non-trawl sector's PSC limit of 833 mt is apportioned under the annual harvest specification process. Section 679.21(e)(4)(i)(C) specifies that NMFS will apportion the BSAI non-trawl sector's PSC limit into PSC allowances “based on each category's proportional share of the anticipated bycatch mortality of halibut during a fishing year and the need to optimize the amount of total groundfish harvested under the non-trawl halibut PSC limit.” As explained above in “Annual Halibut Bycatch (PSC) limits and Apportionment of PSC limits,” NMFS has apportioned the PSC limit for the BSAI non-trawl sector among three non-trawl fishery categories: (1) Pacific cod hook-and-line catcher vessel fishery, (2) Pacific cod hook-and-line catcher/processor fishery, and (3) other non-trawl fisheries. NMFS has the same authority to apportion, by season, the halibut PSC allowances among the non-trawl fisheries as it has for the trawl fisheries (§ 679.21(e)(5)).
As with trawl fisheries, NMFS manages the halibut PSC allowances for the non-trawl fisheries through fishery closures. Section 679.21(e)(8) specifies that if NMFS concludes that a non-trawl fishery will reach its halibut PSC allowance (or a seasonal apportionment of an allowance), it will close that non-trawl fishery in the entire BSAI for the rest of the year (or the rest of the season).
The non-trawl fisheries provide revenue to vessel owners and crew members that harvest and process groundfish on catcher vessels and catcher/processors. In addition, the fisheries provide economic benefits to shorebased processors that receive landings of Pacific cod from catcher vessels and to fishing communities that provide support services for BSAI non-trawl vessel operations. Groundfish harvests in the BSAI non-trawl fisheries averaged 116,000 mt and generated $160 million in wholesale revenues annually from 2008 through 2013. Sections 4.4.4 and 4.4.5 of the Analysis provides detailed information on participants, harvests, and revenues in the BSAI trawl limited access groundfish fisheries.
The CDQ sector includes all trawl and non-trawl vessels that harvest groundfish under the CDQ Program. CDQ vessels primarily target pollock using trawl gear and target Pacific cod using hook-and-line gear. Other species such as yellowfin sole, several flatfish species, Atka mackerel and Pacific ocean perch allocated to the CDQ sector are targeted by vessels using trawl gear.
From 2008 to 2013, 56 vessels participated in the CDQ sector using trawl and non-trawl gear to harvest BSAI groundfish, with nearly 60 percent of the vessels operating in the pollock and Pacific cod target fisheries. The pollock fishery accounted for 73 percent of the total groundfish harvest in the CDQ sector from 2008 through 2013. Vessels participating in the CDQ sector fully harvest the sector's pollock and Pacific cod allocations. Vessels participating in the CDQ sector have not fully harvested other allocations of groundfish species due to a variety of operational factors and choices described in Section 4.4.6 of the Analysis.
As specified in Section 3.7.4.6 of the FMP and at § 679.21(e), NMFS annually establishes a halibut PSC limit of 393 mt for the CDQ sector. The halibut PSC limit is divided among the six CDQ groups by established percentages (71 FR 51804 (August 31, 2006). Each CDQ group receives an apportionment of this halibut PSC limit as halibut prohibited species quota (PSQ), which is a specific amount of halibut that vessels fishing for that CDQ group may use in a year. The apportionment of halibut PSQ to each CDQ group is similar to the apportionment of halibut PSC Cooperative Quota to an Amendment 80 cooperative. The CDQ group manages the use of its halibut PSQ apportionment. The CDQ group has the responsibility to ensure that the vessels fishing its CDQ groundfish allocation do not use halibut PSQ in excess of the amount of the CDQ group's halibut PSQ. This limit is enforced at § 679.7(d)(3), which prohibits a CDQ group from exceeding its apportionment of halibut PSQ.
The CDQ groundfish fisheries provide revenue to CDQ groups that receive royalties from leasing their groundfish allocations for harvest by vessels that participate in non-CDQ groundfish fisheries. In addition, CDQ groundfish harvests provide revenue to vessel owners and crew members that harvest and process groundfish on catcher
From 2008 through 2013, the CDQ sector has consistently harvested almost 100 percent of its pollock allocations. The average annual pollock harvests from 2008 through 2014 are 112,000 mt resulting in $150 million in wholesale revenues. From 2008 through 2013, the CDQ sector harvested an average of 60 percent of its non-pollock species allocations. During this period, vessels in the CDQ sector averaged annual non-pollock groundfish harvests of 42,000 mt and $50 million in wholesale revenues. Section 4.4.6 of the Analysis provides detailed information on participants, harvests, and revenues in the CDQ groundfish fisheries.
As described in the “Halibut Fisheries in the BSAI” section of the preamble above, CDQ groups also receive an annual allocation of the commercial halibut fishery catch limit recommended by the IPHC. CDQ halibut allocations provide revenue to vessel owners and crew members that harvest and process halibut, to shorebased processors that receive landings of CDQ halibut, and to fishing communities that provide support services for vessels fishing in CDQ halibut fisheries. Sections 4.5.1 and 4.5.2 of the Analysis provide detailed information on participants, harvests, and revenues in the CDQ halibut fisheries.
The annual halibut PSC limit established for each BSAI groundfish sector is an upper limit on halibut PSC in that sector for that year. However, the amount of halibut PSC used by a BSAI groundfish sector is almost always less than its halibut PSC limit. Halibut PSC use is less than the halibut PSC limit due to a wide range of operational factors such as the need to avoid a closure or an enforcement action if a PSC allocation or allowance is reached. Table 1 shows the halibut PSC limit and average halibut PSC use for the Amendment 80, BSAI trawl limited access, BSAI non-trawl, and CDQ sectors from 2008 through 2014.
Table 1 shows that the Amendment 80 sector used the largest portion of halibut PSC in recent years. The Amendment 80 sector used, on average, approximately 60 percent of the total amount of halibut PSC used by all BSAI groundfish sectors from 2008 through 2014. The BSAI trawl limited access sector used 20 percent, the BSAI non-trawl sector used 15 percent, and the CDQ sector used 6 percent of the total amount of halibut PSC.
Table 3-14 in Section 3.1.3.3 of the Analysis shows halibut PSC annually for each sector from 2008 through 2014. The Amendment 80 sector used, on average, 88 percent of its annual halibut PSC limit from 2008 through 2014. Halibut PSC use in the Amendment 80 sector varies annually, and the sector's use as a percentage of the limit from 2008 through 2014 ranged from 78 percent in 2011 to 97 percent in 2010.
The BSAI trawl limited access sector used, on average, 81 percent of its annual halibut PSC limit from 2008 through 2014, varying from 55 percent of the sector limit in 2010 to 110 percent of the sector limit in 2012.
The BSAI non-trawl sector used, on average, 61 percent of its annual halibut PSC limit from 2008 through 2014. Like the trawl sectors, halibut PSC use in the non-trawl sector varied substantially on an annual basis. Almost all of the halibut PSC in the non-trawl sector is used by hook-and-line catcher/processors targeting Pacific cod. These vessels averaged 98 percent of the total non-trawl halibut PSC use from 2008 through 2014. Halibut PSC use in the Pacific cod hook-and-line catcher/processor sector has declined since 2010 following formation of the FLCC. From 2008 through 2014, halibut PSC use by the non-trawl sector ranged from 52 percent of the sector limit in 2014 to 74 percent of the sector limit in 2008.
The CDQ sector used, on average, 55 percent of its annual halibut PSC limit from 2008 through 2014, varying from 38 percent of the sector limit in 2009 to 67 percent of the sector limit in 2013. Halibut PSC use in the CDQ sector has typically been much lower than the PSC limit due to a variety of operational choices to limit catch of some groundfish species, and the methods used by CDQ groups to assign halibut PSC when fishing jointly for CDQ and non-CDQ species. Section 4.4.6.2 of the Analysis describes these factors in greater detail.
For all sectors, Section 3.1.3.3 of the Analysis describes the annual variations in halibut PSC use resulting from changes in groundfish TACs and changes in weather, environmental conditions, and other factors. Historical halibut PSC use information shows that each sector's PSC use has varied annually in response to these changing conditions. NMFS anticipates that these annual variations in halibut PSC use would continue under the proposed rule.
Amendment 111 and the proposed rule would reduce the current halibut PSC limits for the BSAI groundfish fisheries. Amendment 111 and the proposed rule are necessary to minimize halibut bycatch to the extent practicable in the BSAI groundfish fisheries, while at the same time providing for the long-term sustainable optimum yield from the groundfish fisheries. By reducing halibut PSC in the groundfish fisheries from current levels, the proposed rule may provide additional harvest opportunities in halibut fisheries in the BSAI and, ultimately, in other Areas (Areas 2 and 3). This section describes the rationale for and the anticipated impacts of the halibut PSC limit reductions that would be implemented by the proposed rule.
In recommending the proposed rule, the Council considered the fact that the halibut resource is fully allocated. Recent declines in halibut exploitable biomass, particularly in Area 4 in the BSAI, underscore the need to minimize bycatch of halibut in the groundfish fisheries to the extent practicable. Since the existing BSAI halibut PSC limits were established in 2000, the exploitable biomass has declined and the commercial halibut sector has experienced decreased catch limits as a result (see Section 2.4 of the Analysis).
Since 2008, the commercial halibut fishery catch limit in the BSAI in Area 4 has declined, although the 2015 commercial catch limit in Area 4 has increased slightly from the recent low in 2014. The Council determined that the proposed rule is necessary because catch limits for the commercial halibut fisheries in the BSAI have declined in recent years and because the halibut PSC used in the BSAI groundfish fisheries has increased as a proportion of total halibut removals.
In recommending the proposed rule, the Council and NMFS considered alternatives that ranged from a 10 percent to a 50 percent reduction in halibut PSC limits for each of the four BSAI groundfish sectors: the Amendment 80, the BSAI trawl limited access, the non-trawl, and the CDQ sectors. The Council and NMFS determined that it was appropriate to recommend a PSC limit reduction for each sector to recognize differences among the sectors in halibut PSC use and management as well as differences in fishery participation, gear and operation type, and available tools to further reduce halibut PSC use.
In making its recommendation, the Council and NMFS also considered the national standards in section 301(a) of the Magnuson-Stevens Act. This preamble has already described the consideration of National Standard 1 (prevent overfishing while ensuring, on a continuing basis, optimum yield from the fisheries), and National Standard 9 (minimize bycatch, to the extent practicable, and where bycatch cannot be avoided, minimize bycatch mortality). Two other national standards were particularly relevant to the Council and NMFS in developing Amendment 111 and the proposed rule: National Standard 8 (provide for the sustained participation of fishing communities and to the extent practicable, minimize adverse economic impacts on such communities) and National Standard 4 (allocation of fishing privileges shall be fair and equitable). Section 6.1 of the Analysis provides additional detail on the consideration of the national standards. The Council believes, and NMFS agrees, that the proposed PSC limit reductions are consistent with the national standards.
The Council and NMFS considered the impacts of alternative ranges of halibut PSC limit reductions on (1) the halibut stock, (2) the halibut fishery participants and fishing communities that are engaged in directed halibut fisheries in the BSAI and in other Areas, and (3) the BSAI groundfish fishery participants and fishing communities that are engaged in the BSAI groundfish fisheries. The Analysis provides detailed information that the Council and NMFS considered for the proposed rule.
After considering these factors, the Council recommended, and NMFS proposes, to reduce halibut PSC limits by 25 percent in the Amendment 80 sector, 15 percent in the BSAI trawl limited access sector, 15 percent in the non-trawl sector, and 20 percent in the CDQ sector. The resulting halibut PSC limits from this proposed reduction would be 1,745 mt for the Amendment 80 sector; 745 mt for the BSAI trawl limited access sector; 710 mt for the BSAI non-trawl sector; and 315 mt for the CDQ sector. The following sections of the preamble describe the rationale for and impacts of the proposed rule on the halibut stock, the directed halibut fishery and fishing communities, and the BSAI groundfish fishery participants and fishing communities.
In order to analyze the impact of the proposed rule and other alternatives considered, the Analysis made two broad assumptions. First, the Analysis assumed the IPHC would (1) differentiate halibut that are over 26 inches in length (O26) from halibut that are under 26 inches in length (U26) for purposes of the annual stock assessment and for establishing commercial fishery catch limits, and (2) establish the blue line catch limit as the commercial fishery catch limit for all IPHC areas. The Analysis assumes application of the IPHC harvest policy because it represents the stated policies of the IPHC and because possible changes in this policy, or the specific commercial catch limits that will actually be adopted by the IPHC, cannot be known or predicted. As described above in the “Allocation of Halibut Among Fisheries” section above, the IPHC is not required to apply its harvest policy and frequently has deviated from it when adopting annual catch limits. However, for purposes of this analysis, assuming application of the IPHC harvest policy is the best available method for analyzing the effects of Amendment 111 and the proposed rule.
Second, based on this assumption, the Analysis provides a prospective evaluation of the economic impacts of halibut PSC limit reductions on halibut fisheries and the groundfish fisheries for ten years (2014 through 2023) under two scenarios with different assumptions about the ability of fishery participants to coordinate harvesting activities to minimize halibut PSC. The “low impact” scenario assumes that fishery participants are able to coordinate harvesting activities to achieve almost optimal efficiency in the use of PSC across all sectors. In other words, the impact of halibut PSC reductions can be mitigated to the maximum extent practicable through well-coordinated sector-wide efforts. The “high impact” scenario assumes significantly less coordination across the sector and models each company operating individually to optimize its PSC use. In other words, each company within a sector will attempt to mitigate the impact of halibut PSC reductions on their operations, but with less well-coordinated sector-wide efforts. Section 4.6 of the Analysis details the methods used. Based on the Analysis and information provided to the Council in public testimony, NMFS determined that the BSAI groundfish sectors have varying abilities to optimize efficient use of halibut PSC, and it is likely that the actual economic impacts of the proposed rule will fall within the range between the low impact and high impact scenarios presented in the Analysis.
The Council determined, and NMFS agrees, that the proposed rule would
Overall, the Council's recommendation is expected to result in a decrease of approximately 361 mt in halibut PSC relative to current levels of halibut PSC use (see Section 4.13 of the Analysis). A decrease of 361 mt represents approximately a 10 percent decrease in total halibut PSC relative to current use. This estimate is based on the assumption that the Amendment 80 sector, which is the sector most constrained by the proposed halibut PSC limit, would fully use its halibut PSC limit of 1,745 mt in each year. As Table 1 of this preamble and Section 3.1.3.3 of the Analysis show, the BSAI groundfish sectors have consistently used less than their halibut PSC allocations due to regulatory and operational limits. Therefore, the actual PSC reduction would likely be higher than this estimate.
The best available information estimates that approximately 64 percent of the halibut PSC mortality in the BSAI is O26 halibut (see Table 4-219 in Section 4.14.1.4 of the Analysis). Assuming that the IPHC were to apply its current harvest policy when adopting annual catch limits and the proportion of O26 and U26 bycatch remains constant, the halibut “savings” from reductions in halibut PSC use under the proposed rule would be expected to provide an additional commercial harvest opportunity in the year following the halibut PSC reduction. Therefore, the primary impact of the proposed rule would be to provide additional harvest opportunity to the Area 4 commercial fishery because most (64 percent) of the bycatch is O26. This result would be expected under all of the alternatives to reduce halibut PSC limits (from 10 to 50 percent) considered by the Council and NMFS.
The best available information estimates that approximately 36 percent of halibut PSC mortality in the BSAI is U26 halibut (see Table 4-219 in Section 4.14.1.4 of the Analysis). The proposed reductions in halibut PSC use would decrease mortality of U26 halibut, which could benefit the halibut stock by contributing to the long-term abundance of the halibut resource. Ultimately, reductions in U26 bycatch could result in additional halibut that can grow and reproduce and then ultimately be harvested in the commercial, personal use, sport and subsistence fisheries on a coastwide basis. The extent to which a decrease in U26 halibut PSC may affect the coastwide female spawning biomass is not well-known based on the best available information (see Section 3.1.1.2 of the Analysis for additional detail).
While the impacts of a decrease in U26 halibut mortality on the coastwide halibut stock are not well-known, the best available information suggests that reductions in U26 halibut PSC under the proposed rule are unlikely to impact the long-term abundance of the halibut stock. The Analysis estimates that even under the most conservative halibut PSC reductions considered by the Council, a 50 percent reduction of the PSC limits in all four BSAI groundfish sectors, the reduction in the amount of U26 halibut PSC would likely range from 690,000 pounds to 740,000 pounds. Therefore, even under the greatest PSC limit reduction alternatives considered, this reduction would represent less than 1 percent of the 2015 coastwide female spawning halibut biomass (see Table 3-1 in Section 3.1.1 of the Analysis).
The Council determined, and NMFS agrees, that under the reduction in U26 halibut mortality estimated from the proposed rule, a reduction estimated to range from 188,000 to 210,000 pounds, the proposed rule could result in some conservation benefit compared to the status quo. The conservation benefit would be limited because it comprises a small proportion of the total female spawning biomass (less than 1 percent of the total female spawning biomass). The specific long-term impacts of reduced U26 bycatch on potential long-term commercial, personal use, sport, or subsistence harvests in a specific Area cannot be predicted with certainty given the available information. Some of the factors affecting the ability to determine impacts are the variable time required for U26 bycatch to grow, reproduce, and become available for harvest; changes in halibut stock abundance on a coastwide basis; and changes in the distribution of harvestable biomass by area in the future. Section 4.14.1.2 of the Analysis reviewed the potential long-term halibut stock impacts of halibut bycatch reduction measures throughout all Areas under a range of assumptions and concluded that the overall impact of these reductions was limited on an annual and 10-year basis. Therefore, under the proposed rule, overall halibut mortality would not be expected to change significantly.
In recommending the proposed rule, the Council and NMFS considered the impacts of reducing halibut PSC limits on fishermen and fishing communities that depend on the halibut resources in the BSAI and in other Areas in Alaska, British Columbia, and the U.S. West Coast, including the commercial, personal use, sport, and subsistence fisheries (see Section 4.13.3 and 4.14.1 of the Analysis).
Specifically, the Analysis estimates the potential increases in halibut fishery harvests and revenues in Area 4 and in other Areas from reduced halibut PSC limits. The proposed reduction in halibut PSC limits could benefit participants in the commercial halibut fisheries if it results in increased levels of harvestable halibut and increased catch limits. Catch limits are not established for the personal use, sport, and subsistence halibut fisheries in Area 4, and the proposed reduction in halibut PSC limits is not expected to impact halibut harvests in those fisheries in the near term, because harvests in personal use, sport, and subsistence fisheries are deducted before commercial catch limits are established.
The Analysis estimates that the proposed rule could result in increased commercial fishery harvests in Area 4 ranging from 315,000 pounds to 353,000 pounds each year compared to current levels of harvests over the 10-year period used for the Analysis. This increased harvest is estimated to provide additional commercial halibut fishery revenues ranging from $3.4 million to $3.5 million each year, which would total $34 million to $38 million over the 10-year period (see Table 4-210 in Section 4.14 of the Analysis). This increased revenue is due to the increased availability of O26 and U26 to the commercial halibut fishery from the halibut PSC reductions.
The Analysis estimates that the proposed rule could reduce U26 bycatch that may provide an additional 64,000 pounds to 72,000 pounds of directed halibut harvest annually in Areas outside of Area 4 (
The Analysis describes the potential impacts of the proposed rule on BSAI coastal fishing communities that participate in the halibut fishery, especially in Area 4CDE. Section 4.14.1.3 of the Analysis states that the proposed action is likely to provide the greatest benefit to fishing communities in the BSAI that are highly dependent on halibut as a primary source of revenue for local vessels that participate in the commercial fishery. Appendix C to the Analysis includes a detailed description of the fishing communities most dependent on the halibut resource in the BSAI. Relative to the status quo, the proposed rule may provide additional opportunities for fishing community residents to harvest halibut by reducing the maximum amount of halibut PSC that can be taken in the groundfish fisheries. Although additional reductions in halibut PSC limits may provide additional harvest opportunities to residents participating in the commercial halibut fishery, the benefit to any one community would be limited by the distribution of harvest privileges among participants in the IFQ and CDQ Programs (see Section 4.14.1.4 of the Analysis for additional detail).
The Council and NMFS considered the impacts of reduced halibut PSC limits on BSAI groundfish sector participants. As discussed in Section 4.14.2.2 of the Analysis, the Council and NMFS considered a number of factors in making the proposed reductions to halibut PSC limits for each BSAI groundfish sector. First, the Council and NMFS considered the relative amount of halibut PSC in each of the BSAI groundfish sectors. Second, the Council and NMFS considered whether a groundfish sector had been able to harvest groundfish TACs with lower amounts of halibut PSC use than the sector's current limit. Third, the Council and NMFS considered the “tools” (
The Council recommended, and NMFS proposes, a minimum 25 percent reduction in the halibut PSC limit for the Amendment 80 sector. The reduction in the halibut PSC limit for the Amendment 80 sector from 2,325 mt to 1,745 mt is a reduction of 580 mt. The proposed halibut PSC limit of 1,745 mt would be a 15 percent reduction from the amount of halibut PSC used, on average, by the Amendment 80 sector from 2008 through 2014. The proposed halibut PSC limit would be a 17 percent reduction from Amendment 80 sector halibut PSC use in 2014 (see Section 3.1.3.3 of the Analysis). This is the largest reduction for any of the four groundfish sectors subject to the proposed rule.
This 1,745 halibut PSC limit would apply to all Amendment 80 vessels participating in an Amendment 80 cooperative. The Council also considered a more restrictive halibut PSC limit that would apply to any participants in the Amendment 80 limited access fishery. Because all Amendment 80 vessels are assigned to Amendment 80 cooperatives currently, and are likely to continue to participate in Amendment 80 cooperatives in the future, the Council and NMFS anticipate that the 1,745 mt halibut PSC limit will apply to the entire Amendment 80 sector. The halibut PSC limit that would apply to participants in the Amendment 80 limited access fishery is described later in this preamble.
The Amendment 80 sector uses the largest portion of halibut PSC in the BSAI groundfish fisheries: 59 percent from 2008 through 2014 as shown in Table 1 in this preamble and in Section 3.1.3.3 of the Analysis. Therefore, the proposed halibut PSC limit would be expected to have the greatest impact on the Amendment 80 sector relative to the other BSAI groundfish sectors.
The Council and NMFS considered the use of halibut PSC by the Amendment 80 sector. On average, the Amendment 80 sector has not used the full amount of its halibut PSC allocation as shown above in Table 1 in this preamble and in Table 3-14 in Section 3.1.3.3 of the Analysis. The Analysis shows that total groundfish harvests by the Amendment 80 sector in the years of lowest and highest halibut PSC use were not substantially different from the average total amount of groundfish harvested by the Amendment 80 sector from 2008 through 2014. The Amendment 80 sector averaged 324,000 mt of groundfish harvest from 2008 through 2014. The Amendment 80 sector harvested 325,000 mt of groundfish in 2011, the year of lowest PSC use, and 337,000 mt in 2010, the year of highest PSC use (see Table 4-1 in Section 4.4.1.1 of the Analysis). The Council determined, and NMFS agrees, that the best available information indicates that the proposed halibut PSC limit for the Amendment 80 sector would be below its lowest use of halibut PSC in any year.
The Council and NMFS recognize that some of the patterns of halibut PSC use observed in the Amendment 80 sector are due to a range of biological, oceanographic, and operational factors, but the Analysis indicates that halibut PSC rates could be reduced through additional changes in fishery operations (
The Council and NMFS considered the tools available to the Amendment 80 sector to reduce halibut PSC under the proposed rule. First, the Council and NMFS considered recently implemented regulatory provisions that could aid the Amendment 80 sector's ability to adapt to reduced halibut PSC limits. Section 3.1.3.6 and Appendices A and B of the Analysis describe that implementation of the flatfish flexibility program in 2014 allows the sector to increase or decrease harvests of yellowfin sole, rock sole, or flathead sole throughout the season to respond to changing bycatch and market conditions (79 FR 56671, September 23, 2014). Additional Atka mackerel opportunities became available to the Amendment 80 fleet with the implementation of revised Steller sea lion protection measures in 2015 (79 FR 70286, November 25, 2014). Although Atka mackerel is not evenly allocated among all Amendment 80 vessels, it provides additional harvest opportunity for a high value groundfish species with a low rate of halibut PSC that could offset other halibut PSC use
Second, the Council and NMFS considered the tools that have, in whole or in part, been voluntarily adopted by the Amendment 80 sector. Public testimony from representatives of the Amendment 80 sector indicated that some of these tools have not been fully used by all fishery participants in recent years. This indicates additional reductions in halibut PSC through the expanded use of these tools are achievable and practicable.
These tools are described in detail in Section 3.1.3.6 and Appendix B of the Analysis and are summarized here:
• Expanding the use of gear modifications known as excluders to reduce the bycatch of halibut;
• Improving communication on the fishing grounds within and between Amendment 80 cooperatives;
• Using modified pelagic trawl gear to harvest groundfish instead of non-pelagic gear. Generally, pelagic trawl gear has a lower incidental rate of halibut bycatch and it has shown promise in the Central Gulf of Alaska rockfish fisheries, and other fisheries nationally in harvesting a number of groundfish species;
• Using test hauls to gauge halibut rates and considering the use of night-time hauls that tend to have lower halibut PSC rates;
• Modifying the timing of fishing to reduce halibut PSC rates toward the end of the year;
• Defining a threshold halibut PSC rate (
• Shifting the composition of species that are harvested to focus on species that appear to have a lower intrinsic rate of halibut PSC than other species (
• Establishing measures to shift fishing effort away from specific geographic locations with higher halibut PSC rates relative to other areas.
Although the proposed rule would establish a halibut PSC limit of 1,745 mt, NMFS believes it is likely that the Amendment 80 sector, specifically participants in the Amendment 80 cooperatives, would use less halibut PSC than the proposed limit. Testimony before the Council indicated that Amendment 80 participants typically manage their halibut PSC allocations with a 5 percent buffer, meaning that an Amendment 80 cooperative would plan to use at least 5 percent less halibut PSC than the Cooperative Quota allocation it receives. NMFS believes that Amendment 80 vessels are likely to establish a buffer as described in public testimony to the Council because the consequences of a cooperative exceeding its halibut PSC allocation can be significant: Financial penalties by the cooperative against the vessel or vessels that resulted in the cooperative exceeding its allocation of halibut PSC; an enforcement action against the cooperative pursuant to § § 679.91(h)(3)(xvi); and a prohibition against fishing for all Amendment 80 species pursuant to § 679.7(o)(4)(v).
The Council and NMFS considered the socioeconomic impact of the proposed rule on the Amendment 80 sector and fishing communities participating in the Amendment 80 fisheries. Table 4-187 in Section 4.13.1 of the Analysis estimates that the proposed rule would result in BSAI groundfish harvest reductions in the Amendment 80 sector between 9,500 mt to 25,700 mt each year during the 10-year analytical period, for a total of 95,000 mt to 257,000 mt for the full 10-year period. The Analysis estimates that the reduction in Amendment 80 groundfish harvests would reduce wholesale revenues for fishery participants from $6.2 million to $18.7 million for each year during the 10-year analytical period. The total wholesale revenue reduction is estimated to range from $62 million to $187 million for the full 10-year period. The Analysis describes that reduced groundfish harvests and revenues would also negatively impact fishing communities that are engaged in the BSAI groundfish fisheries (see Section 4.14.2 and Appendix C of the Analysis). Section 4.4.2.5 describes that the economic value of the use of halibut as PSC in the Amendment 80 sector is substantial as measured by average groundfish wholesale revenue generated per mt of halibut used as PSC to support the Amendment 80 sector.
The Council and NMFS considered a range of alternatives that would have resulted in halibut PSC reductions to Amendment 80 cooperatives ranging from a 10 percent to a 50 percent reduction relative to the current limit. As shown in Table 1 of this preamble, the average halibut PSC used in the Amendment 80 sector from 2008 through 2014 was 2,047 mt, which is less than the 10 percent reduction alternative (
Overall, alternatives that would have imposed a 50, 45, 40, 35, or 30 percent reduction would have been expected to reduce net benefits to the Nation because the socioeconomic benefits from the potential increase in harvest opportunities would be less than the negative socioeconomic impacts from foregone BSAI groundfish harvests. Section 4.8.1 of the Analysis describes the relative impacts of alternatives that would have further reduced halibut PSC limits for Amendment 80 cooperatives. The proposed rule would implement a halibut PSC reduction that balances the need to minimize bycatch to the extent practicable while considering the net benefits to the Nation, the impacts to fishing communities, and the long-term objective of providing for a sustained groundfish harvest by Amendment 80 cooperatives.
Ultimately, the Council determined, and NMFS agrees, that the proposed rule would minimize halibut bycatch to the extent practicable in the Amendment 80 sector after considering information on the sector's use of halibut PSC in recent years, the availability of a number of tools for Amendment 80 cooperatives and vessels to reduce halibut PSC use, the likely impact on net benefits to the Nation, and potential additional harvest opportunities to halibut fishery participants in Area 4 and elsewhere.
Under the status quo and the proposed rule, if all Amendment 80 vessels participate in a cooperative, the Amendment 80 cooperatives will be allocated the total proposed Amendment 80 sector halibut PSC limit of 1,745 mt. If any Amendment 80 vessels elect to participate in the limited access fishery, the proposed rule would reduce the halibut PSC limit for that fishery by 40 percent from the status quo. This reduction of 40 percent of the halibut PSC limit would only apply to the proportional amount of Amendment 80 QS assigned to the Amendment 80 limited access fishery. For example, if
If only a portion of the Amendment 80 QS and vessels are assigned to the Amendment 80 limited access fishery, NMFS would use the process described in Section 2.2.1 of the Analysis to allocate PSC limits between the Amendment 80 cooperatives and vessels in the limited access fishery. A brief summary of that process is provided here. NMFS would first determine the amount of halibut PSC that would be assigned to the Amendment 80 cooperatives. For example, if 80 percent of the Amendment 80 QS were assigned to cooperatives, NMFS would allocate 1,396 mt of halibut PSC (80 percent of the proposed Amendment 80 sector halibut PSC limit of 1,745 mt) to the cooperative (1,745 mt * 0.8 = 1,396). To calculate the amount of halibut PSC assigned for use in the Amendment 80 limited access fishery, NMFS would subtract the amount of halibut PSC allocated to Amendment 80 cooperatives from the total Amendment 80 sector PSC limit. In this example, this amount would be 349 mt (1,745 mt − 1,396 mt = 349 mt). NMFS would apply an additional 20 percent reduction by multiplying the remaining amount of halibut PSC remaining by 0.8 or 80 percent (349 mt * 0.8 = 279 mt). Therefore, this assignment of 279 mt would represent a 40 percent reduction compared to the status quo assignment to the Amendment 80 limited access fishery.
Under the proposed rule, some halibut PSC available to the Amendment 80 sector will be left unallocated and remain in the water if a portion of the Amendment 80 sector participates in the Amendment 80 limited access fishery. Using the example above, 1,396 mt is allocated to the Amendment 80 cooperatives, and 279 mt is assigned to the Amendment 80 limited access fishery. This adds up to 1,675 mt, an amount that is 70 mt less than the amount of halibut PSC (1,745 mt) that could have been allocated if all Amendment 80 sector participants were members of a cooperative.
The Council and NMFS considered the same factors for the halibut PSC limit applicable to the Amendment 80 cooperatives for the Amendment 80 limited access fishery. However, the Council recommended, and NMFS proposes, the more restrictive halibut PSC limit for the Amendment 80 limited access fishery to encourage cooperative management. Cooperative management is likely to provide a sustainable long-term approach to bycatch management. A fast-paced Amendment 80 limited access fishery could result in PSC that exceeds its halibut PSC limit. Therefore, a larger PSC limit reduction is appropriate to recognize management uncertainty and encourage cooperative formation as described in Section 4.8.2 of the Analysis.
The Council recommended and NMFS proposes a halibut PSC limit reduction of 40 percent for the Amendment 80 limited access fishery after considering the fact that although it is likely that all participants in the Amendment 80 sector will continue to fish in cooperatives, there are a range of factors that could create conditions that result in a participant ending up in the Amendment 80 limited access fishery. These factors include specific cooperative structure and participation requirements, and an individual's operating conditions. Therefore, the Council determined, and NMFS agrees, that a halibut PSC limit more restrictive than a 40 percent reduction would not be consistent with the purpose and need for this action because it could create incentives for members of a cooperative to purposefully exclude a specific Amendment 80 QS holder from cooperative membership. This exclusion could force that QS holder to participate in the limited access fishery and diminish their competitiveness within the sector to the potential benefit of other Amendment 80 QS holders. Similarly, a halibut PSC limit less restrictive than 40 percent may not provide sufficient incentives to encourage and maintain cooperative formation. A less restrictive halibut PSC limit could result in a PSC limit for the Amendment 80 limited access fishery that would encourage entry in the fishery and result in a difficult to manage “race for fish” that could result in halibut PSC limits being exceeded. See Section 2.2.1 of the Analysis for additional details on the proposed reduction to the Amendment 80 sector halibut PSC limit.
The proposed rule would establish a 15 percent reduction in the halibut PSC limit for the BSAI trawl limited access sector. The reduction in the PSC limit for the BSAI trawl limited access sector from 875 mt to 745 mt is a reduction of 130 mt. The BSAI trawl limited access sector used the second largest portion of halibut PSC in the BSAI groundfish fisheries from 2008 through 2014 (20 percent, as shown in Table 1 in this preamble and in Section 3.1.3.3 of the Analysis).
The Council and NMFS considered halibut PSC use in the BSAI trawl limited access sector. The BSAI trawl limited access sector, on average, has not used the full amount of halibut PSC assigned to the sector. As shown in Table 1 in this preamble and in Table 3-14 in Section 3.1.3.3 of the Analysis, on average the BSAI trawl limited access sector used 81 percent of the BSAI trawl limited access sector halibut PSC limit from 2008 through 2014.
As described in the “Overview of the BSAI Groundfish Sectors” section above, the Pacific cod and yellowfin sole fisheries are the primary fisheries that would be constrained by the proposed halibut PSC limits in the BSAI trawl limited access sector. Overall PSC used in the Pacific cod and yellowfin sole fisheries from 2008 through 2014 averaged 64 percent of the sector's annual apportionments (see Tables 4-38 and 4-39 in Section 4.4.3.4 of the Analysis).
From 2008 through 2014, the BSAI trawl limited access sector did not exceed the PSC apportioned to the Pacific cod fishery, used only 36 percent of its apportionment in one year (2009), and has used less than 60 percent of its apportionment in 3 years (2008, 2010, and 2011) (see Tables 4-38 and 4-39 in Section 4.4.3.4 of the Analysis for more detail). From 2008 through 2014, the BSAI trawl limited access sector exceeded the PSC apportioned to the yellowfin sole fishery in one year (2013), but has used only 16 percent of its apportionment in one year (2010), and has used less than 50 percent of its apportionment in 2 years (2009 and 2011) [see Tables 4-38 and 4-39 in Section 4.4.3.4 of the Analysis for more detail]. The Analysis and public testimony indicate that there are a variety of factors that contributed to lower PSC use in these years including changing oceanographic conditions, the amount of TAC available for harvests, and operational choices by vessel operators to fish in different areas or fisheries. However, the best available data on halibut PSC use indicate that in most years it is reasonable to expect that both Pacific cod and yellowfin sole can be harvested under the halibut PSC limits established by the proposed rule.
The Council and NMFS considered the tools that could be adopted by the BSAI trawl limited access sector. The Analysis describes a number of tools
Section 4.9 of the Analysis notes that a “race for fish” exists in the BSAI trawl limited access sector, specifically in the Pacific cod and yellowfin sole fisheries. Appendix B of the Analysis examined the operations of catcher/processors in the yellowfin sole fishery and notes that several changes in fishery behavior could be undertaken by this fleet to minimize halibut PSC. Because the yellowfin sole fishery is not managed under a catch share program, there may be some limitations on the ability of participants to coordinate efforts to establish threshold PSC rates and adopt measures to react to those rates by shifting geographic locations, but some level of coordination seems practicable among the participants in this fishery.
The Council and NMFS considered the socioeconomic impact of the proposed rule on the BSAI trawl limited access sector and fishing communities that participate in the fisheries. Reductions in halibut PSC limits greater than actual halibut PSC use could be expected to impose a substantial socioeconomic cost on some BSAI trawl limited access sector participants. Under the two economic scenarios considered, and summarized in Table 4-210 in Section 4.14 of the Analysis, reduced revenue to the BSAI trawl limited access sector from the proposed halibut PSC limit reduction ranges from $14 million to $31 million dollars over a 10-year period, or $1.4 million to $3.2 million dollars annually, of the first wholesale value to the BSAI trawl limited access sector for non-pollock harvests. Section 4.4.3.5 of the Analysis describes that the economic value of the use of halibut as PSC in the BSAI trawl limited access sector is substantial as measured by the average groundfish wholesale revenue generated per metric ton of halibut used as PSC to support BSAI trawl limited access sector.
The proposed rule establishes a halibut PSC limit reduction that recognizes there are more limited tools for the BSAI trawl limited access sector than the Amendment 80 sector, but that the BSAI trawl limited sector has demonstrated an ability, on average, to maintain existing harvests at the level of the proposed reduction. Under the proposed rule, the BSAI trawl limited access sector would have to reduce its halibut PSC use relative to several recent years of halibut PSC use. As described in Appendix B of the Analysis, the BSAI trawl limited access sector has some tools available to reduce halibut PSC use. Reducing groundfish fishing or changing behavior during time periods with higher halibut rates may result in some mitigation of the impacts of a reduction in halibut PSC limits. Fishing earlier in the year would appear to result in lower halibut PSC rates. The proposed rule would result in halibut PSC limits that could be restrictive in some years relative to current management. However, the halibut PSC reduction implemented by the proposed rule would be expected to result in limited reductions in groundfish harvests in most years.
The Council and NMFS considered a range of alternative halibut PSC reductions for the BSAI trawl limited access sector. Less restrictive halibut PSC limit reductions (
The BSAI non-trawl sector has the third greatest amount of halibut PSC use among the BSAI groundfish fishery sectors. As Table 1 in this preamble and Table 4-209 in Section 4.14 of the Analysis show, the non-trawl sector is assigned 833 mt, or approximately 19 percent of the current halibut PSC limit in the BSAI, and used approximately 15 percent of the average amount of halibut PSC used in the BSAI from 2008 through 2014.
The Council and NMFS considered halibut PSC use in the non-trawl sector. The non-trawl sector has clearly used far less than its current PSC apportionment, particularly in recent years. Table 1 in this preamble shows that from 2008 through 2014, the combined non-trawl sectors have used an average of 61 percent of the total non-trawl halibut PSC apportionment. Pacific cod hook-and-line catcher/processors have used 99.4 percent of the non-trawl halibut PSC on average from 2008 through 2014. Because of the overwhelming use of halibut PSC by Pacific cod hook-and-line catcher/processors relative to other non-trawl fishery participants, this section is focused primarily on the impacts of the proposed action on Pacific cod hook-and-line catcher/processors.
The Council and NMFS also considered the tools that could be adopted by the non-trawl sector. The Analysis and public testimony have described the efforts by hook-and-line catcher/processors to minimize their halibut PSC use in recent years. Appendix B of the Analysis describes a range of performance metrics for this fleet. The data in Appendix B show a consistent trend of lower halibut PSC rates year-over-year, particularly beginning in 2011 (see Table 7 in
Table 4-210 in Section 4.14 of the Analysis shows that reductions in halibut PSC would not be expected to limit groundfish harvest in the non-trawl sector until reductions reach a level 30 percent lower than the current halibut PSC limit. Therefore, the proposed reduction in the current halibut PSC limit by 15 percent would not be expected to result in reduced groundfish harvests and revenues. Based on the best available information, the proposed action would not likely have a negative economic impact on the non-trawl sector because all harvests could be accommodated under the reduced limit.
The Council and NMFS considered the socioeconomic impact of the proposed rule on the non-trawl sector and communities participating in the non-trawl fisheries. Reductions in halibut PSC limits would have to be greater than actual halibut PSC use to impose a substantial socioeconomic cost on the non-trawl sector participants. Under the two economic scenarios considered, and summarized in Table 4-210 in Section 4.14 of the Analysis, the impacts of reduced halibut PSC limits to the non-trawl sector would not be expected to have an economic cost from reduced groundfish revenues until the halibut PSC limit is reduced by at least 30 percent. Section 4.4.4.5 describes that the economic value of the use of halibut as PSC is substantial in the non-trawl fishery, as measured by the average wholesale groundfish revenue generated per mt of halibut used as PSC to support the non-trawl sector.
The Council and NMFS considered more restrictive halibut PSC reductions for the non-trawl sector. The Analysis shows that halibut PSC limit reductions would need to be extremely high relative to the current halibut PSC limit to yield actual reductions from current use. For example, a 50 percent reduction in the PSC limit for the non-trawl sector to a PSC limit of 380 mt would yield only 96 mt of savings compared to the 2008 through 2014 average, or only 10 mt relative to 2014 use (See Table 1 of this preamble and Table 4-209 in Section 4.14 of the Analysis). The Council did not recommend, and NMFS does not propose, more restrictive halibut PSC limits for the non-trawl sector given the relatively limited use of halibut PSC by the non-trawl sector, the consistent trend of halibut PSC use that is well below current halibut PSC limits, and the limited benefit that additional reductions would be likely to provide to the halibut fishery and communities participating in the halibut fishery relative to the negative socioeconomic impacts to participants in the non-trawl sector. Given these factors, the Council and NMFS determined that the proposed reduction is consistent with the purpose and need for this action and additional reductions in the non-trawl halibut PSC limit would not be practicable.
The CDQ sector has the fourth greatest impact on PSC of the BSAI groundfish sectors. As Table 1 in this preamble and Table 4-209 in Section 4.14 of the Analysis show, the CDQ sector is assigned approximately 9 percent of the current halibut PSC limit in the BSAI, and uses approximately 6 percent of the average amount of halibut PSC in the BSAI from 2008 through 2014.
The Council and NMFS considered halibut PSC use in the CDQ sector. The CDQ sector has consistently used far less halibut PSC than its current PSC limit, particularly in recent years. Table 1 of this preamble shows that from 2008 through 2014, the sector has used an average of 55 percent of its halibut PSC limit. PSC use has not exceeded 70 percent of the CDQ sector halibut PSC limit, and no CDQ group has exceeded its halibut PSC limit during this time.
The Council and NMFS also considered the tools that could be adopted by the CDQ sector. The CDQ sector clearly has, and uses, many of the tools that are available to the Amendment 80, AFA, and Pacific cod hook-and-line catcher/processor sectors because CDQ groups harvest their allocations in conjunction with vessels operating in those fisheries (Section 3.1.3.6 of the Analysis). The data on the use of halibut PSC indicates that these tools are being effectively used to minimize halibut PSC use in the CDQ sector.
The Council and NMFS considered the socioeconomic impact of the proposed rule on the CDQ sector and communities participating in the CDQ fisheries. The proposed rule would not be expected to have an adverse economic impact on the CDQ groups and would not be expected to constrain groundfish harvests. Table 4-210 in Section 4.14 of the Analysis shows that until halibut PSC reductions reach a level of 35 percent, there does not appear to be an economic impact on the CDQ sector from reduced groundfish harvests and revenues. Section 4.4.6 of the Analysis contains additional information on the economic impacts of the proposed rule for the CDQ sector.
As Table 4-210 in Section 4.14 of the Analysis shows, the proposed halibut PSC reduction of 20 percent relative to current limits would not materially impact the CDQ participants, but would prevent the potential increase of halibut PSC use in future years. It is clear that the level of halibut PSC reduction proposed in this rule is practicable because in all years analyzed, halibut PSC use by the CDQ sector has been less than this limit.
The Council and NMFS considered whether additional halibut PSC limit reductions would be appropriate given the substantial gap between actual halibut PSC use and the current halibut PSC limit in the CDQ sector. The Analysis shows that halibut PSC limit reductions would need to be extremely high relative to the current halibut PSC limit to yield actual deductions. For example, a 50 percent reduction in the CDQ sector halibut PSC limit to 197 mt would yield only 18 mt of savings compared to the average use from 2008 through 2014 average, or only 47 mt relative to 2014 use. Neither the Analysis nor public testimony indicated that it is reasonable to expect that halibut PSC use in the CDQ sector will increase relative to current use. Therefore, the Council and NMFS determined that it is impracticable to establish a reduction that would be expected to substantially constrain the CDQ sector given the limited amount of halibut PSC used by the sector and the limited potential harvest opportunity to the commercial halibut fishery that a more restrictive halibut PSC limit would provide.
During public testimony to the Council, some participants in halibut fisheries and members of the public recommended greater reductions of halibut PSC limits than the proposed rule would implement. However, halibut bycatch cannot be avoided completely, unless groundfish fishing is completely stopped. The Council and NMFS believe that more stringent PSC limit reductions are not practicable for the groundfish sectors.
As described above, the Council and NMFS considered impacts on the halibut stock and concluded that under all the alternatives considered, the impact on exploitable biomass and the halibut female spawning biomass was not likely to be significant. The Council and NMFS considered the impact on the halibut fishery and fishing communities participating in the halibut fishery and concluded that larger halibut PSC reductions in some sectors, particularly the Amendment 80 and BSAI trawl limited access sectors, would be expected to provide greater harvest opportunities in the halibut fisheries than would be realized under the proposed reductions. However, the Council and NMFS considered that larger halibut PSC reductions in these two sectors would be expected to have an adverse impact from foregone groundfish harvests and revenues. The adverse socioeconomic impact on fishing communities participating in the groundfish fisheries would be greater with larger halibut PSC reductions.
Based on the best available information, the Council and NMFS anticipate that participants in the Amendment 80 and BSAI trawl limited access sectors will need to modify their fishing behavior in response to lower halibut PSC limits. Based on the Analysis and public testimony received from groundfish industry participants on the extent to which individual vessels are able to change their fishing behavior to reduce PSC use, the Council and NMFS believe that the proposed halibut PSC reductions would minimize halibut bycatch to the extent practicable.
The proposed rule would implement Amendment 111 to the FMP primarily by revising § 679.21 to reduce BSAI halibut PSC limits for the Amendment 80 sector, BSAI trawl limited access sector, BSAI non-trawl sector, and the CDQ Program. The proposed rule would also make minor changes in terminology, reorganize regulatory text, and make other technical changes.
The proposed rule would establish the following halibut PSC limits at § 679.21(b): 1,745 mt for the Amendment 80 sector; 745 mt for the BSAI trawl limited access sector; 710 mt for the BSAI non-trawl sector; and 315 mt for the CDQ Program. These limits result in an overall BSAI halibut PSC limit of 3,515 mt.
The proposed rule would establish at § 679.21(b)(1)(i) a maximum halibut PSC limit of 1,745 mt for the Amendment 80 sector. If no vessels participate in the Amendment 80 limited access fishery in a year, NMFS will allocate the entire Amendment 80 halibut PSC limit of 1,745 mt among the Amendment 80 cooperatives that submitted a timely application for an Amendment 80 cooperative permit for that year.
If any Amendment 80 vessels chose to fish in the Amendment 80 limited access fishery, the proposed rule would establish the amount of PSC assigned to the Amendment 80 limited access fishery. The proposed rule would revise § 679.91(d)(1) and (d)(3), so that the Amendment 80 limited access fishery would be assigned only 80 percent of the halibut PSC that is remaining after halibut PSC has been assigned to Amendment 80 cooperatives. This regulatory change would result in an overall reduction of the halibut PSC limit to the Amendment 80 limited access sector of 40 percent compared to existing regulations. With these proposed regulatory changes, it is important to note that the combined halibut PSC limit for Amendment 80 cooperatives and the Amendment 80 limited access fishery would not sum to 1,745 mt. As described earlier in this preamble, the Amendment 80 limited access fishery would be assigned an amount of PSC that is 20 percent less than what the vessels in the Amendment 80 limited access fishery would receive if they had participated in a cooperative for that year.
The proposed rule would establish at § 679.21(b)(1)(ii) a halibut PSC limit of 745 mt for the BSAI trawl limited access sector. The proposed rule would make no change in the annual harvest specification process whereby NMFS apportions the overall sector PSC limit of the BSAI trawl limited access sector into PSC allowances for these trawl fishery categories. The proposed rule would make no change in the process whereby NMFS may make seasonal apportionments of the trawl PSC allowances.
The proposed rule would establish at § 679.21(b)(1)(iii) a halibut PSC limit of 710 mt for the BSAI non-trawl sector. The proposed rule would make no change in the annual harvest specification process whereby NMFS has authority to apportion the overall sector PSC limit into non-trawl fishery categories. The proposed rule would make no change in the annual harvest specification process whereby NMFS has authority to make seasonal apportions of the non-trawl PSC allowances. NMFS will continue annual consultations with the Council to determine whether the pot gear, jig gear, and the sablefish IFQ hook-and-line gear fisheries will be exempt from the non-trawl halibut PSC limit as described in the “Annual Halibut Bycatch (PSC) Limits and Apportionments of PSC Limits” section of this preamble.
The proposed rule would establish at § 679.21(b)(1)(iv) a halibut PSC limit of 315 mt for the CDQ Program (
The proposed rule would remove provisions at § 679.21(e)(3)(i)(A)(2)(
The proposed rule would make no other changes in the process for the establishment and use of the halibut PSQ Reserve under the CDQ Program.
The proposed rule would make a minor change in terminology and use “halibut PSC allowances” rather than “halibut bycatch allowances” to describe the apportionment of a halibut PSC sector limit into fishery categories. Section 679.21(e) currently uses “bycatch allowances” to describe the subdivision of a halibut PSC sector limit into fishery categories. NMFS believes that the term “PSC allowance” is more accurate than “bycatch allowance” because bycatch is broader than PSC. NMFS acknowledges that bycatch is often, or even typically, used to refer to the unintended catch of halibut by the groundfish fisheries. However, NMFS concluded that the regulatory text should use the accurate term, PSC, in regulations governing the catch of halibut by the BSAI groundfish fisheries.
The proposed rule also changes the term “incidental catch” to “PSC” at § 679.21(e)(3)(ii)(C). The current regulations at § 679.21(e)(3)(ii)(C) direct NMFS to count incidental catch of all halibut taken by the midwater pollock fishery against the bycatch allowance
The proposed rule would reorganize § 679.21 by creating a new § 679.21(b) that will contain all the provisions that are specific to BSAI halibut PSC limits. In the current regulations, § 679.21(a) is reserved, § 679.21(b) contains general provisions regarding PSC management, and § 679.21(e) contains provisions for BSAI PSC limits for all prohibited species: halibut, salmon, crab, and herring. The proposed rule would move the general provisions from § 679.21(b) to § 679.21(a). The proposed rule would place all provisions in § 679.21(e) that are specific to BSAI halibut PSC limits into § 679.21(b). The proposed rule would specify the BSAI halibut PSC limits for each of the four groundfish sectors in § 679.21(b) and would note that the total of all the BSAI halibut PSC limits is 3,515 mt. This consolidation of BSAI halibut PSC regulations into § 679.21(b) would clarify the regulations for the public.
The proposed reorganization of halibut PSC regulations at § 679.21(b) would have four sections. Section 679.21(b)(1) would establish the halibut PSC limits for the four groundfish sectors: the Amendment 80 sector; the BSAI trawl limited access sector; the BSAI non-trawl sector; and the CDQ Program. Section 679.21(b)(2) would maintain NMFS's authority to make seasonal apportionments of PSC allowances, which is currently at § 679.21(e)(5). Section 679.21(b)(3) would maintain the provisions regarding notification of PSC allowances, which is currently at § 679.21(e)(6). Section 679.21(b)(4) would maintain the management of BSAI halibut PSC allowances through directed fishery closures, which is currently at § 679.21(e)(7)(i) and (v).
The proposed rule would also revise Table 35 to part 679. Table 35 currently specifies the BSAI halibut PSC limits for the Amendment 80 sector and BSAI trawl limited access sector. The proposed rule would change Table 35 to include the revised halibut PSC limits.
Because halibut PSC regulations at § 679.21(e) are cross-referenced in other regulations, the proposed rule would change all cross-references to the halibut-specific provisions in § 679.21(e) throughout part 679 to the new halibut-specific regulations at § 679.21(b). The proposed rule would also change all cross-references in current regulations to the general PSC provisions that are now in § 679.21(b) to the new location for the general provisions in § 679.21(a). For each revised paragraph, this proposed rule includes the revised cross-references in the regulatory text and repeats the text that is not otherwise modified. Table 2 lists the location of regulations with cross-references that would be revised by the proposed rule.
Pursuant to Section 304(b)(1)(A) and 305(d) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has determined that the proposed rule is consistent with the FMP, other provisions of the Magnuson-Stevens Act, and other applicable law, subject to further consideration of comments received during the public comment period.
The proposed rule has been determined to be not significant for purposes of Executive Order 12866.
An Initial Regulatory Flexibility Analysis (IRFA) was prepared for this action, as required by Section 603 of the Regulatory Flexibility Act (RFA). The IRFA describes the economic impact the proposed rule, if adopted, would have on small entities. The IRFA describes the reasons why this action is being proposed; the objectives and legal basis for the proposed rule; the number and description of small entities directly regulated by the proposed action; any projected reporting, recordkeeping, or other compliance requirements of the proposed rule; any overlapping, duplicative, or conflicting Federal rules; impacts of the action on small entities; and any significant alternatives to the proposed rule that would accomplish the stated objectives of the Magnuson-Stevens Act, and any other applicable statutes, and would minimize any significant adverse impacts of the proposed rule on small entities. Descriptions of the proposed action, its purpose, and the legal basis are contained earlier in this preamble and are not repeated here. A summary of the IRFA follows. A copy of the IRFA is available from NMFS (see
The proposed action would directly regulate those entities that participate in harvesting groundfish from the Federal or parallel groundfish fisheries of the BSAI subject to a halibut PSC limit. The RFA recognizes and defines three kinds of small entities that could be regulated by this proposed action: (1) Small businesses, (2) small non-profit organizations, and (3) small government jurisdictions. This proposed action would directly regulate small businesses that participate in the harvesting of groundfish, and small non-profit organizations.
The IFRA estimates the number of directly regulated small entities based on size criteria established for industry sectors defined by the Small Business Administration (SBA). According to the SBA criteria, the groundfish fishery is defined as a finfish harvesting sector. An entity primarily involved in finfish harvesting is a small entity if it is independently owned and operated and not dominant in its field of operation (including its affiliates), and if it has combined annual gross receipts not in
Only 19 of these directly regulated entities are estimated to be small entities based on the best available data on the gross receipts from these entities and their known affiliates. Seventeen of these small entities are hook-and-line catcher vessels that participate in the non-trawl sector, and two are trawl catcher vessels that participate in the BSAI trawl limited access sector, specifically the Pacific cod target fishery.
The IRFA states that all six of the CDQ groups would be directly regulated by this proposed action. The six CDQ groups are: The Aleutian Pribilof Island Community Development Association, the Bristol Bay Economic Development Corporation, the Central Bering Sea Fishermen's Association, the Coastal Villages Region Fund, the Norton Sound Economic Development Corporation, and the Yukon Delta Fisheries Development Association. Each of the six CDQ groups receives an exclusive allocation of halibut PSC that would be reduced (
NMFS has not identified any duplication, overlap, or conflict between this proposed action and existing Federal rules.
The proposed action is intended to reduce halibut PSC mortality by decreasing halibut PSC limits available for use in the BSAI groundfish fisheries. Any reductions in harvest by groundfish harvesters would impact revenue generated from the BSAI groundfish fisheries. The 17 hook-and-line catcher vessels that participate in the non-trawl sector are not likely to be affected by the proposed reduction in the halibut PSC limit for the non-trawl sector because current and anticipated halibut PSC use in this sector is substantially less than the proposed halibut PSC limit that would be established. The 2 trawl catcher vessels that participate in the BSAI trawl limited access sector may be limited by the proposed reduction in the halibut PSC limit for the BSAI trawl limited access sector (15 percent) in some years because halibut PSC use by the BSAI trawl limited access sector has exceeded the halibut PSC limit that would be established by the proposed action.
The six CDQ groups are not likely to be affected by the proposed reduction in the halibut PSC limit for the CDQ sector (20 percent) because current and anticipated halibut PSC use in the CDQ sector is substantially less than the proposed halibut PSC limit that would be established. However, some CDQ groups will experience an adverse impact from PSC reductions in the Amendment 80 and BSAI trawl limited access sectors, to the extent that they have ownership interests in vessels operating in those sectors, and the proposed halibut PSC limits constrain harvest and resulting revenue. The CDQ groups' ownership interests are described in Section 4.12 of the Analysis.
The Council considered an extensive series of alternatives, options, and suboptions to reduce halibut PSC limits in the BSAI, including the “no action” alternative. The RIR presents the complete set of alternatives (see
Section 2.5 of the Analysis describes other significant alternatives to the proposed rule that the Council considered but did not advance for further analysis: (1) Apportioning the halibut PSC limit for the BSAI trawl limited access sector between AFA trawl catcher vessels and non-AFA trawl catch vessels based on the halibut PSC by these vessel categories from 2009 through 2013; (2) implementing permanent measures in the Amendment 80 sector for deck sorting of halibut; (3) establishing a seasonal apportionment of the halibut PSC limit for the BSAI trawl limited access sector. Each of these alternatives would have changed the current management structure for regulating halibut PSC limits in BSAI. The Council's preferred alternative is a straightforward reduction in halibut PSC limits by sector. The Council's preferred alternative leaves the current management structure intact and most expeditiously achieves the Council's objective of reducing halibut PSC limit to the extent practicable in accord with National Standard 9.
Based on the best available scientific data and information, none of the alternatives except the preferred alternative appear to have the potential to accomplish the stated objectives of the Magnuson-Stevens Act and other applicable statutes (as reflected in the proposed action), while minimizing any significant adverse economic impact on small entities beyond those achieved under the proposed action. The proposed action would minimize bycatch to the extent practicable with existing management tools. Thus, the proposed action would minimize the impacts on small entities in the BSAI groundfish fisheries and promote more efficient use of the available halibut PSC limits.
This action does not modify recordkeeping or reporting requirements.
Executive Order (E.O.) 13175 of November 6, 2000 (25 U.S.C. 450 note), the Executive Memorandum of April 29, 1994 (25 U.S.C. 450 note), the American Indian and Alaska Native Policy of the
Section 5(b)(2)(B) of E.O. 13175 requires NMFS to prepare a “tribal summary impact statement” for any regulation that has tribal implications, that imposes substantial direct compliance costs on Indian tribal governments, and is not required by statute. The tribal summary impact statement must contain (1) a description of the extent of the agency's prior consultation with tribal officials, (2) a summary of the nature of their concerns, (3) the agency's position supporting the need to issue the regulation, and (4) a statement of the extent to which the concerns of tribal officials have been met. If the Secretary of Commerce approves this proposed action, a tribal impact summary statement that addresses the four questions above will be included in the final rule.
Alaska, Fisheries, Reporting and recordkeeping requirements.
For the reasons set out in the preamble, 50 CFR part 679 is proposed to be amended as follows:
16 U.S.C. 773
(5)
(a) * * *
(12)
(k) * * *
(1) * * *
(v)
(4) * * *
(iii)
The revisions and additions read as follows:
(a) * * *
(4)
(b)
(i)
(ii)
(
(
(
(B)
(
(
(
(
(
(
(
(
(C)
(iii)
(
(
(
(B)
(
(
(
(
(
(
(iv)
(2)
(ii)
(A) Seasonal distribution of prohibited species;
(B) Seasonal distribution of target groundfish species relative to prohibited species distribution;
(C) Expected PSC needs on a seasonal basis relevant to change in prohibited species biomass and expected catches of target groundfish species;
(D) Expected variations in PSC rates throughout the fishing year;
(E) Expected changes in directed groundfish fishing seasons;
(F) Expected start of fishing effort; or
(G) Economic effects of establishing seasonal prohibited species apportionments on segments of the target groundfish industry.
(iii)
(B)
(iv)
(B)
(3)
(ii)
(4)
(B)
(ii)
(iii)
(e)
(3) * * *
(ii)
(C)
(iv)
(B) * * *
(
(v)
(vi) * * *
(A) Crab PSC limits for the Amendment 80 sector in the BSAI will be established according to the procedure and formulae set out in § 679.91(d) through (f); and
(B) Crab PSC assigned to the Amendment 80 limited access fishery will be managed through directed fishing closures for Amendment 80 vessels to which the crab bycatch limits apply.
(6) * * *
(i)
(ii)
(7) * * *
(i)
(a) * * *
(4)
(a) * * *
(3)
(d) * * *
(1)
(3)
(b) This order shall be transmitted to the Congress and published in the
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration |