CMS 2021: Why Not Price Cat III. Why Hard to Price Software.

 

 86 FR 65039 (small section from 65038)

November 19, 2021  Final PFS rule for CY2022

65039-40

For the PFS, we 

typically assign contractor pricing for 

Category III codes since they are 

temporary codes assigned to emerging 

technology and services. We followed 

this established process for Category III 

codes by assigning and listing them as 

contractor pricing in Appendix B in the 

CY 2018 PFS final rule

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Comment: Several commenters 

expressed concern that CMS repeatedly 

stated that software and analysis fees are 

not direct expenses. Commenters 

disagreed and stated that software that 

is directly attributed to a specific 

physician service is a direct expense, 

and furthermore that there are multiple 

examples of the implementation of such 

costs. Several comments provided a list 

of current CPT codes that they stated 

included software as a direct PE input, 

such as CPT code 95905 (Motor and/or 

sensory nerve conduction, using 

preconfigured electrode array(s), 

amplitude and latency/velocity study, 

,,,, Several commenters raised the 

issue of software as a medical device 

(SaMD) and stated that it should be 

considered a direct PE expense similar 

to other medical equipment. 

Commenters stated that even though 

SaMD does not require physical space 

in an office or administrative staff hours 

to maintain it, SaMD does require 

ongoing upgrades, improvements, and 

security mitigation, as well as the same 

regulatory oversight by the Food and 

Drug Administration (FDA) as hardware 

medical devices. Commenters stated 

that the legal, regulatory, and financial 

burdens incumbent of a SaMD 

manufacturer are no different than those 

of hardware medical device 

manufacturers. 

Response: We appreciate the detailed 

feedback from the commenters 

regarding the issues surrounding 

software and analysis fees. We agree 

with the commenters that there have 

been occasions in the past where we 

have finalized the inclusion of software 

as a direct PE expense if it met our 

criteria as typical and medically 

necessary for the service in question and 

could be individually allocable to a 

particular patient for a particular 

service. For example, we included the 

sheer wave elastography software 

(ED060) as a direct PE input for CPT 

codes 76981–76983 in CY 2019. In this 

case, the sheer wave elastography 

software was an additional resource cost 

added to the general ultrasound room 

(EL015) equipment without which the 

service cannot be performed. We have 

been more hesitant to classify software, 

licensing, and analysis fees that are not 

associated with physical equipment 

used in the performance of a service as 

they pose more significant challenges 

for our traditional PE methodology. 

Therefore, we wish to clarify that 

although we have typically considered 

software costs to be indirect PE under 

our methodology, as these costs were 

not individually allocable to a particular 

patient for a particular service, there 

have been exceptions to this general 

principle where software costs have 

been included directly in the service 

under review. 

As we stated in the proposed rule, we 

believe that costs associated with 

software, licensing, and analysis fees are 

not well accounted for in the PE 

methodology. Unlike a piece of 

equipment, such as the retinal camera, 

an analysis fee for software does not 

require physical space in an office or 

administrative staff hours to maintain it. 

These types of costs were much less 

prevalent when the Physician Practice 

Information Survey (PPIS) was last 

administered in 2007 and 2008 and of 

course did not exist at all in the case of 

AI-based services. We remain concerned 

that if we were to consider software 

analysis fees and software as a medical 

device expenses to be direct costs in all 

cases, we may inadvertently allocate too 

many indirect costs for supplies that 

may not require additional indirect 

expenses. The data underlying the PPIS 

assumes that direct expenses will 

require costs associated with physical 

space and physical maintenance that 

may not appropriate for these new types 

of software. However, we do recognize 

that practitioners are incurring resource 

costs for purchase of the software and 

its ongoing use, which is why we 

proposed the crosswalk to CPT code 

92325 to capture these resource costs for 

CPT code 92229. We believe that the use 

of this crosswalk and other similar 

crosswalks are the best way to value 

services that make use of software, 

licensing, and analysis fees at the 

moment while we explore ongoing 

potential updates to the PE 

methodology.